Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Teva agrees to settle Nexium pay-for-delay suit for $24M, (Apr 3, 2015)

By Greg Hammond, J.D.

Teva Pharmaceutical Industries Ltd. and Teva Pharmaceuticals USA, Inc. have agreed to pay $24 million to settle claims that the pharmaceutical companies violated federal and state antitrust laws, as well as state consumer protection laws, by engaging in pay-for-delay, or reverse payment, settlement agreements with AstraZeneca AB—the manufacturer of the brand name drug Nexium. End payor and direct purchaser plaintiffs have moved for preliminary approval of the proposed settlement with Teva in the federal district court in Boston (In re Nexium (Esomeprazole) Antitrust Litigation, MDL No. 2409, April 2, 2015).

Background. AstraZeneca manufactures Nexium, a proton pump inhibitor containing esomeprazole magnesium, prescribed to treat heartburn. The company holds several patents relating to the drug. In 2005, generic drug maker Ranbaxy Pharmaceuticals, Inc. filed an Abbreviated New Drug Application with the Food and Drug Administration, seeking to market a generic version of Nexium. Teva and Dr. Reddy’s Laboratories, Ltd. shortly thereafter followed suit. AstraZeneca responded by filing patent infringement suits against the three generic manufacturers and later entered into settlement agreements, ending the three suits and suspending the entry of generic Nexium into the market.

Proposed settlement agreement. After weeks into the trial, Teva reached a settlement agreement with end payor and direct purchaser plaintiffs. Under the agreement, Teva will deposit $24 million into a settlement fund, which will be used to pay: (1) the expenses and costs incurred by counsel for the end payor and direct purchaser class; (2) any costs and expenses, not exceeding $2 million, incurred by counsel in continuing their litigation; (3) any taxable costs; (4) taxes payable on the settlement fund; and (5) any and all administrative and notice expenses associated with the litigation and settlement. The remainder of the fund will be allocated (1) in the amount of $1 million to the end-payor class, (2) with 61 percent of the balance of the settlement fund to be allocated to the direct purchaser class and 39 percent of the balance to the individual retailer plaintiffs. An incentive award of $5,000 for each end-payor class plaintiff will also be awarded. However, attorney fees will not be sought from the fund.

The plaintiffs seek preliminary approval of the settlement agreement, arguing that it is the product of good-faith, arm’s length negations; the settlement was reached after extensive discovery and consideration of a full factual record; the settlement was negotiated by counsel experienced in antitrust litigation and has the support of co-lead counsel; the settlement provides substantial benefits to the end payor class and is well within the range of final approval; and the initial reaction of the direct purchaser class members is fully supportive of the settlements.

Notice plan. In addition, the end payor plaintiffs seek preliminary approval of the notice plan, which consists of: (1) direct first-class mail notice to roughly 48,000 third party payors; (2) summary notice publication in HR Magazine and National Underwriter Life and Health; and (3) summary public notice for consumers in People and Parade. In addition, the notice plan will provide notice through targeted “unique impressions” website banner publication, and additional information will be made available through a settlement website and toll-free telephone number.

Direct purchaser plaintiffs also are seeking approval of the proposed form and manner of notice to the class.

Attorneys: Glen DeValerio (Berman DeValerio) for End-Payor Class. Bruce E. Gerstein (Garwin Gerstein & Fisher LLP) for Direct Purchaser Class.

Companies: Teva Pharmaceutical Industries Ltd.; Teva Pharmaceuticals USA, Inc.

News: Antitrust