Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: ACTOS, ACTOplus consumers’ pay-for-delay claims tossed, (Sep 24, 2015)

By Greg Hammond, J.D.

A brand name pharmaceutical company and various generic drug companies were excused from a suit alleging they entered into unlawful reverse settlement agreements, or otherwise conspired to monopolize the market for the prescription drugs ACTOS and ACTOplus. In granting dismissal with prejudice, the federal district court in New York City determined that the non-cash settlement terms at issue were not “reverse payments” within the meaning of Actavis, and there were no sufficient allegations of anticompetitive conduct (In re Actos End Payor Antitrust Litigation, September 22, 2015, Abrams, R.).

Takeda Pharmaceutical Co. Ltd. and its affiliated companies hold three patents for ACTOS and ACTOplus, prescription drugs used to treat Type 2 diabetes. Consumers who indirectly purchased the medications claimed that Takeda, along with generic pharmaceutical companies Mylan Inc., Mylan Pharmaceuticals Inc., Actavis PLC, Watson Laboratories, Inc., Ranbaxy Laboratories, Ltd., Ranbaxy, Inc., Teva Pharmaceutical Industries, Ltd., and Teva Pharmaceuticals USA, Inc., engaged in anticompetitive conduct designed to control and delay competition in the market for ACTOS and ACTOplus, in violation of state antitrust, consumer protection, and unjust enrichment laws. In particular, consumers claim that the defendants conspired to delay generic competition in the ACTOS market through unlawful patent infringement settlement agreements, and that Takeda monopolized and attempted to monopolize the ACTOS market by submitting “improper” patent information and entering into unlawful settlement agreements. The defendants moved to dismiss.

Reverse payment claims. The central question at issue, according to the court, was whether the terms of the various settlement agreements between Takeda and the generic manufacturers were subject to antitrust scrutiny under FTC v.Actavis, 133 S.Ct. 2223 (2013). Under the settlements with Mylan, Ranbaxy, and Actavis, Takeda licensed the three generic companies to enter the market on August 17, 2012, which was roughly four years before two of the three patents expired. The court first determined that a compromise date of generic entry was the very type of settlement sanctioned by the Actavis Court. In addition, “acceleration clauses” that would allow generic entry prior to August 17, 2012, in the event another generic came to the market first, did not render the settlement agreements unlawful or reverse payments under Actavis. Rather, these clauses provided an “indisputably procompetitive effect,” the court concluded, noting that the provisions would ensure that if a generic or authorized generic began marketing its product before the August 2012 date, the licensed generic could also enter without further delay.

Takeda also gave generic ACTOplus licenses to Ranbaxy and Actavis to market ACTOplus as of the earlier of June 15, 2015, or 180 days after the first-filing generic entered the market. The court rejected the consumers’ claims that these constituted unlawful payments, finding that the ACTOplus licenses did not restrain competition because they allowed Actavis and Ranbaxy to enter the market earlier than they otherwise would have been permitted to do.

Takeda’s licensed generic agreement with Teva, which granted Teva a license to enter the ACTOS market as an authorized generic on August 17, 2012, or whenever another generic came to market, and with its own generic product 180 days later, was also not found to be anticompetitive. The court determined that the plaintiffs’ argument—that Teva could have entered the market even earlier—side-stepped the relevant Actavis inquiry: Was there a large, unexplained reverse payment from Takeda to Teva to settle the patent infringement litigation? The court concluded that the agreement, like the other generic company settlements, merely fixed early-entry dates for Teva to enter the ACTOS and ACTOplus markets, which did not trigger antitrust scrutiny under Actavis. Further, even assuming the licensing terms were reverse payments, the claims failed for the additional reason that they do not plausibly allege the payments were “large” and “unjustified.”

Monopolization claims. Consumers also alleged that Takeda monopolized and attempted to monopolize the market for ACTOS by submitting “improper” patent information and entering into unlawful settlement agreements with the generic defendants, creating a “bottleneck” on competition. The first argument, concerning improper patent information, failed because the plaintiffs failed to plausibly allege an antitrust injury resulting from Takeda’s conduct. Takeda was required under the Hatch-Waxman Act to list any patent which claimed either the ACTOS drug or a method of using the drug, regardless of the correctness of the patent information. The consumers also failed to plausibly allege that Takeda’s conduct unlawfully delayed generic entry, demonstrating a lack of antitrust injury.

Allegations that the grant of licenses to the generic defendants to enter the ACTOS and ACTOplus markets also failed to provide a basis for the monopolization claims. The court concluded that the settlements, by their plain terms, resulted in additional competition as of an agreed-to entry date, rather than a further concentration of market power in Takeda. The consumers therefore failed to demonstrate anticompetitive conduct.

“Overarching” conspiracy claim. The plaintiffs brought an additional claim, alleging that through an “overarching anticompetitive scheme, including the Exclusion Payment Agreements…Defendants conspired to block and delay the entry into the market of generic ACTOS.” This claim failed as a matter of law, the court concluded, because the consumers’ conclusory allegations failed to plausibly show the existence of any overarching illegal agreement. Even assuming the existence of an unlawful agreement, the court determined that the plaintiffs failed to demonstrate the existence of unlawful payments or that the defendants illegally restrained the ACTOS or ACTOplus markets.

The state consumer protection and unjust enrichment claims were also dismissed as inadequately pleaded.

The case number is 13-CV-9244 (RA).

Attorneys: Elizabeth G. Arthur (Hilliard & Shadowen LLP) for United Food and Commercial Workers Local 1776 & Participating Employers Health and Welfare Fund. Brian Philip Murray (Glancy Binkow & Goldberg LLP) for Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund. Dan Drachler (Zwerling, Schachter & Zwerling, LLP) for 199 SEIU-National Benefit Fund. Jeffrey Ira Weinberger (Munger, Tolles & Olson) for Takeda America Holdings, Inc., Takeda Pharmaceuticals, U.S.A., Inc. Jessica Leigh Margolis (Wilson Sonsini Goodrich & Rosati) for Mylan, Inc. and Mylan Pharmaceuticals Inc. Steven Craig Sunshine (Skadden, Arps, Slate, Meagher & Flom LLP) for Actavis plc and Watson Laboratories, Inc. Stacey Anne Mahoney (Morgan Lewis & Bockius, LLP) for Ranbaxy, Inc.

Companies: United Food and Commercial Workers Local 1776 & Participating Employers Health and Welfare Fund; Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund; 199 SEIU-National Benefit Fund; Takeda America Holdings, Inc.; Takeda Pharmaceuticals, U.S.A., Inc.; Mylan, Inc.; Mylan Pharmaceuticals Inc.; Actavis plc; Watson Laboratories, Inc.; Ranbaxy, Inc.

Cases: Antitrust NewYorkNews