Antitrust Law Daily Wrap Up, ANTITRUST—S.D. N.Y.: Antitrust counterclaims against pharmaceutical companies survive dismissal, (Sep 11, 2015)

By Michael Menzhuber, J.D., LL.M.

A motion to dismiss a defendant pharmaceutical company’s antitrust counterclaims, made in response to a plaintiff pharmaceutical company’s claims of breach of contract and misappropriating of trade secrets, was denied by the federal district court in New York City. The court denied the motion after determining that the plaintiff pharmaceutical company’s assertions depended on the resolution, in its favor, of factual issues. Consequently, the court concluded that this was a case for trial rather than dismissal (Fera Pharmaceuticals, LLC v. Akorn, Inc., August 31, 2015, Stanton, L.).

Background. Fera Pharmaceuticals, LLC; Alfera Pharmaceuticals, LLC; Feranda, LLC; and Fera Holdings, LLC (collectively, “Fera”) entered into a contract manufacturing and supply agreement (CMS) with Akorn, Inc. pursuant to which Akorn agreed to manufacture ophthalmic drugs that Fera had acquired, including Bacitracin. The CMS, which had an initial term of seven years, permitted Akorn to terminate the agreement if Fera failed to meet the CMS’s annual purchase requirement.

Several years prior to entering into the CMS with Fera, Akorn had begun developing generic Bacitracin using sterile API acquired from Xellia, a non-party in the dispute. Xellia provided Akorn with a letter of authorization (LOA) to reference Xellia’s drug master file for sterile Bacitracin API. This was a required component of the abbreviated new drug application (ANDA) that Akorn was preparing for submission to obtain approval to market and sell Bacitracin legally in the U.S.

About the time Akron decided to finalize its Bacitracin ANDA, Fera failed to fulfill its annual purchase requirements under the CMS. Pursuant to its right under the CMS, Akron terminated the CMS, and along with it, the exclusivity provision. Fera filed a lawsuit which alleged that Akron: (1) fraudulently induced Fera to enter into the CMS; (2) breached the CMS; and (3) misappropriated Fera’s trade secrets. Akorn’s counterclaims directly refuted many of the facts on which Fera’s claims were based, contending that: (1) it developed its own Bacitracin ten years before Fera even existed as a company; (2) the formulation of Akron’s Bacitracin was required by law to match the formulation of the “Referenced Listed Drug” (which was the product Fera had acquired) to obtain FDA approval; (3) Fera did not have any patent protections or other intellectual property protections that otherwise prevented competitive entry; and (4) Akorn used its own proprietary techniques to manufacture Fera’s Bacitracin.

According to Akron’s counterclaim, Fera, who had become the only company with an active ANDA that was selling Bacitracin in the U.S., discussed the sale of its portfolio of ophthalmic products to Perrigo Company of Tennessee and Perrigo Company PLC (collectively, “Perrigo”). As a condition of the sale, Perrigo required that Fera preserve its monopoly in the U.S. Bacitracin market. Fera and Perrigo made various misrepresentations to Xellia that resulted in the parties entering into an exclusivity agreement which prohibited Xellia from issuing any further LOAs for Bacitracin API and required Xellia to revoke any active LOAs issued to third parties, including Akorn’s. When the FDA became aware of Xellia’s withdrawal of the LOA to Akorn, it rescinded its approval of Akorn’s ANDA. As a result, Akorn was unable to enter the Bacitracin market, as it had planned.

Motion to Dismiss. Fera and Perrigo sought to dismiss Akorn’s counterclaims on the grounds that Akorn: (1) lacked standing because it had not alleged a valid antitrust injury and was not an efficient enforcer of the antitrust laws; (2) failed to state a claim under Sections 1 and 2 of the Sherman Act; and (3) failed to state a claim for tortious interference with a business relationship. The court, however, determined that each of these assertions rested upon a different view of the facts than that alleged by Akorn and depended upon the resolution of factual issues in Fera’s and Perrigo’s favor. Consequently, the court determined that this presented a case for trial rather than dismissal.

The case number is 12 Civ. 7694 (LLS).

Attorneys: Brian Howard Brick (Napoli, Bern Ripka & Associates) for Fera Pharmaceuticals, LLC. Douglas J. Kurtenback (Kirkland & Ellis LP) for Akorn

Companies: Fera Pharmaceuticals, LLC; Alfera Pharmaceuticals, LLC; Feranda, LLC; Fera Holdings, LLC; Perrigo Company of Tennessee; Perrigo Company; Akorn, Inc.

Cases: Antitrust NewYorkNews