IP Law Daily, PATENT—D. Del.: AstraZeneca secures partial dismissal of pay-for-delay claims based on Accord settlement, some state laws, (Jul 12, 2022)

By Justin Marcus Smith, J.D.

The court found that the Accord Pharmaceuticals, Inc., patent litigation settlement agreement with AstraZeneca had not led to any delay of generic entry and hence could not have caused any harm necessary to establish Article III standing.

In this complex consolidated litigation about patent litigation settlement agreements that allegedly delayed the introduction of generic Seroquel XR®, the federal district court in Wilmington, Delaware dismissed all of the direct purchaser, end payor, and retailer plaintiffs’ claims for failure to state a claim to the extent that they were based on the Accord/AstraZeneca patent settlement agreement (Accord agreement). The court did not find any possibility that the Accord agreement could have led to any delay of Accord entering the market with its own generic. Without such delay, there could be no adequate pleading of harm required for Article III standing. The outcome was different, however, with respect to the Handa/AstraZeneca patent settlement agreement (Handa agreement). The court found that evidence about the Handa agreement did not rule out the possibility of harm. The court also grappled with a smorgasbord of state law claims, dismissing many for failure to state a claim (In re Seroquel XR (Extended Release Quetiapine Fumarate) Antitrust Litigation, July 5, 2022, Connolly, C.).

Background. Pharmaceutical wholesalers (direct purchasers), union health and welfare funds and municipalities (end payors), and pharmaceutical retailers (retailers), brought three separately consolidated Sherman Act, 15 U.S.C. §§1, 2 antitrust actions against defendants AstraZeneca Pharmaceuticals LP and AstraZeneca LB (collectively, AstraZeneca). The complaints all alleged a “reverse payment” pay for delay scheme restricting supply of generic Seroquel XR®, an anti-psychotic drug, effectuated by AstraZeneca’s settlement of patent litigation with generic manufacturers Handa Pharmaceuticals LLC (Handa), Par Pharmaceuticals, Inc. (Par), and Accord Pharmaceuticals, Inc. (Accord). The Delaware district court gradually received and then coordinated all three actions for discovery and pretrial proceedings pursuant to a stipulated order.

Following the coordination order, the district court considered AstraZeneca, Handa, and Par’s Fed. R. Civ. P. 12(b)(6) motion to dismiss the direct purchasers’ complaint; AstraZeneca, Handa, Par, and Accord’s 12(b)(6) motion to dismiss the retailer plaintiffs’ complaint; and AstraZeneca, Handa, and Par’s 12(b)(1) and 12(b)(6) motion to dismiss the end payor plaintiffs’ complaint.

Limitations period. The court said that it was joining the majority of courts who have held, since Federal Trade Commission v. Actavis, 570 U.S. 136 (2013), that each alleged overpriced sale of a drug resulting from a reverse payment agreement gives rise to a new cause of action. In doing so, the court rejected all of the defendants’ various arguments that the direct purchaser’s causes of action were timed out.

Standing. The court agreed with the defendants that the direct purchasers had failed to adequately plead that the Accord settlement agreement had harmed them. Unlike Handa and Par, Accord had conceded, in the earlier patent litigation that gave rise to this antitrust controversy, that it had infringed AstraZeneca’s patent. The direct purchasers offered nothing to suggest that Accord had any right to sell its generic during the times relevant to the alleged harm or might have struck some alternate settlement contemplating early entry of its own generic. The court accordingly dismissed the direct purchasers’ claims only to the extent of the Accord agreement. It similarly dismissed the end payors’ state law claims in connection with the Accord agreement because the end payors had not disputed that those claims should follow the dismissal of the direct purchasers’ federal antitrust claims.

In contrast, the court held that some evidence produced during discovery might ultimately show that practical details of the Handa agreement meant that the agreement, itself, brought about a harmful delay in FDA approval of the Handa generic. This tended to undercut the defendants’ argument that they could not have harmed the direct purchasers with the Handa agreement, inasmuch as there was no FDA approval of the Handa generic until long after the direct purchasers were arguing they should have been able to buy it. The court accordingly held that it had to give the direct purchaser plaintiffs the benefit of the doubt, at this stage, that the Handa agreement forced them to pay supracompetitive prices and therefore caused them to suffer antitrust injury.

State law claims. As to the end payors’ state law antitrust claims pertinent to the Handa agreement, only, the court deferred Article III harm standing analysis until after Rule 23 class certification for all state laws where the state in question has statutorily circumvented Illinois Brick to permit indirect purchasers to sue for damages. The court otherwise dismissed many of the of the various other state law claims grounded in state antitrust law after engaging in lengthy consideration of each of them.

The case is No. 20-1076-CFC.

Attorneys: Carmella P. Keener (Cooch and Taylor, P.A.) for JM Smith Corp. d/b/a Smith Drug Co. J. Clayton Athey (Prickett, Jones & Elliott, P.A.) for CVS Pharmacy Inc. and Rite Aid Corp. Alexandra M. Joyce (McCarter & English, LLP) for AstraZeneca Pharmaceuticals LP, AstraZeneca LP and AstraZeneca UK Ltd.

Companies: JM Smith Corp. d/b/a Smith Drug Co.; CVS Pharmacy Inc.; Rite Aid Corp.; AstraZeneca Pharmaceuticals LP; AstraZeneca LP; AstraZeneca UK Ltd.

Cases: Patent DelawareNews