IP Law Daily, PATENT—D. Mass.: Court dismisses reverse payment claim from antitrust case over asthma medication, (Nov 8, 2024)

By Martin A. Steinberg, J.D.

Reverse payment claim was implausible because an FTC order precludes Teva from bringing a patent infringement suit against an alleged infringer.

The federal district court in Boston found that labor union health and welfare funds representing a putative class of entities and individuals that allegedly overpaid for prescription asthma medication had standing to assert antitrust claims against Teva Pharmaceutical Industries, Ltd. and Norton (Waterford) Ltd., but dismissed a reverse payment claim. Teva allegedly engaged in illegal, anticompetitive practices to block introduction of a generic drug that competes with its QVAR and QVAR Redihaler lines of inhaler products. The court found that the reverse payment claim was implausible in light of documents submitted by Teva. However, the court found that the class had sufficiently alleged causation to maintain standing as private parties in the antitrust suit (Iron Workers District Council of New England Health and Welfare Fund v.Teva Pharmaceutical Industries Ltd., No. 1:23-cv-11131-NMG (D. Mass. Nov. 6, 2024)).

This case concerns Teva’s prescription asthma treatment products, QVAR and QVAR Redihaler, which contain beclomethasone dipropionate, a corticosteroid, as well as a hydrofluoroalkane (HFA), an aerosol propellant. Teva acquired the rights to QVAR in 2006. The complaint alleges that beginning in 2014, the year before the last patent claiming beclomethasone dipropionate was to expire, Teva began a multifaceted scheme to delay generic competition to QVAR for as long as possible. The scheme purportedly has four components: 1) product hops, 2) improper Orange Book listings, 3) a reverse payment and 4) sham litigation. A “product hop” is an introduction and transition to a new drug product.

A product hop may take the form of a “soft switch,” which generally is deemed to be legal for antitrust purposes or a “hard switch,” which is not. A “soft switch” involves the introduction of a new product, but the original product is left on the market prior to the generic entry. Thus, consumer choice is left intact as well as a base of patients for whom a newly approved generic can automatically be switched. Conversely, a “hard switch” product hop occurs when a manufacturer removes a brand drug from the market just prior to patent expiration, thus forcing consumers to switch onto a new drug product before the generic entry. When a generic drug comes to market after a hard switch, the brand drug cannot be automatically substituted for the generic at the pharmacy counter.

Plaintiffs filed an amended complaint in September 2023, containing ten claims for relief, a claim for injunctive relief under Section 2 of the Sherman Act, a plethora of claims under state antitrust and consumer protection statutes, and a claim for unjust enrichment. The court on a prior motion to dismiss determined that Plaintiffs sufficiently pleaded a Sherman Act claim and generally alleged a plausible monopolization scheme. However, the court granted Defendants’ motion to dismiss the state law claims in Counts IV and VIII in their entirety, Counts I-IV as to the Mississippi cause of action and Massachusetts antitrust statute, M.G.L. ch. 93A, § 11, Count II as to the California, New York, Kansas and Tennessee causes of action and Counts V-VIII as to the Arkansas and Utah causes of action.

Four components of alleged scheme. First, the FDA issued guidance in 2003 requiring all new, metered-dose inhaler products to include a dose counter. This guidance, however, purportedly exempted inhalers already in the market, such as QVAR. Even so, Teva filed a supplemental NDA in January 2014 to add a dose counter to QVAR, which was approved in May 2014. Teva supposedly discontinued its inhaler without the dose counter in what Plaintiffs characterized as an initial “hard switch product hop.” Plaintiffs further alleged that Teva made a second “hard switch” product hop when, in August 2017, it obtained FDA approval for QVAR Redihaler and discontinued all QVAR sales. Unlike QVAR, QVAR Redihaler dispenses the drug when a user inhales.

Second, Plaintiffs alleged that Defendants improperly listed device-only patents in the Orange Book to deter would-be competitors from launching a generic version of QVAR.

Third, Plaintiffs alleged that one component of the purported monopolization scheme relevant here was an alleged reverse payment, or “pay-for-delay,” deal. Plaintiffs asserted that in January 2020, Amneal Pharmaceuticals (Amneal) filed the first application for a generic version of QVAR. Teva did not sue Amneal but by the end of 2020, Amneal’s plans to secure approval for the generic purportedly “fell silent”. Based upon those circumstances, Plaintiffs contended that Teva agreed to pay Amneal to delay launching a generic version of QVAR.

Fourth, Teva allegedly engaged in “sham litigation.” In 2020, two other generic manufacturers, Cipla Ltd. and Aurobindo Pharma Ltd., filed ANDAs seeking approval for generic versions of QVAR which contained paragraph IV certifications. Teva promptly filed suit against both manufacturers thereby triggering a 30-month stay of FDA approval pursuant to the Hatch-Waxman Act. After stipulated dismissals of several claims, Teva ultimately settled with Aurobindo in December 2022, and prevailed on its remaining claims against Cipla in June 2023.

Reverse payment scheme. The court found that in light of the governing Rule 12(c) standard, Plaintiffs' conjecture regarding an alleged reverse payment scheme was rendered implausible in the face of Defendant's documents, and therefore this claim was dismissed. A reverse payment scheme involves allegations that a brand drug manufacturer agreed to pay a potential generic competitor to delay bringing a generic drug to market. The alleged payment is subject to antitrust scrutiny under the “rule of reason.” To state a reverse payment claim, Plaintiffs must allege facts sufficient to support the legal conclusion that the settlement at issue involves a large and unjustified reverse payment.

At the motion to dismiss phase, the court concluded that Plaintiffs had presented plausible allegations of a reverse payment scheme between Defendant and Amneal, by specifically finding that allegations of Amneal’s announcement of a generic QVAR combined with their unexplained failure to launch the drug and Teva’s unexplained failure to sue Amneal created an inference of a reverse payment. The court had perceived no other alternative explanation and thus accepted the reverse payment allegations as plausible and was left to presume that Amneal’s unexplained failure to launch the generic alternative to QVAR plausibly resulted from a reverse payment.

Based on defendants’ responsive pleading, however, it evolved that that conjecture was not enough. Defendants proffered documentary evidence that Teva did not sue Amneal because it was barred from doing so under a 2016 FTC order. Plaintiffs do not dispute in their amended complaint the existence of the FTC order or the APA, nor their purported effects upon Teva's right to sue Amneal.

The FTC order appeared to have rendered Plaintiffs’ reverse payment claim implausible. Specifically, (1) the FTC order precludes Teva from bringing a patent infringement suit against any entity to which it “divested a product under that order”; (2) the products subject to the order included Beclomethasone products which is defined to include QVAR; (3) Teva’s later Asset Purchase Agreement (APA) with Impax incorporated by reference the FTC order; (4) the APA also included a term that the agreement would be binding upon all “successors and permitted assigns” of Impax; (5) Amneal became a successor to Impax through a merger; and (6) therefore, Teva was prohibited from suing Amneal for any patent infringement claim related to QVAR.

Causation for antitrust standing. The court found that at the pleadings stage Plaintiffs sufficiently alleged antitrust standing. To sustain an antitrust action as a private party, a plaintiff must successfully demonstrate that he has “antitrust standing. At the pleading stage, however, all that is required of a claim is plausibility, and nothing in Defendants' answer warranted a change in the court's previous finding that plaintiffs plausibly alleged causation for purposes of antitrust standing.

Defendants challenged Plaintiff’s standing only as to whether they had properly alleged that there was a causal connection between the alleged antitrust violation and harm to Plaintiffs. Causation, for purposes of antitrust standing, requires Plaintiffs to show that the alleged antitrust violation was a “material cause" of their injury, even if it was not the sole cause of that injury. Whether this essential element of causation has been met is usually, though not always, a consideration for the finder of fact.

In applying this standard to defendants' prior motion to dismiss, the court concluded that Plaintiffs had sufficiently alleged causation to maintain standing as private parties to this antitrust matter. The fact that a previous decision validated Defendants' patents provided an insufficient basis to warrant dismissal of Plaintiffs’ antitrust claim for lack of causation at this stage.

Defendants relied on In re Nexium (Esomeprazole) Antitrust Litig., 842 F.3d 34 (1st Cir, 2016) and In re Solodyn (Minocycline Hydrochloride) Antitrust Litig., No. CV 14-MD-02503, 2018 WL 563144 (D. Mass. Jan. 25, 2018) to assert that, in claims involving patented and generic versions of medical products, a plaintiff cannot properly allege causation if the patent at issue is valid. Yet, this case is distinguishable from both Nexium and Solodyn. In both of those cases, the court required evidence for a claim to survive a motion for summary judgment or a motion for judgment as a matter of law. At the pleading stage, however, all that is required of a claim is plausibility.

Accordingly, the court was unpersuaded by Defendants' arguments that Plaintiffs’ claims should be dismissed in their entirety for want of antitrust standing. Moreover, because this case was not dismissed at the pleading stage, the court denied Defendants’ motion to stay.

The Case is No. 1:23-cv-11131-NMG.

Judge: Gorton, N.

Attorneys: Brooke E. Lowell (Berman Tabacco) for Iron Workers District Council of New England Health and Welfare Fund. Tiffany Marie Knapp (Kirkland & Ellis LLP) for Teva Pharmaceutical Industries Ltd.

Companies: Iron Workers District Council of New England Health; Teva Pharmaceutical Industries Ltd.

Cases: Patent MassachusettsNews