IP Law Daily, PATENT—N.D. Cal.: Claims based on alleged reverse payment settlements for HIV drugs go forward, (Aug 22, 2022)

By Nicole D. Prysby, J.D.

The plaintiff sufficiently alleged that a pharmaceutical manufacturer made multiple reverse payment settlements to delay generic competition and maintain a monopoly over certain HIV drugs.

A health insurance trust sufficiently alleged that a pharmaceutical manufacturer made large and unjustified reverse payment settlements to maintain its monopoly with respect to drugs used for treating HIV, held a federal district court in California. The trust alleged that Gilead Sciences, Inc., made reverse payments to at least two different generic rivals, related to patents and ingredients for drugs used to treat HIV. The trust sufficiently alleged that payments flowed from Gilead to the generic drug manufacturers, partly based on the trust’s allegation that the “sheer number of companies that submitted Paragraph IV certifications” for Gilead’s drugs implies that generic manufacturers saw Gilead’s patents as weak. The court also concluded that the allegations were sufficient to plausibly allege the payments were large and unjustified. Therefore, the trust’s Sherman Act claim went forward. State law claims failed for lack of standing, other than claims under Florida law (Jacksonville Police Officers and Fire Fighters Health Insurance Trust v. Gilead Sciences, Inc., August 19, 2022, White, J.).

Gilead manufacturers drugs to treat HIV, marketed under the brand-names Viread, Emtriva, Truvada, and Atripla. Gilead holds patent rights in emtricitabine (’396 Patent) and in the use of emtricitabine (’245 Patent). Gilead also holds patent rights claiming the combination of TDF and emtricitabine in a single dosage, which it markets as Truvada, and has patent rights claiming the combination of TDF, emtricitabine, and efavirenz in a single dosage that forms Atripla. The trust alleged that Gilead’s rights in these patents have been challenged for decades by companies seeking to manufacture generic versions of the drugs, but no case has been fully litigated because Gilead settled these cases through reverse payment settlements. As an example, the trust described litigation between Gilead and Teva Pharmaceuticals USA, Inc., and Teva Pharmaceutical Industries Ltd.. Teva filed Abbreviated New Drug Applications (ANDAs) approval to manufacture and sell generic versions of Truvada, Atripla, and Viread. The parties settled that case before trial on terms that have not been disclosed.

Gilead filed suit regarding the TDF patents, and that case also ended with a confidential settlement. However, Teva announced that it would launch an exclusive generic version of Viread on December 15, 2017, which was shortly before the last of the relevant patents and exclusivity periods expired on January 25, 2018. The trust alleged that six-week period of exclusivity was worth approximately $106 million to Teva and that it would not have been rational for Gilead to provide Teva with such a valuable benefit unless it believed Teva could have prevailed in the Teva TDF suit. Finally, Teva filed suit on the emtricitabine patents and the parties settled shortly before presenting closing arguments in February 2014. The primary issue in that case was whether the ’396 and ’245 Patents covering emtricitabine were invalid for obviousness.

According to the trust, the settlement in the Teva emtricitabine litigation provided that Teva would stay out of the Truvada market. In return, Gilead would grant it an exclusive license to market a generic version of Truvada. The Trust alleged similar behavior by Gilead with respect to defendant Cipla, Ltd. In 2012, Cipla notified Gilead it amended its ANDA for Viread to include paragraph IV certifications for four patents claiming TDF. Gilead filed lawsuits asserting infringement of the emtricitabine patents and TDF patents. The parties settled the Cipla Litigation in July 2014. With the exception of a license agreement, the parties did not disclose the terms the settlement.

The health insurance trust brought claims under the Sherman Act and state law. Gilead motioned to dismiss the claims.

Sherman Act claim went forward. The Trust sufficiently alleged facts suggesting that payment in the Cipla litigation flowed from Gilead to Cipla. Gilead had an incentive to avoid competition from co-packaged versions of Truvada until 2021 and, if the emtricitabine patents were found to be invalid, Cipla could have begun to market a co-packaged version of emtricitabine and TDF as early as 2018. The Trust also alleged that Gilead has a history of filing paragraph IV litigation relating to Emtriva, Truvada, and Atripla and of settling those cases before trial. The Trust alleged that the “sheer number of companies that submitted Paragraph IV certifications” for those drugs implies that generic manufacturers saw Gilead’s patents as weak. The court found that to be a plausible inference. The allegations were sufficient to show that even if emtricitabine is taken out of the equation, it is plausible the Cipla settlement involved a reverse payment settlement. In addition, approximately two-months after Gilead and Cipla settled the Cipla litigation, Gilead publicly announced that it was licensing seven generic manufacturers, including Cipla, to sell generic versions of two of Gilead’s hepatitis C drugs in 91 developing countries. Reports indicated that one of the drugs “could potentially be worth US$300-US$500m,” and that Cipla was likely to earn the active pharmaceutical ingredient (API) rights to the drug. In light of that timing and the Trust’s allegations that many other companies had the capability to manufacture the APIs, the court concluded it was reasonable to infer that Cipla obtained those rights as part of the settlement with Gilead.

The court also concluded that the allegations were sufficient to plausibly allege the payment was large and unjustified. The parties reached a settlement shortly before the Cipla cases were set to go to trial, when weaknesses in Gilead’s patents allegedly were exposed by the Teva litigation and when future litigation costs had diminished. The Trust alleged that when the parties settled the Cipla emtricitabine suit, Gilead’s most recent 10-K showed it had $27.4 million sales in Emtriva. Although the FDA had approved other ANDAs for generic Emtriva, Cipla was the first-to-file. According to the Trust, if Cipla had prevailed at trial, the exclusivity period “would have been worth millions” to Cipla. The Trust also alleged that the value of the API manufacturing rights for the hepatitis C drugs was approximately $185 million and provided estimates of the value to Cipla of a co-packaged drug even in a competitive market.

Other issues. The Trust is a resident of Florida and included no allegations about where it purchased Truvada. Therefore, state law claims were dismissed for lack of standing, with the exception of claims under Florida law.

The case is No. 4:20-cv-06522-JSW.

Attorneys: Edith Marie Kallas (Whatley Kallas, LLP) for Jacksonville Police Officers and Fire Fighters Health Insurance Trust. Christopher M. Curran (White & Case, LLP) for Gilead Sciences, Inc. Elizabeth H. White (K&L Gates LLP) for Cipla Ltd. and Cipla USA Inc.

Companies: Jacksonville Police Officers and Fire Fighters Health Insurance Trust; Gilead Sciences, Inc.; Cipla Ltd.; Cipla USA Inc.

Cases: Patent CaliforniaNews