Antitrust Law Daily Wrap Up, TOP STORY—D.N.J.: Lipitor suit dismissed over failure to estimate alleged reverse payment, (Sep 15, 2014)

By Jeffrey May, J.D.

Drug wholesalers cannot proceed with claims that Pfizer, Inc. and Ranbaxy, Inc. entered into a reverse payment settlement agreement (RPSA) that blocked generic competition for the pharmaceutical drug atorvastatin calcium sold under the brand name Lipitor. The federal district court in Trenton, New Jersey, has dismissed with prejudice the antitrust claims of a proposed class of direct purchasers of Lipitor seeking recovery of overcharges that were allegedly caused by a settlement of patent litigation. Because the plaintiffs failed to provide a reliable foundation for estimating the monetary value of the alleged non-monetary “reverse payment,” the court could not determine the agreement's reasonableness under the antitrust laws (In re Lipitor Antitrust Litigation, September 12, 2014, Sheridan, P.).

The direct purchaser plaintiffs alleged that Pfizer and Ranbaxy entered into an unlawful RPSA in 2008 by signing a settlement agreement resolving multiple litigations pending worldwide. The settlements covered lawsuits related to three brand drugs pending in the United States: Lipitor, Caduet, and Accupril.

Under the settlement, in exchange for Ranbaxy’s alleged promise to stay out of the Lipitor market until an agreed-upon entry date, November 30, 2011, Pfizer allegedly gave substantial financial inducements to Ranbaxy. The plaintiffs identified the financial inducements from Pfizer to Ranbaxy as follows: (1) Pfizer’s “sweetheart” agreement to dismiss damages claims likely worth hundreds of millions of dollars in litigation over generic versions of Lipitor's high blood pressure drug Accupril in exchange for a token “pretextual” payment of $1 million; and (2) the right to market generic Lipitor in at least 11 foreign markets outside the United States. Although not specifically addressed in the complaint, the court noted that the settlement also resolved patent litigation involving the calcium channel blocker Caduet, which is used to treat high blood pressure and migraines.

According to the plaintiffs, the alleged RPSA constituted a conspiracy to allocate the entire U.S. market for atorvastatin calcium to Pfizer until November 30, 2011. Pfizer purportedly sought to protect from generic competition its “blockbuster” cholesterol-lowering drug Lipitor, which grossed $1 billion per month.

The court examined the challenged agreement under the framework established in the U.S. Supreme Court's 2013 decision in FTC v. Actavis, Inc. In Actavis, the Supreme Court instructed lower courts scrutinizing alleged RPSAs to look at the size of the so-called reverse payment because an “unexplained large reverse payment” may “provide strong evidence” of antitrust activity.

In order to determine if a non-monetary payment violated the antitrust laws, it had to be converted to a reliable estimate of its monetary value, the district court explained. The plaintiffs principally argued that the settlement of Pfizer’s claim in Accupril was a non-monetary payment. However, the plaintiffs did not adequately value the non-monetary payment to a reliable measure of damages, according to the court. The court described the plaintiffs' use of the bond amount ($200 million) or the difference in sales ($225 million to $70 million) as “guesswork.” The plausibility of the complaint depended on a reasonable foundation to estimate the cash value of the non-monetary reverse payment, in the court’s view.

“Plaintiffs must plead the allegations of the Complaint as if they were standing in the shoes of the parties at the time the alleged wrong occurred,” the court explained. “This means Plaintiffs must allege a measure of damages accepted within the industry and a discussion of the settlement factors relating to the claim of damages settled at that time. None of this is adequately alleged in the Complaint.”

The case is Civil Action No. 3:12-cv-02389 (PGS).

Attorneys: Kimberly Marion Hennings (Garwin Gerstein & Fisher LLP) for Burlington Drug Co., Inc. and Value Drug Co. Brian K. Herrington (Don Barrett PA) for Professional Drug Co., Inc. Debra Gaw Josephson (Roberts Law Firm PA) for Stephen L. LaFrance Holdings, Inc. Andrew Coyne Curley (Berger & Montague PC) for Rochester Drug Co-Operative, Inc. David S. Nalven (Hagens Berman Sobol Shapiro) for American Sales Co. Inc. Liza M. Walsh (Connell Foley, LLP) for Pfizer Inc. Allyn Zissel Lite (Lite DePalma Greenberg, LLC) for Ranbaxy Laboratories Ltd.

Companies: Burlington Drug Co., Inc.; Value Drug Co.; Professional Drug Co., Inc.; Stephen L. LaFrance Holdings, Inc.; Rochester Drug Co-Operative, Inc.; American Sales Co. Inc.; Pfizer Inc.; Ranbaxy Laboratories Ltd.

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