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From Antitrust Law Daily, February 15, 2018

ACTOS purchasers allowed to pursue claims against Takeda based on FDA’s 2010 ruling

By Robert B. Barnett Jr., J.D.

Drug purchasers who allegedly were forced to pay inflated prices for the diabetes drug ACTOS can amend their complaint against Takeda Pharmaceuticals to allege claims based on the theory that a FDA ruling in March 2010, which relied on Takeda’s allegedly false statements, delayed generics’ entry into the market, a New York federal district court has ruled on remand. The Second Circuit had affirmed the district court’s earlier dismissal of all claims based on a delay in the marketing of generic alternatives to ACTOS, other than the delay caused to generic manufacturer Teva Pharmaceuticals. The district court, however, has allowed the purchasers to pursue claims based not just on a delay to Teva but also on a delay to other generic manufacturers, as long as those delays were alleged to have been caused by the FDA ruling. In so doing, the New York court has also rejected Takeda’s FRCP Rule 15 argument, finding that forcing Takeda to defend these claims would not be unduly prejudicial (In re ACTOS End-Payor Antitrust Litigation, February 12, 2018, Abrams, R.).

Takeda Pharmaceuticals obtained FDA approval to sell ACTOS, its brand-name diabetes drug, after filing a 1999 New Drug Application. After approval, Takeda listed three patents in the FDA’s Orange Book (only one patent purpose could be listed per patent): ‘777 (drug-substance patent to expire in 2011), ‘584 (method-of-use patent to expire in 2016), and ‘404 (method-of-use paten to expire in 2016). In 1999 and 2002, however, Takeda allegedly told the FDA that patents ‘584 and ‘404, which were listed as method-of-use patents, were actually patents for both drug-substance and method-of-use. These statements to the FDA were not made public.

Beginning in 2003, generic manufacturers swarmed, applying to enter the ACTOS market when the patents expired. The three first filers challenged the ‘584 and ‘404 patents under both allowed theories: (1) a direct challenge to the patents’ validity or applicability (thus risking a patent infringement suit) and (2) an indirect challenge that the generics’ method of use was different from Takeda’s method of use. Of the second wave of six generic manufacturers to submit applications, all but one relied only on the theory of directly challenging the patents’ validity or applicability. Only Teva Pharmaceutical Industries, Ltd., submitted an application relying solely on the method-of-use exception.

Beginning also in 2003, Takeda sued the generics other than Teva for patent infringement. In 2009, it also sued Teva. Shortly thereafter, the FDA received a citizen petition, arguing that Teva’s New Drug Application violated the FDA’s rule requiring that any such application challenging a patent with two types of protection include statements challenging both types of patents. Teva had challenged only the method-of-use patent because it did not know at that time that Takeda was claiming that the patent was for both drug-product and method-of-use. When Takeda again told the FDA in January 2010 that the ‘584 and ‘404 patents were both drug-product and method-of-use patents for ACTOS, the FDA, which accepts such statements without independently confirming them, granted in March 2010 the citizen’s petition and dismissed Teva’s application.

Takeda ultimately settled the pending patent infringement suits with the generic manufacturers, including Teva. Meanwhile, indirect purchasers of ACTOS sued Takeda in New York federal district court, alleging that Takeda had delayed generic entry into the ACTOS market for two years by falsely describing the two patents to the FDA. As a result, they argued, the price for ACTOS was kept artificially high for those two years. The district court, however, dismissed the complaint on the ground that the ACTOS purchasers could never prove that the generics knew about the allegedly false patent descriptions, which their claims required. The purchasers appealed to the Second Circuit, which mostly affirmed the lower court’s decision, except that it remanded for a consideration of Teva’s claims, which did not require any knowledge of false patent descriptions.

Earlier misrepresentations. On remand, the purchasers proposed two amendments to their original complaint. First, they wanted to claim that Takeda’s 1999 and 2002 misrepresentations delayed the generics’ entries into the ACTOS market for two years. Even if they did not know about the misrepresentation when they filed their applications, they argued, the generics would have gained that knowledge and would have entered the market earlier than they did. The generics would have gained the knowledge, the purchasers argued, because the FDA would have told them to use only the method-of-use argument. The Second Circuit, however, had already more or less rejected this argument. Even though this precise theory of the case was not before the Second Circuit, the appellate court had explicitly rejected a "similarly flawed theory." As a result, the trial court ruled that the Second Circuit’s ruling had precluded this argument.

2010 FDA ruling. The Second Circuit, however, approved as plausible the theory that Teva was delayed in entering the ACTOS market by Takeda’s 2010 misrepresentation of its patents. The Second Circuit, on the other hand, never addressed whether claims on behalf of the other generics could be pursued on the theory that their failure to amend the applications caused an antitrust injury. Thus, the purchasers’ second proposed amendment was to expand the Teva theory to the other generics. The question for the trial court was: Did the Second Circuit’s ruling preclude this expanded theory or was it still open for consideration?

The court concluded that it was still open for consideration. Any amendment alleging that Takeda’s misrepresentations caused the FDA’s ruling, which in turn caused a delay in the generics’ entry into the market, would still be consistent with the Second Circuit’s ruling. Any amendment, on the other hand, alleging that the generics knew about Takeda’s January 2010 misrepresentation must be dismissed, in accordance with the Second Circuit’s ruling. Thus, any theory that depended on the generics’ reliance of the publicly available March 2010 FDA decision—rather than knowledge of Takeda’s January 2010 misrepresentation—would be acceptable.

Rule 15. Takeda also argued that the court should deny leave to amend the complaint under Federal Rules of Civil Procedure Rule 15, which prohibits amendments that were made in bad faith, would cause undue delay, would result in undue prejudice, or were made despite ample prior opportunity. The trial court, however, rejected denial of leave to amend under Rule 15 on any of those grounds. Acknowledging that the purchasers "could have been more diligent in advancing their theory," leave should be freely granted, the court said. Although the case has been pending for four years, it was still only at the motion to dismiss stage. Requiring Takeda to defend these theories, which are similar to the ones already being pursued, would not be unduly prejudicial. Nor would Takeda be unfairly disadvantaged by having to respond to this closely related theory.

The trial court, therefore, granted leave to the purchasers to amend their complaint to the extent that it alleges causation based on the FDA’s March 2010 ruling.

The case is No. 13-CV-9244 (RA).

Attorneys: Elizabeth G. Arthur (Hilliard & Shadowen LLP) and Karen M. Leser-Grenon (Shepherd, Finkelman, Miller & Shah, LLC) for UFCW Local 1776 & Participating Employers Health and Welfare Fund. Brian Philip Murray (Glancy Prongay & Murray LLP) and Gregory Bradley Linkh (Glancy Binkow & Goldberg LLP) for Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund. Dan Drachler (Zwerling, Schachter & Zwerling, LLP) for 199SEIU-National Benefit Fund. Jeffrey Ira Weinberger (Munger, Tolles & Olson LLP) for Takeda America Holdings, Inc., Takeda Pharamceuticals, U.S.A., Inc. and Takeda Development Center Americas, Inc. Jessica Leigh Margolis (Wilson Sonsini Goodrich & Rosati) for Mylan, Inc.

Companies: UFCW Local 1776 & Participating Employers Health and Welfare Fund; Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund; 199SEIU-National Benefit Fund; Takeda America Holdings, Inc.; Takeda Pharamceuticals, U.S.A., Inc.; Takeda Development Center Americas, Inc.; Mylan, Inc.

MainStory: TopStory Antitrust NewYorkNews

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