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From Antitrust Law Daily, March 24, 2015

Aggrenox purchasers’ “pay for delay” claims proceed against pharmaceutical companies

By Greg Hammond, J.D.

Direct and indirect purchasers of the prescription drug Aggrenox could proceed with claims that various pharmaceutical companies violated state and federal antitrust laws by entering into a “pay for delay” agreement. The federal district court in Bridgeport, Connecticut, partially denied the defendants’ four motions to dismiss, finding that the antitrust claims were not time-barred under the relevant statutes of limitations, and the defendants sufficiently alleged antitrust injury, a “large” and “unjustified” reverse payment, monopoly power, attempt and conspiracy (In re Aggrenox Antitrust Litigation, March 23, 2015, Underhill, S.).

Background. Aggrenox is a brand-name prescription medication consisting of a particular combination of dipyridamole and aspirin. Boehringer Ingelheim Pharma GmbH & Co. KG, Boehringer Ingelheim International GmbH, and Boehringer Ingelheim Pharmaceuticals, Inc. obtained FDA approval in 1999 for Aggrenox’s use to lower the risk of stroke in patients who have already had a stroke or transient ischemic attack. In 2007, Barr Pharmaceuticals, Inc. and Barr Laboratories, Inc. filed an Abbreviated New Drug Application seeking approval to market a generic equivalent of Aggrenox. Boehringer filed suit against Barr, but the parties settled all patent litigation between them, contemporaneously entering into a settlement agreement, an Aggrenox license, a license for another prescription drug, and a co-promotion agreement. Barr agreed to drop its patent challenge and not market generic Aggrenox until July 2015, and to use the sales force of its subsidiary, Duramed Pharmaceuticals Inc. and Duramed Pharmaceuticals Sale Corp., to educate doctors about Aggrenox. Barr would be compensated over $120 million in royalties.

Direct and indirect purchasers, along with Humana, individually, filed separate suits against the various pharmaceutical companies, alleging that the settlement was intended to delay entry of generic Aggrenox in violation of federal and state antitrust laws. The defendants filed four motions to dismiss.

Statute of limitations. First, the court denied the defendants’ motions to dismiss the antitrust claims as time-barred under the Sherman Act’s four-year statute of limitations. Despite arguments to the contrary, the court noted that a purchaser suing a monopolist for overcharges paid within the previous four-years may satisfy the conduct prerequisite to recovery by pointing to anticompetitive actions taken before the limitations period. Because the plaintiffs alleged previous and ongoing overcharges, the court concluded that the federal antitrust claims were timely for all overcharges alleged to have been incurred within the four years preceding the filing of the claims.

The same analysis applied to the state law antitrust claims. Consequently, the court found that the state law antitrust claims, stemming from alleged overcharges incurred within the relevant statutory period, are not time-barred. Claims made in connection with overcharges that were allegedly incurred prior to the filing of the claims by a longer period than the relevant statute of limitations, however, were dismissed with prejudice.

Antitrust injury. The defendants also argued that the plaintiffs failed to plausibly allege antitrust injury, because any injury was predicated upon an assumption that Barr would have prevailed on its patent challenge, and because the plaintiffs made only conclusory allegations that the patent was weak. The court rejected both arguments, noting that patent validity was not at issue in this case. Rather, the relevant question is whether the settlement included a large and unjustified reverse payment leading to the inference of profit-sharing to avoid the risk of competition.

Large, unjustified reverse payment. The court rejected the defendants’ arguments that “payment,” under the Supreme Court’s recent decision in FTC v. Actavis (133 S. Ct. 2223, 2013-1 Trade Cases ¶78,419), necessarily involves a transfer of money. Reading Actavis in the way the defendants suggest would render the opinion “meaningless,” according to the court. Instead, the court concluded that large and unjustified reverse payments are not limited to cash, because reverse payments can bring with them the risk of significant anticompetitive effects regardless of the particular form the transfer of value takes. Therefore, a settlement agreement that causes a large and unexplained net transfer of value from a patent-holder to an alleged patent-infringer “may fairly be called a reverse-payment settlement,” the court stated.

The defendants additionally argued that the plaintiffs failed to sufficiently plead that the co-promotion agreement was made as consideration for the settlement, and that the plaintiffs failed to plead with sufficient specificity the fair value of the services, the excess of the payments over that value, or the total value of the alleged reverse payment. The sufficiency arguments were rejected, however, because the defendants disagreed among themselves whether the challenged settlement agreement actually prevents Boehringer from introducing an authorized generic. Further, the court could not conclude that the plaintiffs failed to sufficiently plead a large and unjustified reverse payment because the complaints specifically allege the terms of the settlement and their relative value, which were found plausible on their face.

Monopoly power. Next, the defendants argued that the plaintiffs failed to state a claim because they did not sufficiently define a relevant product market. Once again, the court rejected the defendants’ argument, finding that when direct evidence is available that a party profitably charges supracompetitive prices, the existence of market power can be established from that fact alone. Because the plaintiffs' allegations—that Boehringer was able to charge supracompetitive prices for Aggrenox in a market with no cross-elasticity of demand with other drugs—were highly plausible, the court denied the motion to dismiss on lack of monopoly power grounds.

Attempt, conspiracy. The defendants’ final argument, in support of their motion to dismiss the federal antitrust claims, was that the plaintiffs’ pleading on intent amounted to mere recitation of the element. However, the court determined that if the settlement included a large and unjustified reverse payment that was made in order to avoid the risk of patent invalidation, then antitrust liability may attach under Actavis, and that particular anticompetitive harm was necessarily intentional, even if intent was proved by inference.

State claims. With regard to the defendants’ motions to dismiss the plaintiffs’ state law claims, the court rejected Humana’s argument that the statutes of limitations should be tolled because the defendants fraudulently concealed their allegedly unlawful conduct, finding that Humana failed to meet its pleading burden for tolling. Nevertheless, certain state antitrust claims were dismissed without prejudice with respect to claims under the laws of states where the named plaintiffs did not plead injury.

Personal jurisdiction. Teva Pharmaceutical Industries, Ltd., which is organized under Israeli law, was dismissed from the suit for lack of personal jurisdiction. However, the plaintiffs may seek leave to replead claims against Teva in the event that evidence is revealed in discovery of Teva’s participation in the specific agreements underlying the case.

The case number is 3:14-md-2516 (SRU).

Attorneys: Barbara J. Hart (Lowey Dannenberg Cohen & Hart, P.C.) for Humana, Inc. Mathew P. Jasinski (Motley Rice LLC) for A.F. of L.- A.G.C. Buildings Trade Welfare Plan. Derek Y. Brandt (Simmons Browder Gianaris Angelides & Barnerd LLC) for Painters District Council No. 30 Health & Welfare Fund. David C. Raphael, Jr. (Smith Segura & Raphael, LLP) and Ephraim R. Gerstein (Garwin Gerstein & Fisher, LLP) for Miami-Luken, Inc. Christina H.C. Sharp (Girard Gibbs, LLP) and Natalie Finkelman Bennett (Shepherd, Finkelman, Miller & Shah, LLP) for International Union of Operating Engineers Local 132 Health and Welfare Fund. Lee Albert (Glancy Binkow & Goldberg LLP) for Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund. Brigid M. Carpenter (Baker, Donelson, Berman, Caldwell & Berkowitz, PC) and Robert D. Carroll (Goodwin Procter, LLP) for Barr Pharmaceuticals, Inc., Duramed Pharmaceuticals Inc., and Barr Laboratories, Inc. Alison Hanstead (White & Case) for Boehringer Ingelheim International GmbH and Boehringer Ingelheim Pharmaceuticals Inc. Brigid M. Carpenter (Baker, Donelson, Berman, Caldwell & Berkowitz, P.C.) for Teva Pharmaceuticals USA, Inc. Robert D. Carroll (Goodwin Proctor, LLP) for Teva Pharmaceutical Industries Ltd.

Companies: Boehringer Ingelheim Pharma GmbH & Co. KG; Boehringer Ingelheim International GmbH; Boehringer Ingelheim Pharmaceuticals, Inc.; Teva Pharmaceutical Industries, Ltd.; Teva Pharmaceuticals USA, Inc.; Barr Pharmaceuticals, Inc.; Barr Laboratories, Inc.; Duramed Pharmaceuticals Inc.; Duramed Pharmaceuticals Sale Corp.; Humana, Inc.

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