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From Antitrust Law Daily, May 21, 2013

Antitrust Claims Proceed Against Drug Makers for Delaying Entry of Muscle Relaxant

By Jeffrey May, J.D.

Purchasers of metaxalone, a prescription muscle relaxant sold under the brand name Skelaxin, adequately alleged that Skelaxin's manufacturer, King Pharmaceuticals LLC, conspired with Mutual Pharmaceutical Company, Inc. to aid King in its effort to delay and obstruct generic competition for Skelaxin, the federal district court in Chattanooga, Tennessee, has ruled. A motion to dismiss the antitrust claims filed by King and Mutual was denied (In re: Skelaxin (Metaxalone) Antitrust Litigation, May 20, 2013, Collier, C.).

At the outset, the court rejected the defendants’ contention that each of the alleged anticompetitive acts had to be considered in isolation. The plaintiffs—pharmacies, labor organizations, health insurance companies, other businesses, and individuals that purchased or reimbursed purchasers for buying Skelaxin—alleged an overarching conspiracy. The allegations of anticompetitive conduct included the filing of patent infringement suits and Food and Drug Administration “citizen petitions” to delay generic competition, as well as the purported agreement between King and Mutual, under which King allegedly paid Mutual $200 million not to enter the market with any generic metaxalone product.

Viewing the factual allegations as a whole, the court determined that the plaintiffs adequately alleged an antitrust injury. The plaintiffs contended that the defendants’ conduct forced them to pay substantial overcharges to purchase metaxalone. They alleged that they would have paid less for metaxalone prior to April 9, 2010—the first generic form of metaxalone entered the market—because, but for the defendants’ conduct, Mutual would have entered the market with generic metaxalone prior to that date. Overcharges to consumers were one type of injury contemplated by the antitrust laws, the court explained.

In addition, the plaintiffs adequately alleged causation. While the court agreed with the defendants that there were no express terms in the agreement between King and Mutual prohibiting Mutual from entering the market with generic metaxalone, the plaintiffs’ additional allegations, with respect to the sum of payments received by Mutual and the relationship of the written agreement to the broader anticompetitive scheme, made the agreement more suspect. The plaintiffs pointed to the size of the payments to Mutual and a "secret meeting" between top executives of the two companies. The court could reasonably infer that the defendants’ challenged conduct was a “material cause” of the overcharges incurred by the plaintiffs.

Noerr-Pennington Immunity. The defendants’ sham litigation and petitioning efforts were not protected from antitrust liability under the Noerr-Pennington doctrine, the court held. The plaintiffs alleged that patent infringement litigation involving King and Mutual was objectively baseless and subjectively filed and maintained in bad faith. The plaintiffs contended that “[a]lthough there was no longer any justiciable controversy, both parties continued the litigation for an additional five years as a subterfuge to maintain their outward appearances—to the FDA, the FTC, and the public—as adversaries rather than conspirators.” The court also concluded that, while not their "strongest argument," the plaintiffs also adequately alleged that patent infringement litigation between King and another would-be generic competitor was “an attempt to interfere directly with the business relationships of a competitor.”

The plaintiffs also plausibly alleged a series of FDA citizen petitions filed by King and Mutual were sham petitions to delay the entrance of generic metaxalone into the market and, therefore, not protected by Noerr-Pennington immunity. Rejecting the defendants' argument that the sham exception to Noerr does not apply to FDA citizen petitions because the citizen petition process was not adjudicatory in nature, the court ruled that the defendants' petitions were objectively baseless and filed subjectively in bad faith.

Tennessee Trade Practices Act. The court rejected the defendants' assertions that indirect purchaser plaintiffs, primarily of retail pharmacies, did not allege sufficient facts to establish that the defendants’ conduct had “substantial effects” on Tennessee trade and commerce to bring the conduct within the Tennessee Trade Practices Act (TTPA). Despite the defendants' arguments that the members of the proposed indirect purchaser class were non-residents of Tennessee with no business ties to the Tennessee pharmaceutical market, the indirect purchaser plaintiffs adequately alleged that the TTPA applied because the challenged conduct affected Tennessee trade or commerce to a “substantial degree.”

King had its corporate headquarters and principal place of business in Tennessee and operated “a centralized branded prescription distribution center and manufacturing facilities” in Tennessee. Also, it was the sole seller of metaxalone in the market until April 2010.

Statute of Limitations. Although most of the alleged anticompetitive conduct occurred more than four years before the earliest complaint was filed, the federal antitrust claims were not time-barred under the statute of limitations, the court ruled. In addition, the court refused to dismiss state law claims as time-barred at this early stage of the litigation.

Applying the continuing violations doctrine, the court concluded that the plaintiffs sufficiently alleged that acts, which were part of a continuing conspiracy and occurred outside the limitations period, resulted in overcharges to the plaintiffs for metaxalone well into the limitations period. Even if the continuing violations doctrine was not applicable, the claims would not be time-barred based on the fraudulent concealment doctrine. The court rejected the defendants' assertions that the doctrine did not apply because: there was no “concealment” on the part of the defendants because all of their acts were a matter of public record; there was nothing “wrongful” about their conduct; and, given the public nature of their acts, there was no reason that the plaintiffs, if reasonably diligent, could not have discovered the facts of this case at an earlier date. Thus, the court refused to dismiss the plaintiffs’ fraudulent concealment claims.

The case is No. 1:12-md-2343.

Attorneys: Keith D, Stewart (Stewart Dupree, PA) for Knight Pharmacy. Andrew K. Solow (Kaye Scholer LLP) for King Pharmaceuticals, Inc.

Companies: King Pharmaceuticals LLC; Mutual Pharmaceutical Company, Inc.

MainStory: TopStory Antitrust TennesseeNews

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