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From Antitrust Law Daily, September 20, 2018

Claims against Wyeth, Teva over restraining generic competition for Effexor scaled back

By Nicole D. Prysby, J.D.

Claims brought by insurance carriers, municipalities, employee welfare benefit plans, and others that purportedly paid inflated costs for the brand-named drug Effexor XR against Wyeth LLC and Teva Pharmaceuticals USA, Inc. have been scaled back by the federal district court in New Jersey. The end-payor purchasers (EPPs) adequately pleaded reliance and higher prices. The claims were based on an alleged anticompetitive scheme that prevented a generic version of the antidepressant Effexor XR from entering the market. The EPPs alleged that Wyeth fraudulently obtained patents and engaged in sham patent litigation and that Wyeth and Teva entered into an unlawful reverse payment agreement. The court rejected arguments that the state law claims were preempted by federal patent law or were untimely. Claims under the consumer protection laws for five states (California, Nevada, New Mexico, New York, and North Carolina) went forward, while claims under Illinois, Main, and Rhode Island law were dismissed. Claims under the antitrust laws for several states were dismissed for lack of standing or failure to allege concerted action (In re Effexor Antitrust Litigation, September 18, 2018, Sheridan, P.).

Background. The case arose from allegations that Wyeth and Teva engaged in an anticompetitive scheme that prevented the generic drug of Effexor XR from entering the market. Claims were brought by both EPPs and direct purchaser plaintiffs (DPPs). Sherman Act clams by the DPPs were dismissed in 2014, but the EPPs claims were not as they were based on state antitrust and consumer protection acts.

After Teva filed an Abbreviated New Drug Application (ANDA), seeking approval of a generic version of Effexor XR, Wyeth brought suit against Teva for infringement. The parties settled the suit, with Wyeth allowing Teva to sell a generic version of Effexor IR before the original compound patent for venlafaxine expired in June 2008 and agreeing that it would not compete with Teva’s marketing of a generic version of Effexor IR by launching its own authorized generic during that period. Wyeth brought infringement suits against 16 additional generic companies that sought to market a generic version of Effexor XR, and eventually settled each suit.

Specifically, the EPPs alleged that Wyeth fraudulently obtained three separate, but related patents, from the U.S. Patent and Trademark Office (PTO); listed the patents in the Orange Book; engaged in sham litigation relating to the patents; entered into an unlawful reverse payment agreement with Teva; and manipulated the 180 day first-to-file period to sustain Wyeth’s and Teva’s exclusivity and collectively prevent other generic companies from entering the market. Wyeth and Teva motioned for judgment on the pleadings with respect to the EPPs.

Federal law preemption. Wyeth and Teva argued that the fraudulent patent listing and sham litigation claims were preempted by federal patent law. The court rejected that argument because not every theory of the claim required resolution of a substantial question of federal law and the state antitrust and consumer protection claims require proof of elements not found in a patent cause of action. The court also rejected an argument that claims based on the reverse settlement agreement were preempted, because the claims were based on antitrust, not patent law.

Statute of limitations. The court rejected an argument by Wyeth and Teva that antitrust claims in Kansas, Mississippi, Montana, and Tennessee, and consumer protection claims in Illinois, New York, and Tennessee should be dismissed since these statutes impose a statute of limitations of four years or less. The court sided with the EPPs, who argued that the claims were timely under the continuing-violation doctrine. The EPPs alleged that they were overcharged for Effexor XR for June 2008 through July 2010 because of the reverse settlement agreement. Because the EPPs filed their claims in September 2011, the claims were timely.

State consumer protection claims. Claims under the law of three states were dismissed. Claims under the Illinois Antitrust Act were dismissed because the Act prohibits indirect purchaser class actions and the EPPs essentially asserted only antitrust claims. Claims under the Maine Consumer Protection Act were dismissed for lack of an allegation that the allegedly unfair practices induced a consumer to make purchases. EPPs’ Rhode Island Unfair Trade Practices and Consumer Protection Act claims also failed since they are not "consumers" within the meaning of the Act.

Claims under five state laws were allowed to go forward. The EPPs’ claims under the California Unfair Competition Law adequately pleaded reliance because the claims were predicated on unlawful and unfair business practices. Claims under the Nevada Deceptive Trade Practices Act could go forward because the EPPs were not required to plead reliance. Claims under the New Mexico Unfair Practices Act could go forward because allegations of a gross disparity in price were sufficient to state a claim. North Carolina Unfair and Deceptive Trade Practices Act claims could go forward because an allegation of higher prices demonstrates a harm to the consuming public. Claims under the New York Consumer Protection from Deceptive Acts and Practices Act also went forward.

Standing. Wyeth and Teva challenged the EPPs’ Article III standing for antitrust claims brought under the laws of the District of Columbia, because the EPPs named no plaintiff in D.C. The court agreed, dismissing those claims because the EPPs failed to allege that any named plaintiff either resides in or made purchases and/or reimbursement for Effexor XR in the District of Columbia.

They also sought dismissal of EPP’s Illinois, Rhode Island, and Utah state antitrust claims, for lack of standing because the injury was likely only a small portion of the injury caused by the defendants’ alleged conduct. The court agreed as to Illinois and Rhode Island, but allowed the plaintiffs leave to amend the claims under Utah law.

Conspiracy. The court dismissed the EPPs’ Kansas, New York, and Tennessee antitrust claims, because those states require unlawful behavior between two or more individuals and the EPPs alleged only unilateral conduct by Wyeth (alleged fraud before the PTO and baseless patent litigation).

Notice challenges. Wyeth and Teva argued that the EPPs failed to satisfy the pre-filling notice requirements in states that require them. The court allowed claims under Maine’s Unfair Trade Practices Act to go forward because its notice requirements are not jurisdictional, but dismissed claims under Arizona, Nevada, Utah, Massachusetts, and West Virginia law. The court also dismissed the claims under Tennessee consumer protection statutes, because the law prohibits the use of class actions.

The case is No. 3:11-cv-05661-PGS-LHG.

Attorneys: John A. Macoretta (Spector Roseman & Kodroff, PC) for Man-U Service Contract Trust Fund. Liza M. Walsh (Walsh Pizzi O'Reilly Falanga LLP) and Megan Depasquale (White & Case LLP) for Wyeth, Inc. Michael E. Patunas (Patunas Law LLC) for Teva Pharamaceutical Industries Ltd. and Teva Pharmaceuticals USA, Inc.

Companies: Man-U Service Contract Trust Fund; Wyeth, Inc.; Teva Pharamaceutical Industries Ltd.; Teva Pharmaceuticals USA, Inc.

MainStory: TopStory Antitrust StateUnfairTradePractices NewJerseyNews

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