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From Antitrust Law Daily, June 24, 2014

Conspiracy claims dismissed in action over delayed generic competition to Provigil

By Linda O’Brien, J.D., LL.M.

In an action against the brand and generic pharmaceutical manufacturers of a sleeping disorder medication, direct purchasers failed to show that the settlement agreements entered into by the drug companies to resolve patent infringement litigation established an overall antitrust conspiracy, the federal district court in Philadelphia has ruled. Thus, the defendant drug companies’ motion for summary judgment was granted (King Drug Company of Florence, Inc. v. Cephalon, Inc., June 23, 2014, Goldberg, M.).

Generic drug manufacturers, pharmaceutical distributors, retailers, and health plan providers that purchased a sleeping disorder medication (modafinil) sold under the brand name Provigil, filed a class action against pharmaceutical manufacturer, Cephalon, Inc., and four generic drug manufacturers for anticompetitive conduct and monopolization by delaying generic competition to Provigil in violation Sections 1 and 2 of the Sherman Act. The plaintiffs alleged that the manufacturers engaged in restraint of trade by entering into reverse payment settlements to resolve patent infringement suits, thereby delaying generic competition for Provigil. The plaintiffs and defendants filed cross-motions for summary judgment.

Direct evidence. The court found that the plaintiffs failed to show direct evidence that the settlement agreements Cephalon entered into with the four generic companies were products of an overall antitrust conspiracy. There was no dispute that the settlement agreements were negotiated separately and contained the same central term of the grant to each company a non-exclusive license to sell generic Provigil after a certain date in exchange for a substantial sum of money. Each settlement agreement also contained a contingent launch provision that allowed each generic company to sell its product earlier than the licensing effective date if another company brought a generic Provigil to the market.

The plaintiffs’ evidence of the settlement agreements—which contain substantially similar language and structure; press releases by Cephalon announcing each settlement; and statements by generic company representatives indicating awareness of the licensing date and contingent launch provisions in other settlements did not indisputably establish a conspiracy, according to the court. Further, there was no direct evidence the generic companies agreed among themselves or such agreement included Cephalon.

Circumstantial evidence. The circumstantial evidence of record did not indisputably show an agreement between Cephalon and the generic defendants to restrain trade in the modafinil market, the court determined. Although the generic companies acted in parallel ways, the incentives in the agreements provided equally plausible independent explanations for their conduct. In return for accepting a date certain for market entry, each of the generic companies were compensated separately. Moreover, there was no evidence of a significant motive for the generic companies to collude among themselves and none of the agreements required participation by the other generic companies. The contingent launch provision, in addition to having significant value for the generic companies, was a contractual protection obtained entirely through independent negotiations with Cephalon. Thus, the lack of motive was further reason why a finder of fact could not determine that the defendants’ actions were the result of an overall conspiracy, the court concluded.

The case is No. 2:06-cv-1797.

Attorneys: Andrew William Kelly (Odom & Des Roches LLP), Bruce E. Gerstein (Garwin Gerstein and Fisher LLP), and Daniel Berger (Berger & Montague, PC) for King Drug Company of Florence, Inc. Allen D. Black (Fine, Kaplan & Black), and David P. Germaine (Vanek Vickers & Masini PC) for Meijer, Inc. Monica L. Rebuck (Hangley Aronchich Segal Pudlin & Schiller), and Scott E. Perwin (Kenny Nachwalter, PA) for Walgreen Co. Joseph H. Meltzer (Kessler Topaz Meltzer & Check, LLP) for Vista Healthplan, Inc. Brian J. Sodikoff (Katten Muchin Rosenmann LLP), Edward A. Diver (Langer Grogan & Diver PC), and Julie A. Katz (Welsh & Katz Ltd.) for Apotex, Inc. Emily R. Whelan (Wilmer Hale) for Cephalon, Inc. C. Fairley Spillman (Akin Gump Strauss Hauer & Feld LLP) for Mylan Laboratories, Inc., and Mylan Pharmaceuticals, Inc. Gregory L. Skidmore (Kirkland Ellis LLP) for Teva Pharmaceutical Industries, Ltd. Christopher K. Diamond (Venable LLP) for Ranbaxy Laboratories, Ltd.

Companies: King Drug Company of Florence, Inc.; Vista Healthplan, Inc.; Apotex, Inc.; Meijer, Inc.; Walgreen Co.; Cephalon, Inc.; Mylan Laboratories, Inc.; Teva Pharmaceutical Industries, Ltd.; Barr Pharmaceuticals, Inc.; Ranbaxy Laboratories, Ltd.

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