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From Antitrust Law Daily, March 24, 2016

Indirect purchasers’ price fixing declaratory judgment claims proceed in Lamictal suit

By Linda O’Brien, J.D., LL.M.

In an action against brand name pharmaceutical company SmithKline Beecham Corporation and generic drug manufacturer Teva Pharmaceutical Industries for entering into an agreement to delay generic competition for the medication, Lamictal, indirect purchasers could pursue declaratory judgments that the defendants engaged in price fixing, market allocation, and monopolization, the federal district court in Newark, New Jersey has ruled (In re Lamictal Indirect Purchaser and Antitrust Consumer Litigation, March 22, 2016, Walls, W.).

Pharmaceutical company SmithKline Beecham Corporation, doing business as GlaxoSmithKline (GSK), markets the prescription drug Lamictal that is used to treat epilepsy and bipolar disorder. GSK held U.S. Patent No. 4,602,017 (the ’017 patent), which covered Lamictal tablets and chewables. GSK had the exclusive right to sell Lamictal tablets and chewables until the patent expired in 2008. Teva Pharmaceuticals filed applications with the Food and Drug Administration (FDA) to market a generic version of Lamictal.

In 2002, GSK sued Teva for patent infringement. Following a bench trial in which the court invalidated the claim of the ’017 patent that covered the Lamictal’s active ingredient, lamotrigine, GSK and Teva reached a settlement under which Teva could begin to sell generic lamotrigine chewables in June 2005, approximately 37 months prior to the expiration of the ’017 patent. Additionally, GSK granted Teva a royalty-free, non-transferable license under the patent to manufacture and sell generic versions of Lamictal tablets, starting in July 21, 2008, when the ’017 patent expired. GSK also agreed not to launch an authorized generic until January 2009.

In August 2012, two health and welfare funds and a health plan participant filed a complaint on behalf of indirect purchasers of Lamictal. The plaintiffs claimed that the settlement unlawfully prevented competition in the lamotrigine tablet market. Their complaint asserted ten causes of action—three seeking declaratory judgments, six state law claims, and a claim for unjust enrichment. The defendants filed a joint motion for judgment on the pleadings that the Sherman Act declaratory judgment claims failed to allege a justiciable case or controversy and that all of the plaintiffs’ state law claims and unjust enrichment claim were barred by the applicable statutes of limitations.

Declaratory judgment claims. The court found that the plaintiffs’ declaratory judgment claims presented justiciable cases or controversies. In the first three causes of action, the plaintiffs sought declaratory judgments that the defendants violated the Sherman Act by engaging in price fixing, allocation of markets, and monopolization.

Although the U.S. Supreme Court decision Illinois Brick v. Illinois, 431 U.S. 720 (1977), held that indirect purchasers of price-fixed products do not suffer an injury within the meaning of Section 4 of the Clayton Act, the direct purchaser status is not mandated to bring claims under Section 16 of Clayton Act, which allows plaintiffs to seek injunctive relief for the same Sherman Act violations, the court explained.

Because the indirect purchaser plaintiffs were not automatically barred from bringing a Section 16 claim for injunctive relief, they were not automatically barred from bringing claims under the Declaratory Judgment Act. To show entitlement to injunctive relief, a class must demonstrate a threatened loss or injury cognizable in equity that proximately resulted from the alleged antitrust injury. The plaintiffs’ allegation that the settlement agreement between GSK and Teva caused them to pay inflated prices for lamotrigine tables was sufficient to meet that standard, the court determined.

State law claims. However, the plaintiffs’ state law antitrust and unfair competition claims were time-barred under the applicable statutes of limitations. According to the court, the limitations period for California’s Cartwright Act and Unfair Competition Law, the Michigan Antitrust Reform Act, and the New York Donnelly Act is four years. The statute of limitations under the New York consumer protection law is three years. The plaintiffs’ claims accrued in August 2006, when the settlement agreement began to prevent generic competition, and the plaintiffs’ suit was well outside the four- and three-year limitations periods.

The continuing violation doctrine, fraudulent concealment doctrine, and doctrine of equitable tolling did not render the plaintiffs’ claims timely, the court noted. The plaintiffs’ purchases of lamotrigine tablets at artificially-inflated prices were the continuing effects of the allegedly unlawful settlement agreement, and the defendants’ disclosure of the material terms of the settlement did not toll the running of the limitations period, the court concluded.

The case is No. 2:12-cv-05120-WHW-CLW.

Attorneys: Michael John Debenedictis (Debenedictis & Debenedictis LLC) for Carolyn McAnaney, International Brotherhood of Electrical Workers, Local 38, Health and Welfare Fund and International Brotherhood of Electrical Workers, Local 595, Health and Welfare Fund. Douglas Scott Eakeley (Lowenstein Sandler PC) for Smithkline Beecham Corp. and Glaxosmithkline LLC. Mayra Velez Tarantino (Patunas Tarantino LLC) for Teva Pharmaceutical Industries Ltd. and Teva Pharmaceuticals USA, Inc.

Companies: International Brotherhood of Electrical Workers, Local 38, Health and Welfare Fund; International Brotherhood of Electrical Workers, Local 595, Health and Welfare Fund; Smithkline BeechamCorp.; Glaxosmithkline LLC; Teva Pharmaceutical Industries Ltd.; Teva Pharmaceuticals USA, Inc.

MainStory: TopStory Antitrust NewJerseyNews

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