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From Antitrust Law Daily, February 11, 2016

Opana ER purchasers may proceed with pay-for-delay claims

By Greg Hammond, J.D.

Direct purchasers of the prescription pain medication Opana ER may move forward with allegations that various pharmaceutical companies delayed entry of generic Opana ER to the Oxymorphone ER market by entering into an illegal reverse payment agreement. In denying the pharmaceutical companies’ motion to dismiss the direct purchasers’ claims, the court concluded that the plaintiffs sufficiently alleged a large and unjustified reverse payment and antitrust injury (In re Opana ER Antitrust Litigation, February 10, 2016, Leinenweber, H.).

Endo Health Solutions Inc., Endo Pharmaceuticals Inc., and Penwest Pharmaceuticals Co. manufactured Opana ER and filed a patent infringement suit against Impax Laboratories, Inc. after Impax sought to market a generic version of Opana ER. The companies reached two agreements to settle the patent infringement suit: (1) a settlement and license agreement; and (2) a development and co-promotion agreement. The settlement agreement contained an “Endo Credit” provision under which Endo eventually paid Impax $102,049,000 due to a decline in Opana ER sales. Under the development and co-promotion agreement for a Parkinson’s disease drug, Endo paid Impax $10 million up-front. Endo also agreed to refrain from launching an authorized generic version of Opana ER during Impax’s 180-day exclusivity period (No-AG agreement).

The direct purchasers filed suit, alleging that the reverse-payment agreement violated the Sherman Act. Indirect purchasers or end-payor plaintiffs also filed suit, alleging violations of various state antitrust, consumer protection, and unjust enrichment laws. Endo and Impax moved to dismiss both complaints.

Reverse payment. The court first determined that the direct purchasers adequately alleged that the settlement contained a reverse payment. In particular, the direct purchasers alleged that the settlement and license agreement insured that Impax would receive a large reverse payment—anywhere from $33 to $49 million—in exchange for staying off the market either through the Endo Credit if sales of Opana ER dropped off, or through the No-AG agreement if sales of Opana ER remained steady after 2.5 years. The court noted that, even though Endo was free to compete with Impax in other areas, by agreeing not to launch an AG during Impax’s 180-day exclusivity period, Endo conveyed significant value to Impax.

Large, unjustified payment. The direct purchasers also adequately alleged that the payments were large and unjustified, according to the court. The court reasoned that even the most conservative estimate of the value of the reverse payment in the Endo-Impax settlement—$33 million—is large in comparison to the value of the avoided litigation costs, demonstrating that the plaintiffs sufficiently pleaded the existence of a large reverse payment under Actavis. In addition, the court found that the defendants could not justify the $10 million upfront payment under the development and co-promotion agreement because the money was guaranteed even if Impax did not manufacture the drug or the drug did not gain FDA-approval.

Antitrust injury. Plaintiffs stated antitrust injury by alleging that the reverse payment was designed to, and did in fact: (1) delay the entry of Impax and other less expensive generic versions of Opana ER; (2) fix, raise, maintain or stabilize the price of brand and generic versions of Opana ER; (3) allow Endo to make a new Opana ER product, and to make sales that otherwise would have gone to less expensive generic Opana ER; and (4) allocate nearly 100 percent of the Oxymorphone ER market to Endo for at least two and one-half years. The court reasoned that the allegations, if true, raised a reasonable expectation that discovery would reveal sufficient evidence to prove the large reverse payment was made to prevent competition on various fronts.

Illinois Brick. The end-payor plaintiffs’ state antitrust claims were partially dismissed. The Illinois antitrust claims were dismissed because only the Illinois Attorney General may bring a class action asserting indirect purchaser antitrust claims. The Puerto Rico antitrust claim was also dismissed because there was no court interpretation allowing antitrust recovery by indirect purchasers or an express Illinois Brick repealer statute enacted by the legislature. The Rhode Island antitrust claim was not saved by the state’s Illinois Brick repealer statute because the Endo-Impax settlement was entered prior to enactment of the statute.

The case is No. 14 C 10150.

Attorneys: Andrew C. Curley (Berger & Montague PC) and Archana Tamoshunas (Garwin Gerstein & Fisher LLP) for Rochester Drug Co-Operative, Inc. David C. Raphael (Smith Segura & Raphael, LLP) for Value Drug Co. Danielle R. Foley (Venable LLP) for Impax Laboratories, Inc. Christine C. Levin (Dechert LLP) for Endo Health Solutions Inc., Endo Pharmaceuticals Inc. and Penwest Pharmaceuticals Co.

Companies: Rochester Drug Co-Operative, Inc.; Value Drug Co.; Impax Laboratories, Inc.; Endo Health Solutions Inc.; Endo Pharmaceuticals Inc.; Penwest Pharmaceuticals Co.

MainStory: TopStory Antitrust IllinoisNews

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