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From Health Law Daily, May 22, 2013

Antitrust immunity not available to brand name muscle relaxant drug manufacturer for agreement with generic competitor

By Anthony H. Nguyen, JD

A drug manufacturer’s motion to dismiss, denying it conspired to artificially inflate the price of a prescription muscle relaxant by engaging in an anticompetitive scheme, was denied (In re: Skelaxin (Metaxalone) Antitrust Litigation, May 20, 2013, Collier, C). The district court held that a class composed of pharmacies, large businesses, labor organizations, health insurance companies, and individuals were able to plausibly allege an antitrust injury and the drug manufacturer was not able to rely upon the Noerr-Pennington doctrine for immunity. Litigation between the drug manufacturer and a generic drug manufacturer could be considered fraud on the court and public. Additionally, citizen petitions and litigation that possibly affected interstate commerce were properly alleged by the class. Allegations that the drug manufacturer’s actions also tolled the statute of limitations were permitted.

Background. Various pharmacies, large businesses, labor organizations, health insurance companies, and individuals (class) that purchased or reimbursed purchasers of Skelaxin® (metaxalone), a branded prescription muscle relaxant manufactured by King Pharmaceuticals (King), brought a class action suit against King for anticompetitive conduct that resulted in overcharges paid.

In 1962, the FDA approved the sale and marketing of metaxalone to provide relief for individuals suffering from acute musculoskeletal conditions. The drug was sold and marketed under the Skelaxin brand by the pharmaceutical Elan; at the time the label did not indicate whether Skelaxin was to be taken with food. The patent on the active ingredient in metaxalone expired in 1979, but in 2002, Elan was granted a new patent based on results of a food effects study it had commissioned showing participants who took metaxalone with food had a higher rate and extent of absorption. However, at the time, public literature was available indicating that the drug should be taken with food.

King, based in Tennessee, acquired the rights to Skelaxin and was issued an additional patent for the drug based on the same food effects study in 2002. King listed the new patent in the FDA’s Orange Book, which in addition to listing drug product approvals, lists patents that are purported to protect each drug. Patent listings and use codes are provided by the drug application owner, and the FDA is obliged to list them. In order for a generic drug manufacturer to win approval of a drug under Hatch-Waxman, the generic manufacturer must certify that they will not launch their generic until after the expiration of the Orange Book-listed patent, or that the patent is invalid, unenforceable, or that the generic product will not infringe the listed patent.

The class alleged that the patent was invalid based on prior art and obviousness and that King knew the patent was invalid when it listed it in the Orange Book. King filed two citizen petitions asking for the FDA to reconsider or stay its 2004 determination that the food effects data that was the subject of both patents could be carved out of metaxalone labels, allowing drug manufacturers to produce generic versions. A number of drug manufacturers, including Mutual Pharmaceuticals (Mutual), opposed King’s petitions.

Subsequently, King entered into an agreement with Mutual; the agreement paid Mutual $35 million plus 10 percent of future revenue from Skelaxin sales. The class alleged that the agreement obstructed other generic competitors from entering the market because Mutual ceased efforts to launch a generic version as it was paid $200 million for forgoing its pursuit of a generic version of Skelaxin. During this period, King was alleged to have filed additional sham petitions with the FDA, as well as sham infringement suits against other generic drug manufacturers. The class alleged that but for King’s unlawful conduct a generic metaxalone product would have entered the market prior to invalidation of the patents in 2010.

King sought to dismiss all claims arguing that: (1) the class did not allege facts establishing an antitrust injury, as well as overcoming Noerr-Pennington immunity; (2) the class failed to support allegations regarding substantial effects on state trade and commerce; (3) unjust enrichment claims were not well-founded; (4) the class was time-barred in regards to federal Sherman Act and state law claims; and (5) fraudulent concealment allegations were insufficient to toll any statute of limitations.

Antitrust. Generally, overcharges to consumers resulting from a party’s actions are indicative of antitrust injury. According to the district court, although there were no express provisions in the agreement between King and Mutual, the upfront payment and share of future revenue in effect induced Mutual from entering the market. Additionally, King had listed its patent in the FDA’s Orange Book and filed a number of citizen petitions questioning the FDA’s intent to carve out the food effects aspect of metaxalone labels. The court held that in total it could infer the conduct was a “material cause” of the overcharges incurred by the class, and thus, an antitrust injury for purposes of determining whether the motion to dismiss was warranted.

Under Noerr-Pennington a business can petition the federal government even when such efforts would result in anticompetitive effects because of First Amendment protection. However, the “sham” exception to Noerr-Pennington holds that using the petitioning process simply as an anticompetitive tool without legitimately seeking a positive outcome to the petitioning destroys immunity for the petitioner. The district court concluded that for purposes of the motion to dismiss, the sham allegations regarding litigation and citizen petitions were plausible and sufficient to overcome Noerr-Pennington immunity.

State claims. In permitting the class’ interference with state trade and commerce claims to continue, the district court noted that King potentially received hundreds of millions of dollars in overcharges for metaxalone. The district court also noted that it was reasonable to infer that some of this money would have flowed back to Tennessee. The agreement money that went to Mutual also deprived the state of additional funds. Moreover, the court agreed that the class had argued that its unjust enrichment claims were in the alternative and not reliant upon the interference claims.

The case number is 1:12-md-2343.

Attorneys: Keith D Stewart (Stewart Dupree, PA) for Knight Pharmacy. Andrew K. Solow (Kaye Scholer LLP (NY)) for King Pharmaceuticals, Inc. Amber M. Nesbitt (Wexler Wallace LLP) for United Food and Commercial Workers Union and Midwest Health Benefits Fund. David Wilson Garrison (Wexler Wallace LLP) for Pirelli Armstrong Retiree Medical Benefits Trust. C. Celeste Creswell (Miller & Martin PLLC (Chattanooga)) for Mutual Pharmaceutical Company, Inc. Arnold Levin (Levin Fishbein Sedran & Berman) for Allied Services Division Welfare Fund. Arthur N. Bailey (Arthur N. Bailey & Associates) for Johnson’s Village Pharmacy, Inc. Andrew Coyne Curley (Berger and Montague, PC) for Professional Drug Company, Inc., Stephen L. LaFrance Pharmacy, Inc., Meijer, Inc., and Rochester Drug Co-Operative, Inc. Christopher M. Burke (Scott & Scott LLP) for Plumbers and Pipefitters Local 572 Health and Welfare Fund. Charles Andrew O’Brien III (Charles Andrew O’Brien, Attorney at Law) for Louisiana Health Service Indemnity Company. Kathleen Styles Rogers (The Kralowec Law Group) for Bidwell Pharmacy & Medical Supple, Inc. Scott E. Perwin (Kenny Nachwalter P.A.) for Supervalu Inc. Anna T. Neill (Kenny Nachwalter P.A.) for Walgreen Co. Barry L. Refsin (Hangley, Aronchick, Segal, Pudlin and Schiller (PA) for Rite Aid Corporation.

Companies: Knight Pharmacy; King Pharmaceuticals, Inc.; United Food and Commercial Workers Union and Midwest Health Benefits Fund; Pirelli Armstrong Retiree Medical Benefits Trust; Mutual Pharmaceutical Company, Inc.; Allied Services Division Welfare Fund.; Johnson’s Village Pharmacy, Inc.; Professional Drug Company, Inc.; Stephen L. LaFrance Pharmacy, Inc.; Meijer, Inc.; Rochester Drug Co-Operative, Inc.; Plumbers and Pipefitters Local 572 Health and Welfare Fund; Louisiana Health Service Indemnity Company; Bidwell Pharmacy & Medical Supple, Inc.; Supervalu Inc.; Walgreen Co.; Rite Aid Corporation.

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