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ALTMAN v. BAYER CORP.

December 22, 2000

MARCY ALTMAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
V.
BAYER CORPORATION, BARR LABORATORIES, INC. AND THE RUGBY GROUP, INC., DEFENDANTS.



The opinion of the court was delivered by: Mcmahon, District Judge.

MEMORANDUM DECISION AND ORDER GRANTING MOTION TO REMAND TO STATE COURT

Plaintiff Marcy Altman brings claims on behalf of herself and other New York state indirect purchasers of the patented antibiotic drug Ciprofloxacin ("Cipro") against defendants Bayer Corporation, Barr Laboratories, and The Rugby Group, Inc., for violations of state antitrust and deceptive trade practice statutes. She contends that Defendants violated New York General Business Law §§ 340, 349 by agreeing to pay Defendants Barr and Rugby $49 million, and to make additional payments of $24.5 million per year to Barr, in exchange for Barr's agreement to refrain from introducing and marketing a Cipro generic equivalent.

Plaintiff alleges that Barr and Bayer restrained trade in violation of section 340 of the New York General Business Law (the "Donnelly Act") by (1) restraining Barr and other generic manufacturers from marketing a generic equivalent of Cipro; (2) stabilizing the price of Cipro; (3) allocating the market for Cipro and its generic equivalent; and (4) transferring monopoly profits to Barr and Rugby. (Compl. ¶ 2.) She also alleges that the agreement between the defendants amounted to a deceptive trade practice under section 349 of the New York General Business Law.

Defendants removed the case to federal court, asking this court to assert jurisdiction under 28 U.S.C. § 1338(a). Defendant so moves on the ground that an essential element of plaintiff's state law antitrust claim requires resolution of a substantial question of patent law: namely, that in order to prove injury-in-fact, plaintiff must demonstrate that Bayer's patent for the compound ciprofloxacin is invalid.

For the reasons stated below, I conclude that this case should be remanded to state court.

FACTS PERTINENT TO THE MOTION

On May 29, 1984, Bayer filed the last of a series of patent applications for Cipro, and subsequently obtained the Cipro patent on June 2, 1987.

On or about October 22, 1991, Barr filed for Abbreviated New Drug Approval ("ANDA") for a generic version of Cipro. In an ANDA filing, a company seeking to manufacture a generic equivalent must disclose its position vis-a-vis the original patent and certify that no patent for the generic equivalent has been filed with the FDA, and one of the following: (1) that the patent for the brand name drug has expired; (2) that the patent for the brand name drug will expire on a particular date and the generic company does not seek to market its generic product before that date; or (3) that the patent for the brand name drug is invalid or will not be infringed upon the proposed generic company's product. (Compl. ¶ 28.) Barr certified that Bayer's patent was invalid.

On or about December 6, 1991, Barr notified Bayer of its ANDA filing for ciprofloxacin, and on or about January 16, 1992, Bayer brought a patent infringement suit against Barr. Under the Drug Price Competition and Patent Restoration Act, Pub.L. No. 98-417, 98 Stat. 1585 (1984), commonly known as the Hatch-Waxman Amendments, if a patent owner responds with a patent infringement lawsuit after an ANDA filing, FDA approval is postponed for 30 months. (Compl. ¶ 29) Hatch-Waxman also gives a 180-day period of market exclusivity to the first manufacturer successfully to file an ANDA. (Id. ¶ 30) No other generic manufacturer filing an ANDA for that drug may market its product until the exclusivity period expires. The exclusivity period commences on the date when the generic manufacturer begins marketing the new drug or, if there is a patent infringement claim against it, on the date when the generic manufacturer receives a patent infringement decision in its favor, whichever is earlier. If neither of these conditions occurs, the exclusivity period cannot expire and no other generic manufacturer may market its generic version of the affected drug.

Ten months after Bayer filed the patent infringement suit, on November 30, 1992, Bayer and Barr executed a stipulation ("the Stipulation") extending the 30-month waiting period until entry of a "final judgment" in the patent litigation. (Id.) Bayer and Barr further agreed that for purposes of the Stipulation, a "final judgment" would exist only after the conclusion of all appeals to the Court of Appeals for the Federal Circuit, or the expiration of the time permitted for such appeals. The patent court signed the Stipulation and Order on December 8, 1992.

On or about January 4, 1995, the FDA tentatively approved Barr's ANDA for a Cipro generic equivalent. At that time, the patent suit between Bayer and Barr had not gone to "final judgment." According to plaintiff, if Bayer and Barr had not entered into the Stipulation, Barr would have been legally entitled to market its Cipro generic equivalent at that time.

Defendants Bayer and Barr entered into another agreement on or about January 8, 1997 ("the Agreement") in which Barr agreed not to market its Cirpo generic equivalent in the United States or otherwise trigger the 180 day exclusivity period in exchange for Bayer's promise to pay $24.5 million each to Barr and Rugby. The Agreement also provided for a Contingent Non-Exclusive Supply Arrangement, effective as of January 1998, which ends when the patent expires in December of 2003. Under the Contingent Non-Exclusive Supply Arrangement, Bayer may: (i) supply ciprofloxacin to Barr to sell under a generic label, or (ii) pay Barr an annual amount based on Bayer's sales of Cipro for the next six years, which were estimated to be approximately $24 million a year. Plaintiffs allege that the defendants did not advise the patent court of the material terms of the Agreement. At the time the Agreement was executed, the parties entered a consent judgment in which defendant Barr acknowledged the validity and enforceability of Bayer's patent.

Plaintiff alleges that the effect of the Stipulation and the Agreement was to delay the approval to market Barr's generic version of Cipro, and at the same time, to avoid triggering the 180 day market exclusivity period. The result was to foreclose any ...


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