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In re Actos End-Payor Antitrust Litigation

United States Court of Appeals, Second Circuit

February 8, 2017

In re ACTOS End-Payor Antitrust Litigation
v.
Takeda America Holdings, Inc., Takeda Pharmaceuticals, U.S.A., Inc., Takeda Development Center Americas, Inc., Takeda Pharmaceuticals Company Limited, Defendants-Appellees, United Food and Commercial Workers Local 1776 & Participating Employers Health and Welfare Fund, individually and on behalf of all others similarly situated, 199 SEIU-National Benefit Fund, Plaintiffs-Appellants, Crosby Tugs, LLC, International Union of Operating Engineers Local 132 Health and Welfare Fund, Painters District Council No. 30 Health and Welfare Fund, Individually and on Behalf of All Others Similarly Situated, NECA-IBEW Welfare Trust Fund, individually and on behalf of all others similarly situated, City of Providence, Rhode Island individually and on behalf of all others similarly situated, Minnesota and North Dakota Bricklayers and Allied Craftworkers Health Fund, on behalf of themselves and all others similarly situated, New England Electrical Workers Benefit Fund, Individually and on behalf of all others similarly situated, Man-U Service Contract Trust Fund, on behalf of themselves and all others similarly situated, Consolidated Plaintiffs-Appellants, Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund, Fraternal Order of Police, Fort Lauderdale Lodge 31, Insurance Trust Fund, A.F. of L. A.G.C. Building Trades Welfare Plan, individually and on behalf of all others similarly situated, Greater Metropolitan Hotel Employers-Employees Health and Welfare Fund, on behalf of themselves and all other similarly situated, Local 17 Hospitality Benefit Fund, on behalf of itself and all others similarly situated, Dennis Kreish, on behalf of himself and all others similarly situated, Teamsters Union Local 115 Health & Welfare Fund, on behalf of themselves and all others similarly situated, Consolidated Plaintiffs, Ranbaxy Laboratories, Ltd., Mylan, Inc., Mylan Pharmaceuticals Inc., Actavis PLC, f/k/a Actavis, Inc., Watson Laboratories, Inc., Ranbaxy, Inc., Ranbaxy Pharmaceuticals, Inc., Teva Pharmaceuticals Industries, Ltd., Teva Pharmaceuticals USA, Inc., Defendants.

          Argued: September 16, 2016

         Plaintiffs-appellants allege that defendants-appellees delayed competitors from marketing generic versions of a drug by falsely describing two patents to the Food and Drug Administration, thereby causing plaintiffs to pay monopoly prices for the drug in violation of state-law analogs of the Sherman Act. The district court (Abrams, J.) dismissed the complaint for failure to plausibly allege that the false descriptions caused the delay. The judgment of the district court is AFFIRMED IN PART, VACATED IN PART, and REMANDED for further proceedings consistent with this opinion.

          Steve D. Shadowen (Jayne A. Goldstein, Pomerantz LLP, Weston, FL; Kenneth A. Wexler, Wexler Wallace LLP, Chicago, IL, on the brief), Hilliard & Shadowen LLP, Austin, TX, for Plaintiffs-Appellants.

          Rohit K. Singla (Blanca F. Young, Munger, Tolles & Olson LLP, San Francisco, CA; Jeffrey I. Weinberger, Adam R. Lawton, Munger, Tolles & Olson LLP, Los Angeles, CA, on the brief), Munger, Tolles & Olson LLP, San Francisco, CA, for Defendants-Appellees.

          Thomas M. Sobol, Davis S. Nalven, Gregory T. Arnold, Kristen A. Johnson, Hagens Berman Sobol Shapiro LLP, Cambridge, MA; Linda P. Nussbaum, Bradley J. Demuth, Nussbaum Law Group, P.C., New York, NY, for amicus curiae Direct Purchasers in support of no party.

          Before: Jacobs and Livingston, Circuit Judges, and Rakoff, District Judge.[1]

          RAKOFF, District Judge:

         Plaintiffs allege that the defendants-appellees (collectively "Takeda") prevented competitors from timely marketing a generic version of Takeda's diabetes drug ACTOS by falsely describing two patents to the Food and Drug Administration. Plaintiffs claim that these false patent descriptions channeled Takeda's competitors into a generic drug approval process that granted the first-filing applicants a 180-day exclusivity period, which in turn acted as a 180-day "bottleneck" to all later-filing applicants. Of the ten generic applicants, nine took that route. However, one generic manufacturer, Teva Pharmaceutical Industries, Ltd. and Teva Pharmaceuticals USA, Inc. (collectively "Teva"), sought approval via another regulatory mechanism, but was thwarted when the FDA announced that all generic manufacturers would be required to take the bottlenecked route. The FDA's announcement was expressly based on Takeda's representations that it had correctly described its patents. Thereafter, Takeda settled pending patent infringement suits with the three first-filing generic manufacturers and Teva on terms that kept them out of the market until August 2012 (though Teva, unlike the three first-filing generics, could only enter the market as an authorized distributor at that time), and with the other six later-filing generic manufacturers on terms that kept them out of the market for another 180 days after that, i.e., until at least February 2013.

         Plaintiffs and the class they seek to represent are drug purchasers who allege that they were wrongfully obliged to pay monopoly prices for ACTOS from January 2011, when Takeda's patent on the active ingredient in ACTOS expired, to at least February 2013, when the mass of generic market entry occurred.

         The district court dismissed plaintiffs' antitrust claims for failing to plausibly allege that Takeda's false patent descriptions caused any delay in generic market entry. The district court reasoned that, inter alia, plaintiffs failed to identify a viable regulatory route for generic drug approval that would have avoided the 180-day bottleneck, and that even if they had, they failed to plausibly allege how the generic manufacturers would have avoided Takeda's infringement lawsuits, all of which were voluntarily settled. Plaintiffs appealed.

         To the extent plaintiffs' theory posits a delay in the marketing of generic alternatives to ACTOS by all the generic applicants other than Teva, we affirm, because plaintiffs' theory presupposes that these applicants were aware of Takeda's allegedly false patent descriptions when they filed their applications, which is not supported by well-pleaded allegations. However, because plaintiffs' theory as to Teva does not require any knowledge of the false patent descriptions, we reach other issues as to Teva and find that plaintiffs plausibly alleged that Takeda delayed Teva's market entry. We therefore vacate the judgment of the district court to that limited extent.

         Discussion

         Although the violations of which plaintiffs ultimately complain are antitrust violations, they occur in the context of the pharmaceutical regulatory scheme governed by the Federal Food, Drug, and Cosmetic Act, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (the "Hatch-Waxman Act"), and various rules promulgated thereunder. We focus in this appeal on two complementary aspects of that regulatory scheme: an initial applicant's duty to inform the FDA of patents covering a proposed new drug, and a subsequent applicant's duty to assure the FDA that a proposed generic version of the drug will not infringe those patents.

         More specifically, under the Hatch-Waxman Act, an initial or "brand" manufacturer, before marketing a new drug, must obtain approval from the FDA by filing a New Drug Application ("NDA"). 21 U.S.C. § 355(b).[2] An NDA must include, inter alia, "the patent number and the expiration date of any patent which claims the drug for which the applicant submitted the application or which claims a method of using such drug and with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use, or sale of the drug." Id. § 355(b)(1). The NDA must classify these patents as "drug" (or "drug substance"), "drug product, " or "method of use" patents. See 21 C.F.R. §§ 314.53(c)(1)(ii), 314.53(b) (1999) & (2002).

         The FDA publishes the brand applicants' patent submissions, including the patent descriptions, in a tome titled Approved Drug Products with Therapeutic Equivalence Evaluation, commonly known as the "Orange Book." See Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 132 S.Ct. 1670, 1676 (2012); 21 C.F.R. § 314.53(e). The FDA considers its role in publishing the Orange Book to be purely ministerial. See, e.g., aaiPharma Inc. v. Thompson, 296 F.3d 227, 237 (4th Cir. 2002). Thus, it does not review the brand applicants' patent submissions for substantive accuracy; instead, it simply publishes them as submitted. See Caraco, 132 S.Ct. at 1677.

         After a new drug has been approved, an applicant seeking to market a generic version may file an Abbreviated New Drug Application ("ANDA"). See 21 U.S.C. § 355(j)(2)(A). Among the many requirements a generic applicant must fulfill is to "assure the FDA that its proposed generic drug will not infringe the brand's patents." See Caraco, 132 S.Ct. at 1676. Generic applicants learn which patents they must address by consulting the Orange Book, see id., and may satisfy their obligation of assuring the FDA of non-infringement in several different ways. See 21 U.S.C. § 355(j)(2)(A)(vii)-(viii). Of relevance here, when a generic applicant wishes to market a drug in seeming competition with one or more of an existing brand manufacturer's patents, it has two choices:

         One option is to certify that each of the brand's patents "is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted." Id. § 355(j)(2)(A)(vii)(IV). Filing such a "Paragraph IV certification" is a justiciable act of patent infringement entitling the patent holder to sue. See 35 U.S.C. § 271(e)(2)(A). To encourage these certifications despite the risk of litigation, the first generic filer that submits a Paragraph IV certification and has its ANDA approved receives a valuable 180-day window of exclusivity during which it alone is permitted to market a generic version of the drug. 21 U.S.C. § 355(j)(5)(B)(iv); see also FTC v. Actavis, Inc., 133 S.Ct. 2223, 2228-29 (2013). Before December 8, 2003, the Hatch-Waxman Act did not provide any mechanism by which this 180-day exclusivity period could be lost. See Teva Pharm. USA, Inc. v. Sebelius, 595 F.3d 1303, 1306-07 (D.C. Cir. 2010).

         A second option is available when a brand's patent covers a method of using a drug. In that circumstance, an applicant seeking to market a generic version of the drug for a non-patented use can submit a "Section viii statement" that "carves out" any patented uses from its proposed label. 21 U.S.C. § 355(j)(2)(A)(viii). This route "is typically used when the brand's patent on the drug compound has expired and the brand holds patents on only some approved methods of using the drug." See Caraco, 132 S.Ct. at 1677. Filing a Section viii statement is not a justiciable act of infringement, so applicants that take this route are not immediately vulnerable to suit. Moreover, while a successful applicant is not entitled to an exclusivity period, it is exempt from any other generic's exclusivity period pursuant to ...


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