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Reproduced with permission from Pharmaceutical Law & Industry Report, 11 PLIR , 9/20/13. Copyright ஽ 2013 byThe Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com Interpreting Actavis, Young said that even though the generic defendants in the Nexium case did not receive Plaintiffs’ Antitrust Claims May Proceed any kind of direct monetary payment from AstraZenecain return for staying off the market with their generic Under Actavis’s Rule of Reason Approach versions of Nexium, Actavis does not require reversepayments to be so narrowly defined.
‘‘Nowhere in Actavis did the Supreme Court explic- itly require some sort of monetary transaction to take The maker of the brand-name heartburn treatment place for an agreement between a brand and generic Nexium and several potential generic competitors manufacturer to constitute a reverse payment,’’ Young that allegedly agreed to stay out of the generic Nexium market must defend Sherman Act claims ‘‘This Court does not see fit to read into the opinion a brought by direct purchasers and end-payers of the strict limitation of its principles to monetary-based ar- drug, a federal judge ruled Sept. 11 (In re Nexium (Es- rangements alone,’’ he wrote. ‘‘Adopting a broader in- omeprazole) Antitrust Litigation, D. Mass., No. 1:12- terpretation of the word ‘payment,’ on the other hand, serves the purpose of aligning the law with modern-day Judge William G. Young of the U.S. District Court for the District of Massachusetts denied the drugmakers’ In addition, Young said the drugmaker defendants motions to dismiss the direct purchasers and end- failed to ‘‘put forward a shred of affirmative evidence payers’ claims challenging a patent litigation settlement tending to show that the agreements into which they al- agreement between Nexium maker AstraZeneca and legedly entered produced any countervailing procom- petitive benefits whatsoever.’’ Young also rejected the Young found that the purchasers had sufficiently defendants’ argument that the direct Purchasers failed to allege a plausible relevant market, finding that the di-rect purchasers’ complaint ‘‘alleges more than enough AstraZeneca Disagrees. In a Sept. 13 email, Michele L.
facts to enable a reasonable jury to find that the Defen- Meixell, director of corporate communications at Astra- Zeneca, told Bloomberg BNA that ‘‘the company dis- He also rejected the defendants’ arguments that all of agrees with the Court’s decision.’’ the agreements between AstraZeneca and the generic ‘‘We are confident that our agreements are lawful defendants were immune from antitrust scrutiny under and will be found lawful under application of the cor- the Noerr- Pennington doctrine.
rect legal standard and law,’’ she said, but she did not Under the Noerr- Pennington doctrine, which takes address what the company’s next steps would be.
its name from two U.S. Supreme Court cases, a party In the current case, AstraZeneca is alleged to have that exercises its First Amendment right to petition the agreed to enter into a no-authorized generic agreement government for redress generally is immune from anti- with generic companies Ranbaxy Pharmaceuticals Inc., trust liability. But the judge said the consent agree- Ranbaxy Inc., and Ranbaxy Laboratories Ltd. (collec- ments at issue were not eligible for such protection.
tively ‘‘Ranbaxy’’), and to pay it over $1 billion. In addi- ‘‘The ways in which parties maneuver to transform a tion, under the settlement of the Nexium litigation, As- settlement agreement into a judicially approved consent tra is alleged to have forgiven certain contingent liabili- judgment,’’ he said, ‘‘cannot be fairly characterized as ties owed by Teva Pharmaceutical Industries Ltd., Teva direct ‘petitioning’ ’’ immunized by Noerr- Pennington.
USA Inc. (collectively ‘‘Teva’’), and Dr. Reddy’s Labora- Accordingly, the court said the purchasers suffi- tories Ltd. and Dr. Reddy’s Laboratories Inc. (collec- ciently pleaded violations of Sherman Act Sections 1 tively ‘‘Dr. Reddy’s’’), tied to Teva and Dr. Reddy’s al- and 2 of the Sherman Act under Actavis’s rule of rea- leged past infringement of AstraZeneca’s patents re- son approach and said they could proceed with their claims challenging continuing harms flowing from theNexium patent litigation settlement.
Supreme Court’s Ruling. In FTC v. Actavis Inc., U.S., Young did grant the drugmakers’ motions to dismiss 133 S.Ct. 2223 (2013), the U.S. Supreme Court in June some of the purchasers’ state antitrust and consumer ruled that reverse payments, which generally involve protection claims on statute of limitations grounds.
payments from branded drug companies to genericdrug companies in exchange for the generic staying off Antitrust Attoneys Weigh In. Meanwhile, antitrust at- the market, may not escape antitrust scrutiny (11 PLIR torneys tell Bloomberg BNA that the district court’s de- cision in the Nexium case, which interprets and applies COPYRIGHT ஽ 2013 BY THE BUREAU OF NATIONAL AFFAIRS, INC.
the high court’s rule of reason approach adopted in Ac- titrust laws of eight states and the consumer protection tavis, may be a guide to how district courts will ap- laws of two other states for various reasons.
proach such reverse payment cases post-Actavis.
Attorney James M. Burns, an antitrust partner in the Washington office of Dickinson Wright, told Bloomberg the court denied the motions and requested further BNA Sept. 13 that Young’s decision may indicate that it briefing on two issues—namely, the end-payers’ stand- may be harder for drug companies to get reverse pay- ing under Rule 23 and their claims under Illinois anti- ment cases dismissed in the early stages of the litiga- Explaining that the court ‘‘may have acted hastily on ‘‘The Court’s decision is precisely what the pharma- some of the matters presented’’ at the motions hearing, ceutical industry feared would be the result of the Su- Young explained that the court was ‘‘tak[ing] the time preme Court’s unwillingness to adopt a ‘bright line’ rule here to revisit some of its earlier conclusions,’’ espe- on reverse payments,’’ he said. ‘‘The decision demon- cially in light of the Supreme Court’s intervening deci- strates that no such settlement is likely to be immune from challenge, and a defendant’s ability to have such The Actavis court resolved a split among the circuits cases dismissed at an early stage of the proceeding will regarding how reverse payments, such as those at issue here, should be evaluated under the law, with some And attorney C. Scott Hemphill, professor of law at courts relying on a scope-of-the-patent test and others Columbia Law School in New York, told Bloomberg applying a rule of reason analysis. The Supreme Court BNA Sept. 12 that Young’s ‘‘decision recognizes that a adopted the rule of reason approach, ‘‘the contours of payment to the generic firm can take many forms, not which’’ it ‘‘left to the lower courts to etch.’’ Applying the Actavis rule of reason approach, Young ‘‘For example,’’ Hemphill said, ‘‘if the branded firm started out by looking at whether the plaintiffs had ad- agrees to forgive a debt owed by the generic firm, or to equately alleged that the defendants exercised market provide something else that the generic firm values, the power in the relevant market, which the direct purchas- analysis is unchanged. Either way, if the competitor ers had defined as ‘‘brand Nexium and generic equiva- agrees to delay entry in exchange for value received, lents that also share its active ingredient, esomeprazole that exchange is of antitrust concern.’’ magnesium.’’ The defendants argued that this defini- Indeed, Burns said, ‘‘the Nexium decision demon- tion was improperly narrow because it ‘‘excludes other strates, quite clearly, that virtually all reverse payment products that are either similar in chemical composition settlements will face careful scrutiny by the courts, and or used to treat comparable medical conditions.’’ that dismissals of such cases at an early stage of the liti- Issue Best Left to Jury. But Young found the defen- gation are likely to be rare,’’ Burns said.
dants’ arguments to ‘‘ring hollow upon review of the And Burns said, the Federal Trade Commission ‘‘is case law,’’ as the relevant inquiry is instead the cross- likely silently cheering the Court’s ruling in Nexium, as elasticity of demand for the product at issue. As the di- it confirms that the Supreme Court’s ruling in Actavis, rect purchasers expressly alleged that such elasticity is despite its measured tones, was a broad victory for the not present in the market for branded and generic Nexium, the court concluded that the fact that other Burns also said that ‘‘the court’s ruling on the Noerr- medications may be used to treat heartburn is irrelevant Pennington issue was both predictable and probably and that any further factual inquiry into its reasonable necessary because any contrary ruling would likely interchangeability with other products ‘‘is better left for have had a significant chilling effect on the willingness of district courts to accommodate party requests for As the direct purchasers presented sufficient direct evidence of the defendants’ market power in that mar- Challenged Conduct. In the case at bar, two groups ket to survive dismissal, Young turned to whether they consisting of wholesale drug distributors (direct pur- have also demonstrated that the defendants’ exercise of chasers) and health and welfare benefit funds (end- that power ‘‘generated anticompetitive consequences,’’ payers) brought suit separately against AstraZeneca, as clarified by the Supreme Court in Actavis. Ranbaxy, Teva and Dr. Reddy’s, contending that Astra- In that case, he explained, the Court instructed that Zeneca had entered into illegal reverse payment agree- ‘‘the likelihood of a reverse payment bringing about an- ments with the generic defendants to delay generic ver- ticompetitive effects depends upon its size, its scale in sions of Nexium from entering the market. The lawsuits relation to the payor’s anticipated future litigation costs, its independence from other services for which it In their motions to dismiss, the defendants argued might represent payment, and the lack of any other that the direct purchasers’ claims must fail because the alleged conduct falls within the scope of AstraZeneca’s It is irrelevant, it continued, that there is no allegation Nexium-related patents and because, even if they could that the generic defendants ‘‘receive[d] any kind of be liable under federal antitrust law for such conduct, monetary payment from AstraZeneca in exchange for the underlying agreements would be immunized by the their alleged commitment to stay out of the market,’’ he Noerr-Pennington doctrine, and the claims would be barred by the federal statute of limitations.
Although the court conceded that the Supreme Court The defendants also contended that the end-payers’ ‘‘spoke only to the merits of cash payouts as a quid pro claims must fail under certain states’ statutes of limita- quo for promises of delayed generic market entry,’’ be- tions and that the end-payers lack standing under both cause the underlying facts of Actavis involved allega- Article III and Federal Rule of Civil Procedure 23. They tions of large cash payments, ‘‘the Supreme Court’s further challenged the end-payers’ claims under the an- confined analysis hardly seems surprising.’’ COPYRIGHT ஽ 2013 BY THE BUREAU OF NATIONAL AFFAIRS, INC.
Noerr-Pennington Doesn’t Apply. Young next ad- the form of reimbursements paid at supracompetitive dressed the defendants’ argument that, even if their prices. Even if the court were to hold otherwise, he de- conduct was anticompetitive, the underlying agree- termined that the end-payers would nonetheless be able ments are immune from antitrust liability under the to proceed under an exception to the strict standing Noerr-Pennington doctrine, having each been sanc- analysis set forth in Plumbers’ Union Local No. 12 Pen- tioned by consent judgments entered by the U.S. Dis- sion Fund v. Nomura Asset Acceptance Corp., 632 F.3d trict Court for the District of New Jersey.
While Young instructed that courts generally agree In that case, the U.S. Court of Appeals for the First that private settlement agreements generally fall out- Circuit held that, ‘‘in those unusual circumstances pre- side the realm of Noerr-Pennington, he said there is sented in class action disputes where the interests of little guidance in which a judge has entered a consent the named plaintiffs, in bringing claims for which they judgment, as here. It thus invoked a 13-year-old law re- do have Article III standing, are sufficiently aligned view article that sets forth ‘‘a sensible analytical ap- with the interests of the putative class over which they proach whose adoption proves useful in determining do not have Article III standing,’’ the plaintiffs may pro- whether the consent judgments at issue ought be cov- ceed. Here, the court concluded, ‘‘the requisite ‘identity of issues’ and ‘alignment of incentives’ is present In the article, ‘‘Antitrust Immunity, the First Amend- amongst’’ end-payers and thus ‘‘[a]ll members of the ment and Settlements: Defining the Boundaries of the putative class have a common interest in litigating Right to Petition,’’ 33 Ind. L. Rev. 385 (2000), Raymond claims arising from the Defendants’ allegedly anticom- Ku set forth a ‘‘bidimensional framework’’ that essen- petitive collusion designed to cause the End-Payors to tially boiled down to a single question—namely: ‘‘Is the pay supracompetitive prices across the several states.’’ Young next addressed the end-payers’ claims arising under the Illinois antitrust law, which expressly states In this case, it is clear that the underlying consent that all indirect purchaser suits must be brought by the judgments ‘‘are not eligible candidates for Noerr- state attorney general. Although the end-payers at- Pennington coverage,’’ the court concluded, because tempted to argue that the law is preempted by Rule 23 the conduct surrounding the formation of the settle- ‘‘where it purports to govern the procedural mechanism by which litigants can bring suit in federal courts,’’ ‘‘transform[ation]’’ into consent judgments cannot be Young was not convinced and dismissed their claims.
considered ‘‘petitioning’’—‘‘at least not as that word is He also dismissed their claims arising under Puerto commonly understood in the context of the political Rico law, as its antitrust law is to be interpreted in ac- cordance with federal law and thus indirect purchasers are barred from bringing suit, and under Utah law, as Nothing prohibited AstraZeneca and the Generic Defen- the end-payers failed to satisfy its statutory citizenship dants from simply stipulating to a dismissal of the patent in- fringement actions. A decision of a court that serves merely Liaison counsel for the proposed end-payer class was to memorialize a bargained-for agreement that could have the law firm of Berman DeValerio in Boston; interim co- otherwise been resolved without judicial intervention ought lead counsel for the proposed end-payer class included not benefit from the exemption allowed by Noerr- Wexler Wallace LLP, Chicago; Shepherd Finkelman Pennington [citation omitted].
Miller & Shah LLP in Weston, Fla.; Hilliard & Shado- The court thus declined to extend Noerr-Pennington wen LLC, Mechanicsburg, Pa.; and Cohen Milstein Sell- immunity to the underlying agreements.
It also summarily declined to dismiss the claims The law firms of Hagens Berman Sobol Shapiro LLP, based on the federal statute of limitations, to the extent in Cambridge, Mass.; Garwin Gerstein & Fisher LLP, in that they rely on a theory of continuing harm, as the di- New York; and Berger & Montague PC in Philadelphia, rect purchasers suffered a cognizable injury each time are co-lead counsel for the proposed direct purchaser they purchased branded Nexium at a supracompetitive price resulting from the alleged misconduct. However, The law firms of Covington & Burling LLP, Washing- ton; Williams & Connolly, LLP, Washington, and Mc- AstraZeneca/Ranbaxy reverse payment agreement it- Carter & English, LLP, Wilmington, Del. and Boston, self because that agreement was entered into more than were counsel for AstraZeneca defendants.
four years prior to the filing of the suit.
The law firms of Venable LLP in Washington; and Minerva Law, P.C. in Andover, Mass, were counsel for Benefit Funds’ Claims. Proceeding to the motions to dismiss with regard to the end-payers’ claims, the courtreiterated its conclusions regarding the applicable stat- The law firms of Jones Day in Washington; Budd utes of limitations and limiting the end-payers’ ability to Larner PC in Short Hills, N.J.; and Hamilton Brook challenge the AstraZeneca/Ranbaxy agreement, but Smith & Reynolds, P.C. in Concord, Mass., were coun- permitted them to proceed on a theory of continuing sel for the Dr. Reddy’s defendants.
harm in those states with a four-year statute of limita- The law firms of Kirkland & Ellis LLP, Washington, tions. It allowed them to pursue all claims, however, in and Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC, in those three states with a six-year limitations period— Boston, represent the Teva defendants.
namely, Maine, Vermont and Wisconsin.
To contact the reporter on this story: Tiffany Friesen Young also rejected the defendants’ arguments that Milone in Washington at tmilone@bna.com, and Dana the end-payers lacked standing. Instead, he found that the end-payers possessed Article III standing to pursue To contact the editor responsible for this story: Brian their claims because they suffered a monetary injury in Text of the court’s decision is at COPYRIGHT ஽ 2013 BY THE BUREAU OF NATIONAL AFFAIRS, INC.

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