On December 5, 2014, an 11-person jury decided in favor of defendants AstraZeneca PLC and Ranbaxy Laboratories, Inc. in the first pay-for-delay class action trial since the United States Supreme Court in FTC v. Actavis, Inc. opened the door on antitrust suits based on patent settlements. Teva Pharmaceutical Industries, Ltd. was also defending the suit before reaching a settlement shortly before the trial ended. United States District Court Judge William Young of the District of Massachusetts last year permitted certification for the class members, including union health plans and insurance companies, based on an alleged injury of supracompetitive prices for AstraZeneca’s brand name heartburn drug, Nexium®.
During the six week jury trial, the main focus of the arguments centered on the resolution of a lawsuit brought by AstraZeneca against Ranbaxy under the Hatch-Waxman Act regarding Ranbaxy’s Abbreviated New Drug Application (“ANDA”) filed with the Food and Drug Administration (FDA) seeking approval to market a generic version of Nexium®. Ranbaxy was the first generic-drug maker to file an ANDA, but AstraZeneca also brought suits against Teva and Dr. Reddy’s Laboratories, Inc. following receipt of their Paragraph IV certifications stating that they too had filed ANDAs with the FDA seeking approval to launch generic versions of Nexium®. The suits settled with an agreement that AstraZeneca would permit Ranbaxy early market entry on May 2014 – years before the last of the patents covering Nexium® will expire – and the benefit of some exclusivity period. AstraZeneca also settled with Teva and Dr. Reddy’s with license entry onto the market until May 2014, subject to Ranbaxy’s expected 180 day exclusivity period, in return for Teva and Dr. Reddy’s admission that the patents were valid and infringed by their ANDA products. AstraZeneca also forgave the liabilities created by Teva’s at-risk launch of its related generic Prilosec product.
The plaintiffs argued that their alleged harm stems from the provision in the Ranbaxy settlement agreement that restricts AstraZeneca from marketing an authorized generic, thus allowing Ranbaxy’s generic drug product to enjoy a period of exclusivity. The plaintiffs theorized that Teva could have negotiated with Ranbaxy to limit Ranbaxy’s exclusivity period in order to avoid a bottleneck to subsequent generic market entry. AstraZeneca and the generic-drug makers argued that the plaintiffs actually benefit from the settlement agreement because its paves the way for generic market entry much earlier than would otherwise have occurred without settling the ANDA litigation. Additionally, Ranbaxy emphasized during trial that, even though the May 2014 date for generic entry had passed, no generic’s ANDA had yet to received tentative approval from the FDA.
The jury found that the Ranbaxy settlement agreement met the first step of the antitrust Sherman Act analysis because Ranbaxy received a “large and unjustified” payment under the settlement agreement with anticompetitive harms that outweighed the deal’s benefits. However, when considering the “but-for” questions of whether the generic drugs could have entered the market if the settlement had not occurred, the jury determined that AstraZeneca would never have permitted a generic Nexium® product to launch before the patents listed in the Orange Book for Nexium® expired, some of which would continue to protect Nexium® until 2018.
For practitioners, the case presents a first look at some of the considerations in a pay-for-delay case based on ANDA litigation settlements. In particular, practitioners should note that the case did not turn on whether the patent case against Teva would have been won, but rather what considerations formed the foundation for the businesspersons’ risk assessments.
Gibbons will continue to monitor decisions from the federal courts for further developments in antitrust actions related to settled Hatch-Waxman cases.