Edgar v. Teva Pharm. Indus.

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KEIKO EDGAR, DENA BURGE, LEIGH HOCKETT, JORDAN FURLAN, GINA GILOMEN-STUDY, UHA HEALTH INSURANCE, ANNE ARUNDEL COUNTY, and ROGERS MACHINERY COMPANY, INC., individually and on behalf of all others similarly situated, Plaintiffs, v. TEVA PHARMACEUTICAL INDUSTRIES, LTD., TEVA PHARMACEUTICALS USA, INC., TEVA PARENTERAL MEDICINES, INC., TEVA NEUROSCIENCE, INC., TEVA SALES & MARKETING, INC., and CEPHALON, INC., Defendants.

No. 22-2501-DDC-TJJ

United States District Court, D. Kansas

March 26, 2024

MEMORANDUM AND ORDER

Daniel D. Crabtree United States District Judge

The law encourages manufacturers of generic pharmaceuticals to bring generic drugs to market by providing incentives for them to challenge weak patents. Should the generic manufacturer file an FDA approval application for its generic drug, then the brand-name manufacturer often sues for patent infringement. Thus begins a garden variety patent infringement suit. But sometimes, the patent infringement suit reaches a suspicious looking settlement called a reverse payment settlement. A reverse payment settlement refers to an agreement by a brand-name manufacturer (and patent holder) to compensate a generic manufacturer (and alleged patent infringer) in exchange for settling the patent infringement litigation, thus delaying the generic manufacturer's entry into the product market.

Plaintiffs here allege that defendants^[1] entered a reverse payment settlement that ended patent litigation over defendants' brand-name drug, Nuvigil. Plaintiffs allege that Mylan, Inc. wanted to bring generic Nuvigil to the market-which would've erased defendants' Nuvigil monopoly-and defendants sued Mylan for patent infringement. Plaintiffs further allege that defendants' Nuvigil patents were weak but, rather than litigate the patent infringement suit defendants and Mylan agreed to compensate Mylan with a reverse payment settlement that delayed the generic Nuvigil's market entry. According to plaintiffs defendants compensated Mylan by making a swap. Defendants agreed to stay out of the EpiPen market, allowing Mylan to maintain its monopoly over the EpiPen. And Mylan agreed to stay out of the Nuvigil market, allowing defendants to maintain their Nuvigil monopoly.

Plaintiffs now bring four claims against defendants for the alleged Nuvigil^[2] reverse payment settlement: (1) a Sherman Act claim; (2) claims for Conspiracy and Combination in Restraint of Trade under various state laws; (3) claims for Monopolization and Monopolistic Scheme under various state laws; and (4) a Racketeer Influenced and Corrupt Organizations Act (RICO) claim. Defendants have filed a Motion to Dismiss (Doc. 47).^[3] As explained below, the court grants the motion in part and denies it in part.

I. Background

The following facts come from plaintiffs' First Amended Complaint (Doc. 42). The court accepts the facts as true and views them in the light most favorable to plaintiffs, as the parties opposing the Motion to Dismiss. Doe v. Sch. Dist. No. 1, 970 F.3d 1300, 1304 (10th Cir. 2020) (explaining that on a motion to dismiss the court “accept[s] as true all well-pleaded factual allegations in the complaint and view[s] them in the light most favorable to” the party opposing the motion (citation and internal quotation marks omitted)). The court begins with the relevant regulatory background.

The Hatch-Waxman Act

Congress passed the Hatch-Waxman Act in 1984 to regulate generic entry into the drug market. Doc. 42 at 20 (1st Am. Compl. ¶ 63). Under the Hatch-Waxman Act, a company who wants to sell or market a new generic product submits an Abbreviated New Drug Application (“ANDA”) to the FDA. Id. (1st Am. Compl. ¶ 61). When the FDA evaluates the ANDA, it compares the proposed generic product to the branded product. Id. (1st Am. Compl. ¶ 62). The FDA refers to the branded product as a “Reference Listed Drug” (RLD). Id.

The Hatch-Waxman Act requires all ANDA applicants to make certifications about the RLD's patents, including a “Paragraph IV certification”-it's a certification by the ANDA applicant that, in the applicant's opinion, the RLD's patent is invalid, or the new proposed generic won't infringe on the RLD's patent. Id. (1st Am. Compl. ¶ 64). An ANDA applicant filing a Paragraph IV certification must notify: (i) the relevant patent holder and (ii) the holder of the approved drug application who claims that patent. Id. at 20-21 (1st Am. Compl. ¶ 65). Once a patent holder receives a Paragraph IV certification, it may file a patent infringement suit within 45 days. Id. at 21 (1st Am. Compl. ¶ 66). This patent infringement suit triggers an automatic 30-month stay of any FDA approval of the ANDA. Id. Notably, the first generic manufacturer to file an ANDA with a Paragraph IV certification enjoys a 180-day exclusivity period. 21 U.S.C. § 355(j)(5)(B)(iv). The court next reviews how this regulatory scheme shaped the EpiPen patent litigation and then, the Nuvigil patent litigation.

EpiPen Patent Litigation Settlement

The EpiPen is an epinephrine auto-injector (EAI) that delivers a controlled dose of epinephrine, which treats severe allergic reaction known as anaphylaxis. Doc. 42 at 18 (1st Am. Compl. ¶¶ 48-50). In 2007, Mylan Pharmaceuticals, Inc. acquired Dey Pharma L.P., which later was renamed Mylan Specialty, L.P. Id. (1st Am. Compl. ¶ 52). Dey held the exclusive right and license to market, distribute and sell the EpiPen in the United States. Id. at 18-19 (1st Am. Compl. ¶ 53). Meridian Medical Technologies, Inc.^[4] manufactured the EpiPen. Id. From 2007 to 2020, Mylan Specialty marketed and sold EpiPen devices, supplied by Meridian under the parties' Supply Agreement. Id. The Supply Agreement required Meridian to prosecute and maintain any patents or patent applications for EpiPen products. Id. at 19 (1st Am. Compl. ¶ 55). The Supply Agreement also required the parties to notify each other of potential infringement and jointly determine in good faith the appropriate course of action. Id.

In 2007, Teva filed ANDA-0589 announcing its intention to develop a generic EAI. Id. at 21 (1st Am. Compl. ¶ 67). The FDA deemed Teva's application acceptable for filing in November 2008. Id. When Teva submitted its ANDA, Meridian held a patent for the autoinjector component of the branded EpiPen. Id. (1st Am. Compl. ¶ 69). To secure ANDA approval, Teva had to demonstrate that its device was equivalent to the EpiPen. Id. (1st Am. Compl. ¶ 70). But Teva couldn't just copy the EpiPen without infringing Meridian's patents- assuming, that is, the patents were valid. Id. (1st Am. Compl. ¶ 71). To avoid infringing these patents, Teva's proposed generic EAI had developed a different auto-injector than EpiPen used. Id. (1st Am. Compl. ¶ 72).

In July 2009, consistent with the Hatch-Waxman Act, Teva notified King Pharmaceuticals LLC and Meridian-Pfizer subsidiaries the court will refer to collectively as Pfizer-that it had filed an ANDA to market a generic version of EpiPen and had submitted a Paragraph IV certification. Id. at 22 (1st Am. Compl. ¶ 73). Pfizer then sued Teva in the District of Delaware on August 28, 2009, seeking to enforce U.S. Patent No. 7,449,012B2 (“'012 Patent”). Id. (1st Am. Compl. ¶ 74). Mylan and Pfizer entered a Common Interest Agreement in connection with the EpiPen patent litigation against Teva. Id. (1st Am. Compl. ¶ 75). In November 2010, Teva submitted a Paragraph IV certification over another Pfizer EpiPen patent: U.S. Patent No. 7,794,432B2 (“'432 Patent”). Id. (1st Am. Compl. ¶ 76). Pfizer quickly amended the complaint in the EpiPen patent litigation asking to enforce the '432 Patent. Id. (1st Am. Compl. ¶ 77).

Both the '012 Patent and '432 Patent expire in September 2025. Id. (1st Am. Compl. ¶ 78). And both patents are weak. Id. As a result, all parties would've known that Pfizer's suit was very unlikely to succeed. Id. Indeed, Pfizer voluntarily dismissed its claims based on the '432 Patent, indicating that Pfizer and Mylan knew the '432 Patent wasn't a viable basis for a patent infringement claim. Id.

In March 2011, Teva and Pfizer discussed, via email, setting up a phone call about the EpiPen patent litigation. Id. at 22-23 (1st Am. Compl. ¶ 79). The EpiPen patent litigation bench trial began on February 16, 2012. Id. at 23 (1st Am. Compl. ¶ 80). On April 26, 2012, Pfizer and Teva executed a binding term sheet that granted Teva a license to launch its generic EAI on or after June 22, 2015, subject to the FDA's approval. Id. (1st Am. Compl. ¶ 81). The EpiPen patent settlement agreement didn't include any money. Id. at 26 (1st Am. Compl. ¶ 97).

Also on April 26, 2012, Mylan and Pfizer issued a joint press release announcing, “Meridian Medical Technologies, a Pfizer subsidiary, has entered into a settlement agreement with Teva that will resolve pending patent litigation related to” the EpiPen. Id. at 25 (1st Am. Compl. ¶ 93). The press release didn't mention that the EpiPen settlement was part of a quid pro quo for Mylan's agreement to enter into a settlement agreement resolving the Nuvigil patent litigation in Teva's favor. Id. Nor did the press release mention whether Mylan was a party to the suit or settlement. Id. (1st Am. Compl. ¶ 95).

The settlement agreement gave Teva a license to all issued patents and a covenant not to sue based on any current or future patents covering EpiPen devices. Id. (1st Am. Compl. ¶ 94). So, the settlement agreement covered patents not at issue in the EpiPen patent litigation and future patents. Id. And, as part of the settlement agreement, Teva agreed that its license to market a generic EAI wouldn't become effective until mid-2015-three years later. Id.

Pfizer and Teva executed the final Settlement and License Agreement to resolve the EpiPen patent...