In re K-Dur Antitrust Litigation

Page 517

338 F.Supp.2d 517

In re K-DUR ANTITRUST LITIGATION.

No. CIV.A. 01-1652(JAG).

No. MDL No. 1419.

United States District Court, D. New Jersey.

September 29, 2004.

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John W. Nields, Jr., Esq., Alan M. Wiseman, Esq., Howrey, Simon, Arnold &

White, LLP, Washington, DC, William E. Goydan, Esq., Wolff & Samson, West Orange, NJ, William J. O'Shaughnessy, Esq., Harvey C. Kaish, Esq., McCarter & English, LLP, Newark, NJ, for Defendant Schering-Plough Corporation.

Christopher M. Curran, Esq., Karie Jo Barwind, Esq., White & Case, LLP, Washington, DC, for Defendant Upsher-Smith Laboratories, Inc.

Robert Michels, Esq., Winston & Strawn LLP, Chicago, IL, Brian J. McMahon, Esq., Gibbons, Del Deo, Dolan, Griffinger & Vecchione, P.C., Newark, NJ, for Defendant Wyeth.

Peter S. Pearlman, Esq., Rebekah R. Conroy, Esq., Cohn, Lifland, Pearlman, Herrmann & Knopf LLP, Saddle Brook, NJ, Barry S. Taus, Esq., Garwin, Bronzaft, Gerstein & Fisher, LLP, New York, NY, Daniel Berger, Esq., David Sorenson, Esq., Peter Kohn, Esq., Berger & Montague, P.C., Philadelphia, PA, Stuart Des Roches, Esq., John G. Odom, Esq., Andrew Kelly, Esq., Odom & DesRoches, New Orleans, LA, Michael Heim, Esq., Jonathan Pierce, Esq., Conley Rose PC, Houston, TX, Mark S. Armstrong, Esq., Squire, Sanders & Dempsey, Houston, TX, David P. Smith, Esq., Percy, Smith, Foote & Gadel, Alexandria, LA, Aubrey Calvin, Esq., The Calvin Law Firm, Houston, TX, for Direct Purchaser Class Plaintiffs Louisiana Wholesale Direct.

Linda P. Nussbaum, Esq., Cohen, Milstein, Hausfeld & Toll, PLLC, New York, NY, J. Douglas Richards, Esq., Milberg, Weiss, Bershad, & Schulman LLP, New York, NY, Eugene A. Spector, Esq., Theodore M. Lieverman, Esq., Jeffrey J. Corrigan, Esq., Spector, Roseman & Kodroff, PC, Philadelphia, PA, for Indirect Purchaser Class Plaintiffs.

Douglas H. Patton, Esq., Dewsnup, King & Olsen, Salt Lake City, UT, Scott E. Perwin, Esq., Kenny Nachwalter, Seymour, Arnold Critchlow & Spector, Miami, FL, for Direct Purchaser Plaintiffs Albertson's Inc., Eckerd Corp., The Kroger Co., Hy-Vee, Inc. Safeway Inc., and Walgreen Co.

James Rosemergy, Esq., Michael J. Flannery, Esq., The David Danis Law Firm, P.C., St. Louis, MO, for Plaintiff Evelyn Barczak.

Donald E. Haviland, Jr., Esq., Kline & Specter, P.C., Philadelphia, PA, for Commonwealth of Pennsylvania.

Allyn Z. Lite, Esq., Lite, DePalma, Greenberg & Rivas, LLC, Newark, NJ, for Plaintiffs.

Barry L. Refsin, Esq., Hangley Aronchick Segal & Pudlin, Philadelphia, PA, Steve Shadowen, Esq., Gordon A. Einhorn, Esq., Hangley, Aronchick, Segal & Pudlin, Harrisburg, PA, for Opt-Out Direct Purchaser Plaintiffs CVS & Rite Aid.

OPINION

GREENAWAY, District Judge.

INTRODUCTION

This matter arises from actions brought by private litigants and the Commonwealth of Pennsylvania against defendant pharmaceutical manufacturers, Schering-Plough Corp. and its subsidiary Key Pharmaceuticals, Inc. (collectively "Schering"), Wyeth (f/k/a American Home Products, Inc.) and its business unit ESI Lederle (collectively "ESI"), and Upsher-Smith Laboratories, Inc. ("Upsher").¹ The Judicial Panel on Multidistrict Litigation has transferred these cases to this Court for consolidated pretrial proceedings, pursuant to 28 U.S.C. § 1407. These cases involve K-Dur, a pioneer potassium chloride supplement used to treat patients with depleted potassium levels, a condition typically occurring in people who take blood pressure medication. Schering-Plough is the manufacturer of K-Dur. Schering entered into separate agreements with generic manufacturers Upsher and ESI while those companies were pursuing FDA approval of generic versions of K-Dur. Plaintiffs have brought claims alleging that these agreements violated the Sherman Act's prohibitions against contracts in restraint of trade.

Defendants Schering and Upsher have moved for judgment on the pleadings, pursuant to FED. R. CIV. P. 12(c), as to the Direct Purchasers' Complaint, and to dismiss the claims, pursuant to FED. R. CIV. P. 12(b), and as to all remaining complaints. Defendant ESI has moved for judgment on the pleadings, pursuant to FED. R. CIV. P. 12(c), as to the Direct Purchasers' Complaint, and to dismiss the claims, pursuant to FED. R. CIV. P. 12(b), as to all remaining complaints, except for the CVS Complaint in which they are not defendants. This Court must also resolve the Direct Purchasers' motion to amend their complaint.

For the reasons set forth below, the Direct Purchasers' motion to amend their complaint is granted. Defendants Schering, Upsher, and ESI's motions to dismiss and for judgment on the pleadings are granted in part, and denied in part.

BACKGROUND

I. The Parties

A. Defendants²

The Schering Defendants

Defendant Schering-Plough Corp. ("Schering") is a New Jersey corporation engaged in the development, manufacturing, and marketing of, among other things, brand name and generic drugs. Defendant Key Pharmaceuticals, Inc. ("Key") is a subsidiary of Schering. Key produces and holds the patent on K-Dur 20, the primary drug at issue in this litigation.

The Upsher Defendants

Defendant Upsher-Smith Laboratories, Inc. ("Upsher") is a Minnesota corporation that develops, manufactures, and markets brand-name pharmaceutical products. Upsher primarily uses wholesale and drug chain distribution channels to market its products to retail, chain and hospital pharmacies, and key physician groups.

The Wyeth/ESI Defendants

Defendant Wyeth (formerly known as American Home Products, Inc.) is a Delaware corporation engaged in the development, manufacturing, and marketing of, among other things, brand name and generic drugs, as well as over-the-counter medications. Defendant ESI Lederle ("ESI") is a business unit of Wyeth that engages in research, manufacture, and sale of primarily generic drugs.

B. Plaintiffs³

Indirect Purchaser Class

The Indirect Purchaser⁴ plaintiffs are named individual consumers, "Third-Party Payors" (e.g., health insurers and employee benefit funds), and consumer advocates in the United States and Puerto Rico who purchased or paid for K-Dur products, other than for resale, since June 1997.

The Commonwealth of Pennsylvania

The Commonwealth of Pennsylvania ("the Commonwealth") brings suit in its sovereign capacity on behalf of the Commonwealth's general economy, as parens patriae on behalf of natural persons in the Commonwealth, and in its proprietary capacity on behalf of departments, bureaus, and agencies of the Commonwealth, who purchased K-Dur products, or who were reimbursers under medical or pharmaceutical reimbursement programs to which Defendants contractually remitted rebate payments, since June 1997.

Direct Purchaser Class

Louisiana Wholesale Drug Company, Inc. ("Louisiana Drug") brings suit on behalf of itself, and all others similarly situated, who purchased K-Dur directly from defendant Schering during the period November 20, 1998 until the cessation of the effects of Defendants' alleged illegal conduct. This class includes wholesalers, hospitals, health maintenance organizations, and retail chain drug stores (collectively "Direct Purchasers"). The Direct Purchasers' motion for class certification is currently pending before this Court, (see Direct Purchasers' Motion for Class Certification, dated June 4, 2004), as well as the Direct Purchasers' motion for preliminary approval of proposed settlement with Wyeth/ESI (see Direct Purchasers' Motion for Preliminary Approval of Proposed Settlement with Defendant Wyeth, for Conditional Certification of the Proposed Settlement Class, and For Approval of the Form and Manner of Notice to the Class, dated July 23, 2004.)

Non-Class Pharmacy Purchasers

Albertson's, Inc., CVS Meridian, Inc., Eckerd Corp., Hy-Vee, Inc., the Kroger Company, Rite-Aid Corp., Safeway, Inc., and Walgreen Company (collectively "Non-Class Pharmacy Purchasers")⁵ are national retail store operators which dispense prescription drugs to the public, and that purchased K-Dur directly from Schering for resale during the relevant period.

II. Generic Drug Approval Process

The Hatch-Waxman Act of 1984 ("HWA"), 21 U.S.C. 355(j), regulates the Food and Drug Administration's ("FDA") approval of generic counterparts to patented drugs. The HWA created an expedited FDA approval process for a generic version of a drug previously approved by the FDA. The expedited process allows the generic manufacturer to forego clinical trials by relying on the test results of the brand name manufacturer.

Under the HWA, a generic drug manufacturer seeking to utilize the expedited approval process must submit an Abbreviated New Drug Application ("ANDA"). To protect the rights of the brand name drug patent holder, the ANDA applicant generic manufacturer must certify that the generic drug will not infringe the brand name manufacturer's patent.⁶

Pursuant to 21 U.S.C. § 355(j)(5)(B)(iii), when an ANDA is submitted with a paragraph IV certification concerning a listed drug, "approval [by the FDA] shall be made effective immediately unless an action is brought for infringement of a patent which is the subject of the certification before the expiration of forty-five days from the date the notice provided under paragraph (2)(B)(i) is received." Pursuant to the statute, the FDA must suspend approval of the ANDA until the earliest of the expiration of the pioneer patent, judicial resolution of the correctness of the ANDA applicant's certification (that the patent is invalid or not infringed), or thirty months from the receipt of notice. If a court finds that the patent is either invalid or not infringed before the 30 month period expires, then the generic drug ANDA is granted approval on the date of the ruling.

As an incentive to file Paragraph IV certifications, the first generic manufacturer to file an ANDA containing a Paragraph IV certification for a specific drug receives a 180-day exclusivity period to...