In re Mylan N.V. Sec. Litig.

379 F.Supp.3d 198

IN RE MYLAN N.V. SECURITIES LITIGATION

16-CV-7926 (JPO)

United States District Court, S.D. New York.

Signed March 29, 2019

OPINION AND ORDER

J. PAUL OETKEN, United States District Judge

A group of plaintiffs bring this putative securities class action against the drug manufacturer Mylan N.V. and several of its officers, in connection with the alleged misclassification of the EpiPen, a rebate scheme involving the EpiPen, and the alleged inflation of prices for various generic drugs. On March 28, 2018, the Court granted in part and denied in part Defendants' motion to dismiss the prior class action complaint (Dkt. No. 69), and Plaintiffs subsequently filed the operative amended complaint (Dkt. No. 89).

Defendants now move to dismiss the new allegations in the amended complaint. (Dkt. No. 95.) For the reasons that follow, the motion is granted in part and denied in part.

I. Background

A. Procedural History

Plaintiffs are purchasers of Mylan's common stock. On October 11, 2016, Plaintiff Stef Van Duppen initiated this action against Mylan N.V., Mylan Inc., and officers Heather Bresch and John Sheehan. (Dkt. No. 1.) Separately, Plaintiff Landon W. Perdue filed an action against Mylan N.V., Mylan Inc., and officers Heather Bresch, Paul B. Campbell, Robert J. Coury, Kenneth S. Parks, and John D. Sheehan on October 13, 2016. (See Perdue v. Mylan N.V. , No. 16 Civ. 8000, Dkt. No. 1.) On January 9, 2017, the Court consolidated the two cases for pre-trial purposes, appointed Lead Plaintiffs, and approved Lead Counsel. (Dkt. No. 26.) Lead Plaintiffs subsequently filed an Amended Class Action Complaint (Dkt. No. 39) asserting claims under: (1) Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b 5, against all Defendants; (2) Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), against the individual Defendants; and (3) Section 1 of the Israeli Securities Law of 1968, against all Defendants.

Defendants jointly moved to dismiss the complaint (Dkt. No. 45), and the Court granted the motion in part (Dkt. No. 69). The Court dismissed Plaintiffs' securities claims to the extent they relied on an alleged "pay-for-delay" agreement with Teva Pharmaceuticals, alleged agreements with schools regarding the EpiPen, and an alleged agreement to allocate the market for the generic drug doxycycline hyclate delayed release ("Doxy DR"). (Dkt. No. 69 at 27–30, 34.) The Court also determined that certain statements alleged in the complaint were not actionable. (Dkt. No. 69 at 11–12, 17, 20.) Finally, the Court declined to exercise supplemental jurisdiction over the Israeli securities law claim, given the complex issues and exceptional circumstances presented in this case. (Dkt. No. 69 at 36–40.) Plaintiffs' remaining securities claims—premised on the misclassification of the EpiPen in the Medicaid rebate scheme and the alleged price-fixing agreements concerning five generic drugs—survived the motion to dismiss.

On July 6, 2018, Plaintiffs filed the operative Second Amended Class Action Complaint ("Amended Complaint"). (Dkt. No. 89 ("Compl.").) Defendants now move to partially dismiss the Amended Complaint (Dkt. No. 95), challenging the sufficiency of its new allegations (Dkt. No. 96 at 1 & n.1).

B. Factual Background

The facts of this case are described in this Court's prior opinion. See In re Mylan N.V. Sec. Litig. , No. 16 Civ. 7926, 2018 WL 1595985, at *1–3 (S.D.N.Y. Mar. 28, 2018). Here, the Court recounts background necessary to resolving the instant motion, as well as those new facts alleged for the first time in the Amended Complaint. The factual allegations in the Amended Complaint are assumed true for the purposes of this motion.

Mylan is a developer, manufacturer, and distributor of brand-name and generic pharmaceuticals. (Compl. ¶ 2.) This action arises out of Mylan's conduct regarding the drug EpiPen Auto-Injector ("EpiPen") and several generic drugs. (Id. ) Mylan is a public company, trading on the NASDAQ Global Select Market. (Compl. ¶ 30.) Lead Plaintiffs Menorah Mivtachim Insurance Ltd., Menorah Mivtachim Pensions and Gemel Ltd., Phoenix Insurance Company Ltd., Meitav DS Provident Funds and Pension Ltd., and Dan Kleinerman ("Plaintiffs") bring this action on behalf of themselves and a class of individuals who purchased the common stock of Mylan N.V. or Mylan, Inc. between February 21, 2012, and October 30, 2017. (Compl. ¶¶ 1, 29.) Defendants in this action include Mylan N.V., Mylan, Inc., and various Mylan executives who served during the class period (collectively, "Mylan"). (Compl. ¶¶ 30–37.)

The conduct giving rise to this action falls into two categories of alleged wrongdoing: (1) Medicaid misclassification, and (2) antitrust violations. First, the Amended Complaint alleges that Mylan unlawfully misclassified the EpiPen as a generic drug for purposes of the Medicaid Drug Rebate Program ("MDRP"). (Compl. ¶ 5; Dkt. No. 69 at 2–3; see generally Compl. ¶¶ 39–97.) The previous complaint outlined the details of this alleged misclassification, along with various statements that Plaintiffs alleged to have misled investors in connection with the misclassification. (See, e.g. , Dkt. No. 39 ¶¶ 33–90, 201–04.) Plaintiffs repeat those allegations in the Amended Complaint, and present several additional statements that Plaintiffs contend were also rendered misleading by the failure to disclose the alleged misclassification. (See, e.g. , Compl. ¶¶ 242–43, 289–91.)

Second, the Amended Complaint alleges that Mylan entered into a number of anticompetitive agreements to block competitors from the market and inflate the prices of various drugs. (Compl. ¶¶ 12–13, 15–18; see also Dkt. No. 69 at 3–4.) The Amended Complaint repeats allegations from the previous complaint that Mylan schemed to manipulate the market to maintain a supracompetitive price for the generic drug Doxy DR, and schemed to fix prices for the generic drugs albuterol sulfate, benazepril, clomipramine, divalproex, and propranolol. (Compl. ¶ 115; Dkt. No. 39 ¶ 104.)

Although Plaintiffs' claims regarding market allocation of Doxy DR were previously dismissed for failure to plausibly allege scienter, the Amended Complaint contains new allegations regarding the agreement of Mylan executives to engage in market allocation with respect to Doxy DR, in an attempt to cure the pleading deficiency. (Compl. ¶¶ 127, 130–31, 134–45.)

The Amended Complaint includes new allegations regarding Mylan's alleged antitrust misconduct. Among these are allegations that Mylan engaged in price fixing in the markets for three other generic drugs: doxycycline monohydrate ("Doxy Mono"), glipizide-metformin, and verapamil. (Compl. ¶¶ 187–200, 405.)

Plaintiffs' new allegations also include claims that Mylan engaged in anticompetitive conduct regarding the EpiPen and a competing epinephrine autoinjector—the Auvi-Q produced by Sanofi-Aventis. (Compl. ¶¶ 12–13.) Specifically, the Amended Complaint alleges that Mylan offered EpiPen at a rebate of 30% or more to third-party payors in the medical insurance market, on the express condition that the payors would decline to reimburse for the Auvi-Q. (Compl. ¶ 104.) As a result, Mylan blocked the Auvi-Q from accessing half of the market for epinephrine autoinjectors, and caused its market share to drop. (Compl. ¶¶ 107–08, 110.) Sanofi decided not to relaunch Auvi-Q, and is suing Mylan for antitrust violations in connection with the alleged conduct. (Compl. ¶ 113.)

Furthermore, the Amended Complaint adds an additional corrective disclosure relevant to allegations of loss causation: On October 31, 2017, a group of 47 state attorneys general issued a press release publicizing new allegations from an amended complaint that the group would be filing in their ongoing antitrust action against Mylan ("State AG action"). (Compl. ¶ 394.) On that day, Mylan shares fell $ 2.53, or 6.62%. (Compl. ¶ 395.)

Finally, the previous complaint brought claims against five of Mylan's executives. (Dkt. No. 39 ¶¶ 28–32.) To that group of individual Defendants, the Amended Complaint also adds Rajiv Malik, who served as the President of Mylan from January 1, 2012, to the present, and has served as an Executive Director of Mylan since 2013. (Compl. ¶ 35.) The Amended Complaint adds allegations about Malik's involvement in the challenged conduct, including six allegedly misleading statements made by Malik and Malik's sale of Mylan stock in a manner potentially evidencing his scienter. (Compl. ¶¶ 127, 130, 141–42, 307–08, 409.)

II. Legal Standard

To survive a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Wilson v. Merrill Lynch & Co. , 671 F.3d 120, 128 (2d Cir. 2011) (quoting Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ).

The Court must "accept[ ] as true the factual allegations in the complaint and draw[ ] all inferences in the plaintiff's favor." Allaire Corp. v. Okumus , 433 F.3d 248, 249–50 (2d Cir. 2006) (quoting Scutti Enters., LLC v. Park Place Entm't Corp. , 322 F.3d 211, 214 (2d Cir. 2003) ). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.

"Securities fraud claims are [also] subject to the heightened pleading standards established by...