In re Terazosin Hydrochloride Antitrust Litigation

352 F.Supp.2d 1279

In re: TERAZOSIN HYDROCHLORIDE ANTITRUST LITIGATION

No. 99-MDL-1317.

United States District Court, S.D. Florida.

January 5, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Mitchell Wayne Berger, Rene Devlin Harrod, Berger Singerman, Fort Lauderdale, FL, Daniel Berger, David Sorensen, Eric L. Cramer, Berger & Montague, P.C., Philadelphia, PA, Richard Drubel, Samuel D. Heins, R. Bryant McCulley, Boies Schiller & Flexner, Hanover, NH, Bruce E. Gerstein, Garwin Bronzaft Gerstein & Fisher LLP, New York, NY, Aubrey B. Calvin, The Calvin Law Firm, Houston, TX, Cory A. Johnson, Attorney General Office Department of Legal Affairs, Tallahassee, FL, for Plaintiffs.

Pamela B. Slate, Slate Kennedy, Kimberly R. West, Matthew D. Fridy, Wallace Jordan Ratliff & Brandt, Birmingham, AL, Monica L. Rebuck, Steve D. Shadowen, Hangley Aronchick Segal & Pudlin, Harrisburg, PA, Joseph T. Lukens, Hangley Aronchick Segal & Pudlin, Philadelphia, PA, Michael D. Hausfeld, Daniel A. Small, Cohen Milstein Hausfeld & Toll, W. Scott Simmer, Andrew Craig Udin, Robins Kaplan Miller & Ciresi, Washington, DC, Elwood S. Simon, John Zuccarini, Elwood S. Simon & Associates, Birmingham, MI, David Scott Mandel, Mandel & Cale, Miami, FL, Stephen Lowey, Richard W. Cohen Geoffrey M. Horn, Lowey Dannenberg Bemporad & Selinger, White Plains, NY, Scott Ray Strand, Robins Kaplan Miller & Ciresi, Minneapolis, MN, for Defendants.

Robert Alexander Milne, Wayne A. Cross, Paul Olszowka, Brendan G. Woodard, White & Case, New York, NY, Paul Alan Shelowitz, Candace Dohn Banks, Akerman Senterfitt, Jon W. Zeder, Ferrell Schultz Carter & Fertel, Miami, FL, Stuart N. Senator, Rohit K. Singla, Munger Tolles & Olson, Los Angeles, CA, Jeffrey I. Weinberger, David M. Rosenzweig, Samuel N. Weinstein, Munger Tolles & Olson, San Francisco, CA, for Plaintiffs and Defendants.

OMNIBUS ORDER ON SIX MOTIONS FOR SUMMARY JUDGMENT RE: PLAINTIFFS' SECTION ONE (AND ANALOGOUS) CLAIMS¹

SEITZ, District Judge.

THIS MATTER is before the Court on six summary judgment motions relating to the Sherman Act Class Plaintiffs and Plaintiff Kaiser Foundation Health Plan, Inc.'s ("Kaiser") claims arising under Section One of the Sherman Antitrust Act, 15 U.S.C. § 1. This Court previously concluded that the April 1, 1998, agreement between Defendants Abbott Laboratories ("Abbott") and Geneva Pharmaceuticals ("Geneva") (collectively, "Defendants") — by which Geneva agreed to delay marketing its generic competitor to Abbott's brand name pharmaceutical terazosin hydrochloride product, Hytrin — was a per se violation of Section One. The Eleventh Circuit reversed that ruling in September 2003, finding the Court's per se condemnation of the Agreement to be "premature" and remanding the case to this Court for consideration of the exclusionary potential of Abbott's '207 patent. The Sherman Act Class Plaintiffs, Kaiser, and Defendants have each filed motions seeking a declaration from the Court as to whether the challenged provision of the Abbott-Geneva Agreement exceeded, or was within, the exclusionary scope of Abbott's patent protections. The Sherman Act Class Plaintiffs also seek rulings that the Agreement violates Section One under either a per se or "quick look" antitrust analysis, and that they may prove their Section One claims using direct evidence of actual anticompetitive effects in lieu of a detailed market power analysis.

The Court has considered the Motions, the responses and replies thereto, the applicable case law, all supporting exhibits and the oral argument of counsel at the July 2, 2004, and August 3, 2004, hearings. Having considered the undisputed material facts² in the light most favorable to the non-moving parties, the Court concludes that: (1) the exclusionary effects of the challenged provision of the Abbott-Geneva Agreement exceeded the exclusionary potential of the '207 patent; and (2) the Agreement is per se unlawful under Section One of the Sherman Act. Therefore, the Sherman Act Class Plaintiffs and Kaiser are entitled to summary judgment as a matter of law on their Section One and analogous claims, and Defendants' Section One Motion must be denied.

I. FACTUAL BACKGROUND

This multi-district antitrust litigation ("MDL") originates at the intersection of antitrust and patent law. At its core, this case revolves around Abbott's attempts to protect its patents' exclusivity with respect to the brand name drug Hytrin, and the competing efforts of generic manufacturers to develop and launch bioequivalent drugs for entry in the terazosin hydrochloride market. Between May 31, 1977, and August 13, 1999, pursuant to several patents, Abbott exclusively manufactured and marketed terazosin hydrochloride under the brand name of Hytrin. Hytrin is a drug prescribed for the treatment of high blood pressure and benign prostatic hyperplasia ("BPH"), an enlargement of the prostate gland that surrounds the urinary canal. Hytrin proved to be a lucrative drug for Abbott; for example, in 1998, Hytrin generated $540 million in sales, which accounted for more than twenty percent of Abbott's sales of pharmaceutical products in the United States that year. Geneva, Zenith Goldline Pharmaceuticals, Inc. ("Zenith"),³ — now known as IVAX Pharmaceuticals, Inc. ("IVAX") — and other generic drug manufacturers developed generic versions of Hytrin for sale in the United States to compete for the Hytrin market. Whereas the first generic drug manufacturer, Geneva, began the regulatory process to enter the market in January 1993, generic entry only occurred in August 1999. Generic market entry not only provides less expensive bioequivalent drugs for consumers, but also eliminates a brand name drug company's patent monopoly.

Plaintiffs Kaiser, the Sherman Act Class Plaintiffs, Individual Direct Purchasers, Indirect Purchaser Class Plaintiffs, and State Plaintiffs (collectively, "Plaintiffs")⁴ sued Defendants alleging, inter alia, claims under Section One of the Sherman Act ("Section One")⁵ and analogous state laws for conspiracy to restrain trade. Essentially, Plaintiffs contend that Defendants violated Section One by entering into an agreement in April 1998 that resulted in delayed domestic competition for the sale of terazosin hydrochloride, thus constituting an unreasonable restraint of trade. More specifically, Plaintiffs argue that Abbott's agreement to pay Geneva $4.5 million per month to keep its generic terazosin hydrochloride product off the market pending final appellate resolution of the '207 patent infringement litigation resulted in reduced output, artificially inflated prices, and eliminated competition in the market for terazosin hydrochloride. Defendants respond that the Agreement was a permissible exercise of Abbott's rights under the '207 patent, and that their accord represented a reasonable interim settlement of a genuine intellectual property dispute.

To place the '207 patent infringement litigation in context, it is necessary to set out the pertinent framework for drug regulation in the United States and then discuss the parties' undisputed material facts as to Abbott's '207 patent, the '207 patent litigation, and the Abbott-Geneva Agreement upon which Plaintiffs' Section One claims are based.

A. The FDA Regulatory Framework Under Hatch-Waxman

A drug patent gives its owner the right to attempt to exclude others from making, using, or selling the drug in the United States for the duration of the patent. Before a drug company can sell a drug in the United States, it must apply for and obtain approval from the Food and Drug Administration ("FDA"), which regulates the domestic sale of drugs pursuant to the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301, et seq. S. ¶¶ 1-2. To secure FDA approval to market a new drug, a pharmaceutical company must first file a New Drug Application ("NDA") with the FDA and may not market a new drug until the NDA is approved. S. ¶ 3. The NDA applicant must demonstrate to the FDA that the new drug is safe and effective for its proposed use(s). S. ¶ 3. New drugs that are approved and marketed through the NDA-approval process, such as Hytrin, are generally referred to as "brand-name" or "pioneer" drugs. S. ¶ 4. The pharmaceutical companies that develop new drugs, such as Abbott, are generally referred to as "brand name," "innovator," or "pioneer" companies. S. ¶ 4.

In 1984, Congress amended the laws governing pharmaceutical sales and enacted the Drug Price Competition and Patent Term Restoration Act, 21 U.S.C. § 355, commonly known as the Hatch-Waxman Act ("Hatch-Waxman").⁶ S. ¶ 5. This Act established an abbreviated process that shortened the time and effort needed to obtain FDA market approval for generic copies of previously approved pioneer drug products, yet also sought to protect against infringement of patents relating to pioneer drugs. As part of the legislative scheme to balance these competing interests, Hatch-Waxman provides that once the FDA approves a new drug, it is listed in a FDA publication called the "Orange Book," which identifies both the brand name and the chemical or generic name for the drug. S. ¶ 6. The FDA also lists in the Orange Book any patents owned by the innovator that "claim the drug" or "which claim a method of using such drug" and "with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use, or sale of the drug," along with the expiration date of such patent(s). S. ¶ 6.

On the other side of the balance, Hatch-Waxman provides that five years after the FDA has approved a new drug, a generic pharmaceutical company may seek approval to sell a generic version of the drug by filing an Abbreviated New Drug Application ("ANDA"). S. ¶ 7. A generic pharmaceutical manufacturer, such as Geneva, may not market a generic drug until the FDA approves the...