Staley v. Gilead Scis., Inc.

446 F.Supp.3d 578

STALEY, et al., Plaintiffs,

v.GILEAD SCIENCES, INC., et al., Defendants.

Case No. 19-cv-02573-EMC

United States District Court, N.D. California.

Signed March 3, 2020

Aditya Vijay Kamdar, David Floyd McGowan, Laura Elizabeth Miller, Mark Alan Lemley, Daralyn J. Durie, Durie Tangri LLP, San Francisco, CA, Alberto Rodriguez, David Paul Germaine, Pro Hac Vice, Eamon Padraic Kelly, Pro Hac Vice, Alberto Rodriguez, Sperling & Slater P.C., Chicago, IL, Daniel Evan Rubenstein, Radice Law Firm, Princeton, NJ, Donald Sean Nation, Pro Hac Vice, Matthew C. Weiner, Nicholas William Shadowen, Richard M. Brunell, Pro Hac Vice, Robert C. Hilliard, Pro Hac Vice, Steve D. Shadowen, Hilliard & Shadowen, LLP, Austin, TX, Frazar Wright Thomas, Pro Hac Vice, Hilliard & Shadowen LLP, Michael Patrick Ols, Natalie Finkelman Bennett, Shepherd, Finkelman, Miller & Shah, LLP, Philadelphia, PA, Gregory T. Arnold, Thomas M. Sobol, Hagens Berman Sobol Shapiro LLP, Cambridge, MA, Jayne Arnold Goldstein, Pro Hac Vice, Shepherd Finkelman Miller & Shah LLP, Ft. Lauderdale, FL, John Daniel Radice, Pro Hac Vice, Radice Law Firm, Long Beach, NJ, Steve W. Berman, Pro Hac Vice, Hagens Berman Sobol Shapiro LLP, Seattle, WA, W. Henry Huttinger, Durie Tangri LLP, Kevin Francis Ruf, Lionel Z. Glancy, Glancy Prongay & Murray LLP, Los Angeles, CA, Linda Phyllis Nussbaum, Pro Hac Vice, Nussbaum Law Group, P.C., Michael Joseph Gallagher, Jr, Pro Hac Vice, Milberg Phillips Grossman, New York, NY, Elizabeth Cheryl Pritzker, Pritzker Levine LLP, Emeryville, CA, Heidi M. Silton, Jessica N. Servais, Karen Hanson Riebel, Lockridge Grindal Nauen PLLP, Minneapolis, MN, Jonathan Krasne Levine, Pritzker Levine, LLP, Emeryville, CA, for Plaintiff.

Bryan Gant, Pro Hac Vice, Gabriella Elizabeth Bensur, Pro Hac Vice, Heather K. McDevitt, Pro Hac Vice, Holly Tao, Pro Hac Vice, Kristen O'Shaughnessy, Pro Hac Vice, White & Case LLP, Travis Wade Clark, Pro Hac Vice, Ada Victoria Anon, Pro Hac Vice, Arnold Porter Kaye Scholer LLP, New York, NY, Christopher M. Curran, Pro Hac Vice, Peter J. Carney, Pro Hac Vice, White and Case, Cindy Yuanjia Hong, Pro Hac Vice, Laura S. Shores, Arnold and Porter Kaye Scholer LLP, Washington, DC, Heather Marie Burke, Jeremy Kent Ostrander, White & Case LLP, Palo Alto, CA, Daniel B. Asimow, Arnold & Porter Kaye Scholer LLP, San Francisco, CA, Ashley Lynn Shively, Holland & Knight LLP, Paul Jeffrey Riehle, Faegre Drinker Biddle & Reath LLP, San Francisco, CA, Jerome W. Hoffman, Holland and Knight, LLP, Jacksonville, FL, Joanne Celia Lewers, Paul Hewit Saint-Antoine, Faegre Drinker Biddle Reath LLP, Philadelphia, PA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

Docket Nos. 143, 149, 158, 159

EDWARD M. CHEN, United States District Judge

Plaintiffs in this putative class action are:

(1) individuals who purchased and/or paid for some or all of the purchase price for certain HIV medications and

(2) health and welfare trust funds/plans that purchased or provided reimbursement for some or all of the purchase price for certain HIV medications.

Plaintiffs have filed suit against companies that are the new drug application holders¹ for, or otherwise manufacture, sell, and/or distribute, those HIV medications, namely:

(1) Gilead² ;

(2) Bristol-Myers Squibb ("BMS")³ ;

(3) Japan Tobacco; and

(4) Janssen.⁴

The bulk of Plaintiffs' claims against Defendants are antitrust claims, both federal and state (Counts 1-6 and 8-13). Plaintiffs have also asserted a claim based on violation of state consumer protection laws (Count 7). Currently pending before the Court are four motions to dismiss, one filed by each defendant named above. Two amicus briefs have also been submitted: one from the Federal Trade Commission ("FTC") and one from a group of nonprofit organizations that do HIV-related work.

Having considered the parties' briefs and accompanying submissions, as well as the oral argument of counsel, the Court hereby GRANTS in part and DENIES in part the motions to dismiss.

I. FACTUAL & PROCEDURAL BACKGROUND

The operative complaint is the corrected consolidated class action complaint ("CAC"). In that pleading, Plaintiffs allege as follows.

A. Regulatory Background

1. New Drugs and Generic Drugs

Drug manufacturers must obtain approval from the Food and Drug Administration ("FDA") before they can market and sell their drugs. If a drug manufacturer wants to sell a new drug, it must file a New Drug Application ("NDA") with the FDA. See CAC ¶ 68. Another process applies to generic drugs.

[O]nce the FDA has approved a brand-name drug for marketing, a manufacturer of a generic drug can obtain similar marketing approval through use of abbreviated procedures. The Hatch-Waxman Act permits a generic manufacturer to file an Abbreviated New Drug Application ["ANDA"] specifying that the generic has the "same active ingredients as," and is "biologically equivalent" to the already-approved brand-name drug." In this way the generic manufacturer can obtain approval while avoiding the "costly and time-consuming studies" needed to obtain approval "for a pioneer drug." The Hatch-Waxman process, by allowing the generic to piggyback on the pioneer's approval efforts, "speed[s] the introduction of low-cost generic drugs to market."

FTC v. Actavis, Inc. , 570 U.S. 136, 142, 133 S.Ct. 2223, 186 L.Ed.2d 343 (2013).

"The FDA assigns generic drugs that are pharmaceutical equivalents of branded drugs an ‘AB’ rating." CAC ¶ 71. State laws "either require or permit pharmacies to substitute AB-rated generic equivalents for branded prescriptions (unless the prescribing doctor has specifically ordered otherwise)." CAC ¶ 91.

2. Generic Manufacturers and Paragraph IV Certifications

New drugs, of course, are often protected by patents which, in theory, prevent the sale of generic versions of the new drugs – at least until the patents expire. Those patents, however, like any patents, may be challenged before their expiration dates.

A generic manufacturer may effectively raise a challenge to a patent by including in its ANDA what is known as a Paragraph IV certification – i.e. , a statement that the brand drug is covered by a patent but that the patent is invalid or will not be infringed by the generic drug. See CAC ¶ 75. A generic manufacturer has an incentive to include a Paragraph IV certification so that it can sell the generic drug before the patent on the brand drug expires on its own terms.

In addition, the first generic manufacturer to file an ANDA with a Paragraph IV certification gets an added benefit: it is "entitled to 180 days of ANDA Exclusivity," meaning that the FDA cannot approve any other generic version of the drug "until 180 days after the first-filer enters the market." CAC ¶ 77 (emphasis added). As the Supreme Court has noted, ANDA Exclusivity "can prove valuable, possibly worth several hundred million dollars. Indeed, the Generic Pharmaceutical Association said in 2006 that the vast majority of potential profits for a generic drug manufacturer materialize during the 180-day exclusivity period." Actavis , 570 U.S. at 144, 133 S.Ct. 2223. (ANDA Exclusivity can be forfeited under certain circumstances.⁵ ) "The first-filing generic manufacturer is guaranteed [the] exclusivity period even if it settles litigation with a patent owner without resolving the invalidity or noninfringement issues." AIDS Healthcare Foundation, Inc. v. Gilead Sciences, Inc. , No. C 16-00443 WHA, 2016 WL 3648623, at *2, 2016 U.S. Dist. LEXIS 87578, at *4-5 (N.D. Cal. July 6, 2016).

In turn, when a Paragraph IV certification is made, a brand manufacturer has an incentive to sue the generic manufacturer for patent infringement because, if it does so within 45 days of receiving the Paragraph IV certification, it may delay approval of the ANDA. More specifically, if the brand manufacturer files suit within 45 days, then the FDA is automatically barred from granting approval to the generic manufacturer's ANDA "until the earlier of (a) the passage of 30 months, or (b) the issuance of a decision by a court that the patent is invalid or not infringed." CAC ¶ 76.

Notably, even if a generic manufacturer wants to file an ANDA with a Paragraph IV certification as soon as possible (given the above), it cannot do so in all circumstances. In particular, "where the FDA has approved a new chemical entity [‘NCE’] (a drug substance that the FDA has not previously approved), no other manufacturer may seek FDA approval for a product containing that drug substance until five years after the FDA first approved it." CAC ¶ 86. Thus, the FDA cannot accept an ANDA from a generic manufacturer if the generic drug contains a NCE until the five-year "NCE Exclusivity" period has expired. See CAC ¶ 87. NCE Exclusivity thus "operates independent of any patent protection." AIDS Healthcare , 2016 WL 3648623, at *2, 2016 U.S. Dist. LEXIS 87578, at *7.

B. Science Background

1. cART Regimen

The modern HIV treatment regimen is known as cART, which stands for combination antiretroviral therapy. See CAC ¶ 1. A combination – or "cocktail" – is usually made up of:

(1) Two NRTIs (nucleotide/nucleoside analogue reverse transcriptase inhibitors); and

(2) A third agent (also known as a core agent).

See CAC ¶¶ 2, 56. A cocktail may also include a third class of drug – namely, a booster. Boosters not taken for any anti-HIV property in the drug but rather for their ability to inhibit the breakdown of some third agents. See CAC ¶¶ 64-65.

"The need to use multiple drugs in cART regimens can be a barrier to patient compliance." CAC ¶ 63. Thus, to reduce the burden on the patient, multiple drugs are often coformulated together into a single pill known as an FDC, which stands for fixed-dose combination. See CAC ¶ 63. An FDC can be made up of drugs made by one manufacturer or by more than one manufacturer, if the manufacturers can reach agreement.

2. Gilead's Drugs

Gilead makes various drugs that are used in cART regimens. The...