Time Insurance v. Astrazeneca AB

52 F. Supp. 3d 705, 2014 U.S. Dist. LEXIS 140110, 2014 WL 4933025
District Court, E.D. Pennsylvania·Decided October 1, 2014·No. Civil Action No. 14-4149·Published·Cited by 4 cases

Opinion

MEMORANDUM

McHUGH, District Judge.

I. Factual Background

This is an antitrust action brought under a variety of state statutes in which the issue presently before me is the propriety of federal jurisdiction. Plaintiffs are health insurance companies who ultimately paid for Nexium prescriptions purchased by individuals who maintained insurance coverage. Defendants are Astrazeneea, the patent-holding pharmaceutical company that produces name-brand Nexium, as well as three generic drug manufacturers who sought to produce generic Nexium.

Under the regulatory framework for pharmaceuticals, companies maintain exclusive patents on their drugs for a set period of time. However, the Hatch-Wax-[707] man Act, which amended the Food, Drug, and Cosmetics Act, 21 U.S.C. §§ 301-392, and other legislation, have created incentives for generic manufacturers to seek generic approval prior to the expiration of the patent. The patent-holder then files an infringement suit in order to prevent entrance of the generics to the market. This ensures an efficient system in which patent-holders are not abusing the patenting system to maintain a monopoly. First-filing generic manufacturers receive a 180-day window in which no other generic brands may sell on the market with the exception of any generic produced by the patent-holder. This provides strong incentive to challenge the validity of patents.

Plaintiffs allege that after the three generic manufacturers challenged the Nexi-um patents, and were subsequently sued for patent infringement in the District of New Jersey, Astrazeneca entered into reverse payment settlement agreements with them through which Astrazeneca provided compensation in exchange for stipulations that the Nexium patents were valid and promises not enter the market until the expiration of those patents. The generic companies did not receive direct payments, but allegedly received compensation in the form of outsized payments for other services and nullification of potential liabilities to Astrazeneca.

Currently, other suits based on these same agreements have been aggregated as multi-district litigation within the District of Massachusetts. The Plaintiffs filed this action in the Philadelphia Court of Common Pleas based entirely on state law antitrust claims. The Defendants removed the action on the basis that: (1) resolution of the state law antitrust claims will necessarily involve litigation of the validity of the Nexium patents; (2) any such litigation will involve a collateral attack on the federal consent judgments entered by the District of New Jersey; and (3) The Class Action Fairness Act (CAFA) requires that this action be combined with a related action filed in state court and removed here, Canten v. Astranzeneca,1 as a “mass action” capable of conferring federal jurisdiction.2

II. Remand on Ground that Resolution of Plaintiffs’ Claims does not Necessarily Involve Litigation of Patent Issues

Complete diversity does not exist amongst the Plaintiffs and the Defendants in this action—therefore, diversity jurisdiction is not proper. The Plaintiff-insurance companies assert their antitrust claims in the form of six state law causes of action, and the Defendant-pharmaceutical companies have removed based on a federal question theory. Federal question jurisdiction under 28 U.S.C. § 1331 provides federal courts with jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.”

It is firmly established that “[t]he presence or absence of federal question jurisdiction is governed by the ‘well-pleaded complaint rule,’ which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiffs properly pleaded complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987); see also Louisville & Nashville R. Co. v. [708] Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 53 L.Ed. 126 (1908). Defenses that may be raised are not a part of the plaintiffs well-pleaded complaint. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). “[A] case may not be removed to federal court on the basis of a federal defense, ... even if the defense is anticipated in the plaintiffs complaint, and even if both parties admit that the defense is the only question truly at issue in the case.” Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 14, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). Furthermore, federal jurisdiction extends “only to those cases in which a well-pleaded complaint establishes either that federal patent law creates the cause of action, or that the plaintiffs right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.” Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 809, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988).

Plaintiffs’ claims are brought under the antitrust laws of many separate states. As Defendants point out,3 and Plaintiffs do not dispute, these claims all seem to involve very similar elements that can be reduced to two components. An antitrust plaintiff must demonstrate (1) the existence of anticompetitive conduct by the defendant and (2) that the conduct caused the plaintiffs alleged injuries. In this case, on the issue of remand, the key question is whether Plaintiffs can assert a theory in which they can demonstrate these two elements without litigating the validity of Astrazeneca’s patents at the time the agreements were entered into.

A. Anticompetitive Conduct

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Time Insurance v. Astrazeneca AB, 52 F. Supp. 3d 705, 2014 U.S. Dist. LEXIS 140110, 2014 WL 4933025 (E.D. Pa. 2014).

52 F. Supp. 3d 705 (Time Insurance v. Astrazeneca AB) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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