United Food & Commercial Workers Local 1776 v. Teikoku Pharma USA, Inc.

74 F. Supp. 3d 1052, 2014 U.S. Dist. LEXIS 161069, 2014 WL 6465235
CourtDistrict Court, N.D. California
DecidedNovember 17, 2014
DocketCase No. 14-md-02521-WHO
StatusPublished
Cited by29 cases

This text of 74 F. Supp. 3d 1052 (United Food & Commercial Workers Local 1776 v. Teikoku Pharma USA, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United Food & Commercial Workers Local 1776 v. Teikoku Pharma USA, Inc., 74 F. Supp. 3d 1052, 2014 U.S. Dist. LEXIS 161069, 2014 WL 6465235 (N.D. Cal. 2014).

Opinion

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

Re: Dkt. No. 95

WILLIAM H. ORRICK, United States District Judge

INTRODUCTION

In this multidistrict antitrust litigation, plaintiffs challenge in their consolidated complaints a settlement between Endo Pharmaceuticals Inc. (“Endo”), a distributor of the brand-name drug Lidoderm, Tei-koku Seiyaku Co., its manufacturer, and Watson Pharmaceuticals, Inc. (“Watson”) a generic drug manufacturer. Plaintiffs allege that when Endo and Teikoku agreed to drop their ongoing patent litigation against Watson, they offered consideration of $96 million in free product and deferred competition with Watson’s generic product worth $170 million in exchange for Watson’s agreement to delay introduction of its generic drug. As a result of this settlement, plaintiffs were allegedly unable to purchase the cheaper generic version of Lidoderm.

The central issue in defendants’ consolidated motion to dismiss is whether plaintiffs have plausibly pleaded that the settlement involved large and unjustified reverse payments that caused antitrust injury under the rule of reason analysis described in F.T.C. v. Actavis, Inc., - U.S. -, 133 S.Ct. 2223, 186 L.Ed.2d 343- (2013). For pleading purposes, plaintiffs have sufficiently alleged a violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. Plaintiffs assert a myriad of other violations of federal and state antitrust and consumer protection laws. Many of these claims require an amended pleading because of questions concerning standing or other potentially amendable defects. I am dismissing some state claims now with prejudice either because indirect purchaser antitrust claims are not available under Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977) and the state at issue did not pass an Illinois Brick repealer, or for reasons specific to the law of a particular state.

I. PARTIES AND CLAIMS

A. Defendants

Endo is a Delaware corporation that markets and sells Lidoderm throughout the United States.1 Direct Purchaser Plaintiffs’ Consolidated Amended Complaint (“DPP Compl.”) [Dkt. No. 70] ¶ 13; End-Payor Plaintiffs’ Consolidated Amended Complaint (“EPP Compl.”) [Dkt. No. 72] ¶ 19; Government Employees Health Association First Amended Complaint (“GEHA Compl.”) [Dkt. No. 71] ¶ 23. Teikoku Seiyaku Co. is a Japanese company that manufactures Lidoderm for Endo pursuant to a Manufacturing and Supply Agreement. DPP Compl. ¶ 14; EPP Compl. ¶ 20; GEHA Compl. ¶ 24. It owns one of the patents for Lidoderm that Watson allegedly infringed. Id. Teikoku Pharma USA is a California corporation that is wholly owned by Teikoku Seiyaku Co., and is the holder of the New Drug [1059]*1059Application for Lidoderm. DPP Compl. ¶ 15; EPP Compl. ¶21; GEHA Compl. ¶ 25. (Endo, Teikoku Seiyaku Co., and Teikoku Pharma USA will be collectively referred to as “Endo/Teikoku”).

Watson Pharmaceuticals, Inc. was a Nevada corporation that marketed, produced, and distributed generic pharmaceutical products, including Lidoderm, starting in September 15, 2013.2 DPP Compl. ¶¶ 2, 19; EPP Compl. ¶¶ 23-24; GEHA Compl. ¶¶ 27-28.

B. Plaintiffs

The plaintiffs allegedly purchased generic and brand-name Lidoderm at supra-competitive prices. They are grouped into three categories based on their claims and relationship to the defendants; the direct purchaser plaintiffs (“DPPs”), entities that purchased Lidoderm directly from the defendants;3 the end-purchaser plaintiffs (“EPPs”), employee health and welfare benefit plans, municipal corporations, employee unions, and two individuals who purchased Lidoderm from third parties;4 and the Government Employees Health Association (“GEHA”), a not-for-profit corporation that provides health and dental plans to federal employees and retirees and their families that, like the EPPs, purchased Lidoderm from third parties.

The DPPs bring two claims for violations of Section 1 and three claims for violations of Section 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2. See DPP Compl. ¶¶ 153-189.5 The EPPs and GEHA assert a total of ten claims for violations of state antitrust laws, state consumer protection laws, and common law unjust • enrichment. See EPP Compl. ¶¶ 162-2056; GEHA Compl. ¶¶ 125-218.7

[1060]*1060II. REGULATORY BACKGROUND

The Food and Drug Administration (“FDA”) must approve all new drugs before a company can begin sales in the United States. Hatch-Waxman Act, 21 U.S.C. § 355(a). To obtain FDA approval, the company must file a New Drug Application (“NDA”), which contains information about the safety and efficacy of the drug, the components of the drug, and any patents issued on the composition of the drug or methods for its use.8 § 355(b)(1). The FDA publishes this information in the directory of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the “Orange Book.” Filing a NDA is a long, expensive, and complicated process. F.T.C. v. Actavis, Inc., - U.S. -, 133 S.Ct. 2223, 2228, 186 L.Ed.2d 343 (2013).

Generic drugs offer significant cost-savings, so Congress passed the Hatch-Wax-man Act in order to provide an additional streamlined FDA approval process. DPP Compl. ¶ 44; EPP Compl. ¶ 38; GEHA Compl. ¶ 33; see Pub.L. No. 98-417, 98 Stat. 1585 (1984).9 Under the Hatch-Wax-man Act, a generic manufacturer can file an Abbreviated New Drug Application (“ANDA”), and show that the generic drug is biologically and pharmaceutically equivalent to an FDA-approved brand-name drug. 21 U.S.C. § 355(j)(2)(A). The generic manufacturer does not need to conduct time-consuming and costly trials anew, but can rely on the scientific findings of safety and effectiveness included in the brand-name drug’s NDA.' Actavis, 133 S.Ct. at 2228.

In order to protect the brand-name drug manufacturer’s patent rights, the generic manufacturer must make one of four “paragraph” certifications (i) that no patent for the brand-name drug has been filed with the FDA (paragraph I); (ii) that the patent for the brand-name drug has expired (paragraph II); (iii) that the patent for the brand-name drug will expire on a .particular date and the generic company does not seek to market its generic product before that date (paragraph III); or (iv) that the patent for the brand-name drug is invalid or will not be infringed by the generic manufacturer’s proposed product (paragraph IV). 21 U.S.C. § 355(g)(2)(A)(vn).10

After filing an ANDA with a paragraph IV certification, the generic manufacturer must send notice to the patent holder. § 355(j)(2)(B).

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74 F. Supp. 3d 1052, 2014 U.S. Dist. LEXIS 161069, 2014 WL 6465235, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-food-commercial-workers-local-1776-v-teikoku-pharma-usa-inc-cand-2014.