McLaughlin, District Judge.
This lawsuit is one of many in the federal courts involving the application of the Supreme Court's decision in
In
The settlements challenged in this case (collectively the "Wellbutrin Settlement") resolved patent disputes among GSK, GSK's business partner Biovail, and multiple generic manufacturers who had filed Hatch-Waxman Act Paragraph IV Certifications challenging the Wellbutrin XL patent. The Wellbutrin Settlement, reached in February 2007, allowed the underlying Hatch-Waxman litigation to continue, and provided for entry of generic Wellbutrin XL immediately upon a finding of non-infringement or patent invalidity, and in any case no later than May 30, 2008, 10 years before the expiration of the patent. The settlement also granted the generic manufacturers sublicenses to patents (which expired in 2022) at issue in a separate patent lawsuit, and provided a guaranteed generic supply of Wellbutrin XL; it also provided for enhanced review of the settlement by the Federal Trade Commission. In the settlement, GSK agreed not to launch an authorized generic Wellbutrin XL product during the generic manufacturer's period of Hatch-Waxman guaranteed exclusivity.
GSK has filed three motions for summary judgment: one motion for summary judgment as to all claims made by the plaintiffs; one motion for summary judgment addressing only the issue of causation; and one motion for summary judgment as to the indirect plaintiffs' Cartwright Act cause of action. In connection with its motions for summary judgment, GSK has filed
The series of settlement agreements challenged here contains a provision not present in any other post-
The fact that the Wellbutrin Settlement allowed the underlying patent litigation to continue, however, is a factor to be considered in the rule of reason analysis mandated by
As to a settlement without a no authorized generic provision, there is no evidence that such a settlement was ever contemplated, much less that it would have resulted in an earlier entry date. The summary judgment record shows that the generic manufacturers regarded the no authorized generic agreement as an essential term. As to continued litigation and the at risk launch, the plaintiffs have not made an adequate showing that a separate patent would not have been an independent bar to market entry.
Even if the plaintiffs had shown that the Wellbutrin Settlement had anticompetitive effects, the Court finds that a reasonable jury could not find that any anticompetitive effects outweigh the procompetitive benefits of the settlement. The Wellbutrin Settlement provided sublicenses to a generic patent that was the subject of separate infringement actions brought by a different pharmaceutical company, and obligated Biovail to supply the generic manufacturer with generic Wellbutrin XL, two results not achievable through successful litigation alone.
Finally, the plaintiffs cannot prove that they suffered antitrust injury or that the Wellbutrin Settlement was the proximate cause of any injury suffered because they have not presented evidence that the Wellbutrin Settlement, as opposed to an independent patent, prevented market entry of generic Wellbutrin XL.
The settlement agreement at issue in these cases — the Wellbutrin Settlement — involves the interplay between complex
The Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301-92 ("FDCA"), provides that the Food and Drug Administration ("FDA") must approve all drugs before they may be introduced into interstate commerce. Companies seeking to market drugs must file applications for approval under one of two procedures.
Under the first procedure, a new drug (or "brand name" drug) applicant files a New Drug Application ("NDA"), which must include examples of the proposed labeling for the drug and clinical data demonstrating the drug's safety and efficacy. The NDA must also include the patent number and expiration date of any patent that claims either the drug or a method of using the drug if "a claim of patent infringement could reasonably be asserted." Submission of an NDA involved "a long, comprehensive, and costly testing process."
Congress established the second new drug approval procedure in 1984 with the Drug Price Competition and Patent Term Restoration Act (the "Hatch-Waxman Act"). Pub.L. No. 98-417, 98 Stat. 1585 (1984). The Hatch-Waxman Act allows companies seeking to manufacture and market a generic version of a previously approved pioneer drug (known as the "listed drug") to avoid filing an NDA. Instead, generic manufacturers are permitted to file an Abbreviated New Drug Application ("ANDA"). The ANDA permits the applicant to rely on the safety and efficacy data for the listed drug if the applicant can show that the generic product is "bioequivalent" to the listed drug. 21 U.S.C. §§ 355(j)(2)(A)(iv), (j)(8)(B).
As part of the ANDA process, a generic manufacturer must make one of four certifications regarding each patent associated in the Orange Book with the listed drug: (I) that the patent information has not been filed; (II) that the patent has expired; (III) that the patent is set to expire; or (IV) that the patent is invalid or will not be infringed by the generic drug. This fourth certification is known as a "Paragraph IV Certification." 21 U.S.C. § 355(j)(2)(A)(vii)(IV). A generic manufacturer that files a Paragraph IV Certification must give notice to the patent holder and provide a "detailed statement of the factual and legal basis of the opinion of the applicant that the patent is invalid or will not be infringed." 21 U.S.C. § 355(j)(2)(B).
The Hatch-Waxman Act provides that if the patent holder files an infringement suit within 45 days after receiving notice of the Paragraph IV Certification, the patent holder benefits from a statutory stay on FDA approval of the ANDA for a period of 30 months or until the resolution of the infringement suit, whichever is shorter. 21 U.S.C. § 355(j)(5)(B)(iii). If the generic applicant begins to market its generic product prior to a determination of the patent's validity or scope, the launch is considered to be "at risk" and the manufacturer can be forced to pay damages. See 35 U.S.C. 271(e)(4)(C).
The first generic company to file an ANDA containing a Paragraph IV Certification
The product at issue in this litigation is Wellbutrin XL, the third iteration of GSK's Wellbutrin product.
Bupropion hydrochloride, an active pharmaceutical ingredient used to treat depression, was first approved by the FDA for the treatment of major depressive disorder in 1985 in an immediate release formulation known by its branded name, Wellbutrin IR. Wellbutrin IR provides for rapid release of the active ingredient and is taken three times a day. To reduce the degradation of bupropion hydrochloride upon contact with water, GSK added hydrochloric acid as a stabilizing agent. GSK Stmt. ¶ 1-2; Pls.' Stmt. Opp. ¶ 1-2.
The next bupropion hydrochloride product to reach the market was the sustained release Wellbutrin SR, which is taken twice a day. Wellbutrin SR was approved on the basis of its bioequivalence to Wellbutrin IR. Wellbutrin SR also used hydrochloric acid as a stabilizing agent. GSK Stmt. ¶ 1-2; Pls.' Stmt. Opp. ¶ 1-2.
Biovail acquired the rights to two U.S. patents covering extended release formulations of bupropion hydrochloride: U.S. Patent No. 6,096,341 (the "'341 patent") and U.S. Patent No. 6,143,327 (the "'327 patent"). Both patents are set to expire on October 30, 2018. GSK Stmt. ¶ 5; Pls.' Stmt. Opp. ¶ 5.
In 2001, Biovail and GSK entered into an agreement to develop, manufacture, and promote a once-a-day extended release bupropion hydrochloride (the "Co-Promotion Agreement"). The extended release formulation, brand-named Wellbutrin XL, would be taken once a day and allow for the continuous and slow release of bupropion hydrochloride into the bloodstream over time. GSK had not independently developed an extended release version of bupropion hydrochloride. The FDA approved GSK's Wellbutrin XL NDA in August 2003. GSK Stmt. ¶ 3, 5-6; Pls.' Stmt. Opp. ¶ 3, 5-6.
There are two sets of underlying patent litigations relevant to the antitrust questions presented by the Wellbutrin Settlement: the cases between Biovail and the generic manufacturers that filed Paragraph IV Certifications (the "Biovail Litigations") — specifically the Anchen litigation and the cases between Andrx Pharmaceuticals and GSK and Anchen Pharmaceuticals, respectively (the "Andrx Litigations").
Between September 2004 and May 2005, four generic manufacturers — Anchen Pharmaceuticals, Inc. ("Anchen"), Abrika Pharmaceuticals, LLP ("Abrika"), Impax Laboratories, Inc. ("Impax"), and Watson Pharmaceuticals, Inc. ("Watson") — filed Abbreviated New Drug Applications ("ANDAs") with the FDA, seeking approval for generic versions of Wellbutrin XL. Each generic manufacturer filed a Paragraph IV Certification claiming non-infringement and served GSK and Biovail with that Certification; the Certifications provided notice of the ANDA filing and declared
In each case, Biovail filed a lawsuit against the generic manufacturers; GSK initially joined the lawsuits against Anchen and Abrika but withdrew from both cases in April 2005.
Biovail's Hatch-Waxman lawsuit against Anchen is the case particularly relevant for evaluating the Wellbutrin Settlement, because only the settlement of the
Anchen's ANDA did not quantify the amount of hydrochloric acid in its product on a per unit basis. The ANDA described a product that used hydrochloric acid as a "stabilizing agent" in the manufacturing process, but stated that the acid was "evaporated during processing" and indicated a "-" under the column designated "MG PER TABLET." Similarly, the percentage of hydrochloric acid was listed as "-" and ingredients other than hydrochloric acid were shown in the ANDA to add up to 100.0% of the finished product. A list in the ANDA comparing the Anchen product to Wellbutrin XL did not include hydrochloric acid as an ingredient in Anchen's product. GSK Stmt. ¶ 12-13; Pls.' Stmt. Opp. ¶ 12-13.
In the
On February 8, 2006, Judge Selna issued a Claim Construction Order finding that "free of stabilizer" meant that "the core is free of any substance or agent that tends to prevent changes to the chemical integrity of the tablet." Regarding Biovail's claim construction argument, Judge Selna's order stated:
GSK Stmt. ¶ 13; Pls.' Stmt. Opp. ¶ 13; Am. Order on Cl. Constr. Hr'g 9.
The parties filed cross motions for summary judgment following Judge Selna's ruling on claim construction. In addition to its claim construction argument, Biovail argued (1) that it was entitled to rely on the representations in Anchen's ANDA when initiating suit and (2) that Anchen had an obligation under FDA regulations and guidance to quantify even residual amounts of hydrochloric acid ("HCl") if the HCI tended to stabilize the final tablet, which it had not done. Biovail argued, therefore, that Anchen's ANDA controlled the infringement inquiry and suggested
Judge Selna issued a tentative minute order denying Anchen's motion, finding a genuine issue of material fact regarding whether Anchen's ANDA directly addressed the infringement inquiry. GSK Stmt. ¶ 14; Pls.' Stmt. Opp. ¶ 14.
After oral argument, however, Judge Selna granted Anchen's motion for summary judgment on August 1, 2006. The court found that there were no facts to show that Anchen's product was "free of stabilizer" since Anchen's product contained the stabilizer hydrochloric acid. Judge Selna denied Biovail's motion for reconsideration, and entered judgment on August 25, 2006. Biovail appealed to the Federal Circuit, challenging both the claim construction and summary judgment orders. Biovail's appeal was docketed on September 25, 2006. GSK Stmt. ¶ 14-15; Pls.' Stmt. Opp. ¶ 14-15.
Following full briefing, the Federal Circuit held oral argument on September 5, 2007. During oral argument, the Federal Circuit engaged in extensive questioning of Anchen's counsel regarding whether Anchen was required to list the amount of "stabilizing" hydrochloric acid in a tablet of generic Wellbutrin XL if the hydrochloric acid was serving a function in the tablet. As the Court recognized in granting summary judgment on the plaintiffs' sham litigation claims, the panel asked whether Anchen had complied with FDA regulation. GSK Stmt. ¶ 15, 16, 19; Pls.' Stmt. Opp. ¶ 15, 16, 19; Anchen Fed. Cir. Tr. at 16-17;
The Federal Circuit granted Biovail's motion to withdraw its appeal on June 11, 2008. GSK Stmt. ¶ 15, 19; Pls.' Stmt. Opp. ¶ 15, 19; Order Granting Mot. to Withdraw.
The litigations among Biovail and the generic manufacturers were not the only patent infringement actions impacting the marketing of both branded and generic 150mg Wellbutrin XL: both GSK and Anchen faced patent infringement actions by Andrx Pharmaceuticals ("Andrx").
On November 28, 2006, Andrx filed a patent infringement lawsuit against Anchen, claiming that Anchen's generic 150mg Wellbutrin Xl product would infringe Andrx's '708 patent. Andrx sought both preliminary and permanent injunctions to prevent the sale of generic Wellbutrin XL.
Anchen was limited in its ability to defend the patent infringement lawsuit: Anchen's CEO, Chih-Ming Chen, was the inventor of the Andrx patent and had assigned the patent rights to Andrx. Anchen's marketing partner Teva Pharmaceuticals U.S.A., Inc. ("Teva") had therefore recognized that the doctrine of "inventor estoppel would prevent Anchen from raising an argument as to the invalidity of the '708 patent," which was the defense used by GSK. GSK Stmt. ¶ 82; Pls.' Stmt. Opp. ¶ 82; Holding Dep. Tr. 65:3-19.
The Andrx lawsuits were settled as part of the Wellbutrin Settlement, discussed below. GSK Stmt. ¶ 45; Pls.' Stmt. Opp. ¶ 45.
On December 20, 2005, Biovail filed a citizen petition with the FDA; GSK did not join the filing. The citizen petition requested that the FDA require any ANDA for a generic version of Wellbutrin XL to meet four criteria: (1) all bioequivalence trials should calculate and evaluate parameters based on concentrations of the parent drug and active metabolites; (2) any generic formulation should be shown to be bioequivalent to Wellbutrin XL, sustained release and immediate release bupropion; (3) the bioequivalence studies should be conducted at steady-state evaluating the performance of the dosage form based on AUC, Cmax, Cmin; and (4) data using the FDA's approach for evaluating the effect of alcohol on the performance of the controlled-release dosage form should be required to ensure the absence of "dose dumping." The FDA granted in part and denied in part the citizen petition. GSK Stmt. ¶ 45; Pls.' Stmt. Opp. ¶ 45;
Anchen qualified for the Hatch-Waxman Act's 180-day exclusivity period for generic Wellbutrin XL because it was the first to file an ANDA with the FDA.
Anchen and Teva had discussed the possible at risk launch of 150mg generic Wellbutrin XL, anticipating a launch in the first quarter of 2007. Pls. Exs. 772, 813, 846, 922, 899, 915, 770.
In December 2006, the FDA approved Anchen's ANDA for both the 300mg and 150mg versions of generic Wellbutrin XL. Anchen's ANDA listed its Goodyear facility as the intended manufacturing site for its generic Wellbutrin XL product. GSK Stmt. ¶ 22-25; Pls.' Stmt. Opp. ¶ 22-25.
During the FDA's January 2007 inspection of Anchen's Goodyear manufacturing site, the FDA learned for the first time that Anchen was expecting to use its Jeronimo manufacturing site — rather than the Goodyear manufacturing site — to manufacture its generic Wellbutrin XL product. GSK Ex. 72.
On May 29, 2007, Anchen received the FDA's Establishment Inspection Report from the January 2007 Goodyear facility inspection. The report explained that the change involving the inspection facility "would require a prior approval supplement if the facility had never been inspected by FDA," as was the case with Anchen's Jeronimo facility.
The FDA orally accepted Anchen's CBE-30 on June 11, 2007. This acceptance was effective on June 12, 2007. Anchen could not market generic Wellbutrin XL
The Wellbutrin Settlement was executed on February 9, 2007 and resolved the Wellbutrin XL Hatch-Waxman litigations brought by Biovail against generic manufacturers Teva, Anchen, Impax, and Watson, as well as the patent litigation brought by Andrx against the generic manufacturers. The Wellbutrin Settlement was comprised of multiple agreements: the Omnibus Agreement (in which GSK was listed as an intended third party beneficiary); the Anchen Definitive Agreement; the Teva License Agreement; the Impax Settlement Agreement; and the Third Amendment, an agreement between GSK and Biovail by which GSK relinquished its right to launch an authorized generic during the 180-day exclusivity period provided by the Hatch-Waxman Act. GSK Stmt. ¶ 52, 54; Pls.' Stmt. Opp. ¶ 52, 54.
The following lawsuits were pending at the time of the Wellbutrin Settlement: Biovail's appeal of the summary judgement decision in the
The Wellbutrin Settlement was initially negotiated among Biovail, Teva, Anchen, and Impax without GSK's involvement, with Teva taking the lead in negotiating for the generic manufacturers. GSK became directly involved in the settlement discussions in December 2006: at a December 20 and 21 hearing in the
Following Judge Brody's request, GSK joined the settlement discussions. Following settlement discussions, GSK agreed to cede licensing and manufacturing rights to its authorized generic Wellbutrin XL. GSK also agreed to sublicense the Andrx patent license to Biovail. Initially, GSK was only willing to finalize the agreement if Judge Brody found the Wellbutrin Settlement procompetitive; GSK, ultimately acquiesced on this point, however, when Judge Brody refused to review the settlement. GSK Stmt. ¶ 60-63, 65; Pls.' Stmt. Opp. ¶ 60-63, 65; Brannon Dep. Tr. 190:17-191:4; GSK Ex. 62.
Both parties have recognized that the Wellbutrin Settlement was a complex agreement with numerous provisions.
The Wellbutrin Settlement allowed the
The Wellbutrin Settlement provided that Teva could enter the market with generic Wellbutrin XL immediately upon Anchen prevailing in its underlying patent litigation (either through a showing of patent invalidity or a showing of non-infringement, or on May 30, 2008, whichever date was earlier.
Although internal GSK and Biovail documents recognized that the May 30, 2008 entry date was the most "likely" outcome, all documents simultaneously recognized that there were "defined exceptions" to that date, including the exception of an Anchen litigation victory.
The Wellbutrin Settlement guaranteed Teva the exclusive right to sell 300mg generic Wellbutrin XL (which Teva had launched at risk) from December 13, 2006
One constant throughout the negotiations was Teva's insistence that any settlement involve an agreement that GSK not produce an authorized generic version of Wellbutrin XL during the 180-day exclusivity period. Teva's representatives expressed the (mistaken) view that the Hatch-Waxman 180-day exclusivity period had been designed to ensure that no authorized generic would be marketed during that time period.
For example, a Stipulation and [Proposed] Order that was drafted but ultimately not submitted to the court by the parties to the
The Wellbutrin Settlement included sublicenses through Biovail to the license GSK obtained from Andrx with regard to the 150 mg product for each of the generic manufacturers. Teva took the position during the negotiation of the Wellbutrin Settlement that it needed "the full freedom to operate" without concern over patent infringement claim by Andrx. Additionally, because Anchen's CEO, Chih-Ming Chen, was the inventor of the Andrx patent (he had left Andrx to found Anchen), Teva had expressed concern that the theory of inventor estoppel would prevent Anchen from raising an argument as to the invalidity of the '708 patent in the
GSK and Andrx had settled the
Anchen, Teva, and Andrx communicated regarding a possible settlement to the Andrx litigation.
The Wellbutrin Settlement also included a supply provision that required Biovail to supply Teva with Wellbutrin XL if (1) Teva faced limited supply from Anchen or (2) the FDA ruled on Biovail's citizen petition in a way that made generic Wellbutrin XL non-compliant. Biovail was obligated to provide up to 75 million pills if Anchen faced supply issues, and an unlimited amount of pills if the outcome of the citizen petition made generic Wellbutrin XL non-compliant. The supply option would provide Teva with access to immediate supply of Wellbutrin XL if Anchen prevailed on appeal and Teva was allowed to enter the market. GSK Stmt. ¶ 69, 73; Pls.' Stmt. Opp. ¶ 69, 73.
Teva requested that the backup supply provision be generous because Teva "need[ed] to be able to sell on the trigger date," which "require[d] reasonable preparations".
Under the provisions of the Medicare Modernization Act Section 1112(a) of Subtitle B of Title IX of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ("MMA"), parties to a reverse payment patent litigation settlement are required to submit the settlement agreement and all related agreements to the FTC within 10 business days of entry of the agreement.
The Wellbutrin Settlement required the parties to submit the agreement to the Federal Trade Commission ("FTC") for review within two days of finalizing the agreement. The parties to the settlement were also required to respond to any FTC inquiries, and if the FTC raised any concerns about the settlement to either revise the settlement as directed by the FTC or
On February 20, 2007, after submitting the Wellbutrin Settlement to the FTC, Biovail, Anchen, Teva, and Impax met with senior FTC counsel to review the terms of the agreements. Biovail and the generic companies provided the FTC with a total of twenty four documents that comprised the Wellbutrin Settlement, as well as a list of parties to the transaction, the patents asserted, and the lawsuits involved. The parties did not provide a written summary of the agreements for the FTC. GSK Stmt. ¶ 87; Pls.' Stmt. Opp. ¶ 87.
At the meeting, the parties presented the central features of the Wellbutrin Settlement to the FTC: (i) the back-up supply provision to Teva (including the provision that allowed for supply in the event of an impediment as a result of Biovail's citizen petition); (ii) the Andrx sublicenses to Teva, Anchen, and Impax; and (iii) the early trigger date for the 150 mg product in the event the Anchen appeal was decided in Anchen's favor prior to the negotiated May 30, 2008 date. During the meeting, Teva's antitrust counsel explained to the FTC that the Wellbutrin Settlement "relieved Teva of the potential enormous liability that" launching the 300mg product at risk in December 2006 had created. Teva's counsel explained to the FTC that this feature distinguished the Wellbutrin Settlement "from a typical Hatch-Waxman settlement" and, as a result, "the FTC in particular should not want to take any action that would upset this agreement because it's procompetitive [to] launch at risk, and the FTC shouldn't take actions that might deter Teva from launching at risk, and making it harder to Teva to settle following a launch at risk could be a deterrent." GSK Stmt. ¶ 88-89; Pls.' Stmt. Opp. ¶ 88-89.
Teva's counsel also explained to the FTC that GSK had agreed to relinquish its right to launch an authorized generic during Teva's 180-day exclusivity period.
On March 2, 2007, the FTC notified Biovail and the generic manufacturers that it would not investigate or take any further action regarding the Wellbutrin Settlement. GSK Stmt. ¶ 91-92; Pls.' Stmt. Opp. ¶ 91-92.
In May 2008, direct and indirect purchasers of Wellbutrin XL filed claims against defendants Biovail Corporation, Biovail Laboratories, Inc., and Biovail Laboratories International (together, "Biovail") and GSK, alleging that Biovail and GSK conspired to prevent generic versions of Wellbutrin XL from entering the American market by filing sham patent infringement lawsuits and a citizen petition with the Food and Drug Administration ("FDA"), and entering into agreements with generic manufacturers to settle the lawsuits. The Court certified the class of direct purchasers on August 11, 2011, and the class of indirect purchasers on August 15, 2011. The Court decertified the indirect purchaser class on June 30, 2015.
On August 3, 2012, the Court approved the parties'
On November 7, 2012, the Court stayed the case pending the Supreme Court's decision on whether to grant certiorari in
The Supreme Court issued its decision in
In light of the Supreme Court's decision in
GSK has moved for summary judgment on the following grounds: (1) The Supreme Court's decision in
GSK has argued that the Wellbutrin Settlement, because it allowed the underlying patent litigation to continue, should not be subject to the rule of reason analysis that the Supreme Court in
The Supreme Court in
In finding that
Anticompetitive harm as the elimination of patent litigation reflects the careful and imperfect interplay between patent law and antitrust law. Patent law grants monopolies, and patents, therefore, act as lawful restraints of trade.
The Hatch-Waxman Act — under which the
In
There is a critical distinction between the Wellbutrin Settlement and the settlements at issue in
Indeed, the Supreme Court and the Third Circuit have classified certain other types of patent lawsuit settlements as being outside the scope of antitrust scrutiny. For example, in
Such settlements, which are without question agreements in restraint of trade, are not subject to antitrust scrutiny because they allow the
Similarly, in the Wellbutrin Settlement, the patent itself remained controlling. Unlike a typical reverse payment patent settlement, in which the settlement itself keeps the patent from playing a role in the entry date, a finding of invalidity or non-infringement — a finding on the patent's strength — dictated the entry date for generic Wellbutrin XL.
The Court, however, is reluctant to apply the mechanical test suggested by GSK, whereby any reverse payment that allows the underlying patent litigation to continue is automatically exempt from the antitrust laws. Such a test could foreseeably create an easily exploited antitrust loophole for reverse payment settlements. Such "formalistic approach[s]" are unhelpful in antitrust actions.
The Court, therefore, will analyze the Wellbutrin Settlement under the rule of reason, as the Supreme Court instructed in
GSK argues that the plaintiffs have not and cannot demonstrate that the Wellbutrin Settlement was anticompetitive under the rule of reason. The rule of reason asks three progressive questions of challenged agreements: (1) does the agreement have anticompetitive effects; (2) if so, are there procompetitive justifications for the agreement; and (3) can the plaintiffs present evidence that the challenged conduct is unnecessary to achieve those justifications. Because there is no genuine issue of material fact as to the answers to these questions, and a reasonable jury could not find the Wellbutrin Settlement to be anticompetitive under the rule of reason, the Court grants GSK's motion for summary judgment.
In
Under the traditional rule of reason analysis, the plaintiffs bear the initial burden of showing that the challenged agreement "produced adverse, anticompetitive effects within the relevant product and geographic market."
In conducting the rule of reason analysis, the Court will evaluate the Wellbutrin Settlement's reasonableness at the time it was entered into.
To survive summary judgment, the plaintiffs must present a "genuinely disputed issue of material fact" as to the elements of the rule of reason analysis; only then will the case go to a jury.
The plaintiffs bear the initial burden under the rule of reason to demonstrate that the agreement had anticompetitive effects.
The plaintiffs, as discussed in detail above, cannot establish that the Wellbutrin Settlement presented the type of anticompetitive harm contemplated by
Because the plaintiffs cannot allege the anticompetitive harm contemplated by
The plaintiffs have suggested that a showing of GSK's market power over the bupropion hydrochloride market satisfies
Although the
In explaining the application of the rule of reason to reverse payment patent settlements, the Supreme Court distinguished a showing of market power from the necessary showing of the anticompetitive harm of such payments.
To allow a showing of market power to satisfy the plaintiffs' burden under the rule of reason would be in tension with the holdings of
In attempting to demonstrate the anticompetitive effects of the Wellbutrin Settlement in the form of a delayed entry, the plaintiffs first argue that they must show only a "large payment" (in the form of a no authorized generic agreement) and a "delay" of generic entry. This argument appears to be advocating that the Court use a "quick look" analysis
The plaintiffs also attempt to show anticompetitive effects by arguing that GSK viewed the no authorized generic promise as being made for delayed generic entry; to support this, the plaintiffs rely on both testimony by GSK officials
It is in keeping with the traditional rule of reason analysis to require the plaintiffs to show that the Wellbutrin Settlement actually resulted in the delayed entry of Wellbutrin XL — that absent the Wellbutrin Settlement, generic competition would have occurred earlier. The plaintiffs'
There are no facts in the summary judgment record to support a contention that, absent the no authorized generic agreement, an alternate settlement would have been reached.
The summary judgment record, in fact, shows the opposite: Teva expressly and unwaveringly refused to settle the Biovail litigation unless the settlement contained a no authorized generic agreement. Teva had demanded a no authorized generic promise prior to GSK's involvement in the settlement process; prior to GSK's involvement, the parties had tried and failed to negotiate a settlement agreement without a no authorized generic agreement. It was Teva's insistence on the no authorized generic promise that made it necessary for Judge Brody to require GSK's involvement in the settlement process, and Teva continued to demand a no authorized generic promise after GSK was instructed by Judge Brody to participate in the settlement process. As further evidence of Teva's insistence, every draft of the Wellbutrin Settlement included a no authorized generic agreement. Brannon Dep. Tr. 129:14-130:5 ("Teva ... was very adamant that certain issues were deal breakers for them, and they required GSK to waive certain rights if there was going to be any settlement at all."); Bauer Dep. Tr. 57:8-13; GSK Exs. 10, 63.
The plaintiffs' expert Dr. Leitzinger offers no testimony in support of a contention that an alternate settlement would have been reached. Dr. Leitzinger states instead that "one can fairly infer the presence of delay simply from the fact of a reverse payment that is not otherwise justified," and Dr. Leitzinger did not "[try] to answer the question of what specifically
Alternatively, the plaintiffs argue that had the Wellbutrin Settlement not been reached, the litigation would have continued, Teva would have launched generic Wellbutrin XL "at risk" of the pending litigation, and GSK would have launched
As discussed in detail in Section D, this argument for anticompetitive effects fails because the summary judgment record does not contain evidence that Anchen would have succeeded in both the
Although he Court is not convinced that the plaintiffs have met their preliminary burden of demonstrating anticompetitive effects of the Wellbutrin Settlement, the Court, nevertheless, will continue the rule of reason analysis and evaluate the procompetitive justifications for the Wellbutrin Settlement.
If plaintiffs meet their initial burden of presenting sufficient evidence of anticompetitive effects, the defendant must then show that the "challenged conduct promotes a sufficiently procompetitive objective."
In the context of reverse payment settlements, the Supreme Court in
GSK has presented the following procompetitive justifications for the Wellbutrin Settlement: (1) the Andrx License that allowed Anchen/Teva to enter the generic Wellbutrin Market without the risk of losing the
The Wellbutrin Settlement included a provision through which GSK — through Biovail — sublicensed Andrx's product to Anchen/Teva, eliminating an independent and substantial hurdle to generic entry. Andrx had sought injunctive relief to keep Anchen/Teva off the market; Andrx's patent was set to expire in 2022. At the time of the Wellbutrin Settlement, GSK entered into a settlement agreement with Andrx, whereby GSK paid Andrx $35 million in satisfaction of Andrx's infringement claims for sales prior to February 1, 2007, and a 3.5% royalty of its net sales for sales following February 1, 2007. GSK Ex. 5. The settlement agreement also allowed GSK to sublicense its rights to Biovail, which could in turn sublicense those rights to the generic manufacturers. Anchen/Teva received that sublicense as a provision of the Wellbutrin Settlement.
Anchen had been severely limited in its defense of the
The summary judgment record demonstrates that Teva demanded that the Wellbutrin Settlement to provide a sublicense to the Andrx patents. Contemporaneous documents show that Teva wanted the "full freedom to operate" without the risk of either the Biovail or Andrx patent infringement claim and anticipated that GSK's negotiations with Andrx would include address generic license for Anchen/Teva. GSK Ex. 64. The Wellbutrin Settlement guaranteed Teva that freedom, and eliminated the possibility that Andrx could prevent generic Wellbutrin XL from being marketed for the 15 years remaining on its patent. Absent a license for the Andrx patent or success in the underlying litigation, it would have been impossible for Anchen/Teva lawfully to market generic Wellbutrin XL.
The Wellbutrin Settlement also included a supply provision that required Biovail to supply Teva with Wellbutrin XL if (1) Teva faced limited supply from Anchen or (2) the FDA ruled on Biovail's citizen petition in a way that made generic Wellbutrin XL non-compliant. Biovail was obligated to provide up to 75 million pills if Anchen faced supply issues, and an unlimited amount of pills if the outcome of the citizen petition made generic Wellbutrin XL non-compliant. GSK Ex. 6.
The parties to the Wellbutrin Settlement extensively negotiated the settlements' supply provisions. Nine versions of the supply terms were exchanged between the December 16, 2006 draft and the final February 9, 2007 Wellbutrin Settlement.
The summary judgment record is clear that Teva was concerned about its ability to market generic Wellbutrin XL on the trigger date, and was therefore highly motivated
Supply contracts can assure steady supply, limit risk, and allow for long-term planning on the part of the recipient.
Finally, the Wellbutrin Settlement preserved for consumers the benefits of Anchen/Teva's immediate entry should Anchen prevail in the Biovail appeal. Under the Wellbutrin Settlement, once Anchen succeeded on appeal, Anchen/Teva were in a position to lawfully enter the market with generic Wellbutrin XL, not at risk of infringing the Biovail patent. The Wellbutrin Settlement also allowed Anchen/Teva to market generic Wellbutrin XL on May 30, 2008 at the latest — ten years prior to patent expiration — even if Biovail prevailed on appeal. Finally, the Wellbutrin Settlement eliminated the liability Anchen faced for its at risk launch of 300mg generic Wellbutrin XL. GSK Exs. 6, 46; Holding Dep. Tr. 55:16-20.
An allegedly anticompetitive restraint survives a rule of reason analysis if it achieves legitimate, procompetitive justifications and is
The plaintiffs have not presented evidence to challenge GSK's procompetitive justifications on the grounds that the allegedly anticompetitive conduct was unnecessary to achieve the justifications. In fact, as discussed above, there would have been no settlement agreement — and thus no supply provision or sublicense — had GSK not agreed to abstain from marketing an authorized generic product.
Rather, the plaintiffs challenge GSK's procompetitive justifications on the grounds that the justifications themselves are "unnecessary", "illusory", and "pretextual".
The summary judgment record, however, does not contain any evidence that would allow a reasonable jury to find that GSK's procompetitive justifications were "unnecessary", "illusory", or "pretextual".
First, the plaintiffs argue that Anchen did not need GSK's "help" to negotiate the
The plaintiffs challenge the Teva supply provision on similar grounds. It is undisputed, however, that Teva aggressively negotiated for the provision and that the provision remedied the possible supply hurdles perceived by Teva. Further, although the plaintiffs focus on the fact that no final supply agreement was actually reached, there is a clear explanation: neither of the supply-triggering events (a successful citizen's petition or an appellate victory) ever occurred.
The parties to the Wellbutrin Settlement presented all elements of the Wellbutrin Settlement — including the allegedly anticompetitive elements and the procompetitive justifications — to the FTC. The summary judgement record demonstrates that the Wellbutrin Settlement provided for FTC review beyond what is required by the MMA. The Wellbutrin Settlement required the parties to present the entirety of the settlement to the FTC on an abbreviated time frame, resolve any questions or concerns raised by the FTC in response to the settlement, and terminate the settlement in the event the FTC's questions or concerns could not be addressed. A note of concern from the agency was sufficient to alter or terminate the settlement; no formal agency action was necessary.
The parties presented the Wellbutrin Settlement to the following individuals at the FTC: Markus Meier, the head of the FTC's Health Care Division; Bradley Albert, the Deputy Assistant Director of the FTC's Health Care Division; and FTC staffer Meredyth Smith Andrus. After meeting with the parties and reviewing the settlement, the FTC raised no concerns regarding the Wellbutrin Settlement.
GSK argues that the FTC's decision not to challenge the Wellbutrin Settlement underscores its procompetitive character. GSK urges the court to follow the decision of another district court that held that any "antitrust intent" on the part of the defendants was negated by the defendants' submissions to the FTC beyond what was required by the MMA and the FTC's subsequent decision not to pursue any action.
GSK argues that the plaintiffs cannot establish antitrust injury or causation, two essential elements in any private antitrust action. GSK's argument takes two forms: (1) the plaintiffs cannot show antitrust injury or causation because they cannot show that it was the Wellbutrin Settlement, rather than the underlying patent(s), that prevented generic entry; and (2) in the alternative, the plaintiffs cannot establish causation because they cannot show that Anchen/Teva could have and would have entered at risk.
Although the plaintiffs concede that they must show antitrust injury and causation, they argue that both elements are made out by their showing of a large payment and a delay. In essence, the plaintiffs argue that once they have shown a large payment and a delay, they have established not only anticompetitive conduct but also antitrust injury or causation. The Court concludes that the principle propounded by the plaintiffs would not only eviscerate the rule of reason analysis, as discussed above, but also ignores the long-standing and strict principles of antitrust injury and causation.
To succeed in an action under Section 4 of the Clayton Act, private plaintiffs must show that they suffered an antitrust injury and that the defendant's allegedly anticompetitive conduct was the actual and proximate cause of that antitrust injury. 15 U.S.C. § 15. In many cases, and in this case, the questions of antitrust injury and causation are closely linked and most effectively analyzed together.
Antitrust injury is "an injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendants' acts unlawful."
Antitrust injury cannot be presumed simply because there is an agreement that results in harm.
To establish causation, the Clayton Act requires antitrust plaintiffs to demonstrate that their injuries were caused "by reason of" allegedly anticompetitive conduct. 15 U.S.C. § 15(a). The "by reason of" language requires both a showing that defendant's actions were the but-for and the proximate cause of the injury.
Given the Clayton Act's "by reason of" language, an independent regulatory scheme can cut off the necessary chain of causation.
Other circuits have likewise found that an independent regulatory limitation can cut off the chain of causation under the Clayton Act. In
Similarly, in
In discussing its application of the rule of reason to reverse payment settlements, the Supreme Court in
The Supreme Court's language in
But the Clayton Act does demand such an analysis, and nothing in
To succeed under the plaintiffs' theory of anticompetitive harm — that the Wellbutrin Settlement prevented an at risk launch of generic Wellbutrin XL — the plaintiffs must show first that it was the Wellbutrin Settlement, and
Anchen/Teva had not one but two patent litigations to overcome in order lawfully to launch Wellbutrin XL: The
GSK has presented the expert opinion of Dr. Martin J. Adelman on both the
Dr. Adelman, however, is a qualified expert offering appropriate expert testimony. The Court, therefore, denies the plaintiffs
Federal Rule of Evidence 702 allow a "witness who is qualified as an expert by knowledge, skill, experience, training, or education" to offer opinion testimony. Fed. R. Evid. 702. To offer opinion testimony, the expert must offer "scientific, technical, or other specialized knowledge" to "help the trier of fact understand the evidence or to determine a fact in issue."
In his Second Expert Report (Dr. Adelman's first report addressed whether Biovail's patent claims against Anchen were shams), Dr. Adelman opines that (1) Biovail had a greater than 50 percent chance of prevailing in the
Dr. Adelman is a patent law professor who has taught at George Washington University Law School, University of Michigan Law School, and Wayne State University Law School. In forming his opinions, Adelman relied on the ANDA interpretations made by FDA experts; the plaintiffs did the same in addressing the since-dismissed sham litigation claims. Dr. Adelman also relied on the opinion of GSK's chemistry expert, Dr. Burgess. Dr. Adelman, an expert in patent litigation, appropriately relies on the conclusions of other experts in reaching his opinion, and is qualified to give that opinion. Adelman Second Rep. ¶¶ 1-3, 14, 44-47.
The Court, therefore, will consider Dr. Adelman's opinion in evaluating both the
Biovail appealed the district court's grant of summary judgment to Anchen in the
GSK has offered the expert opinion of Dr. Adelman that: (1) "there is a strong likelihood that Biovail would have prevailed" on either — or both — claim construction or infringement and (2) had the "Federal Circuit reversed on one or both issues, it almost certainly would have remanded the case to the district court for further proceedings consistent with its opinion." Given those considerations, Adelman concluded that Biovail had a more-than-50 percent chance of success on appeal. Adelman Second Rep. ¶¶ 22-24, 123-25, 127.
On appeal of the claim construction order, Biovail had argued that "free of stabilizer" may have meant free of any functionally stabilizing amount, rather than any stabilizing amount. The district court in the
The plaintiffs have not offered their own expert to rebut Dr. Adelman's testimony. Instead, the plaintiffs rely on the grant of summary judgment by the district court, and their own counsel's analysis of Biovail's chances of success on appeal.
There is no question of fact, however, as to Anchen's likelihood of success in the Andrx Litigation: The summary judgment record contains no evidence that Anchen would have succeeded in defending Andrx's patent infringement claim, and the plaintiffs do not even argue that the generic manufacturers could have succeeded in the
Upon a review of the briefs, pleadings, ANDA, and underlying patent at issue in the
Further, in the
Because there is no question of material fact as to whether Andrx would have succeeded in its underlying patent claim, the Andrx patent served as an independent regulatory bar to Anchen's launch; an at risk launch would have been unlawful and subject to damages and injunctive relief. It was the patent itself, therefore, and not the Wellbutrin Settlement, that caused generic Wellbutrin XL's lack of market presence.
To succeed on their theory that Anchen/Teva would have launched at risk absent the Wellbutrin Settlement, the plaintiffs must establish that Anchen/Teva could have and would have done so. GSK has argued that (1) FDA regulations barred Anchen/Teva's planned March 2007 at risk launch; and (2) there is no evidence in the summary judgment record that Anchen/Teva contemplated a June 2007 at risk launch given the regulatory hurdles faced in May. GSK is correct that Anchen/Teva was prevented under FDA regulations from a launch before June 2007; but there is a question of fact as to whether Anchen/Teva would have launched at risk following June 2007.
The ANDA submitted by Anchen for production of its generic Wellbutrin XL product listed only the Goodyear Facility as a manufacturing site, although Anchen ultimately produced its generic Wellbutrin XL at its Jeronimo Facility. The FDA first learned of the production site change in January 2007 during its inspection. On
Similar to the regulatory ban in
There is a question of fact, however, as to whether Anchen/Teva would have launched an authorized generic in June 2007. The plaintiffs have pointed to evidence in the summary judgment record that in late 2006 and early 2007 Anchen/Teva had planned to launch generic Wellbutrin XL "at risk" of the ongoing patent litigation. Internal emails between Anchen and Teva addressed the possibility of an at risk launch, and meeting minutes and presentations anticipated a "1Q07" launch for generic Wellbutrin XL.
The plaintiffs have also relied on the following circumstances to support their contention that Anchen/Teva would have launched at risk following June 2007: (1) Teva and Impax launched 300mg Wellbutrin XL at risk; (2) Teva and Anchen had the financial incentive to launch at risk "as soon as possible" to take advantage of its 180-day exclusivity period; (3) Anchen had manufactured product for an at risk launch; and (4) Teva frequently launches its products at risk. Finally, the Distribution and Supply Agreement between Teva and Anchen required Teva to launch at risk absent an "adverse occurrence." Pls Ex. 844; Bauer Dep. Tr. 209:7-210:6.
The plaintiffs, however, have not presented any evidence through documents or testimony that an at risk launch would have occurred in June 2007 in view of the regulatory hurdles faced by Anchen/Teva.
GSK is correct that the summary judgment record does not establish a certainty of a post-June 2007 at risk launch. Notably, the circumstances surrounding Teva/Impax's launch of 300mg generic Wellbutrin XL were different than those of Anchen/Teva's possible 150mg launch. Impax did not face the regulatory and production hurdles faced by Anchen, and Impax did not face a patent infringement suit by Andrx. The plaintiffs have not offered support for their contention that it was "commonplace" for Teva to launch at risk.
The Court cannot conclude, however, that no reasonable juror could find that
Finally, GSK does not address Anchen and Teva's agreement to launch at risk. The existence of such an agreement may allow a reasonable jury to find that Anchen/Teva would have launched at risk after June 2007.
GSK has also moved for summary judgment on the ground that it was not a co-conspirator to any allegedly anticompetitive arrangement.
To prove conspiracy under the antitrust laws, the plaintiffs must point to direct or circumstantial evidence in the summary judgement record that "reasonably tends to prove that [the parties] had a conscious commitment to a common scheme
GSK's first argument — that it did not have an "unlawful objective" as required by Monsanto because (1) Judge Brody ordered that it participate in the settlement discussions; (2) GSK requested that Judge Brody approve the settlement; and (3) GSK required that the Wellbutrin Settlement be subject to stronger FTC oversight — is not persuasive, because an intent to avoid liability does not protect conduct that has otherwise been found anticompetitive.
To withstand a summary judgment motion, the plaintiffs do not need to demonstrate that the defendants had the
The summary judgment record contains sufficient evidence for a reasonable jury to find that GSK intended to enter into the Wellbutrin Settlement, was in fact a party
GSK's argument that it participated in the Wellbutrin Settlement only to the extent that it was instructed to do so by Judge Brody appears to be a "reluctant conspirator" defense. Even reluctant participants, however, can be held liable for conspiracy.
Second, GSK's argument regarding its independent motivation misconstrues the holdings of
Direct evidence of a conspiracy "obviates the need" for evidence that excludes the possibility of independent action.
GSK appears to be arguing that it was in its independent interest to join the agreement, not that it acted independent of any agreement. Because direct evidence of an agreement exists in the form of the Wellbutrin Settlement, however, an analysis under
Although the summary judgment record does not contain evidence that GSK was a "calculating conspirator," and the Court recognizes that GSK went to great lengths to "safeguard against antitrust liability," given its desire to have Judge Brody approve the settlement and its insistence on enhanced FTC review, a reasonable jury could find that as a party to the agreement GSK was a co-conspirator and was not engaging in independent action. The Court, therefore, denies GSK's motion for
An appropriate order shall issue.
2003 FDA Guidance at 8. Thus, in its pre-NDA submission to the FDA, the brand manufacturers of the original Wellbutrin IR had quantified a target amount per tablet of 0.5 mg of hydrochloric acid in the 50 mg formulation and 1.0 mg in the 100 mg formulation of Wellbutrin IR. Similarly, the NDA submitted for Wellbutrin SR indicated a target amount per tablet of 16.20 mg of cysteine hydrochloride, a different kind of acid stabilizer. The instruction to quantify the target amount of each component does not apply, however, to "processing agents." 2003 FDA Guidance 9. The FDA guidance does not clearly define "processing agent."
Biovail had not filed an infringement action against Impax within the 45-day window provided by the Hatch-Waxman Act, so no 30-month stay of approval applied. Pls. Ex. 803; Pls. Stmt. Opp. ¶ 9, 23.
Further, the plaintiffs make much of the fact that Andrx and Anchen may have possibly negotiated a settlement separate from the Wellbutrin Settlement. It is undisputed, however, that such a settlement was never memorialized or reached.
These points serve as examples of the speculation the Court cannot consider in deciding the motions for summary judgment.
The Court's analysis applies to both the plaintiffs' federal and state law claims except where otherwise noted.
The Court can decide GSK's motion for summary judgment, however, without deciding GSK's
The Court, however, is bound by the
