In re Nexium
2013 U.S. Dist. LEXIS 129696
D. Mass.2013Background
- AstraZeneca sued multiple generic manufacturers (Ranbaxy, Teva, Dr. Reddy’s) over ANDA/Paragraph IV challenges to Nexium patents; each suit ended in consent judgments and settlements that delayed generic entry until May 27, 2014.
- Plaintiffs: a class of Direct Purchasers (wholesale distributors) and End-Payors (health and welfare benefit funds) allege these were ‘‘reverse payment’’ or pay-for-delay agreements that unlawfully preserved AstraZeneca’s monopoly and caused supracompetitive Nexium prices.
- Alleged consideration included: large payments and/or non‑cash benefits (no‑authorized‑generic agreements and forgiveness of contingent liabilities) to generics in exchange for delayed entry.
- Defendants moved to dismiss on multiple grounds: patent‑scope immunity, Noerr‑Pennington petitioning immunity, statutes of limitations, lack of Article III and Rule 23 standing for End‑Payors, and state‑law defects (notably Illinois, Puerto Rico, Utah).
- The court applied the Supreme Court’s recent decision in FTC v. Actavis (rule‑of‑reason treatment for reverse payments) and: denied most dismissal motions, held (1) Direct Purchasers plausibly stated Sherman Act claims under the rule of reason but Ranbaxy settlement claims barred by the 4‑year federal statute of limitations, and (2) End‑Payors have Article III standing but several state‑law claims were dismissed (Illinois and Puerto Rico dismissed with prejudice; Utah dismissed without prejudice to amend; many state claims time‑barred by 4‑year statutes).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Legality of reverse‑payment settlements post‑Actavis | Reverse payments (cash and non‑cash) were large, unrelated to patent settlement and delayed generic entry — unlawful under antitrust | Agreements fall within patent exclusionary scope or are otherwise lawful settlements; some arrangements not "payments" | Actavis governs; apply rule of reason. Plaintiffs plausibly alleged anticompetitive effects from cash and nonmonetary benefits; claims survive motion to dismiss (except certain time‑barred claims) |
| Market definition / market power | Market is Nexium (brand + AB‑rated generics); AstraZeneca charged supracompetitive prices showing market power | Market is broader (other PPIs, H2 blockers, antacids); plaintiffs failed to plead a relevant market | Court accepts plaintiffs’ allegations as plausible; market‑power allegations sufficient at pleading stage (factual market definition deferred to jury) |
| Noerr‑Pennington immunity for consent judgments | Settlements are private bargains cloaked as consent judgments; petitioning immunity should not shield private anticompetitive agreements | Entry of consent judgments by a court converts the arrangement into government action and triggers Noerr immunity | Noerr‑Pennington does not automatically shield these consent judgments where the court played no independent substantive role; immunity denied on pleadings |
| Statutes of limitations (federal and state) | Ongoing overcharges create a continuing violation; later claims challenge continuing harm | Claim accrues at entry of consent judgment (April 14, 2008) so many claims are time‑barred | Federal 4‑year statute bars Direct Purchasers’ challenge to the Ranbaxy agreement itself (filed after 4 years); continuing harm claims survive. End‑Payors’ claims are time‑barred in 23 jurisdictions with 4‑year limits but may proceed in three 6‑year states; Utah claims dismissed for plaintiff residency defect |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard: complaint must state a plausible claim)
- Federal Trade Commission v. Actavis, 570 U.S. 136 (2013) (reverse‑payment settlements examined under rule of reason)
- Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (limits federal antitrust standing for indirect purchasers)
- Klehr v. A.O. Smith Corp., 521 U.S. 179 (1997) (continuing violation and accrual in antitrust price‑fixing cases)
- Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999) (class‑certification issues may be considered before Article III standing in certain contexts)
- Eastman Kodak Co. v. Image Technical Services, 504 U.S. 451 (1992) (market definition is fact intensive; single‑product markets may be appropriate)
- Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492 (1988) (Noerr‑Pennington immunity depends on source, context, and nature of petitioning)