In re ACTOS Antitrust Litigation
OPINION AND ORDER
RONNIE ABRAMS, United States District Judge:
This case concerns whether Defendants Takeda Pharmaceutical Company Limited, Takeda America Holdings, Inc., Takeda Pharmaceuticals U.S.A., Inc., and Takeda Development Center Americas, Inc. (collectively “Takeda“) are liable to the indirect purchasers of Takeda‘s diabetes medication called ACTOS (“End-Payor Plaintiffs” or “EPPs“), for unlawfully inflating that drug‘s prices in violation of state antitrust laws. In September 2015, this Court granted Defendants’ motion to dismiss. See Op. & Order re: Mot. to Dismiss (“2015 Op.“) at 51 (Dkt. 221), available at 2015 WL 5610752 (”Actos I“). On appeal from that decision, the Second Circuit largely affirmed the dismissal, except with respect to Takeda‘s two monopolization claims, which were remanded to proceed on a narrower theory. See In re Actos End-Payor Antitrust Litig., 848 F.3d 89, 102 (2d Cir. 2017) (”Actos II“). Following remand, EPPs moved for leave to amend, seeking to add new allegations concerning causation, which the Court granted in part and denied in part. EPPs then filed the operative Fourth Consolidated Amended Complaint (“Complaint“). Now before the Court is Takeda‘s motion to dismiss. For the following reasons, the motion is denied.
BACKGROUND
Both this Court and the Second Circuit have recounted this case‘s factual background and explained the relevant regulatory scheme at length. See In re Actos, 848 F.3d at 93-97; 2015 Op. at 1-16. For the purposes of this Opinion, the Court assumes the reader‘s familiarity with the case and will restate only those facts relevant to resolving Takeda‘s motion.
I. Regulatory Background
The issues in this case largely revolve around the proper interpretation of a provision of the Hatch-Waxman Act (the “Act“), which controls how and when manufacturers of brand name drugs, and their generic counterparts, can lawfully enter the market. Normally, inventors obtain patents for their brand-name drugs. Patents that protect a drug may include claims directed to: (1) a single active ingredient of the drug, that is, a chemical compound, referred to in the Act‘s supporting
Inventors must get FDA approval to lawfully sell their drugs. To do so, they must file New Drug Applications (NDAs) with the FDA. When filing an NDA that seeks approval to market a particular brand drug, inventors are required to submit information concerning related patents. The scope of one of the Act‘s provisions governing when (and what) information about such patents must be submitted with an NDA is at the heart of this case.
For each patent that is submitted as part of an NDA, the applicant must describe the patent as a drug substance, drug product, or method-of-use patent, depending on the nature of the claims included in each patent. See In re Actos, 848 F.3d at 98-99. When an NDA is approved, the patent description and other information submitted with the application is listed in conjunction with the NDA number and the drug name, among other things, in the FDA‘s so-called “Orange Book.”
If generic-drug manufacturers wish to sell a generic version of a brand-name drug they must first file with the FDA an Abbreviated New Drug Application (ANDA). Any ANDA must contain “an appropriate certification” for each patent listed in connection with the NDA in the Orange Book. If the generic-drug manufacturer intends to market a drug before a listed patent has expired, then it must tell the FDA that the generic will either not infringe the brand‘s patents, or that the brand‘s patents are invalid. Under the Act, there are two primary ways by which generics can do so.
First, generics can certify that the brand‘s patents are “invalid or will not be infringed by” their generic, which is referred to as a “Paragraph IV certification.” See
Second, if the generic is seeking to market only a new method of using a drug, it can “carve out” any patented methods of use in its proposed label for the drug and proceed with a lower risk of a patent-infringement lawsuit by submitting a so-called Section viii statement.
Starting in the 1980s, Takeda obtained several patents related to its diabetes medicines. The first of those patents, U.S. Patent. No. 4,687,777 (the “‘777 patent“), claimed the compound “pioglitazone,” the active ingredient in Takeda‘s brand-name drug ACTOS. Takeda later obtained two other patents—U.S. Patent Nos. 5,965,584 (the “‘584 patent“) and 6,329,404 (the “‘404 patent“)—which claimed compositions of pioglitazone combined with other drugs and methods of using those compositions. To obtain FDA approval to sell ACTOS, Takeda filed a New Drug Application (NDA) in January 1999, in which it submitted information regarding the ‘777 patent and described it as a drug substance patent. The FDA approved the NDA in July 1999 and listed the ‘777 patent in the Orange Book. Later in 1999, and then in 2002, Takeda submitted information with respect to the ‘584 and ‘404 patents, respectively, in connection with the ACTOS NDA, describing those two patents (hereinafter “the Patents“) as both drug product patents and method-of-use patents (and improperly so, in EPPs’ view). Those patents were also subsequently listed in the Orange Book for the ACTOS NDA. At the time, however, the Orange Book was only capable of displaying one description per patent listed. Thus, although the Patents were described to the FDA as both drug product patents and method-of-use patents, the Orange Book listings displayed only that they were described as method-of-use patents until starting in 2003.
At the start of 2003, several generics also began applying to enter the ACTOS market upon the expiration of the ‘777 patent, which would occur on January 17, 2011. The first four companies—Mylan Pharmaceuticals, Inc., Alphapharm (together, “Mylan“),1 Watson Laboratories, Inc., now known as Actavis PLC (“Actavis“), and Ranbaxy Laboratories, Inc. (“Ranbaxy“)—who sought to compete with ACTOS filed their applications on the same day. These generics, the so-called first filers, challenged the validity and potential for infringement of the Patents with respect to their proposed ACTOS generics by submitting Paragraph IV certifications as to the Patents’ drug product claims. They also submitted Section viii statements with respect to the Patents’ method-of-use claims, seeking to market ACTOS for uses not covered by those patents. Over the following years, six other generics, the later-filers, submitted similar applications with split certifications. Just one manufacturer—Teva Pharmaceutical Industries, Ltd., and Teva Pharmaceuticals USA, Inc. (collectively “Teva“)—submitted an application including only Section viii statements with respect to the Patents’ method claims (and which made no certifications as to the Patents’ drug product claims). According to EPPs, Teva did not file a Paragraph IV certification as to the drug product claims because it believed that the Patents were not properly listed as drug product patents for the ACTOS NDA and that a Paragraph IV certification was therefore unnecessary.
In 2003, Takeda sued the generics who had filed applications with Paragraph IV certifications challenging the validity of the Patents. Six years later, Takeda initiated a separate infringement lawsuit against Teva. Soon thereafter, the FDA received a citizen petition from non-
party Sandoz Inc., essentially asking it to deny Teva‘s ANDA on the ground that it lacked a Paragraph IV certification as to the drug product claims. Critically, as a result of that petition, Takeda informed the FDA in
Takeda ultimately settled its infringement lawsuits on terms that allowed the first-filing generics (and Teva, to a lesser extent) to begin selling generic versions of ACTOS on August 17, 2012. That was over a year after the ‘777 patent expired and approximately four years before the Patents expired. The other companies could begin selling generic ACTOS 180 days later.
III. Procedural Background
On December 31, 2013, EPPs commenced this action against Takeda and several generic manufacturers, no longer part of this case, for allegedly delaying generic entry into the ACTOS drug market, among other things. On September 22, 2015, the Court dismissed EPPs’ prior complaint in its entirety with prejudice. See Actos I, 2015 WL 5610752, at *29. EPPs then appealed the dismissal of its two monopolization claims against Takeda.
A. Actos II
On appeal, EPPs argued that they had plausibly alleged that Takeda‘s purportedly improper Orange Book listings regarding the Patents caused a delay of the generics’ entry into the generic ACTOS market, under two theories. The first theory was that Takeda‘s allegedly false descriptions of the Patents “forced the generics to file Paragraph IV certifications, which triggered a 180-day exclusivity period for first-filers and a corresponding 180-day delay (the ‘bottleneck‘) for all subsequent filers.” In re Actos, 848 F.3d at 98. The second theory was based only on Teva‘s delayed entry into the generic ACTOS market. Under this theory, the FDA‘s ruling on Sandoz‘s citizen petition, which required Teva to file Paragraph IV certifications as to the Patents’ drug product claims, forced Teva to become subject to the 180-day bottleneck because it was not a first filer.
The Second Circuit affirmed this Court‘s rejection of EPPs’ first causation theory, albeit on different grounds. It held that, to succeed on this theory, EPPs were required to plausibly allege that the generics knew that Takeda had listed the Patents as drug product patents for the ACTOS NDA when the generics filed their Paragraph IV certifications as to those patents. Because the EPPs’ Complaint lacked such allegations, EPPs could not plausibly allege that Takeda‘s Orange Book listings caused Mylan, Ranbaxy, and Actavis to file Paragraph IV certifications. As such, EPPs could also not plausibly allege that the description of the Patents as drug product patents caused the 180-day exclusivity period of Mylan, Ranbaxy, and Actavis, and the corresponding bottleneck for all subsequent filers.
The Circuit vacated this Court‘s decision in part, however, as to EPPs’ second theory, holding that EPPs had in fact plausibly alleged that Takeda had delayed Teva‘s entry into the ACTOS market. The Court held that, unlike the other generic defendants, Teva filed its Paragraph IV certification
As noted, the FDA first preliminarily approved Teva‘s application, then entertained a citizen petition seeking to force all applicants to make Paragraph IV certifications as to the ‘584 and ‘404 patents, and then publicly announced that certifications would indeed be required. In so doing, the FDA expressly stated that certifications would be required precisely because Takeda had described these patents as drug product patents. In other words, the FDA made no attempt to evaluate whether the descriptions were true, but simply accepted them at face value—thus frustrating Teva‘s Section viii application. While Teva thereafter sought to challenge the truthfulness of these descriptions in its litigation with Takeda (but settled before the issue was resolved), the damage had been done. A plaintiff could hardly ask for a clearer causal connection.
In re Actos, 848 F.3d at 100 (emphasis in original).
In short, under the second theory, Takeda‘s allegedly false descriptions—as made to the FDA in response to the Sandoz citizen petition—caused the FDA to cause Teva to file Paragraph IV certifications as to the drug product claims of the Patents. This allegedly led Teva to settle its pending lawsuit with Takeda by a accepting a license to market an authorized-generic version of ACTOS on the earlier of August 17, 2012 or the date another generic version of ACTOS entered the market. Thus, absent Takeda‘s representations to the FDA that the Patents were correctly listed as drug patents for the ACTOS NDA, Teva would have stuck with its Section viii statements, and would have remained eligible for final FDA approval following the ruling on the citizen petition. As the theory goes, this would have eliminated the need for Takeda to provide Teva with a license to market an authorized generic, and Teva could instead have entered the market as soon as the ‘777 patent expired.
In remanding to this Court to consider the Teva theory, the Circuit further indicated that this Court should consider “in the first instance” Takeda‘s arguments that it had not previously addressed, including: (1) that Takeda had “correctly described the [Patents] as drug product patents under
B. EPPs’ Post-Actos II Amendment
Following remand, EPPs sought to amend their Complaint to expand the Teva theory endorsed by the Second Circuit by applying it to the other generics. Under the expanded theory, Takeda‘s allegedly false representations to the FDA in response to the Sandoz citizen petition that Takeda‘s patent descriptions were accurate, caused the FDA to permit Mylan, Ranbaxy, and Actavis to maintain their Paragraph IV certifications as to the Patents’ drug product claims. According to EPPs, had Takeda been honest—and only described the patents as “method-of-use patents“—Mylan, Ranbaxy, and Actavis (and all other generics with ANDAs then pending) would have been able to withdraw their Paragraph IV certifications as to the drug product claims, and address only the method-of-use claims, either with a Section viii statement or a Paragraph IV
In response, Takeda argued that the Second Circuit‘s mandate was expressly limited to Plaintiffs’ theory about Teva, such that permitting EPPs to extend the theory to the other generics violated the mandate rule. The Court rejected that argument, holding that the Second Circuit‘s mandate was broad enough to encompass amendments that include more than one way in which the FDA‘s 2010 ruling harmed Plaintiffs. EPPs’ motion was thus granted, to the extent the proposed amendments alleged that the FDA‘s ruling on the Sandoz citizen petition caused a delay in the generics’ market entry. Shortly thereafter, EPPs filed the Complaint which has been narrowed to assert just two monopolization claims (monopolization and attempted monopolization) against Takeda under state law.
LEGAL STANDARD
To survive a motion to dismiss under
DISCUSSION
Pursuant to Section 2 of the Sherman Act, it is unlawful to “monopolize, or attempt to monopolize . . . any part of the trade or commerce among the several States, or with foreign nations.”
anticompetitive conduct, that is, “conduct without a legitimate business purpose that makes sense only because it eliminates competition,” and (3) causes antitrust injury to the plaintiffs as a result. In re Adderall XR Antitrust Litig., 754 F.3d 128, 133 (2d Cir. 2014); In re Tamoxifen Citrate Antitrust Litig., 466 F.3d at 219
Takeda‘s monopoly power in the ACTOS drug market is undisputed. “Given that [its] monopoly power has been established, this case turns on whether [Takeda] willfully sought to maintain or attempted to maintain that monopoly in violation of § 2.” Id. at 651. More specifically, the parties contest whether EPPs have adequately alleged that Takeda engaged in any anticompetitive conduct to begin with, and if so, whether that conduct caused an unlawful extension of Takeda‘s monopoly power. The Court believes it has.
I. Anti-Competitive Conduct
EPPs allege that Takeda acted anti-competitively by falsely representing to the FDA on January 22, 2010, in response to the Sandoz citizen petition, that the Patents were accurately described in the Orange Book as drug product patents for the ACTOS NDA. Under EPPs’ reading of the listing statute,
The parties’ competing interpretations of
The pertinent provision of the listing statute, section
The [NDA] applicant shall file with the application the patent number and the expiration date of any patent which claims the drug for which the applicant submitted the application or which claims a method of using such drug and with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use, or sale of the drug.
(emphasis added).4 As previously noted, “such patents consist of drug substance (active ingredient) patents, drug product (formulation and composition) patents, and method-of-use patents.”
The parties’ dispute over how the Court should interpret
the compound pioglitazone—alone—while the drug product claims of the Patents are directed to a composition comprised of pioglitazone—in combination with other compounds—those drug product claims do not “claim” ACTOS.
Takeda, by contrast, reads the word “claims” in
There is another reading, however, that neither party has urged. This reading was articulated by the Federal Circuit in Apotex, Inc. v. Thompson, a case which neither party cites. 347 F.3d 1335, 1343 (Fed Cir. 2003). Under this reading, the first use of the term “claims” in
2. The Plain Meaning of “Claims”
Interpreting the listing statute begins with its text. See United States v. Lucien, 347 F.3d 45, 51 (2d Cir. 2003). The meaning of the term “claims” is, unfortunately, not defined in the Hatch Waxman Act (“the Act“). In the absence of such a definition, EPPs are correct that an examination of the plain meaning of the term “claims” is the appropriate starting point. See United States v. Balde, 927 F.3d 71, 75 (2d Cir. 2019).
The plain meaning of “claims” in patent law is helpfully illuminated by the Federal Circuit in Hoechst-Roussel Pharmaceuticals, Inc. v. Lehman, upon which EPPs principally rely. 109 F.3d 756 (Fed. Cir. 1997) (”Hoechst“). As explained in Hoechst, the plain meaning of “claims” represents the portion of a patent that delineates the patent owner‘s property rights in the invention: “[a] claim in a patent provides the metes and bounds of the right which the patent confers on the patentee to exclude others from making, using, or selling the protected invention.” Id. at 758 (quoting Corning Glass Works v. Sumitomo Elec. U.S.A. Inc., 868 F.2d 1251, 1257-58 (Fed. Cir. 1989)). The court went on to consider the relationship between the concepts of what a patent claims, and what infringes a patent. While “the claims define the patent owner‘s property rights,”
“infringement is the act of trespassing upon those rights . . . and, as a result, the plain meaning of ‘claims’ is not the same as the plain meaning of infringement.” Hoechst, 109 F.3d at 759.
In light of the Federal Circuit‘s explicit distinction between the plain meaning of “claims” and “infringement,” EPPs logically argue that: (1) the term “claims” in
3. The Infringement Meaning of “Claims”
In Hoechst, however, the Federal Circuit noted that Congress may, at times, depart from using the word “claims” in accordance with its plain meaning and instead use the word “claims” in accordance with infringement. As Judge Newman highlighted in her concurrence, the words “claim” and “infringe” “are indeed different” but “the distinctions are relevant in appropriate contexts.” Id. at 764 (Newman, J., concurring). Indeed, “[u]ltimately, context determines meaning.” See Johnson v. United States, 559 U.S. 133, 139 (2010).
A comparison of the statute at issue in Hoechst and in this case is instructive on how “claims” may be defined with respect to either its plain meaning, or with respect to what may infringe the claim at issue. Hoechst concerned the meaning of the word “claims” in the patent restoration statute,
circumstances, such as when “the product has been subject to a regulatory review period before its commercial marketing or use.”
At issue in Hoechst was whether the life of a patent directed to the chemical compound, 1-hydroxy-tacrine, could be extended under
By comparison, the listing statute,
statute. Section 355(b)(1) describes a patent which “claims the drug for which the applicant submitted the application or which claims a method of using such drug and with respect to which a claim of patent infringement could reasonably be asserted.” (emphasis added). Evidently, unlike the patent restoration statute,
4. Apotex Suggests that the Infringement Clause Refers Only to Method-of-Use Claims
The parties do not address the possibility that the plain meaning of “claims” applies in the phrase “claims the drug,” while the infringement meaning applies in the phrase “method of using such drug.” But Apotex, Inc. v. Thompson nonetheless suggests that this is the proper construction of “claims” in the listing statute. 347 F.3d 1335 (Fed. Cir. 2003). There, the Federal Circuit interpreted the identical language in
In Apotex, the generic sought an injunction requiring that the FDA de-list certain patents from the Orange Book for not satisfying the requirements of
Under [355(c)(2)], a patent must be listed if it contains a product claim that reads on the drug that is the subject of the NDA or, with respect to a method of use claim, if it is reasonable to conclude that a person who makes, uses, or sells the drug would infringe the claim.
Apotex, Inc., 347 F.3d at 1344. The court again stated that to demonstrate the NDA holder‘s listing was inaccurate:
Apotex would have to establish that one or more of the patents . . . submitted for listing in the Orange Book claims neither the drug that is the subject of [the relevant] NDA nor a method of using that drug with respect to which a claim of patent infringement could reasonably be asserted against a party who made, used, or sold the drug.
Id. These passages indicate that, in the Federal Circuit‘s view, the phrase “with respect to which a claim of patent infringement could reasonably be asserted” modifies the term “claims” as used only in the immediately preceding phrase “claims a method of using such drug.” With respect to the earlier phrase referring to when a patent “claims the drug,” such a patent will do so when it “reads on the drug that is the subject of the NDA“—that is, every element in one of the patent‘s claims is present in the NDA drug. See Allen Eng‘g Corp. v. Bartell Indus., Inc., 299 F.3d 1336, 1345 (Fed. Cir. 2002) (noting that a
The above passages from Apotex are dicta. The Federal Circuit also did not further explain why it appeared to treat the reference to infringement in
5. EPPs’ Reading of “Claims” Cannot Apply to Method-of-Use Claims
EPPs apply a plain meaning reading of “claims” as to both uses of the term in
If the term “claims” in
Under EPPs’ plain meaning interpretation of “claims,” it follows that the Patents’ method-of-use claims do not claim methods of using ACTOS; rather, they claim methods of using ACTOS
in combination with metformin or an insulin secretion enhancer. This, in turn, necessitates the conclusion that it would be improper or false for the Patents to be listed as methods-of-use patents for the ACTOS NDA. But EPPs unequivocally do not take that position. On the contrary, they contend that the Patents are correctly listed as method of use patents that “claim” methods of using ACTOS—even though not one of the Patents’ method claims are directed to a method of using ACTOS by itself. EPPs provide no explanation for this discrepancy and the Court does not independently discern one. The plain meaning of claims, therefore, cannot apply both with respect to drug product claims and method-of-use claims.
While Takeda‘s infringement interpretation of claims makes sense with respect to method-of-use claims, applying it to the drug product claims does not. Requiring the Patents to be described as drug product Patents, when a claim for induced infringement of the product claims could reasonably be asserted against the unauthorized sale of ACTOS, is contrary to the language in the Federal Circuit‘s Apotex decision, well-established cannons of statutory interpretation, and FDA regulations.
First, defining the phrase “claims the drug” in
Second, Takeda‘s interpretation runs counter to the canon against surplusage. Under this canon, “courts must give effect to all of a statute‘s provisions ‘so that no part will be inoperative or superfluous, void or insignificant.‘” United States v. Harris, 838 F.3d 98, 106 (2d Cir. 2016) (quoting Corley v. United States, 556 U.S. 303, 314 (2009)). Here, however, by defining the phrase “claims the drug” with respect to that which would reasonably infringe the relevant patent claim, Takeda‘s reading renders the phrase “claims the drug” redundant. If Congress intended the infringement meaning of “claims” to apply both to drug product and method-of-use claims, then
Third, Takeda‘s reading arguably runs counter to the last antecedent rule. Under that rule, “a limiting clause or phrase . . . should ordinarily be read as modifying only the noun or phrase that it immediately follows.” Lockhart v. United States, 136 S. Ct. 958, 962–963 (2016) (“[Q]ualifying words or phrases modify the words or phrases immediately preceding them and not words or phrases more remote, unless the extension is necessary from the context or the spirit of the entire writing[.]” (quoting Black‘s Law Dictionary 1532–1533
At oral argument, Takeda asserted that its interpretation still gives independent meaning to the phrase “claims the drug.” See Oct. 23, 2018 Hr‘g Tr. at 55:11–56:8 (Dkt. 270). As an example, it said to consider a patent claim directed to a drug‘s packaging, a drug‘s metabolite, or a drug‘s manufacturing process. According to Takeda, those claims could reasonably be asserted against the unauthorized use of the drug, but they do not “claim the drug” because they do not have “anything to do with the drug itself.” Id. at 55:24–56:2. Takeda‘s theory thus appears to be that the phrase “claims the drug” is intended to ensure that the patent claim is one that has at least something “to do with the drug.” But this distinction is arbitrary. Contrary to Takeda‘s contention, a metabolite patent, for instance, could easily be understood as having something “to do with the drug” since, by definition, the drug literally becomes the metabolite when ingested by the user. See Hoechst, 109 F.3d at 759. A process patent can also be easily understood as something having “to do with the drug” because its claims are directed to a process that produces the drug itself. The Court is thus persuaded that applying the infringement meaning of claims to both drug product claims and method-of-use claims renders the provision‘s distinction between the two superfluous.
Additionally, the fact that the regulations prohibit the listing of patents directed to packaging or metabolites further supports the conclusion that the infringement meaning of claims does not extend to the phrase “claims the drug.” As Takeda acknowledges, a claim directed to a drug‘s packaging, manufacturing process, or a metabolite could reasonably be asserted against the unauthorized sale of the drug under direct or indirect infringement theories. But at least in the FDA‘s view, such patents are not to be listed in the Orange Book. Under
Lastly, while the two other circuit court cases that have touched on the issue arguably support Takeda‘s reading, they are ultimately unpersuasive. In the first, aaPharma Inc. v. Thompson, the Fourth Circuit stated in a footnote that while it would “not explain the statutory criteria [of
7. The Two Uses of “Claims” in § 355(b)(1) Have Discrete Meanings
In summary, several factors point to the conclusion that the plain meaning of “claims” in
Because it is not disputed that the Patents’ drug product claims do not literally read on ACTOS, EPPs have plausibly alleged
II. EPPs Need Not Allege Bad Faith
Takeda next argues that even if the Court were to disagree with its interpretation of
A. Bad Faith is Not an Element of a Prima Facie Case for Monopolization Pursuant to the Rule of Reason
As previously noted, to prevail on a monopolization claim pursuant to § 2 of the Sherman Act, a plaintiff must establish “the possession of monopoly power in the relevant market,” and “the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historical accident.” In re Adderall XR Antitrust Litig., 754 F.3d at 133. In evaluating such claims, the Second Circuit applies the so-called “rule of reason” framework in the manner set forth by the D.C. Circuit in United States v. Microsoft Corp., 253 F.3d 34, 58–60 (D.C. Cir. 2001). See Schneiderman, 787 F.3d at 652. Pursuant to the rule of reason, the plaintiff must first establish “that a monopolist‘s conduct is anticompetitive or exclusionary.” Id. The burden then shifts to “the monopolist [who] may proffer ‘nonpretextual’ procompetitive justifications for its conduct.” Id. If a defendant meets its burden, the burden shifts back to the plaintiff who may then either “rebut those justifications or demonstrate that the anticompetitive harm outweighs the procompetitive benefit.” Id.
Nothing in the rule of reason suggests that a plaintiff must plead defendant‘s bad faith to meet its initial burden of establishing anti-competitive conduct. Indeed, in other contexts, plaintiffs have adequately alleged anti-competitive conduct without pleading such bad faith. See, e.g., id. at 652–654 (finding that defendants’ introduction of one drug product into the market while simultaneously withdrawing another product constituted anti-competitive conduct warranting a preliminary injunction because it effectively coerced purchasers into purchasing the newer product); Savory Pie Guy, LLC v. Comtec Indus., Ltd., No. 14-CV-7527 (VB), 2016 WL 7471340, at *10 (S.D.N.Y. Dec. 28, 2016) (finding, on motion for summary judgment, that plaintiff raised triable issues of fact as to whether defendant‘s alleged refusal to deal with customers that purchased certain equipment from defendant‘s competitors constituted anti-competitive conduct).
It is true, as Takeda argues, that EPPs have not identified any case in which a court held that bad faith was not an element of a monopolization claim predicated on a wrongful Orange Book listing. But in a related context, at least one court has denied a motion to dismiss monopolization claims, without making any assessment as to whether the defendants had a good faith basis for their conduct. In In re Neurontin Antitrust Litigation, MDL No. 1479, 2009 WL 2751029, at *14–16 (D.N.J. Aug. 28, 2009). The alleged conduct comprising the scheme included the defendant‘s decisions to list patents in the Orange Book improperly, to manipulate the prosecution of one of those patents, and initiate sham lawsuits, among other things. But the court made no determination as to whether the defendant had a good faith basis for the allegedly improper Orange Book listing, concluding that the
In short, then, there is no reason to presume that, under the rule of reason, a defendant‘s purported good faith belief that its conduct was necessary is part of a plaintiff‘s prima facie case.
B. Takeda Fails to Establish that EPPs Must Plead Bad Faith in this Case
Takeda‘s efforts to persuade the Court otherwise are not persuasive. As noted, Takeda contends that a plaintiff cannot allege that a defendant‘s conduct was anticompetitive when the conduct is premised on a good faith effort to comply with a mandatory statute. In support of this theory, it relies upon two out-of-circuit cases: Phonetele, Inc. v. American Telephone & Telegraph Co., 664 F.2d 716, 737 (9th Cir. 1981), modified, Nos. 77-3877, 77-2936, 1982 WL 11277 (9th Cir. Mar. 15, 1982), and Southern Pac. Commc‘ns Co. v. Am. Telephone & Telegraph Co., 740 F.2d 980, 1009 (D.C. Cir. 1984). But neither case suggests, as Takeda argues, that a plaintiff is required to prove, as part of its prima facie case alleging monopolization, that a defendant‘s failure to comply with a complicated regulatory scheme was made in bad faith. Rather, these decisions are clear that, to the extent a defendant accused of anticompetitive conduct asserts that the conduct was based on a good faith interpretation of binding regulations, that is a defense to an antitrust claim.
The claims in Phonetele and Southern Pacific, which, like here, included monopolization claims, arose in part from tariffs filed with the Federal Communications Commission (the “FCC“) by the defendants who were telecommunication carriers. The tariffs at issue in Phonetele “prohibited the direct electrical connection of customer-provided equipment to the telephone without the use of a plate-like connecting device . . . supplied by the telephone company.” 664 F.2d at 720. They were imposed in response to an FCC decision finding that tariffs concerning such connection devices should not ban the devices altogether but “should be designed only to prohibit devices dangerous to the system.” Id. at 726. In rejecting the defendant‘s assertion that it was entitled to antitrust immunity with respect to the tariff at issue, the court held: “[i]f a defendant can establish that, at the time the various anticompetitive acts alleged here were taken, it had a reasonable basis to conclude that its actions were necessitated by concrete factual imperatives recognized as legitimate by the regulatory authority“—for example, that the defendant “reasonably conclude[d] . . . that uncontrolled . . . interconnection would endanger their own equipment“—“then its actions did not violate the antitrust laws.” Id. at 737–38. The court further reasoned that “[t]he logic of complying with a regulatory mandate is relevant as an antitrust defense but the same logic has internal limits which do not justify any and all acts ostensibly taken in response to the” relevant statute or regulations. Id. at 743. And in Southern Pacific, which relied on Phonetele, the court observed that “this regulatory justification defense is only applicable if [the defendant‘s] asserted ‘public interest’ basis for its interconnection decision [was] reasonable and if [the defendant] actually made its decision at the time in good faith on that basis rather than solely on the basis of competitive considerations.” 740 F.2d at 1009. A review of these cases suggests that a highly regulated defendant can seek to
At oral argument, Takeda conceded that Southern Pacific and Phonetele describe an entity‘s good faith effort to comply with regulations as an affirmative defense to antitrust claims. Oct. 23, 2019 Hr‘g Tr. at 19:22. It nonetheless tried to distinguish those cases on the ground that those plaintiffs were challenging the defendants’ conduct towards them directly—that is, the imposition of tariffs on the plaintiffs—whereas here, EPPs are challenging Takeda‘s “actions in front of the FDA itself, not something [Takeda] did to them[.]” Id. at 18:14–17. Takeda contends that in the former scenario, if a defendant asserts that the conduct was consistent with mandatory regulations, that is an affirmative defense. Id. at 19:7–13. But in the latter scenario, Takeda asserts that the plaintiffs must show that the conduct was not reasonable as part of their prima facie case.
This distinction, however, is not, as Takeda put it, “subtle, rather, it is artificial. First, at least under EPPs’ theory of this case, Takeda‘s conduct can just as easily be characterized as conduct directed to the generics, and EPPs by extension, to the extent it caused the FDA to require the generics to submit Paragraph IV certifications, and delayed generic entry as a result. Conversely, in the telecommunication cases, the common carriers’ conduct in imposing tariffs could just as easily be characterized as actions in front of the FCC, since the carriers had to first file their tariffs with the agency in order to implement them. See Phonetele, 664 F.2d at 724–25. In other words, Takeda‘s suggestion that Phonetele and Southern Pacific did not involve “some regulatorily required act,” (Oct. 23, 2019 Hr‘g Tr. at 19:2) unlike this case, is unpersuasive. The common carriers were required to make a regulatory submission to an agency (i.e., file tariffs with the FCC) if they wanted to impose them. By the same token, if Takeda wanted to market a brand drug it too was required to make a regulatory submission to an agency (i.e., file an NDA with the FDA). In the telecommunication cases, the regulatory scheme governed the lawfulness of the submission. If plaintiffs alleged that portions of the submission (i.e, the parameters of the tariff) were anti-competitive, then the carriers—as a defense—could assert in good faith that they reasonably believed that their submission complied with the law. Invoking those cases here, as Takeda has, if EPPs believe that part of Takeda‘s NDA was anti-competitive, then Takeda—as a defense—can also assert that it made a good faith effort to comply with the law. In short, Takeda‘s reliance on Phonetele and Southern Pacific does not establish that EPPs are required to plead bad faith to state their monopolization claims against Takeda.
Nor does Takeda‘s reliance on the various district court cases it cites establish that bad faith is an element of EPPs’ monopolization claims. Two of those cases dealing with Orange Books did not involve the legal theories at issue here. See Astra Aktiebolag v. Kremers Urban Dev. Co., Nos. 99-CV-8928(BSJ), 99-CV-9888(BSJ), 2001 WL 1807917, at *1 (S.D.N.Y. Oct. 26, 2001) (dismissing defendant‘s counterclaim of patent misuse, based on the patentee having listed certain patents in the Orange Book and asserted them against defendant, for failing to adequately allege bad faith or improper purpose); Kroger Co. v. Sanofi-Aventis, 701 F. Supp. 2d 938, 964 (S.D. Ohio 2010) (dismissing a monopolization claim, premised on the theory that the defendant instituted sham litigation against its generic competitors, to preclude
Takeda‘s reliance on two additional cases—Organon Inc. v. Mylan Pharmaceuticals, Inc., 293 F. Supp. 2d 453, 460 (D.N.J. 2003), and In re Lantus Direct Purchaser Antitrust Litigation., 284 F. Supp. 3d 91 (D. Mass. 2018)—provide better support for its position on this issue, but they do not ultimately persuade the Court that EPPs must plead bad faith. In Organon, the defendant had listed a patent under
Nothing in Organon, however, explains the legal basis for that conclusion. The Organon court cites no authority, and it does not appear to articulate a rationale as to why the reasonableness of the defendant‘s interpretation precluded the plaintiff from stating a monopolization claim. In the absence of more reasoning to support the court‘s conclusion, this Court respectfully declines to apply it here.
Citing Organon, the Lantus court similarly held in conclusory fashion that the plaintiffs could not state a monopolization claim against an NDA holder, predicated on an allegedly improper Orange Book listing, where the defendant‘s interpretation of the listing statute was reasonable. 284 F. Supp. 3d at 94–95. There, the defendant NDA-holder had listed a patent on a drug delivery device (a disposable injector pen) with respect to an NDA on a drug called insulin glargine. Although the patent did not reference insulin glargine, the injector device that it recited was “sold loaded with a dosage of insulin glargine.” Id. at 99. The plaintiffs alleged that the listing was improperly made, intended to extend the patent life on the insulin glargine drug substance. The defendant responded that the listing was proper in light of FDA guidance at the time concerning drug-delivery devices. The court held that the defendant‘s interpretation of the relevant FDA regulation was “not unreasonable” and dismissed the complaint because the plaintiffs had not “pled sufficient facts to establish that [the defendant‘s] decision to list the [drug delivery device patent] was unreasonable or objectively baseless.” Id. at 105 (emphasis added).
The Court is also not persuaded by the reasoning in Lantus. As with Organon, the Lantus court does not support its holding—that
The Noerr-Pennington doctrine, among other things, immunizes private actors from antitrust liability for conduct that constitutes “petitioning activity” aimed at “persuading the government of a position or expressing views and wishes concerning government decisions.” La. Wholesale Drug Co. v. Sanofi-Aventis, No. 07-CV-7343(HB), 2008 WL 169362, at *1, *3 (S.D.N.Y. Jan. 18, 2008) (citing E. R.R. Presidents Conference v. Noerr Motor Freight Inc., 365 U.S. 127 (1961) and United Mine Workers v. Pennington, 381 U.S. 657 (1965)). “The doctrine was first established in the context of concerted petitions for anti-competitive legislation,” but the Supreme Court later extended it to the petitioning of courts and administrative bodies through good faith litigation. Primetime 24 Joint Venture v. Nat‘l Broad, Co., 219 F.3d 92, 99 (2d Cir. 2000). A patentee who seeks to enforce its patent through litigation, however, can lose Noerr-Pennington immunity if: (1) the patent was obtained through fraud, or (2) the litigation is a “mere sham” meaning it is “objectively baseless and subjectively motivated by a desire to impose collateral, anti-competitive injury.” Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1071 (Fed. Cir. 1998). The court in In re Buspirone Patent Litigation, 185 F. Supp. 2d 363, 372–73 (S.D.N.Y. 2002), which is cited in both Organon and Lantus, held that listing patents in the Orange Book does not constitute petitioning activity that could confer Noerr-Pennington immunity (a proposition that neither party here takes issue with at this time). The In re Buspirone court nevertheless noted that even if Orange Book listing submissions constituted petitioning activity, the plaintiffs in that case sufficiently pled that the “sham litigation” exception to any Noerr-Pennington immunity applied. This was because the plaintiffs had stated facts to support that the relevant lawsuit “was objectively baseless.”
The Lantus court‘s holding that the plaintiffs were required to show that the defendant‘s interpretation of the listing statute was “objectively baseless“—supported only by citing In re Buspirone—suggests that the court was applying the “objectively baseless” standard used in the Noerr-Penington context to the listing statute.6 The court, however, provided no analysis in support of that decision. For that reason, and because, as with Organon, the Lantus court also did not articulate its basis for requiring plaintiffs to allege that the defendant‘s interpretation of its listing obligations was unreasonable, the Court respectfully declines to apply the holding of Lantus in this case.
The Court has not identified any other cases that persuasively reason that a plaintiff is required to prove bad faith as an element of a monopolization claim predicated on an interpretation of a statute or regulation. Nor has Takeda persuaded the Court to conclude as much here. It is true
Accordingly, the Court is unpersuaded by Takeda‘s argument that EPPs must plead that its interpretation of the listing statute was made in bad faith. EPPs need not allege that Takeda‘s improper Orange Book listings were made in bad faith. They have sufficiently pled that Takeda‘s 2010 statements to the FDA constituted anticompetitive conduct.
III. EPPs Plausibly Allege that the Non-Teva Generics Would Have Withdrawn Their Paragraph IV Certifications as to the Patents’ Drug Product Claims
On remand, Takeda does not contest the theory of causation that the Second Circuit embraced as to Teva. As previously explained, the Circuit approved the theory that Takeda‘s 2010 statements to the FDA, in response to the citizen petition, caused the FDA to cause Teva to file Paragraph IV certifications as to the Patents’ drug product claims, which delayed Teva‘s generic entry (the “Teva theory“). Having now concluded that EPPs have adequately alleged that Takeda‘s statements to the FDA constituted anti-competitive conduct, EPPs’ monopolization claims, to the extent based on the injury caused by Teva‘s delayed entry into the ACTOS drug market, will proceed.
Takeda does dispute, however, EPPs’ application of the Teva theory as to the other generic defendants.7 Takeda argues that even if its 2010 statements to the FDA were inaccurate, and even if EPPs are not required to plead bad faith to allege that those statements constituted
Under the Teva theory as expanded to all generics, EPPs maintain that had Takeda told the FDA that the Patents were improperly described as drug product patents, (which, as the Court has now decided, they were) then the following chain of events would have occurred: (1) either the FDA “would have required all ACTOS generic manufacturers” to address the Patents using “either a Section viii Statement or a Paragraph IV certification, not both,” or the generics would have independently withdrawn their Paragraph IV certifications, Compl. ¶ 78; (2) “each of the ACTOS generics with ANDAs containing split certifications” would have amended their ANDAs to address the method-of-use claims, using either a Section viii statement or Paragraph IV certification, id. ¶ 79; (3) “[a]s rational profit maximizing entities,” the generics “would have elected [s]ection viii [s]tatements exclusively,” in light of the litigation triggered by a Paragraph IV certification and the resulting 30-month stay, id. ¶ 81; and (4) the generics, with their newly amended Section viii statements, would have been able to enter the market earlier than they did, and without regard to any still-existing 180-day exclusivity periods.
Takeda attacks this theory at the first link in the causal chain. According to Takeda, even if it had told the FDA in response to the citizen petition that the Patents should not be described as drug product patents for the ACTOS NDA, the generics would still have been required to maintain their Paragraph IV certifications as to the Patents’ drug product claims. But Takeda fails to provide any relevant legal support for this position, which is also contradicted by the facts of this case. EPPs’ position to the contrary, by contrast, is consistent with the statutory scheme.
In attempting to rebut the notion that the FDA would have required the generics to withdraw their Paragraph IV certifications as to the Patents’ drug product claims, Takeda first cites Caraco, 566 U.S. at 406, for the proposition that “[o]nce a patent is listed in the Orange Book, each generic applicant must address the entire Patent.” Def.‘s Mem. at 18. Takeda bases this proposition on the general statement made by the Caraco court in describing the Hatch-Waxman Act, that “[a]fter consulting the Orange Book, a company filing an ANDA must assure the FDA that its proposed generic drug will not infringe the brand‘s patents.” Caraco, 566 U.S. at 406. But this statement cannot reasonably be read to say anything about whether an ANDA applicant must certify as to drug product claims if the NDA holder never described the patent as a drug product patent in the first place.8 Takeda‘s argument that an ANDA applicant is required to do so, to the extent it is based on Caraco, thus lacks merit.
Next, Takeda cites the FDA‘s response to a comment on a 2003 rulemaking in which the FDA states that it “concluded that submission of a claim-by-claim declaration for all patents is not warranted,” 68 Fed. Reg. 36,676, 36,685 (June 18, 2003). But again, this statement does not address whether an ANDA applicant would have to submit a certification as to drug product
The FDA‘s response to the Sandoz citizen petition, by comparison, is more illuminating. In that response, the FDA explained that “where a patent is submitted as claiming both the drug product and a method of using the drug,” an ANDA applicant can file a “split certification to that patent, which includes both a paragraph IV certification to the drug product claim and a section viii statement to the method of use and an accompanying label carveout.” Weiner Decl., Ex. A at 7. The FDA reiterated that “[t]he ANDA applicant must address all claims for which the patent was submitted and may file a paragraph IV certification to some claims and a section viii statement to other claims, as appropriate.” Id. Thus, if there were claims in a patent for which the patent was not submitted, the FDA‘s response suggests that it would not have required an ANDA applicant to address those claims.
So, too, do the very facts of this case. Prior to the Sandoz Citizen Petition, Teva had submitted Section viii statements only as to the method of use claims when it submitted its original ANDA, and had not included any certifications with respect to the drug product claims. The citizen petition response made clear that Teva needed to submit Paragraph IV certifications as to the drug product claims, specifically because Takeda had described the patent as a drug product patent—not because there was an independent legal obligation to do so. The citizen petition response thus supports the view that had Takeda not listed the Patents as drug product patents, Teva would not have been required to file a Paragraph IV certification.
Lastly, this conclusion also has some support in the FDA‘s response to a comment on the 2003 rulemaking that Takeda cites. There, the FDA stated that “[t]he number of claims contained within a particular patent does not affect the ability of the patent to be listed as long as there is at least one claim” meeting the listing statute‘s requirements. 68 Fed. Reg. at 36,685. This suggests that if, as in this case, a patent includes drug product and method claims, but only the method claims meet the required elements for listing, then the listing should not be affected if the patent is described only as a method-of-use patent. By the same token, then, a generic‘s ANDA should not be affected if it includes an appropriate certification or Section viii statement only as to the listed claims—that is, those that meet the required elements for listing, such as the method-of-use claims in the patents at issue here. See
Thus, at the very least, EPPs have plausibly alleged that if: (1) Takeda had properly told the FDA that its original patent declaration describing the Patents as drug product patents was inaccurate, by amending its patent information in response to the Sandoz citizen petition to reflect that the Patents covered only methods of using ACTOS, see
Although the non-generics were not parties to the citizen petition, the FDA‘s ruling was a matter of public record which the generics would plausibly have been following with interest given its potential impact on their own lawsuits and entries into the market. If the FDA had ruled against Sandoz and revised the ACTOS Orange Book listing to reflect Takeda‘s amended (and truthful) declaration, that outcome plausibly would have led the other generics to withdraw their Paragraph IV certifications as to the Patents’ drug product claims. As EPPs explain, the generics would have been faced with the choice of maintaining their Section viii statements as to the Patents’ method claims, or revising them to Paragraph IV Certifications. EPPs further plausibly allege that the generics would have elected Section viii statements, as they originally had, so that they could enter the market sooner than they did. Takeda has not contended otherwise. As such, EPPs’ monopolization claims—to the extent based on the antitrust injury caused by the delayed entry of the other generics named in the Complaint, into the ACTOS drug market—will also proceed.
Of course, through discovery and after, Takeda will have its opportunity to prove that it reasonably thought that its listing decisions were mandated by statute, and that the delay in generics’ market entry would still have occurred absent the improper Orange Book listings. The relevance or significance of Takeda‘s reasonableness arguments in the rule of reason analysis need not be addressed at this stage of the litigation. Insofar as
CONCLUSION
For the foregoing reasons, Takeda‘s motion to dismiss is DENIED. The Clerk of Court is directed to terminate the motion pending at Dkt. 257.
SO ORDERED.
Dated: September 30, 2019
New York, New York
Ronnie Abrams
United States District Judge