In Re: Lantus Direct Purchaser v.
Matthew W.H. Wessler, with whom Joshua Matz, Gupta Wessler PLLC, Thomas M. Sobol, Kristie A. LaSalle, Kristen A. Johnson, Hagens Berman Sobol Shapiro LLP, John D. Radice, Radice Law Firm, P.C., Joseph M. Vanek, David P. Germaine, John P. Bjork, Vanek, Vickers & Masini, P.C., Paul E. Slater, Matthew T. Slater, Sperling & Slater, P.C., Linda P. Nussbaum, Bradley J. Demuth, Nussbaum Law Group, P.C., Juan R. Rivera Font, and Juan R. Rivera Font LLC were on brief, for appellants.
Benjamin C. Mizer, with whom Laura Diss Gradel, Julia E. McEvoy, Rosanna K. McCalips, Alisha M. Crovetto, and Jones Day were on brief, for appellee.
KAYATTA, Circuit Judge. The FDA maintains a publication called Approved Drug Products with Therapeutic Equivalence Evaluations, known in the industry as “the Orange Book.” The Orange Bоok lists patents said by their owners to claim FDA-approved drugs. The listing of a patent in the Orange Book arms the patent-owning drug manufacturer with the ability to trigger an automatic, thirty-month suspension of the FDA‘s approval of a competitive product. The principal questions posed on this appeal are whether Sanofi improperly submitted a patent for listing in the Orange Book and, if so, whether Sanofi is potentially liable under the antitrust laws to drug purchasers who were allegedly harmed by the effective extension of Sanofi‘s monopoly. We answer “yes” to both questions and vacate the dismissal of the plaintiffs’ complaint to the extent that the district court held otherwise.
I.
A.
When a drug manufacturer files an application for FDA approval of a new drug (a “new drug application,” or NDA) or a supplemental application for approval of changes to an already-approved drug (a “supplemental new drug application,” or sNDA), the manufacturer must
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.
product” or for delisting patents in the Orange Book. 68 Fed. Reg. 36,676, 36,683 (June 18, 2003).2
The Orange Book listing comes into play when another manufacturer seeks FDA approval to sell a competing drug based on the safety and efficacy studies for the original, already-approved drug. See
A Paragraph IV certification has two direct effects on the resolution of any patent dispute between the original manufacturer and the putative competitor. First, the statute treats the filing of a Paragraph IV certification as an infringement of the listed patent, allowing the putative competitor to force the patentholder to acquiesce or sue without exposing the competitor to damages for actual infringement. See
The plain text of the statute calls for the listing of patents “which claim[] the drug for which [an application is submitted] or which claim[] a method of using such drug.”
B.
In reviewing the dismissal of a complaint, see
Sanofi first obtained approval from the FDA to market Lantus for management of diabetes in 2000. With its original application, Sanofi submitted U.S. Patent No. 5,656,722 (“the ‘722 patent“) for listing in the Orange Book. The ‘722 patent claimed the drug insulin glargine and was set to expire in August 2014, with its period of regulatory exclusivity ending in February 2015. Had Sanofi filed nothing else with the FDA, other companies would have been able to pursue requests for FDA approval to sell insulin glargine products beginning in 2015 with the end of the ‘722 patent‘s grace period of exclusivity.
In 2006, Sanofi filed an sNDA to sell insulin glargine in a disposable injector pen device called the Lantus SoloSTAR. Sanofi had previously sold Lantus only in vials or cartridges for reusable injectors. The FDA reviewer evaluating the SoloSTAR product described it this way:
The SoloStar injection system is a device that provides a method of accurately injecting a selected dose of insulin . . . . The device is intended to be used for self-injection by patients. . . . The dose is pre-selected by rotating a dosage selector at the rear end of the device. The number of selected insulin units is displayed in the dose window on the side of the pen. The dialing mechanism allows dosage in 1 insulin unit increments. It provides a maximum of 80 insulin units in one dosing. . . . The dose is delivered by pressing the injection button.
Sanofi sells the SoloSTAR pen for use with several active drugs in addition to insulin.
In 2007, the FDA accepted Sanofi‘s sNDA for the SoloSTAR and categorized it as a change to Lantus‘s labeling or container. In 2013, Sanofi submitted patents associated with the SoloSTAR to the FDA for listing in the Orange Book. While the complaint references a number of those patents, plaintiffs pare their arguments on appeal to U.S. Patent No. 8,556,864 (“the ‘864 patent“), named “Drive Mechanisms Suitable for Use in Drug Delivery Devices,” which is set to expire in 2024.
In intellectual property law, a “patent claim” is “the portion of the patent document that defines the scope of the patentee‘s rights.” Markman v. Westview Instruments, Inc., 517 U.S. 370, 372 (1996). The ‘864 patent contains ten claims, all concerning aspects of a “drive mechanism” that serves as a part of the SoloSTAR drug injector pen. The “drive mechanism” “enabl[es] the administration of medicinal products from” a pen injector‘s cartridge. Claim 1 sets out the attributes of the drive mechanism; Claim 2 describes a drive mechanism with slightly different attributes; Claims 3 through 7 describe different constructions of the mechanism in Claim 2; Claim 8 describes yet another variation on
In 2013, competitor Eli Lilly planned to market a competing insulin glargine product, called Basaglar, in its own injector pen, the KwikPen. Confronted with the Orange Book listing of the ‘864 patent, Lilly submitted a Paragraph IV certification stating that its Basaglar KwikPen product would not infringe that patent. Within forty-five days, Sanofi sued Lilly for patent infringement, seeking to bar Lilly from manufacturing or selling the Basaglar KwikPen until the last of the patents listed in the Orange Book for Lantus and the Lantus SoloSTAR expired in 2024. That lawsuit triggered the thirty-month stay of FDA approval for Basaglar under
Lilly was not the only would-be competitor in the insulin glargine market. In 2016 and 2017, Merck and Mylan both submitted applications to market insulin glargine in injector pens, along with Paragraph IV certifications on the patents that Sanofi had listed for the Lantus SoloSTAR. After it settled with Lilly, Sanofi also sued Merck and Mylan. The Merck lawsuit settled after a trial on some of the patents at issue. Stipulation of Dismissal (redacted), Dkt. 339, Sanofi-Aventis U.S. LLC v. Merck Sharp & Dohme Corp., No. 16-cv-00812 (D. Del. Nov. 1, 2018). A bench trial was held but not decided in the Mylan lawsuit in December 2019. Minute Entry, Dkt. 528, Sanofi-Aventis U.S. LLC v. Mylan GmbH, No. 17-cv-09105 (D.N.J. Dec. 2, 2019).
The plaintiffs in this case are a putative class of direct insulin glargine purchasers who allege that Sanofi artificially restricted competition in the market for insulin glargine by impermissibly extending its monopoly ovеr insulin glargine products. They allege that Sanofi improperly listed the ‘864 patent in the Orange Book, thereby delaying competition in the insulin glargine market and resulting in inflated prices. They also allege that Sanofi‘s lawsuit alleging infringement of the ‘864 patent was a “sham” that was initiated merely to trigger the automatic stay of FDA‘s approval of the KwikPen. They bring two claims under section 2 of the Sherman Act,
The district court dismissed the plaintiffs’ Sherman Act claims, reasoning that as a matter of law Sanofi‘s decision to list the ‘864 patent was reasonable and not “objectively baseless” given what the court deemed to be ambiguities in the FDA‘s listing requirements.3 In re Lantus Direct Purchaser Antitrust Litig., 284 F. Supp. 3d 91, 104–05 (D. Mass. 2018). This appeal followed.
II.
To make out a violation of section 2 of the Sherman Act, a plaintiff must demonstrate, “(1) that the defendant possesses ‘monopoly power in the relevant market,’ and (2) that the defendant has acquired or maintained that power by improper means.” Town of Concord v. Bos. Edison Co., 915 F.2d 17, 21 (1st Cir. 1990) (quoting United States v. Grinnell Corp., 384 U.S. 563, 570 (1966)). Here, all parties assume -- and so do we -- that the complaint adequately alleges that Sanofi possessed monopoly power in the relevant market. Our analysis thus turns on whether the complaint plausibly alleges that the challenged method by which Sanofi allegedly maintained that power, that is to say, submitting the ‘864 patent for listing in the Orange Book, was an “proper means” of maintaining that power. Id.; see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (requiring “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face‘” (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554, 570 (2007))).
A.
We consider first whether, under the facts alleged by the plaintiffs, it was proper for Sanofi to submit the ‘864 patent for listing in the Orange Book. At first blush, the answer seems readily apparent: The statute and applicable regulations call for the listing of only patents that claim the pertinent drug or a method of using the drug, and the ‘864 patent does not even mention, much less claim, either insulin glargine or any method of using it.
Sanofi, though, points out that the term “drug” as used in the FDA‘s regulation includes not just the drug substance itself, but also the “drug product.”
Working backward, then, Sanofi‘s principal argument goes like this: the Lantus SoloSTAR is an injector pen, and as such is a “pre-filled drug delivery system[],” meaning that it qualifies as a “dosage form,” which under the regulations is a “drug prоduct,” which in turn is a “drug.” Hence, Sanofi concludes that because the FDA approved the Lantus SoloSTAR as a “pre-filled drug delivery system,” any patent claiming the Lantus SoloSTAR is a “patent which claims the drug for which” the sNDA was submitted.
Under the plain wording of the statute, proper filing of the ‘864 patent would require not only that it be a patent that claims a drug; it must be a patent that claims the drug (or a method of using the drug) “for which thе applicant submitted” the sNDA.
Confronted with this gap between its reading of the law and its filing of a patent that does not claim the listed drug, Sanofi argues that the regulations also require listing in the Orange Book any patents that contain “integral components” of an approved drug product. According to this line of reasoning, because the drive mechanism is an integral part of the Lantus SoloSTAR, a patent that claims the drive mechanism claims a part of a drug product, and thus “claims the drug.”
We see nothing in the statute or regulations that welcomes such a further expansion of the already stretched statutory terms, whereby an integral part of an injector pen becomes the pen itself, and in turn is a drug. One would not think, for example, that a patent claiming only a transmission system must be read as also claiming any car in which it is used.
The FDA has already passed on opportunities to stretch the statutory terms in this way. In 2003, the FDA addressed commentary to a proposed rule that “would not have allowed an applicant to list a patent that claimed packaging.” 68 Fed. Reg. at 36,680. Some of that commentary argued that “patents claiming devices or containers that are ‘integral’ to the drug product . . . should be submitted and listed.”
Sanofi also argues that, because the language of the regulations suggests that multiple patents cаn be filed with an application, the regulations must contemplate submission of patents claiming components of a drug product4 -- otherwise, Sanofi reasons, manufacturers would have to claim every part of a drug in a single patent in order to file it, and the plural language in the regulations would be meaningless. See, e.g.,
At oral argument, Sanofi tried another argument. It pointed to the general definition of “drug” set forth at
of this chapter,” referring presumably to Chapter 9 of Title 21, at which is codified the entire FDCA. The definition likely applies to the requirements under section 355, then, and it very clearly includes “components” of “articles intended for use in the” treatment of disease.
More importantly, even assuming that the drive mechanism claimed by the ‘864 patent is itself a drug, we still find Sanofi falling short of its goal because the drive mechanism is not the “drug for which [Sanofi] submitted” the sNDA.
Sanofi also seeks to find support in communications between other drug manufacturers and the FDA. Sanofi points to requests for advisory opinions submitted by Ropes & Gray in 2006, Forest Laboratories in 2011, Novo Nordisk in 2012, and AstraZeneca in 2007, all asking, in substance, “whether patents directed to drug delivery systems . . . that do not recite the approved active ingredient or formulation should be listed in the [Orange Book].” According to Sanofi, the FDA has not responded satisfactorily to any of the requests. Instead, the FDA has simply acknowledged that the Orange Book “was not designed to separately address combination product listings or to identify the specific type of drug delivery system” and that it “could benefit from enhanced listing capabilities.” In response to one request
We find no warrant to read anything into the FDA‘s non-answer beyond a conclusion that it simply chose not to answer the question. To infer an answer, or even to infer that silence by the FDA indicates that the correct answer is uncertain, would be to force agencies to respond to all inquiries lest their silence be misunderstood. And even if one could infer an answer from silence, Sanofi points to no support for affording any deference to its chosen inference. Moreover, the fact that the Orange Book is not designed to separately address combination product listings hardly helps Sanofi‘s argument that the ‘864 patent was listable as claiming a component of a combination product. Nor does the fact that some manufacturers view the FDA‘s guidance as outdated in that regard. The statute and regulations clearly require that only patents that claim the drug for which the NDA is submitted should be listed in the Orange Book. The ‘864 patent, which neither claims nor even mentions insulin glargine or the Lantus SoloSTAR, does not fit the bill.
B.
Having detеrmined that the complaint adequately alleges that Sanofi should not have submitted the ‘864 patent for Orange Book listing, we turn to Sanofi‘s alternative argument, accepted by the district court, that submitting the ‘864 patent for listing was reasonable, and that Sanofi cannot be held liable under the antitrust laws for a reasonable mistake. Plaintiffs challenge this argument on both levels: they argue that reasonableness is not a defense, and they argue that the statute was sufficiently unambiguous so as to render Sanofi‘s filing unreasonable as a matter of law. For the following reasons we find that neither side is quite correct, and that further proceedings beyond a Rule 12 motion are necessary to determine whether Sanofi should be held liable under the Sherman Act for any antitrust injury caused by its impropеr submission of the ‘864 patent.
Generally in a section 2 case, we would examine the effects of a monopolist‘s improper conduct, rather that the reasons why it engaged in such conduct. See Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227 (1st Cir. 1983)
Grinnell Corp., 724 F.2d 227, 232 (1st Cir. 1983) (Breyer, J.) (observing that, though “[s]ome courts have written as if one might look to a firm‘s ‘intent to harm’ to separate ‘good’ from ‘bad’ [conduct],” this search for “improper intent” in reality “refer[s] to a set of objective economic conditions“); see also United States v. Microsoft Corp., 253 F.3d 34, 60 (D.C. Cir. 2001) (en banc) (“[I]n considering whether the monopolist‘s conduct on balance harms competition and is therefore condemned as exclusionary for purposes of § 2, our focus is upon the effect of that conduct, not upon the intent behind it.“); Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 658f (4th ed. 2019) [hereinafter Areeda & Hovenkamp] (“[I]nquiries into subjective intent should be limited in § 2 cases.“). Presumably for this reason, Sanofi does not point us to any section 2 cases holding that reasonableness generally immunizes monopolists from section 2 liability.6
This may be something of an overstatement. It would appear that a company unsure about whether it must submit a patent for listing might protect itself from liability by submitting the patent and then not suing within forty-five days of any subsequent Paragraph IV certification, thereby ensuring that the mere listing would not slow down final FDA approval of a competitor‘s submission.
That being said, such a strategy would potentially sacrifice a benefit that Congress gave to patent holders in the Hatch-Waxman Amendments. So, in the end, Sanofi has a fair point in arguing that the plaintiffs’ version of what would essentially be strict liability for improper Orange Book submissions could slightly tilt the regulatory balance Congress sought in this bespoke scheme at the intersection of the FDCA and patent law. See
The fact that Sanofi must align its conduct with regulatory requirements does not, however, mean that Sanofi gets a free pass from antitrust scrutiny. Courts do not frequently find an implied repeal of antitrust law, except where there is a “plain repugnancy between the antitrust and regulatory
See
Several circuits have identified a defense to antitrust liability where the defendant‘s action was taken as part of a good faith, reasonable attempt to comply with a regulatory scheme. In MCI Communications, the Seventh Circuit held that “[i]n the particular context of an industry subject to extensive and rapidly changing regulatory demands, we believe that an antitrust defendant is entitled both to raise and to have the jury consider its good faith adherence to regulatory obligations as a legitimate antitrust defense.” 708 F.2d at 1109–10; see also id. at 1138 (“An ideal instruction would very briefly explain . . . that a carrier has an obligation under the Communications Act to interconnect, but may deny interconnections if it determines that the public interest is to the contrary; and that if the carrier at the time had a reasonable basis in regulatory policy to conclude, and in good faith concluded, that denial of interconnections is required by concrete, articulable concerns for the public interest, then there is no liability under the antitrust laws.“). See also S. Pac. Commc‘ns Co. v. Am. Tel. & Tel. Co., 740 F.2d 980, 1010 (D.C. Cir. 1984) (“[W]e agree with the standard articulated by the Seventh Circuit . . . .“); see also Phonetele, Inc. v. Am. Tel. & Tel. Co., 664 F.2d 716, 737–38 (9th Cir. 1981) (Kennedy, J.).
Though the aforementioned cases all deal with the
The defense recognized in the regulatory context of the communications industry is not quite the defense that Sanofi seeks. Sanofi asks for immunity if its proffered reading of the statute was objectively reasonable. But the precedent we have cited requires that the challenged conduct be both reasonable and in good faith. See MCI Commc‘ns, 708 F.2d at 1138 (allowing the defense “if the [defendant] at the time had a reasonable basis in regulatory policy to conclude, and in good faith concluded,” that its actions were required by regulation); S. Pac. Commc‘ns, 740 F.2d at 1010 (quoting the same). We adopt that two-pronged version of the defense here, to be proven by Sanofi on remand. See MCI Commc‘ns, 708 F.2d at 1109–10 (“[W]e believe that an antitrust defendant is еntitled both to raise and to have the jury consider its good faith adherence to regulatory obligations as a legitimate antitrust defense.“); Phonetele, 664 F.2d at 737–38 (“If 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, then its actions did not violate the antitrust laws.“).9 Certainly the dilemma faced by companies seeking to comply with the Hatch-Waxman Amendments is no greater than the regulatory dilemmas presented by the “extensive and rapidly changing” regulation under the
Plaintiffs seem to argue that the allegations in the complaint necessarily defeat the reasonableness prong of any such defense. At this early stage of the lawsuit, however, the record does not yet contain any evidence about custom and practice in the industry, or what if any legal opinions Sanofi sought and obtained before submitting the patent. Indeed, Sanofi has yet to answer the complaint. And while we are reasonably confident of our reading of the statutory and regulatory texts, we cannot ignore еither the complexity of that endeavor or the fact that at least one other district court has found it difficult to arrive comfortably at a similar conclusion. See Organon, Inc. v. Mylan Pharm., Inc., 293 F. Supp. 2d 453, 459–60 (D.N.J. 2003) (finding no liability where the defendant listed a patent claiming an “off-label” use of the drug because there was a “reasonable basis for the submission“). But see In re Buspirone Patent Litig., 185 F. Supp. 2d 363, 375–76 (S.D.N.Y. 2002) (finding that the defendant‘s improper listing of a patent in the Orange Book and subsequent litigation to enforce it was “objectively baseless” under the Noerr-Pennington
Conversely, the fact that the law in this area is complicated does not by itself mean that Sanofi‘s action was reasonable. Cf. Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, 467 U.S. 837, 842–43 (1984) (anticipating that there are impermissible readings even of ambiguous statutes: “if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency‘s answer is based on a permissible construction of the statute“). An experienced and sophisticated drug manufacturer routinely works with such comрlexity. And in this instance no close reader could have reasonably thought that submitting the ‘864 patent was so clearly proper as to obviate the need for inquiry and advice.
We therefore hold that the facts and reasonable inferences found in the complaint describe an improper submission of the ‘864 patent for listing in the Orange Book; that the defenses to antitrust liability as a result of such an improper submission include proving that the submission was the result of a reasonable, good-faith attempt to comply with the Hatch-Waxman scheme; and that the record does not now allow for the adjudication of that defense as a matter of law.
C.
Finally, Sanofi briefly argues that even if its submission of the ‘864 patent was improper and not subject to any reasonableness defense, the plaintiffs could not win on their claims because the improper Orange Book listing could not alone have caused an antitrust injury. Antitrust causation, however, requires only that the complained-of activity be a “material” or “substantial” cause of the injury. Areeda & Hovenkamp, supra, ¶ 338a (“It is . . . enough that the antitrust violation contributes significantly to the plaintiff‘s injury, even if other factors amounted in the aggregate to a more substantial cause.“). As best we can tell, Sanofi‘s premise is that without the Orange Book listing of the ‘864 patent, the patent infringement litigation between Sanofi and its putative competitors, including its ultimate settlement with Lilly, would have proceeded and concluded exactly the same way as it did, such that the listing itself was not a substantial cause of the extension of Sanofi‘s mоnopoly. Even putting aside the sham-litigation claims, which the plaintiffs have abandoned on appeal, nothing in the operative complaint requires us
III.
We reverse the district court‘s dismissal of the plaintiffs’ claims as to Sanofi‘s alleged improper Orange Book listing of the ‘864 patent and remand for further proceedings in accord with this opinion.