Health and Pharmaceuticals Committee: Recent Developments Series. September 13, :00 PM EDT. White & Case LLP

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1 Health and Pharmaceuticals Committee: Recent Developments Series June, July, and August 2013 September 13, :00 PM EDT White & Case LLP

2 Agenda Patent Settlements Robinson-Patman Act Delayed Generic Entry Conspiracy Mergers Other Litigation 2

3 Patent Settlements FTC v. Actavis, 133 S. Ct (2013) Resolves circuit split: 2nd, 11th and Federal Circuits (scope of the patent) versus 3rd Circuit ( quick look rule of reason) Directs courts to apply rule of reason Factors to consider in evaluating likelihood of anticompetitive effects include payment s Size Scale in relation to the payor s anticipated future litigation costs Independence from other services for which it might represent payment The lack of any other convincing justification The Supreme Court left to the lower courts the structuring of the present rule-of-reason antitrust litigation 3

4 Patent Settlements (cont d) Dissent (Roberts, C.J.) This novel approach is without support in any statute, and will discourage the settlement of patent litigation. The majority today departs from the settled approach separating patent and antitrust law, weakens the protections afforded to innovators by patents, [and] frustrates the public policy in favor of settling. Implications Defining payment Nature and extent of fact-specific inquiry required under rule of reason (e.g., justification, size of payment, fair value, litigation costs, role of merits of underlying patent litigation) 4

5 Patent Settlements (cont d) Effect of Actavis on no-authorized-generic commitments In re Lamictal Direct Purchaser Antitrust Litigation, No (D.N.J.) Addressing no-authorized-generic commitment Grant of motion to dismiss for failure to plead cash payment re-briefed in light of Actavis In re Effexor XR Antitrust Litigation, No (D.N.J.) Addressing no-authorized-generic commitment Oral argument on pending motions to dismiss on September 10, 2013 FTC sought permission to file amicus brief FTC s Position: No-AG provisions substantially increase first-filer revenues during 180-day exclusivity period Defendants Position: Value from no-ag provisions same as value from any exclusive license; early-entry exclusive licenses lawful and procompetitive under Actavis 5

6 Patent Settlements (cont d) Legislation? S. 214, the Preserve Access to Affordable Generics Act, introduced February 4, 2013 Presumption of invalidity for reverse payment agreements July 23, 2013 Senate hearing: Pay-for-Delay Deals: Limiting Competition and Costing Consumers Testimony by FTC Chairwoman Edith Ramirez FTC to continue to aggressively prosecute reverse payment agreements We see the Actavis decision as a victory for American consumers and we're pleased to move forward.... At the same time, my view is that it is going to be resource intensive and time consuming to litigate these cases to judgment, and I believe that the proposed legislation... would be a quick way [to deter reverse payment settlements]. 6

7 Robinson-Patman Act: Commercial Bribery AFSCME DC 37 et al. v. BMS & Otsuka, No (S.D.N.Y. June 3, 2013) Third-party-payers allege commercial bribery under section 2(c) of the Robinson-Patman Act with respect to manufacturer co-pay assistance programs for health plan members Cases pending against six manufacturers; some also allege federal RICO and tortious interference with contract claims Plaintiffs allege co-pay assistance programs interfere with costsavings efforts of insurers Health plan members allegedly are purchasing agents of insurers Co-pay assistance programs are bribes and kickbacks to induce health plan members to choose drugs that cost insurer more money Viability of section 2(c) commercial bribery claim unclear in some circuits 7

8 Robinson-Patman Act: Commercial Bribery (cont d) AFSCME DC 37 (cont d) Motion to dismiss granted as to all claims. Robinson- Patman Act claim dismissed with prejudice Health plan members owe no fiduciary duty to insurers Health plan members are not agents, representatives, or intermediaries of insurers Insureds do not act for or on behalf of insurers Insureds are not under the control of insurers Insureds are the buyers, not the insurers Amended complaints to date do not include Robinson-Patman Act claim 8

9 Delayed Generic Entry In re Lipitor Antitrust Litigation, No (D.N.J.) Direct and indirect purchasers allege Sherman Act Section 1 and 2 claims, and state antitrust, consumer protection and unjust enrichment claims Walker Process fraud Fraudulent Orange Book listing Sham litigation Sham FDA citizen petition Overarching anticompetitive scheme Unlawful patent settlement Direct purchaser and indirect purchaser class plaintiffs moved to amend complaints after Supreme Court s Actavis decision and oral argument on motions to dismiss 9

10 Delayed Generic Entry (cont d) September 5 decision dismissed most allegations in Lipitor Walker Process fraud theory rejected Standing: Standing for purchasers might not exist where patent has been upheld under extraordinary scrutiny Fraud implausible in light of, inter alia, prior patent litigation where inequitable conduct specifically rejected Orange Book listing and sham litigation theories rejected Based on fraud theory underlying Walker Process allegations Listing and enforcing valid patents is immune from antitrust liability Other patents: no plausible allegation that no reasonable litigant could have expected to succeed on merits 10

11 Delayed Generic Entry (cont d) Lipitor (cont d) Sham citizen petition theory rejected. Filing was not objectively baseless Overarching anticompetitive scheme No scheme since previous claims dismissed Unlawful patent settlement Causation adequately alleged damages period limited Motion to amend granted to clarify reverse payment allegations (Actavis) 11

12 Delayed Generic Entry (cont d) Mylan Pharmaceuticals Inc. v. Warner Chilcott PLC, No (E.D. Pa.) Mylan, indirect purchasers, and direct purchasers allege violations of Sherman Act and various state unfair competition laws by engaging in product hopping related to product Doryx Defendants allegedly made small changes designed to delay or impede generic competition and discontinued detailing of the older products (e.g., switching from capsules to tablets) Court skeptical, but MTD denied on June 12, 2013 Defendants contentions, if correct, appear compelling and Plaintiffs theory here is novel at best Court skeptical that the product hopping alleged here constitutes anticompetitive conduct under the Sherman Act But Defendants arguments raised fact issues outside complaint MTD denied without prejudice 12

13 Delayed Generic Entry (cont d) Other recent product hopping cases In re Suboxone (Buprenorphine Hydrochloride and Naloxone) Antitrust Litigation, MDL No (E.D. Pa.) Consolidated by JPML on June 6, 2013 Allegations include switching Suboxone product from tablet to film version of the drug United Food & Commercial Workers Local 1776 et al. v. Medicis Pharm. Corp. et al., No (E.D. Pa filed July 22, 2013) Allegations include switching Solodyn product to new dosage strengths United Food & Commercial Workers Local 1776 et al. v. Warner Chilcott Pub. Ltd. Co., No (E.D. Pa filed March 5, 2013) Allegations include switching Loestrin 24 Fe product to new formulation (Lo Loestrin Fe) 13

14 Conspiracy Rheumatology Diagnostics Laboratory Inc. v. Aetna Inc., No (N.D. Cal.) Alleged that Quest Diagnostics conspired with health insurers to exclude competing labs from in-network designation Accused Quest of engaging in predatory pricing by offering discounts to health insurers for lab work in return for insurers refusal to deal with Quest s rivals 14

15 Conspiracy (cont d) Motion to dismiss granted Hub and spoke conspiracy missing rim Exclusive dealing claims dismissed for failure to allege foreclosure of substantial market Failure to allege monopoly power and lack of antitrust injury Takeaways Focus on lack of rim in alleged conspiracies Focus on lack of agreement or coordinated conduct 15

16 Mergers National Association of Chain Drug Stores et al v. Express Scripts, Inc. et al, No (W.D. Pa. June 28, 2013) Community pharmacies challenged the $29.1 billion merger of Express Scripts Inc. and Medco Health Solutions Inc. Two of the Big Three PBMs Amended complaint alleged that Express Scripts and Medco engaged in collusive behavior by their agreement to merge Merger gives merged entity monopsony power as purchaser of retail community pharmacy services Merged entity unilaterally reduced reimbursement rates below competitive levels 16

17 Mergers (cont d) Motion to dismiss granted No connection between alleged violation (collusive behavior) and injury-in-fact (suboptimal reimbursement rates) Potential harm stemmed from the unilateral, non-predatory actions of the merged entity itself in lowering reimbursement rates Plaintiffs alleged collusive behavior with respect to merger itself, but to allege antitrust injury, must allege improper agreement with respect to reimbursement rates as part of merger agreement No allegation of improper collusion between defendants with respect to reimbursement rates 17

18 Other Litigation Symphony Health Solutions Corp. et al. v. IMS Health Inc., No (E.D. Pa. filed July 24, 2013) Symphony Health Solutions alleges Sherman Act Section 1 and Section 2 claims based on bundling, exclusive dealing and MFN clauses, and other conduct IMS Health alleged to be the largest supplier in the US (and worldwide) of data for the prescription drug industry IMS collects data from all parts of the distribution and payment system regarding how prescription drugs are marketed, distributed, prescribed, and reimbursed IMS data is used in all aspects of commercial decision making in the pharmaceutical industry 18

19 Other Litigation (cont d) Core allegations: IMS has monopoly power in 4 product markets: targeting and compensation data ( T&C data market ); managed markets data; anonymous patient longitudinal data ( APLD ); and integrated global data Bundling of T&C and integrated global data products Symphony offers a competing T&C product but no company offers a competing product to IMS industry essential MIDAS (global data) product IMS allegedly withdraws / threatens to withdraw discounts on MIDAS product when customers do not also purchase T&C product Bundling of T&C and other products; some offered for free Exclusive dealing and MFN clauses with suppliers of data Anticompetitive acquisitions intended to restrict data access 19

20 Other Litigation (cont d) Retractable Technologies Inc. v. Becton Dickinson and Co., No (E.D. Tex. August 19, 2013) Retractable Technologies claimed its retractable needle syringe product effectively eliminates health risks (e.g., accidental needle stick) and threatened Becton s monopoly over syringe and needle product markets Plaintiff alleged Becton improperly used bundling, loyalty discounts, and tying arrangements to exclude Plaintiff and maintain Becton s monopoly Alleged, inter alia, violations of Sherman Act, Sections 1 and 2, and Section 3 of the Clayton Act 20

21 Other Litigation (cont d) Becton s motion for summary judgment denied Loyalty conditions separate from volume-based conditions used to punish non-compliant buyers Non-penalty prices remained stagnant, while penalty prices significantly increased Becton able to maintain higher pricing premiums, foreclose sales by Retractable Technologies, and increase switching costs for consumers Becton s decrease in market share during period where Retractable Technologies share increased not dispositive 21

Presenters Jack Pace Michael Gallagher Bryan Gant Sheryn Alexander Mr.

He has extensive experience defending companies in complex, multi-jurisdictional class actions, including those involving claims under the antitrust

Gallagher is a member of White & Case s Global Competition and Commercial Litigation Practice Groups. Mr.

of antitrust and trade regulation. Bryan Gant is an associate in White and Case s Global Competition and Commercial Litigation Practice Groups.

22 Presenters Jack Pace Michael Gallagher Bryan Gant Sheryn Alexander Mr. Pace is a member of White & Case s Global Competition and Commercial Litigation Practice Groups. He has extensive experience defending companies in complex, multi-jurisdictional class actions, including those involving claims under the antitrust laws, consumer protection statutes and Title VII. Mr. Gallagher is a member of White & Case s Global Competition and Commercial Litigation Practice Groups. Mr. Gallagher's principal areas of practice include complex commercial litigation, with emphasis on antitrust and class actions, and counseling in the areas of antitrust and trade regulation. Bryan Gant is an associate in White and Case s Global Competition and Commercial Litigation Practice Groups. He concentrates on complex commercial litigation and counseling in the areas of antitrust and trade regulation. Mr. Gant regularly represents clients in the pharmaceutical and financial services industries. Sheryn Alexander is an associate in White and Case s Global Competition and Commercial Litigation Practice Groups. She concentrates on antitrust and intellectual property litigation on behalf of clients in the pharmaceutical industries.

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