Late last week, District Court Judge Peter Sheridan (D.N.J.) dismissed with prejudice the complaint for antitrust injury by the so-called "End Payor Class Purchasers" against the parties in previous ANDA litigation in the case styled In re Lipitor Antitrust Litigation (Order).  The gravamen of the complaint was that the defendants violated Sections 1 and 2 of the Sherman Antitrust Act by entering into a "reverse payment settlement agreement" in that ANDA litigation.  Curiously, the agreement between the parties did not contain a reverse payment (i.e., a payment from the branded, patent-holding innovator to the generic challengers).

To recap, the lawsuit involved Pfizer's Lipitor® drug (atorvastatin calcium), which was so profitable at the time that Plaintiffs' alleged sales amounted to $ 1 billion per month.  These plaintiffs were placed by the Court into four groups = (1) a proposed class of direct purchaser plaintiffs asserting claims under the Sherman Act ("Direct Purchaser Plaintiffs"), who had seen their complaint dismissed with prejudice on Memorandum and Order dated September 12, 2014; (2) several opt-out groups of direct purchaser plaintiffs asserting nearly identical claims to the direct purchaser class; (3) a proposed class of end-payor plaintiffs asserting claims under various states' laws; and (4) the RP Healthcare plaintiffs, a group of pharmacist plaintiffs, asserting claims under California law.  Defendants were the parties to the ANDA settlement agreement:  Pfizer, Inc., Pfizer Manufacturing Ireland (formerly known as Pfizer Ireland Pharmaceuticals and previously Warner Lambert Export, Ltd.), and Warner-Lambert Company, the branded drug companies; and generic drugmakers Ranbaxy Inc., Ranbaxy Pharmaceuticals, Inc., and Ranbaxy Laboratories Ltd.

This settlement agreement was highly complex, encompassing three separate ANDA litigations as well as more than two dozen other actions in foreign jurisdictions, and involving Pfizer drugs Accupril® and Caduet® as well as Lipitor®.  The Lipitor® ANDA litigation involved seven patents:  U.S. Patent No. 4,681,893 (the "'893 patent") and U.S. Patent No. 5,273,995 (the "'995 patent," reissued later as U.S. Reissue Patent No. 40,667), directed to the active pharmaceutical agent (API); U.S. Patent No. 6,126,971 (the "'971 patent"), U.S. Patent No. 5,686,104 (the "'104 patent"), directed to formulations (the "Formulation Patents"); U.S. Patent No. 6,087,511 (the "'511 patent"), and U.S. Patent No. 6,274,740 (the "'740 patent"), directed to specific processes of making amorphous atorvastatin calcium using crystalline Form I atorvastatin as a starting material (the "Process Patents"); and U.S. Patent No. 5,969,156 (the "'156 patent"), directed to the crystalline form of the API.  The API patents and the Formulation Patents were listed in the Orange Book, while the Process Patents were ineligible for listing.

Ranbaxy was the first ANDA filer, and its Paragraph IV letter with regard to the '893, '995, '156, '971 and '104 patents asserted non-infringement based on its ANDA for sale of amorphous (not crystalline) Lipitor®.  In the underlying ANDA case, Ranbaxy failed on all its validity and unenforceability challenges as to product patents, which the Federal Circuit affirmed as to the '893 patent and reversed as to validity of asserted claim 6 of '995 patent.  Thereafter the District Court entered an injunction that kept Ranbaxy off the market until March 24, 2010, and Pfizer filed for and obtained Reissue Patent No. RE40,667 based on the '995 patent.  (Pfizer also filed a declaratory judgment action as to the Process Patents which settled outside ANDA context and the settlement agreement at issue here.)

In the first Accupril® litigation (Accupril I), Teva was the first ANDA filer and Ranbaxy the second filer over U.S. Patent No. 4,743,450.  In that action, Pfizer was awarded summary judgment against Teva, with the District Court rejecting all Teva's validity and unenforceability assertions.  The second Accupril litigation (Accupril II) resulted from an exclusive "distribution and supply agreement" between Teva and Ranbaxy, in return for which Teva gave up its rights to the 180 day exclusivity period as first filer.  Ranbaxy launched "at risk" based on structural distinctions between Pfizer's approved drug and its generic drug and the District Court granted Pfizer an injunction keeping Ranbaxy's generic Accupril off the market.  This action was included in the settlement agreement at issue here.

In the Caduet® litigation, the accused generic drug was a combination of atorvastatin and amlodipine (and thus subject to infringement liability for the '893 patent); there was also a related declaratory judgment action involving the Process Patents and both actions were part of the settlement agreement before the Court.

That settlement agreement was a "non-monetary" reverse payment, that contained terms "absolving Ranbaxy of damages accrued from Accupril litigation" and "resolved and terminated patent litigation on the three drugs Lipitor®, Caduet® and Accupril®."  Under the terms of the agreement, "the U.S. actions [falling under the scope of the settlement] were the Accupril II litigation, Lipitor Process litigation, Caduet ANDA litigation, and Caduet Process litigation" as well as all (26) foreign litigations between the companies.  The agreement delayed generic entry into the Lipitor market until November 30, 2011 (a 20 month delay from the earlier District Court injunction) and contained a promise by Ranbaxy not to challenge the Process Patents (the '511 or the '740 patents).  Generic entry of Caduet was also delayed until November 30, 2011 and also contained an agreement not to challenge the relevant patents.  Regarding damages for the "at risk" Accupril® sales, Ranbaxy paid Pfizer $1M.  Finally, Pfizer agreed to be Ranbaxy's API supplier for Lipitor, and Ranbaxy changed its formulation to (putatively infringing) crystalline atorvastatin calcium instead of the amorphous form.

The case was consolidated in the District of New Jersey by the Panel for Multidistrict Litigation, and defendants filed motions to dismiss by defendants under Fed. R. Civ. Proc. 12(b)(6), directed here to the class of "End Payor Class Plaintiffs."  As with the other plaintiffs whose complaints were dismissed by the Court, the only claim remaining against defendants was the reverse payment claim.  The Court allowed limited discovery while this action was stayed awaiting the Actavis decision and permitted Plaintiffs to file an amended complaint after the Supreme Court rendered its decision in the Actavis case.

The Court did not revisit its earlier legal reasoning regarding Plaintiff's allegations  but incorporated its earlier Order in a terse statement that "the facts supporting the claims pleaded in the Amended Complaint of the End Payor Class Plaintiffs are substantially similar to the claims pleaded by the Direct Purchaser Class Plaintiffs" and "for the reasons set forth in the Memorandum dated September 12, 2014" the Court dismissed the End Payor Class Plaintiff's complaint with prejudice.  (Although not directly addressing why the dismissal was "with prejudice" it can be apprehended that these plaintiffs had had similar opportunities to file a complaint that passed Fed. R. Civ. Pro. Rule 12 muster and, as with the earlier Plaintiffs, the Court was not inclined to provide any additional opportunities.

Thus the Court once again (albeit by reference) affirmed its determination that the Supreme Court's FTC v. Actavis decision was not limited to settlement agreements where cash money traded hands from branded drug maker patentee plaintiffs to generic challengers, but that courts should look at the value of what was transferred.  Put another way, the Court (in its earlier Memorandum) made plain that Plaintiffs (but not these Plaintiffs) could properly plead the economic value of what was transferred then a court could assess, under the Actavis rubrics, whether the agreement constituted an antitrust violation using the "rule of reason."  But the Court also reaffirmed here (by reference to its earlier Memorandum) that the burden was on Plaintiffs to plead sufficient facts to support the antitrust conclusion, citing the Supreme Court in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009).

This case is another in the continuing process of "working out" the contours of the Court's Actavis decision, where (to be kind) various courts have understood and applied the law in various ways.  To date, there have been several such cases:

• In re Nexium (Esomeprazole) Antitrust Litig., 968 F. Supp. 2d 367 (D. Mass. 2013) (no authorized generic; mixed decision on state law)

• In re Wellbutrin XL Antitrust Litig., No. 08cv-2431, DKT No. 534 (E.D. Pa. Jan. 17, 2014) (no authorized generic triggered rule of reason analysis)

• In re Lamictal Direct Purchaser Antitrust Litig., 2014 WL 282755 (D.N.J. Jan. 24, 2014) (money means money) (this case is on appeal to the 3rd Circuit, which has granted the FTC to appear as an amicus)

• In re Loestrin 24 FE Antitrust Litig., MDL No. 13-2472-S, DKT No. 116 (D.R.I. Sept. 4, 2014) (money means money)

• In re Niapsan Antitrust Litigation, 2014 U.S. Dist. LEXIS 124818 (E.D. Pa. Sept. 5, 2014) (monetary terms not required)

• In re Lipitor Antitrust Litigation, 3:12-cv-02389 (PGS) (Sept 12, 2014) (antitrust allegations dismissed on the pleadings)

• In re Effexor Antitrust Litigation, 11:5479 (PGS) (Oct. 6, 2014) (accord with Lipitor decision)

The outcomes in many of these cases, and the likely outcome to the question of what constitutes a "reverse payment" that triggers "rule of reason" antitrust scrutiny, is that courts will not be limited to reviewing agreements that set forth express reverse payments of money (a trend away from such agreements has been evidence since the FTC was successful in getting the right to review these agreements and requiring the parties to a reverse payment settlement agreement in ANDA litigation to submit the agreements to the Commission).  The only silver lining is that, should the question come before the Supreme Court at a time after the constitution of that Court has changed, there is the possibility that the Chief Justice will be able to garner enough votes to reverse the Actavis decision or expressly limit its scope to cases of monetary payments.  For now (or at least before the 3rd Circuit rules in the Lactimal case, the existing patchwork quilt of legal decisions will inhibit at least some ANDA litigation, with whatever negative consequences those limitations shall impose upon the parties and the public.