An Analysis of a Failed Biosimilar Antitrust Class Action

McDonnell Boehnen Hulbert & Berghoff LLP

McDonnell Boehnen Hulbert & Berghoff LLP

On June 10th, Judge Manish S. Shah, U.S. District Court Judge for the Northern District of Illinois, dismissed (without prejudice) a class action lawsuit against AbbVie and AbbVie Biotechnology Ltd. by consumer groups, drug wholesalers, and unions (including the City of Baltimore, Miami Police Department insurance trust fund, and a Minnesota-based employee welfare benefits plan for workers in the pipe trade industries), alleging antitrust violations under Sections 1 and 2 of the Sherman Antitrust Act, as well as corresponding state law causes of action for Alaska, California, District of Columbia, Georgia, Illinois, Nevada, New Hampshire, North Carolina, Utah, and West Virginia, over AbbVie's blockbuster biologic drug, Humira.

Humira (adalimumab) is the world's most valuable biologic drug, having sales of $56 billion from 2012-2018.  Originally approved for rheumatoid arthritis, AbbVie has since obtained FDA approval for treatment of a variety of human autoimmune disorders (including Crohn's disease and plaque psoriasis according to the Opinion and Order).  Facing expiration of the patent on the adalimumab molecule (U.S. Patent No. 6,090,382) on December 31, 2016, AbbVie embarked on a successful campaign (247 patent applications, resulting in 132 patents, which the opinion characterizes as a .534 "batting average") to obtain additional patents on ancillary aspects of the technology, including formulation and manufacturing methods.  Plaintiffs alleged that because some (almost half) of these applications (continuations of earlier-filed applications) were filed two years after Humira was first marketed they should be invalid as being anticipated by earlier Humira-related patents.  (Plaintiffs noted that 5 AbbVie patents were challenged by inter partes review, with 3 being invalidated and AbbVie abandoning the other two before judgment.  AbbVie noted that IPRs against 13 other of its patents were unsuccessful.)  Plaintiffs also alleged inequitable conduct in AbbVie's acquisition of some of these patents, based on prior use of claimed manufacturing methods and failure to disclose these uses to the U.S. Patent and Trademark Office.

Nevertheless, this "patent thicket" was very effective, and in 2019 several biosimilar applicants, including Amgen (Amjevita), Samsung Bioepsis (Hadlima), and Sandoz (Hyrimoz), (as well as Mylan (Hulio), Fresenius (Idacio), Momenta (subsequently abandoned development), Pfizer (Abrilada), Coherus (CHS-1420), and Boehringer (Cyltezo), non-defendants in this action), entered into an agreement wherein AbbVie licensed them to enter the market with their Humira biosimilars in Europe in October 2018, and in the U.S. in January 2023.  While these dates were earlier than any likely date for biosimilar entry even assuming all of AbbVie's patents that could be asserted were  either found invalid, unenforceable, or not infringed, nevertheless the class attempted through antitrust law to get a judgment that would provide Humira biosimilar market access even more quickly.

In dismissing the complaint under Ashcroft v. Iqbal and Bell Atl. Corp. v. Twombly, Judge Shah set forth Plaintiffs' allegations in a manner consistent with the requirement that "a court must accept all factual allegations in the complaint as true and draw all reasonable inferences in plaintiffs' favor."  These include:

  • that AbbVie "cornered the market" on Humira (and other, unnamed biosimilar drugs) by "anticompetitive conduct";
  • that AbbVie obtained and asserted patents "to gain the power it needed to elbow its competitors" out of the Humira market;
  • that AbbVie then entered into agreements with those competitors "to keep their competing drugs off the market" (and then, paradoxically, "gave those competitors permission to market their drugs in Europe"; unremarked is that AbbVie gave those same competitors permission to enter the U.S. market a few years thereafter, without having to face those dastardly and profuse patents).

While setting forth Plaintiffs' allegations bluntly, Judge Shah's decision was balanced in this regard; while noting in the first line of the opinion that "Defendant AbbVie Inc. makes a lot of money selling the prescription drug Humira," he also notes that "AbbVie's Humira-related patents (more than a hundred) make it difficult (if not impossible) to sell competing drugs" and that "the Food and Drug Administration's lengthy approval process imposes additional costs on competitors hoping to reach the market."  And that "a third reason might be the expensive, complicated, and contentious patent infringement litigation that often follows on the heels of FDA approval."

The Court also noted AbbVie's actions in Europe to avoid adverse judicial verdicts and take advantage of "a more fractured patent system (and a type of European patent application similar to the continuation application, known as a "divisional application") to retain patent rights to assert against biosimilar applicants.  While not relevant to the antitrust issues before the Court, Plaintiff made these allegations to characterize AbbVie as a "bad actor."

Judge Shah rebuts these arguments (with additional details as set forth below) efficiently:

Plaintiffs say that AbbVie's plan to extend its power over Humira amounts to a scheme to violate federal and state antitrust laws.  But what plaintiffs describe is not an antitrust violation.  AbbVie has exploited advantages conferred on it through lawful practices and to the extent this has kept prices high for Humira, existing antitrust doctrine does not prohibit it.  Much of AbbVie's petitioning was protected by the Noerr–Pennington doctrine, and plaintiffs' theory of antitrust injury is too speculative.

The Judge set forth the following reasoning in support of his legal conclusions.  The complaint sounded in antitrust law under the Sherman Antitrust Act, §§ 1 and 2, as well as state antitrust law claims.  The Sherman Act Section 1 Count was asserted under a "pay-for-delay" theory against AbbVie, AbbVie Biotechnology, and the three biosimilar applicants (Amgen, Samsung Bioepsis, and Sandoz).  Count 3 was also alleged against all Defendants, based on a market allocation agreement theory under § 1.  Count V asserted Section 2 violations against AbbVie alone.  Counts II, IV, and VI alleged state law claims on grounds analogous to the Federal Sherman Act Counts, and Count VII against AbbVie alleged state law unfair competition laws.

With regard to the Sherman Act § 2 allegations against AbbVie, the Court agreed with AbbVie that "there is nothing illegal about amassing a broad portfolio of legitimate patents."  To the extent that some of these patents turn out to be improvidently granted, "the Noerr–Pennington doctrine immunizes them from liability."  Regarding the Section 1 allegations, the Court similarly agreed with Defendants that these settlement agreements don't violate the Sherman Act because "they[] allow AbbVie's competitors to enter the market before the expiration of AbbVie's patents, do not involve any reverse payments from AbbVie (the patentee) to Amgen, Samsung Bioepis, and Sandoz (the alleged infringers), and only divvy up the market in ways consistent with AbbVie's patent rights."  Finally, the Court agreed that even if a single one of AbbVie's patents are not invalid and infringed that would have been sufficient to keep the biosimilar applicants from marketing Humira biosimilars until that patent expired (a date that would have been very much later than January 2023).  For Plaintiffs' antitrust allegations to create liability against Defendants, Plaintiffs would need to show that AbbVie had obtained each and every one of its patents "unlawfully," which the Court found was unlikely, as a "but-for" cause of Plaintiffs' alleged injury.

One basis for the Court's decision to dismiss was that Plaintiffs' complaint comprised "a new kind of antitrust claim."  The Court's basis for this characterization is that the Sherman § 2 allegations, which while analogous to the grounds of antitrust liability found in Walker Process Equip., Inc. v. Food Mach. & Chem. Corp. and to Prof'l Real Estate Inv'rs, Inc. v. Columbia Pictures Indus., Inc. regarding the exemption from Noerr–Pennington immunity raised by an objectively baseless assertion of an invalid patent, Plaintiffs had disclaimed those grounds of legal remedy.  Moreover, the Sherman § 1 allegations were grounded in F.T.C. v. Actavis, Inc., despite the fact that there had been no reverse payment from AbbVie to any of the biosimilar applicants In the Court's view, "[t]he complaint brings together a disparate set of aggressive but mostly protected actions to allege a scheme to harm competition and maintain high prices.  The allegations—even when considered broadly and together for their potential to restrain trade—fall short of alleging the kind of competitive harm remedied by antitrust law."

Turning to the specific deficiencies of each of Plaintiffs' allegations of Sherman Act violations, the Court first plumbed the bases of liability under Section 2 as pled by Plaintiffs.  The opinion sets forth the elements of such a violation:  "a plaintiff must allege '(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident'" citing United States v. Grinnell Corp.  The opinion summarizes Plaintiffs' argument in support of this allegation to be that "AbbVie abused its monopoly over the U.S. market for adalimumab . . . when it gummed up progress toward lower prices by obtaining and asserting "swaths of invalid, unenforceable, or noninfringed patents without regard to the patents' merits" (the "patent thicket" argument).  These allegations did not include that AbbVie had obtained its patents by "knowing and willful fraud" nor that asserting these patents in biosimilar litigation was objectively baseless.

The opinion recognizes the equitable basis for Plaintiffs' argument as being "when a patentee acquires and asserts whole tracts of questionable patents as part of a bad-faith, intentional effort to prop up the market for an existing, expiring patented product," then "petitioning the government (during patent prosecutions, the FDA approval process, and in the courts) can violate the antitrust laws if, in reality, that petitioning is nothing more than a sham meant to inhibit competition," citing California Motor Transport Co. v. Trucking Unlimited for the premise that the Noerr–Pennington doctrine does not immunize activities that are "means or the pretext for achieving substantive evils which the legislature has the power to control."  But the Court also recognized that "because immunized conduct cannot be aggregated with nonimmunized conduct without nullifying the immunity, it is necessary to identify protected and unprotected conduct," citing Mercatus Grp., LLC v. Lake Forest Hosp., and that, ultimately, informs the Court's decision that Plaintiffs should not be permitted to pursue their cause of action under the theories pled in their complaint.

Specifically, a recently decided case -- U.S. Futures Exch., L.L.C. v. Bd. of Trade of the City of Chicago, Inc. -- held that the objectively baseless prong of the test for vitiating Noerr–Pennington immunity is not satisfied "merely by showing that its competitor's purposes were to delay the plaintiff's entry into the market," which was the basis for Plaintiffs' allegations here.  The opinion states that "AbbVie's conduct is protected by Noerr–Pennington (and not subject to antitrust scrutiny) unless its petitions—its patent applications, patent dance exchanges, and the lawsuits that followed—were objectively baseless," and assertions of "numerous flaws" in AbbVie's patents is not enough to amount to their assertion being objectively baseless.  Moreover, the Court is not convinced in view of the 53.4% allowance rate, which the Court believes "compels the conclusion, as a matter of law, that more than half of AbbVie's patent applications were not objectively baseless" under U.S. Futures Exch.  This conclusion is supported by case law from other Circuits where similar success rates led to the conclusion that assertion thereof was not objectively baseless.  This conclusion was bolstered by AbbVie's success before the PTAB in IPRs, where 13 of 18 challenged patents were upheld.  And although the Court did ascertain that some of the patent assertions made by AbbVie during the biosimilar "patent dance" and subsequent litigation may have been objectively baseless, "a settlement that provides substantial value to an antitrust defendant accused of initiating that lawsuit as a sham [which was the case here] is objectively reasonable," citing New W., L.P. v. City of Joliet (the Court citing the benefits of the settlements for Plaintiffs and that the settlements "required concessions from both sides').

Taking these considerations into account, the Court concluded that:

[T]he vast majority of the alleged scheme is immunized from antitrust scrutiny, and what's left are a few sharp elbows thrown at sophisticated competitors participating in regulated patent and biologic-drug regimes.  Some of AbbVie's conduct was not immunized by the Noerr–Pennington doctrine—including what plaintiffs allege to be the heart of their monopolization claim—but much of what preceded and followed that conduct was immunized, which makes the entirety of alleged monopolization scheme immune, because plaintiffs' theory depends on all the components of AbbVie's conduct as the means to suppress competition.

The Court also distinguished Plaintiffs' novel antitrust liability theory here with cases where a court has found "a series of allegedly sham petitions" because in this case the patent system was involved.  Although the Court is cognizant that patenting does not provide blanket antitrust immunity and the patent system is not perfect, the opinion rejects using antitrust law to "launch a collateral attack" on AbbVie's patents and related adjudicative proceedings before the Patent Office and the district courts.

Finally, the Court failed to recognize any antitrust injury based on Plaintiffs' Section 2 allegations because "it is not plausible that AbbVie's nonimmunized conduct intimidated the other defendants into delaying the launch of their biosimilars (or otherwise caused any antitrust injury)."

Turning to the allegations based on Section 1 of the Sherman Act, the opinion sets out what is required for a well-pleaded complaint:  "[i]n order to state a claim under § 1, plaintiffs must plead '(1) a contract, combination, or conspiracy; (2) a resultant unreasonable restraint of trade in [a] relevant market; and (3) an accompanying injury,'" citing Deppe v. Nat'l Collegiate Athletic Ass'n, which are assessed under one of three categories of analysis: "per se, quick-look, and rule of reason," citing Agnew v. Nat'l Collegiate Athletic Ass'n.  The opinion quickly rejects a per se analysis because the agreements are not "facially anticompetitive" (not involving price-setting or the quantity of Humira each defendant could sell), and the Court notes that even frank "pay-for-delay" agreements are not per se anticompetitive under FTC v. Actavis.

Regarding Plaintiffs' market allocation argument (wherein Europe and the U.S. comprise the allocated markets), the Court once again considers the influence of patents, which permit the patentee to selectively license in different territories, citing Dunlop Co. v. Kelsey-Haynes Co.  And the Court notes that per se analysis is disfavored when a Court considers novel antitrust liability theories as pled by Plaintiffs.

The Court also rejects the "quick look" analysis, based on whether "an observer with a rudimentary understanding of economics would []conclude that the agreements have an anticompetitive effect," citing California Dental Ass'n v. F.T.C.  "Even if the rudimentary economist is informed that most of the patents are likely invalid and uninfringed and being asserted without regard to their validity, there are still legitimate, procompetitive justifications for the agreements that require full rule of reason analysis (for instance, the agreements provide certainty to both parties and avoid further litigation costs)" according to the opinion.

Thus the Court concludes that the "rule of reason" approach is the best analytical tool, consistent with FTC v. Actavis for pay-for-delay or reverse payment settlements.  However, using this analysis the Court found that the settlements here fit into the "important exception" to antitrust liability in settlement agreements: "[p]arties remain free to settle on other terms—for example, 'by allowing the generic manufacturer to enter the patentee's market prior to the patent's expiration, without the patentee paying the challenger to stay out prior to that point.'"  And the Court notes an important distinction with FTC v. Actavis: there, under the 180-day exclusivity provisions of the Hatch-Waxman Act the patent holder and the first-to-file generic drug maker shared market exclusivity.  Here, in contrast, not just Amgen but all the other settling defendants were able to enter the market competitively.  Accordingly, "the package of global patent settlements were not an Actavis-like unlawful reverse-payment" and the differential market entry dates between Europe and the U.S. are permissible under Actavis.  On this motion to dismiss, the Court asked "whether the complaint alleges a patent settlement that has Actavis-like anticompetitive features and that warrants further scrutiny under the rule of reason," deciding that it did not.

Finally the Court considered whether the complaint asserts facts amounting to antitrust injury, concluding that it does not.  There is "no hard-and-fast rule" against deciding the antitrust injury question on the pleadings, according to the opinion, but "[d]ismissal is appropriate if the claim 'rests at bottom on some abstract conception or speculative measure of harm,'" citing Associated Gen. Contractors of California, Inc. v. California State Council of Carpenters.  The antitrust injury here is "monopoly pricing" under two allegations: first, that "if the biosimilar manufacturers had pursued the underlying infringement suits, they could have prevailed and, by invalidating the patents that were preventing them from entering the market, entered the market even sooner than they are now able to under their settlement agreements, driving prices down."  Second, if AbbVie had limited assertion of its patents to those not invalid and infringed, the biosimilar applicants would have been able to negotiate more favorable settlement terms.  The Court found these allegations of "what might have happened in the underlying infringement litigation [to be] too speculative and would require legal and factual determinations that go beyond judicially manageable limits," citing Associated Gen. Contractors of California.  These allegations describe "a world where [this] might have happened" but what is conceivable "falls short of plausible" which is required for establishing antitrust injury at the pleadings stage.  "[I]t only takes one valid, infringed patent to render all the rest—whether invalid, infringed, or not—irrelevant for purposes of cause-in-fact analysis," according to the opinion. And further, "[i]f the reason the biosimilar manufacturers could not make it to market was that AbbVie had a patent that prevented them from doing so, it was the patent—and not AbbVie's other conduct—that was the but-for cause of the monopoly prices."

The Court finds Plaintiffs' allegations of patent invalidity to be inadequate because AbbVie needed to be able to assert but one not invalid, infringed patent to avoid antitrust liability.  The Court also considered the temporal aspects affecting competition, because "litigation takes time" and for "complex patent portfolios, it can take a lot of time."  And the timing of litigation between AbbVie and the different biosimilar applicants was not consistent with (and is frankly speculative about) earlier market entry than January 2023 under the settlement agreements that Plaintiffs' allege are anticompetitive.

The Court concludes this section of its opinion by stating:

Antitrust injury is a prerequisite for all of plaintiffs' federal antitrust claims against not only AbbVie but also defendants Amgen, Samsung Bioepis, and Sandoz.  Because plaintiffs have failed to plausibly allege that the but-for cause of Humira's monopoly prices was the biosimilar manufacturers' failure to pursue infringement litigation to its conclusion, AbbVie's unlawful assertion of its patent thicket, or the biosimilar manufacturers' failure to use the leverage that they apparently didn't know they had to reach an agreement to enter the market sooner than they did, all of the federal antitrust claims in the complaint fail.

The  Court then applied the same reasoning to the state law-based Counts and found them similarly lacking, based on the parties' acquiescence that if the Federal law claims are dismissed the state law claims should be as well.  And finally, the Court dismissed Count VII as to "unconscionable and unfair" conduct for failure to give adequate notice of the claim absent the antitrust allegations that the Court considered inadequate.

The interplay between patent law and antitrust law is complex (see, e.g., Antitrust Issues in Intellectual Property Law).  There has been a great deal of angst and upset regarding the Court's decision to dismiss, based on a concern that dismissal puts the Court's imprimatur on AbbVie's strategic behavior (no matter what one may think about it), and that this will chill biosimilar entry.  These sentiments, while perhaps understandable, ignore the outcome:  more than half a dozen biosimilar applicants will bring their biosimilar Humira to market many years earlier than would have happened had the parties engaged in multiple litigations over multiple rounds of the patent dance as provided by the statute.  What Judge Shah's decision means is that antitrust law has established standards in the pharmaceutical context for what constitutes antitrust behavior that can be applied without resource, as here, to novel theories of antitrust liability.  By dismissing without prejudice the Court has given the Plaintiffs an opportunity to bring their case according to these standards.  Whether doing so will promote the cause and goals of bringing biosimilar drugs to market more quickly is less certain.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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