The Interplay: Key Decisions at the Intersection of Antitrust & Life Sciences - May 2024

The Interplay: Key Decisions at the Intersection of Antitrust & Life Sciences - May 2024

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Second Circuit Affirms “Pay for Delay” Dismissal:  On May 13, 2024, the Second Circuit affirmed dismissal of antitrust claims brought by wholesalers, retailers, and employee benefit funds that alleged they overpaid for the hypertension drug Bystolic as a result of patent settlements between Forest Laboratories and generic makers. This is the first time that the Second Circuit has considered a claim under the Supreme Court’s 2013 Actavis decision, which found that patent infringement settlements between branded and generic drug suppliers can violate antitrust law in some circumstances. The panel wrote, “Plaintiffs do not plausibly allege that Forest’s reverse payments were sham and pretextual rather than payments that constituted fair value for goods and services obtained as a result of arms-length dealings.” The court added that “plaintiffs fail to plausibly allege that Forest made an ‘unjustified’ reverse payment under Actavis to any of the generic defendants,” observing that payments must be large and unjustified and aimed at keeping generics off the market to violate antitrust law. The Second Circuit noted that Actavis is “not self-reading” and interpreted it to provide only general principles to help determine whether payments made by branded drug manufacturers violate antitrust law. In following these general principles, the Second Circuit first considered whether the settlements were justified as reflecting the fair value for goods and services the generic supplier provided and, after determining that the payments were justified, determined they were therefore not made “to bring about anticompetitive harm.” This suggests a reading of Actavis that may apply less scrutiny to payments that are not clearly made to keep competitive drugs from the market. The case is In re Bystolic Antitrust Litigation, Case No. 23-410 (2d Cir. Mar. 20, 2023).

District Court Denies Motion to Dismiss Monopolization Claim Based on “Improper” Orange Book listing:  On May 24, 2024, a court in the District of Delaware denied a motion to dismiss antitrust counterclaims brought by Avadel CNS Pharmaceutical, Inc. (Avadel) against Jazz Pharmaceutical Inc. (Jazz). Avadel alleged that Jazz, the maker of ZYREM, improperly listed a patent in the FDA’s Orange Book and, as a result, Jazz was able to delay entry of Avadel’s competing drug, LUMRYZ, by asserting that patent in a subsequent patent suit against Avadel. By listing the patent, Jazz’s patent claim triggered an automatic stay of FDA approval for LUMRYZ under the Hatch-Waxman Act. Jazz maintained that it had a “reasonable basis” for listing the patent. Following precedent set by the Second Circuit in United Food and Com. Workers Local 1776 & Participating Emps. Health and Welfare Fund v. Takeda Pharm. Co. Ltd., 11 F.4th 118 (2d Cir. 2021), however, the court held that an antitrust plaintiff need not allege the defendant “lacked a reasonable basis” for the listing, siding with Avadel’s argument that Jazz would bear the burden as part of an affirmative defense to show it had a reasonable basis to list and acted in good faith. The court went on to hold that Avadel’s allegations would have established that Jazz had no reasonable basis for the listing in any event because the patent, as a “system” patent, was not within the scope of what may be listed in the Orange Book. The court also held that while Jazz’s subsequent patent infringement claim based on the patent was petitioning activity entitled to Noerr-Pennington immunity, the alleged “fraudulent listing” of the patent “followed by lawsuits seeking to exploit that listing for a competitive advantage” fell within the scope of the sham litigation exception to Noerr-Pennington. The case is Jazz Pharmaceuticals, Inc. v. Avadel CNS Pharmaceuticals, LLC, Civ. A. No. 22-941-GBW (D. Del. May 24, 2024). 

Senator Urges Probe of Health Insurance Data Company:  On April 29, 2024, Senator Amy Klobuchar (D-MN) wrote to Assistant Attorney General for the Antitrust Division Jonathan Kanter and Federal Trade Commission Chair Lina Khan urging them to investigate MultiPlan, Inc., a company that aggregates and sells data to health insurance companies. Senator Klobuchar wrote, “I am concerned that—rather than competing for business from employers by reducing these costs to employees—algorithmic tools are processing data gathered across numerous competitors to subvert competition among insurance companies.” Several private plaintiffs have recently initiated claims against MultiPlan and various insurers alleging conspiracies to suppress reimbursements for out-of-network healthcare costs using MultiPlan’s algorithm. See Allegiance Health Management, Inc. v. MultiPlan, Inc., et al., 1:24-cv-03223 (N.D. Ill. Apr. 22, 2024); Live Well Chiropractic PLLC v. MultiPlan, Inc., et al., 1:24-cv-03680 (N. D. Ill. May 6, 2024). Senator Klobuchar also referenced her recently-introduced Preventing Algorithmic Collusion Act aimed at prosecuting anticompetitive behavior that is accomplished through algorithms. Moreover, DOJ and the FTC have filed several statements of interest in private litigations arguing that it can be per se unlawful for competitors “knowingly [to] combin[e] their sensitive, nonpublic pricing and supply information in an algorithm they rely upon in making pricing decisions, with the knowledge and expectation that other competitors will do the same.” Statement of Interest, Dkt. No. 627, at 2, In re RealPage, Inc., Rental Software Antitrust Litigation, No. 3:23-MD-3071 (M.D. Tenn. Nov. 15, 2023).

Antitrust Division Creates Task Force to Target Healthcare Monopoly and Collusion:  On May 9, 2024, DOJ announced that it had created the “Task Force on Health Care Monopolies and Collusion.” Assistant Attorney General Kanter said that DOJ is “upping our game” regarding healthcare enforcement in line with the Biden administration’s “whole of government approach” to antitrust. DOJ created the Task Force to ensure that it has the resources required to focus adequately on healthcare-related antitrust issues and “bring together civil and criminal prosecutors, economists, health care industry experts” and other professionals “to identify and address pressing antitrust problems in healthcare markets.”

Ex-Sandoz Executive Sentenced To 1 Year Probation:  On May 15, 2024, a court in the Eastern District of Pennsylvania approved a joint request by prosecutors and ex-Sandoz Pharmaceuticals executive Hector Armando Kellum that Mr. Kellum receive a one-year probation sentence to resolve the generic drug price-fixing case against him. The court cited Kellum’s cooperation with the government’s investigation into a larger conspiracy. Kellum had pled guilty in 2020 to one count of conspiracy to restrain trade through a scheme to “fix prices, rig bids, and allocate customers for generic drugs.” Kellum was the fourth executive charged in the government’s criminal probe. DOJ alleged that between 2013 and 2015, and while an executive at Sandoz, Kellum conspired with competitors to allocate customers, agreed with competitors to exchange “specific non-public prices,” and discussed the timing of, and agreed to with competitors, upcoming price increases relating to products that include skin treatments and nystatin triamcinolone cream.

Court Rejects Class Certification in Express Scripts Litigation:  On April 29, 2024, a court in the Northern District of Illinois ruled that plaintiffs were unable to meet their predominance burden as a class in their suit against Mallinckrodt and Express Scripts relating to alleged over-payments for the anti-seizure medication, Acthar. The Court concluded that the models that MSP Recovery Claims’ economist presented lacked “empirical validation” and were “fundamentally unreasoned.” The Court faulted the expert for (i) “fail[ing] to identify any of the conditional assumptions” underlying his but-for price assumption based on an 8% yearly increase from a 2006 Mallinckrodt planning document and (ii) failing to justify his benchmarking of Acthar against the BLS PPI for a broad range of drugs without analyzing whether those drugs bore any similarity to Acthar. The court granted Express Script’s motion to exclude the expert’s testimony, the only evidence addressing damages common to the class. Having rejected Magnum’s models, the court ruled that individual damages calculations would “overwhelm questions common to the class” and that class certification would therefore be improper. The case is MSP Recovery Claims, Series LLC et al. v. Mallinckrodt Ard Inc., et al., 20-cv-50056 (N.D. Ill. Apr. 26, 2024).


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