Actos Pay-For-Delay Class Action Gets The Boot

Takeda and five generic-drug makers escaped a pay-for-delay suit over the diabetes drug Actos when a New York federal judge ruled Tuesday that drug buyers relied on too broad an interpretation of the U.S. Supreme Court's decision in Federal Trade Commission v. Actavis Inc.

In a 52-page order, U.S. District Judge Ronnie Abrams agreed with the defendants that the terms of patent-litigation settlements between Takeda Pharmaceutical Co. and the generics makers were not payments subject to antitrust scrutiny under the 2013 Actavis decision. That case concerned agreements by which generics makers allegedly would refrain from launching their own drugs in exchange for a share of Actavis’ monopoly profits.

But unlike the agreements in the Actavis case, Judge Abrams said, Takeda's merely provided early-entry licenses to generics companies. He said a finding for the plaintiffs would suggest that any and all settlements between a brand and a generic are potentially illegal — a result the Actavis court is unlikely to have intended.

“While some settlements of patent infringement suits may produce anticompetitive effects, yet be cleverly designed to evade antitrust scrutiny, not all settlements are illegal, nor — in the court's view — should they be,” Judge Abrams said. “Protecting against anticompetitive conduct is an important interest, but so too is the innovation the patent laws are intended to protect.”

He dismissed the case with prejudice, saying that the plaintiffs have amended the complaint three times and that further amendment is likely to be futile.

The plaintiffs, end-payors for the drug, had claimed in their consolidated putative class action that Takeda filed sham infringement suits against the generics companies, then persuaded them to drop their challenges to the Actos patents by promising the first three challengers that they could get early entry if any other generics entered the market before their negotiated 2012 entry date.

Takeda's drugs — Actos and Actoplus — together generated more than $3 billion in annual sales by 2011, according to the lawsuit.

The underlying patent litigation dates to October 2003, when Takeda sued Mylan Inc., Ranbaxy Inc. and Actavis — now Allergan PLC — in response to abbreviated new drug applications, claiming their generics would infringe its Actos patents.

The oldest of the patents, U.S. Patent No. 4,687,777, was set to expire in January 2011, and two follow-up patents, U.S. Patent Nos. 5,965,584 and 6,329,404, were set to expire in June 2016. The plaintiffs in the instant suit claimed the latter two patents were misleading because they contained ingredients that aren't in Actos — effectively creating a delay the plaintiffs said would improperly bar generics for an extra five years.

The judge first dealt with the '777 patent and Takeda won. It was granted more than $16.8 million in attorneys' fees and the decision was upheld in the Federal Circuit.

Takeda settled the disputes over the other two patents in March 2010, granting the three generics makers nonexclusive licenses to enter the market in August 2012.

Following those settlements, at least seven other generics manufacturers that had filed ANDAs for generic Actos settled with Takeda and allegedly agreed to delay their market entry until 180 days after Mylan, Ranbaxy and Allergan.

Takeda adopted a similar strategy with Actoplus, the plaintiffs said.

Steven Sunshine of Skadden Arps Slate Meagher & Flom LLP, representing generics maker Allergan, told Law360 on Wednesday that Allergan was pleased with the ruling. Takeda separately said it was happy with the decision.

The plaintiffs could not be reached for comment Wednesday.

Takeda is represented by Munger Tolles & Olson LLP. Teva is represented by Kirkland & Ellis LLP. Ranbaxy is represented by Morgan Lewis & Bockius LLP. Mylan is represented by Wilson Sonsini Goodrich & Rosati PC. Allergan is represented by Skadden Arps Slate Meagher & Flom LLP.

The plaintiffs are represented by Shepherd Finkelman Miller & Shah LLP, Hilliard & Shadowen LLP, Pomerantz LLP, Wexler Wallace LLP, Motley Rice LLC, Robbins Geller Rudman & Dowd LLP, Miller Law LLC, Cohen Milstein Sellers & Toll PLLC, Glancy Prongay & Murray LLP and Cohen Placitella & Roth PC, among others.

The case is In re: Actos End Payor Antitrust Litigation, case number 1:13-cv-09244, in the U.S. District Court for the Southern District of New York.

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