A Pennsylvania federal judge on Monday said the generic-drug manufacturers accused of accepting $300 million from Cephalon Inc. to delay generic versions of narcolepsy drug Provigil won’t face a per se theory of liability at trial for allegedly knowing the patent was unenforceable, as they had no involvement in its procurement.
U.S. District Judge Mitchell S. Goldberg said that a liability theory suggesting Teva Pharmaceutical Industries Ltd., Mylan Inc. and other generic drug manufacturers knew that Cephalon’s Provigil patent was procured by fraud before agreeing through litigation settlements to delay generic versions cannot be used at trial in light of the U.S. Supreme Court’s “rule of reason” precedent set in Federal Trade Commission v. Actavis.
Using the high court’s guidance, Judge Goldberg said the plaintiff groups — which include drug retailers and end payors — could present evidence at trial suggesting the generic manufacturers may have known that Cephalon’s patent was “weak” or “unenforceable” to support their rule of reason claims. However, the judge explained, accepting the plaintiffs’ per se liability theory “would significantly undermine the public policies encouraging patent challenges, as well as settlement.”
“It is undisputed that the generic defendants had no involvement in the procurement of the patent, nor did they somehow conspire to enforce the patent by initiating the infringement lawsuit,” Judge Goldberg said. “Instead, they settled a lawsuit where they may have had knowledge of facts indicating fraud may have occurred. But, at the time the settlements at issue were reached, that knowledge had not yet been confirmed by a judgment.”
To accept the plaintiffs’ theory would require generics to choose between declining to raise potential defenses in drug patent litigation for fear of being sued for antitrust violations if a settlement is reached or raise the defenses and litigate the case to conclusion without considering a settlement, the judge concluded.
The antitrust litigation stems from a series of reverse payment settlements worth about $300 million that Cephalon reached with four generic-drug makers — Teva, Mylan, Ranbaxy Laboratories Ltd. and Barr Pharmaceuticals Inc. — in 2005 and 2006 to resolve patent infringement litigation over the blockbuster narcolepsy treatment. The generics companies all sought approval to market their own versions of the drug on the same day, meaning that all four were eligible for the initial 180-day exclusivity window granted to first filers under the Hatch-Waxman Act.
The FTC, Apotex Inc. and a slew of direct and indirect purchasers of the drug all sued to challenge the settlements, but the litigation dragged on amid a broader dispute over whether the pharmaceutical patent settlements could be challenged under federal antitrust law at all.
After the U.S. Supreme Court finally resolved that question in favor of the FTC in 2013, the Provigil case resumed.
The company, faced with the FTC's bid to force Teva to disgorge billions of dollars that the watchdog said amounted to ill-gotten profits from the settlements, inked a $512 million settlement with direct purchasers in April and then agreed to disgorge a total of $1.2 billion as part of a settlement with the FTC in May. Judge Goldberg denied a motion from the end-payor plaintiffs for class certification in the long-running multidistrict litigation in June.
Counsel for the parties didn’t immediately respond to requests for comment Tuesday evening.
Apotex is represented by Robert B. Breisblatt, Brian J. Sodikoff and Thomas J. Maas of Katten Muchin Rosenman LLP, James W. Matthews, Katy E. Koski and Redi Kasollja of Foley & Lardner LLP.
Walgreens is represented by Scott E. Perwin, Lauren C. Ravkind and Anna T. Neill ofKenny Nachwalter PA. CVS and Rite Aid are represented by Barry L. Refsin, Monica L. Rebuck and Hangley Aronchick Segal Pudlin & Schiller. Giant Eagle is represented by Bernard D. Marcus and Moira Cain-Mannix of Marcus & Shapira LLP, and Kevin Landau and Archana Tamoshunas of Taus Cebulash & Landau LLP.
Vista and other end payors are represented by Jeffrey L. Kodroff and John A. Macoretta of Spector Roseman Kodroff & Willis PC, Joseph H. Meltzer, Terence S. Ziegler and Casandra A. Murphy of Kessler Topaz Meltzer & Check LLP, and Kevin B. Love of Criden & Love PA.
Teva is represented by Stevens & Lee PC. Cephalon is represented by WilmerHale and Conrad O'Brien PC. Barr is represented by Kirkland & Ellis LLP and Montgomery McCracken Walker & Rhoads LLP. Ranbaxy is represented by Venable LLP. Mylan is represented by Akin Gump Strauss Hauer & Feld LLP.
The cases are Apotex Inc. v. Cephalon Inc. et al., case number 2:06-cv-02768; Vista Health Plan Inc. v. Cephalon Inc. et al., case number 2:06-cv-01833; and King Drug Co. of Florence Inc. v. Cephalon Inc. et al., case number 2:06-cv-01797, all in the U.S. District Court for the Eastern District of Pennsylvania.
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