United States District Court, D. Massachusetts
MEMORANDUM AND ORDER
J. Casper, United States District Judge
Union 25 Health Services & Insurance Plan, NECA-IBEW
Welfare Trust Fund, United Food and Commercial Workers Unions
and Employers Midwest Health Benefits Fund, Wisconsin
Masons’ Health Care Fund, Minnesota Laborers Health and
Welfare Fund (collectively, “Health Fund
Plaintiffs”), and Mark Adorney (collectively,
“Plaintiffs”) bring this antitrust class action
on behalf of themselves and all others similarly situated
against Zydus Pharmaceuticals USA Inc. and Cadila Healthcare
Limited (collectively, “Zydus”), Allergan plc,
Allergan, Inc., Allergan USA, Inc., Allergan Sales, LLC, and
Warner Chilcott Limited (collectively, “Warner
Chilcott”) (collectively, “Defendants”).
Plaintiffs allege that Warner Chilcott’s product
hopping scheme and a reverse payment settlement agreement
between Warner Chilcott and Zydus constitute monopolization
(Count I) and combination and conspiracy in restraint of
trade (Count II), respectively, under various state laws. D.
has moved to dismiss Count II, D. 46, and the Warner Chilcott
has moved to dismiss the entire complaint, D. 47. Plaintiffs
have moved to strike materials attached in support of the
Warner Chilcott’s motion to dismiss. D. 56. The Court
ALLOWS Zydus’s motion to dismiss, ALLOWS IN PART and
DENIES IN PART Warner Chilcott’s motion to dismiss and
DENIES Plaintiffs’ motion to strike.
Standard of Review
motion to dismiss under Rule 12(b)(6), the Court must conduct
a two-step, context-specific inquiry.
García-Catalán v. United States, 734
F.3d 100, 103 (1st Cir. 2013). First, the Court must
distinguish the factual allegations from the conclusory legal
allegations. Id. Factual allegations are accepted as
true, while conclusory legal allegations are not.
Id. Second, the Court must determine whether the
factual allegations “plausibly narrate a claim for
relief.” Schatz v. Republican State Leadership
Comm., 669 F.3d 50, 55 (1st Cir. 2012).
“Plausible, of course, means something more than merely
possible, and gauging a pleaded situation’s
plausibility is a ‘context-specific’ job that
compels [the Court] ‘to draw on’ [its]
‘judicial experience and common sense.’”
Id. (quoting Ashcroft v. Iqbal, 556 U.S.
662, 679 (2009)).
otherwise noted, the following factual summary is based upon
the factual allegations in the amended complaint, D. 26, and
are accepted as true for the consideration of the
Defendants’ motions to dismiss.
Asacol, Asacol HD and Delzicol
colitis is a chronic inflammatory bowel disorder. D. 26
¶ 60. The most common treatment for ulcerative colitis
is a class of drugs that contain the active ingredient
mesalamine. Id. ¶ 62. Asacol, Asacol HD and
Delzicol are all ulcerative colitis treatments that contain
mesalamine. Id. ¶¶ 66, 72, 108.
the Federal Food, Drug and Cosmetic Act (“FDCA”),
a manufacturer must obtain approval from the Food and Drug
Administration (“FDA”) to sell any drug in the
United States. Id. ¶ 26. The manufacturer must
submit a new drug application so the FDA can determine
whether the drug is both safe and effective for its proposed
uses. Id. Once the FDA approves the drug,
manufacturers may protect the product by listing applicable
patents in the FDA’s “Orange Book, ” which
includes all FDA-approved prescription drugs, their approved
generic equivalents and any patents that purportedly protect
each drug. Id. ¶ 27.
January 1992, the FDA approved Asacol, a delayed-release oral
tablet containing 400 mg of mesalamine to treat mild to
moderately active ulcerative colitis. Id. ¶ 65.
Five years later, the FDA approved Asacol for the maintenance
of the remission of ulcerative colitis. Id. The
Orange Book lists two patents for Asacol, U.S. Patent Nos. 5,
541, 170 (“the ’170 patent”) and 5, 541,
171 (“the ’171 patent”). Id.
¶ 67. Both patents expired July 30, 2013. Id.
2008, the FDA approved Asacol HD, a delayed-release oral
tablet containing 800 mg of mesalamine to treat moderately
active ulcerative colitis. Id. ¶¶ 72-73.
Unlike Asacol, Asacol HD was not approved for mildly active
ulcerative colitis or the maintenance of remission of
ulcerative colitis. Id. ¶ 73. The Orange Book
lists two patents for Asacol HD, U.S. Patent Nos. 6, 893, 662
and 8, 580, 302. Id. ¶ 74. Both expire on
November 15, 2021. Id.
February 2013, the FDA approved Delzicol, a delayed-release
oral tablet containing 400 mg of mesalamine. Id.
¶¶ 108-11. The Orange Book lists U.S. Patent No. 6,
649, 180 (“the ’180 patent”) for Delzicol,
which expires on April 13, 2020. Id. ¶ 114.
Hatch-Waxman Regulatory Framework
1984, Congress enacted the Hatch-Waxman Act to facilitate
competition from low-price generic drugs. Id. ¶
31. Once the FDA has approved a brand-name drug, the
Hatch-Waxman Act allows a generic manufacturer to obtain
similar approval by filing an Abbreviated New Drug
Application (“ANDA”) specifying that the generic
has the same active ingredient and is bioequivalent to the
brand-name drug. Id. ¶ 32.
generic manufacturer must certify that it will not infringe
any of the patents listed in the Orange Book for the
brand-name drug. Id. ¶ 34. One possible basis
for non-infringement is known as Paragraph IV certification,
in which the generic manufacturer asserts that all applicable
patents are invalid or will not be infringed by the proposed
generic drug. Id. If the patent owner brings an
infringement suit within 45 days of receiving the Paragraph
IV notice, the FDA cannot approve the generic
manufacturer’s ANDA for 30 months, a time when parties
are supposed to litigate the infringement or validity of the
patent. 21 U.S.C. § 355(j)(5)(B)(iii). The Hatch-Waxman
Act bestows upon the first generic company that files an ANDA
with a Paragraph IV certification a 180-day period of
marketing exclusivity, during which no other generic can
compete. Id. § 355(j)(5)(B)(iv); see
D. 26 ¶ 52. The brand-name manufacturer, however, may
release an authorized generic version of its drug during the
exclusivity period. D. 26 ¶ 49. An authorized generic is
chemically identical to the brand-name drug but sold as a
generic product. Id.
allege that this case involves product hopping and a reverse
payment settlement agreement. Product hopping is the practice
of tweaking a brand-name drug to prevent pharmacists from
substituting a generic equivalent when presented with a
prescription for the newly modified brand-name drug.
Id. ¶ 45; see New York ex rel. Schneiderman
v. Actavis PLC (“Namenda”), 787
F.3d 638, 643 & n.2 (2d Cir. 2015) (stating that
“conduct by a monopolist to perpetuate patent
exclusivity through successive products” is
“commonly known as ‘product
hopping’”). To further product hopping, a
brand-name manufacturer often removes the original drug from
the market entirely, known as a “hard switch, ”
right before patent expiration to deprive potential generic
manufacturers a prescription base for their generic drugs. D.
26 ¶ 45; Namenda, 787 F.3d at 648. In a reverse
payment settlement agreement, a brand-name manufacturer who
holds a patent compensates a potential generic rival to delay
or abandon market entry and to abandon the challenge to the
brand manufacturer’s patent. D. 26 ¶ 51;
F.T.C. v. Actavis, Inc., __U.S.__, 133 S.Ct. 2223,
2227 (2013) (noting that such an agreement is known as
reverse payment settlement agreement because the settlement
“requires the patentee to pay the alleged infringer,
rather than the other way around”). Reverse payment
settlement agreement raise concerns because they
“insulat[e] the brand’s market from competition
and prevent consumers from accessing a more affordable
generic version of the brand-name drug.” In re
Loestrin 24 Fe Antitrust Litig., 814 F.3d 538, 544 (1st
Promotion of Asacol HD
allege that Warner Chilcott acquired Asacol and Asacol HD in
2009. D. 26 ¶ 77. That year, Asacol was the 75th
top-selling prescription in the United States, with sales of
approximately $490 million. Id. ¶ 78. Shortly
after the 2009 acquisition, Warner Chilcott sought to switch
patients from Asacol to Asacol HD before the ’170 and
’171 patents for Asacol expired, even though the drugs
did not treat the exact same issues. Id.
¶¶ 81-87. The biggest difference is that Asacol was
approved for low-dose, long-term maintenance of remission
therapy, which accounts for the bulk of its prescriptions,
while Asacol HD was approved only for the high-dose,
short-term treatment of the most severe flares. Id.
¶ 83. Warner Chilcott’s efforts to switch patients
to Asacol HD was remarkably successful. Id. ¶
97. In 2010, Asacol HD made up 9% of Warner Chilcott’s
total Asacol franchise sales. Id. By 2012, Asacol HD
sales constituted 28% of the company’s Asacol franchise
Citizen Petitions to Drive Up the Cost of Generic Entry
Chilcott also allegedly submitted multiple FDA citizen
petitions to make it harder for other companies to sell
generic Asacol. Id. ¶ 98. A citizen petition
allows a person or organization to express concerns to the
FDA about the safety, efficacy or legality of a proposed or
existing drug. Id. ¶ 99.
February 2010, Warner Chilcott submitted a citizen petition
that requested the FDA to require generic Asacol applicants
to submit comparative clinical endpoint studies, comparative
in vitro dissolution test, and comparative pharmacokinetic
safety testing as a condition to FDA approval. Id.
¶ 101. In August 2010, the FDA denied Warner
Chilcott’s request for clinical endpoint studies.
Id. ¶ 103. Two months later, Warner Chilcott
submitted another citizen’s petition. Id.
¶ 104. This petition requested that the FDA establish
heightened bioequivalency requirements for generic
competitors to Asacol and Asacol HD. Id. The FDA
denied this request as well; Warner Chilcott’s citizen
petitions were thus “largely unsuccessful.”
Id. ¶¶ 105-06.
Promotion of Delzicol and the Hard Switch
a concerted three-year effort to switch Asacol patients to
Asacol HD, Warner Chilcott realized that patients and
prescribers still preferred the original product because
Asacol still constituted nearly 72% of the sales of the
overall franchise in 2012. Id. ¶ 107.
2013, Warner Chilcott began selling Delzicol. Id.
¶ 108. That same year, a few months before the
expiration of Asacol’s patents in July 2013, Warner
Chilcott discontinued Asacol. Id. ¶ 144. Warner
Chilcott did so because it knew discontinuing Asacol would
weaken a generic drug’s ability to convert
Asacol’s market share. Id. ¶¶
144-49. Manufacturers of generics rely on state laws that
often require pharmacists to substitute an AB-rated generic
drug to the brand-name drug to gain market share.
Id. ¶ 147. An AB-rated generic drug is a
generic drug determined by the FDA to meet strict
bioequivalence testing standards that show it has the same
efficacy and safety profile as the brand drug. Id.
the FDA approval process, Warner Chilcott identified only two
differences between the drugs: (1) Delzicol consists of a
cellulose capsule around an Asacol tablet and (2) Delzicol
contains dibutyl sebacate (“DBS”) as an inactive
coating ingredient, while Asacol contains dibutyl phthalate
(“DBP”) instead. Id. ¶ 112. The
cellulose capsule is covered by the ’180 patent, which
does not expire until 2020. Id. ¶ 114.
allege that Warner Chilcott created Delzicol to further its
monopolization scheme. Id. ¶ 116. First, the FDA
approved Delzicol based on its bioequivalence to Asacol.
Id. ¶ 117. This eliminates the possibility that
the Delzicol capsule, which is triggering its patent
protection, makes Delzicol a medically superior product to
Asacol. Id. Second, the cellulose capsule dissolves
quickly in stomach acid. Id. ¶ 118. The capsule
thus provides no additional protection to the active drug
ingredients in Asacol, which is already covered in a coating
designed to protect the active drug ingredients from stomach
acid. Id. Third, Warner Chilcott did not need to
include the capsule in Delzicol to replace the DBP in Asacol
with DBS. Id. ¶ 119. Warner Chilcott currently
sells a DBP-free 400 mg Asacol tablet in the United Kingdom,
which shows how the capsule is an unnecessary modification.
Id. In fact, for many patients, the capsule has made
Delzicol more difficult to swallow than Asacol. Id.
also allege that Warner Chilcott’s purported concerns
about DBP in Asacol was simply a pretext to create Delzicol.
Id. ¶ 127. First, Warner Chilcott was not required
to remove Asacol from the market to remove DBP from the
product. Id. ¶ 134. Consistent with the
FDA’s recommendations, the company could have simply
removed the DBP from Asacol, replaced it with DBS, and then
submitted the necessary regulatory submissions to establish
that DBS was safe. Id. Instead, Warner Chilcott
chose to introduce a new patent-protected product while
simultaneously destroying the market for Asacol, which faced
imminent generic competition. Id.
the DBP concerns primarily applied to pregnant and nursing
women and young children. Id. ¶ 135. As of May
2010, Asacol’s label already recommended limited use by
pregnant and nursing women and warned that the safety and
effectiveness of Asacol for young children had not been
established. Id. Third, Warner Chilcott’s
subsidiary in Canada continued to sell Asacol and Asacol HD,
both of which contained DBP, to Canadians as of December 29,
2014. Id. ¶ 136. Had the company believed that
removing DBP resulted in a better product, it would have
introduced DBP-free versions of both drugs. Id.
concerns over DBP had been known since the 1990s.
Id. ¶ 137. Yet Warner Chilcott and its
predecessor released Asacol HD in 2008, which contains more
DBP than Asacol, despite these concerns. Id.
¶¶ 128, 137. Fifth, because of Asacol HD’s
higher DBP content, had Warner Chilcott truly been concerned
about DBP, it would have developed a replacement for Asacol
HD first. Id. ¶ 138. Sixth, Warner Chilcott
continued to give Asacol to children in pediatric trials as
last as March 2011. Id. ¶ 139. Seventh, had
Warner Chilcott been legitimately concerned about DBP, it
would not have aggressively sought to switch Asacol patients
to Asacol HD. Id. ¶ 140. Finally, Warner
Chilcott sought, and the FDA approved, Asacol for children on
October 18, 2013, after the company had removed Asacol
purportedly over its concerns about DBP. Id. ¶
after Delzicol’s release, doctors and patients have
quickly realized that Delzicol is essentially Asacol
surrounded by an unnecessary capsule. Id. ¶
122. Members of the public have made videos, posted pictures,
or written online about their frustration over the lack of
differences between the two. Id. ¶¶
Allergan plc acquired Warner Chilcott, Warner
Chilcott’s efforts to throttle generic competition
received praise during the merger. Id. ¶
163-64. Asacol HD and Delzicol had approximately $550 million
in sales in 2014. Id. ¶ 166.
The Settlement Agreement with Zydus and Allegations of a
Large and Unjustified Reverse Payment
September 2011, Zydus filed an ANDA seeking permission from
the FDA to sell a generic version of Asacol HD. Id.
¶ 170. Zydus filed a Paragraph IV certification, which
meant it intended to challenge the Asacol HD patents.
Id. After two years of litigation, Warner Chilcott
and Zydus announced a settlement agreement (“Settlement
Agreement”) in December 2013. Id. Zydus was
the first Paragraph IV filer, which meant it qualified for
the 180-day marketing exclusivity period under Hatch-Waxman.
the Settlement Agreement, Zydus has two options to sell a
generic Asacol HD. D. 53-1. Under the first option, Zydus can
enter the market with its own generic starting November 15,
2015 (or earlier under certain conditions) if Zydus receives
FDA approval of its ANDA. Id. at 10-11. In exchange,
Zydus would pay Warner Chilcott a 25% royalty of
Zydus’s net sales. Id. at 11. Warner Chilcott,
however, would maintain the option to supply an authorized
Asacol HD generic to its affiliates (but not third-parties)
during Zydus’s marketing exclusivity period.
Id. at 18; D. 26 ¶ 49.
the second option, if the FDA does not approve Zydus’s
ANDA, Zydus has the option to sell an authorized generic
version of Asacol HD from Warner Chilcott beginning July 2,
2016. D. 53-1 at 17. Warner Chilcott would be barred from
supplying an authorized generic to its affiliates or any
third party for two years. Id. at 18. In exchange,
Zydus would pay 75% of its profits to Warner Chilcott.