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United Food and Commercial Workers Unions and Employers Midwest Health Benefits Fund v. Novartis Pharmaceuticals Corp.

United States District Court, D. Massachusetts

June 30, 2017

NOVARTIS PHARMACEUTICALS CORP., NOVARTIS AG, and NOVARTIS CORPORATION, Defendants. AFSCME HEALTH AND WELFARE FUND, on behalf of themselves and others similarly situated, Plaintiff,
NOVARTIS PHARMACEUTICALS CORP., NOVARTIS AG, and NOVARTIS CORPORATION, Defendants. MINNESOTA LABORERS HEALTH AND WELFARE FUND, on behalf of themselves and others similarly situated, Plaintiff,
NOVARTIS PHARMACEUTICALS CORP., NOVARTIS AG, and NOVARTIS CORPORATION, Defendants. PENNSYLVANIA EMPLOYEES BENEFIT TRUST FUND, on behalf of themselves and others similarly situated, Plaintiff,




         In this putative class action, Laborers Health and Welfare Trust Fund for Northern California and Louisiana Health Service and Indemnity Company d/b/a Blue Cross and Blue Shield of Louisiana (“Plaintiffs”) bring state-law claims against Defendants Novartis Pharmaceuticals Corporation, Novartis AG, and Novartis Corporation (collectively, “Novartis”), on behalf of themselves and all others similarly situated, for engaging in an alleged “monopolistic scheme” in connection with Gleevec®, a brand-name prescription drug used to treat certain types of chronic myeloid leukemia and acute lymphoblastic leukemia. Specifically, Plaintiffs allege that Novartis, which held the patent rights to Gleevec, engaged in illegal, anticompetitive conduct designed to delay the entry of generic forms of the drug into the U.S. market. Presently before the Court is Novartis' Motion to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1) [ECF No. 111] and End Payer Plaintiffs' Motion for a Rule 26(f) Conference [ECF No. 135]. For the reasons set forth below, the motion to dismiss is GRANTED, and the motion for a conference is DENIED.


         Plaintiffs filed their original Class Action Complaint on June 22, 2015, seeking only declaratory and injunctive relief under federal antitrust law. [ECF No. 1]. In July and August 2015, Novartis filed motions to dismiss. [ECF Nos. 53, 60]. On February 1, 2016, while the motions were pending, a generic form of Gleevec was introduced into the market, thus mooting the request for injunctive relief. On March 24, 2016, the Court denied the motions to dismiss as moot and gave Plaintiffs leave to amend their complaint. [ECF No. 104]. In addition, the Court consolidated the action for pretrial purposes with four other cases involving similar claims against Novartis. On April 8, 2016, Plaintiffs filed the operative Consolidated Amended Class Action Complaint (“CAC”). [ECF No. 105]. The parties stipulated that the CAC would supersede all other complaints filed by any plaintiff in any of the consolidated actions. In contrast to the original complaint, the CAC does not contain any claims arising out of federal antitrust law; instead, it asserts only state-law antitrust and unfair trade practices claims, under the laws of 23 states and the District of Columbia. This Court appears to have diversity jurisdiction pursuant to 28 U.S.C. § 1332.

         On May 10, 2016, Novartis filed a motion to dismiss for failure to state a claim and lack of jurisdiction [ECF Nos. 111, 112] and a supporting declaration [ECF No. 113]. Plaintiffs opposed the motion [ECF No. 120] and Novartis filed a reply [ECF No. 121]. On August 1, 2016, the Court held a hearing on the motion. [ECF No. 126].


         The CAC alleges a single claim for relief on behalf of the putative class-that Novartis' conduct amounted to “monopolization and [a] monopolistic scheme” in violation of the laws of 23 states and the District of Columbia. Specifically, Plaintiffs allege that Novartis “engaged in an exclusionary, anticompetitive scheme designed to create and maintain a monopoly for Gleevec and its generic substitutes, ” and that “as part of this scheme, Novartis: (1) [w]ith intent to mislead or deceive, failed to disclose to the PTO [U.S. Patent and Trademark Office] material information known to it and made material misrepresentations to the PTO, but for which the ‘051 patent would not have issued; (2) [i]mproperly listed the ‘051, ‘799, and RE'923 patents in the Orange Book; and (3) [p]rosecuted sham patent litigation lawsuits against generic manufacturers.” Plaintiffs further allege that at all relevant times, Novartis intended to, and did, maintain and extend its monopoly power, which allowed it to continue charging supra-competitive prices for Gleevec without a substantial loss in sales, and that as a direct and proximate result of this conduct, Plaintiffs and other members of the putative class were injured, in that they paid more for the drug than they would have if a generic had been allowed onto the market.

         The following facts are derived from the CAC unless otherwise noted.

         A. Prosecution of the Polymorph Patents

         Defendant Novartis Pharmaceuticals Corporation (a subsidiary of Defendant Novartis AG), with FDA approval, markets and distributes Gleevec in the United States. Defendant Novartis Corporation is the assignee of U.S. Patent No. 5, 521, 184 (“the ‘184 Patent”), which is the basic compound patent claiming Gleevec's active ingredient, commonly known as “imatinib.” In addition to claiming the imatinib compound in its “free base” form, the ‘184 Patent also claims certain “salts” of the imatinib compound and their use as tumor-inhibiting agents.[1] The ‘184 Patent issued on May 28, 1996, and expired on July 4, 2015.

         Prior to the expiration of the ‘184 Patent, Novartis obtained two follow-on patents that claim particular crystalline (“polymorphic”) “non-needle” forms of the mesylate salt of imatinib:[2] (1) U.S. Patent No. 6, 894, 051 (“the ‘051 Patent”) issued on May 17, 2005, and (2) U.S. Patent No. 7, 554, 799 (“the ‘799 Patent) issued on June 9, 2009, which was subsequently surrendered and reissued as RE43'932 (“the RE'932 Patent”)[3] (collectively, the “Polymorph Patents”). The CAC alleges that the Polymorph Patents are invalid, although Plaintiffs do not contest the validity of the original ‘184 Patent.

         The application for the ‘051 Patent, filed in January 2000, purported to disclose and claim the methanesulfonate salt of imatinib, along with a particular polymorphism-namely, the non-needle form, which Novartis referred to as the “β-crystalline” form.[4] In September 2000, the patent examiner issued a non-final rejection of Novartis' claims, concluding that the claims were both anticipated and rendered obvious by the ‘184 Patent. Specifically, the examiner rejected the claims as anticipated by the ‘184 Patent's disclosure of the “free form” of imatinib and a “list of intended salts, including the methanesulfonate [mesylate] salt.” She also held that the burden was on the applicant to show that the claimed β-crystalline form would not be inherently produced using routine procedures described in the ‘184 Patent. Although Novartis responded to the examiner's rejections, the examiner nonetheless issued a final office action on July 5, 2001 in which she found that Novartis' patent claims were anticipated and rendered obvious by the ‘184 Patent.

         Novartis appealed this rejection to the Patent Board. On November 24, 2003, the Patent Board reversed the examiner's decision. The Patent Board's decision assumed, without deciding, that the original ‘184 Patent described the mesylate salt of imatinib. The Patent Board nevertheless held that the ‘184 Patent “contains insufficient disclosure to support a finding of anticipation of the appealed claims which recite a non-hygroscopic or β-crystalline form of the methanesulfonic acid addition [mesylate] salt of imatinib.” See Declaration of Wyley S. Proctor [ECF No. 113] (“Proctor Decl.”), Ex. D.[5] Further, the Patent Board held that the examiner had erred in shifting the burden of persuasion to Novartis “to establish that the β-crystalline form recited in their claims ‘cannot be made following routine conditions.'” Id. This, the Patent Board explained, was reversible error, because “before an applicant can be put to this burdensome task, the examiner must provide some evidence or scientific reasoning to establish the reasonableness of the examiner's belief that the functional limitation is an inherent characteristic of the prior art.” Id. (internal quotations and citation omitted). Because no such evidence or reasoning appeared in the record, the Patent Board reversed the examiner's rejections based on anticipation.

         Similarly, the Patent Board reversed the examiner's rejections based on obviousness. Again, the Patent Board assumed, arguendo, that the ‘184 Patent described the mesylate salt of imatinib. Id. The Patent Board, however, disagreed with the examiner that this disclosure would render obvious the claims in the ‘051 Patent. The Board found that the examiner had not adequately explained how a person having ordinary skill in the art “would have been led from ‘here to there, ' i.e., from the methanesulfonic acid addition [mesylate] salt of imatinib to the . . . β-crystalline form of that compound recited in the appealed claims.” Id.; see also CAC ¶ 244.

         On December 31, 2003, six weeks after the Patent Board reversed the examiner's rejections and without conducting any further proceedings, the examiner issued a notice of allowance.[6] Plaintiffs allege that the file wrapper reflects no further developments to the record following the Board's decision, except a notice that the patent term would be extended by 311 days due to the pendency of the appeal to the Board. In Plaintiffs' view, the Board's decision was based on an incomplete prior art record and that the examiner's subsequent decision allowing the patent to issue was not on the merits.

         The CAC alleges that Novartis specifically withheld five prior art references- publications by its own scientists-that disclosed the earlier use of the mesylate salt form of imatinib to inhibit the growth of tumor cells:

(1) A 1996 article published in Cancer Research by Novartis scientists Buchdunger, Zimmerman, Lydon, Druker, and others entitled “Inhibition of the Ab1 Protein-Tyrosine Kinase in vitro and in vivo by a 2-Phenylaminopyrimidine Derivative.” The article allegedly disclosed that the scientists had made a series of compounds that inhibited tyrosine kinases, and described a single compound (imatinib) that showed potent inhibition of the Abl kinase associated with chronic myeloid leukemia. The article explained that the scientists had also synthesized a methanesulfonate salt form of the compound, and that they did so well before the article was submitted on July 31, 1995. The Court will refer to this article as the “1996 Buchdunger Article.” See CAC ¶¶ 159-64.
(2) A 1997 article published in Bioorganic & Medicinal Chemistry Letters by Zimmerman, Buchdunger, and others from Novartis' Oncology Research Department, entitled “Potent and Selective Inhibitors of the Abl-Kinase: Phenylamino-Pyrimidine (PAP) Derivatives.” The article, which was submitted on August 21, 1996, described development and optimization of a new class of phenylamino-pyramidine derivatives that yielded highly potent and selective Bcr-Abl kinase inhibitors. The article advised that in one particular series of the PAP derivatives, “improvement of the aqueous solubility can be accomplished by attachment of a salt forming group on the indole side chain.” Thus, the article suggested that the compound might be a development candidate for use in treatment of certain leukemias. The Court will refer to this article as the “1997 Zimmerman Article.See id. ¶¶ 178-80.
(3) A 1996 Article published in Nature Medicine by Druker, Buchdunger, Zimmerman, Lydon, and others entitled “Effects of a Selective Inhibitor of the Abl Tyrosine Kinase on the Growth of Bcr-Ab1 Positive Cells.” The article allegedly detailed the design of imatinib and its effect of selectively inhibiting proliferation of Bcr-Abl expressing cells in vitro and in vivo. The Court will refer to this article as the “1996 Druker Article.” See id. ¶ 172.
(4) A 1995 presentation that Druker gave at the American Society of Hematology's annual meeting in Seattle, entitled “Preclinical evaluation of a selective inhibitor of the Abl tyrosine kinase as a therapeutical agent for chronic myelogenous leukemia.” The presentation abstract allegedly disclosed the imatinib compound as a potent and specific inhibitor of the ABL protein tyrosine kinase, and concluded that the compound may be useful in the treatment of certain leukemias. The Court will refer to this as the “1995 Druker Presentation.” See id. ¶¶ 157-58.
(5) A 1996 Article published in Bioorganic & Medicinal Chemistry Letters by Zimmerman, Buchdunger, Lydon, and others entitled “Phenylamino-Pyrimidine (PAP) - Derivatives: A New Class of Potent and Highly Selective PDGF-Receptor Autophosphorylation Inhibitors.” In that article, Zimmerman noted that the phenylamino-pyramidine compounds at issue “show poor solubility in water . . . but are soluble under acidic conditions.” In a footnote, the authors described a “typical synthesis” of the compounds, which involved filtration, evaporation, and crystallization. The Court will refer to this as the “1996 Zimmerman Article.” See id. ¶¶ 165-67.

         On March 26, 2004, Novartis submitted a Continued Prosecution Application Request and a supplemental Information Disclosure Statement (“IDS”) that disclosed, for the first time, two of these prior art references (the 1996 Buchdunger Article and 1997 Zimmerman Article). See id. ¶ 252. Other prior art-the 1995 Druker Presentation, 1996 Zimmerman Article, and 1996 Druker Article-was allegedly never disclosed. Id. ¶¶ 252, 271, 272. Along with the IDS, Novartis filed “remarks, ” in which it argued that because the Patent Board had presumed that the mesylate salt of imatinib was described in the prior art, yet still reversed the examiner's rejections, principles of res judicata required that the patent claims be allowed, even assuming that the prior art disclosed the mesylate salt. Id. ¶ 253; Proctor Decl. Ex. G.

         Plaintiffs further allege that during the prosecution of the ‘051 Patent before the PTO, Novartis made intentional false statements and material omissions, including

(i) misrepresenting that the mesylate salt of imatinib was not actually prepared in Zimmermann [the ‘184 Patent], (ii) misrepresenting that obviousness and anticipation depend on whether the salt form compound was actually made in Zimmermann [the ‘184 Patent] (when the relevant question is whether its preparation is within the knowledge of those of ordinary skill in light of Zimmerman [the ‘184 Patent]), (iii) failing to disclose that the specific salt, imatinib mesylate, had been publicly disclosed in publications authored by Novartis's own scientists, (iv) withholding relevant prior art until after the PTO sent a notice of allowability, thereby failing to disclose information material to patentability during the prosecution of the patent, (v) misrepresenting, when it did finally disclose some material prior art, that the Board had already decided that prior art disclosing the mesylate salt form would not invalidate the patent (when the Board did not consider whether other prior art disclosed the mesylate salt, in part because Novartis had not provided the relevant prior art).

CAC ¶ 265.

         Plaintiffs additionally claim that Novartis misrepresented in its patent application that the non-needle, β-crystalline form of imatinib mesylate was a recent and “surprising” discovery when, in fact, Novartis scientists had been using the β-crystalline form since August 1993 and anyone skilled in the art would have been both motivated and easily able to formulate a non-needle, crystalline form using routine laboratory procedures.

         The PTO ultimately issued the '051 Patent on May 17, 2005. In 2006, Novartis filed and obtained the second follow-on patent, the ‘799 Patent, which purportedly disclosed the methanesulfonate salt of imatinib and its β-crystalline form. According to Plaintiffs, parts of the ‘799 Patent application were identical to the ‘051 Patent application. Novartis again stated that it was “surprised” to find the β-crystalline form in the methanesulfonate salt of the compound, even though the form had been known to have advantageous properties since July 31, 1995 and was the basis of the ‘051 Patent. Plaintiffs allege that the ‘799 Patent was broader than the ‘051 Patent, which claimed the β-crystalline form, because the ‘799 Patent ultimately also claimed the non-needle crystal of imatinib mesylate. The ‘799 Patent eventually issued on June 9, 2009. Plaintiffs argue that it is invalid for the same reasons that the ‘051 Patent is invalid. The ‘799 Patent was eventually reissued as the RE'932 Patent.

         B. The Orange Book Listing

         The Orange Book lists FDA-approved drug products along with the corresponding patents that cover the drugs. One objective of the Orange Book is to provide would-be generic manufacturers with notice of any patent rights that are implicated by a brand-name drug. The information published in the Orange Book, however, is based on drug manufacturers' submissions and representations to the FDA. The FDA does not independently determine whether a particular drug product actually reads on a particular patent claim, and it does not examine the asserted patents to ensure their validity.[7]

         Novartis submitted all three patents-the original ‘184 Patent, the ‘051 Patent, and the ‘799 Patent-to the FDA to be listed in the Orange Book as covering Gleevec. CAC ¶ 295. Plaintiffs allege that Novartis did so knowing that the Polymorph Patents had “no realistic likelihood” of ever being able to stand up in court as valid patents, and that those patents would pose an impediment to the launch of generic imatinib mesylate. Id.

         C. Litigation and Settlement Between Sun ...

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