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Picone v. Shire PLC

United States District Court, D. Massachusetts

October 20, 2017

TINA PICONE, et al., individually and on behalf of all others similarly situated, Plaintiffs,
v.
SHIRE PLC, SHIRE, LLC, SHIRE U.S., INC., ACTAVIS ELIZABETH LLC, ACTAVIS HOLDCO US, INC., and ACTAVIS LLC, Defendants.

          AMENDED MEMORANDUM AND ORDER ON MOTIONS TO DISMISS

          ALLISON D. BURROUGHS, U.S. DISTRICT JUDGE

         Plaintiffs Tina Picone, Sherry Cummisford, Carmen Richard, and Shana Wright, individually and on behalf of all others similarly situated as consumer indirect purchasers (“IPPs”) of the pharmaceutical drug Intuniv, allege violations of federal and state antitrust laws and state consumer protection statutes against Defendants Shire, LLC and Shire U.S., Inc. (“Shire”), and Actavis Elizabeth LLC and Actavis Holdco US, Inc. (“Actavis”) (collectively, “Defendants”). Currently pending before the Court are Shire's and Actavis's separate motions to dismiss for failure to state a claim. [ECF Nos. 51, 54]. For the reasons stated below, the motions are GRANTED in part and DENIED in part.

         I. PROCEDURAL BACKGROUND

         On November 23, 2016, the IPPs filed their first complaint. [ECF No. 1]. Following the Court's allowance of a motion for consolidation [ECF Nos. 26, 32], they filed a Consolidated and Amended Class Action Complaint (“CAC”). [ECF No. 39]. On April 10 and April 11, 2017, Defendants moved separately to dismiss the CAC [ECF Nos. 51, 54]. On July 20, 2017, the Court held a hearing on the motions to dismiss in both the instant action and the related action, FWK Holdings LLC v. Shire PLC et al., No. 16-cv-12653. [ECF No. 78].

         II. ALLEGATIONS IN THE COMPLAINT

         The CAC is 100 pages long and consists of 508 paragraphs. Accordingly, the Court provides only an abbreviated overview here, with additional facts included in the analysis as needed.

         A. Intuniv

         Shire manufacturers and sells Intuniv, which is a branded, once-daily, extended-release formulation of the prescription medication guanfacine hydrochloride, generally prescribed for young patients to treat attention deficit hyperactivity disorder. CAC ¶ 1. On September 2, 2009, the Food and Drug Administration (“FDA”) approved Shire's New Drug Application (“NDA”) for Intuniv, pursuant to 21 U.S.C. § 355, et seq. Id. ¶ 2. An NDA discloses any patents that claim the new drug, and, if approved, the manufacturer must list these patents in the FDA publication known as the “Orange Book.” See In re Loestrin 24 Fe Antitrust Litig., 814 F.3d 538, 542 (1st Cir. 2016). During the relevant time period, Shire held three patents covering Intuniv: U.S. Patent No. 5, 854, 290 (‘290 Patent), which was a method-of-use patent, and U.S. Patent Nos. 6, 287, 599 (‘599 Patent) and 6, 811, 794 (‘794 Patent) (collectively, the “Intuniv Patents”), which covered the sustained release coating allowing for the extended release of the active ingredients. CAC ¶¶ 45, 50. The IPPs assert that these sorts of patents, which do not cover the active pharmaceutical ingredient, “have a high rate of being found invalid or not infringed.” Id. ¶ 47. According to the CAC, Wall Street analysts, generic pharmaceutical companies, and Shire itself considered the Intuniv Patents to be “weak.” Id. ¶ 51.

         B. Intuniv Patent Litigation

         Under the Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585, commonly known as the Hatch-Waxman Act, a generic manufacturer may file an Abbreviated New Drug Application (“ANDA”) to seek approval of a proposed generic version of a brand drug. See 21 U.S.C. § 355(j). Obtaining approval for an ANDA is simpler than obtaining approval for an NDA. See In re Loestrin 24 Fe Antitrust Litig., 814 F.3d at 543. In filing an ANDA to obtain approval for a generic drug, a generic manufacturer must certify, in one of four ways specified by statute, that the generic does not infringe any of the patents that the brand company listed in the Orange Book. See 21 U.S.C. § 355(j)(2)(A)(vii). In a “Paragraph IV” certification, the ANDA filer certifies that the patent claiming the brand drug “is invalid or will not be infringed by the manufacture, use, or sale of the” proposed generic. Id. at § 355(j)(2)(A)(vii)(IV). This certification constitutes a constructive act of infringement, granting the brand company standing to sue the ANDA filer. See In re Loestrin 24 Fe Antitrust Litig., 814 F.3d at 543; 35 U.S.C. § 271(e)(2)(A). The brand company may initiate patent infringement litigation against the ANDA filer within 45 days after receiving notice of the certification. 21 U.S.C.§ 355(j)(5)(B)(iii). See In re Loestrin 24 Fe Antitrust Litig., 814 F.3d at 543. This litigation also triggers an automatic 30-month stay of FDA approval of the ANDA. Id.

         On December 29, 2009, Actavis was the first to file an ANDA to manufacture and sell a generic version of Intuniv, and included a Paragraph IV certification as to all three Intuniv patents. CAC ¶¶ 53-54. The first filer of an ANDA, if successful, “will receive a 180-day period of exclusivity during which ‘no other generic can compete with the brand-name drug.'” In re Loestrin 24 Fe Antitrust Litig., 814 F.3d at 543 (quoting FTC v. Actavis, 133 S.Ct. 2223, 2229 (2013)). See 21 U.S.C. § 355(j). One relevant exception, however, is that the brand company itself can market an “authorized generic” (“AG”) during this 180-day, first-filer exclusivity period.[1] See Sanofi-Aventis v. Apotex Inc., 659 F.3d 1171, 1175 (Fed. Cir. 2011) (“[T]he branded company may still market an authorized generic during this 180-day exclusivity period.”). See also Mylan Pharm., Inc. v. U.S. Food And Drug Admin., 454 F.3d 270, 271 (4th Cir. 2006) (holding that Hatch-Waxman Act “does not grant the FDA the power to prohibit the marketing of authorized generics during the 180-day exclusivity period”); Teva Pharm. Indus. Ltd. v. Crawford, 410 F.3d 51, 52 (D.C. Cir. 2005) (same).

         Shortly after Actavis filed its ANDA, TWi Phamaceuticals, Inc. (“TWi”) and Anchen Pharmaceuticals, Inc. (“Anchen”) (together, “Twi/Anchen”)[2] each filed ANDAs with Paragraph IV certifications on January 25, 2010 and January 28, 2010, respectively. CAC ¶¶ 56-57. Teva Pharmaceuticals, Inc. (“Teva”), Watson Pharmaceuticals, Impax Laboratories, Inc. (“Impax”), Mylan Pharmaceuticals, and Sandoz Inc. also filed ANDAs with Paragraph IV certifications in 2010 and 2011. Id. ¶¶ 57, 59.

         Shire initiated patent infringement litigation against each of the ANDA filers, which the IPPs contend amounted to sham litigation. Id. ¶¶ 1, 59. The CAC emphasizes parts of the litigation that purportedly revealed Shire's anticompetitive behavior and weak patents. For instance, on March 22, 2012, Shire dedicated the ‘290 Patent to the public shortly before it would have been required to make expert disclosures. Id. ¶ 62. With Actavis's support, Shire then moved to dismiss the ‘290 Patent claims without judgment. Id. ¶ 64. Nevertheless, on July 23, 2012, the court entered a judgment finding the ‘290 Patent invalid. Id. ¶ 66. The IPPs claim that Actavis's support of the motion for dismissal without judgment was the first step in an anticompetitive scheme, because without a judgment against the ‘290 patent, even if the second ANDA filer, TWi/Anchen, “achieved victory against Shire's ‘599 and ‘794 Patents (triggering Actavis's exclusivity as to those patents), it still could not have launched a generic Intuniv until 180 days after Actavis's launch because the ‘290 Patent's exclusivity would have still been in effect.” Id. ¶ 64.

         The IPPs further claim that Shire had a “weak litigation position” with respect to the ‘599 and ‘794 Patents, which were “formulation” patents that were generally at a higher risk of invalidation. Id. ¶ 68. In March 2012, in Shire's cases against TWi/Anchen and Impax, the courts issued claim construction orders that were unfavorable to Shire. Id. ¶ 69. In both instances, Shire moved for reconsideration but both motions were denied. Id. These examples are purportedly indicative of Shire's overall strategy to prolong litigation through “untimely expert disclosures, motions for discovery, and other litigation tactics” in order to maintain its monopoly. Id. ¶ 71.

         On or around September 4, 2012, Shire allegedly took a key step toward accomplishing its anticompetitive scheme by settling the Intuniv patent litigation with TWi/Anchen. Id. ¶¶ 72, 79. Upon information and belief, the settlement agreement made TWi/Anchen an AG distributor of Intuniv. Id. ¶ 78. On September 6, 2012, Shire issued a press release regarding the settlement, stating that Shire may authorize Twi/Anchen to sell an AG version of Intuniv, in exchange for which Shire would receive a “significant royalty.” Id. ¶ 77. TWi/Anchen also could market its own generic version of Intuniv beginning on July 1, 2016, “or earlier in certain limited circumstances.” Id. In the event that the first ANDA filer, Actavis, did not settle its patent litigation with Shire and released its own generic, Twi/Anchen could launch a Shire AG to compete with Actavis during its 180-day exclusivity period. Id. ¶ 78. These settlement terms allegedly gave Shire substantial leverage over Actavis. Id. ¶ 79. In short, even if Actavis prevailed over Shire in the pending litigation and began marketing its generic Intuniv, Twi/Anchen could launch the AG during Actavis's 180-day exclusivity period and cut into Actavis's profits. Id.

         Although Shire had settled with Twi/Anchen, litigation remained pending against Actavis and Teva. Id. ¶ 87. From September 17 through September 20, 2012, a bench trial was held as to the ‘599 and ‘794 Patents. Id. The IPPs allege that Wall Street analysts believed that the generic drug defendants were going to prevail. Id. ¶¶ 88, 91. However, Shire delayed the ruling following the bench trial by a “frivolous and non-substantive post-trial motions practice.” Id. ¶ 89.

         On or around April 25, 2013, Shire and Actavis accomplished another key step in implementing the anticompetitive scheme: they settled the patent litigation between them prior to the entry of a court decision. Id. ¶ 93. On April 25, 2013, Shire and Actavis entered into a Settlement Agreement, which also incorporated by reference a related License Agreement. [ECF No. 53-10]. That same day Shire and Actavis also issued press releases stating that Actavis could launch its own generic Intuniv on December 1, 2014 and would pay Shire 25% royalties on gross profits, which the IPPs assert was a commercially unreasonably low rate. Id. ¶ 96. Additionally, the IPPs claim that Shire agreed as part of the settlement not to launch an AG during Actavis's 180-day exclusivity period (a so-called “no-AG agreement”).[3] Id. ¶ 98.

         In sum, the IPPs assert that the no-AG agreement and the low royalty rates negotiated with TWi/Anchen and Actavis constitute unlawful “reverse payments” under FTC v. Actavis, 133 S.Ct. 2223 (2013). See id. at 2227 (generally describing a “‘reverse payment' settlement agreement” as one that “requires the patentee to pay the alleged infringer, rather than the other way around”). Moreover, absent Shire's assertion of the Intuniv Patents in sham litigation and the subsequent settlements, Actavis could have launched its generic starting on October 5, 2012, the day the FDA approved Actavis's ANDA (shortly after the 30-month stay expired). Id. ¶ 90. As a result of the anticompetitive scheme, however, Shire was able to prolong its Intuniv monopoly until December 1, 2014 and then shared in the monopoly profits with Actavis during Actavis's statutorily granted 180-day exclusivity period. Therefore, purchasers of Intuniv paid artificially inflated prices until at least December 1, 2014, and likely until July 2015, when other generics entered the market. Id. ¶ 10.

         C. Causes of Action

         The CAC asserts 25 causes of action under state law. In Counts 1-4, the IPPs allege, under Massachusetts law, (1) unreasonable restraint of trade against Shire and Actavis (premised on Section 1 of the Sherman Act); (2) unlawful monopoly against Shire (premised on Section 2 of the Sherman Act); (3) unlawful attempted monopolization against Shire (premised on Section 2 of the Sherman Act); and (4) unlawful conspiracy to monopolize against Shire and Actavis (premised on Section 2 of the Sherman Act). In Count 5, they allege a violation of the Massachusetts Consumer Protection Statute against Shire and Actavis (not premised on the Sherman Act).

         The remaining claims mirror those above, except they are brought under consumer protection and/or antitrust laws of Florida (Counts 6-10), Missouri (Counts 11-15), New York (Counts 16-20), and Wisconsin (Counts 21-25).

         III. LEGAL STANDARD

         On a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must accept as true all well-pleaded facts, analyze those facts in the light most hospitable to the plaintiff's theory, and draw all reasonable inferences from those facts in favor of the plaintiff. U.S. ex rel. Hutcheson v. Blackstone Med. Inc., 647 F.3d 377, 383 (1st Cir. 2011). In ruling on a motion under Rule 12(b)(6), the Court “must consider the complaint, documents annexed to it, and other materials fairly incorporated within it, ” which “sometimes includes documents referred to in the complaint but not annexed to it” and “matters that are susceptible to judicial notice.” Rodi v. S. New Eng. Sch. of Law., 389 F.3d 5, 12 (1st Cir. 2004).

         Although detailed factual allegations are not required, a complaint must set forth “more than labels and conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A “formulaic recitation of the elements of a cause of action” is not enough. Id. To avoid dismissal, a complaint must set forth “factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.” Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (internal quotations and citation omitted).

         Further, the facts alleged, when taken together, must be sufficient to “state a claim to relief that is plausible on its face.” A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013) (quoting Twombly 550 U.S. at 570). “The plausibility standard invites a two-step pavane.” Id. (quoting Grajales v. P.R. Ports Auth., 682 F.3d 40, 45 (1st Cir. 2012)). “At the first step, the court ‘must separate the complaint's factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited).'” Id. (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). “At the second step, the court must determine whether the remaining factual content allows a ‘reasonable inference that the defendant is liable for the misconduct alleged.'” Id. (quoting Morales-Cruz, 676 F.3d at 224). “Although not equivalent to a probability requirement, the plausibility standard asks for more than a sheer possibility that a defendant has acted unlawfully.” Boroian v. Mueller, 616 F.3d 60, 65 (1st Cir. 2010) (internal quotations and citation omitted). See also Sepulveda-Villarini v. Dep't of Educ. of P.R., 628 F.3d 25, 29 (1st Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) (“The make-or-break standard . . . is that the combined allegations, taken as true, must state a plausible, not a merely conceivable, case for relief.”).

         IV. DISCUSSION

         All but five of the IPPs' claims rely on two theories of antitrust liability premised on Sherman Act violations: first, that Shire engaged in sham litigation, and second, that Shire entered into illegal reverse payment settlement agreements with Actavis and non-party TWi/Anchen.[4] Under federal law, indirect purchasers cannot bring antitrust claims for damages under the Sherman Act. See Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). See also California v. ARC Am. Corp., 490 U.S. 93, 100 (1989) (“Under federal law, no indirect purchaser is entitled to sue for damages for a Sherman Act violation. . . .”). Following Illinois Brick, various states passed legislation granting indirect purchasers standing to sue under state antitrust laws. See Newberg on Class Actions § 20:12 (5th ed.). The Supreme Court has upheld the validity of such legislation. See ARC Am. Corp., 490 U.S. at 101. The remaining five claims (Counts 5, 10, 15, 20, and 25) are not premised on Sherman Act violations and instead allege violations of each applicable state's consumer protection or antitrust laws (Massachusetts, Florida, Missouri, New York, and Wisconsin, respectively).

         Shire argues that the IPPs failed to plausibly allege unlawful conduct or injury based on Shire's assertion of the ‘290 Patent during litigation. With respect to the reverse payment claims, the Defendants argue that, in light of the settlement documents, the IPPs' allegations fail to plead the existence of a no-AG agreement and that a royalty payment, whatever the size, is a lawful forward payment. Shire also asserts that the IPPs fail to adequately plead the value of the reverse payments in the Shire-TWi/Anchen settlement agreement.

         A. Elements of Violations of Sections 1 and 2 of the Sherman Act

         Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States.” See 15 U.S.C. § 1. See also In re Nexium (Esomeprazole) Antitrust Litig., 309 F.R.D. 107, 140 (D. Mass. 2015), as amended (Aug. 7, 2015), aff'd, 842 F.3d 34 (1st Cir. 2016). The First Circuit has explained:

There are two prerequisites for a successful section 1 claim. First, there must be concerted action. Second, the actors' agreement must involve either restrictions that are per se illegal or restraints of trade that fail scrutiny under the rule of reason.

Euromodas, Inc. v. Zanella, Ltd., 368 F.3d 11, 16 (1st Cir. 2004) (internal citations omitted).

         Under Section 2 of the Sherman Act, it is illegal to “monopolize, or attempt to monopolize . . . any part of the trade or commerce among the several States.” 15 U.S.C. § 2. To prove monopolization, a plaintiff must show “(1) possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” Diaz Aviation Corp. v. Airport Aviation Servs., Inc., 716 F.3d 256, 265 (1st Cir. 2013) (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)). To prove attempted monopolization, a plaintiff must show “(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power.” Id. (quoting Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993)). To prove conspiracy to monopolize, “a plaintiff must show: ‘(1) the existence of a conspiracy, (2) an overt act in furtherance of the conspiracy, and (3) specific intent to monopolize.'” Sterling Merch., Inc. v. Nestle, S.A., 724 F.Supp.2d 245, 273 (D.P.R. 2010), aff'd, 656 F.3d 112 (1st Cir. 2011) (quoting Dyno Nobel, Inc. v. Amotech Corp., 63 F.Supp.2d 140, 150 (D.P.R. 1999)).

         B. Sham Litigation

         i. Background Legal Principles

         The Noerr-Pennington doctrine, which arose in antitrust cases under the Sherman Act, holds that “[t]hose who petition government for redress are generally immune from antitrust liability.” Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 56 (1993) (hereinafter, “PRE”). Noerr-Pennington immunity extends to “petitioning” activities before the courts (i.e., litigation). See Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972). There are exceptions to Noerr-Pennington immunity, however, including when a defendant engages in sham litigation. See Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1071 (Fed. Cir. 1998).[5]

         In order to bring a sham litigation claim, a plaintiff must plausibly plead that the litigation was:

(1) ‘objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits'; and (2) subjectively motivated by a desire to ‘interfere directly with the business relationships of a competitor, through the use of the governmental process-as opposed to the outcome of that process-as an anticompetitive weapon.

In re Solodyn (Minocycline Hydrochloride) Antitrust Litig., No. 14-md-02503, 2015 WL 5458570, at *11 (D. Mass. Sept. 16, 2015) (quoting PRE, 508 U.S. at 60-61). “The existence of probable cause to institute legal proceedings precludes a finding that an antitrust defendant has engaged in sham litigation.” PRE, 508 U.S. at 62. Further, “[o]nly if challenged litigation is objectively ...


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