Interacting: Key Decisions at the Crossroads of Antitrust and Life Sciences – May 2024

2nd Circuit affirms ‘Pay for Late’ dismissal: On May 13, 2024, the Second Circuit upheld the dismissal of antitrust claims brought by wholesalers, retailers, and employee benefit funds alleging that they overpaid for the blood pressure drug Bystolic as a result of patent settlements between Forest Laboratories and generic drug manufacturers. This is the first time the Second Circuit has heard an appeal based on the Supreme Court’s 2013 ruling Actavis decision that found that patent infringement settlements between suppliers of branded and generic drugs may violate antitrust law in certain circumstances. The panel wrote: “Plaintiffs do not convincingly maintain that Forest’s reverse payments were specious and pretextual, rather than payments representing the fair value of goods and services obtained through an arm’s length transaction.” The court added that “plaintiffs do not convincingly allege that Forest made an ‘unreasonable’ reverse payment under s. Actavis to any of the defendant generic drug manufacturers,” noting that the payments must be large and unreasonable and intended to exclude generic drugs from the market, which constitutes a violation of antitrust law. The Second Circuit noted this Actavis is “not self-readable” and interpreted it as merely presenting general principles to help determine whether payments by brand-name drug makers violate antitrust law. Following these general principles, the Second Circuit first considered whether the settlements were reasonable as reflecting the fair value of the goods and services provided by the generic supplier and, after determining that the payments were reasonable, found that they were therefore not made “for the purpose of causing anticompetitive harm.” This suggests a reading of Actavis that may place less scrutiny on payments that are not expressly made to keep competing drugs out of the market. The case is this In the Bystolic antitrust caseCase No. 23-410 (2d Cir. March 20, 2023).

The District Court rejects the motion to dismiss the monopoly claim based on an “inappropriate” entry in the Orange Book: On May 24, 2024, a court in the District of Delaware denied a motion to dismiss antitrust counterclaims brought by Avadel CNS Pharmaceutical, Inc. (Avadel) v. Jazz Pharmaceutical Inc. (Jazz). Avadel alleged that Jazz, the manufacturer of ZYREM, improperly listed a patent on the FDA’s Orange Book, as a result of which Jazz was able to delay the launch of Avadel’s competing drug, LUMRYZ, by invoking the patent in a subsequent patent lawsuit against Avadel. The patent’s listing resulted in an automatic suspension of FDA approval of LUMRYZ under the Hatch-Waxman Act. Jazz argued that it had “reasonable grounds” to list the patent. Following the precedent set by the Second Circuit in United Food and Com. Local 1776 staff and participating Emps. Health and Welfare Fund v. Takeda Pharm. Company., 11 F.4th 118 (2d Cir. 2021), however, the court held that an antitrust plaintiff need not allege that the defendant “lacked a reasonable basis” for listing, sharing Avadel’s argument that Jazz would bear the burden under an affirmative defense, to demonstrate that it had reasonable grounds for listing and acted in good faith. The court further found that Avadel’s allegations would show that Jazz did not, in any event, have a reasonable basis for listing because the patent, as a “system” patent, fell outside the scope of what could be listed in the Orange Book. The court also found that, although Jazz’s subsequent patent infringement claim based on the patent constituted the filing of an application for authorized activity Noerr-Pennington immunity, the alleged “false listing” of a patent “followed by lawsuits designed to exploit that listing for competitive advantage” fell within the scope of the sham litigation exception Noerr-Pennington. Here’s the thing Jazz Pharmaceuticals, Inc. v. Avadel CNS Pharmaceuticals, LLC, Civil. A. No. 22-941-GBW (D. Del. May 24, 2024).

Senator calls for investigation of health insurance data company: On April 29, 2024, Senator Amy Klobuchar (D-MN) wrote to Antitrust Division Assistant Attorney General Jonathan Kanter and Federal Trade Commission Chair Lina Khan urging them to investigate MultiPlan, Inc., a company that aggregates and sells data to third parties health care insurance companies. Senator Klobuchar wrote: “I am concerned that instead of competing for business with employers by reducing these costs for workers – algorithmic tools are processing data collected from many competitors to weaken competition among insurance companies.” Several private plaintiffs recently initiated lawsuits against MultiPlan and various insurers, alleging a conspiracy to block out-of-network healthcare reimbursements using the MultiPlan algorithm. See Allegiance Health Management, Inc. v. MultiPlan, Inc. et al.1:24-cv-03223 (ND III. April 22, 2024); Live Well Chiropractic PLLC v. MultiPlan, Inc. et al., 1:24-cv-03680 (ND III. May 6, 2024). Senator Klobuchar also commented on its recently introduced nature Act on counteracting algorithmic collusion whose aim is to prosecute anti-competitive behavior carried out using algorithms. Moreover, the Department of Justice and the FTC have made several statements of interest in private litigation, arguing that it may be illegal per se for competitors to “knowingly (combine) their sensitive, non-public pricing and shipping information into the algorithm they rely on for making pricing decisions, with the knowledge and expectation that other competitors will do the same.” Declaration of interest, Dkt. No. 627, hrs. 2, In re RealPage, Inc., Software Rental Antitrust LitigationNo. 3:23-MD-3071 (M.D. Tenn. Nov. 15, 2023).

The Antitrust Division creates a task force to combat monopoly and collusion in health care: On May 9, 2024, the Department of Justice announced that it had established a “Health Care Monopolies and Collusion Task Force.” Deputy Attorney General Kanter said the Justice Department is “raising the bar” on health care enforcement in line with the Biden administration’s “whole of government approach” to antitrust law. The Justice Department created the task force to provide it with the resources necessary to focus on health care antitrust issues and “bring together civil and criminal prosecutors, economists, health care industry experts” and other specialists “to identify and address pressing health care issues.” antitrust law in health care markets.”

Former Sandoz director sentenced to one year’s probation: On May 15, 2024, a court in the Eastern District of Pennsylvania approved a joint motion by prosecutors and former Sandoz Pharmaceuticals CEO Hector Armando Kellum to sentence Mr. Kellum to one year of probation to resolve the generic drug price fixing case against him. The court cited Kellum’s cooperation in the government’s investigation into the larger conspiracy. In 2020, Kellum pleaded guilty to one count of conspiracy to restrain trade in a scheme to “fix prices, misquote and allocate customers for generic drugs.” Kellum was the fourth executive charged in the government’s criminal investigation. The Department of Justice alleged that, from 2013 to 2015, while an executive at Sandoz, Kellum conspired with competitors to allocate customers, agreed with competitors to exchange “specific non-public prices,” and discussed the timing of upcoming pricing and agreed with competitors to raise prices for products including skin treatments and cream with nystatin and triamcinolone.

The court rejects the certificate of class in Express scripts Dispute: On April 29, 2024, a court in the Northern District of Illinois ruled that the plaintiffs were unable to discharge the preponderance burden in their lawsuit against Mallinckrodt and Express Scripts over alleged overpayments for the anti-epileptic drug Acthar. The tribunal found that the models presented by the MSP Recovery Claims economist lacked “empirical verification” and were “fundamentally unjustified”. The Court faulted the expert for (i) “failing to identify any of the contingent assumptions” underlying his price assumption, based on an 8% annual increase over Mallinckrodt’s 2006 planning document, and (ii) failing to substantiate his comparison of Acthar with BLS PPIs for a wide range of drugs without analyzing whether these drugs had any similarity to Acthar. The court agreed to Express Script’s request to exclude expert testimony, the only evidence confirming the group’s common compensation. In rejecting the Magnum models, the court ruled that individual compensation calculations would “overwhelm the questions common to the class” and therefore certification of the class would be inappropriate. Here’s the thing MSP, Series LLC et al. Damage Claims v. Mallinckrodt Ard Inc. et al.20-cv-50056 (N.D. Ill. April 26, 2024).