United Food & Commercial Workers Local 1776 v. Teikoku Pharma USA, Inc.

• Decision Date: 17 November 2014
• Docket Number: Case No. 14–md–02521–WHO
• Court: U.S. District Court — Northern District of California
• Parties: United Food and Commercial Workers Local 1776 & Participating Employers Health and Welfare Fund, et al., Plaintiffs, v. Teikoku Pharma USA, Inc., et al., Defendants.

74 F.Supp.3d 1052

United Food and Commercial Workers Local 1776 & Participating Employers Health and Welfare Fund, et al., Plaintiffs

v.Teikoku Pharma USA, Inc., et al., Defendants.

Case No. 14–md–02521–WHO

United States District Court, N.D. California.

Signed November 17, 2014

Brian O. O'Mara, David W. Mitchell, Robbins Geller Rudman & Dowd LLP, Amanda Marie Friedman, Ralph B. Kalfayan, Krause Kalfayan Benink and Slavens LLP, San Diego, CA, Christina H. Sharp, Daniel C. Girard, Scott M. Grzenczyk, Girard Gibbs LLP, Andrew Michael Purdy, Joseph R. Saveri, Ryan James McEwan, Joseph Saveri Law Firm, Inc., Joshua P. Davis, University of San Francisco School of Law, Todd Anthony Seaver, Berman DeValerio, San Francisco, CA, Gregory S. Asciolla, Labaton Sucharow LLP, J. Douglas Richards, Sharon K. Robertson, Cohen, Milstein, Sellers and Toll PLLC, Domenico Minerva, Peter G.A. Safirstein, Morgan & Morgan, John Andrew Ioannou, New York State Attorney General's Office, Lee Albert, Glancy Binkow & Goldberg LLP, Michael M. Buchman, Pomerantz Haudek Block Grossman & Gross LLP, Archana Tamoshunas, Taus, Cebulash & Landau, LLP, Elizabeth Silva, Faruqi & Faruqi LLP, Bruce E. Gerstein, Elena K. Chan, Jonathan Gerstein, Joseph Opper, Noah H. Silverman, Ephraim R. Gerstein, Garwin Gerstein Fisher LLP, Mitchell M. Breit, Hanly Conroy Bierstein Sheridan Fisher & Hayes LLP, Stewart L. Cohen, Cohen Tauber Spievack & Wagner LLP, Frank R. Schirripa, Michael A. Rose, Bradley Demuth, Hach Rose Schirripa & Cheverie, LLP, Adam M. Steinfeld, Grant & Eisenhofer P.A., New York, NY, Jeffrey L. Kodroff, Spector Roseman & Kodroff & Willis,P.C., Mindee J. Reuben, Robert Samuel Kitchenoff, Weinstein Kitchenoff and Asher LLC, Robert William Sink, Law Offices of Robert W. Sink, Deborah R. Willig, Willig Williams & Davidson, William E. Hoese, Joseph C. Kohn, Kohn, Swift and Graf, P.C., Krishna Brian Narine, Meredith Narine, Michael D. Donovan, Noah I. Axler, Donovan Axler LLC, Stephen C. Richman, Markowitz & Richman, Sarah Schalman–Bergen, Caitlin Goldwater Coslett, David F. Sorensen, Berger & Montague, P.C., Keith J. Verrier, Levin Fishbein Sedran and Berman, Michael Coren, Cohen Placitella & Roth, Dianne M. Nast, Nastlaw LLC, Brent William Landau, Hausfeld LLP, Philadelphia, PA, Renae Diane Steiner, Vincent J. Esades, David Richard Woodward, Heins Mills and Olson, P.L.C., Kristen G. Marttila, Karen Hanson Riebel, Heidi M. Silton, Lockridge Grindal Nauen P.L.L.P., Minneapolis, MN, David S. Nalven, Thomas M. Sobol, Hagens Berman Sobol Shapiro LLP, Cambridge, MA, Douglas R. Plymale, James R. Dugan, II, David Baylis Franco, The Dugan Law Firm, APLC, New Orleans, LA, Elizabeth Gentry Arthur, Hilliard Shadowen LLP, Austin, TX, Garrett D. Blanchfield, Jr., Reinhardt Wendorf & Blanchfield, St. Paul, MN, Jacob A. Goldberg, Faruqi & Faruqi, LLP, Huntingdon Valley, PA, Jayne Arnold Goldstein, Pomerantz LLP, Weston, FL, Karen M. Leser–Grenon, Shepherd Finkelman Miller & Shah, LLP, Chester, CT, Lori A. Fanning, Marvin Alan Miller, Miller Law LLC, Chicago, IL, Michael P. Thorton, Thornton Naumes LLP, Boston, MA, Natalie Finkelman Bennett, Shepherd, Finkelman, Miller & Shah, LLP, Media, PA, Stephen E. Connolly, Connolly Wells & Gray LLP, King of Prussia, PA, Steve D. Shadowen, Hilliard & Shadowen LLP, Mechanicsburg, PA, William H. London, Freed Kanner London & Millen LLC, Bannockburn, IL, Lionel Z. Glancy, Glancy Binkow & Goldberg LLP, William J. O'Brien, Attorney at Law, Los Angeles, CA, Peter Russell Kohn, Joseph T. Lukens, Faruqi and Faruqi LLP, Jenkintown, PA, Erin R. Leger, David Coleman Raphael, Jr., Smith Segura Raphael, LLP, Alexandria, LA, George Edward Barrett, Jerry E. Martin, Scott P. Tift, Timothy L. Miles, Barrett Johnston, LLC, James Gerard Stranch, III, James Gerard Stranch, IV, Branstetter Stranch & Jennings, Charles F. Barrett, Charles Barrett, P.C., Nashville, TN, Donald A. Migliori, Motley Rice LLC, Providence, RI, Derek Yeats Brandt, Sarah S. Burns, Simmons Hanly Conroy, Alton, IL, Meghan Boone, Cohen, Milstein, Sellers & Toll PLLC, Washington, DC, Juan R. Rivera Font, Juan R. Rivera Font LLC, Guaynabo, PR, Linda P. Nussbaum, Supreme Court, State of New York, Brooklyn, NY, John Radice, Radice Law Firm, Long Beach, NJ, Barbara J. Hart, Noelle Ruggiero, Peter St. Phillip, Uriel Rabinovitz, Lowey Dannenberg Cohen and Hart P.C., White Plains, NY, for Plaintiffs.

James Patrick Schaefer, Skadden Arps Slate Meagher & Flom LLP, David S. Elkins, Squire Patton Boggs (US) LLP, Palo Alto, CA, Paul M. Kessimian, Christian Richard Jenner, Partridge, Snow & Hahn LLP, Providence, RI, Brian S. Paszamant, Terry M. Henry, William R. Cruse, Blank Rome LLP, Philadelphia, PA, Daniel B. Asimow, Arnold & Porter LLP, San Francisco, CA, Karen Hoffman Lent, Skadden Arps Slate Meagher Flom LLP, New York, NY, Steven C. Sunshine, Skadden Arps Slate Meagher and Flom LLP, Washington, DC, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

Re: Dkt. No. 95

WILLIAM H. ORRICK, United States District Judge

INTRODUCTION

In this multidistrict antitrust litigation, plaintiffs challenge in their consolidated complaints a settlement between Endo Pharmaceuticals Inc. (“Endo”), a distributor of the brand-name drug Lidoderm, Teikoku Seiyaku Co., its manufacturer, and Watson Pharmaceuticals, Inc. (“Watson”) a generic drug manufacturer. Plaintiffs allege that when Endo and Teikoku agreed to drop their ongoing patent litigation against Watson, they offered consideration of $96 million in free product and deferred competition with Watson's generic product worth $170 million in exchange for Watson's agreement to delay introduction of its generic drug. As a result of this settlement, plaintiffs were allegedly unable to purchase the cheaper generic version of Lidoderm

.

The central issue in defendants' consolidated motion to dismiss is whether plaintiffs have plausibly pleaded that the settlement involved large and unjustified reverse payments that caused antitrust injury under the rule of reason analysis described in F.T.C. v. Actavis, Inc., ––– U.S. ––––, 133 S.Ct. 2223, 186 L.Ed.2d 343 (2013). For pleading purposes, plaintiffs have sufficiently alleged a violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. Plaintiffs assert a myriad of other violations of federal and state antitrust and consumer protection laws. Many of these claims require an amended pleading because of questions concerning standing or other potentially amendable defects. I am dismissing some state claims now with prejudice either because indirect purchaser antitrust claims are not available under Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977) and the state at issue did not pass an Illinois Brick repealer, or for reasons specific to the law of a particular state.

I. PARTIES AND CLAIMS

A. Defendants

Endo is a Delaware corporation that markets and sells Lidoderm throughout the United States.¹ Direct Purchaser Plaintiffs' Consolidated Amended Complaint (“DPP Compl.”) [Dkt. No. 70] ¶ 13; End–Payor Plaintiffs' Consolidated Amended Complaint (“EPP Compl.”) [Dkt. No. 72] ¶ 19; Government Employees Health Association First Amended Complaint (“GEHA Compl.”) [Dkt. No. 71] ¶ 23. Teikoku Seiyaku Co. is a Japanese company that manufactures Lidoderm

for Endo pursuant to a Manufacturing and Supply Agreement. DPP Compl. ¶ 14; EPP Compl. ¶ 20; GEHA Compl. ¶ 24. It owns one of the patents for Lidoderm that Watson allegedly infringed. Id. Teikoku Pharma USA is a California corporation that is wholly owned by Teikoku Seiyaku Co., and is the holder of the New Drug

Application for Lidoderm

. DPP Compl. ¶ 15; EPP Compl. ¶ 21; GEHA Compl. ¶ 25. (Endo, Teikoku Seiyaku Co., and Teikoku Pharma USA will be collectively referred to as “Endo/Teikoku”).

Watson Pharmaceuticals, Inc. was a Nevada corporation that marketed, produced, and distributed generic pharmaceutical products, including Lidoderm

, starting in September 15, 2013.² DPP Compl. ¶¶ 2, 19; EPP Compl. ¶¶ 23–24; GEHA Compl. ¶¶ 27–28.

B. Plaintiffs

The plaintiffs allegedly purchased generic and brand-name Lidoderm

at supracompetitive prices. They are grouped into three categories based on their claims and relationship to the defendants; the direct purchaser plaintiffs (“DPPs”), entities that purchased Lidoderm directly from the defendants;³ the end-purchaser plaintiffs (“EPPs”), employee health and welfare benefit plans, municipal corporations, employee unions, and two individuals who purchased Lidoderm from third parties;⁴ and the Government Employees Health Association (“GEHA”), a not-for-profit corporation that provides health and dental plans to federal employees and retirees and their families that, like the EPPs, purchased Lidoderm from third parties.

The DPPs bring two claims for violations of Section 1 and three claims for violations of Section 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2. See DPP Compl. ¶¶ 153–189.⁵ The EPPs and GEHA assert a total of ten claims for violations of state antitrust laws, state consumer protection laws, and common law unjust enrichment. See EPP Compl. ¶¶ 162–205⁶ ; GEHA Compl. ¶¶ 125–218.⁷

II. REGULATORY BACKGROUND

The Food and Drug Administration (“FDA”) must approve all new drugs before a company can begin sales in the United States. Hatch–Waxman Act, 21 U.S.C. § 355(a). To obtain FDA approval, the company must file a New Drug Application (“NDA”), which contains information about the safety and efficacy of the drug, the components of the drug, and any patents issued on the composition of the drug or methods for its use.⁸ § 355(b)(1). The FDA publishes this information in the directory of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the “Orange Book.” Filing a NDA is a long, expensive, and complicated process. F.T.C. v. Actavis, Inc., ––– U.S. ––––, 133 S.Ct. 2223, 2228, 186 L.Ed.2d 343 (2013).

Generic drugs offer significant cost-savings, so Congress...