United Food & Commercial Workers Local 1776 & Participating Emp'rs Health & Welfare Fund v. Takeda Pharm. Co.

• Decision Date: 25 August 2021
• Docket Number: August Term 2020,Docket No. 20-1994-cv,Docket No. 20-2002-cv
• Citation: 11 F.4th 118
• Parties: UNITED FOOD AND COMMERCIAL WORKERS LOCAL 1776 & PARTICIPATING EMPLOYERS HEALTH AND WELFARE FUND, individually and on behalf of all others similarly situated, Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund, 199 SEIU-National Benefit Fund, Fraternal Order of Police, Fort Lauderdale Lodge 31, Insurance Trust Fund, Crosby Tugs, LLC, International Union of Operating Engineers Local 132 Health and Welfare Fund, A.F. OF L. - A.G.C. Buildings Trade Welfare Plan, individually and on behalf of all others similarly situated, Painters District Council No. 30 Health and Welfare Fund, Individually and on Behalf of All Others Similarly Situated, NECA-IBEW Welfare Trust Fund, individually and on behalf of all others similarly situated, City of Providence, Rhode Island, individually and on behalf of all others similarly situated, Minnesota and North Dakota Bricklayers and Allied Craftworkers Health Fund, on behalf of themselves and all others similarly situated, Greater Metropolitan Hotel Employers-Employees Health and Welfare Fund, on behalf of themselves and all other similarly situated, Local 17 Hospitality Benefit Fund, on behalf of itself and all others similarly situated, New England Electrical Workers Benefit Fund, Individually and on behalf of all others similarly situated, Dennis Kreish, on behalf of himself and all others similarly situated, Man-U Service Contract Trust Fund, on behalf of themselves and all others similarly situated, Teamsters Union Local 115 Health & Welfare Fund, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. TAKEDA PHARMACEUTICAL COMPANY LIMITED, Takeda America Holdings, Inc., Takeda Pharmaceuticals U.S.A., Inc., Takeda Development Center Americas, Inc., Defendants-Appellants. Meijer, Inc., Meijer Distribution, Inc., Cesar Castillo, Inc., Individually and on behalf of all those similarly situated, Plaintiffs-Appellees, American Sales Company, LLC, on behalf of itself and all others similarly situated, Plaintiff, v. Takeda Pharmaceutical Company Limited, Takeda America Holdings, Inc., Takeda Pharmaceuticals, U.S.A., Inc., Takeda Development Center Americas, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

11 F.4th 118

UNITED FOOD AND COMMERCIAL WORKERS LOCAL 1776 & PARTICIPATING EMPLOYERS HEALTH AND WELFARE FUND, individually and on behalf of all others similarly situated, Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund, 199 SEIU-National Benefit Fund, Fraternal Order of Police, Fort Lauderdale Lodge 31, Insurance Trust Fund, Crosby Tugs, LLC, International Union of Operating Engineers Local 132 Health and Welfare Fund, A.F. OF L. - A.G.C. Buildings Trade Welfare Plan, individually and on behalf of all others similarly situated, Painters District Council No. 30 Health and Welfare Fund, Individually and on Behalf of All Others Similarly Situated, NECA-IBEW Welfare Trust Fund, individually and on behalf of all others similarly situated, City of Providence, Rhode Island, individually and on behalf of all others similarly situated, Minnesota and North Dakota Bricklayers and Allied Craftworkers Health Fund, on behalf of themselves and all others similarly situated, Greater Metropolitan Hotel Employers-Employees Health and Welfare Fund, on behalf of themselves and all other similarly situated, Local 17 Hospitality Benefit Fund, on behalf of itself and all others similarly situated, New England Electrical Workers Benefit Fund, Individually and on behalf of all others similarly situated, Dennis Kreish, on behalf of himself and all others similarly situated, Man-U Service Contract Trust Fund, on behalf of themselves and all others similarly situated, Teamsters Union Local 115 Health & Welfare Fund, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees,

v.TAKEDA PHARMACEUTICAL COMPANY LIMITED, Takeda America Holdings, Inc., Takeda Pharmaceuticals U.S.A., Inc., Takeda Development Center Americas, Inc., Defendants-Appellants.^†

Meijer, Inc., Meijer Distribution, Inc., Cesar Castillo, Inc., Individually and on behalf of all those similarly situated, Plaintiffs-Appellees,

American Sales Company, LLC, on behalf of itself and all others similarly situated, Plaintiff,

v.Takeda Pharmaceutical Company Limited, Takeda America Holdings, Inc., Takeda Pharmaceuticals, U.S.A., Inc., Takeda Development Center Americas, Inc., Defendants-Appellants.

Docket No. 20-1994-cv

August Term 2020

Docket No. 20-2002-cv

United States Court of Appeals, Second Circuit.

Argued: April 7, 2021

Decided: August 25, 2021

STEVEN A. REED, Morgan, Lewis & Bockius LLP, Philadelphia, PA (R. Brandan Fee, Morgan, Lewis & Bockius LLP, Philadelphia, PA; Scott A. Stempel, Morgan, Lewis & Bockius LLP, Washington, DC; Alexander J. Scolnik, Morgan, Lewis & Bockius LLP, New York, NY, on the brief) for Defendants-Appellants.

STEVE D. SHADOWEN, Hilliard & Shadowen LLP, Austin, TX (Jayne A. Goldstein, Shepherd Finkelman Miller & Shah LLP, Ft. Lauderdale, FL; Kenneth A. Wexler, Wexler Wallace LLP, Chicago, IL; Michael M. Buchman, Motley Rice LLC, New York, NY, on the brief), for Plaintiffs-Appellees United Food and Commercial Workers Local 1776 et al.

THOMAS SOBOL, Hagens Berman Sobol Shapiro LLP, Cambridge, MA (Gregory T. Arnold, Hagens Berman Sobol Shapiro LLP, Cambridge, MA; Linda P. Nussbaum, Nussbaum Law Group, P.C., New York, NY, on the brief), for Plaintiffs-Appellees Meijer, Inc. et al.

Before: Livingston, Chief Judge, Wesley, Carney, Circuit Judges.

WESLEY, Circuit Judge:

Defendants-Appellants in these tandem cases (collectively, "Takeda") are a brand pharmaceutical manufacturer and related entities that began producing and marketing the Type-2 diabetes drug ACTOS in 1999. To lawfully market ACTOS, Takeda obtained the patent rights for pioglitazone hydrochloride ("pioglitazone"), the lone active ingredient in the drug. The pioglitazone patent expired on January 17, 2011. Takeda also secured rights to two patents that combined pioglitazone with other substances, yielding novel synergies that ACTOS alone did not offer. These "combination patents" both expired in June 2016.

On November 5, 1999, and January 3, 2002, in applications submitted to the Food and Drug Administration ("FDA"), Takeda described the combination patents as "claiming" the drug ACTOS. Those representations triggered a series of procedural safeguards under the Hatch–Waxman Act regarding the production of ACTOS-based drugs. Most fundamentally, they delayed the ability of generic drug manufacturers to offer consumers cheaper bioequivalent alternatives to ACTOS and thereby compete with Takada.

Plaintiffs-Appellees purchased ACTOS between January 2011 (when the pioglitazone patent expired) and February 2013 (when substantial generic competition began). They allege that during this period, Takeda sold ACTOS at monopolistic prices under the patent protection secured by mischaracterizing the scope of the combination patents to the FDA. Takeda responds that its characterization was proper and, even if not, it was made pursuant to a reasonable interpretation of the relevant statutes and regulations.

We hold that under the "Listing Requirement" of 21 U.S.C. § 355(b)(1), a combination patent does not "claim" any of its component substances past their individual patent expiration dates. We further hold that the purchasers were not required to allege that Takeda's interpretation of the Listing Requirement was unreasonable in order to plead a monopolization claim under the Sherman Act. We therefore affirm the district court's denial of Takeda's motion to dismiss and remand for further proceedings consistent with this opinion.

BACKGROUND¹

I. The Hatch–Waxman Act and the Listing Requirement

As explained in a prior appeal, "[a]lthough the violations of which plaintiffs ultimately complain are antitrust violations, they occur in the context of the pharmaceutical regulatory scheme governed by the Federal Food, Drug, and Cosmetic Act, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98–417, 98 Stat. 1585 (the ‘Hatch–Waxman Act’), and various rules promulgated thereunder." In re Actos End-Payor Antitrust Litigation , 848 F.3d 89, 93 (2d Cir. 2017). Thus, an overview of the relevant statutory framework may be helpful.

Under the Federal Food, Drug, and Cosmetic Act, brand-name drug manufacturers must obtain FDA approval to sell a new drug. 21 U.S.C. §§ 301 – 399. To do so, a manufacturer needs to file a New Drug Application ("NDA"), which includes among other information "a full list of the articles used as components of such drug" and "a full statement of the composition of such drug." 21 U.S.C. § 355(b)(1). If the new drug either is or contains a patented substance, the pharmaceutical company that owns the patent enjoys market exclusivity for the drug co-extensive with the patent's protection.

Meanwhile, the Hatch–Waxman Act "simplifie[s] the regulatory hurdles for prospective generic drug manufacturers by eliminating the need to file lengthy and costly NDAs." App'x 105 (citing Pub. L. No. 98-417, 98 Stat. 1585 (1984) ). As a result, generic manufacturers need only file an Abbreviated New Drug Application ("ANDA"), which allows the applicant to rely on the FDA's previous safety and effectiveness findings for the brand drug they wish to replicate and bring to market. 21 U.S.C. §§ 355(j)(2)(A)(ii), (iv). Still, generics are prohibited from infringing the brand's patents; when a generic competitor submits an ANDA, it must provide a "certification" with respect to each unexpired patent related to the brand drug's production. The certification alerts the FDA to the relevant patent and explains why the proposed generic would not infringe it.

The Hatch–Waxman Act envisions two types of certifications, each providing a separate regulatory route for the production of a generic drug despite a brand pharmaceutical company's patent related to the drug. The first is commonly referred to as a "Paragraph IV" certification. 21 U.S.C. § 355(j)(2)(A)(vii)(IV). This certification states that the patent "is invalid or will not be infringed by the manufacture, use, or sale of the new drug." Id. The second is a "section viii" certification. 21 U.S.C. § 355(j)(2)(A)(viii). A section viii certification is appropriate where the generic company seeks only to market an unpatented method of using a substance in the public domain and certifies that it will "carve out" patented methods from its drug's production and labeled uses. Id. ; GlaxoSmithKline LLC v. Teva Pharms. USA, Inc. , 7 F.4th 1320, 1344–45 (Fed. Cir. Aug. 5, 2021) (Prost, J. , dissenting).

Relevant to this case, Paragraph IV certifications activate powerful rights and restrictions on behalf of the patent-holding company. As an initial matter, it triggers a "highly artificial act of infringement," permitting the brand manufacturer to sue the ANDA applicant. Eli Lilly & Co. v. Medtronic, Inc. , 496 U.S. 661, 678, 110 S.Ct. 2683, 110 L.Ed.2d 605 (1990). If the brand chooses to sue, the FDA is automatically prevented from approving the ANDA for the earlier of thirty months or the outcome of the litigation. The wait may be worth it, however, because the statute awards a 180-day period of market exclusivity to the first generic Paragraph IV ANDA applicant who is either not sued or who proves the patent invalid or not infringed by the generic. The exclusivity period begins to run "after the date of the first commercial marketing of the drug" by that generic applicant. 21 U.S.C. § 355(j)(5)(B)(iv). This imposed delay oftentimes creates a bottleneck effect of generic competitors who are ready and willing—but legally unable—to enter the market.

The consequences of filing a section viii certification, on the other hand, are much less dramatic. The process entails neither a 30-month litigation stay nor a 180-day exclusivity period. Thus, a generic manufacturer that files a section viii certification can more easily enter the market without delay.

Whether the generic manufacturer files a Paragraph IV certification or a section viii certification depends on how the brand drug manufacturer identifies the object patent(s) to the...