Ass'n for Accessible Medicines v. Bonta

Decision Date08 December 2021
Docket Number2:20-cv-01708-TLN-DB
Citation562 F.Supp.3d 973
Parties ASSOCIATION FOR ACCESSIBLE MEDICINES, Plaintiff, v. Rob BONTA, in his official capacity as Attorney General of the State of California, Defendant.
CourtU.S. District Court — Eastern District of California

Matthew D. Rowen, Kirkland & Ellis LLP, Washington, DC, Jay P. Lefkowitz, PHV, Pro Hac Vice, Kirkland & Ellis LLP, New York, NY, for Plaintiff.

David Samuel Houska, California Attorney General, Public Rights Division, San Francisco, CA, Jacqueline Palma Malafa, California Department of Justice, Los Angeles, CA, Karli A. Eisenberg, California Office of Attorney General, Sacramento, CA, Nicole D. Ries Fox, Office of The Attorney General, San Diego, CA, for Defendant.

ORDER

Troy L. Nunley, United States District Judge

This matter is before the Court on Plaintiff Association for Accessible Medicine's ("Plaintiff") Motion for Preliminary Injunction ("PI") requesting the Court enjoin the enforcement of Assembly Bill 824 ("AB 824"). (ECF No. 15.) Defendant Rob Bonta, in his official capacity as Attorney General of the State of California ("Defendant" or the "State"), has filed an opposition.1 (ECF No. 20.) Plaintiff has filed a reply. (ECF No. 26.) For the reasons set forth below, Plaintiff's motion is GRANTED.

I. FACTUAL AND PROCEDURAL BACKGROUND 2

AB 824, signed into law by California Governor Gavin Newsom on October 7, 2019, creates a presumption that "reverse payment" settlement agreements regarding patent infringement claims between brand-name and generic pharmaceutical companies are anticompetitive and unlawful.

Reverse payment settlement agreements arise primarily — if not exclusively — in the context of pharmaceutical drug regulations and suits brought under the statutory provisions of the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. Under the Hatch-Waxman Act, once a brand-name company has submitted a new prescription drug to the U.S. Food and Drug Administration ("FDA") and gained approval to market it, a manufacturer of a generic drug with the same active ingredients that is biologically equivalent to the approved brand-name drug can gain approval to market the generic through an abbreviated FDA process. The New Drug Application ("NDA") process is long, comprehensive, and expensive, whereas the Abbreviated New Drug Application ("ANDA") process to which generic drugs are subject is substantially less expensive and requires far less testing.

In order to gain approval through the FDA, the generic company must file an ANDA. As part of this application, the generic company must assure the FDA that its drug will not infringe on any patents owned by the brand-name company. One way to do so is for the generic company to certify that any listed, relevant patent is invalid or will not be infringed by the manufacture, use, or sale of the generic drug. This is called Paragraph IV certification. Because filing under Paragraph IV indicates there are current patents the generic company asserts are invalid or uninfringed by its product, the Paragraph IV certification is per se a patent infringement and thus the brand-name company can and often does bring suit against the generic drug manufacturer.

Settlements of the resulting lawsuits sometimes include reverse payments in which the plaintiff, the brand-name company, pays the defendant, the infringing generic company, a sum of money for the promise that the generic company will keep its drug off the market for an agreed-upon length of time.

AB 824 targets these types of settlements. According to the State, AB 824 closes this loophole in the Hatch-Waxman Act and ensures a brand-name company cannot continue to enforce an otherwise weak patent against generic companies through these reverse payment settlement agreements. AB 824 imposes a presumption that a settlement agreement involving a brand-name company compensating the generic company for keeping its drug off the market is anticompetitive under California antitrust law. It also levies a civil penalty against any individual who assists in the violation of the section of three times the value received by the individual due to the violation or $20 million, whichever is greater.

Plaintiff, a nonprofit, voluntary association comprised of the leading manufacturers and distributors of generic and biosimilar medicines, manufacturers and distributors of bulk active pharmaceutical ingredients, and suppliers of other goods and services to the generic and biosimilar pharmaceutical industry, previously filed suit in an attempt to invalidate AB 824. (ECF No. 1, No. 2:19-cv-02281-TLN-DB.) In the related case, Plaintiff also filed a motion for preliminary injunction (ECF No. 10, No. 2:19-cv-02281-TLN-DB), which the Court denied (ECF No. 29, No. 2:19-cv-02281-TLN-DB). The Court found, primarily due to the nature of Plaintiff's pre-enforcement attack on AB 824, Plaintiff failed to establish a likelihood of success on the merits or raise serious questions going to the merits. (Id. ) The Court concluded that absent a constitutional violation, Plaintiff failed to establish an irreparable harm that was both likely and imminent. (Id. ) Plaintiff subsequently filed an interlocutory appeal of the Court's decision to the Ninth Circuit. (ECF No. 31, No. 2:19-cv-02281-TLN-DB.) The Ninth Circuit heard oral arguments on the matter and ultimately vacated this Court's order and remanded with instructions to dismiss without prejudice, finding Plaintiff failed to demonstrate its members had an Article III injury in fact and concluding Plaintiff lacked associational standing to bring claims on its members’ behalf. (See ECF Nos. 46–47, No. 2:19-cv-02281-TLN-DB.) The Court subsequently dismissed the suit without prejudice pursuant to the Ninth Circuit's memorandum and mandate. (ECF Nos. 48–49, No. 2:19-cv-02281-TLN-DB.)

On August 25, 2020, Plaintiff filed the instant Complaint alleging near-identical causes of action to its prior suit, once again in an attempt to invalidate AB 824: (1) Declaratory/Injunctive Relief — Commerce Clause — Extraterritoriality; (2) Declaratory/Injunctive Relief — Preemption; (3) Declaratory/Injunctive Relief — Excessive Fines Clause; and (4) Declaratory/Injunctive Relief — Due Process — Burden-Shifting. (ECF No. 1 at 21–33.) On September 14, 2020, Plaintiff filed the instant motion for preliminary injunction. (ECF No. 15.) On October 15, 2020, the State filed an opposition (ECF No. 20), and on October 22, 2020, Plaintiff filed a reply (ECF No. 26).

II. STANDARD OF LAW

Injunctive relief is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Nat. Res. Def. Council, Inc. , 555 U.S. 7, 22, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008) (citing Mazurek v. Armstrong , 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997) (per curiam)). "The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held." Univ. of Tex. v. Camenisch , 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981) ; see also Costa Mesa City Emps. Ass'n v. City of Costa Mesa , 209 Cal. App. 4th 298, 305, 146 Cal.Rptr.3d 677 (2012) ("The purpose of such an order is to preserve the status quo until a final determination following a trial."); GoTo.com, Inc. v. Walt Disney, Co. , 202 F.3d 1199, 1210 (9th Cir. 2000) ("The status quo ante litem refers not simply to any situation before the filing of a lawsuit, but instead to the last uncontested status which preceded the pending controversy.").

"A plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest." Winter , 555 U.S. at 20, 129 S.Ct. 365. A plaintiff must "make a showing on all four prongs" of the Winter test to obtain a preliminary injunction. Alliance for the Wild Rockies v. Cottrell , 632 F.3d 1127, 1135 (9th Cir. 2011). In evaluating a plaintiff's motion for preliminary injunction, a district court may weigh the plaintiff's showings on the Winter elements using a sliding-scale approach. Id. A stronger showing on the balance of the hardships may support issuing a preliminary injunction even where the plaintiff shows that there are "serious questions on the merits ... so long as the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest." Id. Simply put, plaintiffs must demonstrate, "that [if] serious questions going to the merits were raised [then] the balance of hardships [must] tip[ ] sharply" in [p]laintiffs’ favor in order to succeed in a request for preliminary injunction. Id. at 1134–35.

III. ANALYSIS 3

Plaintiff argues in the instant motion for preliminary injunction that it is likely to succeed on the merits of its claims, its members will suffer irreparable harm absent an injunction, the balance of equities and the public interest weigh in favor of an injunction, and it is likely to succeed on the merits. (See ECF No. 15-1.) The Court will first address the State's evidentiary objections, then the jurisdictional prerequisite of standing, and finally evaluate each of Plaintiff's arguments, starting with the dormant Commerce Clause claim.

A. The State's Objections to Plaintiff's Evidence

The State filed objections to Plaintiff's declarations submitted with the instant motion. (ECF No. 24-1.) With respect to Exhibit E, the State contends the following portion of paragraph four is inadmissible on the grounds of lack of personal knowledge, in violation of Federal Rule of Evidence 602 : "[B]ecause of [the company's] concern about the enforcement of AB 824 as it would apply to such a settlement in light of AB 824's provision...

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1 books & journal articles
  • Dormant Commerce Clause: a Potential Brake on State Antitrust Legislation
    • United States
    • California Lawyers Association Competition: Antitrust, UCL and Privacy (CLA) No. 33-1, March 2023
    • Invalid date
    ...Supp. 2d 30, 49 (D.D.C. 2003).48. 663 F. Supp. 2d 1138, 1153-54 (D.N.M. 2009).49. Id. at 1154.50. Ass'n for Accessible Meds. v. Bonta, 562 F. Supp. 3d 973, 977 (E.D. Cal. 2021), modified, No. 2:20-CV-01708-TLN-DB, 2022 WL 463313 (E.D. Cal. Feb. 15, 2022).51. Codified at section 134002 of th......

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