Fed. Trade Comm'n v. Endo Pharm. Inc.

• Decision Date: 24 March 2022
• Docket Number: Case No. 1:21-cv-217-RCL
• Citation: 596 F.Supp.3d 115
• Parties: FEDERAL TRADE COMMISSION, Plaintiff, v. ENDO PHARMACEUTICALS INC., et al., Defendants.
• Court: U.S. District Court — District of Columbia

596 F.Supp.3d 115

FEDERAL TRADE COMMISSION, Plaintiff,

v.ENDO PHARMACEUTICALS INC., et al., Defendants.

Case No. 1:21-cv-217-RCL

United States District Court, District of Columbia.

Signed March 24, 2022

Filed March 30, 2022

Eric Matthew Sprague, James Harris Weingarten, Kara Lee Monahan, Markus H. Meier, Evan J. Cartagena, Garth W. Huston, Federal Trade Commission, Bureau of Competition, Health Care Division, Washington, DC, Emma Powers Dick, Jamie Richard Towey, Bureau of Competition, Health Care Division, Washington, DC, for Plaintiff.

George G. Gordon, Pro Hac Vice, Julia Chapman, Pro Hac Vice, Dechert LLP, Philadelphia, PA, Craig Gerald Falls, Orrick, Herrington & Sutcliffe, LLP, Washington, DC, Eric Dean Hageman, Dechert LLP, Washington, DC, for Defendant Endo Pharmaceuticals Inc.

George G. Gordon, Dechert LLP, Philadelphia, PA, Eric Dean Hageman, Dechert LLP, Washington, DC, for Defendant ENDO International PLC.

Devora Allon, Pro Hac Vice, Evelyn Blacklock, Pro Hac Vice, Jay Philip Lefkowitz, Kara Cheever, Pro Hac Vice, Kirkland & Ellis LLP, New York, NY, James Hileman, Pro Hac Vice, Matthew LaGrone, Pro Hac Vice, Kirkland & Ellis LLP, Chicago, IL, for Defendants Impax Laboratories, LLC, Amneal Pharmaceuticals, Inc.

MEMORANDUM OPINION

Royce C. Lamberth, United States District Judge

For more than one hundred years, the Sherman Act has declared that every contract in restraint of trade or commerce is illegal. 15 U.S.C. § 1. For more than two hundred years, the Patent Act in its various iterations has granted a successful patent applicant the "sole and exclusive right and liberty of making, constructing, using, and vending to others" her invention. Patent Act of 1790, ch. 7 § 1.1 Stat. 109 (repealed 1793); see 35 U.S.C. § 154(a)(1). These dissonant statutes have coexisted for years. But the Supreme Court threw their uneasy detente in flux in FTC v. Actavis , 570 U.S. 136, 133 S.Ct. 2223, 186 L.Ed.2d 343 (2013). In the present case, this statutory conflict comes to a head.

Endo Pharmaceuticals ("Endo") holds valid patents that cover an extended-release ("ER") oxymorphone medicine. Endo licensed those patents to Impax Laboratories, LLC ("Impax") for a [Redacted] % royalty—contingent on Endo not using the patents and [Redacted]. Impax is now the only producer of oxymorphone ER. With oxymorphone prices escalating, the Federal Trade Commission ("FTC") sued Endo, Impax, and their parent companies, claiming that (1) this licensing agreement is an unlawful noncompete agreement and (2) that Impax is maintaining an illegal monopoly. Endo and Impax argue that the patent laws expressly approve of exclusive licensing agreements akin to the one that they entered.

Before the Court are defendants’ motions to dismiss, ECF Nos. 48, 51 & 53, the FTC's two opposition briefs, ECF Nos. 59 & 61, and defendants’ replies in support, ECF Nos. 62, 63 & 65. Upon consideration of the parties’ filings, applicable law, and the record herein, the Court will GRANT defendants’ motions to dismiss for failure to state a claim.

I. BACKGROUND

A. Factual Background

Defendant Endo is a for-profit Delaware corporation. Compl. ¶ 12, ECF No. 3. Endo's parent company, Endo International plc, is based in Ireland. Id. ¶ 14. Endo owns several patents for Opana ER, an oxymorphone extended-release painkiller. Id. ¶¶ 17–20. After the Food and Drug Administration ("FDA") approved it in 2016, Opana ER quickly became Endo's second-best-selling product. Id.

Defendant Impax is also a for-profit Delaware corporation. Id. ¶ 15. In 2007, seeking approval to market a generic version of oxymorphone ER, Impax filed an Abbreviated New Drug Application ("ANDA") with the FDA. Id. ¶ 23. In its ANDA, Impax stated that its generic product would not infringe on Endo's patents. Id. ¶ 26. Endo disagreed and sued Impax for patent infringement in January 2008. Id. ¶ 27.

Endo and Impax settled that patent infringement litigation in 2010. Id. ¶ 28. Under their settlement agreement (the "2010 Agreement"), Impax agreed not to launch its generic oxymorphone ER until Endo's patent expired in 2013. Id. ¶¶ 27–28. In exchange, Endo agreed to provide Impax a license to any then-issued and future patents that could cover oxymorphone ER. Id. ¶ 29. The 2010 Agreement ensured that Impax could sell its oxymorphone ER product, even if Endo later obtained additional patents covering the drug. Id. The 2010 Agreement required Endo and Impax to "negotiate in good faith an amendment to the terms of the License to any [later-issued] patents." Id. ¶ 85.

In the years after the 2010 Agreement, nine more companies filed ANDAs covering generic oxymorphone ER. Id. ¶¶ 32, 34. Each time, Endo filed a patent infringement lawsuit against the company, and each time, the parties settled. Id. ¶¶ 34, 36. But none of these other settlement agreements included a licensing agreement for future patents like the 2010 Agreement. Id. ¶ 36. In other words, Endo did not grant these other companies a license for all future patents that could cover oxymorphone ER—just a license for the then-current patents.

Accordingly, when the Patent and Trademark Office ("PTO") issued Endo additional patents covering oxymorphone ER—including a patent that does not expire until 2029—Endo continued to assert its patents against generic oxymorphone ER manufacturers. Id. ¶¶ 47–49. Endo doggedly pursued litigation against all companies that were infringing upon its new patents. Id. ¶¶ 48–50. Through these patent-infringement suits, Endo prevented all producers of generic oxymorphone ER from making or selling their generic versions of oxymorphone ER until November 2029. Id. ¶¶ 50–56. But not Impax. The 2010 Agreement protected Impax from these injunctions because Endo had already licensed the additional patents to Impax. When the dust settled from Endo's patent-litigation frenzy, Endo and Impax were the only two companies allowed to sell oxymorphone ER in the United States. Id. ¶ 56.

In 2012, Endo launched a reformulated, "crush-resistant" version of Opana ER with FDA approval and stopped making the original Opana ER. Id. ¶¶ 57–58. Endo then petitioned the FDA to find that the original Opana ER was discontinued for safety reasons. That finding would have resulted in the FDA withdrawing its approval for all generic oxymorphone ERs on the market, including Impax's. Id. ¶ 61. The FDA denied this request. Id. ¶ 62. Instead, the FDA expressed safety concerns about the reformulated Opana ER and requested that Endo. voluntarily remove it from the market in June 2017. Id. ¶ 69. Endo acquiesced and stopped selling reformulated Opana ER. Id.

Opana ER sales made up a crucial portion of Endo's revenue, so the loss of that revenue became crushing to Endo's business. Id. ¶¶ 71–72. To stay in the oxymorphone ER market, Endo prepared to relaunch Opana ER with an approved ANDA (the "Watson ANDA") for generic oxymorphone ER. Id. ¶ 75. Endo took significant strides in early 2017 to relaunch Opana ER using the Watson ANDA. Id. ¶ 76. Endo executives held "almost weekly" meetings to plan the relaunch, organized manufacturing equipment, and purchased oxymorphone to begin required testing. Id. ¶¶ 77–82. But Endo never relaunched Opana ER. Instead, it took a different tactic.

While it prepared its potential relaunch, Endo also had a different plan in motion. In 2015, Endo—already aware that the FDA had concerns about reformulated Opana ER—requested (unsuccessfully) that Impax pay it an 85% royalty fee for the license to the later-issued patents. Id. ¶¶ 64, 85. When Impax refused, Endo sued Impax for breach of the 2010 Agreement in the District Court for the District of New Jersey. Id. ¶ 85. In a May 2016 filing, Endo alleged that Impax had breached the 2010 Agreement's requirement to negotiate an amendment in good faith and had, accordingly, infringed on Endo's patents. Id. ¶ 85. After that court denied Impax's motion to dismiss, Endo and Impax settled the breach-of-contract and patent-infringement lawsuit on August 5, 2017 (the "2017 Agreement"). Id. ¶ 85.

The terms of the 2017 Agreement are integral to the FTC's claims against defendants. The 2017 Agreement "clarifies that Impax's license in the [2010 Agreement] includes any Opana ER patents owned by Endo and obtained after it entered" the 2010 Agreement. Id. ¶ 93. Per the terms of the 2017 Agreement, Impax will pay Endo a licensing fee equal to [Redacted]% of its gross profits from selling generic Opana ER. Id. ¶ 94. But if Endo (1) sells an oxymorphone ER product, (2) [Redacted], or (3) [Redacted] the royalty fee amount drops to 0%. Id. In other words, [Redacted] Impax pays Endo nothing. Additionally, the 2017 Agreement requires that Endo split with Impax any damages that it obtains from suing patent infringers. Id. ¶ 97.

After the 2017 Agreement was executed, Endo terminated its project to relaunch a generic version of Opana ER and completely exited the oxymorphone ER market. Id. ¶ 98. Following Endo's exit, the average price of a 40 mg tablet of oxymorphone ER increased by over [Redacted]%. Id. ¶ 117.

B. Procedural Background

The FTC filed this action on January 25, 2021, against Endo, Endo International, Impax, and Amneal Pharmaceuticals, Inc. ("Amneal"), alleging that Endo and Impax's anticompetitive agreement and Impax's subsequent monopoly violate Sections 1 and 2 of the Sherman Act.¹ Compl. ¶¶ 119–24. In particular, the FTC alleges that the 2017 Agreement puts an unreasonable restraint on trade by eliminating Endo's financial incentive to compete in the market in violation of Section 1, leaving Impax without competitors. Id. ¶¶ 102–07, 119–21. The FTC further alleges that Amneal, Impax's parent company, has willfully obtained and maintained its monopoly power in the oxymorphone ER market through the 2017 Agreement in violation of Section 2. Id. ¶¶ 121–24. In its telling, Amneal—through Impax—holds a monopoly in the oxymorphone ER market because it is currently the only company selling oxymorphone ER products. Id. ¶¶ 110–11...