In re Ciprofloxacin Hydrochloride Antitrust Lit., No. 1:00-MDL-1383.

• Court: United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
• Writing for the Court: Trager
• Citation: 261 F.Supp.2d 188
• Parties: IN RE CIPROFLOXACIN HYDROCHLORIDE ANTITRUST LITIGATION.
• Docket Number: No. 1:00-MDL-1383.
• Decision Date: 20 May 2003

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261 F.Supp.2d 188 IN RE CIPROFLOXACIN HYDROCHLORIDE ANTITRUST LITIGATION. No. 1:00-MDL-1383. United States District Court, E.D. New York. May 20, 2003.

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Bernard Persky, Goodkind, Labaton, Rudoff & Sucharow, LLP, New York City, Marc H. Edelson, Hoffman & Edelson, Doylestown, PA, Peter L. Masnik, Kalikman & Masnik, Haddonfield, NJ, Bruce E. Gerstein, Garwin, Bronzaft, Gertein & Fisher, LLP, New York City, John G. Odom, Odom & Des Roches, New Orleans, LA, Elwood S. Simon, Elwood S. Simon & Associates, P.C., Birmingham, MI, for Plaintiffs.

Phillip A. Proger, Jones Day Reavis & Pogue, Washington, DC, Fred H. Bartlit, Jr., Bartlit, Beck, Herman, Palenchar & Scott, Chicago, IL, David E. Everson, Stinson Mag Law Firm, Kansas City, MO, Joseph Serino, Jr., Kirkland & Ellis, New York City, for Defendants.

MEMORANDUM & ORDER

TRAGER, District Judge.

This suit challenges the validity of agreements between the brand-name manufacturer of the widely used antibiotic ciprofloxacin hydrochloride ("Cipro") and potential generic manufacturers of Cipro. Direct Purchaser and Indirect Purchaser Class Plaintiffs and Individual Non-Class Plaintiffs (collectively, "plaintiffs") have brought suit against Bayer AG, a German company, and its American subsidiary, Bayer Corporation (collectively, "Bayer") and Barr Laboratories, Inc. ("Barr"); The Rugby Group, Inc. ("Rugby"); Hoechst Marion Roussel, Inc. ("HMR"); and Watson Pharmaceuticals, Inc. ("Watson") (collectively, "Generic Defendants")¹ alleging that Bayer and Generic Defendants (collectively, "defendants") entered into agreement

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that prevent competition in the market for Cipro in violation of federal and state antitrust laws. Plaintiffs now move this court pursuant to Federal Rule of Civil Procedure 56 for partial summary judgment finding that these agreements are per se unlawful under Section 1 of the Sherman Act, 15 U.S.C. § 1, and various state antitrust and consumer protection laws. Defendants have filed a cross-motion seeking to dismiss plaintiffs' respective complaints pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to plead facts sufficient to sustain a Sherman Act violation.² These motions present difficult questions of antitrust law and its interaction with patent rights.

Statutory and Regulatory Background

The manufacture and distribution of pharmaceutical drugs in the United States is regulated by the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301 et seq. (the "Act"). Recognizing that the Act's "cumbersome drug approval process delayed entry of relatively inexpensive generic drugs into the marketplace," Mylan Pharms., Inc. v. Shalala, 81 F.Supp.2d 30, 32 (D.D.C.2000), Congress passed the "Hatch-Waxman Amendments" to the Act in 1984. See Drug Price Competition & Patent Term Restoration Act of 1984, Pub.L. No. 98-417 (codified as amended at 21 U.S.C. § 355). The impetus behind the Hatch-Waxman Amendments was "to make available more low cost generic drugs[.]" H.R.Rep. No. 98-857, pt. 1, at 14 (1984), reprinted in 1984 U.S.C.C.A.N 2647, 2647. In fact, the Hatch-Waxman Amendments embody Congress' attempt to "balance two conflicting policy objectives: to induce name-brand pharmaceutical firms to make the investments necessary to research and develop new drug products, while simultaneously enabling competitors to bring cheaper, generic copies of those drugs to market." Mylan, 81 F.Supp.2d at 32 (citations omitted).

To this end, the Hatch-Waxman Amendments established new guidelines that simplify the approval process for generic drugs. Previously, any company wanting to market a new drug had to secure approval from the U.S. Food & Drug Administration ("FDA") by filing a New Drug Application ("NDA"), a process often "time consuming and costly" because a NDA requires companies to submit specific data concerning the drug's safety and effectiveness. Andrx Pharms., Inc. v. Biovail Corp. Int'l, 256 F.3d 799, 801 (D.C.Cir. 2001) (citations omitted), cert. denied 535 U.S. 931, 122 S.Ct. 1305, 152 L.Ed.2d 216 (2002). Under the new guidelines, a generic drug manufacturer can file an Abbreviated New Drug Application ("ANDA") that incorporates by reference the safety and efficacy data developed and previously submitted by the company that manufactured the original, "pioneer" brand-name drug. To obtain FDA approval, the

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ANDA filer must demonstrate that its product is "bioequivalent" to the pioneer drug. 21 U.S.C. § 355(j)(2)(A)(iv).

To protect the patent rights of the pioneer drug manufacturer, the ANDA filer must make one of four certifications in its ANDA concerning patents listed with the FDA for the pioneer drug,³ namely that (1) no patent for the pioneer drug is listed in the Orange Book; (2) the patent listed in the Orange Book has expired; (3) the listed patent will expire on a particular date, and the ANDA filer does not seek FDA approval before that date (a "Paragraph III Certification"); and (4) the listed patent "is invalid or ... will not be infringed by the manufacture, use, or sale of the [generic] drug" (a "Paragraph IV Certification"). Id. § 355(j)(2)(A)(vii); see also 21 C.F.R. § 314.94(a)(12)(A)(4).

An ANDA containing a Paragraph IV Certification (an "ANDA IV") has "important legal ramifications. It automatically creates a cause of action for patent infringement." Mylan, 81 F.Supp.2d at 32. Indeed, an ANDA applicant making such a certification must notify the owner of the listed patent of the filing of its ANDA and certification. See 21 U.S.C. § 355(j)(2)(B). Thereafter, the patent holder has 45 days to initiate a patent infringement suit against the ANDA applicant. See id. § 355(j)(5)(B)(iii). If the patent holder does not commence an action within 45 days, the FDA may approve the ANDA at any time. See id. If a timely infringement suit is initiated, the FDA cannot approve the ANDA for 30 months. See id. Moreover, the court hearing the patent case may, in its discretion, extend the 30-month stay if either party fails to "reasonably cooperate in expediting the action." Id. § 355(j)(5)(B)(iii).⁴ However, if the court presiding over the infringement action determines before the 30-month period expires that the patent at issue is "invalid or not infringed," approval is effective "on the date of the court decision[.]" Id. § 355(j)(5)(B)(iii)(I).

The Hatch-Waxman Amendments provide an incentive to encourage generic drug manufacturers to challenge listed patents for brand-name drugs. As an incentive to incur "potentially substantial litigation costs," Mylan, 81 F.Supp.2d at 33, the first company to submit an ANDA IV is awarded a 180-day period of exclusive rights to market a generic formula of the pioneer drug. See 21 U.S.C. § 355(j)(5)(B)(iv). Prior to the expiration of the exclusivity period, the FDA cannot finally approve any other ANDA for the same generic drug. See id. The exclusivity period is triggered by either the commercial marketing of the generic drug by the first ANDA filer or the decision of a court finding the pioneer drug's patent to be either invalid, unenforceable, or not infringed.

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See id.; see also 21 C.F.R. § 314.107.

Factual Background⁵ (1)

Bayer manufactures and distributes Cipro, a broad spectrum antibiotic that is prescribed for various infections and is dispensed in tablet, liquid and intravenous forms. Bayer AG claims the active ingredient in Cipro—ciprofloxacin hydrochloride—in Patent No. 4,670,444 (the "444 Patent"), which was issued by the Patent and Trademark Office ("PTO") on June 2, 1987. See App. to Bayer's Mem. in Opp'n to Pls.' Mot. for Partial Summ. J. ("Bayer App."), Ex. 1. The 444 Patent expires on December 9, 2003. In October 1987, Miles, Inc. (the predecessor to Bayer Corporation and the licensee of the 444 Patent) obtained FDA approval to market Cipro in the United States. Cipro has been the best selling antibiotic in the United States for many consecutive years and is described as "the most prescribed antibiotic in the world." D.P. Compl. ¶ 1. Since 1987, Bayer has been the only producer of Cipro in the United States, and, since 1997, Bayer has derived over $1 billion in U.S. net sales of all Cipro products. See Bayer App., Ex. 12 ¶ 3.

By letter dated October 22, 1991, Barr filed ANDA 74-124 for a generic, bioequivalent version of Cipro.⁶ See App. to Decl. of Edwin John U in Supp. of Generic Defs.' Mem. in Opp'n to Pls.' Mot. for "Partial Summ. J." ("G.Defs.' Summ. J. Mem.") ("G.Defs.' App."), Tab 1. Barr's ANDA included a Paragraph IV Certification seeking the FDA's permission to market its generic drug before the 444 Patent expires on the grounds that the patent is invalid and unenforceable. See J.A. in Supp. of all Pls.' Mot. for Summ. J. ("Pls.' J.A."), Ex. T. As set forth in the Hatch-Waxman Amendments, on December 6, 1991, Barr notified Bayer of its ANDA IV filing and its assertions contained therein regarding Bayer's 444 Patent. See id. On January 16, 1992, Bayer commenced a timely patent infringement suit against Barr in the Southern District of New York, thereby triggering the 30-month statutory waiting period for FDA approval. See generally id., Ex. G; see also Bayer App., Ex. 3. This litigation was styled Bayer AG and Miles, Inc. v. Barr Labs., Inc., 798 F.Supp. 196 (S.D.N.Y.1992) (Knapp, J.). In its pleadings, Barr denied any violation of the patent laws and asserted counterclaims seeking a declaratory judgment that the 444 Patent is invalid and unenforceable.⁷ See generally Pls.' J.A., Exs. H, I.

Subsequently, in November 1992, Bayer and Barr executed a stipulation whereby

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the parties agreed to extend the 30-month waiting period until final judgment was entered in the patent infringement action. See id., Ex. J. This stipulation was "so ordered" by Judge Knapp on December 8, 1992. See id. Absent this agreement, the stay would otherwise have expired on...