In re Loestrin 24 Fe Antitrust Litig.

• Decision Date: 08 August 2017
• Docket Number: MDL No. 13–2472–S–PAS,No. 1:13–md–2472–S–PAS,1:13–md–2472–S–PAS
• Citation: 261 F.Supp.3d 307
• Parties: IN RE LOESTRIN 24 FE ANTITRUST LITIGATION This Document Relates To: All Actions
• Court: U.S. District Court — District of Rhode Island

261 F.Supp.3d 307

IN RE LOESTRIN 24 FE ANTITRUST LITIGATION This Document Relates To: All Actions

MDL No. 13–2472–S–PAS

No. 1:13–md–2472–S–PAS

United States District Court, D. Rhode Island.

Signed August 8, 2017

OPINION AND ORDER

William E. Smith, Chief Judge

The plaintiffs in this multidistrict litigation ("MDL") seek damages from the defendant-pharmaceutical companies for an allegedly anti-competitive scheme relating to Loestrin 24 FE ("Loestrin 24"), an oral contraceptive comprising 24 norethindrone acetate/ethinyl estradiol (1 mg/20 mcg) tablets and four ferrous fumarate tablets.

In June 2013, the United States Supreme Court decided a landmark patent antitrust case, FTC v. Actavis, Inc., 570 U.S. 136, 133 S.Ct. 2223, 186 L.Ed.2d 343 (2013), which held that "reverse payments"—settlement payments in patent infringement suits remitted by patent holders to alleged infringers—are subject to the rule of reason under federal antitrust law. In October 2013, the United States Judicial Panel on Multidistrict Litigation consolidated and transferred the instant litigation to this Court. (See Transfer Order, ECF No. 1.) In September 2014, after briefing and argument, the Court dismissed the complaints, holding that Actavis applied only to cash payments and reserving judgment on all other issues. See generally In re Loestrin 24 Fe Antitrust Litig., 45 F.Supp.3d 180 (D.R.I. 2014) (" Loestrin 24 (D.R.I.)"). The First Circuit disagreed, vacating the dismissal and remanding for further proceedings. See generally In re Loestrin 24 Fe Antitrust Litig., 814 F.3d 538 (1st Cir. 2016) (" Loestrin 24").

On remand from the Circuit, the plaintiffs have amended their complaints, and the parties have re-briefed and argued the defendants' motions to dismiss. Before the Court are two Motions to Dismiss¹ seeking to dismiss the four Operative Complaints² in this MDL. For the reasons set forth below, and as previously ordered by this Court on July 21, 2017 (ECF No. 299), the Warner Chilcott Defendants' Motion to Dismiss (ECF No. 192) is GRANTED with respect to the parent companies; DENIED WITHOUT PREJUDICE with respect to the End–Payor Plaintiffs' ("EPPs") claims under state law in the twenty-five states and Puerto Rico in which they failed to plead that they have either resided or purchased Loestrin 24 products in the state; DENIED WITHOUT PREJUDICE with respect to arguments that the EPPs failed to state a claim for relief under various state laws for antitrust violations, consumer protection violations, and unjust enrichment; and DENIED in all other respects. The Lupin Defendants' Motion to Dismiss (ECF No. 191) is DENIED.

I. Background³

A. The Parties

This MDL litigation consolidates four complaints filed by four sets of plaintiffs. The Direct Purchaser Plaintiffs ("DPPs") are corporate entities that purchased Loestrin 24 directly from Warner Chilcott, one of the defendants.⁴ The Retailers, or the opt-out DPPs, comprise the Walgreen Plaintiffs⁵ and the CVS Plaintiffs.⁶ The EPPs are "third-party payors" or "indirect purchasers." They generally comprise employee welfare benefit programs that reimbursed subscribers who purchased Loestrin 24, but also include three individuals who purchased Loestrin 24 for their own use.⁷

Defendants are pharmaceutical companies; due to various mergers and acquisitions in the industry, their relationships to one another have changed over the relevant time period, and even during the course of this litigation. (DPP Compl. ¶¶ 18–30.) Warner Chilcott Company, LLC ("Warner Chilcott")⁸ is the current assignee of the patent covering Loestrin 24, U.S. Patent No. 5,552,394 ("the '394 patent"), and it holds the approved New Drug Application ("NDA") from the Food and Drug Administration (the "FDA") for Loestrin 24. (Id. ¶¶ 7, 19.) Defendant Watson Laboratories, Inc. is a wholly-owned subsidiary of Watson Pharmaceuticals, Inc., which acquired Actavis, Inc. in 2013 and continued operations under the name Actavis, Inc.; the Court refers to these defendants collectively as "Watson," except when explicitly discussing Actavis, Inc. (CVS Compl. ¶ 30.) Warner Chilcott and Watson are currently both part of Defendant Allergan plc.⁹ (EPP Compl. ¶ 27.) The remaining defendants are Lupin Ltd. and Lupin Pharmaceuticals Inc. (collectively, "Lupin" and, together with Warner Chilcott and Watson, "Defendants"). (CVS Compl. ¶¶ 32–34.) Because Warner Chilcott's and Watson's interests are now aligned, and they have submitted joint briefing, they are collectively referred to as the "Warner Chilcott Defendants." The EPPs, Walgreen Plaintiffs, and CVS Plaintiffs have named Lupin as a defendant; the DPPs have not. (DPP Compl. ¶ 16–30; EPP Compl. ¶¶ 40–41; Walgreens Compl. ¶¶ 36–37; CVS Compl. ¶¶ 32–34.)

B. Generics and the Hatch–Waxman Act Regulatory Framework

The public relies on pharmaceutical companies to develop and bring to market the medical advances that keep us healthy. For this reason, our patent laws afford substantial protection to firms whose innovation leads to the development of new and beneficial medications. Typically, a company that has developed a beneficial and successful medication will enjoy a period of time during which it can sell it exclusively and at a supracompetitive price, thereby recovering its development costs and turning a profit. This period of exclusivity is considered to be an essential incentive for further healthcare and biopharmaceutical research and innovation. See Wendy H. Schacht and John R. Thomas, Cong. Research Serv., RL30756, Patent Law and Its Application to the Pharmaceutical Industry: An Examination of the Drug Price Competition and Patent Term Restoration Act of 1984 ("The Hatch–Waxman Act") 2–5 (2000).

Once the period of exclusivity expires, however, generic competitors enter the market, severely undercutting the manufacturer's pricing scheme and eliminating most of the innovator's profits. (EPP Compl. ¶ 66.) For example, where there is a single generic competitor, the generic tends to be priced approximately 10% lower than the brand name counterpart. (DPP Compl. ¶ 56.) And, where there are multiple generic alternatives, the price of the generics typically falls to 50% to 80% below the brand name product, driving the price close to the marginal cost of production. (Id. ¶¶ 56, 70.) It is no mystery then why a brand and first-filing generic may be motivated to conspire to keep the brand's monopoly going, splitting the higher profits amongst themselves. (See id. ¶ 74.)

Because every state has passed a law to either require or permit pharmacies to substitute AB-rated generics for brand name drugs (unless the prescribing doctor orders otherwise), generally within a year of generic market entry, generics will capture 90% of sales and prices will fall by as much as 85%. (DPP Compl. ¶ 57.) Not surprisingly, then, brand manufacturers view generic competition as a serious threat to profits. (Id. ) If there is no generic on the market, the pharmacy must fill the prescription with the branded drug, and supracompetitive pricing may continue. (See id. ¶ 59.)

The Drug Price Competition and Patent Term Restoration Act of 1984 (more commonly known as the "Hatch–Waxman Act"), Pub. L. No. 98–417, 98 Stat. 1585 (1984), as amended, prescribes the process by which pharmaceutical firms may gain approval from the FDA to bring medications to market. There are four key features to the Hatch–Waxman Act's architecture.

First, a drug manufacturer that wishes to market a new product must submit a New Drug Application ("NDA") to the FDA and undergo a rigorous approval process. See Hatch–Waxman Act, 21 U.S.C. § 355(b)(1)(A) (requiring, inter alia, that the manufacturer provide "full reports of investigations which have been made to show whether or not such drug is safe for use and whether such drug is effective in use"). By all accounts, this approval process is arduous and expensive. But, once the FDA has approved an NDA, the manufacturer is entitled to list the drug in the FDA's "Approved Drug Products with Therapeutic Equivalence Evaluations" (also known as the "Orange Book"). (DPP Compl. ¶ 38.) The Orange Book entry provides a measure of protection for the manufacturer by allowing it to list any patents that the manufacturer believes could be asserted against generic competitors. (Id. )

Second, the Hatch–Waxman Act recognized that if manufacturers who have gained FDA approval were allowed to charge supracompetitive prices indefinitely, it would harm consumers. Therefore, the Act creates a mechanism to promote the availability of cheaper generic alternatives by allowing generic manufacturers to bypass many of the onerous aspects of the NDA process. Instead of filing an NDA, a generic manufacturer may instead file an Abbreviated NDA ("ANDA"). See 21 U.S.C. § 355(j). An ANDA incorporates the findings of safety and effectiveness of the previously-approved NDA, and generally assures that the proposed generic contains the same active ingredients and is otherwise as equally safe and effective as the brand name counterpart. See id. at § 355(j)(2). Thus, the ANDA process allows a generic manufacturer to obtain approval while avoiding the "costly and time-consuming studies" needed to obtain approval for a "pioneer drug." Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 676, 110 S.Ct. 2683, 110 L.Ed.2d 605 (1990). The FDA assigns a rating of "AB" when it determines a generic drug is therapeutically equivalent to its brand-name counterpart. (Walgreen Compl. ¶ 48.) To be therapeutically equivalent, the ANDA must demonstrate that the generic drug is both pharmaceutically equivalent and bioequivalent, or in other words, that it "contains the same active ingredient(s), dosage form, route of administration, and strength as the brand drug, and is absorbed at the same rate and to the same extent as the brand drug ...." ( Id. )

Third, the Hatch–Waxman Act sets forth procedures for resolving patent disputes between brand and generic manufacturers. A...