Meijer, Inc. v. Ranbaxy Inc., CIVIL ACTION NO. 15-11828-NMG

CourtUnited States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
Writing for the CourtKELLEY, U.S.M.J.
PartiesMEIJER, INC., and MEIJER DISTRIBUTION, INC., on behalf of themselves and all others similarly situated, Plaintiffs, v. RANBAXY INC., RANBAXY LABORATORIES, LTD., RANBAXY U.S.A., INC., and SUN PHARMACEUTICAL INDUSTRIES LTD., Defendants.
Docket NumberCIVIL ACTION NO. 15-11828-NMG
Decision Date16 June 2016

MEIJER, INC., and MEIJER DISTRIBUTION, INC., on behalf of themselves
and all others similarly situated, Plaintiffs,



Filed: September 7, 2016
June 16, 2016



In this action Plaintiffs seek redress for Defendants' alleged anticompetitive and racketeering behavior prior to the market entry of two generic drugs. The case presents an issue of apparent first impression: whether Sherman Act claims brought by purchasers of a product may be predicated on an underlying fraud on the Food and Drug Administration.1 Both parties rely primarily on Supreme Court precedent that, while instructive, is not precisely on point. See

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Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341 (2001) (defendants), and POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228 (2014) (plaintiffs).

Defendants filed a Motion to Dismiss (##21, 22, 23), Plaintiffs opposed (##25, 26), and Defendants replied (##31, 36). For the reasons set forth below, I recommend that Defendants' Motion to Dismiss be ALLOWED as to all counts against Ranbaxy Laboratories Limited and Ranbaxy USA, Inc., and DENIED as to all counts against Ranbaxy, Inc. and Sun Pharmaceutical Industries Limited.

I. Facts

A. Background and Statutory Scheme

Some background is necessary to understand the issues in this case, so a summary of the relevant statutory and regulatory provisions follows. The Food and Drug Administration ("FDA") is the federal agency responsible for regulating and approving prescription drugs under the Food, Drug and Cosmetic Act ("FDCA"). (#1, Complaint, ¶33; see generally 21 U.S.C. § 301 et seq.) All pharmaceutical products must be approved by the FDA before being sold in interstate commerce in the United States. Title 21 U.S.C. § 355. Obtaining FDA approval for a new drug is an onerous process. (#1 ¶¶34, 39; and see 21 U.S.C. § 355 et seq.) To ease this burden, in 1984 legislation known as the Hatch-Waxman Act created a fast-track process for pharmaceutical companies to obtain FDA approval to produce generic versions of approved drugs. (#1 ¶¶39-42; Pub. L. No. 98-417, 98 Stat. 1585 (1984).) Under this scheme, a prospective generic drug manufacturer initiates the approval process by filing an Abbreviated New Drug Application ("ANDA") with the FDA. (#1 ¶¶43-55; 21 U.S.C. § 355(j).) The ANDA process was

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further refined by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the "MMA"), Pub. L. No. 108-173, 117 Stat. 2066 (Dec. 8, 2003). (#1 ¶60.)

B. ANDA Approval Process

Currently, there are three "milestones" in the ANDA approval process: receipt, tentative approval, and final approval. (#26-32 at 123; Ranbaxy Labs., Ltd. v. Burwell, 82 F. Supp. 3d 159, 166 (2015).) The District Court for the District of Columbia has summarized the process succinctly:

... [An] ANDA typically passes through three distinct phases of FDA review on the generic drug's way to the marketplace. A generic drug manufacturer must first perfect an application before that application is reviewed on the merits. If the ANDA could be approved, except for the presence of blocking patents or other periods of exclusivity, the ANDA may be tentatively approved, which approval does not allow the marketing of the drug but may serve to preserve eligibility for a 180-day generic marketing exclusivity period by eliminating a potential forfeiture event. After any patent impediments are removed, the ANDA may be granted final approval, at which point the drug may be marketed in interstate commerce.

Ranbaxy Labs., Ltd., 82 F. Supp. 3d at 170. Each of these steps is described in more detail below.

1. Receipt and Patent Certification

When a new ANDA is submitted, the FDA must determine whether it contains all the information required by statute. (#1 ¶44; #26-3 at 12; 21 U.S.C. § 355(j)(2)(a).) If so, the application is deemed "received." Id. "'Receipt' is a term of art... [meaning] 'that FDA has made a threshold determination that the [ANDA] is sufficiently complete to permit a substantive review.'" (#26-3 at 13 (quoting 21 C.F.R. § 314.101(b)(1)).) In its ANDA, the prospective

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manufacturer (the "prospect") must make detailed representations as to bioequivalence, demonstrate its ability to manufacture a safe, stable product, and show compliance with current good manufacturing practices ("cGMP"), among other things. (#1 ¶¶46-48; #26-3 at 12-13 (citing 21 C.F.R. §§ 314.50(d)(1), 314.94(a)(9)(i)).) The FDCA also lists circumstances under which an ANDA must be rejected. (#26-3 at 12 (citing 21 U.S.C. § 355(j)(4)).)

Usually the entity responsible for research and development (the "innovator") holds a patent on the drug it discovered; therefore, the prospect must claim in its ANDA one of four statutory exemptions to the patent. (#1 ¶51; 21 U.S.C. § 355(j)(2)(A)(vii)(I)-(IV).) Paragraph IV of Hatch-Waxman, relevant here, allows the prospect to assert either that the innovator's patent is invalid or that it will not be infringed by the prospect's generic drug. (#1 ¶51(d); 21 U.S.C. § 355(j)(2)(A)(vii)(IV).) An ANDA filing under Paragraph IV is per se an act of patent infringement, and triggers a 45-day window for the innovator to file suit against the prospect. (#1 ¶52; 35 U.S.C. § 271(e)(2).) In exchange for assuming this risk of litigation, the first prospect to file a successful Paragraph IV ANDA is rewarded with 180 days of exclusive rights to market and sell the generic version of the drug. (#1 ¶54; 21 U.S.C. §355(j)(5)(B)(iv).) During this exclusivity period, the first filer competes only with the brand manufacturer and any generic version of the drug authorized by the brand manufacturer and marketed under the authority of its original FDA approval. (#1 ¶55 n.13.) In doing so, the ANDA process effectively delays market competition to create an economic incentive for generics to challenge the patent.

The initial 180-day exclusivity period is the most profitable time for a new generic, because the first ANDA filer "typically captures an overwhelming majority of unit sales while offering only a relatively modest discount off the price of the brand." (#1 ¶¶28-29.) After

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multiple generic manufacturers launch their products, the price settles at market levels. (#1 ¶30.) Therefore, the exclusivity period is "whoppingly lucrative" for prospective generic manufacturers. (#45 at 35:11, and see F.T.C. v. Actavis, Inc., 133 S. Ct. 2223, 2229 (2013) (exclusivity period "possibly 'worth several hundred million dollars'" (quoting Hemphill, Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, 81 N.Y.U. L.Rev. 1553, 1579 (2006))).)

2. Tentative Approval and Exclusivity Eligibility

If the ANDA meets all the FDA's substantive requirements for approval yet faces pending technical obstacles due to a patent, another manufacturer's exclusivity, or a change of the applicable rules, the FDA may grant tentative approval ("TA"). (#1 ¶¶56-57; 21 U.S.C. § 355(j)(5)(B)(iv)(II)(dd)(AA); 21 C.F.R. § 314.107(b)(3)(v).) By statute, the FDA "shall approve" an ANDA unless a listed exception applies. (#26-3 at 13 (citing 21 U.S.C. § 355(j)(4) and 21 C.F.R. § 314.127).) "[I]n the FDA's view, the requirements for tentative and final approval are identical, except that tentative approval does not require a showing that the ANDA will not infringe upon any valid patent. Thus, the FDA must withhold tentative approval for the same reasons it must withhold final approval, including a lack of CGMP compliance." Ranbaxy Labs., Ltd., 82 F. Supp. 3d at 189. Even after the technical hurdle is resolved, TA is not a green light for entering the market. If enough time has elapsed, the FDA may still require further investigation before issuing a final approval letter. (#1 ¶58; #26-3 at 14 (quoting Ranbaxy Labs. Ltd. v. FDA, 307 F. Supp. 2d 15, 19 (D.D.C. 2004) ("Approvals do not become effective by operation of law because the FDA has an ongoing health and safety responsibility to perform.") (additional citations omitted)).)

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Merely winning the race to file a "received" ANDA does not ensure that a prospect will get the exclusivity period. The MMA sought to motivate prospects to get to market sooner by imposing a deadline on the first filer. (#26-3 at 15.) Under this amendment, the exclusivity period is generally forfeited if the first filer fails to obtain TA within 30 months of its ANDA filing date. (#1 ¶61; 21 U.S.C. § 355(j)(5)(D)(i)(IV); and see 21 U.S.C. § 355(j)(5)(D)(iii) ("If all first applicants forfeit the 180-day exclusivity period under clause (ii) — *** (II) no applicant shall be eligible for a 180-day exclusivity period").) "Congress enacted the forfeiture provisions to 'ensure that the 180-day exclusivity period enjoyed by the first generic to challenge a patent cannot be used as a bottleneck to prevent additional generic competition.'" 149 Cong. Rec. S15746 (daily ed. Nov. 24, 2003) (statement of Sen. Schumer) (quoted in Hi-Tech Pharmacal Co., Inc. v. U.S. Food & Drug Admin, 587 F. Supp. 2d 1, 4 (D.D.C. 2008), and #26-3 at 15).

However, there are two relevant exceptions to the forfeiture provisions. First, if the FDA causes the delay itself by "a change in or a review of the requirements for approval of the application," the exclusivity period is not forfeited even if the first filer cannot obtain TA within 30 months.4 (#1 ¶61 n.20; #26-25 at 15 (quoting 21 U.S.C. § 355(j)(5)(D)(i)(IV)).) Second, the exclusivity period is tolled while the FDA examines a citizen petition concerning the ANDA. (#1 ¶19 n.20; 21 U.S.C. §355(j)(5)(D)(IV).) In sum, the first filer "must demonstrate within 30 months that its application would be approved but for any blocking patents, exclusivities, or stays" in...

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