Retrophin, Inc. v. Questcor Pharm., Inc.

• Decision Date: 08 August 2014
• Docket Number: Case No. SACV 14–26–JLS JPRx.
• Citation: 41 F.Supp.3d 906
• Court: U.S. District Court — Central District of California
• Parties: RETROPHIN, INC., Plaintiff, v. QUESTCOR PHARMACEUTICALS, INC., Defendant.

41 F.Supp.3d 906

RETROPHIN, INC., Plaintiff

v.QUESTCOR PHARMACEUTICALS, INC., Defendant.

Case No. SACV 14–26–JLS JPRx.

United States District Court, C.D. California.

Signed Aug. 8, 2014.

Tami Kameda Sims, Katten Muchin Rosenman LLP, Los Angeles, CA, James J. Calder, Mark T. Ciani, Katten Muchin Rosenman LLP, New York, NY, for Plaintiff.

John F. Cannon, Stradling Yocca Carlson and Rauth PC, Newport Beach, CA, Mark S. Popofsky, Ropes & Gray LLP, Washington, DC, Rocky C. Tsai, Ropes & Gray LLP, San Francisco, CA, for Defendant.

ORDER DENYING MOTION TO DISMISS (Doc. 21)

JOSEPHINE L. STATON, District Judge.

I. INTRODUCTION

Before the Court is Defendant Questcor Pharmaceuticals, Inc.'s Motion to Dismiss. (Mot., Doc. 21.) Plaintiff Retrophin, Inc. opposed, and Questcor replied. (Opp'n, Doc. 25; Reply, Doc. 26.) Having considered the parties' briefing, heard oral argument, and taken the matter under submission, the Court DENIES Questcor's Motion.

II. BACKGROUND

When ruling on a motion to dismiss, the Court accepts as true the factual allegations in the complaint. Hemi Grp., LLC v. City of New York, 559 U.S. 1, 130 S.Ct. 983, 986–87, 175 L.Ed.2d 943 (2010). Retrophin is a biopharmaceutical company. (Compl. ¶ 11, Doc. 1.) Questcor is the sole provider in the United States of approved therapeutic preparations of adrenocorticotropic hormone (“ACTH

”), a drug used to treat certain life threatening and often fatal diseases. (Id. ¶ 1.) Questcor's ACTH drug is sold under the brand name H.P. Acthar Gel (“Acthar ”). (Id. )

A. Acthar

and Relevant Markets

Acthar

is the only long-acting ACTH therapeutic drug approved by the Food and Drug Administration for use in the United States. (Id. ¶ 3.) It is the most effective and dominant first-line of treatment for Infantile Spasms. (Id. ) Questcor has obtained “Orphan Drug Designation” for Acthar from the FDA, giving it the exclusive right to market Acthar and its chemical equivalent for use in treating Infantile Spasms. (Id. ) Acthar is also the most commonly used treatment of last resort for patients suffering from Nephrotic Syndrome —in other words, it is used when patients do not respond to or cannot tolerate other therapies. (Id. )

In 2001, Questcor acquired the rights to Acthar

, at which time the drug was being sold for $50 a vial or less. (Id. ¶ 2.) Since acquiring Acthar, Questcor has raised the price to $28,000 a vial. (Id. )

Retrophin alleges that Questcor has monopoly power in the following three markets: (1) ACTH

therapeutic drugs, for which Questcor “effectively has 100% of the market,” (id. ¶¶ 19–24, 37–39); (2) therapeutic drugs to treat Infantile Spasms, for which Questcor has “more than 50% ” of the market (id. ¶¶ 25–29, 40–42); and (3) last resort therapeutic drugs to treat Nephrotic Syndrome, for which no specific market share is alleged, but for which Acthar is alleged to be the “primary and dominant” treatment. (Id. ¶¶ 30–34, 43–45.) Each market is geographically limited to the United States. (Id. ¶¶ 24, 29, 34.) The Court refers to these three markets collectively as the “Relevant Markets.”

B. Questcor's Acquisition of Rights to Synacthen

Novartis AG holds rights to Synacthen, an ACTH

drug that is similar, but not chemically identical, to Acthar. (Id. ¶¶ 4, 46.) Unlike Acthar, Synacthen is synthetically manufactured, and as a result Synacthen is less expensive to manufacture, is less susceptible to variation, and is produced in a more sterile environment. (Id. ¶ 47.) Synacthen has been used for decades outside of the United States for the successful treatment of Infantile Spasms and Nephrotic Syndrome. (Id. ¶¶ 4, 46, 59.) Synacthen is not sold in the United States because it has never been submitted to the FDA for approval. (Id. ¶ 4, 46.)

Retrophin planned to purchase rights from Novartis to manufacture and sell Synacthen in the United States, and to seek FDA approval for its use as a therapeutic. (Id. ¶ 48.) Retrophin intended to compete in the Relevant Markets with Questcor by selling Synacthen at a fraction of the price charged by Questcor for Acthar

. (Id. ) Following approximately nine months of negotiations, Retrophin and Novartis agreed on terms for Retrophin to acquire rights to Synacthen. (Id. ¶ 49.) In anticipation of the transaction, Retrophin prepared specific plans on how to obtain regulatory approval of Synacthen, and put in place a clinical apparatus to conduct clinical trials necessary for FDA approval. (Id. ¶¶ 50, 51.) Retrophin believed that the history of Synacthen's use in other countries would aid in obtaining FDA approval for the same indications. (Id. ¶ 50.)

On June 11, 2013, the day Retrophin and Novartis were set to sign their proposed agreement, Questcor “swept in” and acquired the rights to Synacthen. (Id. ¶¶ 53–54.) Retrophin alleges that Questcor's acquisition of Synacthen has preserved and entrenched Questcor's monopoly in the Relevant Markets by foreclosing or delaying Retrophin's entry into those markets. (Id. ¶¶ 52, 56.)

C. Retrophin's Development of RE–034

Retrophin has also taken the “highly unusual step of trying to create from scratch a drug—that it has designated as RE–034—that will match Synacthen.” (Id. ¶ 57.) “Retrophin is endeavoring to create a new formulation of the drug that will incorporate the same active pharmaceutical ingredient used in Synacthen and match Synacthen's therapeutic effects for patients suffering from Infantile Spasms

and Nephrotic Syndrome.” (Id. ¶ 57.) The development of RE–034 “will take substantial time and money and will require FDA approval;” it will also require the successful completion clinical trials. (Id. ¶ 58.) There is no guarantee that RE–034 will succeed in the clinical trials or succeed in obtaining FDA approval. (Id. ) Thus, there is no guarantee RE–034 will ever be able to enter the Relevant Markets. (Id. ) Entering the Relevant Markets through RE–034 is more difficult, risky, and time consuming than entering through Synacthen, because there are decades of clinical data from outside the United States that can be used to facilitate and speed the regulatory approval process in the United States, whereas for RE–034 “Retrophin will need to develop all of that knowledge from scratch.” (Id. ¶¶ 58–60.)

III. LEGAL STANDARDS

A. Rule 12(b)(6)

When evaluating a Rule 12(b)(6) motion, the Court must accept as true all allegations of material facts that are in the complaint and must construe all inferences in the light most favorable to the non-moving party. See Moyo v. Gomez, 32 F.3d 1382, 1384 (9th Cir.1994). Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires only a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Dismissal of a complaint for failure to state a claim is not proper where a plaintiff has alleged “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). A complaint must (1) “contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively,” and (2) “plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.2011). “Although for the purposes of a motion to dismiss [the Court] must take all of the factual allegations in the complaint as true, [it] ‘[is] not bound to accept as true a legal conclusion couched as a factual allegation.’ ” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ). Moreover, the Supreme Court has cautioned against permitting antitrust cases to proceed to discovery without a plaintiff demonstrating “plausibility” because of the high cost of discovery in antitrust cases in particular. See Twombly, 550 U.S. at 558, 127 S.Ct. 1955 (“Thus, it is one thing to be cautious before dismissing an antitrust complaint in advance of discovery, but quite another to forget that proceeding to antitrust discovery can be expensive.”) (internal citation omitted).

IV. DISCUSSION

Questcor moves to dismiss Retrophin's Complaint under Federal Rule of Civil Procedure 12(b)(6) based on the following arguments: (1) Retrophin lacks antitrust injury and antitrust standing; (2) Retrophin fails to allege market power or harm to competition; (3) Retrophin's attempted monopolization claim fails; (4) Retrophin fails to allege the absence of a legitimate business justification by Questcor; and (5) Retrophin's state-law claims fail. (Mem., Doc. 22.) In support of its Motion, Questcor requests that the Court take judicial notice of or otherwise consider a substantial number of documents outside the pleadings. The Court first addresses Questcor's requests for the Court to consider these documents. The Court next addresses whether Retrophin sufficiently alleges antitrust injury and antitrust standing. The Court then addresses Questcor's arguments regarding market power, harm to competition, attempted monopolization, and lack of legitimate business justification. Finally, the Court addresses Retrophin's state-law claims.

A. Requests for Judicial Notice and Matters Outside the Pleadings

“As a general rule, [courts] may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion.” U.S. v. Corinthian Colleges, 655 F.3d 984, 998 (9th Cir.2011) (citation and quotation marks omitted). “[Courts] may, however,...