Sigmapharm Inc. v. Mut. Pharm. Co. Inc.

• Decision Date: 02 March 2011
• Docket Number: Civil No. 10–430.
• Citation: 772 F.Supp.2d 660
• Parties: SIGMAPHARM, INC., Plaintiff,v.MUTUAL PHARMACEUTICAL COMPANY, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

772 F.Supp.2d 660

SIGMAPHARM, INC., Plaintiff,

v.MUTUAL PHARMACEUTICAL COMPANY, INC., et al., Defendants.

Civil No. 10–430.

United States District Court, E.D. Pennsylvania.

March 2, 2011.

Andrea L. D'Ambra, Gregory J. Lavorgna, Drinker, Biddle & Reath, LLP, Philadelphia, PA, Randy C. Eisensmith, James W. Dabney, Stephen S. Rabinowitz, Fried Frank Harris Shriver Jacobson LLP, New York, NY, for Plaintiff.James J. Rodgers, Dilworth Paxson LLP, T. Joel Zuercher, Pepper Hamilton LLP, Philadelphia, PA, Michael J. Klisch, Robert T. Cahill, Cooley Godward Kronish LLP, Reston, VA, for Defendants.

MEMORANDUM OPINION & ORDER

RUFE, District Judge.

In its First Amended Complaint, Plaintiff SigmaPharm, Inc. brings claims for violation of Section 1 of the Sherman Act (count I),¹ Pennsylvania common law barring restraint of trade (count II), and Section 17200 of the California Business and Professions Code barring unlawful and unfair competition ² (count III) against Defendants Mutual Pharmaceuticals Company, Inc. (“Mutual”), United Research Laboratories, Inc. (“United”), and King Pharmaceuticals, Inc. (“King”). Plaintiff also asserts a claim for breach of contract under Pennsylvania common law against Mutual and United only (count IV). Before the Court are: (1) a Motion to Dismiss counts I through III by Defendant King [doc. no. 40]; (2) a Motion to Dismiss all counts by Defendants Mutual and United [doc. no. 41]; (3) a motion to stay discovery pending this Court's resolution of the motions to dismiss by all Defendants [doc. no. 44]; and (4) a motion to compel discovery by SigmaPharm [doc. no. 57]. For the reasons set forth below, the Court will dismiss the federal antitrust claim for failure to state a claim, decline to exercise supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367(c), and dismiss the discovery motions as moot.

I. Factual & Procedural Background

SigmaPharm, a Delaware corporation, develops pharmaceutical technologies and products and enters into agreements with other entities to commercialize them. ³ Mutual and United (collectively “Mutual”), both Pennsylvania corporations, and King, a Tennessee corporation, develop, manufacture, market, sell, and distribute pharmaceutical drugs.⁴ SigmaPharm's First Amended Complaint alleges that Mutual and King conspired to restrict the output of generic equivalents to King's brand-name drug SKELAXIN, in violation of federal and state antitrust law and in breach of SigmaPharm's development agreement with Mutual.

A. The SigmaPharm–Mutual Employment & Development Agreements

In March 1999, Mutual and SigmaPharm entered into two agreements: (1) a development agreement between Mutual and SigmaPharm; and (2) an employment agreement between SigmaPharm's President, Dr. Spiridon Spireas, and Mutual. The employment agreement provided that Spireas would serve as Mutual's Vice President of Research and Development, and assume responsibility for Mutual's laboratory and research activities related to obtaining Food and Drug Administration (“FDA”) approval of any new drugs it developed. Under the development agreement, SigmaPharm served as a contractor to develop “innovations” for Mutual. “Innovations” are inventions, improvements or enhancements to Mutual's pharmaceutical products developed by SigmaPharm for which Mutual secures a patent or which Mutual otherwise deems to be an “innovation.” ⁵ The development agreement provided that Mutual had sole ownership of all rights, title and interest in any “innovation” in the U.S. market as well as ownership of any U.S. Patents that might issue,⁶ but SigmaPharm was entitled to royalties from Mutual's manufacture and sale of any such pharmaceuticals in the United States. For generic equivalents of name-brand drugs developed by SigmaPharm that required approval under the FDA's Abbreviated New Drug Application (“ANDA”) process, SigmaPharm was to receive 10% of gross profits from Mutual's U.S. sales.⁷ But if additional generic competitors entered the market, the royalties would decrease: with the entry of one, two or three additional competitors, royalties declined to 5%, 2.5%, or 0%, respectively.⁸ And if Mutual licensed or sold the right to sell the product, or “agreed to refrain from selling such product,” SigmaPharm was to receive 25% of the gross profit from the licensing fees or royalties from that license, sale, or agreement.⁹

B. The Abbreviated New Drug Application Process

The ANDA process was established by the Drug Price Competition and Patent Term Restoration Act of 1984 (“Hatch–Waxman Act”).¹⁰ The Hatch–Waxman Act establishes relaxed FDA approval procedures for generic equivalents of previously approved pharmaceutical drugs, allowing generic manufacturers to submit abbreviated applications.¹¹ Those procedures allow a generic drug manufacturer to bypass the safety and efficacy studies required for all new drugs so long as they establish the generic's bioequivalence ¹² to a drug previously approved by FDA as safe and effective.¹³ The ANDA must also provide information to show that the labeling for the generic is the same as the labeling approved for the listed drug, unless certain exceptions apply.¹⁴ If a patent claims the previously approved drug that the generic copies, or claims a use for the previously approved drug for which the ANDA applicant seeks approval, the generic manufacturer must certify either that patent information has not been filed, the patent has expired, the date on which the patent will expire, or that the “patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted.” ¹⁵ This last certification is known as a “Paragraph IV certification.” ¹⁶ The generic manufacturer must notify the brand-name manufacturer and patent holder of its ANDA, after which the patent holder has 45 days to bring an infringement suit.¹⁷ This notification is not required if the applicant certifies that the patent at issue protects only methods of using the drug and the patent does not claim a use for which the applicant is seeking approval ¹⁸—a “Section viii” certification. If an infringement suit is filed, the FDA must stay approval of the ANDA until the earliest of: (1) the date the patent expires; (2) the date the district court holds the patent invalid or the generic non-infringing; or (3) 30 months from the date of the notice have elapsed.¹⁹ If the generic is approved, the generic manufacturer enjoys a 180–day period of market exclusivity.²⁰

C. Mutual's Second Generic to SKELAXIN & King's Method Patents

The dispute in this case arises from SigmaPharm's development, pursuant to the development agreement, of a generic equivalent of the brand-name muscle relaxant SKELAXIN.²¹ SKELAXIN's active ingredient, metaxalone, is no longer protected by patent.²² Thus the patents relevant here, licensed to Defendant King, claim new methods of administering metaxalone (with food) that increase bioavailability ²³ of the drug and the drug levels in a patient's blood. In early 2001, after Spireas developed a 400 mg metaxalone tablet that demonstrated bioequivalence to SKELAXIN under fasting conditions (the “First Generic”), Mutual successfully petitioned the FDA to require all ANDA's for generic SKELAXIN to demonstrate bioequivalence under fasting conditions,²⁴ protecting its competitive position. Later in 2001, Elan Pharmaceuticals, which then owned the SKELAXIN trademark and the exclusive right to sell and market that drug, sought the FDA's permission to amend SKELAXIN's label to reference increased bioavailability of SKELAXIN when administered with food, and petitioned it to require all ANDA's for generic SKELAXIN to demonstrate bioequivalence under both fasting and non-fasting conditions.²⁵ In March 2002, the FDA granted the petition, ordered all ANDA's to comply with it, and subsequently approved the proposed labeling amendment.²⁶

Elan then sought method patents for SKELAXIN associated with the drug's administration under fed conditions. In mid–2002, the U.S. Patent and Trademark Office issued to Elan the “'128 Patent,” which claims “methods of increasing the bioavailability of metaxalone by administering [it] with food.” ²⁷ Then, in January 2004, the USPTO issued to Elan the “'102 Patent,” which was “directed to methods of providing metaxalone to patients while informing them that taking metaxalone with food results in higher blood levels of metaxalone.” ²⁸ At some point after June 2002, Elan sold to King the SKELAXIN trademark and rights to market and sell that drug, and licensed the '102 and '128 patents to King.²⁹

After the '128 Patent was issued, Spireas developed another SKELAXIN generic (the “Second Generic”) that demonstrated bioequivalence under fed as well as fasting conditions, as required under the new FDA order. In March 2003, Mutual filed an ANDA for that formulation, including a Section viii certification that the '128 Patent did not claim a use for which Mutual was seeking approval.³⁰ Then, in January 2004, after the '102 Patent was issued, Mutual filed a Paragraph IV certification that its Second Generic would not infringe that patent.³¹ In March 2004, FDA notified ANDA applicants that they need not include labeling regarding the increased bioavailability of metaxalone under fed conditions, undermining King's strategy to exclude generic competitors by requiring them to use labels that implicated King's method patents.³² The notice thus allowed ANDA applicants to carve King's patented indications out of the label, permitting Mutual to market the Second Generic without implicating “the allegedly novel ‘methods' ” claimed in King's patents.³³

In March 2004, King fought back, bringing an infringement action against Mutual in the Eastern District of Pennsylvania,³⁴ and petitioning the FDA to: rescind its March 2004 notice to ANDA applicants; require all ANDA applicants to submit a Paragraph IV certification against the...