Takeda Pharmaceutical Company Ltd. v. Zydus Pharmaceuticals USA Inc.

• Decision Date: 26 July 2021
• Docket Number: Civil Action 18-1994 (FLW)
• Parties: TAKEDA PHARMACEUTICAL COMPANY LIMITED, TAKEDA PHARMACEUTICALS U.S.A., INC., and TAKEDA PHARMACEUTICALS AMERICA, INC., Plaintiffs and Counterclaim Defendants, v. ZYDUS PHARMACEUTICALS USA INC., and CADILA HEALTHCARE LIMITED, Defendants and Counterclaim Plaintiffs.
• Court: U.S. District Court — District of New Jersey

TAKEDA PHARMACEUTICAL COMPANY LIMITED, TAKEDA PHARMACEUTICALS U.S.A., INC., and TAKEDA PHARMACEUTICALS AMERICA, INC., Plaintiffs and Counterclaim Defendants, v. ZYDUS PHARMACEUTICALS USA INC., and CADILA HEALTHCARE LIMITED, Defendants and Counterclaim Plaintiffs.

Civil Action No. 18-1994 (FLW)

United States District Court, D. New Jersey

July 26, 2021

OPINION

HON FREDA L. WOLFSON U.S. CHIEF DISTRICT JUDGE

In this patent litigation, Takeda Pharmaceutical Company Limited sued Zydus Pharmaceuticals (USA) Inc. for infringing Prevacid SoluTab, an orally disintegrating tablet used to treat gastroesophageal reflux disease. Zydus counterclaimed arguing that Takeda filed a “sham suit” to maintain its monopoly power in violation of the Sherman Act and the New Jersey Antitrust Act, and sought damage for the delayed launch of its product. After testing Zydus' generic version in discovery, Takeda voluntarily dismissed its claims, but Zydus did not. Both parties now move for summary judgment on the counterclaims. Takeda argues that its suit is protected by the Noerr-Pennington doctrine which immunizes First Amendment activity such as litigation from antitrust liability. E.R.R. Presidents Conference v Noerr Motor Freight, Inc., 365 U.S. 127 (1961); United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965). Takeda also argues that Zydus has not established a substantive antitrust violation, but “stymied” its own efforts to enter the market after winning a prior infringement case in 2014. Zydus counters that Takeda's suit falls under the narrow exception to Noerr-Pennington for litigation that is both objectively and subjectively baseless, and as such, Takeda should not be permitted to raise that defense. In re Wellbutrin XL Antitrust Litig. Indirect Purchaser Class, 868 F.3d 132, 146 (3d Cir. 2017). For the following reasons, Takeda's motion is GRANTED, Zydus' motion is DENIED, and the counterclaims are DISMISSED.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Takeda manufactures Prevacid SoluTab, an orally disintegrating tablet used to treat gastroesophageal reflux disease by suppressing stomach acid. Pl. Statement of Undisputed Material Facts (“SUMF”), ¶¶ 1-3. Prevacid contains the active ingredient lansoprazole, a proton pump inhibitor. Id. ¶ 1. Its main innovation is fine granules measuring 400 μm or less in diameter, which dissolve in the mouth and leave behind thousands of coated particles, or microcrystals, that release directly into the bloodstream, obviating the need for patients to swallow. Id. ¶¶ 20, 22, 25, 28. First patented in 2001, ^[1] id. ¶¶ 10-12, and approved by the Federal Drug Administration (“FDA”) in a New Drug Application (“NDA”) in 2002, id. ¶¶ 4, 7, Prevacid was the only drug of its type for many years. Def. Supp. SUMF, ¶¶ 222-24 (“[I]f the relevant market is lansoprazole ODT, then [Prevacid] would have had a 100 percent market share from . . . approximately 2011 until . . . 2018.”).

A. Hatch-Waxman: The Statutory Framework Governing Generic Drug Entry

To better explain the issues in this case, it is necessary to begin with the statutory framework applicable when a generic seeks to enter the market for a branded drug. Under the Drug Price Competition and Patent Term Restoration Act of 1984, see 98 Stat. 1585, Pub. L. No. 98-417, commonly known as Hatch-Waxman, a generic manufacturer may file an Abbreviated New Drug Application (“ANDA”) to “piggy-back on the brand's NDA.” Caraco Pharm. Lab'ys., Ltd. v. Novo Nordisk A/S, 566 U.S. 399, 404-05 (2012). “Rather than providing independent evidence of safety and efficacy, ” as a brand-name manufacturer must do when it files an NDA, see 21 U.S.C. § 355(b)(1)(A)(i), which often entails “a long, comprehensive, and costly testing process, ” see Wellbutrin, 868 F.3d at 143, “the typical ANDA shows that the generic drug has the same active ingredients as, and is biologically equivalent to, the brand-name drug, ” and thus receives expedited review. Caraco, 566 U.S. at 405.

Submitting an ANDA is “by statutory definition an infringing act, ” see Wellbutrin, 868 F.3d at 149; 35 U.S.C. § 271(e)(2)(A) (“It shall be an act of infringement to submit [ ] an [ANDA] for a drug claimed in a patent.”), so generic entry generates many intellectual property disputes.^[2]Hatch-Waxman sets out “special procedures” for resolving them. F.T.C. v. Actavis, Inc., 570 U.S. 136, 143 (2013). For instance, a brand-name manufacturer must “list in its [NDA] the number and the expiration date of any relevant patent, ” id., which the FDA compiles into an Orange Book. 21 U.S.C. § 355(j)(5)(B)(iii). The generic must then “assure the FDA [in its ANDA] that [it] will not infringe the brand-name's patents.” Actavis, 570 U.S. at 143 (quotations and citations omitted). One way to do so is to affirm that “any listed, relevant patent ‘is invalid or will not be infringed by the manufacture, use, or sale' of the drug described in the [ANDA], ” otherwise known as a Paragraph IV Certification. 21 U.S.C. § 355(j)(2)(A)(vii); In re Omeprazole Pat. Litig., 490 F.Supp.2d 381, 395-96 (S.D.N.Y. 2007) (“Only one type of certification is pertinent here: a ‘Paragraph IV' certification. In a Paragraph IV certification, the generic manufacturer seeks to obtain FDA approval before a listed patent expires and asserts that the patent listed in the Orange Book is either not infringed or invalid.”), aff'd, 281 Fed. App'x. 974 (Fed. Cir. 2008). Because the generic must send its Paragraph IV Certification to the brand-name, see 21 C.F.R. §§ 314.96(d)(1)(i)-(iii), this usually “means provoking litigation.” Caraco, 566 U.S. at 407.

There is a strong economic incentive to litigate Hatch-Waxman cases in a timely manner. If, within 45 days of receiving a Paragraph IV Certification, a brand-name sues for infringement, the FDA cannot approve the generic's product for up to 30 months.^[3] 21 U.S.C. § 355(j)(5)(B)(iii). This provides “some breathing space before competition can begin.” Wellbutrin, 868 F.3d at 144. The 30-month stay lifts when the generic wins, the parties settle, or the patents expire. Similarly, there is a special incentive to file the first ANDA: the generic who does so obtains the exclusive right to sell its drug for 180 days. 21 U.S.C. § 355(j)(5)(B)(iv). This period can be “possibly” be “worth several hundred million dollars.” Actavis, 570 U.S. at 144 (quoting Hemphill, Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, 81 N.Y.U. L. Rev. 1553, 1579 (2006)).

B. The Parties' Prior Litigation: Zydus I, Zydus II, and Zydus III

Generics have long sought entry into the Prevacid market. See, e.g., Takeda Pharm. Co. v. Teva Pharm. USA, Inc., 668 F.Supp.2d 614 (D. Del. 2009); Pl. SUMF, ¶¶ 15-16 (listing nine ANDAs in twelve years). Teva Pharmaceuticals USA, Inc., was the first to receive FDA approval in October 2010, but withdrew its product in April 2011 because it risked clogging a patient's nasogastric (i.e., feeding) tubes when injected by syringe.^[4] Pl. SUMF, ¶ 17. No other generic succeeded until September 2017, when the FDA authorized Teva's second formulation. Id. ¶ 18. Teva launched on March 8, 2018.^[5] Id. ¶ 19.

Zydus sought to enter the Prevacid market around the same time as Teva. Id. ¶ 25; Def. SUMF, Ex. 7. In February 2010, it served Takeda with a Paragraph IV Certification for its original ANDA. Def. SUMF, ¶ 31. Takeda promptly sued for infringement. Pl. SUMF, ¶ 26. The present dispute hinges in large part on that litigation. The parties disagreed on how to construe the claim language “fine granules having an average particle diameter of 400 μm or less” in the '994 patent. Takeda Pharm. Co. v. Zydus Pharms. USA Inc., No. 10-1723, 2011 WL 4736306, at *3 (D.N.J. Oct. 5, 2011). Judge Pisano^[6] adopted Takeda's construction, finding Claim 1 to mean “granules up to and including the enteric coating layer having an average particle diameter of 400 μm (+/-10%) or less.” Id. at *4.

In 2012, in response to an FDA inquiry, Zydus incorporated into its ANDA an “in-process quality control specification” resulting from a product reformulation, which would require a median particle diameter “not less than 450 μm” and discard any non-conforming particles. Def. SUMF, Ex. 17. Judge Pisano permitted Takeda to re-test Zydus' new product to ensure the accuracy of its assertions, despite Zydus' objections. Pl. SUMF, ¶ 31; see also Case No. 10-1723, ECF No. 265, at 2. As a result, he extended the 30-month stay for six months and reopened discovery. Id. After this round of discovery concluded, Zydus moved in limine to “preclude evidence of particle size diameter” from trial on the grounds that “the Court need not look beyond the ANDA to resolve infringement.” Case No. 10-1723, ECF No. 317, at 4. According to Zydus, because it changed its ANDA to require its granules to be at least 450 μm, 10 μm bigger than the 440 μm upper limit in the '994 patent, its generic could not literally infringe Prevacid. Pl. SUMF, ¶ 33. Judge Pisano denied Zydus' motion, holding that “the focus of the infringement inquiry in this case, like a typical ANDA case, is on what the ANDA applicant will likely market if the application is approved, ” not merely on what the ANDA recites. Case No. 10-1723, ECF No. 317, at 4. Judge Pisano also noted that “a focus of the infringement portion of the trial” would be whether the ‘994 patent requires Prevacid's granules to be “deagglomerated, ” or broken apart without breaking the microcrystals themselves, prior to testing size. Id. at 11; Def. Supp. SUMF, ¶ 26.

The parties went to trial on the '994 patent.^[7] Def. Supp. SUMF ¶ 23. Takeda's expert testified that, based on testing requiring deagglomeration, Zydus' reformulated particles averaged between 412.28 μm and 420.46...