Antitrust Law Daily Claims go forward in ‘first-to-file’ generic drug application case
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Monday, December 2, 2019

Claims go forward in ‘first-to-file’ generic drug application case

By Nicole D. Prysby, J.D.

Federal and state law claims will proceed against pharmaceutical company Ranbaxy, Inc., based on its alleged wrongful acquisition of exclusivity periods for generic Diovan, Valcyte, and Nexium.

The bulk of the claims against pharmaceutical company Ranbaxy, Inc., based on its alleged anticompetitive behavior in obtaining first-to-file status for generic drug applications, go forward, held a federal district court in Massachusetts. Direct purchaser (DPP) and end-payor (EPP) plaintiffs alleged that Ranbaxy ignored Federal Drug Administration regulations and protocols by submitting multiple Abbreviated New Drug Application (ANDAs) for generic Diovan, Valcyte, and Nexium with missing, incorrect or fraudulent information, thereby wrongfully acquiring exclusivity periods and delaying the market entry of generic drugs. The Food, Drug, and Cosmetic Act (FDCA) did not preempt the claims because the state law remedies supplement the federal law. Plaintiffs established Racketeer Influenced and Corrupt Organizations Act (RICO) predicate acts by alleging that Ranbaxy’s conduct caused a delay in the availability of generic drugs which caused them to purchase those drugs at artificially inflated prices. There is no requirement in the mail or wire fraud statutes that the victim who is deprived of money or property be the same party who was deceived by the defendant’s scheme. The sham petitioning exception to Noerr-Pennington immunity applies even though the alleged anticompetitive conduct is a result of the outcome of a government process (the granting of the exclusivity period) rather than a use of governmental process. Most claims under state antitrust and consumer protection law go forward (In re Ranbaxy Generic Drug Application Antitrust Litigation, November 27, 2019, Gorton, N.).

DPPs and EPPs alleged that Ranbaxy submitted multiple Abbreviated New Drug Application (ANDAs) with missing, incorrect or fraudulent information, thereby wrongfully acquiring exclusivity periods and delaying the market entry of generic drugs. DPPs and EPPs brought claims for violations of RICO, federal and state antitrust law, and state consumer protection law. Ranbaxy motioned to dismiss all claims.

Preemption. Ranbaxy argued that the FDCA precludes EPPs’ state law claims because the FDA has the exclusive authority to enforce the FDCA. The court held that the claims are not preempted by the FDCA, because the state law remedies supplement the federal law, rather than encroach on it. The EPPs do not seek to remedy only FDCA noncompliance, but claim an injury by conduct of Ranbaxy that is independently proscribed under state law. The EPPs may use evidence of Ranbaxy’s efforts to manipulate the regulatory process in order to prove their state law antitrust and consumer protection claims without converting them into preempted fraud-on-the-FDA claims.

State law claims. The court held that the EPPs have standing under Florida and Massachusetts antitrust laws, which permit claims by indirect purchasers. Arizona, Michigan and North Dakota claims may proceed in federal court. Iowa and Minnesota claims go forward over Ranbaxy’s argument that it is entitled to state action immunity, because there is no evidence that its alleged anticompetitive activities were expressly approved or regulated as required by the state action doctrine. For similar reasons, the EPPs’ Nebraska state law claims go forward.

EPPs have standing under the consumer protection laws of Maine, Michigan, Missouri, Pennsylvania, North Carolina, and Vermont. The court rejected an argument from Ranbaxy that the EPPs’ claims under consumer statutes of Minnesota, Missouri, New Mexico, North Dakota and South Dakota fail because its alleged fraud was made in connection with the FDA approval process, not with respect to any sale of goods. The statutes are broad enough to encompass misrepresentations which bear on downstream sales. West Virginia consumer protection claims go forward. Claims under Massachusetts law go forward because at least some EPPs were injured by Ranbaxy’s conduct in Massachusetts.

EPPs’ consumer protection claims under California, Maine and West Virginia law fail, because Ranbaxy was not served with the required notice and demand prior to the filing of the respective suits. Claims under Pennsylvania and South Dakota law fail because the EPPs do not identify any specific misrepresentations upon which they relied to their detriment. Minnesota consumer protection claim fails because the sole statutory remedy for deceptive trade practices under the Minnesota statute is injunctive relief which EPPs do not seek.

Statute of limitations. Ranbaxy argued that the EPPs’ RICO claim and some of the state claims are barred by a four-year statute of limitations, which accrued when the FDA revoked Ranbaxy’s approval for Valcyte and Nexium (which occurred more than four years before the complaints were filed). The court declined to decide the issue at this time, as there is an issue of a possible continuing violation.

Noerr-Pennington immunity. Ranbaxy asserted that the sham petitioning exception to Noerr-Pennington immunity applies only when the alleged anticompetitive conduct is a result of a defendant’s use of governmental process as opposed to its use of the outcome of that process. In other words, Ranbaxy is not alleged to have gained an anticompetitive advantage merely by seeking a tentative approval for its ANDAs; any alleged anticompetitive advantage could have resulted only from the outcome of that process: the FDA’s grant of the exclusivity period. But the court found no support to limit the governmental process at issue to include only the tentative approval stage as opposed to the entire ANDA approval process. Plaintiffs adequately allege that Ranbaxy used a stage of the ANDA approval process to secure exclusivity while awaiting final approval to bar competition.

RICO predicate offenses. Ranbaxy argued that the plaintiffs cannot demonstrate that it committed the alleged predicate acts of mail and/or wire fraud, since a license to market drugs for a 180-day exclusivity period is not "property" in the hands of the FDA, and the FDA was Ranbaxy’s only victim of fraud. But the court rejected that argument, based on plaintiffs’ allegations that Ranbaxy’s fraud affected the interests of entities other than the government. Specifically, plaintiffs allege that Ranbaxy’s conduct caused a delay in the availability of generic Diovan, Valcyte, and Nexium which caused them to purchase those drugs at artificially inflated prices, an interest distinct from any regulatory interests of the FDA. There is no requirement in the mail or wire fraud statutes that the victim who is deprived of money or property be the same party who was deceived by the defendant’s scheme.

This case is No. 1:15-cv-11828-NMG.

Attorneys: Gregory T. Arnold (Hagens Berman Sobol Shapiro LLP) and John D. Radice (Radice Law Firm, PC) for Meijer, Inc. and Meijer Distribution, Inc. Amanda B. Elbogen (Kirkland & Ellis LLP) for Ranbaxy Inc. and Sun Pharmaceuticals Industries Ltd.

Companies: Meijer, Inc.; Meijer Distribution, Inc.; Ranbaxy Inc.; Sun Pharmaceuticals Industries Ltd.

MainStory: TopStory Antitrust RICO MassachusettsNews

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