By Peter Reap, J.D., LL.M.
Overarching conspiracy claims fail, but antitrust claims based on the No-Generics Restraints in some of Gilead’s agreements survive the motion to dismiss. The motion to dismiss the antitrust claims based on the Teva patent settlement agreements also was denied.
In a suit alleging in a long-running scheme to restrain competition in the markets for certain HIV medications, the federal district court in San Francisco has rejected some of the numerous antitrust and consumer protection claims brought by individuals who purchased and/or paid for some the drugs and by health and welfare trust funds/plans that purchased or provided reimbursement for those drugs. For instance, the antitrust claims alleging an overarching conspiracy between the defendants were dismissed, with leave to amend. Some of the antitrust claims based on agreements between Gilead Sciences, Inc. and other drug companies not to launch generic alternatives to certain HIV treatments (No-Generics Restraints) were allowed to proceed. As for state-law antitrust and consumer protection claims, the motion to dismiss was granted in part and denied in part (Staley v. Gilead Sciences, Inc., March 3, 2020, Chen, E.).
The plaintiffs in this putative class action filed suit against companies that are the new drug application holders for, or otherwise manufacture, sell, and/or distribute, HIV medications: Gilead, Bristol-Myers Squibb (BMS), Japan Tobacco, and Janssen. The anticompetitive conduct identified by the plaintiffs was in three categories: (1) agreements between Gilead and one of the other defendants that contain No-Generics Restraints; (2) patent settlement agreements between Gilead and generic manufacturer Teva, under which Teva agreed to delay entry into the market in exchange for certain benefits; and (3) Gilead’s commercialization of one of its drugs known as TAF. The plaintiffs’ 13-count complaint included federal and state law claims for conspiracy to monopolize, monopolization, and attempted monopolization; violation of various state consumer protection laws; and various conspiracy claims in violation of both federal and state antitrust laws.
Currently pending before the court were four motions to dismiss, one filed by each defendant. Two amicus briefs had also been submitted—one from the FTC and one from a group of nonprofits in the field of HIV-related work.
Overarching conspiracy. The plaintiffs alleged an overarching conspiracy implicating all three categories of anticompetitive conduct identified above. The defendants moved to dismiss the causes of action on the basis that the plaintiffs failed to adequately allege all of the defendants were involved in one overarching conspiracy, asserting that nowhere in the complaint did the plaintiffs suggest that there was any collective agreement among BMS, Japan Tobacco, and Janssen to assist Gilead. The plaintiffs admitted that there was no such agreement, but argued that there was a viable overarching conspiracy claim based on a broader product market – i.e., the market for cART drugs (the modern HIV treatment regimen is known as cART, which stands for combination antiretroviral therapy, sometimes referred to as a "cocktail").
The plaintiffs’ overarching conspiracy claims were dismissed, with leave to amend, because they failed to adequately allege a cART product market. In addition, the plaintiffs failed to adequately allege that each non-Gilead defendant knew of its connection to a conspiracy to restrain trade in or monopolize that broader product market (as opposed to the narrower product markets consisting of each FDC (multiple drugs are often coformulated together into a single pill known as an FDC) coformulated by a non-Gilead defendant and Gilead, and its generic equivalent).
No-Generics Restraints. This category of antitrust claims was based on No-Generics Restraints in agreements between Gilead and each of the three other defendants. According to the plaintiffs, these restraints effectively protected Gilead’s NRTIs (nucleotide/nucleoside analogue reverse transcriptase inhibitors) by precluding the other drug manufacturer from selling a single pill known as an FDC, which stands for fixed-dose combination, that incorporate generic versions of Gilead’s NRTIs even after the patents protecting the NRTIs expire. The court first rejected the defendants’ motion based on the ancillary restraints doctrine. The No-Generics Restraints were not per se legal. They were subject to review under, at the very least, the rule of reason, the court explained.
Turning to the merits of each of the agreements at issue, the claims based on the No-Generics Restraints in the Gilead/Japan Tobacco agreement were dismissed with prejudice. The claims based on the No-Generics Restraints in the Gilead/BMS agreements and the Gilead/Janssen agreements were allowed to proceed. The plaintiffs were given leave to provide a more definite statement regarding their antitrust injury theory that untainted competitors in BMS, Japan Tobacco, and Janssen’s positions would actually have challenged Gilead’s patents prior to their expiration dates.
Teva patent settlements. The plaintiffs also claimed anticompetitive conduct based on patent settlement agreements between Gilead and Teva. The agreements contained Most-Favored Entry (MFE) and Most-Favored Entry Plus (MFEP) clauses, which were what allegedly induced Teva to delay its entry into the market. Because this was a situation where there was both an MFE and an MFEP, it was different from those cited by Gilead, and the court did not need to address the question of whether an MFE by itself can constitute anticompetitive conduct, it held. Therefore, the motion to dismiss was denied.
Gilead’s commercialization of TAF. In this category of antitrust claims, the plaintiffs alleged anticompetitive conduct based on the way that Gilead commercialized TAF, a form of the drug Tenofovir made by Gilead used in cART regimens. Gilead’s argument that the antitrust claims based on the commercialization of TAF should be dismissed because the same or similar types of claims were already dismissed in a prior case was without merit. Further, whether Gilead’s conduct for the actions at issue was an unlawful restraint could not be determined on a motion to dismiss, thus, the motion to dismiss was denied.
Relevant market. The plaintiffs pointed to two product markets: (1) the broader market for cART drugs generally and (2) the narrower market for each brand drug (standalone or FDC) and its AB-rated generic equivalent. To the extent the defendants suggested it was not permissible for the plaintiffs to base their antitrust claims on two different product markets, the court disagreed. It was not unreasonable for the plaintiffs to have identified two different product markets because they claimed harm to competition in two different ways. More specifically, they alleged that: (1) one "purpose and effect of Defendants’ unlawful conduct was to impair competition among drugs used in the cART regimen;" and (2) another "purpose and effect of Defendants’ ... unlawful conduct was to impair competition from generic versions of each of the brand name drugs at issue."
However, it was not clear from the complaint what exactly the cART product market was, the court reasoned. The plaintiffs did not explain, e.g., how there was reasonable interchangeability of use with respect to different cART drugs. Thus, because the plaintiffs did not adequately allege a cART market, its antitrust claims based on that market (as opposed to the narrower market for each brand drug) were dismissed but with leave to amend.
State law claims. The motion to dismiss the state law claim, both antitrust and consumer, was granted in part and denied in part.
The case is No. 3:19-cv-02573-EMC.
Attorneys: Aditya Vijay Kamdar (Durie Tangri LLP) for Peter Staley., Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund and Service Employees International Union, Local No. 1 Health Fund. Bryan Gant (White & Case LLP) for Gilead Sciences, Inc., Gilead Holdings, LLC and Gilead Sciences, LLC.
Companies: Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund; Service Employees International Union, Local No. 1 Health Fund; Gilead Sciences, Inc.; Gilead Holdings, LLC; Gilead Sciences, LLC
MainStory: TopStory Antitrust CaliforniaNews
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