Antitrust Law Daily Overarching conspiracy claims fail, other claims go forward in action over HIV drugs
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Thursday, July 30, 2020

Overarching conspiracy claims fail, other claims go forward in action over HIV drugs

By Nicole D. Prysby, J.D.

Overarching conspiracy claims failed but claims based on a No-Generics Restraint clause survived in class action litigation over HIV drugs.

Antitrust claims based on a No-Generics Restraints clause survived but overarching conspiracy claims were dismissed by the federal district court in San Francisco in a class action suit alleging a long-running scheme to restrain competition in the markets for certain HIV medications. Plaintiffs adequately alleged that an agreement between pharmaceutical manufacturers contained a No-Generics Restraint, because the agreement was ambiguous and could have precluded a product made up of some generic components. Plaintiffs also adequately alleged a product market and antitrust injury. Claims based on an overarching conspiracy failed because Plaintiffs only alleged parallel conduct, but claims based on bilateral conspiracies went forward. Claims based on alleged payment of royalties after patent expiration and based on a patent term extension failed (Staley v. Gilead Sciences, Inc., July 29, 2020, Chen, E.).

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 Sciences, Inc., Bristol-Myers Squibb (BMS), and Janssen. Plaintiffs’ 15-count complaint included claims for monopolization and attempted monopolization in violation of section 2 of the Sherman Act and state law; violation of various state consumer protection laws; and various conspiracy claims in violation of sections 1 and 2 of the Sherman Act and state antitrust laws. In March 2020, the court dismissed some of the claims and gave Plaintiffs leave to amend. Plaintiffs filed a first amended consolidated class action complaint (FACC) and Defendants moved to dismiss the claims.

No-generics restraints. Plaintiffs adequately alleged that the Atripla Agreement between Gilead and BMS contains a No-Generics Restraint. Atripla is the brand version of the fixed-dose combination (FDC) made up of TDF/FTC (Gilead’s drugs) and (2) EFV (BMS’s drug). According to Plaintiffs, these restraints effectively protected Gilead’s NRTIs (nucleotide/nucleoside analogue reverse transcriptase inhibitors) by precluding the other drug manufacturer from selling a single FDC pill that incorporates generic versions of Gilead’s NRTIs even after the patents protecting the NRTIs expire. According to Defendants, the Atripla Agreement simply prevents Gilead or BMS from making Atripla on its own outside the context of the joint venture. But the court found that the language in the Agreement prohibiting a "Combination Product" could refer to a product made up of a combination of brand and generic components, and that other clauses in the Agreement supported that interpretation. Because the agreement is ambiguous as to whether "Combination Product" simply means branded Atripla or could include a FDC made up of some generic components, the Agreement is plausibly a No-Generics Restraint.

cART product market. Plaintiffs adequately alleged a combination antiretroviral therapy (cART) product market. In the FACC, Plaintiffs defined the cART product market as covering "all antiretroviral drugs used in the treatment of HIV as part of a combination therapy." Such drugs can be standalone or can be in an FDC. The court rejected Defendants’ argument that the proposed market was too broad because in some cases the drugs cannot be substituted for one another. A jury could find a cART product market based on commercial realities. For example, the U.S. Department of Health and Human Services has Guidelines for the treatment of HIV that illustrate the interchangeability of use of different types of cART drugs. And there is price competition among cART drugs (albeit weak), indicating that, at competitive prices, two drugs may be weak substitutes for one another but, if one company raises its drug’s prices to high levels, this may induce a consumer to substitute away from that drug in favor of a different drug.

Antitrust injury. Plaintiffs asserted that untainted competitors in BMS and Janssen’s positions would actually have challenged Gilead’s patents prior to their expiration dates, instead of waiting for the patents to expire). Defendants maintained that, without some indication that the patents are in fact weak, it would make little sense for BMS and/or Janssen to spend millions on patent litigation. In addition, BMS and/or Janssen would not have challenged Gilead’s patents because they were partnering with Gilead to make FDCs using Gilead’s patented drugs. In other words, BMS and/or Janssen had no incentive to sue their partner/collaborator/joint venture. The court was not unsympathetic to Defendants’ arguments, but they relate to questions of fact. For example, the prospect of large gains from earlier entry into the market might well have led BMS or Janssen to challenge the TAF and COBI patents (or at least threaten to challenge the patents), regardless of whether the patents would ultimately be held valid and regardless of any partnership with Gilead. Therefore, Plaintiffs alleged a plausible claim of antitrust injury for the purposes of this stage of the proceedings.

Conspiracy, royalty payments, patent term extension issues. The court dismissed Plaintiff’s claims for overarching conspiracy, as well as claims based on the alleged payment of royalties after patent expiration and the patent term extension (PTE) for the TAF-related patent. Overarching conspiracy claims failed because the Plaintiffs alleged only parallel conduct. The complaint alleged that BMS and Janssen were each aware that the other had entered into an agreement with Gilead that contained a No-Generics Restraint. But Plaintiffs failed to show how BMS or Janssen would benefit from an overarching conspiracy involving all three Defendants (as opposed to, e.g., the bilateral conspiracy between it and Gilead alone), and therefore it cannot reasonably be inferred that either BMS or Janssen agreed to an overarching conspiracy. Mere knowledge that Gilead was entering into parallel bilateral deals with others is not enough to show BMS and Janssen had a stake in the overarching enterprise. However, claims based on bilateral conspiracies, between (1) BMS and Gilead and (2) Janssen and Gilead, went forward, based on Plaintiffs’ allegations that BMS and Janssen acted contrary to their independent business interests. BMS and Janssen would have an interest in being able to make generic versions of Gilead’s drugs once the patents on those drugs expired or were invalidated; but under the agreements, they were restrained from doing so.

In the original complaint, Plaintiffs alleged that the No-Generics Restraints protected Gilead’s NRTIs by precluding the other drug manufacturers from selling FDCs that incorporate generic versions of Gilead’s NRTIs even after the patents protecting the NRTIs expire. In the FACC, Plaintiffs essentially just added a new liability theory – i.e., pleading that the agreements include provisions requiring "the payment of royalties ‘even after Gilead’s patents had expired or were invalidated.’" The court dismissed claims based on this theory of liability.

Plaintiffs also set forth another new liability theory in the FACC, one related to Gilead obtaining a PTE for one of its patents related to TAF. Specifically, that Gilead intentionally delayed its development/approval of TAF, and then obtained a PTE, such that protection for the lasted until April 2025, instead of February 2023. This theory failed based on the Noerr-Pennington doctrine. Gilead’s request of a PTE does not fall under the ministerial exception to Noerr-Pennington because the PTE process is lengthy and and it involves decisions requiring judgment, both on the length of the regulatory review period and on whether the applicant has exercised due diligence. And the court rejected Plaintiffs’ argument that even if PTE is a discretionary matter, there is no immunity for petitioning conduct that is an integral art of a larger overall scheme to restrain trade. Here, there was not the exercise of market power through litigation – e.g., relying on a patent to bring patent infringement cases; rather, what is at issue is (allegedly) the use of the government process – i.e., the PTE – to get market power.

This case is No. 3:19-cv-02573-EMC.

Attorneys: Aditya Vijay Kamdar (Durie Tangri LLP) for Peter Staley. Alison Hanstead (White & Case LLP) for Gilead Sciences, Inc.

Companies: Gilead Sciences, Inc.

MainStory: TopStory Antitrust CaliforniaNews GCNNews

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