By Robert B. Barnett Jr., J.D.
The gist of the complaint was that Assertio and Santarus paid Lupin to end its patent challenge and grant them four more years of Glumetza monopoly, during which huge price gouging happened.
A Sherman Act suit alleging that Assertio Therapeutics, Inc., Lupin Pharmaceuticals, Inc., and Santarus, Inc. illegally carved up the market for the diabetes medication Glumetza has been allowed to proceed, despite the lapse of the statute of limitations, because the conspiracy was ongoing and was fraudulently concealed, a California federal district court has ruled. Also, Assertio’s contention that it had no liability because it left the alleged conspiracy early on was rejected on the ground that once a party signs on to conspiracy, that party remains liable for every penny, if liability is established. And, finally, the court concluded that end-payor plaintiffs, who sought damages nationwide, lacked standing to pursue claims anywhere but where they resided, which meant that they could pursue claims only in California, New York, and Rhode Island (In re Glumetza Antitrust Litigation, March 5, 2020, Alsup, W.).
Background. In 2002, a predecessor to what is now Assertio developed a controlled-release version of the classic diabetes drug metformin. Assertio obtained patents for the new drug, which it called Glumetza. In July 2009, Lupin filed an application for a generic version of Glumetza. Assertion sued Lupin, triggering the 30-month stay against FDA final approval. In January 2012, the FDA tentatively approved the application. At some point during this process, Assertio sold the commercialization rights to Glumetza to Santarus, though it retained the patent rights. One month after the tentative FDA approval, Santarus settled with Lupin. Under terms of the agreement, Lupin agreed not to market Glumetza for four years. In return, Assertio and Santarus promised not to market their own generic version for 180 days after Lupin entered the market in early 2016. They also promised not to allow any other company to produce a generic while they held the patent rights. In addition, Lupin had two more protections. First, if anyone else succeeded in marketing a generic Glumetza before February 2016, Lupin could market immediately. Second, Assertio and Santarus agreed not to grant a license to any other generic manufacturers until 180 days after Lupin entered the market. Lupin agreed to enter into the agreement because it guaranteed Lupin the right to be the only generic version for at least 180 days. The economic value of that head start was estimated to be more than $50 million. In fact, the plan did work. It was not until mid-2017 that any other generic Glumetza entered the market.
In 2013, before anyone else entered the market, Glutmetza prices skyrocketed, jumping about 800%. In 2019, plaintiffs began suing, with 10 suits having been filed in the Northern District of California. Nine remain, now consolidated into this litigation (two more were filed as this opinion was being issued). The plaintiffs consist of three groups: (1) direct purchasers, (2) end-payors, and (3) retailers. The alleged co-conspirators filed a motion to dismiss all complaints.
Statute of limitations. The Sherman Act contains a four-year statute of limitations (15 U.S.C. §15b). Given that the action was filed August 29, 2019, the statute therefore reaches back only to August 29, 2015, well after the Assertio-Santarus-Lupin agreement. To keep the case alive, the drug purchasers argued both that the continuing violations reset the statute of limitations and that the co-conspirators fraudulently concealed the agreement, thus tolling the statute.
Continuing violations. The court concluded that, although the original act creating the alleged conspiracy occurred back in 2012, the later sales of Glumetza constituted continuing violations not barred by the statute of limitations because the co-conspirators maintained the monopoly after the 2012 agreement. To qualify as a continuing violation, the act must be new and independent (not merely a reaffirmation of a previous act), and it must inflict new and accumulating injury. The passive receipt of profits does not qualify because the harm occurred at the time of the initial violation. In this case, while the agreement occurred in 2012, the conduct that caused competitive harm continued to occur well after the August 29, 2015, statute of limitations cut-off. Also, in February 2016, the co-conspirators converted the Glumetza monopoly into a brand-versus-generic duopoly that included new conduct, new antitrust violations, and new harm to the purchasers. As a result, the court concluded that the purchaser could bring suit for Glumetza sales since August 29, 2015. Whether they could recover for sales before that date depended on the fraudulent concealment argument.
Fraudulent concealment. The gist of the complaint was that Assertio and Santarus paid Lupin to end its patent challenge and grant them four more years of Glumetza monopoly, during which they raised prices significantly. As the Supreme Court has noted, this pay-for-delay scheme is unique to pharmaceutical patents. Lupin’s delay of a generic Glumetza was public knowledge in March 2012. At that point, the purchasers were on notice of certain important facts but they were not on notice of the provisions in which Assertion and Santarus promised not to market their own generic for 180 days after Lupin entered the market, not to license any other generics at that time, and that Lupin could market immediately if another generic made it to the market. The complaint alleges that the co-conspirators improperly concealed the details of those provisions. While they disclosed the agreement in court proceedings, they kept hidden the terms of those provisions, which the complaint contends transformed an even split of patent terms into the alleged conspiracy. The complaint also plausibly alleged that the concealment continued into the four-year statute of limitations period. Lupin did not reveal the terms until an earnings call on February 5, 2016. Until Lupin used the term "sole exclusivity" in that call, the public did not fully realize the scope of the agreement. As a result, the court concluded that all of the purchasers’ claims were timely filed. Thus, recovery will be allowed back to the date that a jury funds that Lupin would have first marketed its generic Glumetza.
Assertio independence. Assertio tried to disclaim liability on the theory that it left the conspiracy in the early days when it sold Glumetza’s commercialization rights to Santarus. But its conduct cannot be sequestered. "Their conspiracy to maintain a monopoly and then split the Glumetza market means each is liable for the entire course of conspiratorial conduct," the court said. Thus, Assertio was not free to plan the conspiracy, reap the benefits, and then avoid liability. As a result, the court rejected Assertio’s argument "that it just stood in the background while Santarus and Lupin did all the wrongs."
Standing—end-payors. The co-conspirators argued that the end-purchaser payors, who reside in California, New York, and Rhode Island, had no right to assert claims across 50 states and the District of Columbia. The court agreed. The end-purchasers lacked standing to assert claims in the states where they did not reside.
State antitrust claims—end-payors. The end-payors asserted a number of state law claims. As a result of the previous ruling that only claims in California, New York, and Rhode Island will be considered, the court concluded that the statute of limitations in California, New York, and Rhode Island would be used to determine whether the claims were timely filed. First, the court concluded that all three states have a four-year statute of limitations for state antitrust claims. It also concluded that all three states recognize the concepts of continuing violations and fraudulent concealment. As a result, all state antitrust claims were deemed timely filed for the same reason that the federal antitrust claims were timely filed, with the one caveat that no recovery under Rhode Island law for damages before July 13, 2013, would be allowed because that is when Rhode Island first recognized indirect antitrust claims.
Other state claims—end payors. The other state claims consisted of allegations of violations of state consumer protection statutes and unjust enrichment. Ultimately, the court concluded that the consumer protection claims failed in California and Rhode Island but could proceed under New York law. It also concluded that the unjust enrichment claims failed in New York but could proceed under California and Rhode Island law.
Sherman Act claims—retailers. The court concluded that the Sherman Act claims by retailer plaintiffs on their own behalf failed because of Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), which bars federal antitrust damages claims by indirect purchasers. Because the retailers neither asserted direct purchases nor asked for injunctive relief, their claims were either barred or not alleged.
The court, therefore, permitted the antitrust claims and recovery of Glumetza sales beginning from the date when Lupin otherwise would have entered the market. End-payor plaintiffs were deemed to lack standing to pursue claims anywhere but in California, New York, and Rhode Island. Their consumer protection claims failed in California and Rhode Island. Their unjust enrichment claims failed in New York. The retailers could not assert Sherman Act claims.
This case is No. 3:19-cv-05822-WHA.
Attorneys: Alberto Rodriguez (Sperling & Slater PC) and Barry Steven Taus (Taus, Cebulash & Landau, LLP) for Meijer, Inc. and Meijer Distribution, Inc. Stephen J. Teti (Block & Leviton LLP) for City of Providence. Matthew C. Weiner (Hilliard & Shadowen LLP) for BI-LO, LLC. Jennifer Bridget Patterson (Arnold And Porter Kaye Scholer) for Bausch Health Companies Inc., Salix Pharmaceuticals, Ltd., Salix Pharmaceuticals, Inc. and Santarus, Inc. Eric Jonathan Stock (Gibson, Dunn & Crutcher LLP) for Assertio Therapeutics, Inc. Brendan Jasper Coffman (Wilson Sonsini Goodrich and Rosati) for Lupin Pharmaceuticals, Inc. and Lupin Ltd.
Companies: Meijer, Inc.; Meijer Distribution, Inc.; BI-LO, LLC; Bausch Health Companies Inc.; Salix Pharmaceuticals, Ltd.; Salix Pharmaceuticals, Inc.; Santarus, Inc.; Assertio Therapeutics, Inc.; Lupin Pharmaceuticals, Inc.; Lupin Ltd.
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