IP Law Daily District court should have analyzed patents before concluding they blocked drug manufacturer from market
News
Wednesday, January 13, 2021

District court should have analyzed patents before concluding they blocked drug manufacturer from market

By Nicole D. Prysby, J.D.

The lower court should not have concluded, without a patent analysis, that drug patents blocked plaintiff’s entry into the generic market and broke the chain of causation for the plaintiff’s claims that exclusive supply agreements were anticompetitive.

In a case alleging that exclusive supply agreements for a pharmaceutical ingredient were anticompetitive, the district court erred when it declined to evaluate patent validity and noninfringement claims because there was no actual patent litigation or filed Abbreviated New Drug Application (ANDA), held the Third Circuit Court of Appeals. The district court improperly declined to engage in that analysis because plaintiff Fresenius Kabi had not filed an Abbreviated New Drug Application or ANDA and there was no litigation challenging the patents. Instead, the district court focused on the element of antitrust causation. It concluded that because a defending drug company’s patents would have blocked the complaining manufacturer’s entry into the market, the plaintiff could not show that the challenged exclusivity agreement caused an antitrust injury. However, the absence of a filed ANDA or an actual lawsuit challenging the patents did not provide a basis to decline considering patent challenges. Therefore, the U.S. Court of Appeals in Philadelphia reversed summary judgment in favor of the defendants and remanded the case for the district court to determine whether a reasonable jury could find that the defendant’s patents would have blocked Fresenius Kabi’s market entry (Fresenius Kabi USA, LLC v. Par Sterile Products, LLC, January 11, 2021, Shwartz, P.).

Background. To obtain approval to introduce a new drug to the market, a manufacturer must file a New Drug Application (NDA) with the Food and Drug Administration (FDA). Manufacturers seeking to sell the generic version of a previously approved drug must file an ANDA. Both applications must contain descriptions of the drug’s chemical makeup, including its active pharmaceutical ingredient (API). One way for applicants to provide the necessary technical information about the API is to reference the API supplier’s drug master file (DMF).

In 2012, the predecessor of Par Sterile Products, LLC and Par Pharmaceutical Companies, Inc. (together, Par), JHP Pharmaceuticals, filed the first vasopressin NDA using API provided by BCN Peptides. The NDA was approved in 2014 and Par introduced the product into the market as Vasostrict and obtained patents on its formulations in 2016 and 2017. Consistent with its policy, the FDA ordered others, including Fresenius Kabi, to stop selling their unapproved vasopressin products, leaving Vasostrict as the only vasopressin product on the market. Because Par already secured the NDA for vasopressin, Fresenius Kabi transitioned its efforts away from filing an NDA and toward filing an ANDA for a generic version of Vasostrict in the fall of 2014.

In the early development of its ANDA, drug manufacturer Fresenius Kabi USA obtained API from BCN and received assurances that BCN would provide it access to its DMF. In the summer of 2015, however, Fresenius Kabi learned that BCN and Par were negotiating an exclusive supply agreement. By the fall of 2015, Fresenius Kabi began looking for alternative API suppliers. Fresenius Kabi initially contacted Bachem and PolyPeptide—the only two API suppliers other than BCN with then-active DMFs—but both suppliers were also in exclusive arrangements with Par. Fresenius Kabi thereafter switched to Bachem upon learning that Bachem was no longer in an exclusive supply arrangement with Par. In July 2019, Fresenius Kabi submitted its ANDA for a generic vasopressin injection.

Fresenius Kabi sued Par for violating the Sherman Antitrust Act, New Jersey antitrust law, and for common law tortious interference, alleging that Par’s exclusivity agreements with BCN, Bachem, and PolyPeptide were anticompetitive. The district court recognized that the heart of the claims was that that Par delayed generic Vasopressin manufacturers’ entrance into the market by entering into exclusive supply agreements, but did not evaluate whether the exclusive arrangements were anticompetitive. Rather, the lower court focused on whether Par’s patents broke the chain of causation between the allegedly anticompetitive conduct and Fresenius Kabi’s purported injury because the patents independently would have prevented market entry. Fresenius argued that Par’s patents did not break the chain of causation because, but for Par’s alleged anticompetitive conduct, Fresenius would have filed the "But For" ANDA around July 2016, challenged Par’s patents in court or via inter partes review, won this challenge on the basis of invalidity or non-infringement, gained regulatory approval, and then launched its product around June 2018. The district court declined to evaluate Fresenius Kabi’s patent validity and noninfringement claims because there was no actual patent litigation or filed ANDA on which a jury could consider these claims and thus the court would be undertaking a purely hypothetical patent exercise. As a result, the court ruled that Par’s patents broke the chain of causation and so Fresenius Kabi’s antitrust claims could not succeed. Fresenius Kabi appealed.

District court erred by omitting patent analysis. The district court focused on the element of antitrust causation and concluded that because Par’s patents would have blocked Fresenius Kabi’s entry into the market, Fresenius Kabi could not show that the exclusivity agreement Par had with BCN caused an antitrust injury. Where a valid patent independently blocks the plaintiff’s entry into the relevant market, the defendant’s allegedly anticompetitive conduct cannot be the cause of the plaintiff’s injury. Here, the district court declined to engage in this analysis because Fresenius Kabi had not filed an ANDA and there was no litigation challenging the patents. However, Third Circuit precedent does not require that patent litigation be commenced or that an ANDA be filed for a court to determine whether the patent breaks the chain of causation. Rather, an argument that a patent would have blocked an antitrust plaintiff’s market entry, and a response that the patent is either invalid, or unenforceable, or the product at issue does not infringe it, triggers a patent analysis. Because the district court was required to examine the record to determine whether a reasonable jury could find that Par’s patents would have blocked Fresenius Kabi’s market entry, the Third Circuit vacated the district court’s ruling and remanded the case.

This case is No. 20-1618.

Attorneys: David E. Finkelson (McGuireWoods LLP) for Fresenius Kabi USA LLC. Benjamin Bradshaw (O'Melveny & Myers LLP) for Par Sterile Products, LLC and Par Pharmaceutical Companies, Inc.

Companies: Fresenius Kabi USA LLC; Sterile Products, LLC; Par Pharmaceutical Companies, Inc.

MainStory: TopStory Patent DelawareNews NewJerseyNews PennsylvaniaNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More

IP Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on intellectual property legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.