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In re Loestrin 24 FE Antitrust Litig.

United States District Court, D. Rhode Island

September 4, 2014

IN RE LOESTRIN 24 FE ANTITRUST LITIGATION. THIS DOCUMENT RELATES TO: ALL ACTIONS

Page 181

For City of Providence, Rhode Island, individually and on behalf of itself and all others similarly situated, Plaintiff: Donald A. Migliori, LEAD ATTORNEY, Motley Rice LLC, Providence, RI; Jeffrey M. Padwa, LEAD ATTORNEY, City Solicitor's Office, City of Providence, Providence, RI; John Andrew Ioannou, Michael M. Buchman, LEAD ATTORNEYS, PRO HAC VICE, Motley Rice LLC, New York, NY; Matthew T. Jerzyk, LEAD ATTORNEY, The Law Offices of Matthew Jerzyk LLC, Providence, RI; Megan K Maciasz Disanto, LEAD ATTORNEY, Rhode Island Supreme Court, Providence, RI.

For American Sales Company, LLC, on behalf of itself and all others similarly situated, Plaintiff: Jeffrey B. Pine, LEAD ATTORNEY, Jeffrey B. Pine, Esq P.C., Providence, RI; Joseph H. Meltzer, Monique Myatt Galloway, LEAD ATTORNEYS, PRO HAC VICE, Kessler Topaz Meltzer & Check, LLP, Radnor, PA; Maria F. Deaton, LEAD ATTORNEY, Lynch & Pine, LLC, Providence, RI; Thomas M. Sobol, LEAD ATTORNEY, Kristen Johnson Parker, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Cambridge, MA.

For United Food and Commercial Workers Local 1776 & Participating Employers Health and Welfare Fund, individually and on behalf of all others similarly situated, Plaintiff: Elizabeth G. Arthur, PRO HAC VICE, Hilliard & Shadowen, LLC, Austin, TX; Karen M Leser-Grenon, PRO HAC VICE, Sheperd, Finkelman, Miller & Shah, LLP, Chester, CT; Natalie Finkelman Bennett, PRO HAC VICE, Shepard, Finkelman, Miller & Shah, LLP, Media, PA; Steve D. Shadowen, Hilliard & Shadowen LLC, Mechanicsberg, PA.

For New York Hotel Trades Council & Hotel Association of New York City, Inc. Health Benefits Fund, individually and on behalf of all others similarly situated, John Douglas Richards, Plaintiffs: Christopher Lometti, Sharon K. Robertson, LEAD ATTORNEYS, John Douglas Richards, LEAD ATTORNEY, PRO HAC VICE, Cohen Milstein Sellers & Toll PLLC, New York, NY.

For Fraternal Order of Police, Fort Lauderdale Lodge 31, Insurance Trust Fund, individually and on behalf of all others similarly situated, Plaintiff: Adam G. Kurtz, LEAD ATTORNEY, PRO HAC VICE, Pomerantz LLP, New York, NY; Jayne A. Goldstein, LEAD ATTORNEY, PRO HAC VICE, Pomerantz LLP, Weston, FL.

For Denise Loy, a resident citizen of the State of Florida, individually and on behalf of all others similarly situated, Melisa Chrestman, a resident citizen of the State of Tennessee, individually and on behalf of all others similarly situated, Mary Alexander, a resident citizen of the State of North Carolina, individually and on behalf of all others similarly situated, Plaintiffs: Christopher W. Cantrell, James R. Hail, William J. Doyle, II, LEAD ATTORNEYS, PRO HAC VICE, Doyle Lowther LLP, San Diego, CA; Donald A. Migliori, LEAD ATTORNEY, Motley Rice LLC, Providence, RI.

For Painters District Council No. 30 Health & Welfare Fund, Individually and on Behalf of All Others Similarly Situated, Plaintiff: Lori A. Fanning, Marvin A. Miller, PRO HAC VICE, Miller Law LLC, Chicago, IL.

For Rochester Drug Co-Operative, Inc., on Behalf of Itself and All Others Similarly Situated, Plaintiff: David F. Sorensen, Michael J. Kane, PRO HAC VICE, Berger & Montague, P.C., Philadelphia, PA; Maria F. Deaton, LEAD ATTORNEY, Lynch & Pine, LLC, Providence, RI; Neill W. Clark, Peter R. Kohn, PRO HAC VICE, Faruqi & Faruqi, LLP, Jenkintown, PA.

For Laborers' International Union of North America Local 35 Health Care Fund, on Behalf of Itself and All Others Similarly Situated, Plaintiff: Dianne M. Nast, LEAD ATTORNEY, PRO HAC VICE, NastLaw LLC, Philadelphia, PA; Frank R. Schirripa, LEAD ATTORNEY, PRO HAC VICE, Hach Rose Schirripa & Cheverie, LLP, New York, NY; James R. Dugan, II, LEAD ATTORNEY, PRO HAC VICE, The Dugan Law Firm, APLC, New Orleans, LA; John Douglas Richards, Cohen Milstein Sellers & Toll PLLC, New York, NY.

For Allied Services Division Welfare Fund, on Behalf of Itself and All Others Similarly Situated, Plaintiff: David B. Franco, James R. Dugan, II, LEAD ATTORNEYS, PRO HAC VICE, The Dugan Law Firm, APLC, New Orleans, LA; Douglas R. Plymale, LEAD ATTORNEY, PRO HAC VICE, Dugan Law Firm, New Orleans, LA.

For End Payor Plaintiffs, Plaintiff: Marvin A. Miller, Miller Law LLC, Chicago, IL.

For Direct Purchaser Class Plaintiffs, Plaintiff: Thomas M. Sobol, LEAD ATTORNEY, Hagens Berman Sobol Shapiro LLP, Cambridge, MA.

For Walgreen Co., The Kroger Co., Safeway, Inc., Albertson's, LLC, HEB Grocery Company L.P., Plaintiffs: Anna T. Neill, LEAD ATTORNEY, PRO HAC VICE, Kenny Nachwalter, P.A., Miami, FL; Lauren C. Ravkind, LEAD ATTORNEY, PRO HAC VICE, Kenny Nachwalter, P.A., Austin, TX; Paul J. Skiermont, LEAD ATTORNEY, PRO HAC VICE, Skiermont Puckett LLP, Dallas, TX; S. Michael Levin, LEAD ATTORNEY, S. Michael Levin, Providence, RI; Scott E. Perwin, LEAD ATTORNEY, PRO HAC VICE, Kenny Nackwalter, P.A., Miami, FL.

For Warner Chilcott Public Limited Company, Warner Chilcott Company, LLC, Warner Chilcott Holdings Company III, Ltd., Warner Chilcott Corporation, Warner Chilcott Sales (U.S.), LLC, Warner Chilcott Laboratories Ireland Limited, Warner Chilcott Company, Inc., Defendants: John A. Tarantino, Nicole J. Benjamin, Patricia K. Rocha, LEAD ATTORNEYS, Adler Pollock & Sheehan P.C., Providence, RI; Robert A. Milne, PRO HAC VICE, White & Case LLP, New York, NY.

For Warner Chilcott (U.S.), LLC, Defendant: Alison Hanstead, Jack E. Pace, III, LEAD ATTORNEYS, PRO HAC VICE, Robert A. Milne, PRO HAC VICE, White & Case LLP, New York, NY; J. Mark Gidley, LEAD ATTORNEY, PRO HAC VICE, Peter J. Carney, LEAD ATTORNEY, White & Case LLP, Washington, DC; John A. Tarantino, Nicole J. Benjamin, Patricia K. Rocha, LEAD ATTORNEYS, Adler Pollock & Sheehan P.C., Providence, RI.

For Actavis, Inc., Watson Pharmaceuticals, Inc., Watson Laboratories, Inc., Defendants: Alison Hanstead, Jack E. Pace, III, LEAD ATTORNEYS, Robert A. Milne, PRO HAC VICE, White & Case LLP, New York, NY; J. Mark Gidley, LEAD ATTORNEY, White & Case LLP, Washington, DC; John A. Tarantino, Nicole J. Benjamin, Patricia K. Rocha, LEAD ATTORNEYS, Adler Pollock & Sheehan P.C., Providence, RI.

For Lupin Ltd., Lupin Pharmaceuticals, Inc., Defendants: Leiv Blad, Zarema Arutyunova, LEAD ATTORNEYS, PRO HAC VICE, Bingham McCutchen LLP, Washington, DC; William R. Landry, LEAD ATTORNEY, Blish & Cavanagh, LLP, Providence, RI.

Page 182

OPINION AND ORDER

William E. Smith, Chief United States District Judge.

This multidistrict litigation was consolidated and transferred to this Court by the United States Judicial Panel on Multidistrict Litigation. It arises in the wake of the Supreme Court's seminal holding in F.T.C. v. Actavis, Inc., 133 S.Ct. 2223, 186 L.Ed.2d 343 (2013), which held tat " reverse payments" -- settlement payments in patent infringement suits made by a patent holder to an alleged infringer in exchange for the alleged infringer's promise not to produce the patented product until a later date -- may violate federal antitrust law.[1]

The plaintiffs allege that pharmaceutical firms involved in the sale of Loestrin 24 FE (" Loestrin 24" ), a widely-used oral contraceptive, violated state and federal antitrust and consumer protection law by exchanging reverse payments in connection with a scheme to delay generic competition. There are two separate consolidated complaints -- the first by so-called direct purchasers (the " Direct Purchasers" ) and the second by so-called end payors (the " End Payors" and, together with the Direct Purchasers, the " Plaintiffs" ). The defendants have filed two corresponding Motions to Dismiss (ECF Nos. 74 and 76), seeking to test the parameters of Actavis. For the reasons that follow, these Motions to Dismiss will be GRANTED.

I. Factual and Regulatory Background

A. The Parties

The Direct Purchasers are corporate entities that purchased Loestrin 24 directly from Warner Chilcott, one of the defendants.[2] The End Payors, generally, are employee welfare benefit programs that reimbursed subscribers who purchased Loestrin 24.[3] The End Payors also include

Page 183

three individuals who purchased Loestrin 24 for their own use.[4]

The defendants are pharmaceutical companies. Warner Chilcott Company, LLC (" Warner Chilcott" ) is the holder of an approved New Drug Application from the Food and Drug Administration (the " FDA" ) for Loestrin 24 and has marketed and sold Loestrin 24 since 2006.[5] The remaining defendants are Actavis, Inc. (formerly known as Watson Pharmaceuticals, Inc., and referred to herein as " Watson" )[6] and Lupin Pharmaceuticals, Inc. (" Lupin" and, together with Warner Chilcott and Watson, the " Defendants" ).

In brief, the Plaintiffs allege that Warner Chilcott made what amount to reverse payments to Watson and Lupin in exchange for Watson and Lupin's agreement not to launch generic versions of Loestrin 24. This, the Plaintiffs contend, illegally extended Warner Chilcott's monopoly and resulted in higher prices for consumers.

B. Generics and the Hatch-Waxman Regulatory Framework [7]

We rely on pharmaceutical companies to develop and bring to market the medical advances that keep us healthy. For this reason, our patent laws afford substantial protection to firms whose innovation leads to the development of new and beneficial medications. Typically, a company that has developed such a medication will enjoy a period of time during which it can sell it exclusively and at a supracompetitive price, thereby recovering its development costs and turning a profit. This period of exclusivity is considered to be an essential incentive for further healthcare and biopharmaceutical research and innovation. See Wendy H. Schacht and John R. Thomas, Cong. Research Serv., RL30756, Patent Law and Its Application to the Pharmaceutical Industry: An Examination of the Drug Price Competition and Patent Term Restoration Act of 1984 (" The Hatch-Waxman Act" ) 2-5 (2000).

Once the period of exclusivity expires, however, the entry by generic competitors severely undercuts the manufacturer's pricing scheme and eliminates most of the innovator's profits. (EP Compl. ¶ 65, ECF No. 40.) For instance, data suggests that where there is a single generic competitor, the generic tends to be priced approximately 25% lower than the brand name counterpart. (DP Compl. ¶ 62, ECF No. 39.) And, where there are multiple generic alternatives, the price of the generics typically falls to 50% to 80% below the brand name product. (Id.)

Because every state permits pharmacies to substitute generics for brand name

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drugs (unless the prescribing doctor orders otherwise), generally within a year of generic market entry, generics will capture 90% of sales and prices will fall by as much as 85%. (Id. at ¶ 63.) Not surprisingly, then, brand manufacturers view generic competition as a grave threat to profits. (Id.)

The Drug Price Competition and Patent Term Restoration Act of 1984 (more commonly known as the " Hatch-Waxman Act" ), Pub. L. No. 98-417, 98 Stat. 1585 (1984), as amended, prescribes the process by which pharmaceutical firms may gain approval from the FDA to bring medications to market. ...


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