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In re Loestrin 24 FE antitrust Litigation

United States Court of Appeals, First Circuit

February 22, 2016

IN RE: LOESTRIN 24 FE ANTITRUST LITIGATION
v.
WARNER CHILCOTT COMPANY, LLC; WARNER CHILCOTT PUBLIC LIMITED COMPANY; WARNER CHILCOTT HOLDINGS COMPANY III, LTD.; WARNER CHILCOTT CORPORATION, LLC, f/k/a Warner Chilcott Company, Inc.; WARNER CHILCOTT (US), LLC; WARNER CHILCOTT SALES (US), LLC; WARNER CHILCOTT LABORATORIES IRELAND LIMITED; WARNER CHILCOTT COMPANY; ACTAVIS, INC., f/k/a WATSON PHARMACEUTICALS, INC.; WATSON LABORATORIES, INC.; LUPIN LTD.; LUPIN PHARMACEUTICALS, INC., Defendants, Appellees. AMERICAN SALES COMPANY, LLC, on behalf of itself and all others similarly situated; ROCHESTER DRUG CO-OPERATIVE, INC., on behalf of itself and all others similarly situated, Plaintiffs, Appellants, CITY OF PROVIDENCE, RHODE ISLAND, individually and on behalf of itself and all others similarly situated; UNITED FOOD AND COMMERCIAL WORKERS LOCAL 1776 & PARTICIPATING EMPLOYERS HEALTH AND WELFARE FUND, individually and on behalf of all others similarly situated; NEW YORK HOTEL TRADES COUNCIL & HOTEL ASSOCIATION OF NEW YORK CITY, INC. HEALTH BENEFITS FUND, individually and on behalf of all others similarly situated; FRATERNAL ORDER OF POLICE, FORT LAUDERDALE LODGE 31, INSURANCE TRUST FUND, individually and on behalf of all others similarly situated; ELECTRICAL WORKERS 242 & 294 HEALTHCARE & WELFARE FUND, individually and on behalf of all others similarly situated; 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; PAINTERS DISTRICT COUNCIL NO. 30 HEALTH & WELFARE FUND, individually and on behalf of all others similarly situated; TEAMSTERS LOCAL 237 WELFARE BENEFITS FUND, individually and on behalf of all others similarly situated; LABORERS INTERNATIONAL UNION OF NORTH AMERICA LOCAL 35 HEALTH CARE FUND, on behalf of itself and all others similarly situated; ALLIED SERVICES DIVISION WELFARE FUND, on behalf of itself and all others similarly situated; WALGREEN CO.; THE KROGER CO.; SAFEWAY, INC.; ALBERTSON'S, LLC; HEB GROCERY COMPANY L.P., Plaintiffs,

APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND [Hon. William E. Smith, U.S. District Judge]

Thomas M. Sobol, with whom Kristen A. Johnson, Hagens Berman Sobol Shapiro, LLP, Joseph H. Meltzer, Terence S. Ziegler, Kessler Topaz Meltzer & Check, LLP, David F. Sorensen, Michael Kane, Berger & Montague, PC, Peter R. Kohn, Neill W. Clark, and Faruqi & Faruqi, LLP, were on brief, for Direct-Purchasers' appellants.

Mark S. Hegedus, Attorney, Office of the General Counsel, Federal Trade Commission, with whom Jonathan E. Nuechterlein, General Counsel, Joel Marcus, Director of Litigation, Deborah L. Feinstein, Director, Stephen Weissman, Deputy Director, Markus H. Meier, Assistant Director, Bradley S. Albert, Deputy Assistant Director, and Jamie R. Towey, Attorney, Bureau of Competition, were on brief, of the Federal Trade Commission as amicus curiae in support of appellants.

Steve D. Shadowen, Interim Co-Lead Counsel, with whom Elizabeth Arthur, Matthew C. Weiner, Hilliard & Shadowen LLP, Donald A. Migliori, Michael M. Buchman, John A. Ioannou, Motley

Rice LLC, J. Douglas Richards, Sharon K. Robertson, Cohen Milstein Sellers & Toll PLLC, Marvin A. Miller, Lori A. Fanning and Miller Law LLC, were on brief, for End-Payors' appellants.

Robert A. Milne, with whom Jack E. Pace III, Alison Hanstead, J. Mark Gidley, Peter J. Carney, White & Case LLP, John A. Tarantino, Nicole J. Benjamin and Adler Pollock & Sheehan P.C., were on brief, for appellees Warner companies.

Leiv Blad, Jr., with whom Zarema A. Jaramillo and Morgan, Lewis & Bockius LLP, were on brief, for appellees Lupin Limited and Lupin Pharmaceuticals, Inc.

Scott E. Perwin, Lauren C. Ravkind, Anna T. Neill, Kenny Nachwalter P.A., Paul J. Skiermont, Skiermont Puckett LLP, S. Michael Levin, Barry L. Refsin, Monica L. Rebuck and Hangley Aronchick Segal Pudlin & Schiller, on amicus brief of Walgreen Co., The Kroger Co., Safeway, Inc., Albertson's LLC, HEB Grocery Company, LP, Rite Aid Corporation and CVS Pharmacy, Inc.

Kenneth A. Wexler and Wexler Wallace LLP, on amicus brief on behalf of 70 Law, Economics, and Business Professors and the American Antitrust Institute.

Janet T. Mills, Attorney General of Maine, on amicus brief of the States of Maine, California, Alaska, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan Minnesota, Mississippi, Nebraska, New Hampshire, New Mexico, Oregon, Rhode Island, Tennessee, Texas, Utah, Vermont, and Washington.

Daniel S. Francis, D. Bruce Hoffman, Hunton & Williams LLP, Linda E. Kelly, Quentin Riegel, Manufacturers' Center for Legal Action, on amicus brief of National Association of Manufacturers.

Richard A. Samp, Mark S. Chenoweth, and Washington Legal Foundation, on amicus brief of Washington Legal Foundation.

Christopher T. Holding, William M. Jay, Brian T. Burgess, and Goodwin Procter LLP, on amicus brief of Generic Pharmaceutical Association.

Andrew Lazerow, Ashley Bass, Stephen Bartenstein and Covington & Burling LLP, on amicus brief of Pharmaceutical Research and Manufacturers of America.

Burt M. Rublin, Stephen J. Kastenberg, Jessica M. Anthony, Barbara A. Schwartz and Ballard Spahr LLP, on amicus brief of Antitrust Economists.

David A. Balto, James J. Kovacs and Law Offices of David A. Balto, on amicus brief of Consumer Action, AARP, U.S. Public Interest and Research Group, Public Citizen, Families USA, and Consumers Union.

Before Torruella, Lynch, and Thompson, Circuit Judges.

TORRUELLA, Circuit Judge.

This appeal arises from several pharmaceutical antitrust actions that were consolidated and transferred to the United States District Court for the District of Rhode Island by the United States Judicial Panel on Multidistrict Litigation.

Defendant Warner Chilcott ("Warner") is a brand-name drug manufacturer that owns the patent covering the oral contraceptive Loestrin 24 Fe ("Loestrin 24"). After defendant Watson Pharmaceuticals, Inc. ("Watson") notified Warner that it would seek to introduce a generic version of Loestrin 24, Warner sued Watson for patent infringement. The parties settled on conditions that Watson delay entry of its generic version of Loestrin 24 and, in exchange, Watson entered into favorable promotional deals with Warner and received promises that Warner would not introduce its own generic version of Loestrin 24, among other things. Shortly thereafter, defendant Lupin Pharmaceuticals, Inc. ("Lupin") announced that it would introduce a generic version of Loestrin 24. Warner brought a patent infringement suit against Lupin. Again, the parties settled on terms that Lupin wait to introduce its generic Loestrin 24 in exchange for attorneys' fees and Warner's agreement to enter into favorable side deals with Lupin.

Two putative classes of plaintiffs -- the Direct Purchaser Plaintiffs ("DPPs"), a group comprised of corporate entities that purchased Loestrin 24 directly from Warner, and End Payor Plaintiffs ("EPPs"), which consist of health and welfare benefit plans that have indirectly purchased, paid for, and provided reimbursement for their members' purchase of Loestrin 24, and individuals who purchased or paid for some or all of the purchase price of Loestrin 24 -- subsequently brought antitrust claims that the settlement agreements were violations of § 1 of the Sherman Act, 15 U.S.C. § 1.[1] They contend that these agreements constitute illegal restraints on trade under FTC v. Actavis, __ U.S. __, 133 S.Ct. 2223');">133 S.Ct. 2223 (2013), which subjected certain patent settlement agreements between generic drug and brand-name drug manufacturers to antitrust scrutiny where they involve "reverse payments." As described in more detail herein, a reverse payment typically arises where a brand-name drug manufacturer pays the generic manufacturer to delay entry of its generic equivalent, thereby protecting the brand's market from generic competition.

Specifically, this antitrust case queries whether, following Actavis, such settlement agreements are subject to federal antitrust scrutiny where they do not involve reverse payments in pure cash form. The district court found that Actavis only applied to monetary reverse payments and dismissed on the basis that the EPPs and DPPs had alleged the existence of non-cash reverse payments only. Because we disagree with the district court's limited reading of Actavis, we vacate and remand. We begin with the relevant statutory and legal background, which provides the framework for understanding the facts in this appeal.

I. Regulatory Background

The Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585, commonly known as the Hatch-Waxman Act, stipulates the process by which pharmaceutical firms may gain approval from the Food and Drug Administration ("FDA") to bring medications to the public marketplace. The Supreme Court in Actavis identified "four key features of the relevant drug-regulatory framework" under the Hatch-Waxman Act. 133 S.Ct. 2227-29.

First, to market a new prescription drug, a brand-name drug manufacturer must submit a New Drug Application ("NDA") to the FDA and undergo a laborious and expensive approval process. 21 U.S.C. § 355(b)(1); see Actavis, 133 S.Ct. at 2228. Among other things, the NDA must include "the patent number and the expiration date of any patent which claims the drug . . . or which claims a method of using such drug." 21 U.S.C. ยง 355(b)(1). Upon receiving FDA approval, the brand manufacturer must publish a description of any patents associated with that drug in the Approved Drug Products with ...


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