FWK Holdings LLC v. Shire PLC et al. (Direct Purchaser Antitrust Class Action Complaint) (16-cv-12653).

FWK Holdings brought this class action antitrust suit, alleging an illegal reverse payment settlement between Shire defendants and Actavis defendants relating to the drug Intuniv, which is used to treat hypertension and ADHD. Each defendant moved to dismiss the complaint for failure to state a claim.  The case was reassigned to Massachusetts, as it was related to an existing Massachusetts case, Picone et al. v. Shire I.S., Inc. et al. (16-cv-12396).  In the complaint, the plaintiffs allege that Actavis had introduced compelling evidence at an ANDA trial that Shire’s patents listed in the FDA’s Orange Book as covering Intuniv were invalid, and that in April, 2013, Actavis and Shire settled the litigation by having Actavis, the first generic to file an ANDA, agree to delay entry into the generic market until December of 2014 in return for Shire implicitly agreeing not to launch an “authorized generic” (“AG”) during the 180-day period of generic exclusivity for Actavis that followed.  The agreement allowed Shire to market its own AG, but prevented it from marketing an AG through a third party; the defendants assert that Shire had in fact agreed not to market an AG itself but avoided putting that into the agreement to avoid antitrust scrutiny.  The plaintiffs allege that this scheme constituted an anticompetitive reverse payment agreement, banned under prevailing law, that resulted in Shire earning $424 million in additional sales free from generic competition and in Actavis generating $84.5 million in profits during its period of generic exclusivity.  This scheme purportedly cost American purchasers of the drug half a billion dollars.  The complaint alleges restraint of trade in violation of Section 1 of the Sherman Act and monopolization in violation of Section 2 of the Sherman Act.

Judge Burroughs recognized that reverse payments, while potentially actionable, are not ipso facto antitrust violations.  Courts are to make a rule of reason analysis, looking at the size of the payment in relation to anticipated future litigation costs, and existence, or lack thereof, of other convincing justification to determine whether the payment was made to prevent the risk of competition.  She noted that the First Circuit had stated in dictum that no-AG agreements can constitute illegal reverse payments, a position expressly held by other courts, and determined that it formed a sufficient basis for an antitrust complaint here.  Applying the rule of reason, Judge Burroughs noted that the plaintiffs had alleged that Shire’s alleged retention of the right to market an AG was illusory, given that common industry practice (and Shire’s own past practice) was to launch such products through bona fide third parties to avoid Medicaid pricing regulations, that Shire had, prior to the settlement, planned to launch an AG through a third party, and that following settlement, Shire never launched an AG.  These allegations, combined with the allegation that the defendants settled the underlying litigation only following a trial at which Shire seemed poised to lose, plausibly alleged that an implicit no-AG agreement existed.  Accordingly, the motion to dismiss was denied.

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