Pay-for-Delay Lawsuit Involving Nexium Reopened by Federal Court

In the Nexium pay-for-delay multidistrict litigation accusing drug companies of violating antitrust laws by agreeing to delay entry of a generic version of AstraZenca’s heartburn drug Nexium, federal Judge William Young may be reconsidering some of his orders granting the summary judgments to drugmakers.

The case stems from the 2008 pay-for-delay deal struck between AstraZeneca, who manufactures the brand name heartburn drug Nexium, and generic-drug makers Ranbaxy, Inc., Teva Pharmaceuticals Ltd. and Dr. Reddy’s Laboratories, Inc. (the “Generic Manufacturers).  Under the billion-dollar deal, the Generic Manufacturers agreed to delay the launch of generic versions of Nexium drugs until May 2014.

While Judge Young denied most of the direct purchaser plaintiffs’ motions for reconsideration, he reopened the case to allow further briefing on two of the plaintiff’s reconsideration motions, indicating their may be new hope for the case.  One of the motions for reconsideration involves new evidence from the U.S. Food and Drug Administration (FDA) about Ranbaxy’s ability to launch a generic drug earlier than May 2014.  The other motion for reconsideration involves the requisite royalty damages calculation the plaintiffs must show in order to prove that the pay-for-delay settlement involved a large, unjustifiable amount.

Ranbaxy’s Ability to Launch a Generic Drug

Judge Young initially granted the drug companies’ motions for summary judgment on grounds of insufficient evidence that, but for the pay-for-delay settlement, Ranbaxy would have launched a generic Nexium drug earlier than May 2014.  Specifically, Judge Young cited Ranbaxy’s “continuing and well-document difficulties with obtaining FDA approval.”

However, in support of their motion for reconsideration, the direct-purchaser plaintiffs informed the court that Ranbaxy had previously received approval from the FDA, in a different matter, to be the sole generic manufacturer for the drug Lipitor.  Ranbaxy simply had to move its assembly operations from India to New Jersey to satisfy the FDA’s concerns about quality issues in overseas plants. The FDA had increased its oversight of all overseas drug companies, not just Ranbaxy.  In fact, Ranbaxy, a multi-billion dollar company based in India, is one of the top generic drug makers exporting its products to the U.S. market.

In light of the new FDA evidence, Judge Young determined that the plaintiff’s motion for reconsideration on this issue deserves “more thorough analysis” and has asked the parties for further briefing.

Large, Unjustified Reverse Payment (Under Supreme Court’s Actavis Decision)

The plaintiffs also filed a motion asking Judge Young to reconsider his order granting the Teva’s motion for summary judgment on the issue of royalty damages.  Judge Young initially found in Teva’s favor on the basis that the plaintiffs failed to demonstrate that the AstraZeneca pay-for-delay settlement constituted a “large, unjustified reverse payment” as set forth under the Supreme Court’s decision in Actavis.  The plaintiffs had not filed a reasonable royalty damages calculation from its expert witness, Dr. Thomas McGuire, on the mistaken believing it could be filed at a later date.  The reasonable royalty damages report is needed to address the economic impact of the settlement payment, i.e. that the settlement payment is so large and unjustified in comparison that it triggers antitrust concerns.

Increased Scrutiny of Pay-for-Delay Settlements After Supreme Court’s Actavis Decision

In the highly competitive, billion-dollar pharmaceutical industry, pay-for-delay settlements have been an increasingly popular way to resolve challenges to a patent’s validity due, in part, to the high cost of patent litigation. However, because the terms of these settlements rarely become public, consumers have largely been unaware about the economic impact it has caused.  In addition to settling the patent challenges, these agreements also delay the introduction of generics to market.

According to the FTC, hundreds of generic drugs are being kept off the market under these agreements.  The FTC considers the ” inherently anticompetitive nature of these deals” to be the cause of “enormous consumer harm” and continues to challenge these arrangements in court and through its investigative powers. The drug industry has argued for years that pay-for-delay settlements speed entry of a generic drug to market, rather than impede competition.

While the U.S. Supreme Court recently declined to hold pay-for-delay settlements as presumptively unlawful, the Court did rule in Actavis that these agreements are subject to court scrutiny to determine if a particular pay-for-delay settlement violates the antitrust laws. Since this is a notable change in legal precedent largely protecting pay-for-delay deals, the Actavis ruling has opened the door for more class action lawsuits accusing Big Pharma and generic drug makers of colluding to keep cheaper generic drugs off the market.

Audet and Partners, LLP is a leader in pursuing pay-for-delay claims against drug companies and provides consultations to end payors of pharmaceuticals with questions about excessively high costs.  Please contact a pay-for-delay lawyer today at at (800) 965-1461 or you can fill out the confidential case inquiry form on the right side of this page.

Sources:  Lawson, Alex, (2014, March 7); Retrieved from http://www.law360.com/articles/516581/judge-mulls-revival-of-nexium-pay-for-delay-row; Judge Young’s February 12, 2014 order In Re Nexium (Esomeprazole) Antitrust retrieved from: http://www.gpo.gov/fdsys/pkg/USCOURTS-mad-1_12-md-02409/pdf/USCOURTS-mad-1_12-md-02409-5.pdf

See also: Supreme Court case of FTC v Actavis, Inc.; Retrieved from: http://www.supremecourt.gov/opinions/12pdf/12-416_m5n0.pdf