Civil Action No. Jury Trial Demanded CLASS ACTION COMPLAINT

Transcription

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TENNESSEE
UNITED FOOD AND COMMERICIAL WORKERS
UNION AND MIDWEST HEALTH BENEFITS
FUND, and PIRELLI ARMSTRONG RETIREE
MEDICAL BENEFITS TRUST, individually and on
behalf of all others similarly situated,
Civil Action No.
Jury Trial Demanded
Plaintiffs,
v.
KING PHARMACEUTICALS, INC., AND
MUTUAL PHARMACEUTICAL COMPANY, INC.,
Defendants.
CLASS ACTION COMPLAINT
Case 3:12-cv-00112 Document 1
Filed 03/08/12 Page 1 of 63 PageID #: 1
I. INTRODUCTION
1.
Plaintiffs United Food and Commercial Workers Union Midwest (“UFCW
Midwest”) and Pirelli Armstrong Tire Corporation Retiree Medical Benefits Trust (“PMBT”)
bring this antitrust action on behalf of a Class of end-payors that indirectly purchased or
reimbursed for the prescription drug Skelaxin, a muscle relaxant containing the active ingredient
metaxalone, or its AB-Rated generic bioequivalent.
Plaintiffs seek to recover overcharge
damages incurred by the Class due to Defendants’ anticompetitive conduct, conduct which
delayed entry of less expensive generic versions of Skelaxin (metaxalone).
Defendants’
anticompetitive scheme violates the federal and state antitrust laws, state consumer fraud and
deceptive business practices laws, and the common law of unjust enrichment in each of the fifty
states.
2.
Although the original compound patent for Skelaxin expired in 1979, generics
remained foreclosed from the market until April 9, 2010, over 30 years later. The Defendants
illegally delayed generic entry by implementing an overarching anticompetitive scheme,
including the following acts:
a. Defendant King Pharmaceuticals, Inc. (“King”),
initiated and perpetuated
baseless sham patent litigation against generic competitors to enforce United
States Patent No. 6,407,128 (the ‘128 Patent), No. 6,683,102 (the ‘102 Patent),
and No. 7,122,566 (the ‘566 Patent);
b. King wrongfully listed and/or continued to list the ‘128, ‘102, and ‘566 patents in
the United States Food and Drug Administration’s (“FDA”) “Orange Book”;
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c. Defendants entered into an unlawful market allocation agreement, pursuant to
which Defendant Mutual Pharmaceutical Company, Inc. (“Mutual”) agreed not to
launch a generic version of Skelaxin in the United States in exchange for
payments by King that have so far exceeded $200 million (the “King-Mutual
conspiracy”); and
d. Pursuant to and in furtherance of the King-Mutual conspiracy, Defendants
engaged in a campaign of filing meritless Citizen Petitions with the FDA to help
thwart and delay other generic companies’ efforts to obtain FDA approval of
generic versions of Skelaxin, and, in so doing, unlawfully extended King’s
monopoly over metaxalone products years beyond the point at which generic
competition would otherwise have ensued.
3.
The scheme worked as planned. Generic Skelaxin was not sold until on or about
April 9, 2010, far later than it would have been sold absent Defendants’ illegal, anticompetitive
conduct. Because of Defendants’ scheme to delay generic Skelaxin competition, in whole or in
part, Plaintiffs and the Class have paid hundreds of millions of dollars more for metaxalone
products than they would have paid absent such conduct.
II.
4.
JURISDICTION AND VENUE
This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332(d)
because this is a class action in which the aggregate amount in controversy exceeds
$5,000,000 and at least one member of the putative class is a citizen of a state different from
that of one of the defendants.
5.
This Court also has jurisdiction over this matter pursuant to 15 U.S.C. § 26 and 28
U.S.C. §§ 1331 and 1337 in that Plaintiffs bring claims under Section 16 of the Clayton Act, 15
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U.S.C. § 26, for injunctive and equitable relief to remedy Defendants’ violations of Sections 1
and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2. The Court has supplemental
jurisdiction over Plaintiffs’ pendent state law claims pursuant to 28 U.S.C. § 1367.
6.
Venue is appropriate within this district under Section 12 of the Clayton Act, 15
U.S.C. § 22, and 28 U.S.C. §1391(b) and (c), because Defendants transact business within this
district and the interstate trade and commerce, hereinafter described, is carried out, in substantial
part, in this district. Mutual is a corporation organized under the laws of the Commonwealth of
Pennsylvania with its principal place of business in Philadelphia, Pennsylvania. Finally, one of
the lawsuits challenged as being a sham was pursued in this district.
III. PARTIES
7.
UFCW Midwest is an “employee welfare benefit plan.” UFCW Midwest’s office,
from which it pays medical benefits including benefits for prescription drugs, is located in Cook
County, Illinois. During the Class Period, as defined below, UFCW Midwest purchased and/or
provided reimbursement for brand Skelaxin or its generic equivalent during the Class Period.
UFCW Midwest paid more than it would have absent Defendants’ unlawful scheme to prevent
and delay generic entry.
UFCW Midwest purchased and/or provided reimbursement for
Skelaxin or its generic equivalent in the states of Florida, Iowa, Illinois, Indiana, and Oklahoma
during the Class Period.
8.
PMBT is a voluntary employee benefits association maintained pursuant to the
federal Employee Retirement Secutiry Act, 29 U.S.C. § 1132, et seq. and to the settlement of a
federal court action (Case No. 3:94-0573) brought in the United States District Court for the
Middle District of Tennessee against Pirelli Armstrong Tire Corp. (“Pirelli) in the early 1990s by
many Pirelli retirees for the purpose of providing health and medical benefits to eligible
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participants and beneficiaries. PMBT maintains its principal place of business in Goodlettsville,
Sumner County, Tennessee.
During the Class Period, as defined below, PMBT purchased
and/or provided reimbursement for brand Skelaxin or its generic equivalent during the Class
Period. PMBT paid more than it would have absent Defendants’ unlawful scheme to prevent and
delay generic entry. PMBT purchased and/or provided reimbursement for Skelaxin or its generic
equivalent in Alabama, Arizona, California, Florida, Illinois, Iowa, Kentucky, Mississippi,
Oregon, Tennessee, and Texas during the Class Period.
9.
King is a corporation organized and existing under the laws of the state of
Tennessee with its principal place of business at 501 5th Street, Bristol, Tennessee.
10.
Mutual is a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania, and has its principal place of business located at 1100
Orthodox Street, Philadelphia, Pennsylvania 19124.
11.
All of Defendants’ actions described in this complaint are part of, and in
furtherance of, the illegal monopolization and restraint of trade alleged herein, and were
authorized, ordered, and/or done by Defendants’ various officers, agents, employees, or other
representatives while actively engaged in the management of Defendants’ affairs, within the
course and scope of their duties and employment, and/or with the actual, apparent, and/or
ostensible authority of Defendants.
IV. REGULATORY BACKGROUND
A.
The Regulatory Structure for Approval of Generic Drugs and Substitution of
Generics for Brand Name Drugs
12.
Under the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301-392
(“FDCA”), a manufacturer of a new drug must obtain FDA approval to sell a new drug. The
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manufacturer must file a New Drug Application (“NDA”) that includes data concerning the
safety and effectiveness of the drug as well as information about applicable patents.
13.
Generic manufacturers may file abbreviated applications, or ANDAs, that (i) rely
on the scientific findings of safety and effectiveness included in the brand name drug
manufacturer’s original NDA, and (ii) show that the generic drug contains the same active
ingredient(s), dosage form, route of administration, and strength as the brand name drug (or, in
other words, is bioequivalent to the brand name drug). Drug Price Competition and Patent Term
Restoration Act, Pub. L. No. 98-417, 98 Stat. 1585 (1984) (“Hatch-Waxman”).
14.
After approval of an NDA, the brand manufacturer may list any patents that it
believes could reasonably be asserted against a generic manufacturer who makes, uses, or sells a
generic version of the brand name drug prior to the expiration of the listed patents in the FDA’s
book of Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange
Book”). The FDA relies on the brand name manufacturer for information concerning the validity
of the patents and applicability of the patents to the brand name drug. The FDA performs a
ministerial function only in listing patents in the Orange Book.
15.
New patents obtained after NDA approval may be listed in the Orange Book as
related to the NDA if the manufacturer certifies, inter alia, that the new patents claim either the
approved drug (for compound patents) or that the patents claim the approved drug for approved
methods of use (for method-of-use patents). The NDA holder is required to list any new patents
within 30 days of issuance. 21 U.S.C. §§ 355 (b)(l) & (c)(2).
16.
With respect to patent information for method of use claims, the NDA holder’s
obligation to submit patent information includes “use codes” and specific descriptions of the
protected methods of use. 21 C.F.R. § 314.53(b)(l). “Use codes” are listed in the Orange Book
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and are intended to alert ANDA applicants to the existence of a patent that claims an approved
use. Applications for FDA Approval to Market a New Drug: Patent Submission and Listing
Requirements and Application of 30-Month Stays on Approval of [ANDAsJ Certifying That a
Patent Claiming a Drug Is Invalid or Will Not Be Irfringed, Final Rule, 68 Fed. Reg. 36676,
36683 (June 18, 2003). “Use code narratives” are written descriptions, provided by an NDA
holder, of the approved method of use claimed by a patent.
17.
The FDA relies completely on the brand manufacturer’s truthfulness about a
patent’s validity and applicability; the FDA has neither the authority nor the resources to check
the manufacturer’s patent representations for accuracy or trustworthiness.
18.
To obtain FDA approval of an ANDA, a generic manufacturer must certify that
the generic drug will not infringe any patents listed in the Orange Book. There are several
different certifications that an ANDA filer may make in its submission to the FDA; two are
relevant here. A Paragraph IV certification must state “that the patent for the brand name drug is
invalid or will not be infringed by the generic manufacturer’s proposed product.” Alternatively, a
Section viii “carve out” certification must state that the generic manufacturer is seeking approval
only for non-patented uses of the referenced drug.
19.
If a generic manufacturer files a Paragraph IV certification, a brand name
manufacturer may delay the final FDA approval of the ANDA by suing for patent infringement.
If the brand name manufacturer initiates a patent infringement action against the generic filer
within 45 days of receiving notification of the Paragraph IV certification, the FDA may not grant
final approval to the ANDA until the earlier of (a) the passage of 30 months, or (b) the issuance
of a decision by a court that the patent is invalid or not infringed by the generic manufacturer’s
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ANDA. The FDA may grant “tentative approval” while the 30-month stay is pending, but cannot
authorize the generic manufacturer to go to market.
20.
As an incentive to spur generic companies to provide alternatives to branded
drugs, the first generic manufacturer to file a substantially complete ANDA containing a
Paragraph IV certification gets a period of protection from competition with other ANDA filers
for that drug. For Paragraph IV certifications made prior to December 2003, the first generic
applicant is entitled to 180 days of market exclusivity, measured from its initial commercial
marketing of the drug or court decisions determining that all patents for the branded drug listed
in the FDA Orange Book are invalid or not infringed, whichever comes first. After December
2003, pursuant to the Medicare Modernization Act of 2003, the first generic manufacturer to file
a Paragraph IV certification is entitled to 180 days of market exclusivity, but that exclusivity
potentially is subject to forfeiture under certain circumstances. One such circumstance is when
the generic manufacturer fails to obtain tentative approval within 30 months of filing its ANDA,
unless the FDA determines that the failure “is caused by a change in or a review of the
requirements for approval of the application imposed after the date on which the application is
filed.”
21.
When a generic manufacturer files an ANDA with a Section viii statement, the
stay provision associated with ANDAs filed pursuant to Paragraph IV certifications do not apply.
To the extent the brand manufacturer contends the ANDA filer is infringing on a patent, the
brand manufacturer can file an infringement suit, but it does not get the benefit of an automatic
stay. The generic manufacturer, even if it the first to file an ANDA with respect to the brand
product, does not get the benefit of 180 days of market exclusivity.
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22.
Although not intended to do so, FDA regulations create powerful incentives for
brand manufacturers to: (a) list patents in the Orange Book, even if such patents are not eligible
for listing; and (b) sue any generic competitor that files an ANDA with a Paragraph IV
certification, even if the competitor’s product does not actually infringe the listed patent(s)
and/or the patents are invalid or unenforceable, in order to delay final FDA approval of an
ANDA for up to 30 months.
B. The Benefits of Generic Drugs
23.
Once bioequivalence to the corresponding branded drug is demonstrated, the FDA
assigns an “AB” rating to the generic drug, permitting it to be sold and also substituted for the
brand name drug at the pharmacy counter. Typically, an AB-rated generic enters the market
priced at least 30% below the branded counterpart, and this discount rapidly increases to 50-80%
as multiple generics enter the market and increase price competition.
24.
Generic competition enables purchasers to (a) purchase generic versions of the
brand name drug at a substantially lower price than the brand, and/or (b) purchase the brand
name drug at a reduced price. Generic competition to a single branded drug product can result in
billions of dollars in savings to consumers, insurers, and other drug purchasers. AB-rated
generic equivalents routinely take 80-90% of the brand’s market share within the first year of
availability.
25.
All states permit (and some states require) pharmacists to automatically substitute
a generic drug for the corresponding brand name drug unless the doctor has stated that the
prescription for the brand name product must be dispensed as written. Until a generic
manufacturer enters the market, no substitution can occur and therefore the brand name
manufacturer can charge supracompetitive prices profitably without material loss of sales
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volume to generics. Consequently, brand name drug manufacturers have a strong interest in
seeking to delay the introduction of generic competition into the market.
26.
Many third party payers (such as health insurance plans and Medicaid programs)
have adopted policies to encourage the substitution of AB-rated generic drugs for their branded
counterparts. Many consumers routinely switch from a branded drug to an AB-rated generic drug
once the generic becomes available. Consequently, AB-rated generic drugs typically capture a
significant share of their branded counterparts’ sales, causing a significant reduction of the
branded drug’s unit and dollar sales.
V. FACTUAL BACKGROUND
27.
Skelaxin is a muscle relaxant approved by the FDA for the treatment of acute,
painful, musculoskeletal conditions. The active pharmaceutical ingredient in Skelaxin is
metaxalone. Skelaxin was originally approved by the FDA for marketing in the United States in
1962. The patent on metaxalone (U.S. Patent No. 3,062,827) expired in or about 1979.
28.
Skelaxin has a unique pharmacokinetic and safety profile. It is fast-acting, does
not interfere with the motor activity used to maintain posture and balance, does not produce a
loss of muscle tone, has a low incidence of side effects and drowsiness, and exerts no adverse
cardiovascular effects. It contains an active pharmaceutical ingredient different from those
found in other muscle relaxants, and has a mechanism of action that is distinct from other muscle
relaxants.
29.
Prior to June 2003, Skelaxin was owned and marketed by Elan Pharmaceuticals
Inc. (“Elan”) in the United States. In June 2003, King acquired Skelaxin and another drug from
Elan for approximately $750 million. At that time, Skelaxin sales in the United States were
approximately $145 million per year. Skelaxin was originally approved and marketed only in
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400 mg strength, to be taken in 800 mg increments (i.e., 2 tablets) three to four times per day.
Subsequently, Elan obtained approval from the FDA to market an 800 mg version of Skelaxin.
By 2007, four years after King’s acquisition, Skelaxin sales in the United States exceeded $500
million per year.
A. The Patents
30.
Elan is an assignee of the ‘128 Patent, which claims “methods of increasing the
bioavailability of metaxalone by administering [it] with food.” The United States Patent and
Trademark Office (“USPTO”) issued the ‘128 patent on June 18, 2002, and Elan shortly
thereafter listed the’ 128 patent in the Orange Book.
31.
In June 2003, as part of the sale of Skelaxin to King, Elan licensed to King the
‘128 Patent and Elan’s rights to a patent application that ultimately would issue as the ‘102
Patent.
32.
In January 2004, USPTO issued the ‘102 Patent which was “directed to methods
of providing metaxalone to patients while informing them that taking metaxalone with food
results in higher blood levels of metaxalone.” King listed the ‘102 patent in the Orange Book
in early 2004 as covering Skelaxin.
33.
In October 2006, the USPTO issued the ‘566 Patent to Mutual. The ‘566 Patent is
directed to methods of providing a patient with metaxalone and informing the patient
about the potential for metaxalone to interact with drugs or foods that inhibit or induce the
enzymes that metabolize metaxalone.
34.
After the Defendants abandoned their adversarial positions and entered into an
anticompetitive agreement, Mutual licensed the’ 566 patent to King. King then listed the’ 566
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Patent in the Orange Book in late 2006, attempting to add further patent protection to brand
Skelaxin.
35.
Each of the ‘128, ‘102, and ‘566 patents have been adjudicated by federal courts
to be invalid as inherently obvious; no reasonable litigant would or could have believed them to
be valid patents at any time.
B. “Life Cycle Management”
36.
In the later part of the 1990s and early 2000s, several generic companies were
developing generics for Skelaxin. The possibility of imminent generic competition caused Elan,
and later King, to think of ways to avoid competition by extending the “life” of the metaxalone
monopoly. In 2001, Elan created a life cycle management (“LCM”) team. One of the key
objectives of the LCM team was blatantly to “delay[] generic entry.” Acknowledging that this
exclusionary objective was accurately characterized, a senior Elan executive noted that “[w]e can
think it, say it, but not write it,” as that description was legally unacceptable. Elan used its
cherry-picked Skelaxin bioavailability studies in FDA submissions as “another grenade to throw
in front of generic companies.” King Pharmaceuticals, Inc. v. Eon Labs, Inc., Civil Action No.
04-5540, at 2-4 (E.D.N.Y. Apr. 1, 2009) (attached as Exhibit A).
37.
As part of its due diligence into the acquisition of the rights to Skelaxin (a
transaction originally valued at over $850 million dollars), King conducted extensive research
into the value of Skelaxin. Such research required an evaluation of intellectual property rights,
marketing plans, development plans, sales projections, and threats to its value, such as the
pending and anticipated patent litigation, as well as potential avenues of protection, such as the
pending ‘102 patent.
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38.
Upon taking over Skelaxin, King’s LCM efforts included initiating and
continuing sham litigation against generic competitors, and entering into the King-Mutual
conspiracy so that Mutual would agree not to come to market with a generic metaxalone product
and would instead join with King in a joint campaign sham Citizen Petition filing with the FDA
to obstruct and delay FDA approval for other would-be generic competitors. Generics’ Efforts
to Come to Market and Defendants’ Efforts to Obstruct and Delay Entry
C. Generics’ Efforts to Come to Market and Defendants’ Efforts to Stop Them
39.
In 1999, Mutual began development work on a generic version of Skelaxin in
collaboration with SigmaPharm, Inc. (“SigmaPharm”), 1 a Delaware corporation engaged in the
business of the development of pharmaceutical technologies and products. Under Mutual’s
agreement with SigmaPharm, SigmaPharm’s President, Dr. Spireas, served as Mutual’s Vice
President of Research and Development and assumed responsibility for Mutual’s laboratory and
research activities related to obtaining FDA approval for generic metaxalone.
40.
As early as 2001, Mutual developed a generic equivalent to Skelaxin.
41.
By the early 2000s, three different generic drug companies were simultaneously
developing generic versions of Skelaxin: Mutual; Eon Labs, Inc. (“Eon”) (later acquired by
Sandoz, Inc. (“Sandoz”); and CorePharma LLC (“CorePharma”).
42.
In 2001, representatives of Mutual approached Elan in an effort to collaborate
with Elan on extending the monopoly for the Skelaxin product. Mutual informed Elan that
1
In January 2010, SigmaPharm brought its own antitrust suit against Mutual. The action was dismissed due to lack
of antitrust standing, but the Court “h[eld] that the facts alleged in the First Amended Complaint, viewed as a whole
as they must be, are sufficient to nudge the allegation of an unlawful agreement to restrict the output of generic
equivalents to SKELAXIN ‘across the line from conceivable to plausible.” SigmaPharm, Inc. v. Mutual
Pharmaceuticals Inc. et al., 772 F.Supp. 2d 660, 671-72 (E.D. Pa. 2011) (J. Rufe). The SigmaPharm opinion as
attached as Exhibit B.
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bioequivalence studies “would effectively give Elan another year of exclusivity on the [Skelaxin]
product.” Ex. A at 4.
43.
In March 2001, Mutual filed a Citizen Petition requesting that the FDA withhold
approval of any Abbreviated New Drug Application (“ANDA”) for a generic version of Skelaxin
unless the applicant demonstrated that the proposed generic product and the branded drug were
bioequivalent under fasting conditions. In support of its petition, Mutual submitted
bioequivalence studies conducted on metaxalone in both the fed and fasted state (i.e., “with
food” and “without food”). As defined by FDA, bioequivalence studies test “the rate and extent
of absorption of the test drug” to determine if it shows “a significant difference from the rate and
extent of absorption of the reference drug when administered at the same molar dose of the
therapeutic ingredient under similar experimental conditions in either a single dose or multiple
doses.” “Bioavailability,” as defined by FDA, “refers to the rate and extent to which the active
ingredient or therapeutic ingredient is absorbed from a drug product and becomes available at the
site of drug action.”
44.
Piggybacking on Mutual’s March 2001 petition, Elan also petitioned the FDA for
an order that ANDA applicants for generic metaxalone be required to demonstrate that the
proposed generic and Skelaxin were bioequivalent not only under fasting conditions (as FDA
had already required) but also under non-fasting conditions (which was not required by FDA).
This was consistent with the advice that Mutual had given Elan earlier that forcing competitors
to conduct bioequivalence studies both in the fasted state (as had been required already by the
FDA) and the fed state (not previously required by FDA) “would effectively give Elan another
year of exclusivity of the [Skelaxin] product.” Ex. A at 4. Elan also petitioned the FDA to
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change the label for Skelaxin to include information reflecting the results of certain food effect
studies.
45.
At the same time, Elan was seeking issuance of the ‘128 and ‘102 patents from
the USPTO in connection with certain food effect studies on Skelaxin. If the FDA granted the
Elan and Mutual petitions, it would force future generic Skelaxin manufacturers into the
exclusionary purview of the pending ‘128 and ‘102 patents.
46.
On January 30, 2002, the FDA granted Mutual’s March 2001 Citizen Petition,
requiring ANDA applicants to demonstrate the proposed generic product and the branded drug
were bioequivalent under both fed and fasting conditions. FDA would subsequently reverse this
decision in March 2004, after the patents were approved and the scheme to push generic ANDA
filers into the exclusionary scope of the later-invalidated patents became more clear.
47.
On June 20, 2002, the FDA granted Elan’s supplemental New Drug Application
(“NDA”) to revise the Skelaxin label to include reference to the studies that had been conducted
under fasting conditions.
48.
The FDA approval of Elan’s supplemental NDA occurred just two days after Elan
obtained USPTO approval of its ‘128 patent. Upon Elan’s listing of the ‘128 patent in FDA’s
“Orange Book,” potential generic competitors for Skelaxin were required to make certain
certifications concerning the ‘128 patent. Generic competitors wishing to enter the market before
expiration of the patent could make certifications that the patent was invalid or not infringed by
their ANDA applications under 21 U.S.C. § 355(j)(2)(A)(vii) (the “Paragraph IV certification”),
or the competitor could seek approval for the product with a “carve out” with respect to the FDA
approved label under 21 U.S.C. § 355(j)(2)(A)(viii) (the “Section viii certification”). Utilizing
the Section viii certification would permit a generic competitor to market the generic product
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under an approved label that excluded references to certain patent-protected aspects of the
branded product. Essentially, the “carve out” approach applies to method of use patents, such as
the’ 128 patent, which do not cover the molecule or a particular formulation of the approved
product, but which cover a method of using the product and are listed in the Orange Book under
certain “use codes.”
49.
In August 2002, Elan obtained FDA approval for an 800 mg version of Skelaxin,
which it launched shortly thereafter.
50.
In December 2002, Eon filed an ANDA for a generic 400 mg Skelaxin product,
with a Paragraph IV Certification concerning the’ 128 Patent. Eon thus became the first
Paragraph IV filer against the’ 128 Patent. This meant that Eon was entitled to 180 days of
marketing exclusivity for the 400 mg Skelaxin product upon final approval of Eon’s ANDA
application.
51.
In response to Eon’s Paragraph IV certification, on or about January 2, 2003, Elan
commenced litigation against Eon in the United States District Court for the Eastern District of
New York alleging infringement of the ‘128 Patent (the “Elan-Eon Litigation”). After June 2003,
King took control of the litigation against Eon.
52.
In or about February 2003, CorePharma also filed an ANDA for a generic 400 mg
Skelaxin product, with a Paragraph IV Certification concerning the’ 128 Patent.
53.
In response, on or about March 7, 2003, Elan commenced litigation against
CorePharma in the United States District Court for the District of New Jersey (the “ElanCorePharma Litigation”). The Elan-CorePharma Litigation was transferred to the United States
District Court for the Eastern District of New York in June 2003. After June 2003, King took
control of the litigation against CorePharma.
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54.
In or around March 2003, Mutual filed an ANDA for a 400 mg generic Skelaxin
product and certified under Section viii that the ‘128 Patent did not claim a use for which Mutual
was seeking approval. Mutual did not file a Paragraph IV certification. Mutual requested that
FDA carve out the infringing method of use from the label for Mutual’s generic product.
55.
The ‘102 Patent is directed to methods of providing metaxalone to patients while
informing them that taking metaxalone with food results in higher blood levels of metaxalone.
56.
In April 2003, Elan filed a supplemental New Drug Application (“sNDA”)
seeking to revise the Skelaxin label to include information relating to the pharmacokinetic effects
of taking Skelaxin with food. Elan asked for this labeling revision knowing that future generic
ANDA filers would need to mirror, in most cases, the labeling of the brand product. Thus, the
sNDA labeling revision could give Elan an additional way to drag generic competition into the
purview of its flimsy later-invalidated ‘128 and ‘102 patents.
57.
King became the owner of Skelaxin in June 2003. “[T]here was a concern about
[generic entry] from the time [King] acquired [Skelaxin from Elan].” King Pharmaceuticals, Inc.
v. Sandoz, Inc., Civil Action No. 08-5974, at 24-27 (D.N.J. 2011) (hereinafter the “King-Sandoz
Litigation”) (testimony of Mr. James Green, former Executive Vice President of Corporate
Affairs for King, Sept. 8, 2010). King immediately took up the mantel from Elan of the effort to
delay generic competition to Skelaxin, including the effort to obtain what became the ‘102
patent.
58.
On or about January 27, 2004, the USPTO issued the ‘102 patent. By virtue of its
purchase of the Skelaxin franchise from Elan, King became the owner of the rights to the ‘102
patent. King listed the ‘102 Patent in the Orange Book as covering Skelaxin.
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59.
Subsequently, that same month, Mutual filed a second ANDA for 400 mg generic
metaxalone, this time certifying under Paragraph IV that Mutual’s generic metaxalone did not
infringe on the ‘102 or ‘128 Patents. Eon and CorePharma also made Paragraph IV Certifications
against the ‘102 Patent in connection with their respective ANDAs for 400 mg generic Skelaxin.
Unlike a Section viii carve out, a Paragraph IV certification opened the ANDA filers up to a
mandatory 30 month stay on FDA approval, should the patent holder file an infringement suit
within 45 days.
D. 2004 FDA Petition Battles: King vs. Mutual
60.
On March 1, 2004, the FDA announced that it had determined that “omission of
information regarding fed-state bioavailability [from the labeling] will not negatively affect the
safe use of metaxalone.” This reversed FDA’s January 30, 2002 determination that such
information needed to be included in the label. Instead, FDA determined that ANDA applicants
for a generic version of Skelaxin could, pursuant to Section viii, carve out the use listed in the
Orange Book that related to the ‘128 patent. The FDA stated that it had received “information
and analysis that has persuaded FDA that the [information protected by the’ 128 Patent] may be
carved out of the metaxalone labeling without rendering the drug less safe or effective for the
remaining conditions of use.” The FDA noted “[t]here are no data to support an increase in
adverse events related to increased drug concentrations.” “FDA notes that metaxalone has a long
history of safe use. It has been marketed for decades without dosing adjustment information
related to fed-state administration. Few adverse event reports have been entered into the Adverse
Event Reporting System.”
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61.
FDA pointed out that it had already examined the limited data available,
discussed the outcome with Elan, and concluded that there was “insufficient data to support a
correlation between enhanced drug concentrations and increased adverse events.”
62.
FDA also specifically delineated what would be needed to justify requiring
inclusion of King’s labeling language: “If Elan had conducted clinical trials to demonstrate a
clinical effect arising from the difference in fed and non-fed state bioavailability, the inclusion of
such information in labeling might have been considered necessary for the safe and effective use
of metaxalone. No such study has been submitted.”
63.
On or about March 12, 2004, King commenced litigation against Mutual in the
United States District Court for the Eastern District of Pennsylvania in response to Mutual’s
Paragraph IV filing on the ‘102 Patent (the “King-Mutual Litigation”), a patent that could not be
“carved out” because it addressed labeling, not method of use directly.
64.
On March 18, 2004, King submitted a Citizen Petition to the FDA requesting that
the FDA (i) rescind its March 1, 2004 Letter allowing Section viii carve outs for ‘128 patentrelated information; (ii) require all ANDA applicants for generic Skelaxin to submit a Paragraph
IV Certification against the ‘128 Patent; and (iii) prohibit the removal of the Food-Effect
Labeling appearing on the Skelaxin label (which would push generic filers into the purview of
the ‘102 patent).
65.
On March 18, 2004, King also petitioned the FDA for a Stay of Action to delay
FDA approval of any generic metaxalone products until the FDA had ruled upon King’s March
18, 2004 Citizen Petition. King argued that approval of generic metaxalone with a label that
carved out the Food-Effect Labeling would render the generics less safe and effective. Each of
King’s March 18, 2004 petitions were baseless because they provided no relevant information to
19
justify FDA reconsidering its March 1, 2004 decision. The FDA had made clear in its March 1,
2004 decision that in order to reach a contrary decision it needed to be shown “clinical trials to
demonstrate a clinical effect arising from the difference in fed and non-fed state bioavailability.”
66.
King’s March 18, 2004 petitions did not submit any such study; they simply
rehashed the data that FDA had already reviewed in reaching its March 1, 2004 decision. This
data had already been called “insufficient…to support a correlation between enhanced drug
concentrations and increased adverse events.” Thus, these two petitions were baseless, and no
reasonable petitioner could have expected to succeed on them. Skelaxin had been sold in the
United States for over 40 years without the information that King now said was required for it to
be safe and effective.
67.
On or about April 2004, in connection with its 400 mg generic Skelaxin ANDA,
CorePharma withdrew its Paragraph IV Certification against the ‘128 Patent, and subsequently
filed a Section viii carve-out – a statement that the ‘128 patent listed in the Orange Book did not
claim a use for which CorePharma was seeking approval.
68.
On or about April 5, 2004, Mutual filed with the FDA an opposition to King’s
Petition for Stay, and also requested a stay of the April 2003 sNDA that had been filed by Elan
requesting the inclusion of additional information in the label concerning the pharmacokinetic
effects of taking Skelaxin with food. Mutual told the FDA that the relief it requested was
“necessary to assure that FDA does not inadvertently facilitate an anticompetitive scheme by
King to prevent generic competition for metaxalone tablet drug products using faulty medical
assumptions derived from dubious scientific data.”
69.
Mutual noted that “[f]or the past 40+ years, Skelaxin’s labeling has not included
any specific instructions vis a vis dosing with or without food.” Mutual also noted that, despite
20
tests showing differing bioavailability when taken with food or without food, “to this day, there
is no clinically significant evidence to suggest that the safety or effectiveness of Skelaxin is
altered based on whether the drug is dosed in a fasting or fed condition.” Mutual asserted:
“Nevertheless, for the past several years King and Elan Pharmaceuticals Inc. (the previous owner
of the Skelaxin NDA) have been pursuing a strategy to leverage dubious patents and a handful of
small, clinically inconclusive bioavailability studies into an additional long-term barrier to
generic competition.” Mutual summarized the state of affairs: “[u]nfortunately for American
consumers, the King-Elan scheme has already delayed the availability of lower cost generic
metaxalone products for several years, and if [Mutual’s] stay [of the April 2003 supplemental
NDA] is not granted, FDA approval of King’s proposed labeling changes may inappropriately
solidify King’s stranglehold on the metaxalone market without conferring any medical or
economic benefits on American consumers.”
70.
On May 13, 2004, King submitted to the FDA a response to Mutual’s April 5,
2004 submission. King denied Mutual’s claim that it was relying on “dubious” bioavailability
studies, responding that Mutual had not reviewed King’s studies (which were not publicly
available), and noting that “when it suited its purposes, Mutual took the position that information
about the bioavailability of metaxalone was extremely important and warranted a change in the
Agency’s classification of metaxalone and corresponding ANDA requirements.” King simply
reiterated its position that the FDA should reverse its March 1, 2004 decision. Again, King did
not submit any of the studies that the FDA indicated would be required to reverse its decision.
Indeed, King admitted that its studies “were not designed to establish the precise clinical impact
of the bioavailability differences on particular patient populations.” Thus, the submission was
baseless, and no reasonable petitioner could have expected to succeed on that request.
21
71.
On or about May 17, 2004, Mutual requested that FDA require King to make all
the studies in support of its position available to the public so they could be properly scrutinized.
Mutual argued that King’s descriptions of its studies were “wholly inadequate to support any
clinical rationale for inclusion of a fed dosing instruction for Skelaxin.” Mutual emphasized that
“Skelaxin is widely regarded as a safe drug. As FDA’s medical review of Skelaxin in 2002
noted, for the 30 year period between 1970 and 2000, only 52 Skelaxin-related adverse events
were reported to the AERS system [FDA’s Adverse Events Reporting System], only 18 of those
events were serious, and ‘many were confounded by concomitant medication, preexisting
medical conditions or lack of clinical[ly] detailed information.’”
72.
On or about November 4, 2004, Eon filed an amendment to its ANDA for the 400
mg Skelaxin product to also seek approval for the 800 mg Skelaxin formulation, certifying under
Paragraph IV that the ‘128 and ‘102 patents were invalid or not infringed. Eon thus became the
first Paragraph IV filer with respect to the 800 mg Skelaxin product. This meant that Eon was
entitled to 180 days of marketing exclusivity for the 800 mg generic metaxalone product upon
final approval of Eon’s ANDA application.
73.
On December 17, 2004, King commenced litigation against Eon in the United
States District Court for the Eastern District of New York in response to Eon’s Paragraph IV
filing for the 800 mg Skelaxin product.
E. 2005: King and Mutual Cut a Deal
74.
On February 15, 2005, Mutual submitted a letter to the FDA, opposing Food-
Effect Labeling for Skelaxin and any generic equivalents. Mutual included the affidavit of Dr.
Daniel L. Azarnoff, which stated that “there are no data or other information that would support
a determination that metaxalone tablets sold with labeling that omits the information about food
22
effects is either less safe or less effective than a product sold with labeling containing such
information. In fact, there are no data or information that even suggests that omission of the
information on pharmacokinetics would pose a safety or efficacy problem.” This is consistent
with millions of prescriptions and over 40 years of experience of safety and efficacy of Skelaxin
without the inclusion of such information in the label. Dr. Azarnoff further noted that the
pharmacokinetic data included in the label is not relevant given that the dosing instructions in the
approved label say nothing about whether Skelaxin should be taken with or without a meal.
75.
In October 2005, Mutual’s Spireas met with King’s President and Chief Executive
Officer, Brian Markison, and King’s Vice President of Business Development, Adriane Sax. At
that meeting, Markison discussed King’s efforts to settle the Skelaxin patent litigation with other
generic manufacturers, indicating that King would make substantial annual payments to those
generic manufacturers to settle the patent litigation threatening King’s monopoly.
76.
On December 6, 2005, King and Mutual entered into an agreement that had the
effect of restricting the output of, and thereby raising the price of, generic metaxalone
(hereinafter, the “King-Mutual Agreement”). The King-Mutual Agreement, which resulted in
Mutual foregoing sales of generic metaxalone, is one component of the King-Mutual conspiracy.
The King-Mutual Agreement did not settle the King-Mutual patent litigation, which remained
pending for five more years.
77.
The specific terms of the King-Mutual Agreement concerned the licensing to
King of Mutual’s intellectual property relating to metaxalone, including any patents that Mutual
may obtain relating to metaxalone. Mutual would receive from King $35 million up front and a
10% “royalty” on sales of King’s branded Skelaxin regardless of whether any patent ever issued
or was ruled invalid. Mutual would also receive an additional 5% “royalty” on Skelaxin sales if
23
King revised its label and another 10% on sales of any new formulation of Skelaxin. In fact,
despite the licensing terms, which were a pretext, these payments were for the purpose of
causing Mutual to stay off the market with its generic metaxalone product, and instead to
cooperate with King in keeping other generic competitors off the market.
78.
Upon information and belief, Mutual agreed to aid King in its effort to delay and
obstruct approval and launch of other generic competitors, including, but not limited to
Eon/Sandoz and CorePharma. Mutual and King intended and carried out a joint, multi-year
campaign of filing baseless Citizen Petitions to delay generic approval, as well as concerted
fraud on the federal district court in which the King-Mutual patent litigation was pending.
Absent an anticompetitive agreement with King, all of these efforts were against Mutual’s
economic self-interest.
79.
A direct and intended result of the Agreement was that Mutual no longer had any
independent economic incentive to pursue its ANDA for generic Skelaxin. Instead, Mutual stood
to gain more revenue from a continuing monopoly by King over Skelaxin than from bringing its
own generic metaxalone product to market. Thus, as King and Mutual intended in entering the
Agreement, Mutual determined to forego launching its own generic metaxalone product, and,
instead would work with King to file baseless Citizen Petitions with the FDA to obstruct
approval of any other generic version of metaxalone. Mutual’s interest now was best served by
assisting King in perpetuating that monopoly, causing Plaintiffs and members of the Class to
incur overcharges. This was the King-Mutual conspiracy.
80.
King and Mutual did not inform Judge Stengel, who was presiding over the
pending King- Mutual patent litigation in the Eastern District of Pennsylvania, of the Agreement,
which would have raised a red flag about whether that action should be dismissed for lack of a
24
justiciable controversy.Instead, in furtherance of the conspiracy, King and Mutual filed a
stipulation under seal with the Court on May 15, 2006. After a telephone conference with Judge
Stengel on May 16, 2006, the Court placed the litigation in civil suspense on May 17, 2006
“pending outcome of an FDA decision.” King and Mutual’s stipulation was filed just one month
before the FDA’s thirty-month stay on approving Mutual’s ANDA would expire and just five
months before the case was set to go to trial on October 17, 2006.
81.
As a direct result of the King-Mutual Agreement, Mutual changed from a
potential generic competitor to a co-conspirator. Mutual had previously been planning and
preparing to “market its metaxalone tablets (400 mg) as soon as it is permitted to do so” and had
been “aggressively defend[ing] against any baseless lawsuit filed by King” on the ‘102 patent as
it contended in its Paragraph IV certification. Mutual reversed course to help maintain King’s
monopoly as long as possible so that it could share in the monopoly profits that King had been
enjoying.
82.
Delaying the progress of the King-Mutual patent litigation was in furtherance of
the conspiracy, as it enabled Mutual to continue to appear to the FDA as an adversary of King’s.
In truth, Mutual had joined King to begin a relentless, concerted, five-year campaign of meritless
Citizen Petition filing to delay the approval of any generic metaxalone products. The cloak of
adversarial litigation was intended to, and did, mask Mutual’s complicity in King’s scheme to
unlawfully maintain its monopoly.
83.
Under the King-Mutual Agreement, King paid Mutual the first payment of $35
million and committed to making further periodic payments after January 1, 2006, based on sales
of Skelaxin. King has made substantial payments to Mutual, which have exceeded $200 million
to date.
25
84.
In furtherance of the conspiracy, King and Mutual misled the Court by continuing
to maintain the King-Mutual patent litigation long after Mutual actually abandoned any genuine
effort to challenge ‘102 and ‘128 patents and to market generic metaxalone. Mutual no longer
had any intention of invalidating either patent; to do so after the King-Mutual Agreement would
have been against its commercial interests given the payments Mutual was receiving from King,
as long as King’s monopoly was preserved.
85.
Although the King-Mutual litigation was a sham at the outset (because King had
no reasonable chance of success on the merits), when the King-Mutual agreement was
consummated, the King-Mutual litigation became a concerted fraud on the Eastern District of
Pennsylvania Court. There was no justiciable controversy any longer, yet both parties maintained
the litigation for an additional 5 years -- a subterfuge to maintain an outward adversarial
appearance to the FDA, other courts, and the public. The subterfuge was crucial to the KingMutual scheme; Defendants intended to mislead the FDA into believing that Mutual’s 180degree lobbying reversal was based upon “good science” and not its lucrative royalty deal with
King. It was not until 2011, after the Federal Circuit affirmed the invalidity of the ‘102 and ‘128
patents in the King-Eon litigation, that the parties informed Judge Stengel that their action should
be dismissed.
86.
Absent the King-Mutual Agreement, Mutual would have continued its challenges
to the ‘102 and ‘128 patents and would have pursued its efforts to obtain approval for generic
metaxalone products, ultimately resulting in entry with its generic metaxalone. Instead, Mutual
has not pursued its ANDA filing to final approval, and has never entered the market because
King paid Mutual not to do so.
26
F. King and Mutual Begin Lobbying Together
87.
Instead of continuing to act as a competitor, Mutual, working in concert with
King in furtherance of the King-Mutual conspiracy, set about flooding the FDA with baseless
Citizen Petition filings raising issues designed solely to continue King’s monopoly and to delay
FDA approval of any generic ANDAs to Skelaxin.
88.
This concerted campaign started just two days after Mutual signed the King-
Mutual Agreement. On December 8, 2005, Mutual withdrew its prior opposition to King’s
labeling requests, now completely reversing course to ask the FDA to reconsider its March 1,
2004 determination that ANDA applicants for generic Skelaxin tablets could carve out the FoodEffect Labeling from their proposed product labels.
Mutual’s change of position was in
furtherance of the conspiracy to obstruct and delay FDA approval of generic competitors to
Skelaxin through Citizen Petition activity.
89.
Mutual’s December 8, 2005 submission was baseless because it was not based on
any clinical studies demonstrating any actual clinical effects (as FDA indicated would be
necessary in its March 1, 2004 decision). Instead, Mutual cited data from three studies, none of
which were designed to demonstrate any actual clinical or safety effects. Mutual’s change of
heart was not based upon studies mirroring those it had previously called “small, [and] clinically
inconclusive” but was the direct result of the formation of the King-Mutual conspiracy. Mutual
informed the FDA it had licensed “this new safety data” to King, but it did not tell FDA that
King agreed to pay to Mutual $35 million and royalties on all sales of branded Skelaxin. No
reasonable petitioner would expect to succeed on the merits of this petition.
90.
On or about December 27, 2005, CorePharma filed an ANDA on the 800 mg
Skelaxin product with a Section viii Certification that the ‘128 patent listed in the Orange Book
27
did not claim a use for which CorePharma was seeking approval. On January 2, 2008, King and
CorePharma ended infringement litigation in the Eastern District of New York, with King
granting CorePharma the right to enter the market with an “authorized generic” Skelaxin product
upon the fulfillment of certain conditions. King would supply CorePharma with the active
pharmaceutical ingredient, and CorePharma would manufacture the product and pay King a
distribution fee.
91.
On October 17, 2006, the USPTO issued the ‘566 Patent to Mutual, which King
listed in the Orange Book pursuant to the King-Mutual Agreement. All putative generic filers
were now required to certify to the ‘566 Patent and potentially face patent additional
infringement lawsuits, placing another “grenade” in the path of generic metaxalone developers.
King and Mutual were still over four years away from informing Judge Stengel in the Eastern
District of Pennsylvania that the parties had abandoned their adversarial positions.
92.
Capitalizing on the “change of heart” by Mutual, and in furtherance of the King-
Mutual conspiracy, on February 13, 2007, King filed a supplement to its March 18, 2004 Citizen
Petition seeking to prohibit any generics from carving out the food effect information from the
label for generic metaxalone. King argued that the carve out issue had been rendered moot by the
new labeling and the listing of the ‘102 patent. King claimed that since the new precaution
section of the label now specifically cross-referenced the pharmacokinetic information in the
Clinical Pharmacology section, omission of that information would render the drug less safe.
This petition was baseless for three reasons. First, the ‘102 patent was an invalid patent, and
King knew it was an invalid patent. Second, as before, King’s safety arguments were not
supported by the types of studies that the FDA referred to in its March 1, 2004 decision - studies
demonstrating actual clinical effects. King cited the same studies it had previously submitted as
28
well as recent studies conducted by Mutual, none of which were designed to demonstrate any
actual clinical or safety effects. Third, King cited Mutual’s change of position as reflected in
Mutual’s December 8, 2005 submission. However, King did not tell the FDA that Mutual now
was receiving royalties from King for sales of branded Skelaxin and that Mutual was now
directly benefiting from keeping generic competitors, including itself, off the market. Thus,
King’s February 13, 2007 submission was baseless, and no reasonable petitioner could have
expected to succeed on that request.
93.
Continuing the tag-team approach, and in furtherance of the King-Mutual
conspiracy, on or about May 2, 2007, Mutual submitted comments in support of King’s February
13, 2007 submission. Mutual stated that it “supports King’s position in its supplement that the
food effect information contained in King’s revised labeling for Skelaxin cannot be ‘carved out’
of the labeling for generic metaxalone.” The primary basis for Mutual’s submission was
“additional confirmatory data that Mutual has developed since its December 8, 2005 submission
to FDA.” This submission was baseless because, again, as with the previous studies proffered by
Mutual and King, the additional study was not designed to, and did not, demonstrate any actual
clinical or safety effects. As the FDA later reiterated, to demonstrate merit, the submission would
need to present “[d]ata from at least one adequately designed clinical study that demonstrate the
relationship of dose and exposure of metaxalone on safety and efficacy parameters.” This is the
same rationale that the FDA said it would require in its March 1, 2004 decision. Nothing had
changed. No reasonable petitioner would have expected success on this petition.
94.
Just as it had accused King of in 2004 prior to entering into the King-Mutual conspiracy,
Mutual was attempting to tum “a handful of small, clinically inconclusive bioavailability studies into an
29
additional long-term barrier to generic competition.” Additionally, Mutual did not tell FDA that it now
was profiting from King’s branded Skelaxin sales and no longer intended to pursue its own ANDA.
95.
In furtherance of the conspiracy, Mutual and King made numerous other baseless
submissions to the FDA that were claimed to call into question the safety of generic metaxalone
but were actually intended to tax an already overburdened and resource-deprived FDA, thus
further delaying FDA approval of other Skelaxin ANDAs.
96.
On July 27, 2007, Mutual submitted another Citizen Petition requesting that the
FDA require that the Skelaxin label include information relating to the effects of certain enzymes
on metabolizing metaxalone. The primary basis for this submission was the same study that
Mutual had submitted as part of its May 2, 2007 submission.
97.
On January 22, 2008, Mutual submitted yet another Citizen Petition requesting
that the FDA not approve any ANDAs for generic metaxalone “until appropriate studies are
performed to assure that product administration and generic substitution can occur without
adverse clinical outcomes.” The primary basis for this submission also was the study that Mutual
had submitted as part of its May 2, 2007 submission. Both of these submissions were baseless
because, again, as with the previous studies proffered by Mutual and King, the additional study
relied upon by Mutual did not (because it could not) demonstrate any actual clinical or safety
effects. These submissions did not include the type of “adequately designed clinical study that
demonstrate the relationship of dose and exposure of metaxalone on safety and efficacy
parameters” that FDA would require. No reasonable petitioner would have expected success on
these petitions. Again, Mutual had taken up King’s approach and was attempting to use “a
handful of small, clinically inconclusive bioavailability studies into an additional long-term
barrier to generic competition.”
30
G. FDA Rejects Baseless Citizen Petitions and the Courts Reject Obvious Patents
98.
On July 18, 2008, the FDA denied Mutual’s Citizen Petitions dated July 27, 2007
and January 22, 2008. The FDA examined the data submitted by Mutual and observed that
Mutual’s evidence was based “solely on in vitro data and theoretical concerns.” It concluded that
Mutual had provided “no evidence that higher metaxalone exposure would lead to increased
Skelaxin toxicities.” Unsurprisingly, FDA concluded that Mutual’s studies were not of the type
that would be required to demonstrate a need for the additional clinical testing that Mutual was
seeking to impose on ANDA applicants, or to justify additional changes to the Skelaxin label.
FDA noted that Mutual failed “to explain why clinical [drug-to-drug interaction] studies of
Skelaxin must be performed at this time given that Skelaxin has been marketed in the United
States for over 45 years with about 4 million prescriptions dispensed yearly since 2001 and
without significant toxicities.” In short, the FDA confirmed that Mutual’s studies were of the
same character (“a handful of small, clinically inconclusive bioavailability studies”) as those that
Mutual had warned FDA to be wary of in 2004 due to their potential use as an anti-competitive
monopoly protecting device.
99.
On December 5, 2008, a month before strikingly similar ‘102 and ‘128 patents
were struck down as invalid by a different court, King commenced litigation against Sandoz
(which now owned Eon) in the United States District Court for the District of New Jersey in
response to Sandoz’s Paragraph IV certification to the ‘566 patent (the “King-Sandoz ‘566 patent
litigation”) – the patent Mutual had licensed to King to try and further bolster the Skelaxin
monopoly.
100.
On January 20, 2009, Judge Trager, in the Eastern District of New York, granted
summary judgment to Eon, finding that the ‘128 and ‘102 patents, “which are directed to
31
methods of informing patients about and administering the muscle relaxant metaxalone,” were
invalid as having been inherently obvious. King Pharmaceuticals, Inc. v. Eon Labs, Inc., 593 F.
Supp. 2d 501 (E.D.N.Y. 2009). The court’s opinion was substantially grounded in the following
observation: “For over forty years it has been known to give metaxalone with food.”
101.
Upon initiation of the Eon patent litigation, Elan knew that for over forty years it
had been common knowledge that metaxalone should be given with food; King was similarly
aware of this when buying the Skelaxin franchise from Elan, and before obtaining and listing
the’ 102 patent in the Orange Book. No reasonable litigant could have expected the patents to be
found to be valid. On August 2, 2010, the invalidity judgment was affirmed by the Federal
Circuit. King Pharmaceuticals, Inc. v. Eon Labs, Inc., 616 F.3d 1267 (Fed. Cir. 2010).
102.
Given the outcome of the ‘128 and ‘102 patent litigation, and the inevitable and
expected invalidation of the ‘566 patent in the King-Sandoz litigation, King and Mutual were
now desperate. As a result, in furtherance of the conspiracy, on May 13, 2009, Mutual filed yet
another baseless Citizen Petition with a litany of requests for action by the FDA designed to
slow down and obstruct FDA approval of generic Skelaxin. One baseless request was for the
FDA to declare Skelaxin to be “misbranded” unless King updated its label to reflect that
Skelaxin is a delayed release dosage form. The bases for Mutual’s submission were three
bioequivalence studies, none of which were designed to demonstrate clinical or safety effects.
103.
In the May 13, 2009 Petition, Mutual was ostensibly asking the FDA to require a
host of studies by King, but the true target was the other generics, who would be subject to any
new requirements placed upon King (thus further delaying generic market entry) and likely
pushed into the purview of the not-yet-invalidated ‘566 patent. In reality, Mutual had no interest
in FDA declaring Skelaxin “misbranded,” which would put its royalty profits at risk. Almost 50
32
years after the introduction of Skelaxin to the U.S. market, and millions upon millions of
prescriptions being filled for Skelaxin, in furtherance of its conspiracy with King, Mutual was
still seeking to have the FDA delay of generic competitors on the basis of “a handful of small,
clinically inconclusive bioavailability studies.” As with every other Petition Mutual had filed, it
failed to inform the FDA that it has a direct financial stake in delaying entry of generic Skelaxin.
Instead, in a continuation of its subterfuge, Mutual reminded the FDA that it has had an ANDA
“for a generic metaxalone product pending before FDA (No. 40-536) since 2003.” This
statement incorrectly and misleadingly suggested that Mutual was working against its own selfinterest to bring the FDA good science. The May 13, 2009 submission was baseless, and no
reasonable petitioner could have expected to succeed on that request.
104.
On March 30, 2010, Sandoz obtained final FDA approval for its generic
metaxalone ANDA. In its approval letter, the FDA stated that Sandoz’s approval had been
delayed due to the pendency of a Citizen Petition concerning the language in the label – the exact
arguments repeated by Mutual and King numerous times, in numerous forms, over the years.
105.
Upon final FDA approval, in a blatant illustration of the weakness of the King-
Mutual ‘566 patent threat, Sandoz immediately attempted to launch its generic product, despite
still being ostensibly “at risk” because of patent litigation with King over Mutual’s licensed ‘566
patent (pending in the District of New Jersey since December 2008). King sought and briefly
obtained a Temporary Restraining Order in that litigation on April 1, 2010. The TRO was
modified on April 6 to permit Sandoz to manufacture its generic and to permit Sandoz to enter if
CorePharma launched an authorized generic version of Skelaxin. CorePharma launched on April
9, 2010, which resulted in the dissolution of the TRO and Sandoz immediately entered the
market with its generic metaxalone product. The Court then held a hearing on King’s preliminary
33
injunction motion, which it denied on May 17, 2010. Subsequently, without the filing of
summary judgment motions, the case went to trial by a jury, which resulted in a finding of
invalidity of the ‘566 patent. The Court denied King’s motion for judgment as a matter of law.
King Pharmaceuticals, Inc., et al. v. Sandoz, Inc., C.A. No. 08-cv-05974 (D.N.J. Feb. 17, 2011)
(Brown, J.).
106.
In the opinion, the court observed the following about King’s licensing of
Mutual’s ‘566 patent under the King-Mutual Agreement: “In addition, there was evidence that
the license was related to King’s attempt to maintain a monopoly in the market on
metaxalone and not the innovative nature of the patent. Mr. Green admitted that one of his
concerns prior to the license was preventing generic competitors from entering the market and
that, at the time, Mutual had proposed a generic product. He also admitted that King had
managed to keep generics such as Mutual off the market until Sandoz’s entry during the
lawsuit.” (Emphasis added).
H. King Improperly Listed and Maintained the ‘128, ‘102, and ‘566 Patents in the
Orange Book
107.
Each of the patents that King listed and continued to maintain in the Orange
Book with respect to Skelaxin was ruled invalid as inherently obvious. Each patent is of the same
character, as each disclosed an existing property of Skelaxin and covered methods of
administering the product in a manner consistent with that property and/or informing patients or
providers with information concerning that property. No reasonable litigant could have believed,
in light of the existing state of the art and forty years of experience with the drug, that any of
those patents would survive judicial scrutiny. Thus, no litigant would reasonably believe those
patents to be valid; such patents are not eligible for listing in the FDA Orange Book.
34
108.
While conducting its due diligence for the Skelaxin franchise purchase from
Elan, King analyzed the ‘128 patent and knew that it should not have been listed in the Orange
Book. Upon taking over the Skelaxin franchise, King continued to improperly list the ‘128 Patent
in the Orange Book, knowing it was inherently obvious and invalid. King improperly listed the
‘102 patent in the Orange Book, knowing it was inherently obvious and invalid. King improperly
listed the ‘566 patent in the Orange Book, knowing it was inherently obvious and invalid. The
purpose and effect of these improper Orange Book listings was the exclusion of generic
competition to Skelaxin.
I. King’s filing and maintenance of sham lawsuits
109.
The ‘128 and ‘102 patents, directed to methods of informing patients about the
pharmacokinetic effects of taking metaxalone with food, were invalid as having been inherently
obvious. At least six prior art references, several dating back to the 1960s, disclosed the relevant
elements of the ‘102 and ‘128 patents -- that metaxalone should be taken with food. Millions of
patients had been taking Skelaxin four times a day, with and without food, for decades. “For over
forty years it has been known to give metaxalone with food.” There was nothing novel about the
‘102 or ‘128 patents. No reasonable litigant would have expected success on the merits of the
Elan-Eon litigation, the Elan-CorePharma litigation, or the King-Mutual litigation because
numerous prior art references dating back up to 40 years rendered the ‘128 and ‘102 patents
invalid as obvious. King’s continued maintenance of the ‘128 patent litigation against Eon,
CorePharma and Mutual after taking over the Skelaxin franchise in June 2003 was baseless.
King’s initiation of patent litigation against Eon, CorePharma and Mutual over the ‘102 patent
was baseless. King should have withdrawn the lawsuits relating to the ‘128 patent after it
purchased the Skelaxin franchise and King never should have initiated the ‘102 patent litigation.
35
110.
The ‘566 Patent is directed to methods of providing a patient with metaxalone
and informing them about the potential for metaxalone to interact with drugs or foods that inhibit
or induce the enzymes that metabolize metaxalone. This information was known in the prior art
for years prior to the application for the ‘566 patent. The prior art included FDA guidances
issued in 1997 and 1999 that recommended that manufacturers of new and existing drugs should
incorporate the results in the label of the very type of enzyme tests that formed the basis of the
‘566 patent. There was nothing the least bit novel about conducting tests that the FDA
recommended and instructing patients about the results of those tests. No reasonable litigant
would have expected success on the merits of the King-Sandoz ‘566 patent litigation because
numerous prior art references dating back to the 1990s rendered the patent invalid as obvious.
King’s initiation of the ‘566 patent litigation was baseless. King should never have initiated the
‘566 patent litigation.
111.
The patent infringement lawsuits pursued by King against Eon/Sandoz, Mutual
and CorePharma were “shams.” Each lawsuit was objectively baseless because all three patents
were invalid as obvious based upon numerous prior art references that had been in the public
domain for more than a decade prior to the patent applications being filed, and King was aware
of that. King pursued each lawsuit solely to block generic metaxalone competition. No
reasonable litigant would have expected success on the merits of those patent infringement
lawsuits.
VI. MONOPOLY POWER AND MARKET DEFINITION
112.
At all relevant times, King had monopoly power over metaxalone products
because King had the power to maintain the price of metaxalone products at supracompetitive
levels without losing substantial sales to non-metaxalone products.
36
113.
A small but significant, non-transitory price increase by King to Skelaxin would
not have caused a significant loss of sales so as to make the higher prices unprofitable.
114.
Skelaxin does not exhibit significant, positive cross-elasticity of demand with
respect to price, with any product other than AB-rated generic versions of Skelaxin.
115.
Because of, among other reasons, its unique pharmacokinetic and safety profile
as a muscle relaxant, Skelaxin is differentiated from all products other than AB-rated generic
versions of Skelaxin.
116.
King needed to control only Skelaxin and its AB-rated generic equivalents, and
no other products, in order to maintain the price of Skelaxin profitably at supracompetitive
prices. Only the market entry of a competing, AB-rated generic version of Skelaxin would render
King unable to profitably maintain its current monopoly prices of Skelaxin without losing
substantial sales.
117.
King also sold branded Skelaxin at prices well in excess of marginal costs, and
in excess of the competitive price, and enjoyed high profit margins.
118.
Defendants have had, and exercised, the power to exclude generic competition to
branded Skelaxin.
119.
Defendants, at all relevant times, enjoyed high barriers to entry with respect to
Skelaxin.
120.
To the extent that Plaintiffs are legally required to prove monopoly power
circumstantially by first defining a relevant product market, Plaintiffs allege that the relevant
market is all metaxalone products - i.e., Skelaxin (in all its forms and dosage strengths) and ABrated bioequivalent metaxalone products. During the period relevant to this case, Defendants
have been able to profitably maintain the price of Skelaxin well above competitive levels.
37
121.
The relevant geographic market is the United States and its territories.
122.
King’s market share in the relevant market was 100% until on or about April 9,
2010.
VII.
123.
MARKET EFFECTS
Sandoz began to ship generic Skelaxin to Plaintiffs and other members of the
Class on or shortly after April 9, 2010, after receiving formal, written final approval of its
ANDA from FDA.
124.
In its March 31, 2010 approval letter for Sandoz’s ANDA, the FDA explained its
delay in approving Sandoz’s ANDA was related to the Citizen Petition discussed above.
125.
Defendants’ overarching anticompetitive scheme had the purpose and effect of
restraining competition unreasonably and injuring competition by protecting Skelaxin from
generic competition. For example: But for King’s sham litigation against Eon for its Paragraph
IV certification on the 800 mg formulation and its baseless Citizen Petitions, and but for the
anticompetitive agreement between King and Mutual, their joint efforts to present the FDA with
sham Citizen Petitions, and the simultaneous concerted fraud on the district court hearing their
own patent litigation, Eon would have received final FDA approval and entered the market with
a generic Skelaxin bioequivalent at least as early as June 1, 2007 (after the expiration of the
thirty month Hatch-Waxman stay following the date King sued Eon/Sandoz for its 800 mg
metaxalone ANDA filing) and under all circumstances, on or about January 20, 2009 (when Eon
won summary judgment of invalidity on the ‘102 and ‘128 patents). Defendants’ actions allowed
King to maintain a monopoly and exclude competition in the market for metaxalone products,
leading to higher prices paid by Plaintiffs and all other members of the Class.
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126.
As a direct and proximate result of some or all of Defendants’ overarching
anticompetitive scheme, Eon/Sandoz or one or more other generic competitors would have
begun selling AB-rated generic versions of Skelaxin sooner than April 9, 2010, when
Eon/Sandoz launched. Specifically, as a direct and proximate result of Defendants’ overarching
anticompetitive scheme, in whole or in part, Eon/Sandoz or one or more generic competitors
would have launched generic Skelaxin at least as early as June 1, 2007.
127.
But for Defendants’ illegal conduct, Mutual would have launched its own
generic Skelaxin bioequivalent six months after Sandoz entered the market with its generic, thus
forcing down the price of generic Skelaxin bioequivalents due to additional price competition.
128.
But for Defendants’ illegal conduct, Plaintiffs and members of the Class would
have paid less for metaxalone far earlier than April 9, 2010, when the Sandoz generic first
entered the market. Defendants’ conduct directly injured Plaintiffs and the Class by forcing
them to pay hundreds of millions of dollars in overcharges on their metaxalone purchases.
129.
As a result of the delay in generic Skelaxin competition brought about by
Defendants’ overarching anticompetitive scheme, in whole or in part, Plaintiffs and the Class
paid more for metaxalone products than they would have paid absent Defendants’ illegal
conduct.
130.
Eon/Sandoz and the other ANDA applicants seeking to market generic Skelaxin
had extensive experience in the pharmaceutical industry, including in obtaining approval for
ANDAs, manufacturing commercial launch quantities adequate to meet market demand,
marketing generic pharmaceutical products, and paying and receiving consideration for selective
waiver and/or relinquishment of 180-day first-to- file marketing exclusivities.
39
131.
Upon generic entry, generic versions of brand-name drugs are priced
significantly below the corresponding branded drug to which they are AB-rated. As a result,
virtually all branded drug purchases are rapidly substituted with purchases of the generic
versions of the drug. As more generic manufacturers enter the market, prices for generic versions
of a drug fall even further because of increasing price competition.
132.
This price competition enables all indirect purchasers of the drugs to: (a)
purchase generic versions of a drug at a substantially lower price than the brand; (b) purchase
generic versions of the drug as a lower price; and/or (c) purchase the brand drug at a reduced
price. Consequently, brand name drug manufacturers have a keen financial interest in delaying
the onset of generic competition, and purchasers experience substantial cost inflation from that
delay.
133.
If generic Skelaxin competitors had not been unlawfully prevented from entering
the market earlier and competing with King, indirect purchasers, such as Plaintiffs and members
of the Class, would have paid less for metaxalone by (a) substituting purchases of less-expensive
AB-rated generic Skelaxin for their purchases of more-expensive branded Skelaxin, (b) receiving
discounts on their remaining branded Skelaxin purchases, and (c) purchasing generic Skelaxin at
lower prices sooner.
134.
Moreover, due to Defendants’ conduct, other generic manufacturers were
discouraged from and/or delayed in developing generic versions of Skelaxin even after the first
generic entered the market.
135.
Thus, Defendants’ unlawful conduct deprived Plaintiffs and the Class of the
benefits of competition that the antitrust laws were designed to ensure.
40
VIII. ANTITRUST IMPACT
136.
During the relevant period, Plaintiffs and members of the Class purchased
substantial amounts of Skelaxin indirectly from King and/or purchased substantial amounts of
generic Skelaxin from Sandoz or others. As a result of Defendants’ illegal conduct, members of
the Class were compelled to pay, and did pay, artificially inflated prices for their metaxalone
requirements. Those prices were substantially greater than the prices that members of the Class
would have paid absent the illegal conduct alleged herein, because: (1) the price of brand-name
Skelaxin was artificially inflated by Defendants’ illegal conduct; (2) Class members were
deprived of the opportunity to purchase lower-priced generic versions of Skelaxin sooner; and/or
(3) the price of the available generic Skelaxin was artificially inflated by Defendants’ illegal
conduct.
137.
As a consequence, Plaintiffs and members of the Indirect Purchaser Class have
sustained substantial losses and damage to their business and property in the form of
overcharges. The full amount and forms and components of such damages will be calculated
after discovery and upon proof at trial.
138.
Defendants’ efforts to monopolize and restrain competition in the market for
metaxalone have substantially affected interstate and foreign commerce.
139.
At all material times, King manufactured, promoted, distributed, and sold
substantial amounts of Skelaxin in a continuous and uninterrupted flow of commerce across state
and national lines and throughout the United States. Defendants’ anticompetitive conduct had
substantial instrastate effects in that, inter alia, retailers within each state were foreclosed from
offering cheaper generic Skelaxin competition; generic foreclosure and delay directly impacted
and disrupted commerce for consumers and third-party payors within each state.
41
140.
At all material times, Defendants transmitted funds as well as contracts, invoices
and other forms of business communications and transactions in a continuous and uninterrupted
flow of commerce across state and national lines in connection with the sale of Skelaxin.
141.
General economic theory recognizes that any overcharge at a higher level of
distribution generally results in higher prices at every level below. See Hovencamp, FEDERAL
ANTITRUST POLICY, THE LAW OF COMPETITION AND ITS PRACTICE (1994) at 624.
Prof. Hovencamp goes on to state that “Every person at every stage in the chain will be poorer as
a result of the monopoly price at the top.” He also acknowledges that “[t]heoretically, one can
calculate the percentage of any overcharge that a firm at one distribution level will pass on to
those at the next level.
142.
The institutional structure of pricing and regulation in the pharmaceutical drug
industry assures that overcharges at the higher level of distribution are passed on to indirect
purchasers. Wholesalers and retailers passed on the inflated prices of Skelaxin and generic
Skelaxin bioequivalents to the Plaintiffs and members of the Indirect Purchaser Class.
143.
Mississippi retailers purchased the relevant products at supracompetitive prices
for resale to Plaintiffs and Class members in Mississippi at supracompetitive prices, and
Mississippi retailers were foreclosed from purchasing the relevant cheaper products to resell to
Plaintiffs and Class members in Mississippi, thus Plaintiffs and Class members in Mississippi
suffered antitrust injury via specific, wholly instrastate restraints on Mississippi commerce.
144.
These prices were inflated as a direct and foreseeable result of Defendants’
anticompetitive conduct.
42
IX. CLASS ACTION ALLEGATIONS
145.
Plaintiffs, on behalf of themselves and all Class members, seek damages,
measured as overcharges, trebled, against Defendants based on allegations of anticompetitive
conduct in the market for branded Skelaxin and its generic equivalents.
146.
Plaintiffs bring this action on behalf of themselves and, under Fed. R. Civ. P.
23(a) and (b )(3), as representatives of a Class defined as follows:
All persons or entities in the United States and its territories who
purchased and/or paid for some or all of the purchase price for
Skelaxin and/or its AB-rated generic equivalents in any form, for
consumption by themselves, their families, or their members,
employees, insureds, participants, or beneficiares (the “Class”),
other than for resale, during the period June 1, 2007 through and
until the anticompetitive effects of Defendants’ unlawful conduct
cease (the “Class Period”). For purposes of the Class definition,
persons or entities “purchased” Skelaxin or its generic equivalent if
they paid or reimbursed some or all of the purchase price.
147.
The following persons or entities are excluded from the proposed class:
a. Defendants and their officers, directors, management, employees, subsidiaries, or
affiliates, and all federal government entities, except for governmental funded
employee benefit plans;
b. All persons or entities who purchased Skelaxin or its AB-Rated generic
equivalent for purposes of resale or directly from Defendants or their affiliates;
c. Fully insured health plans (i.e., Plans that purchased insurance from another thirdparty payor covering 100% of the Plan’s reimbursement obligations to its
members);
d. “Flat co-pay” consumers whose purchases were paid in part by a third-party payor
and whose co-payment was the same regardless of the retail purchase price.
148.
Members of the Class are so numerous that joinder is impracticable. Plaintiffs
believe that there are hundreds of thousands of Class members.
43
149.
Plaintiffs’ claims are typical of the claims of the members of the Class. Plaintiffs
and all members of the Class were damaged by the same wrongful conduct of Defendants, i.e.,
they paid artificially inflated prices for metaxalone and were deprived of the benefits of earlier
and more robust competition from cheaper generic versions of Skelaxin as a result of
Defendants’ wrongful conduct.
150.
Plaintiffs will fairly and adequately protect and represent the interests of the
Class. The interests of the Plaintiffs are coincident with, and not antagonistic to, those of the
Class.
151.
Plaintiffs are represented by counsel with experience in the prosecution of class
action antitrust litigation, and with particular experience with class action antitrust litigation
involving pharmaceutical products.
152.
Questions of law and fact common to the members of the Class predominate
over questions that may affect only individual Class members because Defendants have acted on
grounds generally applicable to the entire Class, thereby making overcharge damages with
respect to the Class as a whole appropriate. Such generally applicable conduct is inherent in
Defendants’ wrongful conduct.
153.
Questions of law and fact common to the Class include:
a.
whether King willfully obtained and/or maintained monopoly power over
Skelaxin and its generic equivalents;
b.
whether King entered into a contract, combination, and/or conspiracy with Mutual
to restrain trade and, if so, whether it should be evaluated under the rule of per se
illegality, the “rule of reason,” or some other rule or standard;
c.
whether Defendants unlawfully excluded competitors and/or potential competitors
from the market for metaxalone, i.e., Skelaxin and its AB-rated generic
bioequivalents;
44
d.
whether Defendants unlawfully delayed or prevented generic manufacturers from
coming to market in the United States;
e.
whether Defendants maintained King’s monopoly power by delaying generic
entry;
f.
whether the law requires definition of a relevant market when direct proof of
monopoly power is available, and if so the definition of the relevant market;
g.
whether the activities of Defendants as alleged herein have substantially affected
interstate commerce;
h.
whether, and to what extent, Defendants’ conduct caused antitrust injury
(i.e., overcharges) to Plaintiffs and the members of the Class; and
i.
the quantum of aggregate overcharge damages to the Class.
154.
Class action treatment is a superior method for the fair and efficient adjudication
of the controversy. Such treatment will permit a large number of similarly situated,
geographically dispersed persons or entities to prosecute their common claims in a single forum
simultaneously, efficiently, and without the unnecessary duplication of evidence, effort, or
expense that numerous individual actions would engender. The benefits of proceeding through
the class mechanism, including providing injured persons or entities a method for obtaining
redress on claims that could not practicably be pursued individually, substantially outweighs
potential difficulties in management of this class action.
155.
Plaintiffs know of no special difficulty to be encountered in the maintenance of
this action that would preclude its maintenance as a class action.
X. FRAUDULENT CONCEALMENT TOLLING THE
STATUTE OF LIMITATIONS
156.
Plaintiffs and members of the Class had no knowledge of Defendants’ unlawful
self-concealing scheme and could not have discovered the scheme and conspiracy through the
exercise of reasonable diligence more than four years prior to the filing of this Complaint
45
because of the deceptive practices and techniques of secrecy employed by Defendants to avoid
detection of, and fraudulently conceal, their contract, combination, conspiracy and scheme.
Among other things, Defendants concealed their plan to prolong the patent litigation in the
Eastern District of Pennsylvania, made relevant filings designed to delay the litigation under
seal, and maintained the illusion of being adversaries in their Citizen Petition activities before the
FDA.
157.
Because the alleged conspiracy was both self-concealing and affirmatively
concealed by Defendants and their co-conspirators, Plaintiffs and members of the Class had no
knowledge of the alleged conspiracy, or of any facts or information that would have caused a
reasonably diligent person to investigate whether a conspiracy existed, until January 29, 2010 at
the earliest, when SigmaPharm filed a complaint in the Eastern District of Pennsylvania alleging
a scheme to delay entry of generic metaxalone.
158.
As a result of Defendants’ fraudulent concealment, all applicable statutes of
limitations affecting the Plaintiffs and the Class’s claims have been tolled.
XI. CLAIMS FOR RELIEF
FIRST CLAIM FOR RELIEF
For Declaratory and Injunctive Relief Under Section 16 of the Clayton Act for
Defendants’ Violations of Sections 1 and 2 of the Sherman Act
(Asserted Against All Defendants)
159.
Plaintiffs incorporate by reference the preceding allegations and paragraphs.
160.
Defendants knowingly, intentionally, and cooperatively engaged in an
anticompetitive scheme designed to block and delay entry of competing metaxalone
formulations, i.e., AB-rated generic versions of Skelaxin. The intended and accomplished goal
of the scheme was to maintain King’s monopoly power using restrictive and exclusionary
46
conduct to delay FDA approval of ANDAs for generic metaxalone products. Defendants injured
Plaintiffs and the Class through, inter alia, a series of sham Citizen Petitions, sham litigations,
concerted fraud on the district court hearing Defendants’ own infringement case, and an
agreement between King and Mutual to exclude Mutual’s generic Skelaxin product from the
market in exchange for cash payments and royalties on the brand Skelaxin product.
161.
Defendants’ scheme specifically included, inter alia, the following events:
a. Wrongfully instituting and/or maintaining sham patent lawsuits over the ‘128,
‘102, and ‘566 patents against Mutual, Eon/Sandoz, and CorePharma;
b. Wrongfully listing and maintaining the listing in FDA’s Orange Book of the ‘128, ‘102,
and ‘566 patents as claiming Skelaxin despite knowing that those patents were invalid
and could not reasonably support a claim of infringement;
c. wrongfully filing baseless Citizen Petitions with FDA including, but not limited
to, the following submissions:
i. King’s March 18, 2004 submission;
ii. King’s May 13, 2004 submission;
iii. Mutual’s December 8, 2005 submission;
iv. King’s February 13, 2007 submission;
v. Mutual’s May 2, 2007 submission;
vi. Mutual’s July 27, 2007 submission;
vii. Mutual’s January 2, 2008 submission;
viii. Mutual’s May 13, 2009 submission; and
d.
King paying Mutual to and Mutual agreeing to: (1) stay out of the generic
metaxalone market; (2) perpetuate the King-Mutual litigation despite abandoning
47
adversarial positions; and (3) wrongfully file baseless Citizen Petitions with the
FDA to delay and obstruct approval of generic metaxalone ANDAs.
162.
King repeatedly asserted that the generic Skelaxin formulations of its
competitors infringed its patents, despite knowing that the Skelaxin patents were invalid and/or
unenforceable.
163.
It was the Defendants’ conscious object to further King’s monopoly in the
relevant market through the overarching anticompetitive scheme. Defendants conspired to
monopolize, and did wrongfully and intentionally maintain monopoly power, with respect to
metaxalone in violation of Section 2 of the Sherman Act.
As a result of this unlawful
maintenance of monopoly power, Plaintiffs and members of the Class paid artificially inflated
prices for their metaxalone requirements.
164.
Had manufacturers of generic metaxalone products entered the market and
lawfully competed with King in a timely fashion, Plaintiffs and other members of the Class
would have substituted lower-priced generic metaxalone products for the higher-priced brandname Skelaxin for some or all of their metaxalone product requirements, and/or would have paid
lower net prices on their remaining Skelaxin and/or AB-rated bioequivalent purchases.
165.
Defendants’ intended, and accomplished, a horizontal market allocation of the
metaxalone market, a per se violation of Section 1 of the Sherman Act. By their agreement,
Defendants intentionally and wrongfully conspired and combined in an unreasonable restraint of
trade in violation of Section 1 of the Sherman Act. As a result of this unreasonable restraint on
competition, Plaintiffs and members of the Class paid artificially inflated prices for their
metaxalone requirements.
48
166.
Although at least one generic version of Skelaxin has entered the market,
Plaintiffs continue to suffer and will continue to suffer in the future from paying higher prices for
Skelaxin and/or AB-rated generic versions than they would have absent Defendants’
anticompetitive conduct and continuing anticompetitive agreement.
167.
Upon information and belief, Mutual, to this day, has not released a generic
Skelaxin product to compete with King.
168.
Defendants’ anticompetitive conduct is not entitled to qualified Noerr-
Pennington immunity.
The Citizen Petitions and infringement litigations were objectively
baseless in that no reasonable litigant could expect success on the merits, and subjectively in bad
faith in that Defendants used, and intended to use, these official processes solely as
anticompetitive weapons.
169.
Plaintiffs and members of the Class purchased substantial amounts of Skelaxin
and/or AB-rated generic equivalents indirectly from King and/or other manufacturers.
170.
Plaintiffs and the Class, pursuant to Fed. R. Civ. P. 57 and 18 U.S.C. § 2201(a)
hereby seek a declaratory judgment that Defendants’ conduct in seeking to prevent competition
as described herein violates Sections 1 and 2 of the Sherman Act.
171.
Plaintiffs and the Class further seek equitable and injunctive relief pursuant to
Section 16 of the Clayton Act, 15 U.S.C. § 26, and other applicable law, to correct for the
anticompetitive market effects caused by the unlawful conduct of Defendants, and other relief so
as to assure that similar anticompetitive conduct does not reoccur in the future.
SECOND CLAIM FOR RELIEF
For Monopolization Under State Law
(Asserted Against King)
172.
49
173.
At all relevant times, King possessed substantial market power (i.e., monopoly
power) in the relevant market. King possessed the power to control prices in, prevent prices from
falling in, and exclude competitors from the relevant market.
174.
Through the overarching anticompetitive scheme, as alleged extensively above,
King willfully maintained its monopoly power in the relevant market using restrictive or
exclusionary conduct, rather than by means of greater business acumen, in order to exclude
competition for its monopolized metaxalone product.
175.
The goal, purpose and effect of King’s scheme was to prevent and delay the sale
of metaxalone products in the United States at prices significantly below King’s prices for
Skelaxin, thereby effectively preventing the average market price of metaxalone products from
declining dramatically.
176.
By engaging in the foregoing conduct, King has violated the following state
antitrust laws:
a. King has intentionally and wrongfully maintained monopoly power in the relevant
market in violation of Arizona Rev. Stat. §§ 44-1401, et seq., with respect to
purchases of Skelaxin and AB-rated bioequivalents in Arizona by members of the
Class.
b. King has intentionally and wrongfully maintained monopoly power in the relevant
market in violation of Cal. Bus. Code §§ 16700, et seq., and Code §§ 17200, et
seq., with respect to purchases of Skelaxin and AB-rated bioequivalents in
California by members of the Class.
50
c. King has intentionally and wrongfully maintained monopoly power in the relevant
market in violation of Fla. Stat. § 501.201, et seq., with respect to purchases of
Skelaxin and AB-rated bioequivalents in Florida by members of the Class.
d. King has intentionally and wrongfully maintained monopoly power in the relevant
market in violation of Miss. Code Ann. §§ 75-21-1, et seq., with respect to
purchases of Skelaxin and AB-rated bioequivalents in Mississippi by members of
the Class.
e. King has intentionally and wrongfully maintained monopoly power in the relevant
market in violation of Or. Rev. Stat. §§ 646.705, et seq., with respect to purchases
of Skelaxin and AB-rated bioequivalents in Oregon by members of the Class.
f. King has intentionally and wrongfully maintained monopoly power in the relevant
market in violation of Tenn. Code Ann. §§ 47-25-101, et seq., with respect to
purchases of Skelaxin and AB-rated bioequivalents in Tennessee by members of
the Class, in that the actions and transactions alleged herein substantially affected
Tennessee, with thousands of end-payors in Tennessee paying substantially higher
prices for Skelaxin and AB-rated bioequivalents at Tennessee pharmacies.
177.
Plaintiffs and members of the Class have been injured in their business or
property by reason of Defendants’ antitrust violations alleged in this Claim. Their injuries
consist of: (1) being denied the opportunity to purchase lower-priced generic metaxalone
products, sooner, and (2) paying higher prices for metaxalone products than they would have
paid in the absence of Defendants’ conduct. These injuries are of the type the antitrust laws were
designed to prevent, and flow from that which makes Defendants’ conduct unlawful.
51
178.
Plaintiffs and the Class seek damages and multiple damages as permitted by law
for their injuries by Defendants’ violations of the aforementioned statutes.
THIRD CLAIM FOR RELIEF
For Conspiracy to Monopolize Under State Law
179.
180.
On or before December 6, 2005, Defendants willfully and unlawfully engaged in
a continuing illegal conspiracy to monopolize the metaxalone market through at least April 9,
2010 by engaging in an anticompetitive scheme to keep generic equivalents from the market—
not as a result of providing a superior product, business acumen, or historical accident.
181.
The agreement between King and Mutual to monopolize the metaxalone market
includes overt acts between separate economic entities—actual and potential competitors—and is
illegal per se under state antitrust laws. Alternatively, this Complaint alleges that the agreement
and conspiracy to monopolize is a violation of state antitrust law under a “quick look” or “rule of
reason” analysis.
182.
The King-Mutual conspiracy included, but was not limited to, the following
substantial steps by King and Mutual in furtherance of the conspiracy:
a. An agreement with Mutual to forgo marketing of a generic metaxalone product in
exchange for substantial payments;
b. The King-Mutual Agreement;
c. Perpetuating the King-Mutual litigation in the United States District Court for the
Eastern District of Pennsylvania without alerting the Court to Mutual’s
abandonment of any intent to market generic metaxalone or King’s substantial
payments to Mutual, and
52
d. A joint campaign of filing baseless Citizen Petitions with the FDA to obstruct and
delay approval of any generic metaxalone ANDA.
183.
King and Mutual knowingly and intentionally conspired to maintain and enhance
King’s monopoly power in the relevant market.
184.
King and Mutual specifically intended that the overarching anticompetitive
scheme would maintain King’s monopoly power in the relevant market, and injured Plaintiffs
and the Class thereby.
185.
King and Mutual each committed at least one overt act in furtherance of the
conspiracy.
186.
Contrary to what would have been its own unilateral economic self-interest in
the absence of anticompetitive conspiracy, Mutual secured and licensed the ‘566 patent to King
in order to help King prolong its monopoly stranglehold on the metaxalone market when it was
clear the ‘102 and ‘128 patents would be invalidated.
187.
By engaging in the foregoing conduct, Defendants have violated the following
state antitrust laws:
a. Defendants have intentionally and wrongfully engaged in a conspiracy to
monopolize the relevant market in violation of Arizona Rev. Stat. §§ 44-1401, et
Arizona by members of the Class.
b. Defendants have intentionally and wrongfully engaged in a conspiracy to
monopolize the relevant market in violation of Cal. Bus. Code §§ 16700, et seq.,
and Code §§ 17200, et seq., with respect to purchases of Skelaxin and AB-rated
bioequivalents in California by members of the Class.
53
c. Defendants have intentionally and wrongfully engaged in a conspiracy to
monopolize the relevant market in violation of Fla. Stat. § 501.201, et seq., with
respect to purchases of Skelaxin and AB-rated bioequivalents in Florida by
members of the Class.
d. Defendants have intentionally and wrongfully engaged in a conspiracy to
monopolize the relevant market in violation of Miss. Code Ann. §§ 75-21-1, et
Mississippi by members of the Class.
e. Defendants have intentionally and wrongfully engaged in a conspiracy to
monopolize the relevant market in violation of Or. Rev. Stat. §§ 646.705, et seq.,
with respect to purchases of Skelaxin and AB-rated bioequivalents in Oregon by
f. Defendants have intentionally and wrongfully engaged in a conspiracy to
monopolize the relevant market in violation of Tenn. Code Ann. §§ 47-25-101, et
Tennessee by members of the Class, in that the actions and transactions alleged
herein substantially affected Tennessee, with thousands of end-payors in
Tennessee paying substantially higher prices for Skelaxin and AB-rated
bioequivalents at Tennessee pharmacies.
188.
property by reason of Defendants’ antitrust violations alleged in this Claim. Their injuries consist
of: (1) being denied the opportunity to purchase lower-priced generic metaxalone products,
sooner, and (2) paying higher prices for metaxalone products than they would have paid in the
54
absence of Defendants’ conduct. These injuries are of the type the antitrust laws were designed
to prevent, and flow from that which makes Defendants’ conduct unlawful.
189.
for their injuries by Defendants’ violations.
FOURTH CLAIM FOR RELIEF
For Conspiracy and Combination in Restraint of Trade Under State Law
190.
191.
In 2005, King and Mutual entered into the Agreement, and Mutual joined King’s
overarching anticompetitive scheme as a co-conspirator. The Agreement is and was a contract,
combination and/or conspiracy that substantially, unreasonably, and unduly restrained trade in
the relevant market, the purpose and effect of which were to:
a. allocate all sales of metaxalone in the United States to King until April 9, 2010;
b. prevent the sale of generic version of metaxalone by Mutual in the United States; and
c. fix the price at which Plaintiffs and members of the Class would pay for metaxalone.
192.
The Agreement harmed Plaintiffs and the Class as set forth above.
193.
The Agreement impacted a sufficiently substantial percentage of the relevant
market to harm competition.
194.
The agreement between Defendants is a horizontal market allocation and price
fixing agreement between actual and potential competitors and is illegal per se under state
antitrust laws. Alternatively, this Complaint alleges that these agreements are an unreasonable
restraint of trade, in violation of state antitrust law, under a “quick look” or “rule of reason”
analysis.
55
195.
There is and was no legitimate, nonpretextual, procompetitive business
justification for the Agreement that outweighs its harmful effect. Even if there were some
conceivable such justification, the Agreement is and was broader than necessary to achieve such
ends.
196.
By engaging in the foregoing conduct, Defendants have violated the following
state antitrust laws:
a. Defendants have intentionally and wrongfully engaged in a combination and
conspiracy in restraint of trade in violation of Arizona Rev. Stat. §§ 44-1401, et
Arizona by members of the Class.
b. Defendants have intentionally and wrongfully engaged in a combination and
conspiracy in restraint of trade in violation of Cal. Bus. Code §§ 16700, et seq.,
and Code §§ 17200, et seq., with respect to purchases of Skelaxin and AB-rated
bioequivalents in California by members of the Class.
c. Defendants have intentionally and wrongfully engaged in a combination and
conspiracy in restraint of trade in violation of Fla. Stat. § 501.201, et seq., with
respect to purchases of Skelaxin and AB-rated bioequivalents in Florida by
d. Defendants have intentionally and wrongfully engaged in a combination and
conspiracy in restraint of trade in violation of Miss. Code Ann. §§ 75-21-1, et
Mississippi by members of the Class.
56
e. Defendants have intentionally and wrongfully engaged in a combination and
conspiracy in restraint of trade in violation of Or. Rev. Stat. §§ 646.705, et seq.,
with respect to purchases of Skelaxin and AB-rated bioequivalents in Oregon by
f. Defendants have intentionally and wrongfully engaged in a combination and
conspiracy in restraint of trade in violation of Tenn. Code Ann. §§ 47-25-101, et
Tennessee by members of the Class, in that the actions and transactions alleged
herein substantially affected Tennessee, with thousands of end-payors in
Tennessee paying substantially higher prices for Skelaxin and AB-rated
bioequivalents at Tennessee pharmacies.
197.
property by reason of Defendants’ antitrust violations alleged in this Claim. Their injuries consist
of: (1) being denied the opportunity to purchase lower-priced generic metaxalone products,
sooner, and (2) paying higher prices for metaxalone products than they would have paid in the
absence of Defendants’ conduct. These injuries are of the type the antitrust laws were designed
to prevent, and flow from that which makes Defendants’ conduct unlawful.
198.
for their injuries by Defendants’ violations.
FIFTH CLAIM FOR RELIEF
For Unfair And Deceptive Trade Practices Under State Law
199.
57
200.
Defendants engaged in unfair competition or unfair, unconscionable, deceptive
or fraudulent acts or practices in violation of the state consumer protection statutes listed below.
As a direct and proximate result of Defendants’ anticompetitive, deceptive, unfair,
unconscionable, and fraudulent conduct, Plaintiffs and class members were deprived of the
opportunity to purchase a generic version of Skelaxin and forced to pay higher prices. By
engaging in the foregoing conduct, Defendants have violated the following state Unfair and
Deceptive Trade Practices and Consumer Fraud laws:
a. Defendants have engaged in unfair competition or unfair or deceptive acts or
practices in violation of Ariz. Rev. Stat. § 44-1522, et seq., with respect to
purchases of Skelaxin and AB-rated bioequivalents in Arizona by members of the
Class.
b. Defendants have engaged in unfair competition or unfair or deceptive acts or
practices in violation of Cal. Bus. & Prof. Code § 17200, et seq., with respect to
purchases of Skelaxin and AB-rated bioequivalents in California by members of
the Class.
c. Defendants have engaged in unfair competition or unfair or deceptive acts or
practices in violation of Fla. Stat. § 501.201, et seq., with respect to purchases of
Skelaxin and AB-rated bioequivalents in Florida by members of the Class.
201.
Plaintiffs and members of the Class have been injured in their business and
property by reason of Defendants’ anticompetitive, unfair or deceptive acts alleged in this Claim.
Their injury consists of paying higher prices for Skelaxin and/or AB-rated bioequivalents than
they would have paid in the absence of these violations. This injury is of the type the state
58
consumer protection statutes were designed to prevent and directly results from Defendants’
unlawful conduct.
SIXTH CLAIM FOR RELIEF
Unjust Enrichment
202.
203.
Defendants have benefited from the monopoly profits on their sales of Skelaxin
and/or AB-rated bioequivalents resulting from the unlawful and inequitable acts alleged in this
Complaint.
204.
Defendants’ financial benefits resulting from their unlawful and inequitable
conduct are traceable to overpayments for Skelaxin and AB-rated bioequivalents by Plaintiffs
and members of the Class.
205.
Plaintiffs and the Class have conferred upon Defendants an economic benefit, in
the nature of profits resulting from unlawful overcharges and monopoly profits, to the economic
detriment of Plaintiffs and the Class.
206.
It would be futile for Plaintiffs and the Class to seek a remedy from any party
with whom they had privity of contract. Defendants have paid no consideration to anyone for
any benefits received indirectly from Plaintiffs and the Class.
207.
It would be futile for Plaintiffs and the Class to seek to exhaust any remedy
against the immediate intermediary in the chain of distribution from which it indirectly
purchased Skelaxin or its generic equivalents, as they are not liable and would not compensate
Plaintiffs for unlawful conduct caused by Defendants.
59
208.
The economic benefit of overcharges and unlawful monopoly profits derived by
Defendants through charging supracompetitive and artificially inflated prices for Skelaxin and/or
its generic equivalents is a direct and proximate result of Defendants’ unlawful practices.
209.
The financial benefits derived by Defendants rightfully belongs to Plaintiffs and
the Class, as Plaintiffs and the Class paid anticompetitive and monopolistic prices during the
Class Period, inuring to the benefit of Defendants.
210.
It would be inequitable under the laws of all states and jurisdictions within the
United States for the Defendants to be permitted to retain any of the overcharges for Skelaxin
and/or AB-rated bioequivalents derived from Defendants’ unfair and unconscionable methods,
acts and trade practices alleged in this Complaint.
211.
Defendants should be compelled to disgorge in a common fund for the benefit of
Plaintiffs and the Class all unlawful or inequitable proceeds received by them.
212.
A constructive trust should be imposed upon all unlawful or inequitable sums
received by Defendants traceable to Plaintiffs and the Class.
213.
Plaintiffs and the Class have no adequate remedy at law.
XII. DEMAND FOR JUDGMENT
WHEREFORE, Plaintiffs, on behalf of themselves and the End-Payor Class, demand
judgment for the following relief:
A.
Determine that this action may be maintained as a class action pursuant to Fed. R.
Civ. P. 23(a) and (b)(3), and direct that reasonable notice of this action, as provided by Fed. R.
Civ. P. 23(c)(2), be given to the Class and declare the Plaintiffs representatives of the End-Payor
Class;
60
B.
Declare that the conduct alleged herein is in violation of Sections 1 and 2 of the
Sherman Act, of the other statutes set forth above, and of the common law of unjust enrichment
under the laws of all states and jurisdictions within the United States;
C.
Enjoin Defendants from continuing the illegal activities alleged herein;
D.
Enter joint and several judgments against Defendants in favor of Plaintiffs and the
End-Payor Class;
E.
Grant Plaintiffs and the Class equitable relief in the nature of disgorgement,
restitution, and the creation of a construction trust to remedy Defendants’ unjust enrichment;
F.
Award the End-Payor Class damages and, where applicable, treble, multiple,
punitive, and/or other damages, in an amount to be determined at trial, including interest;
G.
Award Plaintiffs and the End-Payor Class their costs of suit, including reasonable
attorneys’ fees as provided by law; and
H.
Grant such other further relief as is necessary to correct for the anticompetitive
market effects caused by the unlawful conduct of Defendants, and as the Court deems just.
61
Gregory F. Coleman
Greg Coleman Law PC
Bank of America Center
550 Main St., Suite 600
Knoxville, Tennessee 37902
(865) 247-0080 – Telephone
(865) 522-0049 – Facsimile
greg@gregcolemanlaw.com
Jonathan D. Karmel
Karmel Law Firm
221 N. LaSalle Street, Suite 1307
Chicago, IL 60601
(312) 641-2910 -- Telephone
(312) 641-0781 – Facsimile
jon@karmelllawfirm.com
(United Food and Commercial Workers
Union and Midwest Health Benefits Fund)
Counsel for Plaintiffs and the proposed Class
63
Case 1:04-cv-05540-RRM-RLM Document 306 Filed 04/01/09 Page 1 of 42 PageID #: 4556
Case 3:12-cv-00112 Document 1-1
Page 1
SIGMAPHARM, INC., Plaintiff, v. MUTUAL PHARMACEUTICAL COMPANY,
INC., et al., Defendants.
CIVIL NO. 10-430
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA
772 F. Supp. 2d 660; 2011 U.S. Dist. LEXIS 21267
March 2, 2011, Decided
March 2, 2011, Filed
SUBSEQUENT HISTORY: Affirmed by SigmaPharm,
Inc. v. Mut. Pharm. Co., 2011 U.S. App. LEXIS 24567
(3d Cir. Pa., Dec. 12, 2011)
COUNSEL: [**1] For SIGMAPHARM, INC., Plaintiff:
ANDREA L. D'AMBRA, LEAD ATTORNEY,
DRINKER,
BIDDLE
&
REATH,
LLP,
PHILADELPHIA, PA; RANDY C. EISENSMITH,
LEAD ATTORNEY, FRIED FRANK HARRIS
SHRIVER & JACOBSON LLP, NEW YORK, NY;
STEPHEN S. RABINOWITZ, LEAD ATTORNEY,
FRIED FRANK HARRIS SHRIVER JACOBSON LLP,
NEW YORK, NY; GREGORY J. LAVORGNA,
DRINKER BIDDLE & REATH LLP, PHILADELPHIA,
PA; JAMES W. DABNEY, PRO HAC VICE, FRIED
FRANK HARRIS SHRIVER JACOBSON LLP, NEW
YORK, NY.
For MUTUAL PHARMACEUTICAL COMPANY,
INC., UNITED RESEARCH LABORATORIES, INC.,
Defendants: JAMES J. RODGERS, LEAD ATTORNEY,
DILWORTH PAXSON LLP, PHILADELPHIA, PA;
MICHAEL J. KLISCH, COOLEY GODWARD
KRONISH LLP, WASHINGTON, DC; ROBERT T.
CAHILL, PRO HAC VICE, COOLEY GODWARD
KRONISH LLP, RESTON, VA; T. JOEL ZUERCHER,
PEPPER HAMILTON LLP, PHILADELPHIA, PA.
For KING PHARMACEUTICALS, INC., Defendant:
DEBRA S. CLAYMAN, JONES DAY, WASHINGTON,
DC; MURRAY S. LEVIN, PEPPER HAMILTON
L.L.P., PHILADELPHIA, PA; PHILLIP PROGER, PRO
HAC VICE, JONES DAY, WASHINGTON, DC;
ROBERT T. CAHILL, PRO HAC VICE, COOLEY
GODWARD KRONISH LLP, RESTON, VA; T. JOEL
ZUERCHER,
PEPPER
HAMILTON
LLP,
PHILADELPHIA, PA; WILLIAM V. O'REILLY,
JONES, DAY, REAVIS &
[**2] POGUE,
WASHINGTON, DC.
JUDGES: CYNTHIA M. RUFE, J.
OPINION BY: CYNTHIA M. RUFE
OPINION
[*662] MEMORANDUM OPINION & ORDER
RUFE, J.
In its First Amended Complaint, Plaintiff
SigmaPharm, Inc. brings claims for violation of Section 1
of the Sherman Act [*663] (count I), 1 Pennsylvania
common law barring restraint of trade (count II), and
Section 17200 of the California Business and Professions
Code barring unlawful and unfair competition 2 (count
Page 2
772 F. Supp. 2d 660, *663; 2011 U.S. Dist. LEXIS 21267, **2
III) against Defendants Mutual Pharmaceuticals
Company,
Inc.
("Mutual"),
United
Research
Laboratories, Inc. ("United"), and King Pharmaceuticals,
Inc. ("King"). Plaintiff also asserts a claim for breach of
contract under Pennsylvania common law against Mutual
and United only (count IV). Before the Court are: (1) a
Motion to Dismiss counts I through III by Defendant
King [doc. no. 40]; (2) a Motion to Dismiss all counts by
Defendants Mutual and United [doc. no. 41]; (3) a motion
to stay discovery pending this Court's resolution of the
motions to dismiss by all Defendants [doc. no. 44]; and
(4) a motion to compel discovery by SigmaPharm [doc.
no. 57]. For the reasons set forth below, the Court will
dismiss the federal antitrust claim for failure to state a
claim, decline to exercise supplemental [**3] jurisdiction
over the state law claims pursuant to 28 U.S.C. § 1367(c),
and dismiss the discovery motions as moot.
1
This Court has subject matter jurisdiction
under 28 U.S.C. §§ 1331 and 1337, and 15 U.S.C.
§ 15. It does not have jurisdiction pursuant to
§1332(a) because SigmaPharm asserts its
principal place of business is Pennsylvania, and
both Mutual and United are Pennsylvania
corporations. Because a corporation is a citizen of
both its state of incorporation and the state in
which its principal place of business is located,
see 28 U.S.C. § 1332(c)(1), SigmaPharm is not
diverse from Mutual and United. Complete
diversity is required. Owen Equip. & Erection Co.
v. Kroger, 437 U.S. 365, 373, 98 S. Ct. 2396, 57
L. Ed. 2d 274 (1978).
2 Cal. Bus. & Prof. Code § 17200, et seq.
I. FACTUAL & PROCEDURAL BACKGROUND
SigmaPharm, a Delaware corporation, develops
pharmaceutical technologies and products and enters into
agreements with other entities to commercialize them. 3
Mutual and United (collectively "Mutual"), both
Pennsylvania corporations, and King, a Tennessee
corporation, develop, manufacture, market, sell, and
distribute pharmaceutical drugs. 4 SigmaPharm's First
Amended Complaint alleges that Mutual and King
conspired [**4] to restrict the output of generic
equivalents to King's brand-name drug SKELAXIN, in
violation of federal and state antitrust law and in breach
of SigmaPharm's development agreement with Mutual.
3 First Am. Compl. ("FAC") ¶¶ 2, 24.
4 FAC ¶¶ 3-5.
A. The SigmaPharm-Mutual
Development Agreements
Employment
&
In March 1999, Mutual and SigmaPharm entered
into two agreements: (1) a development agreement
between Mutual and SigmaPharm; and (2) an
employment agreement between SigmaPharm's President,
Dr. Spiridon Spireas, and Mutual. The employment
agreement provided that Spireas would serve as Mutual's
Vice President of Research and Development, and
assume responsibility for Mutual's laboratory and
research activities related to obtaining Food and Drug
Administration ("FDA") approval of any new drugs it
developed. Under the development agreement,
SigmaPharm served as a contractor to develop
"innovations" for Mutual. "Innovations" are inventions,
improvements
or
enhancements
to
Mutual's
pharmaceutical products developed by SigmaPharm for
which Mutual secures a patent or which Mutual otherwise
deems to be an "innovation." 5 The development
agreement provided [*664] that Mutual had sole
ownership of all rights, [**5] title and interest in any
"innovation" in the U.S. market as well as ownership of
any U.S. Patents that might issue, 6 but SigmaPharm was
entitled to royalties from Mutual's manufacture and sale
of any such pharmaceuticals in the United States. For
generic equivalents of name-brand drugs developed by
SigmaPharm that required approval under the FDA's
Abbreviated New Drug Application ("ANDA") process,
SigmaPharm was to receive 10% of gross profits from
Mutual's U.S. sales. 7 But if additional generic
competitors entered the market, the royalties would
decrease: with the entry of one, two or three additional
competitors, royalties declined to 5%, 2.5%, or 0%,
respectively. 8And if Mutual licensed or sold the right to
sell the product, or "agreed to refrain from selling such
product," SigmaPharm was to receive 25% of the gross
profit from the licensing fees or royalties from that
license, sale, or agreement. 9
5
FAC ¶¶ 29-31; Mem. in Supp. of King
Pharms., Inc.'s Mot. to Dismiss Count I of
SigmaPharm's First Amended Compl. ("King
Mem.") Ex. 1.
Because SigmaPharm explicitly relies on the
development agreement in its Complaint, FAC ¶¶
29-38, this Court may consider the entire
agreement attached [**6] as Exhibit 1 to King's
Memorandum in support of its motion to Dismiss.
Page 3
See Lum v. Bank of Am., 361 F.3d. 217, 222 n.3
(3d Cir. 2004) (in deciding a 12(b)(6) motion to
dismiss, a court may consider exhibits attached to
the complaint and documents that form the basis
of the claim; a document forms the basis of the
claim if it is integral to or explicitly relied upon in
the complaint), abrogated in part on other
grounds as recognized in In re Ins. Brokerage
Antitrust Litig., 618 F.3d 300 (3d Cir. 2010).
6 FAC ¶¶ 32, 37; King Mem. Ex. 1 ¶¶ 3, 5. The
agreement provided SigmaPharm with equivalent
interests and rights to the innovations in all other
markets. See FAC ¶ 32.
7 FAC ¶ 33; King Mem. Ex. 1 ¶ 4(b)(I).
8 FAC ¶ 33; King Mem. Ex. 1 ¶ 4(b) (ii)-(iv).
9 FAC ¶ 34; King Mem. Ex. 1 ¶ 4(c).
B. The Abbreviated New Drug Application Process
The ANDA process was established by the Drug
Price Competition and Patent Term Restoration Act of
1984 ("Hatch-Waxman Act"). 10 The Hatch-Waxman Act
establishes relaxed FDA approval procedures for generic
equivalents of previously approved pharmaceutical drugs,
allowing generic manufacturers to submit abbreviated
applications. 11 Those procedures allow a generic drug
[**7] manufacturer to bypass the safety and efficacy
studies required for all new drugs so long as they
establish the generic's bioequivalence 12 to a drug
previously approved by FDA as safe and effective. 13 The
ANDA must also provide information to show that the
labeling for the generic is the same as the labeling
approved for the listed drug, unless certain exceptions
apply. 14 If a patent claims the previously approved drug
that the generic copies, or claims a use for the previously
approved drug for which the ANDA applicant seeks
approval, the generic manufacturer must certify either
that patent information has not been filed, the patent has
expired, the date on which the patent will [*665] expire,
or that the "patent is invalid or will not be infringed by
the manufacture, use, or sale of the new drug for which
the application is submitted." 15 This last certification is
known as a "Paragraph IV certification." 16 The generic
manufacturer must notify the brand-name manufacturer
and patent holder of its ANDA, after which the patent
holder has 45 days to bring an infringement suit. 17 This
notification is not required if the applicant certifies that
the patent at issue protects only methods [**8] of using
the drug and the patent does not claim a use for which the
applicant is seeking approval 18 --a "Section viii"
certification. If an infringement suit is filed, the FDA
must stay approval of the ANDA until the earliest of: (1)
the date the patent expires; (2) the date the district court
holds the patent invalid or the generic non-infringing; or
(3) 30 months from the date of the notice have elapsed. 19
If the generic is approved, the generic manufacturer
enjoys a 180-day period of market exclusivity. 20
10 21 U.S.C. § 355(j).
11 Colacicco v. Apotex Inc., 521 F.3d 253, 260
(3d Cir. 2008), vacated on other grounds, 129 S.
Ct. 1578, 173 L. Ed. 2d 672 (2009).
12
Under the Hatch-Waxman Act,
bioequivalence generally requires that the extent
of absorption of the generic drug not be
significantly different from the approved drug
when administered under similar experimental
conditions. See 21 U.S.C. § 355(j)(8)(B).
13 King Drug Co. of Florence, Inc. v. Cephalon,
Inc., 702 F. Supp. 2d 514, 520 (E.D. Pa. 2010)
(citing 21 U.S.C. § 355(j)(2)(A)).
14 See 21 U.S.C. § 355(j)(2)(A)(v).
15 21 U.S.C. § 355(j)(2)(A)(vii).
16 See King Drug, 702 F. Supp. 2d at 520.
17 Id.
18 See 21 U.S.C. § 355(j)(2)(A)(viii) & (2)(B).
19 See King Drug, 702 F. Supp. 2d at 520-21
[**9] (citing 21 U.S.C. § 355(j)(5)(B)(iii)).
20 See id. at 521.
C. Mutual's Second Generic to SKELAXIN & King's
Method Patents
The dispute in this case arises from SigmaPharm's
development, pursuant to the development agreement, of
a generic equivalent of the brand-name muscle relaxant
SKELAXIN. 21 SKELAXIN's active ingredient,
metaxalone, is no longer protected by patent. 22 Thus the
patents relevant here, licensed to Defendant King, claim
new methods of administering metaxalone (with food)
that increase bioavailability 23 of the drug and the drug
levels in a patient's blood. In early 2001, after Spireas
developed a 400 mg metaxalone tablet that demonstrated
bioequivalence to SKELAXIN under fasting conditions
(the "First Generic"), Mutual successfully petitioned the
FDA to require all ANDA's for generic SKELAXIN to
demonstrate bioequivalence under fasting conditions, 24
protecting its competitive position. Later in 2001, Elan
Pharmaceuticals, which then owned the SKELAXIN
trademark and the exclusive right to sell and market that
Page 4
drug, sought the FDA's permission to amend
SKELAXIN's label to reference increased bioavailability
of SKELAXIN when administered with food, and
petitioned it to require [**10] all ANDA's for generic
SKELAXIN to demonstrate bioequivalence under both
fasting and non-fasting conditions. 25 In March 2002, the
FDA granted the petition, ordered all ANDA's to comply
with it, and subsequently approved the proposed labeling
amendment. 26
21 FAC ¶ 39.
22 The patent for metaxalone expired in 1979.
FAC ¶ 40.
23 "The term 'bioavailability' means the rate and
extent to which the active ingredient or
therapeutic ingredient is absorbed from a drug and
becomes available at the site of drug action." 21
U.S.C. § 355(j)(8)(A)(i).
24 FAC ¶¶ 43-45. FDA granted the petition on
January 30, 2002. FAC ¶ 45.
25 FAC ¶¶ 46-47.
26 FAC ¶¶ 48, 50.
Elan then sought method patents for SKELAXIN
associated with the drug's administration under fed
conditions. In mid-2002, the U.S. Patent and Trademark
Office issued to Elan the " '128 Patent," which claims
"methods of increasing the [*666] bioavailability of
metaxalone by administering [it] with food." 27 Then, in
January 2004, the USPTO issued to Elan the " '102
Patent," which was "directed to methods of providing
metaxalone to patients while informing them that taking
metaxalone with food results in higher blood levels of
metaxalone." 28 At some point after June [**11] 2002,
Elan sold to King the SKELAXIN trademark and rights
to market and sell that drug, and licensed the '102 and
'128 patents to King. 29
27 FAC ¶ 49.
28 FAC ¶ 55.
29 FAC ¶¶ 41, 52.
After the '128 Patent was issued, Spireas developed
another SKELAXIN generic (the "Second Generic") that
demonstrated bioequivalence under fed as well as fasting
conditions, as required under the new FDA order. In
March 2003, Mutual filed an ANDA for that formulation,
including a Section viii certification that the '128 Patent
did not claim a use for which Mutual was seeking
approval. 30 Then, in January 2004, after the '102 Patent
was issued, Mutual filed a Paragraph IV certification that
its Second Generic would not infringe that patent. 31 In
March 2004, FDA notified ANDA applicants that they
need not include labeling regarding the increased
bioavailability of metaxalone under fed conditions,
undermining King's strategy to exclude generic
competitors by requiring them to use labels that
implicated King's method patents. 32 The notice thus
allowed ANDA applicants to carve King's patented
indications out of the label, permitting Mutual to market
the Second Generic without implicating "the [**12]
allegedly novel 'methods'" claimed in King's patents. 33
30 FAC ¶¶ 53-54. Pursuant to the development
and employment agreements, Mutual directed
Spireas to file patent applications for novel
formulations of metaxalone, including Mutual's
Second Generic. Id. ¶¶ 69-74. In 2009, as required
by the agreement, Spireas assigned the U.S. patent
applications to Mutual.
31 FAC ¶¶ 56-57.
32 FAC ¶ 59.
33 FAC ¶ 60.
In March 2004, King fought back, bringing an
infringement action against Mutual in the Eastern District
of Pennsylvania, 34 and petitioning the FDA to: rescind
its March 2004 notice to ANDA applicants; require all
ANDA applicants to submit a Paragraph IV certification
against the '128 patent; and require generic labels to
include information about increased bioavailability under
fed conditions. King also asked FDA to stay approval of
any ANDAs for SKELAXIN until it had decided the
petition. 35 Mutual opposed each of these requests in
multiple filings with the FDA between April 2004 and
February 15, 2005. 36
34
FAC ¶ 58 (citing King Pharms., Inc. v.
Mutual Pharms., Inc., No. 04-1083 (E.D. Pa.)).
The infringement action is assigned to the
Honorable Lawrence Stengel.
35 FAC ¶¶ 61-62.
36 FAC ¶¶ 63, 66, [**13] 68.
D. The Alleged Unlawful Agreement & Breach of
Contract
Then things changed. On December 6, 2005, Mutual
and King entered into a co-exclusive licensing agreement
under which Mutual granted King a co-exclusive license
for one of Mutual's method patents (the " '566 Patent"),
which claims methods of administering metaxalone and
Page 5
informing users of potential drug interactions. 37 Two
[*667] days later, Mutual withdrew its opposition to
King's petition for labeling requirements for generic
SKELAXIN and asked the FDA to withdraw its March
2004 notice that permitted ANDA applicants for generic
SKELAXIN to omit labeling regarding bioavailability
under fed conditions, threatening Mutual's ability to
market its Second Generic without infringing on the '102
and '128 patents. 38 Then, in 2007, when King made a
supplemental submission to FDA in support of its March
2004 petition and request for a stay of approval of any
generic SKELAXIN ANDAs, Mutual submitted
comments in support of King. 39 That same year, Mutual
also petitioned FDA to require SKELAXIN generics to
include labeling information that implicated the '566
Patent on drug interactions, and to withhold approval of
any generic equivalent of SKELAXIN [**14] until drug
interaction study results were included on the label 40 --a
move that would impair the ability of other generic
competitors to design their label to avoid the potentially
infringing use.
37 FAC ¶ 84; Mem. in Supp. of Mutual Pharm.
Co, Inc. & United Research Labs., Inc.'s Mot. to
Dismiss First Am. Compl. Ex. 2. Because
SigmaPharm references the licensing agreement
in its Complaint, and its relevant terms were
published in an SEC filing, this Court may take
notice of the agreement to determine what the
documents stated. See Lum, 361 F.3d. at 222 n.3;
Oran v. Stafford, 226 F.3d 275, 289 (3d Cir.
2000).
38 FAC ¶¶ 82-83.
39 FAC ¶¶ 85-86.
40 FAC ¶¶ 87-88. Both petitions were denied.
Id. ¶ 89.
The King-Mutual infringement litigation also
sputtered. Though scheduled for a trial beginning in
October 2006, on May 17, 2006, the Parties filed a joint
stipulation under seal, after which the case was stayed
pending an FDA decision on the generic label. 41 And
when the '128 and '102 patents were held invalid by
another district court, 42 Mutual neither informed the
court handling the infringement claim of that
development nor sought to remove the case from
suspense to assert its newly available [**15] defenses. 43
41 FAC ¶ 58; see also King Pharms., Inc. v.
Mutual Pharms., Inc., No. 04-1083 (E.D. Pa.),
doc. no. 40 (Order granting stay). The Court may
take judicial notice of other court proceedings.
Zdrok v. V Secret Catalogue, Inc., 215 F. Supp.
2d 510, 513 (D.N.J. 2002) (citing S. Cross
Overseas Agencies, Inc. v. Wah Kwong Shipping
Grp. Ltd., 181 F.3d 410, 426 (3d Cir.1999) and
Fed. R. Evid. 201), vacated on other grounds, 108
F. App'x 692 (3rd Cir. 2004).
42 King Pharms., Inc. v. Eon Labs, Inc., 593 F.
Supp. 2d 501 (E.D.N.Y. 2009).
43 FAC ¶ 90. On August 2, 2010, after the
King-Mutual court ordered a status report,
Mutual's counsel reported the favorable results of
the King-Eon litigation but requested the matter
remain stayed pending the outcome of the appeal
and an FDA decision. King Pharms., Inc., No.
04-1083 (E.D. Pa. docketed Aug. 2, 2010) (doc.
no. 46). The Federal Circuit later affirmed the
district court's invalidity holdings. King Pharms.,
Inc. v. Eon Labs, Inc., 616 F.3d 1267 (Fed. Cir.
2010). SigmaPharm informed this Court of that
development in a filing of supplemental authority.
See Notice of Supplemental Authority [doc. no.
59].
Based on these facts, SigmaPharm's First [**16]
Amended Complaint alleges that at some point between
February 15, 2005, when Mutual last opposed King's
FDA petition and request for stay of approval, and
December 6, 2005, when Mutual and King entered into
the co-exclusive licensing agreement for the '566 Patent,
the two companies entered into an agreement to restrict
output of generic equivalents to SKELAXIN, including
Mutual's Second Generic. 44 SigmaPharm alleges King
and Mutual intended to, and did, suppress output of the
Second Generic, and agreed that Mutual would support
King's efforts to suppress other generic competitors,
allowing King to continue to sell SKELAXIN at [*668]
prices higher than would have existed absent the
agreement. 45 In exchange, Mutual allegedly received
tens of millions of dollars. 46 SigmaPharm claims this
agreement was a "naked, horizontal restraint of trade" in
violation of Section 1 of the Sherman Act, Pennsylvania
common law barring restraint of trade (Count II), and
California statutes barring unlawful and unfair
competition (Count III). And it asserts the conspiracy
injured SigmaPharm by depriving it of royalties it would
otherwise have received under the development
agreement from sales of the Second [**17] Generic, and
injured consumers by artificially inflating prices for
Page 6
SKELAXIN. 47
44
45
46
47
FAC ¶¶ 77-81, 84.
FAC ¶¶ 80, 96.
FAC ¶¶ 81, 96.
FAC ¶¶ 101-103.
This case thus presents a variation on antitrust claims
challenging settlement of infringement suits brought by
brand-name manufacturers against their generic
competitors--known as "pay-for-delay" settlements or
"reverse-exclusion payments." 48 In those cases,
ordinarily brought by end-payers of the brand-name drug
or the government, as part of the settlement agreement,
the
patent-holder-plaintiff
pays
the
generic-competitor-defendant to delay its entry into the
market. 49 Here, however, Mutual and King have not
reached a settlement of King's infringement action
against Mutual; that action is still pending.
48
See Ark. Carpenters Health and Welfare
Fund v. Bayer AG, 625 F.3d 779, 780 (2d Cir.
2010) (Pooler, J., dissenting).
49 See id.
SigmaPharm also claims Mutual breached the
development agreement by failing to pay SigmaPharm
the 25% royalty it was due from Mutual's alleged
agreement with King to refrain from marketing the
Second Generic, by failing to perform their contract
obligations in good faith, and by frustrating the terms of
that agreement [**18] (Count IV). 50
50 FAC ¶¶ 122-125.
E. Defendants' Motions to Dismiss
All Defendants now move to dismiss Counts I
through III on grounds that: (1) SigmaPharm has failed to
sufficiently allege an agreement; (2) SigmaPharm lacks
antitrust standing for its Sherman Act claim because inter
alia it has not pleaded antitrust injury; (3) the
Pennsylvania common law restraint of trade claim fails
because the Sherman Act claim fails; and (4) the
California statutory unfair competition claim is not
cognizable because the injury and misconduct took place
outside California. Mutual also moves to dismiss the
contract claim because SigmaPharm has not sufficiently
alleged either a breach or a violation of good faith.
II. STANDARD OF REVIEW
In reviewing a Rule 12(b)(6) motion to dismiss for
failure to state a claim upon which relief may be granted,
the Court must accept a plaintiff's factual allegations as
true and draw all logical inferences in favor of the
non-moving party. 51 Courts are not, however, bound to
accept as true legal conclusions couched as factual
allegations. 52 The Complaint must set forth "direct or
inferential allegations [for] all the material elements
necessary to sustain recovery under [**19] some viable
legal theory." 53 And the plaintiff must allege "enough
facts to state a claim for relief that is plausible [*669] on
its face." 54 The court has no duty to "conjure up
unpleaded facts that might turn a frivolous action . . . into
a substantial one." 55
51 ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859
(3d Cir. 1994).
52 Bell Atl. Corp. v. Twombly, 550 U.S. 544,
564, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007).
53
See id. at 562 (citations and quotations
omitted).
54 Id. at 570.
55 Id. at 562 (citing McGregor v. Indus. Excess
Landfill, Inc., 856 F.2d 39, 42-43 (6th Cir.
1988)).
For claims under Section I of the Sherman Act, a
plaintiff must plead "enough factual matter (taken as true)
to suggest that an agreement was made." The plausibility
standard, however, "does not impose a probability
requirement." 56 Instead, the plaintiff need only state
enough facts to "raise a reasonable expectation that
discovery will reveal evidence of illegal agreement,"
even if the court believes such proof is improbable. 57
But allegations of otherwise lawful parallel conduct,
without more, are insufficient to render an alleged
conspiracy plausible. 58 Instead, the parallel conduct
"must be placed in a context that raises a suggestion of a
preceding [**20] agreement," rather than independent
action. 59 For example, parallel "conduct [that] indicates
the sort of restricted freedom of action and sense of
obligation that one generally associates with agreement"
may be sufficient to state a claim of tacit conspiracy. 60
56 Id.
57 Id.
58 Id. at 556-57.
59 Id. at 557.
60 Id. at 557 n.4 (citing Blechman, Conscious
Parallelism, Signalling and Facilitating Devices:
Page 7
The Problem of Tacit Collusion Under the
Antitrust Laws, 24 N.Y.L. Sch. L. Rev. 881, 899
(1979)) (alterations in original).
III. DISCUSSION
A. Sherman Act Claim
1. Sufficiency of SigmaPharm's Allegation of an
Agreement
Defendants argue that SigmaPharm has not stated a
Section 1 claim because SigmaPharm has not pleaded
sufficient facts to render a Mutual-King agreement
plausible. 61 First, Defendants [*670] contend that
Plaintiff's general allegation that the agreement to restrict
output was entered into between February 15, 2005 and
December 6, 2005 is too vague and conclusory to support
a Section 1 claim. While it is true that SigmaPharm
provides no detail as to the specifics of when, where and
how the agreement was reached, in claims alleging tacit
agreement where direct evidence may be unavailable,
[**21] Plaintiffs may rely "solely on circumstantial
evidence (and the reasonable inferences that may be
drawn therefrom) to prove a conspiracy." 62 To that end,
Plaintiffs alleged specific acts that they assert support an
inference of conspiracy: (1) King's payments to Mutual;
(2) Mutual's support of King's FDA petition to prohibit
labeling that carves out infringing uses; (3) the sealed
joint stipulation in the infringement action leading to an
indefinite stay and Mutual's failure to alert that court to
the patent invalidity holding in the King-Eon litigation;
and (4) Mutual's FDA petition seeking labeling
requirements regarding drug interactions with metaxalone
that would frustrate the entry of generic competitors.
61 See King Mem. at 5-6; King's Reply at 6-8.
Though Defendants moved to dismiss on
grounds that SigmaPharm has not adequately
pleaded harm to competition, they did so largely
in the context of the standing inquiry. See King
Mem. at 15 (Sigmapharm cannot prove its injury
was caused by the agreement where the generic
had not been approved and King held a valid
patent); King Reply at 10 (citing Warfield Phila.
L.P. v. Nat'l Passenger R.R. Corp., No. 09-1002,
2009 U.S. Dist. LEXIS 109432, 2009 WL
4043112, at *1-2, *5 (E.D. Pa. Nov. 20, 2009)
[**22] in which antitrust injury was evaluated).
But SigmaPharm has pleaded a per se violation,
see FAC at ¶ 98 (naked, horizontal restraint of
trade), for which the harm to the marketplace is
ordinarily presumed. See Pace Elecs., Inc. v.
Canon Computer Sys., Inc., 213 F.3d 118, 123
(3d Cir. 2000). And Defendants did not argue in
either their moving brief or their reply that the
rule of reason test, applied by some courts
evaluating pay-for-delay patent infringement
settlements applies here, or that Plaintiffs have not
adequately pleaded that the alleged agreement
exceeded the scope of the relevant patents, as
some courts have required under that test. See
King Drug Co. of Florence, Inc., v. Cepahlon,
Inc., 702 F. Supp. 2d 514, 524-28 (E.D. Pa.
2010). In their response to Plaintiff's Notice of
Supplemental Authority, however, Defendants
appear to belatedly suggest that this standard
should be applied in this case. See Defs.' Resp. to
Pl.'s Notice of Supplemental Authority at 1-3
(citing Valley Drug Co. v. Geneva Pharms. Inc.,
344 F.3d 1294, 1306-07 (11th Cir. 2003) and
Joblove v. Barr Labs. Inc., 466 F.3d 187 (2d Cir.
2006)). Because Defendants failed to raise that
issue in their moving memoranda, [**23] the
issue has not been fully briefed, and the
Complaint does not allege a pay-for-delay
settlement, the Court declines to reach that issue.
See Schering-Plough Corp. v. F.T.C., 402 F.3d
1056, 1066 n.14 (11th Cir. 2005) (noting a
"critical difference" between agreements that
resolve litigation, to which rule-of-reason applies,
and those that do not permit a generic company to
market its product before patent expiration and
which prolong rather than resolve a patent
infringement action, for which a per se rule may
be appropriate) (citing In re Terazosin
Hydrochloride Antitrust Litig., 352 F. Supp. 2d
1279 (S.D. Fla. 2005)).
62 Rossi v. Standard Roofing, Inc., 156 F.3d
452, 465 (3d Cir. 1998).
Defendants argue these acts are insufficient to make
a Section 1 conspiracy plausible. Principally, Defendants
contend Mutual's decision to support King's exclusionary
petitions before the FDA was merely parallel conduct,
insufficient under Twombly's pleading standard, and that
Mutual's submissions to the FDA are irrelevant. 63 But
Defendants' argument loses force upon consideration of
the
respective
market
positions
of
the
telecommunications providers in Twombly, who did not
Page 8
compete in each others' [**24] markets, and the
positions of King and Mutual here. Up to the point of the
alleged agreement, Mutual was aggressively seeking to
enter the market for generic SKELAXIN, 64 and Mutual
and King took adverse positions on King's FDA petition
that would have made non-infringing entry of Mutual and
other generic competitors more difficult. King and
Mutual were not, as in Twombly, companies merely
seeking to entrench their own economic dominance in
separate geographic markets in which they did not
compete. 65 Nor is Mutual's support of King's FDA
petitions the type of innocent parallel, but independent,
action among competitors that is generally insufficient
under Twombly. That is because King's petition on
food-effect labeling was adverse, not advantageous, to
Mutual's economic interest in marketing its Second
Generic. 66 The [*671] timing of Mutual's about-face on
King's petition--two days after it entered into a
co-exclusive licensing agreement with King for a
different product--also supports an inference that
Mutual's newly found opposition was not merely
independent action. This factual context at least suggests
preceding agreement, and "the sort of restricted freedom
of action and sense of obligation [**25] that one
generally associates with agreement." 67 And that context
makes it plausible that the licensing agreement, and any
payments made thereunder, were mere pretext for an
agreement to refrain from marketing the Second Generic
or other generic equivalents.
63 That the Noerr-Pennington doctrine might
immunize Defendants from liability for
petitioning government to impose market
restraints does not prevent this Court from
considering whether the FDA submissions make
the agreement alleged here plausible; the
underlying private agreement is not immunized by
the doctrine. See A.D. Bedell Wholesale Co., Inc.
v. Philip Morris, Inc., 263 F.3d 239, 251 (3d Cir.
2001) (private parties cannot immunize an
anticompetitive agreement by later requesting
government approval).
64
In re Terazosin Hydrochloride Antitrust
Litig., 352 F. Supp. 2d at 1315 n.34 ("[C]ourts
have recognized that the mere filing of an ANDA
is sufficient evidence that generic drug companies
are competitors of brand-name manufacturers.").
65 Twombly, 550 U.S. at 564-66.
66 See In re Baby Food Antitrust Litig., 166
F.3d 112, 122 (3d Cir. 1999) (additional plus
factors that may show parallel action was not
independent include "that the [**26] defendants:
(1) acted contrary to their economic interests, and
(2) were motivated to enter into a price fixing
conspiracy").
67 Twombly, 550 U.S. at 557 n.4.
Defendants contend that Mutual's change in position
was innocuous given the Mutual-King licensing
agreement. King argues that "Mutual's subsequent
support of King's petition to the FDA regarding
[food-effect labeling] is entirely consistent with Mutual's
status as a licensor to King." 68 But Defendants do not
explain how or why a licensing agreement with respect to
the method patent for drug interactions would logically
lead the licensor to subvert its ability to market a generic
drug for which it has a pending ANDA unless it had
decided not to market the Second Generic. While Mutual
could have made that decision unilaterally, the attendant
circumstances and timing of events here tend to exclude
that possibility. And, presumably, had it made such a
decision, it would have reversed its position on the FDA
labeling rules before it entered the licensing agreement
with King.
68 See King Reply at 8.
Additionally, Mutual's less-than-aggressive litigating
position in the infringement action, together with the
above facts also supports an [**27] inference that King
and Mutual entered into an agreement at least with
respect to sales of Mutual's Second Generic. The Court
notes that as King and Mutual apparently stipulated to
stay the infringement litigation, the expiration of the
30-month automatic stay on FDA approval was
approaching. And Mutual's failure to inform the trial
court that King's '102 and '128 Patents were held invalid
and seek to lift the stay likewise was counter to its
interest in marketing and selling the Second Generic.
While this Court does not wish to second-guess Mutual's
litigation strategy, these facts, in tandem with Mutual's
support of King's petitions, enhance the plausibility of an
agreement to refrain from marketing the Second Generic.
The Court finds, however, that Mutual's petition
requesting that the FDA adopt labeling rules that would
require generic competitors to include labeling
information that would implicate the '566 method patent
to be non-inculpatory, self-interested action, though
counter to the interests of other generic competitors.
Mutual held a method patent it sought to protect and for
Page 9
which it held a co-exclusive license with King. That
either or both companies would seek to impede [**28]
competitors does not alone suggest a conspiracy to
restrict the output of the Second Generic or other generic
equivalents. 69
69 Twombly, 550 U.S. at 566 (parallel decisions
to resist competition is insufficient to imply an
antitrust conspiracy).
Nevertheless, the Court holds that the facts alleged in
the First Amended Complaint, viewed as a whole as they
must be, 70 are sufficient to nudge the allegation of an
unlawful agreement to restrict the output of generic
equivalents to SKELAXIN [*672] "across the line from
conceivable to plausible." 71
70 In re Blood Reagents Antitrust Litig., 756 F.
Supp. 2d 623, 2010 U.S. Dist. LEXIS 86930, 2010
WL 3364218, at *6 (E.D. Pa. 2010).
71 Twombly, 550 U.S. at 570.
2. Antitrust Standing
A plaintiff seeking treble damages for a violation of
the federal antitrust laws must have antitrust standing. 72
This requires more than "injury-in-fact" and a "case or
controversy;" it requires a determination that the plaintiff
is the proper party to bring a private antitrust action. 73
The antitrust standing doctrine arises from judicial
concern that despite the broad language of Section 4 of
the Clayton Act, which provides that anyone injured "in
his business or property by reason of anything forbidden
[**29] in the antitrust laws" may bring a claim, 74
Congress did not intend to permit those only tangentially
injured by a violation to recover treble damages. 75 Thus
courts apply a balancing test, weighing five factors:
(1) the causal connection between the
antitrust violation and the harm to the
plaintiff and the intent by the defendant to
cause that harm, with neither factor alone
conferring standing; (2) whether the
plaintiff's alleged injury is of the type for
which the antitrust laws were intended to
provide redress; (3) the directness of the
injury, which addresses the concerns that
liberal application of standing principles
might produce speculative claims; (4) the
existence of more direct victims of the
alleged antitrust violations; and (5) the
potential for duplicative recovery or
complex apportionment of damages. 76
72 Blue Shield of Va. v. McCready, 457 U.S.
465, 476-77, 102 S. Ct. 2540, 73 L. Ed. 2d 149
(1982).
73 Associated Gen. Contractors of Cal., Inc. v.
Cal. State Council of Carpenters, 459 U.S. 519,
535 n.31, 103 S. Ct. 897, 74 L. Ed. 2d 723 (1983).
74 15 U.S.C. § 15(a).
75 Blue Shield, 457 U.S. at 477; Allegheny Gen.
Hosp. v. Philip Morris, Inc., 228 F.3d 429, 438
(3d Cir. 2000) (ancillary victims of the ripple
effects from antitrust violations [**30] do not
have standing).
76
Barton & Pittinos, Inc. v. SmithKline
Beecham Corp., 118 F.3d 178, 181 (3d Cir. 1997)
(quotations and citations omitted).
The second of these factors, more commonly
referred to as "antitrust injury," is a necessary, but
insufficient factor, and if a court finds lack of antitrust
injury it need go no further before dismissing the case. 77
This Court's analysis thus begins and ends there.
77 City of Pittsburgh v. West Penn Power Co.,
147 F.3d 256, 264 n.14, 265 (3d Cir. 1998);
(citing Barton & Pittinos, 118 F.3d at 182).
a. Antitrust Injury
To successfully plead antitrust injury, a plaintiff
must plead more than just injury causally related to the
alleged anticompetitive conduct. Instead, they must plead
an "injury of the type the antitrust laws were intended to
prevent and that flows from that which makes defendants'
acts unlawful." 78 This requires evaluating whether the
injury suffered by a plaintiff reflects the central interest
of the Sherman Act "in protecting the economic freedom
of participants in the relevant market." 79 The inquiry
effectively imposes limits on which market actors can
bring private antitrust actions by requiring that the injury
claimed result [**31] from the anticompetitive outcomes
of the alleged conduct. Consequently, courts [*673]
have generally limited "the class of plaintiffs capable of
satisfying the antitrust-injury requirement . . . to
consumers and competitors in the restrained market" 80
because of the reduced price competition or artificial
restrictions on the freedom of competitors to operate in
Page 10
that market that such violations bring. Thus, brokers,
suppliers, contractors, sales representatives, and lessors
that provide goods or services to competitors in the
restrained market have not ordinarily suffered antitrust
injury even though the anticompetitive scheme may have
reduced or eliminated their sales of goods and services to
those competitors. 81 Their losses resulting from
restrained competition in the downstream market "are
merely byproducts of the anticompetitive effects of the
restraint." 82 Courts have identified exceptions to the
competitor-consumer rule: where the injury suffered is
"inextricably intertwined" with the wrongdoing, the
plaintiff has suffered antitrust injury though not a
competitor or consumer. 83 An injury may be inextricably
intertwined when it is a necessary step in, integral to, or
the very means [**32] used to achieve the
anticompetitive outcome, 84 or "is the precisely intended
consequence of the defendants' anticompetitive conduct."
85 For the purposes of this inquiry, the Court will assume
the alleged agreement occurred. 86
78 Alberta Gas Chems. Ltd. v. E.I. Du Pont De
Nemours & Co., 826 F.2d 1235, 1240 (3d Cir.
1987) (quotations and citation omitted).
79 Associated Gen. Contractors of Cal., 459
U.S. at 538.
80 West Penn Allegheny Health Sys., Inc. v.
UPMC, 627 F.3d 85, 102 (3d Cir. 2010)
(emphasis added).
81 See, e.g., id. at 102 (suppliers); McCullough
v. Zimmer, Inc., 382 F. App'x 225, 229 (3d Cir.
2010) (commission-based sales representatives);
Gregory Mktg. Corp. v. Wakefern Food Corp.,
787 F.2d 92, 96-97 (3d Cir. 1986) (broker was
neither consumer nor competitor in juice market);
Schuylkill Energy Res., Inc. v. Pa. Power & Light
Co., 113 F.3d 405, 415 (3d Cir. 1997) (exclusive
supplier to competitor); Barton & Pittinos, 118
F.3d at 184 (advertisers and brokers); Delco LLC
v. Giant of Maryland, LLC, No. 07-3522, 2007
U.S. Dist. LEXIS 82711, 2007 WL 3307018, at
*10 (E.D. Pa. Nov. 8, 2007) (lessors) (citing
cases).
82 West Penn Allegheny Health Sys., 627 F.3d at
102.
83 Carpet Grp. Int'l v. Oriental Rug Importers
Ass'n, Inc., 227 F.3d 62, 76-77, 78 (3d Cir. 2000).
84
See, [**33] e.g., West Penn Allegheny
Health Sys., 627 F.3d at 102; Allegheny Gen.
Hosp., 228 F.3d at 438.
85 Carpet Grp., 227 F.3d at 78 (citations and
quotations omitted).
86 The Third Circuit has cautioned courts not to
confuse
the
substantive
element
of
anticompetitive harm required to state an antitrust
claim with the standing requirement of antitrust
injury. See Angelico v. Lehigh Valley Hosp., Inc.,
184 F.3d 268, 275 n.2 (3d Cir. 1999).
Sigmapharm asserts that it has suffered antitrust
injury because it lost royalties when Mutual failed to
commercialize the Second Generic pursuant to its
unlawful agreement with King. It argues that because it
has contractual rights to the profits in the suppressed
product, it is a market " participant," not a supplier,
whose injuries are inextricably entwined with the
marketplace injury of reduced output and higher prices.
87 And it argues that this loss "flows" from those
anticompetitive results.
87 SigmaPharm Mem. in Opp'n to King Pharms.
Inc.'s Mot. to Dismiss Counts I--III of
SigmaPharm's First Am. Compl. ("SigmaPharm
Resp. in Opp'n") at 10-11.
The Court disagrees. SigmaPharm's alleged injury is
precisely the type of ancillary or tangential harm that
courts [**34] have repeatedly held does not constitute
antitrust injury. A proper antitrust plaintiff is an adversely
affected market participant in the restrained market. Here
that market is generic SKELAXIN and the adverse
impact is higher prices and restricted [*674] entry.
SigmaPharm does not assert it manufactures or markets
any pharmaceuticals in the United States. And because
SigmaPharm expressly disclaimed any rights to own,
market, manufacture or sell the innovations it developed
under the development agreement with Mutual,
SigmaPharm is not even a potential competitor of the
Second Generic and other products it developed. Instead
it is a contract drug developer that has not alleged that its
access to the market in which it operates--drug
development--was in any way restrained by the
agreement. 88 And even if it could allege this, it would
not change the outcome. Such injury to an input market
would remain too remote from the harms that antitrust
law seeks to prevent by prohibiting output-restricting
agreements in the downstream market.
88 Cf. Stark v. Ear Nose & Throat Specialists of
Nw. Pa., P.C., 185 F. App'x 120, 125 (3d Cir.
2006) (no standing where alleged anticompetitive
Page 11
conduct restrained [**35] the market for
physicians and medical research and plaintiffs
provide research study contract services or
contract support to physicians and drug
manufacturers).
The Seventh Circuit's decision in Repp v. F.E.L.
Publications is instructive: there the plaintiff, a music
composer, complained that its publisher's allegedly
unlawful practice of using blanket licenses reduced his
royalties by discouraging buyers from purchasing his
works. 89 The court held that the anticompetitive injuries
sought to be prevented by antitrust law in that
circumstance included coercing music users into buying
more product than they required and restricting entry of
lesser known artists by preventing them from offering
individual works at lower prices than pieces offered by
well-known artists--injuries Repp did not complain he
had suffered. 90 The court thus held his injuries were not
the type the antitrust laws were intended to protect. 91
Similarly, SigmaPharm complains of lost royalties, not of
the harms that market allocation or supply agreements
inflict on the restrained market--increased prices and
restricted entry. SigmaPharm was neither a consumer nor
a competitor since, by contract, it could not have [**36]
entered the restrained market or insisted on
commercialization of the drug. Thus, "the source of
[SigmaPharm's] right not to be deprived of royalties . . .
is [the contract with Mutual], not the federal antitrust
laws." 92
89 Repp v. F.E.L. Publications, Ltd., 688 F.2d
441, 443 (7th Cir. 1982).
90 Id. at 445-46.
91 Id. at 446.
92 Id. at 447.
SigmaPharm's belief that its "economic rights" in
sales of Second Generic somehow differentiate it from an
average supplier is misplaced. To be sure, the
development agreement gave SigmaPharm an economic
interest in sales of the Second Generic, but that interest is
insufficient: Those with contractual rights to a portion of
the sales revenues of a product or service that they do not
produce or offer do not suffer antitrust injury when the
sales of that product or service are unlawfully suppressed.
93 Here, SigmaPharm effectively bargained for deferred
and contingent compensation for its services as a [*675]
drug developer. That such compensation was in the form
of royalties from drug sales does not change
SigmaPharm's fundamental position as a contractor
supplying drug-formulation services. The Court can find
no principled basis for distinguishing between
SigmaPharm's [**37] lost royalties and the losses
suffered by any service provider whose compensation is
linked to sales of a suppressed product in another market.
94
93 See, e.g., R.C. Dick Geothermal Corp. v.
Thermogenics, Inc., 890 F.2d 139, 148 (9th Cir.
1989) (en banc) ("Mere injury as a landlord or
lessor entitled to royalties would not by itself be
the kind of injury to competition that the antitrust
laws are designed to prevent. . . . [T]he injured
party [must] be a participant in the same market
as the alleged malefactors."); Productive
Inventions, Inc. v. Trico Prods Corp., 224 F.2d
678, 679-80 (2d Cir. 1955) (patent licensor only
incidentally injured by antitrust violation harming
its licensee's business that resulted in loss of
royalties); SCM Corp. v. Radio Corp. of Am., 407
F.2d 166, 170 (2d Cir. 1969) (patentor's injury
from lost revenues resulting from licensees'
injuries does not give it standing to sue); Melrose
Realty Co. v. Loew's, Inc., 234 F.2d 518, 520 (3d
Cir. 1956) (citing Harrison v. Paramount
Pictures, Inc., 211 F.2d 405 (3d Cir. 1954) (no
antitrust standing for non-operating owner and
lessor of a movie theater entitled to share of
lessee's receipts where lessee allegedly conspired
[**38] with another theater owner that resulted in
reduced receipts), cert. denied 352 U.S. 890, 77 S.
Ct. 128, 1 L. Ed. 2d 85 (1956). Cf. Eisai, Inc. v.
Sanofi-Aventis, LLC, No. 08-4168, 2010 U.S.
Dist. LEXIS 82291, 2010 WL 3172187, at *8
(D.N.J. Aug. 10. 2010) (no antitrust injury
suffered by contract drug manufacturer that
retained only a royalty interest because "fewer or
non-existent royalties under the profit-sharing
arrangement . . . is not the type of injury to be
redressed by the antitrust laws . . . .").
94
McCullough, 382 F. App'x. at 229
(commission-based sales representatives suffered
no cognizable antitrust injury as a result of
Defendants' alleged anticompetitive conduct in
the market for the orthopaedic devices they sold).
And though SigmaPharm argues its injury is
inextricably intertwined with the injury to the
marketplace, 95 nothing it alleges suggests the denial of
Page 12
royalties was necessary or integral to effectuating the
agreement, the means by which the agreement was
carried out, or an intended consequence of the agreement.
SigmaPharm relies primarily on two cases in which
foreign manufacturers of prescription drugs were held to
have antitrust standing though they used an intermediary
to market and sell the drug in the United States: [**39]
Chemi S.p.A. v. GlazoSmithKline 96 and EthylPharm S.A.
France v. Abbott Laboratories. 97 In both cases, the
plaintiff was a manufacturer of the pharmaceutical for
which the market was allegedly restrained, but relied on
U.S. distributors to sell the product in the U.S. Though
the manufacturers were not direct competitors in the
market, both courts held the Plaintiffs' injuries were
inextricably entwined with the injury to market for the
drug. 98 The anticompetitive agreement prevented the
foreign manufacturers from selling their drugs--products
which directly competed in the restrained market--to
vendors who resold them in the U.S. SigmaPharm
erroneously analogizes its market position to that of
Chemi and Ethylpharm, asserting that because it
attempted to "commercialize" metaxalone "through its
agreement with Mutual," it too is a market participant. 99
But unlike Chemi and Ethylpharm, SigmaPharm is not a
manufacturer of the restrained product, and it cannot
transform itself into one by relabeling its services
contract with Mutual as an agreement to "commercialize"
drugs. And the alleged restraint does not prevent
SigmaPharm from offering drug development services to
others in the market. [**40] Finally, in both of the cases,
the anticompetitive scheme could not have been
effectuated without inflicting the harm on Chemi and
Ethylpharm because the generics they produced were the
very object of the conspiracy. 100 But here, Mutual and
King [*676] could effectuate their agreement to restrain
generic SKELAXIN with no impact on SigmaPharm
whatever because the development agreement obligated
Mutual to pay SigmaPharm 25% of the proceeds from
any deal to refrain from marketing the Second Generic.
Had Mutual abided by that term here, SigmaPharm could
claim no injury because it had no contractual right to
insist on commercialization even if sales royalties would
have been higher. 101 Its injuries thus flow from the
breach of contract, not from an antitrust violation.
95 SigmaPharm Resp. in Opp'n at 11-12.
96 356 F. Supp. 2d 495 (E.D. Pa. 2005).
97 598 F. Supp. 2d 611 (D. Del. 2009).
98 Chemi, 356 F. Supp. 2d at 502; Ethylpharm,
598 F. Supp. 2d at 617-18.
99 SigmaPharm Resp. in Opp'n at 12; FAC ¶ 24.
100 Chemi, 356 F. Supp. 2d at 501 (monopoly
was designed to prevent the sale of Chemi's
product); Ethylpharm, 598 F. Supp. 2d at 618
(intent of conspiracy was to harm EthylPharm).
101 For this reason, the Court [**41] rejects
SigmaPharm's argument that there is "no
necessary congruence" between the losses from
the antitrust violation (lost sales royalties) and the
losses from the breach claim (failure to remit 25%
of King's payment to Mutual). See SigmaPharm
Resp. in Opp'n at 10.
Accordingly, because SigmaPharm's injury does not
flow from higher prices for SKELAXIN or restricted
entry into the market for generic equivalents, was not
inextricably intertwined with those harms, and is
attributable to Mutual's breach of contract not from any
antitrust violation, SigmaPharm has not alleged antitrust
injury and therefore lacks standing.
b. Other Balancing Factors
While the Court need not address the remaining
balancing factors, it touches briefly on the fourth--the
existence of more direct victims of the alleged antitrust
violation--because of its grave concerns about
SigmaPharm's interests here. This factor discourages a
finding of standing for a remote victim of the unlawful
conduct when there is a class of victims who would
ordinarily be motivated to bring a private enforcement
action. 102
102 Associated Gen. Contractors, 459 U.S. at
542 ("The existence of an identifiable class of
persons whose self-interest [**42] would
normally motivate them to vindicate the public
interest in antitrust enforcement diminishes the
justification for allowing a more remote party . . .
to perform the office of a private attorney
general.").
Even if this Court were to find SigmaPharm had
suffered antitrust injury, it would find SigmaPharm lacks
standing because, contrary to SigmaPharm's assertion, 103
there are far more direct victims of the alleged
conspiracy, and SigmaPharm's interests diverge from,
rather than align with, their interests. First, consumers of
SKELAXIN, such as patients, pharmacists, and
third-party payers, are more directly injured by the
alleged conspiracy because they paid inflated prices for
Page 13
the drug. So, too, are drug manufacturers who sought to
enter the market for generic SKELAXIN--efforts the
conspiracy allegedly restrained. Those victims have
suffered the types of injury the antitrust laws are designed
to prevent. 104
103 SigmaPharm Resp. in Opp'n at 14 ("[T]here
is no more direct victim of defendants unlawful
scheme than SigmaPharm.").
104 2660 Woodley Road Joint Venture v. ITT
Sheraton Corp., 369 F.3d 732, 741-42 (3d Cir.
2004) (market players excluded by the restraint
are more direct victims [**43] that suffered
injury antitrust laws address); Southaven Land
Co., Inc. v. Malone & Hyde, Inc., 715 F.2d 1079,
1087 (6th Cir. 1983) (noting "[m]ore direct
victims may justify denial of a § 4 remedy to
those only tangentally injured [sic]," and finding
"two categories of potential plaintiffs--consumers
and participants--are obviously more direct
victims" than lessor-plaintiff).
Moreover, SigmaPharm's economic interests are not
aligned with the interests of those more direct victims.
First, SigmaPharm expressly contracted to gain from an
agreement to refrain from marketing generic
SKELAXIN. Second, under the development agreement,
SigmaPharm [*677] earns less, on a percentage basis, as
more generic competitors enter the market. SigmaPharm's
royalties from sales are the highest when only Mutual (or
its licensee) markets a given "innovation,"and are
reduced to nothing as more generic competitors enter the
market. Thus, SigmaPharm gains when there is either no
competition to SKELAXIN because of an agreement to
refrain from marketing the drug, or when there is a
duopoly. Both set up incentives that are aligned with
neither market entrants nor with consumers. And "[w]hen
the plaintiff is a poor champion [**44] of consumers, a
court must be especially careful not to grant relief that
may undercut the proper functions of antitrust." 105 Thus
this Court would not recognize standing here even if it
found SigmaPharm had suffered antitrust injury.
105 Ball Mem'l Hosp., Inc. v. Mutual Hosp. Ins.,
Inc., 784 F.2d 1325, 1334 (7th Cir. 1986).
B. Supplemental Jurisdiction Over the State Law
Claims
The only claims remaining (Counts II through IV)
are based on Pennsylvania or California law. Although
federal courts with original jurisdiction over a federal
claim have supplemental jurisdiction over state claims
that form "part of the same case or controversy," a court
may decline to exercise supplemental jurisdiction over
state law claims if "the district court has dismissed all
claims over which it has original jurisdiction." 106 The
Third Circuit directs that, "where the claim over which
the district court has original jurisdiction is dismissed
before trial, the district court must decline to decide the
pendent state claims unless considerations of judicial
economy, convenience, and fairness to the parties provide
an affirmative justification for doing so." 107
106 28 U.S.C. § 1367(a), (c)(3).
107 Borough of W. Mifflin v. Lancaster, 45 F.3d
780, 788 (3d Cir. 1995) [**45] (citing inter alia
Growth Horizons, Inc. v. Del. Cnty., 983 F.2d
1277 (3d Cir. 1993)).
Here, these factors warrant dismissal of the state law
claims. There is no judicial economy in trying the state
claims here because the case is in its early stages, an
answer has not been filed, and trial has not been
scheduled. 108 Nor does SigmaPharm suffer any
prejudice or unfairness since it may transfer its claims to
state court. 109 Because no federal issues remain, the
Court will dismiss the state law claims without prejudice.
108
See, e.g., Plum Prop. Assocs., Inc. v.
Mineral Trading Co., No. 09-1059, 2009 U.S.
Dist. LEXIS 119834, 2009 WL 5206013, at *5
(W.D. Pa. Dec. 23, 2009) (declining to exercise
jurisdiction over state law claims after dismissing
federal claims because of the early stage of
proceeding prior to significant discovery).
109 See Williams v. F.L. Smithe Mach. Co., 395
Pa. Super. 511, 577 A.2d 907, 909 (Pa. Super.
1990) (under 42 Pa. C.S.A. § 5103(b), plaintiff
may transfer to state court a timely filed action in
federal court that is dismissed for lack of
jurisdiction, and state action will be deemed filed
on the date it was first filed in the federal court).
IV. CONCLUSION
For the foregoing reasons, the Court will dismiss
without [**46] prejudice the Sherman Act claim and
decline to exercise supplemental jurisdiction over the
Pennsylvania and California state law claims. An
appropriate Order follows.
Page 14
ORDER
AND NOW, this 2nd day of March 2011, upon
consideration of a Motion to Dismiss Counts I through III
by Defendant King Pharmaceuticals, Inc. [doc. no. 40]
and a Motion to Dismiss all Counts by Defendants
Mutual Pharmaceuticals Company, Inc. and United
Research Laboratories, Inc.[doc. no. 41 ]; Plaintiff's
Responses in Opposition thereto [doc. nos. 42 & 43]; and
[*678] Defendants Replies in Support [doc. nos. 49 &
51]; and for the reasons stated in the accompanying
Memorandum Opinion, it is hereby ORDERED that:
1. Count I is DISMISSED without prejudice for
failure to state a claim pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure; and
2. The remaining claims, Counts II, III and IV, are
DISMISSED without prejudice pursuant to 28 U.S.C. §
1367(c)(3).
3. Defendants' Motion to Stay Discovery [doc. no.
44] and Plaintiffs Motion to Compel Discovery [doc. no.
57] are DISMISSED as moot.
It is so ORDERED.
BY THE COURT:
/s/ Cynthia M. Rufe
CYNTHIA M. RUFE, J.

Civil Action No. Jury Trial Demanded CLASS ACTION COMPLAINT

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