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In re: Wellbutrin XL Antitrust Litigation

United States Court of Appeals, Third Circuit

August 9, 2017

IN RE: WELLBUTRIN XL ANTITRUST LITIGATION Indirect Purchaser Class, Appellants Aetna Health of California Inc.; IBEW-NECA Local Health and Welfare Plan; Bricklayers and Masons Union Local Union Ohio Health and Welfare Fund; Mechanical Contractors-United Association Local Health and Welfare Plan; Painters District Council Health and Welfare Fund; Plumbers and Pipefitters Local Health and Welfare Fund; Aetna, Inc., Appellants Professional Drug Company, Inc., individually and on behalf of the Direct Purchaser Class, Appellant SmithKline Beecham Corporation d/b/a GlaxoSmithKline and GlaxoSmithKline plc, Appellants

          Argued September 7, 2016

         On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Nos. 2-08-cv-2431 and 2-08-cv-2433) District Judge: Hon. Mary A. McLaughlin

          Kenneth A. Wexler Justin N. Boley Wexler Wallace LLP Peter D. St. Phillip, Jr. [ARGUED] Richard W. Cohen Gerald Lawrence, Jr. Uriel Rabinovitz Melissa Cabrera Lowey Dannenberg Cohen & Hart, P.C. Karen Iannance Kissel Hirsch & Wilmer James G. Stranch, III Joe P. Leniski Branstetter, Stranch & Jennings, PLLC Counsel for Appellant Indirect Purchaser Class/ End-Payor Class.

          David F. Sorensen [ARGUED] Andrew C. Curley Caitlin G. Coslett Nicholas Urban Berger & Montague, P.C. Thomas M. Sobol [ARGUED] Gregory T. Arnold David S. Nalven Kristen A. Johnson Kristie A. LaSalle Hagens Berman Sobol Shapiro LLP John W. Barrett Barrett Law Group Peter Kohn Faruqi & Faruqi Dianne M. Nast NastLaw Counsel for Appellant Direct Purchaser Class.

          Leslie E. John [ARGUED] Edward D. Rogers Stephen J. Kastenberg [ARGUED] Jason A. Leckerman Jessica M. Anthony Marcel S. Pratt Ballard Spahr Taimarie N. Adams Daniel J. Boland Timothy K. Gilman Kirkland & Ellis Emily P. Hughes Jason R. Parish Kirkland & Ellis, Simeon G. Papacostas Kirkland & Ellis, Susanna R. Greenberg, Chong S. Park Ropes & Gray Counsel for Appellee SmithKline Beecham Corp, dba GlaxoSmithKline; GlaxoSmithKline PLC.

          Linda E. Kelly Quentin Riegel Leland P. Frost Brian H. Pandya Wiley Rein Counsel for Amicus, National Association of Manufacturers.

          Deborah L. Feinstein Markus H. Meier Bradley S. Alberg Daniel W. Butrymowicz Elizabeth R. Hilder Jamis R. Towey David C. Shonka Joel Marcus Mark S. Hegedus Federal Trade Commission Counsel for Non Party Amicus, Federal Trade Commission.

          Barbara W. Mather Robin P. Sumner Lindsay D. Breedlove Pepper Hamilton Counsel for Amicus, Antitrust Economists.

          Sarah K. Frederick Goodwin Procter LLP Exchange Place Counsel for Amicus, Generic Pharmaceutical.

          David W. Ogden Wilmer Cutler Pickering Hale and Dorr LLP Mark A. Ford Peter A. Spaeth Daniel C. Wewers Wilmer Cutler Pickering Hale and Dorr LLP Counsel for Amicus, Pharmaceutical Research and Manufacturers of America.

          Daniel G. Brown Latham & Watkins Counsel for Par Pharmaceutical Inc., and its predecessor in interest Anchen Pharmaceuticals.

          Before: JORDAN, VANASKIE, and NYGAARD, Circuit Judges.

          OPINION

          JORDAN, CIRCUIT JUDGE.

         Table of Contents

         I. Background ................................................................... 14

         A. The Hatch-Waxman Act ..................................... 14

         B. Factual and Procedural Background ................... 18

         II. Discussion ..................................................................... 24

         A. Sham Litigation .................................................. 24

         1. Applicable Law ................................................... 25

         2. The Anchen Lawsuit ........................................... 29

         3. The Abrika Lawsuit ............................................ 36

         4. The Impax and Watson Lawsuits and the Appellants' Conspiracy Theory .......................... 37

         5. The FDA Citizen Petition ................................... 40

         6. Serial Petitioning ................................................ 46

         B. Reverse Payment Settlement Agreement ........... 49

         1. Events Leading to the Settlement ....................... 49

         2. The Settlement .................................................... 51

         3. The Appellants Cannot Prevail on Their Antitrust Claims Pertaining to the Alleged Reverse Payment .............................................................. 54

         a) The Agreements Are Not Immune from Antitrust Scrutiny; the Rule of Reason Test Applies ......... 55

         b) The Appellants Do Not Have Antitrust Standing .............................................................. 61

         (1) License-Based Scenario ............................. 68

         (2) Litigation-Based Scenario .......................... 71

         C. Class Certification, Daubert, and Intervention Issues ................................................................... 77

         III. Conclusion .......................................................... 78

         This appeal lies at the confluence of intellectual property and antitrust law. Following the Supreme Court's decision in FTC v. Actavis, Inc., 133 S.Ct. 2223 (2013), we are tasked with balancing a patent owner's right to exclude and the public's right to benefit from fair and open competition.

         The Appellants in this case are the direct and indirect purchasers of Wellbutrin XL, a drug designed to treat depression. (Consolidated Brief of Appellees/Cross-Appellants ("Ans. Br.") 6, 19.) The direct-purchaser Appellants bring claims under federal antitrust law, alleging that the Appellee, GlaxoSmithKline ("GSK"), [1] violated Sections One and Two of the Sherman Antitrust Act by entering into an unlawful conspiracy with a company called Biovail, [2] GSK's partner in the development of Wellbutrin XL, to delay the launch of generic versions of the drug. (Consolidated Brief of Direct Purchaser and End-Payor Class Plaintiffs-Appellants ("Op. Br.") 2; JA 11465-68.) The indirect-purchaser Appellants assert similar theories, but under state, rather than federal law. They also allege that GSK's actions violated common law principles and state statutes mandating fair trade practices.

         According to the Appellants, GSK is liable under two theories. First, the Appellants claim that GSK delayed the launch of generic versions of Wellbutrin XL by supporting baseless patent infringement suits and a baseless FDA Citizen Petition aimed at generic drug companies. Second, they claim that GSK delayed the launch of those generic drugs by entering into an unlawful reverse payment settlement agreement with its potential competitors.[3] The District Court granted summary judgment on the merits to GSK with respect to both of those theories. It concluded that there was insufficient evidence that GSK's patent litigation was a sham or that the settlement delayed the launch of generic versions of Wellbutrin XL. At the same time, the Court granted GSK's Daubert motion to exclude the testimony of the Appellants' economic expert. The Court also granted a motion to decertify the indirect-purchaser class for lack of ascertainability and dismissed the indirect-purchaser claims brought under the laws of any state that was not the home of a named class representative.[4] Finally, the Court denied a motion filed by Aetna, Inc. to intervene on the side of the indirect purchasers.[5]

         This appeal followed. Both the direct-purchaser and indirect-purchaser Appellants seek review of the District Court's summary judgment and Daubert rulings. The indirect-purchaser Appellants also contest the order decertifying their class and the denial of Aetna's motion to intervene. GSK filed a conditional cross-appeal challenging on numerosity grounds the certification of the direct-purchaser class. GSK filed a second conditional cross-appeal with respect to the indirect-purchaser class, asking that, if we were to disagree with the District Court's decertification on ascertainability grounds, we nevertheless affirm on numerosity grounds. The direct-purchaser and indirect-purchaser Appellants filed a joint brief addressing the summary judgment orders and the order denying Aetna's intervention; the indirect-purchaser Appellants also filed a separate brief addressing the decertification order.

         We agree with the District Court's conclusions that the Appellants have failed to establish a genuine dispute of fact either as to whether GSK engaged in sham litigation or whether GSK's actions delayed the launch of any generic version of Wellbutrin XL. Consequently, we will affirm the District Court's grant of summary judgment and do not reach the remaining issues on appeal.

         I. Background

         A. The Hatch-Waxman Act

         To better explain the antitrust issues in this case, we first describe the regulatory scheme that governs the testing and approval of new drugs in the United States. That framework was established by the Drug Price Competition and Patent Term Restoration Act of 1984, 98 Stat. 1585, as amended, which is commonly known as the Hatch-Waxman Act ("the Act"), or simply Hatch-Waxman. Actavis, 133 S.Ct. at 2227-28.

         A drug manufacturer seeking to market a new drug "must submit a New Drug Application [(NDA)] to the federal Food and Drug Administration (FDA) ... and undergo a long, comprehensive, and costly testing process, after which, if successful, the manufacturer will receive marketing approval from the FDA." Id. at 2228 (citing 21 U.S.C. § 355(b)(1)). One of the goals of Hatch-Waxman is to increase competition between generic and brand-name drugs. To that end, the Act allows the manufacturers of generic drugs to obtain FDA approval without having to endure the gauntlet of procedures associated with NDAs.

[O]nce the FDA has approved a brand-name drug ... a manufacturer of a generic drug can obtain similar marketing approval through the use of abbreviated procedures. The [Act] permits a generic manufacturer to file an Abbreviated New Drug Application [(ANDA)] specifying that the generic has the "same active ingredients as, " and is "biologically equivalent" to, the already-approved brand-name drug. ... [B]y allowing the generic to piggy-back on the pioneer's approval efforts, [the Act] "speed[s] the introduction of low-cost generic drugs to market, " thereby furthering drug competition.

Id. (last alteration in original) (internal citations omitted) (quoting Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 566 U.S. 399, 405 (2012)).

         In addition to streamlining the drug approval process, the Hatch-Waxman Act provides specialized procedures for brand-name and generic drug manufacturers to resolve intellectual property disputes. The Act "requires the ... brand-name manufacturer to list in its [NDA] the number and the expiration date of any relevant patent. And it requires the generic manufacturer in its [ANDA] to assure the FDA that the generic will not infringe the brand-name's patents." Id. (internal quotation marks and citations omitted). One way for generic manufacturers to make that assurance is to "certify that any listed, relevant patent 'is invalid or will not be infringed by the manufacture, use, or sale' of the drug described in the [ANDA]." Id. (quoting 21 U.S.C. § 355(j)(2)(A)(vii)). That assurance is referred to as a paragraph IV certification. Id. To facilitate the filing of infringement suits, a paragraph IV certification "automatically counts as patent infringement."[6] Id. (citation omitted). Hatch-Waxman further states that "[i]t shall be an act of infringement to submit an [ANDA] for a drug claimed in a patent[.]" 35 U.S.C. § 271(e)(2)(A).

         The Act also encourages brand-name manufacturers to file patent infringement suits quickly. If a patentee files an infringement suit against a generic manufacturer within 45 days of receiving notice of the filing of a paragraph IV certification, the patentee is rewarded with some breathing space before competition can begin: the FDA is required to withhold approval of the generic drug for 30 months or until the infringement case is resolved, whichever comes first. 21 U.S.C. § 355(j)(5)(B)(iii).

         Finally, the Act "provides a special incentive for a generic to be the first to file an [ANDA] taking the paragraph IV route." Actavis, 133 S.Ct. at 2228-29. The first applicant is entitled to an exclusivity period during which no generic drug other than the first-filer's can compete with the brand-name drug. More specifically, the Act prohibits the FDA from approving any ANDA other than the one first filed until 180 days after the first-filer starts marketing its drug. 21 U.S.C. § 355(j)(5)(B)(iv). In effect, that allows the first-filing generic to exclude other generics from the market for longer than 180 days because it may delay or decline to launch its drug.[7]

         B. Factual and Procedural Background

         In 1985, GSK obtained FDA approval for bupropion hydrochloride, a drug for the treatment of major depressive disorders. The drug became branded as "Wellbutrin." Over the years, several companies, including GSK, sought to develop an extended release formulation of bupropion hydrochloride. While GSK was unsuccessful, at least two companies - Biovail and Andrx Pharmaceuticals, LLC - found success and obtained patents covering extended release formulations of the drug.[8] To gain access to an extended release formulation, GSK obtained an exclusive license to certain of Biovail's patents. Then, in August 2002, GSK filed an NDA for that new formulation, which was approved the following year. The extended release Wellbutrin was named "Wellbutrin XL."

         Between September 2004 and May 2005, four generic manufacturers filed AND As seeking approval to market generic versions of Wellbutrin XL. Each of the four companies - Anchen, Abrika, Impax, and Watson - filed a paragraph IV certification.[9] Of those companies, Anchen was the first to file its ANDA, and, as a result, was entitled to the 180-day period of exclusivity.

         Biovail filed patent infringement suits against all four generic companies. With one exception, it filed its several suits within 45 days of receiving each of the would-be competitors' paragraph IV certifications. As explained above, that triggered a stay that generally prevented the FDA from approving the ANDAs for 30 months, or until the resolution of the respective patent suits, whichever came first. Biovail did not file suit within the required 45-day period against Impax's 300 mg dosage of extended release bupropion hydrochloride. Impax was therefore not subject to the 30-month stay with respect to that product. GSK joined Biovail's suits against Anchen and Abrika but not the suits against Impax and Watson.[10]

         In addition to its lawsuits, Biovail filed a "Citizen Petition" with the FDA on December 20, 2005.[11] Biovail asked the FDA to impose certain requirements for approval of any generic version of Wellbutrin XL. The FDA issued a final response to the Petition in December 2006, granting it in part and denying it in part.

         On December 21, 2005, Andrx filed suit against GSK, alleging that Wellbutrin XL, in 150 mg dosages, violated Andrx's '708 patent, see supra n.8. Andrx also filed suit against Anchen for infringing the same patent with a generic version of Wellbutrin XL. In both cases, Andrx sought damages and an injunction against the sale of infringing products. In February 2007, all of the parties involved in the Wellbutrin-related patent litigation, except for Abrika, entered into a settlement.[12]

         The next year, in May 2008, this litigation began. Two putative classes - a class of direct purchasers (e.g., entities like pharmacies that purchased Wellbutrin XL directly from GSK) and a class of indirect purchasers (e.g., consumers) - filed suits against Biovail and GSK.[13] As noted at the outset of this opinion, both sets of plaintiffs alleged that Biovail and GSK conspired to prevent generic versions of Wellbutrin XL from entering the market. The instrumentalities of the alleged conspiracy were, according to the Plaintiffs, sham lawsuits, a sham FDA petition, and an unlawful reverse payment settlement. The direct purchasers brought their claims under federal law, while the indirect purchasers brought their claims under various state laws. Biovail settled with both classes in November 2012, so only GSK has remained as a defendant.[14]

         The District Court had earlier granted summary judgment for GSK on the merits on all of the claims. First, the Court granted summary judgment on the sham petition claims. Shortly after that, it stayed both the direct-purchaser and indirect-purchaser cases while the Supreme Court considered potentially relevant petitions for writs of certiorari. The District Court continued the stay in anticipation of the Supreme Court's decision in FTC v. Actavis, Inc., 133 S.Ct. 2223 (2013). After the Actavis opinion issued, the District Court granted summary judgment for GSK on the reverse payment claims.

         The District Court also rendered decisions regarding class certification. It at first certified both putative classes. Later, however, it concluded that the indirect-purchaser class only had standing "under the laws of those states where the plaintiffs are located or their members reside." (JA 243.) The Court thus dismissed the claims arising under the laws of states that were not represented by one of the named plaintiffs. In response, Aetna moved to intervene in the indirect-purchaser suit. It alleged that it had purchased brand and generic Wellbutrin XL in all fifty states, and that, consequently, its intervention would alleviate the standing issues. The Court denied Aetna's motion. In June 2015, the Court granted a motion to decertify the indirect-purchaser class on ascertainability grounds.

         Before us on appeal are the following rulings: the grant of summary judgment to GSK on all claims, the exclusion of the testimony of the Appellants' economic expert, the decertification of the indirect-purchaser class, the dismissal of certain of the indirect-purchaser Appellants' claims for lack of standing, and the denial of Aetna's motion to intervene. GSK also conditionally challenges the certification of the direct-purchaser class. And, should the indirect purchasers succeed in overcoming the ascertainability objection to certification of their class, GSK also conditionally appeals any certification of that class, citing problems with numerosity.

         II. Discussion[15]

         A. Sham Litigation

         The first broad issue on appeal is whether the District Court erred in granting summary judgment on the sham litigation claims. The Appellants argue that GSK violated antitrust laws by conspiring with Biovail to prosecute sham lawsuits against Anchen, Abrika, Impax, and Watson, and to file a sham petition with the FDA. According to the Appellants, GSK and Biovail worked together to press the infringement lawsuits in order to exploit the mandatory 30-month stay created by the Hatch-Waxman Act. The Appellants also allege that, but for the lawsuits and the FDA petition, the FDA would have approved Anchen's ANDA immediately and likewise would have approved the other three ANDAs at the end of Anchen's 180-day exclusivity period. The assertion is that, without the delay in ANDA approvals, Anchen and the other generics would have launched their products sooner, resulting in increased competition and lower drug prices for pharmacies and consumers.

         1. Applicable Law

         A plaintiff claiming that a lawsuit is, by its very existence, anticompetitive and unlawful faces an uphill battle. It is well-established that the First Amendment protects the right to petition the government and to have access to the courts. Prof'l Real Estate Inv'rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 56-57 (1993);[16] Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 515 (1972); see also U.S. Const. amend. I ("Congress shall make no law ... abridging ... the right of the people ... to petition the Government for a redress of grievances."). That protection is the basis of the Noerr-Pennington doctrine, which holds that "[t]hose who petition [the] government for redress are generally immune from antitrust liability."[17] PRE, 508 U.S. at 56. Noerr-Pennington immunity, however, is not absolute. "[A]ctivity 'ostensibly directed toward influencing governmental action' does not qualify for [first amendment] immunity if it 'is a mere sham to cover ... an attempt to interfere directly with the business relationships of a competitor.'" Id. at 51 (third alteration in original) (quoting E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 144 (1961)).

         To determine whether a lawsuit qualifies as a "sham, " courts apply a two-part test:

First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. If an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized under Noerr, and an antitrust claim premised on the sham exception must fail. Only if challenged litigation is objectively meritless may a court examine the litigant's subjective motivation. Under this second part ..., the court should focus on whether the baseless lawsuit conceals an attempt to interfere directly with the business relationships of a competitor through the use of the governmental process-as opposed to the outcome of that process-as an anticompetitive weapon. This two-tiered process requires the plaintiff to disprove the challenged lawsuit's legal viability before the court will entertain evidence of the suit's economic viability.

PRE, 508 U.S. at 60-61 (internal quotation marks, citations, alteration, and footnote ...


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