throbber
Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 1 of 32
`
`
`
`
`
`
`
`
`
`
`
`UNITED STATES DISTRICT COURT
`
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`In re
`
`
`
`
`GLUMETZA ANTITRUST
`LITIGATION.
`
`
`This Document Relates to:
`
`
`ALL ACTIONS.
`
`
`
`
`
`
`No. C 19-05822 WHA
`No. C 19-06138 WHA
`No. C 19-06839 WHA
`No. C 19-07843 WHA
`No. C 19-08155 WHA
`No. C 20-01198 WHA
`No. C 20-05251 WHA
`
`(Consolidated)
`
`ORDER RE SUMMARY
`JUDGMENT
`
`
`
`
`
`INTRODUCTION
`
`In a secret pharmaceutical-patent infringement settlement agreement, concealed from the
`
`district judge, brand and generic manufacturers of the type 2 diabetes drug Glumetza allegedly
`
`pledged not to compete with each other by agreeing to not introduce a generic version of the
`
`drug for several years. So, while generic competition should have driven drug prices down, the
`
`brand manufacturer instead hiked prices up. The generic manufacturer belatedly entered the
`
`market at premium pricing, and, as a result, the conspiring manufacturers allegedly extracted
`
`huge sums of money from consumers. In this resulting antitrust action, a certified class of
`
`direct purchasers move for partial summary judgment that our defendant brand and generic
`
`manufacturers wielded market power. For their part, defendants move for summary judgment,
`
`attacking the underlying antitrust violation and causal injury. All motions are DENIED.
`
`
`
`
`
`
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 2 of 32
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`STATEMENT
`
`An estimated thirty million Americans suffer from type 2 diabetes. The condition,
`
`“caused by the combination of insulin resistance . . . and deficient insulin secretion,” causes an
`
`alarming array of complications. Those with diabetes face nearly twice the average risk of
`
`stroke and heart disease. They may suffer foot ulcers that take months or years to heal, or may
`
`require amputation. Around forty percent suffer some degree of kidney disease, with one
`
`percent suffering kidney failure. In fact, “[p]ersons with diabetes make up the fastest growing
`
`group of kidney dialysis and transplant recipients in the United States.” “Diabetes is the
`
`leading cause of new cases of blindness among adults aged 18–64 years.” And, in 2017,
`
`diabetes was estimated to be the seventh leading cause of death in the United States. CTRS.
`
`DISEASE CTRL. & PREV., NAT’L DIABETES STATS. RPT. 12 (2020), https://www.cdc.gov/
`
`diabetes/pdfs/data/statistics/national-diabetes-statistics-report.pdf; NAT’L INST. OF DIABETES &
`
`DIGESTIVE & KIDNEY DISEASES, DIABETES IN AMERICA, ch. 1, pp. 2–3, ch. 22, p. 1, fact sheet
`
`(3d ed. 2018), https://www.niddk.nih.gov/about-niddk/strategic-plans-reports/diabetes-in-
`
`america-3rd-edition.
`
`Fortunately, modern medicine offers a battery of remedial medications. One such drug,
`
`metformin hydrochloride, helps control blood-sugar levels. Following approval by the Food
`
`and Drug Administration in June 2005, defendant Depomed, Inc. launched a new extended-
`
`release version of metformin in late 2006. Glumetza, introduced first in 500 mg and later in
`
`1000 mg tablets, extended the release of metformin over a prolonged period by disbursing the
`
`active drug into a polymeric matrix. In the stomach, the metformin would more slowly diffuse
`
`out of the matrix and ensure its smooth delivery into the bloodstream over time, without the
`
`usual initial spike and later lull in drug level, to offer consistent blood-sugar control.
`
`Depomed obtained several patents covering the developments embodied in Glumetza,
`
`United States Patent Nos. 6,340,475 and 6,635,280, which expired in September 2016, No.
`
`6,488,962, which expired in June 2020, and No. 6,723,340, which will expire in October 2021.
`
`Depomed listed these patents as covering Glumetza in the FDA’s “Orange Book.” U.S. DEP’T
`
`2
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 3 of 32
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`HEATH & HUM. SERVS., FDA, APPROVED DRUG PRODUCTS WITH THERAPEUTIC EQUIVALENCE
`
`EVALUATIONS (41st ed. 2021), https://www.fda.gov/media/71474/download.
`
`In 2009, defendants Lupin Pharmaceuticals, Inc. and Lupin Limited filed an Abbreviated
`
`New Drug Application with the FDA, seeking to manufacture and market generic versions of
`
`both 500 mg and 1000 mg Glumetza. Lupin certified to the FDA that Depomed’s patents were
`
`either invalid or not infringed, yet Depomed sued anyway in November 2009, asserting several
`
`claims from the ’475, ’280, and ’962 patents (it also asserted but later dropped the ’340 patent).
`
`The case came before the Honorable Phyllis J. Hamilton of our district. Following a year of
`
`litigation, Judge Hamilton held a Markman hearing in January 2011 and issued a claim
`
`construction order in May. The parties fought for the rest of that year, but, before filing
`
`dispositive motions, settled in February 2012. As far as the parties told the judge, they would
`
`simply go their separate ways and Lupin would launch its generic on February 1, 2016.
`
`Depomed, Inc. v. Lupin Pharms., Inc., No. C 09-05587 PJH, Dkt. No. 152 (N.D. Cal. Mar. 27,
`
`2012). This, our plaintiffs now allege, concealed an underlying unlawful conspiracy.
`
`*
`
`
`
`*
`
`
`
`*
`
`Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984,
`
`more commonly known as the Hatch-Waxman Act, to lower pharmaceutical drug prices by
`
`speeding generics to market. In general, a pharmaceutical drug must undergo a grueling —
`
`and costly — testing regimen to obtain FDA approval to market. To ease generic entry,
`
`however, the Act permits a generic drug manufacturer to file an Abbreviated New Drug
`
`Application (ANDA) to piggyback on the approval efforts of the underlying brand-name drug
`
`that uses the same active ingredient and to which the proposed generic is biologically
`
`equivalent. The Act then implements a network of interlocking incentives to encourage faster
`
`introduction of these low-cost generics into the pharmaceutical market, yet still drive new drug
`
`development. See FTC v. Actavis, 570 U.S. 136, 142 (2013); 21 U.S.C. §§ 355(j)(2)(A)(ii),
`
`(iv).
`
`The ANDA relieves generic drug manufacturers of a significant burden by, in practical
`
`effect, placing it on brand manufacturers. So, to ensure generics cannot immediately hop
`
`3
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 4 of 32
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`aboard and profit from a brand manufacturers’ costly investment, the ANDA scheme relies on,
`
`among others, patents to temporarily exclude generic manufacturers from use of the novel drug
`
`ingredient itself or its new formulation, delivery mechanism, or form of treatment. H.
`
`Hovenkamp, Anticompetitive Patent Settlements & the Supreme Court’s Actavis Decision, 15
`
`MINN. J.L. SCI. & TECH. 3, 10–11 (2014). Recognizing that the long FDA approval process
`
`would otherwise eat into a substantial portion of a patent’s twenty-year term, the Act provides
`
`for up to a five-year extension of a drug patent’s term. New York ex rel. Schneiderman v.
`
`Actavis PLC, 787 F.3d 638, 644 (2d Cir. 2015). The Act adds a further layer to drug-patent
`
`protection, requiring an ANDA application to certify that the relevant patents have either
`
`expired or will expire before the generic reaches the market, or that the patents are either
`
`invalid or not infringed. Actavis, 570 U.S. at 143; 21 U.S.C. § 355(j)(2)(A)(vii)(I)–(IV).
`
`Balancing this patent protection with its overall goal of expediting generic entry, the Act
`
`encourages generic manufacturers to challenge weak validity or infringement cases. See King
`
`Drug Co. v. SmithKline Beecham Corp., 791 F.3d 388, 394 (3d Cir. 2015). The first generic to
`
`file an ANDA including a certification of invalidity or noninfringement (the “Paragraph IV”
`
`approach) wins 180 days of generic exclusivity, meaning that once it gains FDA approval and
`
`enters the market, the FDA can’t approve any other generics during that time. This, however,
`
`doesn’t stop the brand from launching its own “authorized generic” to win some market share
`
`back from the first filer, and the first filer can lose the exclusivity if fails to market promptly
`
`after a later generic filer gains FDA approval. But the exclusivity period can be “worth several
`
`hundred million dollars” to the first-filer generic and outweigh the risk of infringement suit.
`
`Actavis, 570 U.S. at 143–44; In re Wellbutrin XL Antitrust Litig., 868 F.3d 132, 144 fn. 7 (3d
`
`Cir. 2017); See Teva Pharm. v. Crawford, 410 F.3d 51, 55 (D.C. Cir. 2005); 21 U.S.C.
`
`§ 355(j)(5)(B)(iv), (D).
`
`To ease timely judicial resolution of ANDA patent challenges, a Paragraph IV
`
`certification operates as a technical act of patent infringement. And, to encourage prompt
`
`commencement, the Hatch-Waxman Act imposes a thirty-month stay against FDA approval of
`
`the ANDA if the patent owner sues within forty five days’ notice of the certification. If a court
`
`4
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 5 of 32
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`resolves the infringement suit during that time, the FDA follows that result. If not, the FDA
`
`will then be free to approve the ANDA at the expiration of the statutory stay. Actavis, 570
`
`U.S. at 143; 21 U.S.C. § 355(j)(5)(B)(iii); 35 U.S.C. § 271(e)(2)(A).
`
`With FDA approval, a generic drug may enter the market. Though, if the infringement
`
`suit remains ongoing, the launch is commonly referred to as “at risk,” given the brand
`
`manufacturer might still win a judgment of infringement, damages (perhaps enhanced for
`
`willfulness), and, where appropriate, an injunction. Wellbutrin, 868 F.3d at 168 fn. 59; 35
`
`U.S.C. §§ 283–84. But once a generic drug makes it to market, the FDA’s Orange Book
`
`broadcasts its availability to the public as an alternative to the underlying brand drug. All fifty
`
`states and the District of Columbia have some form of mandatory or permissive drug
`
`substitution law to help shift consumers from expensive brand drugs to their cheaper generics,
`
`without another visit to the doctor. See Schneiderman, 787 F.3d at 644–45.
`
`This scheme is supposed to expedite our access to cheaper generics. But the
`
`pharmaceutical industry found a way around it. In some infringement cases, the brand
`
`manufacturer (the patent owner) pays the generic (the accused infringer) to settle. This may
`
`seem topsy-turvy but the patent owner actually comes out ahead. In exchange, the first-filer
`
`generic manufacturer agrees to stay off the market for a few years. So, instead of expedited
`
`generic entry, the brand maintains its monopoly and cuts the supposed-generic a share of the
`
`profits.
`
`In 2013, the United States Supreme Court found that these “pay for delay” schemes can
`
`violate federal antitrust law. True, a patent gives a brand drug the power to exclude
`
`competition within the bounds of the claims for its twenty-year term. But by paying the
`
`accused infringer to stay out of the market, the brand in essence concedes the weakness of the
`
`patent’s validity or infringement case against the ANDA. Thus, the settlement suppresses
`
`generic competition and does so outside the bounds of the brand manufacturer’s patent
`
`protection. See Actavis, 570 U.S. at 147–49, 153–58.
`
`Our plaintiffs allege just a scheme here. The stipulated dismissal in 2012, which the
`
`parties submitted to Judge Hamilton, and which they characterized as permitting Lupin’s early
`
`5
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 6 of 32
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`generic market entry, in fact concealed from the judge an extensive side agreement which
`
`preserved the brand monopoly and kept Lupin’s generic Glumetza off the shelves for years.
`
`Per the secret quid pro quo, dated February 22, 2012, Lupin agreed to walk away, leave
`
`the patents alone, and delay market entry of its generic Glumetza for four years, until February
`
`1, 2016. Instead of a simple cash payment to stay away, Depomed gave Lupin something else
`
`of value — a guarantee that Depomed would not launch an authorized-generic to compete with
`
`Lupin for one year, atop the FDA-granted 180 days of market exclusivity from other generic
`
`competition. The settlement also included two clauses to protect Lupin from other generic
`
`competition, providing, first, that if any other manufacturer succeeded in marketing a generic
`
`Glumetza before February 2016, Lupin could market immediately, and, second, that Depomed
`
`would not license any other generic Glumetza manufacturers until at least 180 days following
`
`Lupin’s market entry. These provisions undercut the incentive for any other generic
`
`manufacturer to enter the market before Lupin. But, as noted above, only the first of these
`
`terms, Lupin’s February 2016 market entry, made it into the parties’ stipulated dismissal.
`
`Crucially, as alleged, defendants did not disclose the no-authorized generic (no-AG) provision
`
`until a February 5, 2016, quarterly earnings call with Lupin executives.
`
`This artificially-prolonged monopoly and synthesized duopoly proved a windfall to our
`
`defendants. Depomed had already sold its marketing rights in Glumetza to defendant Santarus,
`
`Inc., but then sold its royalty rights, estimated between $140 million and $180 million, to PDL
`
`Biopharma in October 2013 (Dkt. No. 464-1). The juiced Glumetza portfolio aided Santarus’
`
`sale to defendant Salix Pharmaceuticals for $2.6 billion in November 2013, and Salix’s sale to
`
`defendant Valeant Pharmaceuticals for $14.5 billion in April 2015.
`
`Then, in the summer of 2015, Valeant hiked the price of Glumetza on the order of 800%.
`
`The wholesale acquisition cost of a 500 mg pill spiked from $5.72 in May to $51.48 by the end
`
`of July. In the same time, the cost of a 1000 mg pill spiked from $12.37 to $113.36. Glumetza
`
`accounted for a three hundred fifty million dollar swell in Valeant’s profits in the second half
`
`of 2015. When Lupin joined the market in February, the supposed affordable generic did so at
`
`6
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 7 of 32
`
`
`
`around $45 for each 500 mg tablet. All in all, Lupin reaped to the tune of six hundred million
`
`dollars from Glumetza over the next few years.
`
`Only adding to their spoils, defendants’ scheme apparently dissuaded other generic
`
`manufacturers from marketing their own generic versions of Glumetza until after Lupin did.
`
`Sun Pharmaceuticals filed its ANDA in March 2011. But Depomed and marketing-partner
`
`Santarus promptly sued, and a January 2013 settlement kept Sun’s generic off the market until
`
`August 2016. Watson Pharmaceuticals then filed its ANDA in March 2012. Another prompt
`
`lawsuit resulted in a November 2013 settlement keeping Watson’s generic also off the market
`
`until August 2016. In the end, Watson (by then Teva Pharmaceutical Industries Ltd.) did not
`
`market its generic Glumetza until May 2017, and Sun not until July 2018.
`
`Glumetza prices have to some extent slowly recovered, but not to pre-hike estimates.
`
`The most immediate fallout for our defendants? Bad press. So, in 2018, Depomed changed its
`
`name to Assertio Therapeutics, Inc., and Valeant changed its name to Bausch Health
`
`Companies Inc.
`
`Plaintiffs started suing in August 2019. Ultimately, twelve cases by both direct and
`
`indirect purchasers arrived before the undersigned. An order dated March 5, 2020, largely
`
`denied defendants’ motions to dismiss the direct purchasers but granted the motions in part
`
`against the indirect purchasers, who all subsequently dismissed. In re Glumetza Antitrust
`
`Litig., No. C 19-05822 WHA, 2020 WL 1066934 (N.D. Cal. Mar. 5, 2020). The remaining
`
`7
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 8 of 32
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`direct purchasers, several who sued as assignees of absent direct purchasers, have proceeded in
`
`two groups: (1) the direct-purchaser class, and (2) the retailer plaintiffs. An August 15 order
`
`certified the Rule 23(b)(3) direct-purchaser class comprising:
`
`All persons or entities in the United States and its territories who
`directly purchased Glumetza or generic Glumetza from a defendant
`from May 6, 2012 until the date of [the] order.
`
`In re Glumetza Antitrust Litig., 336 F.R.D. 468 (N.D. Cal. 2020). Days prior, plaintiff Humana
`
`Inc. attempted to resurrect the slew of indirect-purchaser claims. Orders dated December 5 and
`
`February 2, 2021, rejected that ploy.
`
`Over the past three months, our parties have filed ten Daubert motions and four motions
`
`for summary judgment. This order resolves the motions for summary judgment, reserves the
`
`Daubert motions for later, and follows full briefing and oral argument held via
`
`videoconference due to COVID-19.
`
`ANALYSIS
`
` Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of
`
`trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States.”
`
`Put plainly, it bars (1) concerted conduct which (2) unreasonably restrains trade. F.T.C. v.
`
`Qualcomm Inc., 969 F.3d 974, 989 (9th Cir. 2020). An unreasonable restraint comes either as
`
`a per se violation (“when surrounding circumstances make the likelihood of anticompetitive
`
`conduct so great as to render unjustified further examination”) or a violation of the rule of
`
`reason, meaning the “restraint’s harm to competition outweighs its procompetitive effects” in
`
`light of the peculiarities of the business, the nature and history of the restraint, and its reason
`
`for being. NCAA v. Bd. of Regents of Univ. Okla., 468 U.S. 85, 103–04 (1984); Tanaka v.
`
`Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001); United States v. Topco Assocs., 405 U.S.
`
`596, 607 (1972). In pharmaceutical reverse-payment cases, such as ours, we apply the rule of
`
`reason. Actavis, 570 U.S. at 158–59.
`
`Section 2 condemns “[e]very person who shall monopolize, or attempt to
`
`monopolize . . . any part of the trade or commerce among the several States.” Unlike Section
`
`1’s prohibition of concerted restraints, Section 2 prohibits unilateral (as well a multilateral)
`
`8
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 9 of 32
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`conduct, but only that which threatens to or actually monopolizes. Alaska Airlines v. United
`
`Airlines, 948 F.2d 536, 541 (9th Cir. 1991). Such violation involves the (1) possession of
`
`power in the relevant market following (2) its willful acquisition or maintenance and (3) an
`
`injury resulting from abuse or leverage of that market power. This causal-harm element
`
`emphasizes the distinction between, on the one hand, the unlawful acquisition of market power
`
`and, on the other, its “development as a consequence of a superior product, business acumen,
`
`or historic accident.” Qualcomm, 969 F.3d at 990 (quoting United States v. Grinnell Corp.,
`
`384 U.S. 563, 570–71 (1966)).
`
`Our threshold inquiry asks whether defendants wielded power over the relevant market,
`
`“the area of effective competition.” Section 2 carries this demand on its face; a monopolist
`
`unifies the market for a given good and wields the resulting anticompetitive power. Though
`
`less obvious a requirement of Section 1, “courts usually cannot properly apply the rule of
`
`reason without an accurate definition of the relevant market,” as the analysis requires our
`
`location of defendants within the market structure to gauge the results of their anticompetitive
`
`conduct. Ohio v. Am. Express Co., 585 U.S. ___, 138 S. Ct. 2274, 2285 (2018); Qualcomm,
`
`974 F.3d at 989–92; Rebel Oil Co. v. ARCO, 51 F.3d 1421, 1434 (9th Cir. 1995).
`
`Plaintiffs establish the antitrust violation itself via a tripart burden shift, beginning with a
`
`prima facie concerted restraint under Section 1 or willful or attempted monopoly under Section
`
`2. The defendant must then offer a nonpretextual procompetitive rationale for the restraint or
`
`the monopolization, which plaintiffs must either rebut or show, under Section 1, that a less
`
`anticompetitive means would achieve the same ends, or under Section 2, that the
`
`anticompetitive harm outweighs the procompetitive benefit. See Qualcomm, 974 F.3d at 991;
`
`Image Tech. Serv. v. Eastman Kodak Co., 903 F.2d 612, 618–19 (9th Cir. 1990), aff’d, 504
`
`U.S. 451 (1992).
`
`If plaintiffs establish the antitrust violation, they must then prove their causal antitrust
`
`injury, i.e., an injury both of the kind the antitrust laws seek to prevent and which flows from
`
`the unlawfulness of defendants’ conduct, and offer a fair estimate of their damages. Brunswick
`
`Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477, 489 (1977); Bigelow v. RKO Radio Pictures, 327
`
`9
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 10 of 32
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`U.S. 251, 264–65 (1946); Qualcomm, 974 F.3d at 989–92; In re New Motor Vehicles Canadian
`
`Export Antitrust Litig., 522 F.3d 6, 19 fn. 18 (1st Cir. 2008).
`
`This order denies plaintiffs’ motion for partial summary judgment. True, a reasonable
`
`trier of fact could find that defendants wielded market power during the relevant time period.
`
`Compelling evidence illuminates classic indicators of power in the market for brand and
`
`generic Glumetza. In 2015, Bausch profitably hiked prices and reduced consumption. Lupin
`
`profitably maintained those supracompetitive prices for several years before competition with
`
`the authorized generic, Teva, and Sun finally brought prices back down. But a reasonable trier
`
`could reject these considerations in light of defendants’ evidence of the cross-elasticity of
`
`demand between Glumetza and the many, and more prevalent, variants of metformin
`
`hydrochloride available to consumers.
`
`This order also denies defendants’ motions for summary judgment. A reasonable trier of
`
`fact could conclude that defendants violated the rule of reason. The challenged settlement
`
`included cross-covenants not to compete, one from Lupin to pause its generic Glumetza entry
`
`for four years, and the other from Assertio and Santarus to forego an authorized generic for one
`
`year. These horizontal restraints on competition mirrored classic per se antitrust violations.
`
`Defendants, however, contend these restraints fell within the scope of their patent rights. But
`
`given evidence calling into question the strength of defendants’ infringement case, a
`
`reasonable trier of fact could find defendants’ covenants exceeded those bounds.
`
`A reasonable trier of fact could further conclude that defendants’ restraint of the market
`
`delayed generic entry, stifled competition, and caused plaintiffs to pay more for brand and
`
`generic Glumetza than they would have otherwise. In the absence of the unlawful scheme,
`
`Lupin might have marketed its generic earlier via either an at-risk launch, by prevailing in the
`
`underlying suit, or by negotiating an earlier market entry date in the absence of the no-AG
`
`agreement, and other generics might have followed quickly thereafter. This earlier generic
`
`competition would have prevented or mitigated defendants’ price gouging. A reasonable trier
`
`of fact could also find plaintiffs’ suit timely and reject both Assertio and Lupin’s solo defenses.
`
`Material questions abound. Anderson v. Liberty Lobby, 477 U.S. 242, 248–49, 255 (1986).
`
`10
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 11 of 32
`
`
`
`1.
`
`
`DEFENDANTS’ MARKET POWER.
`
`A reasonable trier of fact could find that defendants’ wielded power in the market for
`
`brand and generic Glumetza. It could also find otherwise. Up front, no one doubts that the
`
`market for brand Glumetza included both its authorized generic and those by Lupin, Sun, and
`
`Teva. Drug substitution laws nationwide permit or even require pharmacies to swap these
`
`cheaper generics in place of a brand drug. Schneiderman, 787 F.3d at 644–45, 657; ORANGE
`
`BOOK at vii–xvi, 3-284. If our relevant market stopped there, then defendants’ market power
`
`would likely follow. Until the authorized generic joined in February 2017, our defendants
`
`retained 100% market share, the FDA approval regime posed a significant barrier to market
`
`entry, and others like Sun and Teva proved unable to ramp up production until mid-2017 and
`
`2018. Rebel Oil Co. v. ARCO, 51 F.3d 1421, 1434 (9th Cir. 1995).
`
`Our parties, however, dispute whether the relevant market also encompassed other
`
`variants of metformin hydrochloride, such as Glucophage, Glucophage XR, and Fortamet
`
`(including their generics). This question of fact involves a broad inquiry into “the particular
`
`structure and circumstances” of the pharmaceutical context and into the cross-elasticity of
`
`demand between Glumetza and its proposed substitutes, including empirical study, to
`
`determine which, if any, would have been adequate and available enough to constrain prices.
`
`Rebel, 51 F.3d at 1434–35; Verizon Comm’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540
`
`U.S. 398, 411 (2004); Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962); Times-
`
`Picayune Publ. Co. v. United States, 345 U.S. 594, 612 fn. 31 (1953).
`
`In the dysfunctional pharmaceutical market, the doctor who chooses the drug does not
`
`pay for it, and the consumer who pays does not choose. Insurance obfuscates the price the
`
`consumer sees. The prescription requirement, by corollary, limits alternatives. And, consumer
`
`“demand” for pharmaceutical drugs often manifests as degrees of desperation, because we
`
`consume these drugs to prevent illness, ease suffering, and even forestall death. See
`
`Schneiderman, 787 F.3d at 645–47; Mylan Pharms. v. Warner Chilcot Pub. Ltd. Co., 838 F.3d
`
`421, 429–30 (3d Cir. 2016); F.M. Scherer, The Pharmaceutical Industry, in I HANDBOOK OF
`
`HEALTH ECONOMICS 1300–01 (2000).
`
`11
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 12 of 32
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`This all shifts bargaining power to the drug companies, but it only tells part of the story.
`
`Defendants’ expert testimony indicates that physicians both account for price in prescribing
`
`and view Glumetza as therapeutically interchangeable with the numerous, and more prevalent,
`
`metformin variants (Glumetza has only ever accounted for about a two and a half percent
`
`share). Drug manufacturers then compete behind the scenes for preferred placement on health
`
`plan formularies which govern drug insurance coverage.
`
`Both sides’ experts also attack cross-elasticity empirically. Plaintiffs’ expert submits
`
`studies indicating little to no cross-elasticity between Glumetza and other metformin variants.
`
`Defendants’ expert presents the contrary. Plaintiffs’ Daubert motion may narrow this battle of
`
`the experts, but the breadth of this inquiry ensures that sufficient, though perhaps lopsided,
`
`disputes will remain. Ultimately, the balancing of this evidence must be left to our trier of fact.
`
`See Primiano v. Cook, 598 F.3d 558, 564–65 (9th Cir. 2010); Provenz v. Miller, 102 F.3d
`
`1478, 1490 (9th Cir. 1996).
`
`Seeking to bypass this maze, plaintiffs offer direct evidence of defendants’ market power.
`
`True enough, market power asks “whether an arrangement has the potential for genuine
`
`adverse effects on competition.” Under either Section 1 or 2, “proof of actual detrimental
`
`effects . . . can obviate the need for an inquiry into market power.” F.T.C. v. Ind. Fed’n
`
`Dentists, 476 U.S. 447, 460–61 (1986); United States v. Microsoft, 253 F.3d 34, 51 (D.C. Cir.
`
`2001) (en banc).
`
`Plaintiffs point to the “hallmarks of market power” — defendants’ profitable
`
`maintenance of supracompetitive pricing and reduced output for several years. Bausch’s 2015
`
`price hike, which plaintiffs characterize as an 800% increase, though defendants would place
`
`the number around 275%, drove thousands of consumers from Glumetza to (we infer in
`
`defendants’ favor) Glucophage and Fortamet, whose producers ably supplied the new demand.
`
`Meanwhile, Bausch reaped three hundred fifty million dollars more in profit over the latter half
`
`of 2015. Lupin joined the market at a similar premium in February 2016, quickly captured the
`
`brand consumer base, and maintained that profitable supracompetitive pricing for several years
`
`(Dkt. Nos. 493-79, 493-100). Oltz v. St. Peter’s Comm’ty Hosp., 861 F.2d 1440, 1448 (9th Cir.
`
`12
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 13 of 32
`
`
`
`1988); NCAA, 468 U.S. at 85–86; William M. Landes & Richard A. Posner, Market Power in
`
`Antitrust Cases, 94 HARV. L. REV. 937 (1981).
`
`Prices & WAC of Extended-Release and
`Immediate-Release Metformin 2010–2019
`
`Though the Supreme Court approved of direct proof of market power in Indiana
`
`Federation, there remains a broad gap between affirmance of a direct factual finding of market
`
`power versus plaintiffs’ request here to take that question from the jury. Plaintiffs cite, and this
`
`order is aware of, no appellate decision stemming from Indiana Federation affirming the leap
`
`plaintiffs’ seek. Additionally, Indiana Federation did, in fact, roughly define the market,
`
`emphasizing the locality of dentistry services and defendants’ majority share in two specific
`
`cities. Defendants’ evidence of the cross-elasticity of demand between Glumetza and other
`
`metformin variants, particularly given Glumetza’s small role in the broader metformin array,
`
`precludes our reliance on even a rough market definition here. 476 U.S. at 460–61; Oltz, 861
`
`F.2d at 1448.
`
`A reasonable trier of fact could exclude other versions of metformin and include only
`
`Glumetza and its generics in our market. The reasonable trier could also find that defendants’
`
`have already wielded anticompetitive market power. But as our court of appeals has observed:
`
`
`13
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 14 of 32
`
`
`
`The ultimate issue in a rule of reason case is whether a challenged
`practice will produce adverse effects on price or output. The only
`direct way to answer that question is to introduce evidence of
`actual price increases or

This document is available on Docket Alarm but you must sign up to view it.


Or .

Accessing this document will incur an additional charge of $.

After purchase, you can access this document again without charge.

Accept $ Charge
throbber

Still Working On It

This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.

Give it another minute or two to complete, and then try the refresh button.

throbber

A few More Minutes ... Still Working

It can take up to 5 minutes for us to download a document if the court servers are running slowly.

Thank you for your continued patience.

This document could not be displayed.

We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.

Your account does not support viewing this document.

You need a Paid Account to view this document. Click here to change your account type.

Your account does not support viewing this document.

Set your membership status to view this document.

With a Docket Alarm membership, you'll get a whole lot more, including:

  • Up-to-date information for this case.
  • Email alerts whenever there is an update.
  • Full text search for other cases.
  • Get email alerts whenever a new case matches your search.

Become a Member

One Moment Please

The filing “” is large (MB) and is being downloaded.

Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.

Your document is on its way!

If you do not receive the document in five minutes, contact support at support@docketalarm.com.

Sealed Document

We are unable to display this document, it may be under a court ordered seal.

If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.


Access Government Site

We are redirecting you
to a mobile optimized page.





Document Unreadable or Corrupt

Refresh this Document
Go to the Docket

We are unable to display this document.

Refresh this Document
Go to the Docket