Case 3:19-cv-05822-LB Document 1 Filed 09/18/19 Page 1 of 66
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`
`
`Shana E. Scarlett (SBN 217895)
`HAGENS BERMAN SOBOL SHAPIRO LLP
`715 Hearst Avenue, Suite 202
`Berkeley, CA 94710
`Telephone: (510) 715-3000
`shanas@hbsslaw.com
`
`Thomas M. Sobol (pro hac vice forthcoming)
`Lauren Barnes (pro hac vice forthcoming)
`HAGENS BERMAN SOBOL SHAPIRO LLP
`55 Cambridge Parkway, Suite 301
`Cambridge, MA 02142
`Telephone: (617) 482-3700
`tom@hbsslaw.com
`lauren@hbsslaw.com
`
`Joseph M. Vanek (pro hac vice forthcoming)
`David P. Germaine (pro hac vice forthcoming)
`Eamon P. Kelly (pro hac vice forthcoming)
`Alberto Rodriguez (pro hac vice forthcoming)
`SPERLING & SLATER, P.C.
`55 W. Monroe St, Suite 3200
`Chicago, IL 60603
`Telephone: (312) 641-3200
`jvanek@sperling-law.com
`dgermaine@sperling-law.com
`ekelly@sperling-law.com
`arodriguez@sperling-law.com
`
`Counsel for Plaintiffs
`
`
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`
`
`No.
`
`CLASS ACTION COMPLAINT
`
`DEMAND FOR JURY TRIAL
`
`
`Plaintiffs,
`
`
`MEIJER, INC. and MEIJER DISTRIBUTION,
`INC.,
`
`
`
`v.
`
`
`BAUSCH HEALTH COMPANIES INC.,
`SALIX PHARMACEUTICALS, LTD., SALIX
`PHARMACEUTICALS, INC., SANTARUS,
`INC., ASSERTIO THERAPEUTICS, INC.,
`LUPIN PHARMACEUTICALS, INC., and
`LUPIN LTD.,
`
`
`
`
`
`
`
`
`
`Defendants.
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`I. 
`II. 
`III. 
`IV. 
`V. 
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`VI. 
`
`B. 
`C. 
`D. 
`E. 
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`F. 
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`Case 3:19-cv-05822-LB Document 1 Filed 09/18/19 Page 2 of 66
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`TABLE OF CONTENTS
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`Page
`INTRODUCTION ................................................................................................................... 1 
`INTRADISTRICT ASSIGNMENT ........................................................................................ 4 
`PARTIES ................................................................................................................................. 4 
`JURISDICTION AND VENUE .............................................................................................. 6 
`REGULATORY AND ECONOMIC BACKGROUND ......................................................... 7 
`A. 
`Regulatory Structure for Approval and Substitution of Generic Drugs ...................... 7 
`1. 
`Hatch-Waxman Amendments ......................................................................... 8 
`2. 
`ANDA Paragraph IV Certifications ................................................................ 9 
`3. 
`ANDA Exclusivity Period ............................................................................. 10 
`Competitive Effects of AB-rated Generic Competition ............................................ 11 
`Price Competition from Authorized Generics ........................................................... 12 
`Manufacturers’ Motive to Conspire .......................................................................... 14 
`No-AG Payments ....................................................................................................... 16 
`1. 
`No-AG Payment’s Value to the Generic Manufacturer ................................ 19 
`2. 
`No-AG Payment’s Value to the Brand Manufacturer ................................... 20 
`Deterrents to Later Filers ........................................................................................... 21 
`1. 
`Most-Favored-Entry Clauses ......................................................................... 21 
`2. 
`Most-Favored-Entry-Plus Clauses ................................................................. 22 
`ASSERTIO/SANTARUS AND LUPIN MADE AN UNLAWFUL NO-AG
`PACT. .................................................................................................................................... 23 
`A. 
`Assertio/Santarus Marketed Branded Glumetza. ...................................................... 23 
`B. 
`Glumetza’s Narrow Patents Could Not Prevent Generic Competition. .................... 25 
`C. 
`Assertio Sued Lupin, Whose Potential Competition Threatened
`Growing Glumetza Business. .................................................................................... 30 
`Assertio/Santarus Paid Off Lupin to End the Risk of Competition. .......................... 32 
`D. 
`VII.  ASSERTIO/SANTARUS AND LUPIN NEUTRALIZED COMPETITION
`FROM LATER FILERS. ....................................................................................................... 36 
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`Case 3:19-cv-05822-LB Document 1 Filed 09/18/19 Page 3 of 66
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`A. 
`B. 
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`B. 
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`Later Filers Were Poised to Upend the Anticompetitive No-AG Pact. ..................... 36 
`The MFE and MFEP Delayed Later Filers’ Entry. ................................................... 38 
`1. 
`The MFE and MFEP Delayed Sun’s Entry. .................................................. 38 
`2. 
`The MFE and MFEP Delayed Watson’s Entry. ............................................ 40 
`VIII.  DEFENDANTS FULLY EXPLOITED THE MONOPOLY THEY
`CREATED. ............................................................................................................................ 41 
`Defendants Sold the Glumetza Monopoly to Valeant—A Ruthless
`A. 
`Exploiter of Drug-Product Monopolies. .................................................................... 41 
`Defendants Exploited the Glumetza Monopoly Through Four Years of
`Delayed Generic Entry, Then Another Full Year of No Competition
`from an Authorized Generic. ..................................................................................... 44 
`IX.  MARKET EFFECTS ............................................................................................................. 46 
`X. 
`MARKET POWER ............................................................................................................... 48 
`XI. 
`EFFECT ON INTERSTATE COMMERCE ......................................................................... 53 
`XII.  CLASS ACTION ALLEGATIONS ...................................................................................... 54 
`XIII.  DEFENDANTS CONCEALED THEIR UNLAWFUL AGREEMENTS ............................ 56 
`XIV.  CLAIMS FOR RELIEF ......................................................................................................... 59 
`COUNT ONE VIOLATION OF 15 U.S.C. § 1 (AGAINST ALL DEFENDANTS) ....................... 59 
`COUNT TWO VIOLATION OF 15 U.S.C. § 2 (AGAINST ALL DEFENDANTS) ...................... 60 
`XV.  DEMAND FOR JUDGMENT .............................................................................................. 61 
`XVI.  JURY DEMAND ................................................................................................................... 62 
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`Case 3:19-cv-05822-LB Document 1 Filed 09/18/19 Page 4 of 66
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`Plaintiffs Meijer, Inc. and Meijer Distribution, Inc. bring this class action, on behalf of
`themselves and all others similarly situated, against Bausch Health Companies Inc. (formerly known
`as Valeant Pharmaceuticals International, Inc.), Salix Pharmaceuticals, Ltd., Salix Pharmaceuticals,
`Inc., Santarus, Inc., Assertio Therapeutics, Inc. (formerly known as Depomed, Inc.), Lupin
`Pharmaceuticals, Inc., and Lupin Ltd. (collectively “Defendants”), based on personal knowledge as
`to themselves and upon information and belief as to all other allegations, and allege as follows.
`I.
`INTRODUCTION
`Fair competition would have limited the price of a 30-day supply of diabetes
`1.
`prescription drug Glumetza to less than $55. Defendants instead were able to charge more than
`$3,000 for the brand version and more than $2,200 for the generic version. This Complaint explains
`how the Defendants’ blatant violation of the federal antitrust law allowed them to charge more than
`50 times the competitive price for Glumetza and steal more than $2.8 billion from Glumetza
`purchasers.
`Patients with Type 2 diabetes use metformin to prevent and control high blood sugar,
`2.
`helping the body to properly respond to its own naturally produced insulin. A person with Type 2
`diabetes who fails to control high blood sugar can develop very serious disabilities, such as kidney
`damage, blindness, and loss of limbs or sexual function.
`3.
`Prescription metformin has been available as a generic drug since 2002. Defendant
`Assertio developed an extended-release version of metformin that can alleviate some of the drug’s
`common side effects. Assertio obtained several patents on the extended-release technology and
`began selling extended-release metformin, marketed under the brand name Glumetza, in 2005.
`Extended-release mechanisms are very common, however, and Assertio’s patents were weak and
`narrow and could not prevent competition from generic versions of the drug.
`4.
`The effects of generic competition for a brand drug are predictable: sales switch
`quickly from the brand drug to the generic version. Generic drugs are priced at a fraction of the
`brand drug price, with prices for the generics falling farther as more generics enter the market, and
`purchasers shift swiftly to the generics. Brand manufacturers’ profits fall dramatically upon generic
`entry. Forestalling generic entry, then, is the name of the (unlawful) game.
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`Case 3:19-cv-05822-LB Document 1 Filed 09/18/19 Page 5 of 66
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`When Defendant Lupin developed a generic Glumetza, Assertio and its marketing
`5.
`partner, Defendant Santarus, sued Lupin for patent infringement. That lawsuit triggered an automatic
`prohibition on Lupin’s entry into the market for 30 months. Just before the 30 months were over and
`Lupin would enter the market with generic Glumetza, Assertio/Santarus and Lupin settled the patent
`lawsuit.
`Assertio/Santarus paid Lupin to delay generic entry. The companies settled the patent
`6.
`litigation in February 2012 with a “reverse payment,” that is, a payment from the plaintiffs in the
`patent lawsuit, Assertio/Santarus, to the defendant in the patent lawsuit, Lupin. Lupin agreed to stay
`out of the market from 2012 to February 2016. In exchange, Assertio/Santarus agreed that, when
`Lupin finally did enter the market in 2016, for at least six months they would not compete against
`Lupin by marketing their own generic version of Glumetza.
`7.
`Those Defendants allocated the Glumetza market between them: Assertio/Santarus
`got the entire market from 2012 to February 2016, and Lupin got the generic sector of the market
`from February 2016 until at least August 2016. That market-allocation agreement is blatantly
`unlawful under antitrust law.
`8.
`Other generic manufacturers could have upended the Assertio/Santarus/Lupin
`anticompetitive scheme. The Assertio patents’ weakness created the risk that another manufacturer
`could avoid them and market a generic Glumetza before February 2016. To prevent that possibility,
`Assertio/Santarus and Lupin included in their agreement two deterrent provisions aimed at other
`competitors: (a) if another generic manufacturer succeeded in entering the market before February
`2016, Lupin could also enter on that earlier date; and (b) Assertio/Santarus would not grant a license
`to any other manufacturer to enter the market sooner than 180 days after Lupin.
`9.
`These deterrents ensured that, no matter how many resources another manufacturer
`might expend in overcoming Assertio’s patents, it could never get the financial reward of being the
`only generic manufacturer on the market. It could not get that reward by winning a patent lawsuit
`against Assertio/Santarus—the deterrent provision would allow Lupin to enter earlier; it could not
`get that reward by negotiating an earlier-entry license from Assertio/Santarus—the deterrent
`expressly prohibited such a license.
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`Assertio/Santarus and Lupin unlawfully closed every pathway to generic competition
`10.
`before February 2016. Lupin agreed not to enter before then, and the deterrents eliminated the
`incentive for other generic manufacturers to try to enter before then. And those Defendants extended
`the anticompetitive effect beyond February 2016—Assertio/Santarus agreed that they would not
`compete in the generic sector from February 2016 until at least August 2016, and agreed not to grant
`a license to any other generic to compete during that time.
`11.
`In short, Assertio/Santarus and Lupin conjured a monopoly in the sale of Glumetza
`and its generic equivalents where a monopoly shouldn’t—and wouldn’t—have existed under lawful,
`competitive practices.
`12.
`That monopoly was extremely valuable, and Assertio/Santarus wasted no time in
`exploiting it. In November 2013, Santarus announced that it was being acquired by Defendant Salix
`for $2.6 billion. At the time, Glumetza accounted for just under half of Santarus’ sales. From 2012 to
`2015 Assertio/Santarus and Salix raised Glumetza prices by more than 40%, far outstripping the
`4.2% rise in the Consumer Price Index.
`13.
`In April 2015, when Glumetza accounted for more than 25% of its sales, Salix in turn
`sold the Glumetza monopoly to Valeant Pharmaceuticals, Inc. (now known as Bausch Health).
`Valeant paid $14.5 billion to acquire Salix.
`14.
`Valeant was known in the industry as a ruthless and remorseless exploiter of drug-
`product monopolies. As Forbes magazine later characterized it, Valeant’s business strategy
`“emphasized boosting drug prices, gutting research and development budgets, [and] firing
`employees….” Nathan Vardi & Antoine Gara, Valeant Pharmaceuticals’ Prescription for Disaster,
`Forbes, April 13, 2016, https://www.forbes.com/sites/nathanvardi/2016/04/13/valeant-
`pharmaceuticals-prescription-for-disaster/#6f4f657f206c. “[S]cientists were seen as unnecessary
`costs to be cut,” while Valeant’s “drug-price increases became legendary.” Id. Industry observers
`concluded that “Valeant was the pure expression of the view that companies are there to make
`money for shareholders, every other consideration be damned.” Bethany McLean, The Valeant
`Meltdown and Wall Street’s Major Drug Problem, Vanity Fair, Summer 2016,
`https://www.vanityfair.com/news/2016/06/the-valeant-meltdown-and-wall-streets-major-drug-problem.
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`15. Within four months of acquiring the Glumetza monopoly, Valeant raised the price an
`additional 750%. The price of a 30-day supply skyrocketed from $350 to more than $3,000. In the
`half year before the price hike, Salix made $145 million on Glumetza; in the half year after, Valeant
`made more than $800 million.
`16.
`Piling injury on injury, the unlawful agreements also resulted in an outrageously high
`price for the generic product when Lupin finally entered the market in February 2016. Valeant
`complied with the unlawful agreement not to compete in the generic sector, and Lupin took full
`advantage. With no competition in the generic sector and branded Glumetza being sold at an
`astronomically high price, Lupin sold a 30-day supply of generic Glumetza for more than $2,200.
`Lupin made more than $650 million in profits on generic Glumetza in 2016 alone.
`17.
`Defendants’ anticompetitive scheme has already caused direct purchasers to overpay
`by more than $2.8 billion. And the scheme continues to reverberate, causing more than $175 million
`in additional overcharges to direct purchasers every year.
`18.
`On behalf of themselves and all other direct purchasers of brand and generic
`Glumetza, Plaintiffs bring this lawsuit to recover damages for overcharges they have already suffered
`and obtain equitable relief to put a stop to the ongoing harm.
`II.
`INTRADISTRICT ASSIGNMENT
`Pursuant to Local Rule 3-2(c), this is an Antitrust Class Action to be assigned on a
`19.
`district-wide basis.
`
`III.
`PARTIES
`Plaintiffs Meijer, Inc. and Meijer Distribution, Inc. (collectively, “Meijer”) are
`20.
`corporations organized under the laws of the state of Michigan, with their principal place of business
`located at 2929 Walker Avenue, NW, Grand Rapids, Michigan 49544. Meijer is the assignee of the
`claims of the Frank W. Kerr Company, which, during the class period, as defined below, purchased
`branded Glumetza directly from Santarus, Salix, and/or Valeant (as defined below) and generic
`Glumetza directly from Lupin. Frank W. Kerr Company suffered antitrust injury as a result of
`Defendants’ unlawful conduct.
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`Case 3:19-cv-05822-LB Document 1 Filed 09/18/19 Page 8 of 66
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`Defendant Assertio Therapeutics, Inc. (“Assertio”) is a corporation organized under
`21.
`the laws of Delaware with its principal place of business located at 100 South Saunders Road,
`Suite 300, Lake Forest, Illinois. Until August 14, 2018, Assertio was named Depomed, Inc., which
`was a party to the unlawful agreements alleged herein. Assertio is the owner or licensee of the
`relevant patents.
`22.
`Defendant Santarus, Inc. (“Santarus”) is a corporation organized under the laws of
`Delaware and, during much of the relevant time, had its principal place of business in San Diego,
`California. Its current principal place of business is located at 400 Somerset Corporate Blvd.,
`Bridgewater, New Jersey 08807. Pursuant to a Commercialization Agreement signed in August
`2011, Assertio granted Santarus exclusive rights to manufacture and commercialize Glumetza in the
`United States. Santarus was a party to the unlawful agreements alleged herein. On January 2, 2014,
`Santarus was acquired by defendant Salix Pharmaceuticals, Ltd. and became a wholly owned
`subsidiary of Salix Pharmaceuticals, Inc.
`23.
`Defendant Salix Pharmaceuticals, Inc. is a corporation organized under the laws of
`California with its principal place of business located at 400 Somerset Corporate Blvd. Bridgewater,
`New Jersey 08807. Salix Pharmaceuticals, Inc. joined and adhered to the unlawful agreements
`alleged herein. Salix Pharmaceuticals, Inc. is a wholly owned subsidiary of Salix Pharmaceuticals,
`Ltd.
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`Defendant Salix Pharmaceuticals, Ltd. is a corporation organized under the laws of
`24.
`Delaware with its principal place of business located at 400 Somerset Corporate Blvd. Bridgewater,
`New Jersey 08807. Effective January 1, 2014, Salix Pharmaceuticals, Inc. and Salix Pharmaceuticals,
`Ltd. (“Salix”) assumed Santarus’s rights and obligations under its Commercialization Agreement
`with Assertio. Salix Pharmaceuticals, Ltd. joined and adhered to the unlawful agreements alleged
`herein.
`On April 1, 2015, Salix was acquired by Valeant Pharmaceuticals International, Inc.,
`25.
`which, on or about that date, assumed Santarus’s and Salix’s rights and obligations under the
`Commercialization Agreement with Assertio. Valeant Pharmaceuticals International, Inc. joined and
`adhered to the unlawful agreements alleged herein. Effective on July 13, 2018, Valeant
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`Case 3:19-cv-05822-LB Document 1 Filed 09/18/19 Page 9 of 66
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`Pharmaceuticals International, Inc. changed its corporate name to Bausch Health Companies Inc.
`Salix Pharmaceuticals, Ltd. is now a wholly owned subsidiary of Bausch Health Companies Inc.
`26.
`Defendant Bausch Health Companies Inc. (“Bausch”) is a corporation organized and
`existing under the laws of British Columbia, Canada with its U.S. headquarters located at 400
`Somerset Corporate Blvd. Bridgewater, New Jersey 08807. Bausch joined and adhered to the
`unlawful agreements alleged herein.
`27.
`Except where otherwise noted, Defendants Santarus, Salix, and Bausch are
`collectively referred to herein as “Valeant.”
`28.
`Defendant Lupin Pharmaceuticals, Inc. is a corporation organized under the laws of
`Virginia with its principal place of business located at Harbor Place Tower, 111 South Calvert Street,
`21st floor, Baltimore, Maryland 21202. Lupin Pharmaceuticals is a wholly owned subsidiary of
`Defendant Lupin Ltd. and was a party to the unlawful agreements alleged herein.
`29.
`Defendant Lupin Ltd. is a company organized under the laws of India with its
`principal place of business located at B/4 Laxami Towers, Bandra Kurla Complex, Bandra (East),
`Mumbai, Maharashtra 400051, India, and was a party to the unlawful agreements alleged herein.
`30.
`Lupin Pharmaceuticals, Inc. and Lupin Ltd. are collectively referred to herein as
`“Lupin.”
`All of the Defendants’ wrongful actions described in this Complaint are part of, and in
`31.
`furtherance of, the unlawful restraints of trade alleged herein, and were authorized, ordered, and/or
`undertaken by the Defendants’ various officers, agents, employees, or other representatives while
`actively engaged in the management of the Defendants’ affairs (or that of their predecessors-in-
`interest) within the course and scope of their duties and employment, and/or with the actual,
`apparent, and/or ostensible authority of the Defendants.
`IV.
`JURISDICTION AND VENUE
`This action arises under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and
`32.
`sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15(a), 26. The action seeks to recover treble
`damages, interest, costs of suit, equitable relief, and reasonable attorneys’ fees for the overcharges
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`paid by the Plaintiffs and members of the Class resulting from Defendants’ restraints of trade and
`conspiracy to monopolize and to restrain trade in the sale of Glumetza and its generic equivalents.
`33.
`The Court has subject matter jurisdiction under 28 U.S.C. §§ 1331 (federal question),
`1332 (diversity due to a qualifying class action), 1337(a) (antitrust), and 15 U.S.C. § 15 (antitrust).
`34.
`Venue is appropriate in this district under 15 U.S.C. § 15(a) (Clayton Act), 15 U.S.C.
`§ 22 (nationwide venue for antitrust matters), and 28 U.S.C. § 1391(b) (general venue provision).
`Defendants transact business within this district, and the Defendants transact their affairs and carry
`out interstate trade and commerce, in substantial part, in this district.
`35.
`The Court has personal jurisdiction over each Defendant. Each Defendant has
`transacted business, maintained substantial contacts, and/or committed overt acts in furtherance of
`the illegal scheme and conspiracy throughout the United States, including in this district. The scheme
`and conspiracy have been directed at, and have had the intended effect of causing injury to, persons
`residing in, located in, or doing business throughout the United States, including in this district.
`V.
`REGULATORY AND ECONOMIC BACKGROUND
`Regulatory Structure for Approval and Substitution of Generic Drugs
`36.
`Under the Federal Food, Drug, and Cosmetic Act (“FDCA”), a manufacturer that
`creates a new drug must file a New Drug Application (“NDA”) in order to obtain approval from the
`Food and Drug Administration (“FDA”) to sell it. 21 U.S.C. §§ 301-392. An NDA must include
`specific data concerning the safety and effectiveness of the drug, as well as any information on
`applicable patents. 21 U.S.C. §§ 355(a) & (b).
`37. With the filing of the NDA (and through amendments as necessary during the
`approval process), the manufacturer must inform the FDA of any patents that the manufacturer
`alleges “could reasonably be asserted” against a generic manufacturer that makes, uses, or sells a
`generic version of the brand drug before the listed patents expire. The FDA will then list these
`patents in its Approved Drug Products with Therapeutic Equivalence Evaluations publication,
`known as the “Orange Book.” Information about any later issued patent that the manufacturer alleges
`“could reasonably be asserted” against a generic manufacturer must be provided to the FDA within
`
`A.
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`30 days of issuance of the patent; the FDA then publishes the patent in the Orange Book. 21 U.S.C.
`§§ 355(b)(1) & (c)(2).
`38.
`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 representations for accuracy or trustworthiness.
`1.
`Hatch-Waxman Amendments
`39.
`The Hatch-Waxman Amendments to the FDCA, enacted in 1984, simplified
`regulatory hurdles for prospective generic manufacturers by eliminating the need for them to file
`lengthy and costly NDAs. See Drug Price Competition and Patent Term Restoration Act, Pub. L. No.
`98-417, 98 Stat. 1585 (1984). A manufacturer seeking approval to sell a generic version of a brand
`drug may instead file an Abbreviated New Drug Application (“ANDA”). An ANDA relies on the
`scientific findings of safety and effectiveness included in the brand manufacturer’s original NDA and
`must further show that the generic contains the same active ingredient(s), dosage form, route of
`administration, and strength as the brand drug and that it is bioequivalent, i.e., absorbed at the same
`rate and to the same extent as the brand. 21 U.S.C. § 355(j)(8)(B). The FDA assigns generics that
`meet these criteria relative to their brand counterparts an “AB” rating, meaning the generics are
`therapeutically equivalent to and may be substituted for the brand (as well as other AB-rated generics
`of the brand).
`Through the Hatch-Waxman Amendments, Congress sought to expedite the entry of
`40.
`less expensive generic competitors to brand drugs, thereby reducing healthcare expenses nationwide.
`Congress also sought to protect pharmaceutical manufacturers’ incentives to create new and
`innovative products.
`41.
`The Hatch-Waxman Amendments achieved both goals, substantially advancing the
`rate of generic product launches and ushering in an era of historic high profit margins for brand
`pharmaceutical manufacturers. In 1983, before the Hatch-Waxman Amendments, only 35% of the
`top-selling drugs with expired patents had generic alternatives; by 1998, nearly all did. In 1984,
`prescription drug revenues for brands and generics totaled $21.6 billion; by 2013, total prescription
`drug revenues had climbed to more than $329.2 billion, with generics accounting for 86% of
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`prescriptions. See IMS Institute for Healthcare Informatics, Medicine Use and Shifting Costs of
`Healthcare: A Review of the Use of Medicines in the U.S. in 2013, at 30, 51 (Apr. 2014). Generics
`are now dispensed 95% of the time when a generic version of the drug is available. Id. at 51.
`2.
`ANDA Paragraph IV Certifications
`42.
`To obtain FDA approval of an ANDA, a manufacturer must certify that the generic
`will not infringe any patents listed in the Orange Book. Under the Hatch-Waxman Amendments, a
`generic manufacturer’s ANDA must contain one of four certifications for each patent the brand
`manufacturer has listed in the Orange Book as claiming the brand product. The generic manufacturer
`must certify that:
`a. no patent has been filed with the FDA (a “paragraph I certification”);
`b. the patent has expired (a “paragraph II certification”);
`c. the patent will expire on a particular date and the manufacturer does not seek to
`market its generic before that date (a “paragraph III certification”); or
`d. the patent is invalid or will not be infringed by the generic manufacturer’s
`proposed product (a “paragraph IV certification”). 21 U.S.C. § 355(j)(2)(A)(vii).
`If a generic manufacturer files a paragraph IV certification, a brand manufacturer can
`43.
`delay FDA approval of the ANDA simply by suing the ANDA applicant for patent infringement. If
`the brand manufacturer initiates a patent infringement action against the generic filer within forty-
`five days of receiving notification of the paragraph IV certification, the FDA cannot grant final
`approval to the ANDA until the earlier of (i) the passage of 30 months, or (ii) the issuance of a
`decision by a court that the patent is invalid or not infringed by the generic manufacturer’s ANDA
`(referred to as a “30-month stay”). 21 U.S.C. § 355(j)(5)(B)(iii). Before that time, the FDA may
`grant “tentative approval,” meaning all other scientific and regulatory requirements have been met
`and the application is approvable save for the 30-month stay/pending litigation. It cannot, however,
`authorize the generic manufacturer to market its product (i.e., grant final approval), until one of the
`two conditions is met.
`44.
`The high profit margins on brand drugs and the predictable effects of generic entry—
`sales switch quickly from the brand to the generic—create powerful financial incentives for brand
`manufacturers to sue any generic competitor that files an ANDA with a paragraph IV certification,
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`even if the competitor’s product does not actually infringe the listed patent(s) and/or the patent is
`invalid and unenforceable. Simply by listing the patents in the Orange Book and filing the lawsuit
`the brand manufacturer can delay final FDA approval of an ANDA for up to 30 months.
`3.
`ANDA Exclusivity Period
`45.
`Generics may be classified as (i) first-filer generics, (ii) later-filer generics, or
`(iii) authorized generics.
`46.
`As an incentive for manufacturers to seek approval of generic alternatives to brand
`drugs, the Hatch-Waxman Amendments provide that the first manufacturer to file an ANDA
`containing a paragraph IV certification (the “first filer”) gets a period of protection from competition
`from other generic versions of the drug approved through the ANDA process (“ANDA Exclusivity”).
`That is, subject to certain limitations the FDA is precluded from approving any other generic version
`of the product through the ANDA process until 180 days after the first filer enters the market.
`21 U.S.C. § 355(j)(5)(B)(iv) & (D).
`47.
`By creating a statutory mechanism to enable early infringement litigation following
`paragraph IV certifications, the Hatch-Waxman Amendments encourage generic manufacturers to
`test the validity of pharmaceutical patents and invent around them. The notion is that bona fide
`litigation will result in rulings that either confirm legitimate patent protection or ferret out invalid,
`unenforceable, or narrow drug patents.
`48.
`As a statistical matter, if the parties litigate a pharmaceutical patent infringement suit
`to a decision on the merits, it is more likely that a challenged patent will be found invalid or not
`infringed than upheld. For example, an empirical study of all substantive decisions rendered in every
`patent case filed in 2008 and 2009—when the relevant patent case here was filed—reports that when
`a generic challenger stays the course until a decision on the merits, the generic wins 74% of the time.
`John R. Allison, Mark A. Lemley & David L. Schwartz, Understanding the Realities of Modern
`Patent Litigation, 92 Tex. L. Rev. 1769, 1787 (2014) (“[P]atentees won only 164 of the 636
`definitive merits rulings, or 26%,” and “that number is essentially unchanged” from a decade ago.).
`49.
`An applicant that is otherwise eligible for the 180-day