Drug Manufacturer's Alleged Patent Scheme May Have Violated Sherman Act

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

The manufacturer of a branded constipation drug could have violated federal antitrust law by allegedly improperly listing an invalid patent on the drug in the U.S. Food and Drug Administration (FDA) Orange Book and then filing infringement litigation against companies seeking to market generic versions, the federal district court in Wilmington, Delaware, has ruled.

An argument that the alleged conduct was protected under the Noerr-Pennington doctrine was rejected. The manufacturer’s motion for dismissal of the suit was denied.

The putative class of direct purchasers sufficiently alleged that the manufacturer's overall scheme to forestall competition and illegally maintain its monopoly power with respect to the drug constituted a violation of Sec. 2 of the Sherman Act, the court determined.

The purchasers alleged that during and prior to the proposed class period, the manufacturer held a 100 percent share of the market for the drug. The scheme further consisted of the manufacturer obtaining a non-exclusive license to the patent, which it considered invalid, and its outright purchase of that patent only after having listed it in the Orange Book despite its presumed invalidity.

Antitrust Injury

The asserted conduct caused antitrust injury to purchasers, the court held. As a result of the alleged scheme, the approval process for a generic competitor was delayed by the FDA. This purportedly caused the putative class of purchasers to pay more than they otherwise would have paid for the drug during the exclusionary period.

The emergence of generics typically resulted in price competition that enabled drug purchasers both to buy generic versions of a drug at a substantially lower price and to buy the branded version at a reduced price, the court explained.

The plaintiffs' allegations were of the type that generally passed muster in the context of causation. The complaint sufficiently conveyed a causal nexus between the alleged injury and the manufacturer's purportedly monopolistic behavior, the court added.

Noerr-Pennington Immunity

The drug purchasers' claims were not barred under the doctrine of Noerr-Pennington immunity, which shields from antitrust liability individuals' efforts to petition the government for redress. The infringement litigation could have been objectively baseless, thereby falling outside the protection of the doctrine.

The purchasers demonstrated by clear and convincing evidence the lack of any objectively reasonable argument that the patent was valid. Thus, the manufacturer knew or should have known that it was invalid when pursuing the infringement suit, in the court's view.

The decision is Rochester Drug Co-Operative, Inc. v. Braintree Laboratories, 2010-1 Trade Cases ¶77,140.