VALUE DRUG COMPANY v. TAKEDA PHARMACEUTICALS, U.S.A., INC.

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

VALUE DRUG COMPANY : CIVIL ACTION

v. NO. 21-3500

TAKEDA PHARMACEUTICALS,

U.S.A., INC., et al. :

ORDER-MEMORANDUM

AND NOW, this 30 day of March 2022, upon considering Defendant Takeda

Pharmaceuticals’ Motion to dismiss (ECF Doc. No. 168), Plaintiff's Response (ECF Doc. No.

176), and Defendant’s Reply (ECF Doc. No. 181), Defendants Watson and Amneal’s joint

Motion to dismiss (ECF Doc. No. 169), Plaintiff's Response (ECF Doc. No. 176), and

Defendants’ Reply (ECF Doc. No. 179), and Defendant Par Pharmaceutical’s Motion to dismiss

(ECF Doc. No. 170), Plaintiff's Response (ECF Doc. No. 177), and Defendant’s Reply (ECF

Doc. No. 180), following extensive oral argument, and for reasons below, it is ORDERED:

l. Defendant Takeda’s Motion (ECF Doc. No. 168) is GRANTED without

prejudice as to the Plaintiff's claims of separate bilateral conspiracies (Counts II, III, IV) and

DENIED as to the claims for an overarching conspiracy to restrain trade, monopolization,

conspiracy to monopolize, and (Counts I, V, VI);

2. Defendants Watson and Amneal’s Motion (ECF Doc. No. 169) is GRANTED

without prejudice as to the claims for separate bilateral conspiracies with Takeda (Counts III,

IV), and DENIED as to the single overarching conspiracy to restrain trade (Count I) and

conspiracy to monopolize (Count VI);

3. Defendants Teva Ltd. and Teva Pharmaceuticals USA, Inc.’s request to join

Defendants’ Watson and Amneal’s Motion to Dismiss (ECF Doc. No. 169-1 at 5 n. 1) is

GRANTED, and the separate bilateral conspiracy claim (Count III) is DISMISSED without

prejudice against the Teva Defendants;

4, Defendant Par’s Motion (ECF Doc. No. 170) is GRANTED without prejudice as

to the claim for a separate bilateral conspiracy with Takeda (Count II) allowing Par to join the

co-Defendants’ arguments and DENIED as to the single overarching conspiracy to restrain trade

(Count I) and conspiracy to monopolize (Count VI); and,

5. Defendants shall answer the remaining allegations and claims in the first amended

class action Complaint no later than April 13, 2022.

Analysis!

Takeda obtained Food and Drug Administration approval for Colcrys — a tablet of

colchicine — to treat Familial Mediterranean Fever and prevent gout in July 2009.? This approval

caused the twenty-one existing sellers of colchicine treatments to exit the market leading to

prices for colchicine to increase dramatically.* Generic drug manufacturers Par, Amneal, and

Watson — in this order — filed Abbreviated New Drug Applications with the Food and Drug

Administration seeking approval for their generic versions of Colcrys, certifying Takeda’s

patents covering Colerys are either invalid or not infringed by their generics.* Takeda sued each

' We write solely for the parties familiar with the facts largely detailed in our December 29, 2021

Memorandum explaining why we granted the Defendants’ Motions to dismiss the Complaint.

ECF Doc. No. 157. Plaintiff Value Drug Company accepted our invitation to amend, regrouped,

and pleaded additional facts in the first amended class action Complaint now before us. We

address the limited newly pleaded facts material to today’s analysis. We accept the pleaded facts

in the light most favorable for a plaintiff when reviewing a motion to dismiss. ECF Doc. No. 157

at 38 n. 62 (motion to dismiss standard).

* ECF Doc. No. 163 §§ 35-37. Takeda had exclusivity based on approval of its New Drug

Applications until July 29, 2016. Jd. § 35.

3 Id. 4 36.

4 Id. Tf 63, 65, 67.

of the three Generics for patent infringement in the District of Delaware. Judge Robinson

coordinated the cases and set a joint bench trial for Takeda’s lawsuits against the three Generics

(Par, Watson, and Amneal) to begin in December 2015.° Takeda settled with the three Generics

on the eve of trial, giving rise to Value Drug’s antitrust claims now before us.’

Value Drug is a pharmaceutical wholesaler who purchases Colcrys and generic Colcrys

for resale.® It claims Takeda conspired to order market entry and restrict output through, among

other things, separate settlement agreements with each Generic.’ It alleges these three settlement

agreements are part of a larger antitrust conspiracy to order market entry and restrict output of

Colcrys or, in the alternative, separate bilateral conspiracies between Takeda and each Generic to

achieve the same result.'° Value Drug alleges Takeda and the Generics conspired to restrict

> Id. J 64, 66, 68. Takeda’s suit against each Generic triggered the thirty-month stay in the

Hatch-Waxman Act for each of their ANDA applications during which time the FDA would not

give final approval to the Generics. Jd. [J 60, 62, 69.

® Id. | 100.

7 Id. 109-16.

Sid 41.

° The settlements are comprised of multiple written agreements, including the settlement

agreement and license agreements. See, generally, ECF Doc. No. 163 beginning at 85.

'0 Value Drug alleges this conduct violated Sections 1 and 2 of the Sherman Act. Section 1 of the

Sherman Act provides “{e]very contract, combination in the form of trust or otherwise, or

conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is

declared to be illegal.” 15 U.S.C. § 1. Section 1 antitrust plaintiffs must establish three things: (1)

“a contract, combination . . . or conspiracy”; (2) an unreasonable restraint on trade; and (3)

antitrust injury. Jn re Insur. Brokerage Antitrust Litig., 618 F.3d 300, 314-15, 315 n.9 (3d Cir.

2010); see also Howard Hess Dental Lab’ys Inc. v. Dentsply Int’l, Inc., 602 F.3d 237, 253 (3d

Cir. 2010). “T]he existence of an agreement is the hallmark of a Section 1 claim.” Jn re Insur.,

618 F.3d at 315 (citing In re Baby Food Antitrust Litig., 166 F.3d 112, 117 (3d Cir. 1999)

(further citation omitted)). “Instead of assigning [contract, combination . . . or conspiracy] a

distinct meaning, courts have interpreted them collectively to require ‘some form of concerted

action’... in other words, a ‘unity of purpose or a common design and understanding or a

output by ordering the market entry of generic Colcrys products to share the supracompetitive

profits for an extended period of time. Takeda and the Generics allegedly did so by staggering

the Generics’ entry and conspiring to hold off the “third wave” of Generics consisting of generic

drug manufacturers who had not yet filed ANDA applications from entering the market for as

long as possible to prevent the incremental price collapse which occurs with each generic

entrant.

Value Drug pleads circumstantial evidence of a plausible, single horizontal conspiracy among

Takeda and the Generics.

We again must determine whether Value Drug pleads a single horizontal overarching

conspiracy among Takeda, Par, Watson, and Amneal. We conclude it does so on a second try.

Value Drug may plead the conspiracy with direct or circumstantial evidence or a combination of

both.'! Value Drug alleges the direct evidence'? of the conspiracy includes the settlement

meeting or minds’ or ‘a conscious commitment to a common scheme.”” /d. (citing Jn re Baby

Food, 166 F.3d at 117 and In re Flat Glass Antitrust Litig., 385 F.3d 350, 357 (3d Cir. 2004))

(further citations omitted) (internal quotation omitted). Section 2, conversely, has “sweeping

language” making it unlawful to “monopolize, attempt to monopolize, or conspire to

monopolize, interstate or international commerce.” Broadcom Corp. v. Qualcomm Inc., 501 F.3d

297, 306 (3d Cir. 2007) (citing 15 U.S.C. § 2). “A Section 2 conspiracy claim has four elements:

(1) an agreement to monopolize; (2) an overt act in furtherance of the conspiracy; (3) a specific

intent to monopolize; and (4) a causal connection between the conspiracy and the injury

alleged.” Howard Hess Dental Lab’ys Inc., 602 F.3d at 253. But a litigant may bring a Section 2

claim for monopolization as well, requiring ‘““‘(1) the possession of monopoly power in the

relevant market and (2) the willful acquisition or maintenance of that power as distinguished

from growth or development as a consequence of a superior product, business acumen, or

historic accident.’” Broadcom Corp., 501 F.3d at 307. (quoting United States v. Grinnell Corp.,

384 U.S. 563, 570-71 (1966)). The second element of a monopolization claim requires “the

willful acquisition or maintenance of monopoly power.” Jd. at 308. “As this element makes clear,

the acquisition or possession of monopoly power must be accompanied by some anticompetitive

conduct on the part of the possessor.” Jd. (citing Verizon Commcn’s Inc. v. Law Offices of Curtis

V. Trinko, LLP, 540 U.S. 398, 407 (2004)).

1 In re Generic Pharms. Pricing Antitrust Litig., 338 F. Supp. 3d 404, 438 (E.D. Pa. 2018)

(quoting W. Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 99 (3d Cir. 2010)). To

agreements themselves and statements in other litigation.'? We found the direct evidence

arguments unavailing when we dismissed the Complaint three months ago. We find the same

again today as to direct evidence for the reasons we described in our extensive Memorandum.'4

proceed beyond a motion to dismiss a conspiracy claim, we must find a plaintiff plead “enough

factual matter (taken as true) to suggest that an agreement was made.” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 556 (2007) (discussing pleading standard for conspiracy in Sherman Act

Section 1 claim); see also In re Insur., 618 F.3d at 320 (“Twombly’s importance to the case

before us, however, goes beyond its formulation of the general pleading standard. Twombly is

also an essential guide to the application of that standard in the antitrust context, for in Twombly

the Supreme Court also had to determine whether a Sherman Act claim alleging horizontal

conspiracy was adequately pled.”’). We apply the same pleading standards to a Section 1 and

Section 2 conspiracy claim. See W. Penn Allegheny Health Sys., Inc, 627 F.3d at 99-100. If

relying exclusively on direct evidence of conspiracy, “the complaint must plead ‘enough fact to

raise a reasonable expectation that discovery will reveal’ this direct evidence” of illegality. Jn re

Insur., 618 F.3d at 324 (quoting Twombly, 550 U.S. at 556); see also In re Processed Egg Prod.

Antitrust Litig., 821 F. Supp. 2d 709, 717 (E.D. Pa. 2011) (quoting In re Insur., 618 F.3d at 324)

(further citations omitted)). “And if the plaintiff alternatively expects to rest on the circumstantial

evidence of parallel behavior, the complaint’s statement of facts must place the alleged behavior

in ‘a context that raises a suggestion of a preceding agreement, not merely parallel conduct that

could just as well be independent action.’” Jn re Insur., 618 F.3d at 324 (quoting 7wombly, 550

U.S. at 557). “[R]egardless of whether the plaintiff expects to prove the existence of a conspiracy

directly or circumstantially, it must plead ‘enough fact[s] to raise a reasonable expectation that

discovery will reveal evidence of illegal agreement.’” Jd. (quoting Twombly, 550 U.S. at 556).

We look at the conspiracy as a whole when assessing each Defendants’ involvement, and □□□□□

short, the issue is whether the pleading delineates to some sufficiently specific degree that a

defendant purposefully joined and participated in the conspiracy.” Jn re Processed Egg Prod.,

821 F.Supp.2d at 718-20; see also In re Generic Pharms., 338 F. Supp. 3d at 438.

!2 “Allegations of direct evidence of an agreement, if sufficiently detailed, are independently

adequate” to plead a conspiracy. Jn re Insur., 618 F.3d at 323-24. Direct evidence is “evidence

that is explicit and requires no inferences to establish the proposition or conclusion being

arrested” such as “a document or conversation explicitly manifesting the existence of the

agreement in question.” Jd. at 323-24 n.23; see also King Drug Co. of Florence, Inc. v.

Cephalon, Inc., Nos. 06-1797, 06-1833, 06-2768, 2014 WL 2813312, at *6 (E.D. Pa. June 23,

2014) (citing In re Insur., 618 F.3d at 324 n.23)).

ECF Doc. No. 163 206, 208-209, 224.

14 ECF Doc. No. 157 at 15-19. Value Drug offers no argument as to why the settlement

agreements are direct evidence of an overarching conspiracy despite pleading as much in the first

amended class action Complaint. But Value Drug tells us it “addressed [our] concern” about the

judicial admissions made by Takeda and Par in other litigation by pleading the object of the

conspiracy “was to order the market for generic Colcrys” and Watson and Amneal stood to

While Value Drug still does not plead direct evidence, it now pleads enough facts of

circumstantial evidence to plausibly allege an overarching conspiracy.!°

Value Drug pleads consciously parallel conduct. Takeda settled its patent litigation with

the three Generics on the eve of its bench trial before Judge Robinson. Judge Robinson canceled

the trial for Takeda, Watson, and Amneal following a status conference and stayed the trial as to

Par in light of Takeda and Par’s settlement.'® Takeda negotiated and executed the agreements

with the Generics nearly simultaneously, and the agreements contain similar provisions with

benefit from this ordering by ensuring limited competition for 135 days after their launch. ECF

Doc. No. 176 at 18. It did not. The statements detailed in paragraph 224(a)-d) of the first

amended class action Complaint all require an inference there is an overarching agreement

among Takeda and the Generics. None of the statements “explicitly manifest[]” the existence of

the agreement in question. While the statements may be direct evidence of the parties’ motive to

conspire, they are not direct evidence of the actual agreement. Value Drug does not plead direct

evidence of a single, horizontal conspiracy.

15 A plaintiff may plead an anti-competitive conspiracy violating federal law through

circumstantial evidence. See, e.g. In re Ins., 618 F.3d at 321. But mere allegations of parallel

conduct are not enough, nor are allegations of “conscious parallelism.” Jd. (“Parallel conduct is,

of course, consistent with the existence of an agreement; in many cases where an agreement

exists, parallel conduct—such as setting prices at the same level—is precisely the concerted

action that is the conspiracy’s object. But as the Supreme Court has long recognized, parallel

conduct is ‘just as much in line with a wide swath of rational and competitive business strategy

unilaterally prompted by common perceptions of the market.’” (quoting Twombly, 550 U.S. at

554)). “In order ‘to avoid deterring innocent conduct that reflects enhanced, rather than

restrained, competition,’ . . . and in order to enforce the Sherman Act’s requirement of an

agreement, the Supreme Court has required that ‘a § 1 plaintiff's offer of conspiracy evidence

must tend to rule out the possibility that the defendants were acting independently.” Jd. (further

citations omitted). “Some courts have denominated these facts, the presence of which may

indicate the existence of an actionable agreement, as ‘plus factors’” and although not exhaustive,

our Court of Appeals recognizes three such plus factors: (1) motive to enter the conspiracy; (2)

evidence defendants acted contrary to their interests; and (3) evidence implying a traditional

conspiracy. Jd. (quoting Flat Glass, 385 F.3d at 360). “[P]lus factors are simply circumstances in

which the inference of independent action is less likely than that of concerted action.” Jn re

Generic Pharm., 338 F. Supp. 3d at 448 (further citation omitted) (alteration in original).

'6 ECF Doc. No. 163 100, 110-125, 208(a).

Watson’s agreement referring explicitly to Par’s and Amneal’s agreements.!’ Takeda told Judge

Andrews in earlier litigation Par, Watson, and Amneal enjoyed “a better deal” than the later

ANDA filers.!® These pleaded facts allow us to plausibly infer Takeda treated Par, Watson, and

Amneal as a group and they each knew of each other’s settlements.

Value Drug also pleads a plausible motive for each conspirator. Value Drug pleads: with

each generic drug’s entrance to the market, the price the drug companies can charge per dose

incrementally decreases;!? Takeda faced “certain” defeat in the patent litigation with Par,

Watson, and Amneal—a defeat which would cause an end to Takeda’s monopoly on Colcrys;°

by entering the conspiracy, Takeda ensured it would maintain control of the Colcrys market for a

longer period of time, maintaining its high profits;”! by entering the conspiracy, Par would face

no other generic competition when it took over selling Takeda’s authorized generic, which it

otherwise would have competed with had it seen the patent litigation through and prevailed;””

Par also extended its market exclusivity period as the only generic from 180 days to 837 days;”

and in entering the conspiracy, Watson and Amneal obtained 135 days of limited competition

\7 Id. FF 110-125, 138, 208(a); see also ECF Doc. No. 157 at 6-8 (detailing terms of settlement

and license agreements now attached to first amended class action Complaint as exhibits).

18 Iq Wf 133-34, 168-69, 224(a).

'9 ECF Doe. No. 163 §§ 53-55.

20 Id. Jf 38-41, 74, 80-81, 83-100, 102.

Id 4129.

22 Id. FF 103-104, 110-13, 130-33.

23 Id JF 59, 63, 150. The license agreement required Par to remit a substantial royalty to Takeda

for the sale of its authorized generic. Jd. J 131. But Par remained the only generic on the market

for 657 days longer than it otherwise would have been entitled to under the regulatory scheme.

with only Par in the market for generics, allowing the generic price to be maintained at least

twenty percent higher than when more than three generics sell on the market with the brand.”4

In seizing on language in our December 29, 2021 Memorandum finding no plausibly

pleaded conspiracy because it makes no economic sense to conspire to cause a price collapse —

which Value Drug then pleaded?> — Watson and Amneal argue this conspiracy also makes no

economic sense because no other generic drug company had filed an ANDA at the time Watson,

Amneal, and Par would have prevailed in the patent litigation, thus no other generic could have

entered the market for at least twenty-two months, giving Watson and Amneal a longer period of

exclusivity immediately than what it allegedly conspired to receive five years in the future.

Watson and Amneal’s argument may have merit on summary judgment. Aside from requiring a

24 Id. Ff 114-16, 134, 151, 168-69, 206.

25 We dismissed the Complaint without prejudice because the conspiracy as pleaded was

implausible and belied an inference of concerted action. Jd. at 20-25. Value Drug then pleaded

Takeda and the Generics conspired to preserve a two-entrant market for as long as possible, with

each Generic enjoying a defined period of exclusive sales. ECF Doc. No. 1 {§ 58, 60 (“Par even

explained the logic behind the output-restriction conspiracy: [*] [A market with] a single branded

drug (Takeda’s Colcrys) and a single generic version (Par’s authorized generic) only functions if

the market for Colcrys-equivalent colchicine is limited to those two products. [] Although a drug

market can maintain price stability with a single generic version of a drug on the market,

multiple entrants often produce a market-wide price collapse with mass renegotiation and

cancellation of supply agreements. [] The distribution agreement between Takeda and Par

recognizes this dynamic and provides powerful incentives to ensure that the parties preserve the

two-entrant market’ . . . The conduct among Takeda, Par, Watson, and Amneal only makes

economic sense if there was an agreement among the four of them to restrain their respective

generic and authorized-generic output and prevent the price collapse that Par so vividly

described.”). But we knew from the terms of the license agreements this would not occur —

Watson and Amneal never stood to benefit from defined periods of exclusive sales. Rather, if

and when Watson and Amneal entered the market, the very price collapse the conspirators

conspired to avoid would occur. We found this admission belied a finding of concerted action.

But now Value Drug pleads the theory it merely argued in opposing the Defendants’ previous

Motions to dismiss — namely, the conspirators wanted to stave off the “third wave” of ANDA

filers for as long as possible to prevent an incremental price decrease which occurs when each

additional generic enters the market, thereby reducing each sellers’ market share and profits.

Value Drug’s amended Complaint no longer belies a finding of concerted action. Discovery will

assist our analysis of this alleged circumstantial evidence.

factual inquiry inappropriate on a motion to dismiss, it ignores the pleaded fact by entering the

conspiracy, Watson and Amneal also achieved more limited competition than they would have

faced had they prevailed in the patent litigation and entered the market with Prasco, who at that

time sold Takeda’s authorized generic, and Par—putting four generics on the market instead of

three. We cannot draw inferences in Takeda and the Generics’ favor on a motion to dismiss. And

we make no judgment on whether Value Drug will be able to prove the motive it pleads to

withstand summary judgment. Our inquiry here is plausibility. At this stage we find Value Drug

now pleads a plausible motive.

Value Drug also plausibly pleads Takeda and the Generics acted against their unilateral

interests in agreeing to order the market entry. Value Drug alleges generic drug companies

generally want to bring their generic product to market as soon as possible.*® Value Drug pleads

it did not make sense for Takeda to stop selling its authorized generic with Prasco, and in the

face of a certain win, it did not make sense for Par, Watson, or Amneal to delay their entry into

the market absent the conspiracy and the benefits it stood to gain by it.2? Takeda argues we

should dismiss the first amended class action Complaint because these settlements constituted

actions in each Defendant’s unilateral interest. But Value Drug need not disprove all possible

reasons for the settlements to plausibly plead the actions constituted actions against their

unilateral interest but for the conspiracy to withstand a motion to dismiss.?® Whether Value Drug

*6 ECD Doc. No. 163 § 141.39.

27 Id. 4974, 80-81, 83-85, 86-89, 90-106, 141-44.

supra n.15; see also Areeda & Hovenkamp, Antitrust Law § 1405b (4th & 5" ed. 2021)

(discussing the Supreme Court’s summary judgment holding in Matsushita Elec. Indus. Co. v.

Zenith Radio Corp., 475 U.S. 574 (1986), and concluding “[t]he Court surely did not mean that

the plaintiff must disprove all nonconspiratorial explanations for the defendants’ conduct. Not

only did it use the word “tend,” but the context made clear that the Court was simply requiring

can prove its allegations to withstand summary judgment is not before us today. Value Drug

plausibly pleads this “plus” factor.

Additional key pleaded facts nudge Value Drug over the line from possibility to

plausibility in pleading an overarching conspiracy based on circumstantial evidence. First, each

license agreement contained an acceleration clause.” As Judge Koh recently explained in finding

a plausible overarching conspiracy similar in part to the one reviewed today, these “acceleration

clauses”? function as a “cartel enforcement mechanism” by “threatening ‘reversion to

competitive behavior’ — i.e. immediate entry by [the generic co-conspirators] — if certain market

events were to occur.”?! Thus, these “‘penalties’ for ‘firms exceeding their agreed upon shares’

sufficient evidence to allow a reasonable fact finder to infer that the conspiratorial explanation is

more likely than not.”).

Value Drug misreads our earlier holding granting Defendants’ first motions to dismiss. Value

Drug asserts it “respectfully disagrees with the Court’s prior view . . . the Contingent Launch

Provisions in the agreements do not constitute evidence of coordinated conduct.” ECF Doc. No.

176 at 17. Value Drug points us to page eighteen of our Memorandum where we found the

separate bilateral settlement agreements did not constitute direct evidence of a single

overarching conspiracy. ECF Doc. No. 157 at 18. We did not hold the contingent launch

provisions are not evidence of coordinated conduct. We held the settlement agreements,

containing the contingent launch provisions, are not direct evidence of an overarching

conspiracy because it would require an inference from the agreements to conclude this, which is

classic circumstantial evidence. We did not consider this issue in our circumstantial evidence

analysis because Value Drug pleaded an economically implausible conspiracy, which ended our

analysis. Value Drug now pleads a plausible conspiracy, and we now consider whether the

contingent launch provisions provide further evidence of coordinated conduct. We find it does.

3° We note the parties call these provisions different things: contingent launch provisions,

acceleration clauses, etc. But the provisions discussed — no matter the name — are the same. The

provisions at issue here appear in Section 1.3 of Par’s license agreement with Takeda (ECF Doc.

No. 163 at 100-01); Section 1.2 of Watson’s license agreement with Takeda (ECF Doc. No. 163

at 192-93); and Section 1.2 of Amneal’s license agreement with Takeda (ECF Doc. No. 163 at

234-35); see also ECF Doc. No. 163 121-25 (discussing terms of license agreements), 139-

42 (discussing “contingent launch provisions” purpose).

3! In re Xyrem (Sodium Oxybate) Antitrust Litig., --- F. Supp. 3d ---, No. 20-2966, 2021 WL

3612497, at *29 (N.D. Cal. Aug. 13, 2021) (internal and further citations omitted).

10

are cartel mechanisms that ‘give firms a disincentive to steal sales from one another’ . . . [i]n

other words, the Generic Defendants are bound together through mutually assured competition, if

not mutually assured destruction.”3? We agree with Judge Koh “the acceleration clauses are even

more ‘potent’ evidence of a ‘conspiracy to [restrain trade and monopolize]’ at the motion to

dismiss stage.’*? And the events which took place after the parties settled the infringement

litigation show (at least at this pleading stage) these acceleration clauses did in fact dissuade the

Generics from defecting from the conspiracy. As Value Drug pleads, Takeda lost summary

judgment in the Mitigare litigation and did not appeal the ruling.*4 Mylan, a member of the “third

wave” of ANDA filers, found (and later successfully argued), this denial of summary judgment

triggered its launch date in its settlement agreement with Takeda which allowed it to launch upon

a final court decision invalidating or finding the Colcrys patents uninfringed.*> Par, despite its

reasoned suggestion at oral argument it had incentive to get out from under the substantial

royalty it paid to Takeda under its license agreement,*° fought against Mylan’s entry into the

market, which would have allowed it to launch its own generic?’ and no longer pay the royalty.>®

Takeda and the Generics argue about theories derived from their view of the pleaded facts. We

cannot join them in this analysis.

32 Tq. at *30.

33 Id

34 ECF Doc. No. 163 §§ 85, 160.

35 Id. 4§ 127, 160, 163.

36 ECF Doc. No. 196, Oral Argument Transcript (Tr.), Mar. 10, 2022, at 77:15-80:2.

37 ECF Doc. No. 163 at 100, Section 1.3(c).

38 Id. Ff 161-62, 166-67.

11

Considering these pleaded facts together and drawing all reasonable inferences in favor

of Value Drug, we find Value Drug pleads a plausible single horizontal conspiracy among

Takeda, Watson, Par, and Amneal by pleading consciously parallel conduct, a plausible motive

for each conspirator, the conspirators acted against their unilateral interests, and additional

pleaded facts supporting an inference of conspiracy, all of which together tend to rule out the

possibility of independent action.

Value Drug does not plead plausible separate bilateral conspiracy theories to restrict output.

While we prefer to avoid opining in the negative, Value Drug’s unique arguments on its

bilateral conspiracy theory require we defer to what Value Drug argues this case is not. Value

Drug concedes it does not plead a large and unjustified reverse payment. Value Drug argues

because this is not a “pay-for-delay” scheme, it need not meet the Supreme Court’s tests in FTC

v. Actavis to state a claim.*? Value Drug expressly repeatedly disclaimed it seeks to proceed

under this theory of antitrust liability. And it tells us it does not seek to challenge the

“acceleration clause” provisions themselves as violative of the Sherman Act.

So this is not an Actavis pay-for-delay scheme. Value Drug instead maintains Takeda

engineered three separate output restriction conspiracies with each Generic as an individual co-

conspirator with Takeda. Takeda and the Generics argue Value Drug is functionally arguing a

pay-for-delay theory but calling it something else, and because it admittedly fails to plead a large

and unjustified reverse payment, its bilateral conspiracy claims fail under Actavis. The parties

agree there is no authority post-Actavis allowing Value Drug’s output restriction conspiracy

theory to go forward when challenging patent settlement agreements in the context of the Hatch-

39 570 U.S. 136 (2013).

12

Waxman Act. We also did not find authority for this theory. But the parties disagree about

whether allowing this theory to go forward is breaking new ground or merely applying

traditional antitrust principles to decide whether the three agreements are anticompetitive to the

level of raising antitrust concerns.

We begin with two maxims: patent-related settlement agreements can sometimes violate

antitrust laws, and in reviewing a case like this we must balance “the lawful restraint on trade of

the patent monopoly and the illegal restraint prohibited broadly by the Sherman Act”;*° and,

reduced output is an anticompetitive effect sufficient to plead an unreasonable restraint on a

motion to dismiss.*!

But both sides’ arguments have some merit here. Value Drug’s pleaded conspiracy is Par

agreed to delay its market entry in exchange for 837 days of exclusivity, and Watson and

Amneal agreed to delay entry in exchange for 135 days of limited competition, none of which

could be enjoyed by the Generics but for the conspiracy. In other words, the Generics agreed to

delay their entry in exchange for value — sharing large profits due to supracompetitive prices. But

despite the apparent transfer of value here forming the alleged motivation to enter the

conspiracy, Value Drug disclaims the “large and unjustified” reverse payment theory.” So

Takeda and the Generics seize on Value Drug’s strategy by arguing Value Drug can call its

40 King Drug Co. of Florence v. Smithkline Beecham Corp., 791 F.3d 388, 401 (3d Cir. 2015)

(quoting Actavis, 570 U.S. at 147-48) (internal quotations omitted).

41 W. Penn Allegheny Health Sys., Inc., 627 F.3d at 100 (“[A] plaintiff may satisfy the

unreasonable-restraint element by alleging that the conspiracy produced anticompetitive effects

in the relevant markets . . . [a]nticompetitive effects include increased prices, reduced output,

and reduced quality.”) (emphasis added).

42 We make no judgment on whether Value Drug could sustain a claim based on a large and

unjustified reverse payment theory here because Value Drug told us it did not plead it and did

not want to proceed under this theory.

13

theory whatever it wants, but the essence of the theory is “delayed” market entry but permitting

entry before the patent expiration, which the Supreme Court taught in Actavis requires a large

and unjustified reverse payment to raise antitrust concerns.*? Otherwise, Takeda and the Generics

argue, any patent settlement agreement, including those allowing entry before patent expiration,

will be subject to antitrust scrutiny.

After some time considering this interesting issue, we realized we need not today decide

it because Value Drug’s bilateral conspiracy theory is implausible. The object of the conspiracy

could not be achieved without all three Generics’ active and knowing participation belying a

theory Takeda conspired separately with each Generic. “4

The very facts which make Value Drug’s overarching conspiracy theory plausible make

the separate bilateral theory implausible. Most importantly, and as shown in part by the

8 Fed. Trade Comm’n v. AbbVie Inc., 976 F.3d 327, 359 (3d Cir. 2020), cert. denied sub nom.,

AbbVie Inc. v. Fed. Trade Comm’n, 141 S. Ct. 2838 (2021) (“As to AbbVie’s settlement with

Teva, the District Court erred in concluding it was procompetitive as a matter of law. Granted,

the District Court was right that under Actavis, ‘an agreement does not run afoul of the antitrust

laws’ if it simply allows a generic company to enter a market before patent expiration . .. And it

was reasonable for the Court to think this exception reflects the Supreme Court’s view that such

agreements are so often procompetitive they should be legal per se. Still, the exception applies

only if a patentee does not ‘pay[ ] the challenger to stay out [before patent expiration],’ and the

District Court erred in concluding this condition was met here . . . The Court said AbbVie ‘did

not make any payment, reverse or otherwise, to ... Teva.’ ... Because the FTC plausibly alleged

the TriCor deal was a reverse payment, the settlement may have been ‘something more than just

an agreed-upon early entry’—it may have been ‘pay-for-delay.’ . . . And pay-for-delay is

anticompetitive even if the delay does not continue past patent expiration.”) (internal citations

omitted); see also In re Sensipar (Cinacalcet Hydrochloride Tablets) Antitrust Litig., No. 2895,

2022 WL 736250, at *10 (D. Del. Mar. 11, 2022) (Judge Stark finding the plaintiffs’ market

allocation theory “effectively a pay-for-delay theory and, hence, ‘depends upon an allegation of

an unlawful reverse payment’ governed by the rule of reason test under Actavis. . . The Court

sees no good reason to treat this part of Plaintiffs’ market allocation theory as a standalone claim;

all of the allegations (and, eventually, evidence) supporting this theory can be included as part of

the reverse payment theory the Court has already held will proceed”).

“4 Tn light of this finding, we do not analyze whether there is direct or circumstantial evidence of

each bilateral conspiracy because the conspiracy as plead is implausible.

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acceleration clauses in the license agreements, the success of the horizontal, temporal “market

allocation” conspiracy required Par’s, Watson’s, and Amneal’s participation and buy-in, lending

support to Value Drug’s overarching conspiracy claim. But the fact the conspiracy would not

work absent all three Generic ANDA filers’ participation belies the plausibility each Generic

conspired itself with Takeda.

For example, there is nothing in Par’s agreements with Takeda which gives it an

extended exclusivity period. The terms of the agreements with Takeda give Par a date to start

selling Takeda’s authorized generic and a date which it can sell its own ANDA product. Par’s

benefit of 837 days of exclusivity, rather than 180 days provided by the regulatory scheme,

derives from Watson and Amneal agreeing to stay off the market until October 15, 2020. How

then could Takeda and Par alone conspire to order the market and receive this economic benefit?

Takeda and Par could not alone achieve the preservation of a two-entrant market for an extended

period; they needed Watson and Amneal. The same is true for Watson’s and Amneal’s benefit,

which depended in part on Par agreeing to continue selling Takeda’s authorized generic when

Watson and Amneal began selling their generics rather than Par launching its own generic.

Ordering the market as alleged here required all four conspirators’ active and knowing

participation to derive the benefit to the conspirators. In other words, all three Generics had to

agree here to achieve the object of the conspiracy as pleaded — “restrict[] . . . output of generic

Colcrys in order to keep prices from falling” and enjoy supracompetitive profits.” This reality

alone necessitates a finding all three Generics participated in one conspiracy with Takeda, rather

than three separate bilateral conspiracies. We dismiss as implausible Value Drug’s claims

ECF Doe. No. 163 $f 221, 235, 247.

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alleging Takeda conspired with each Par, Watson, and Amneal individually to order the market

and restrict output.

Value Drug plausibly pleads antitrust injury.

Par moves to dismiss arguing Value Drug fails to plead antitrust injury.*® Par does not

challenge Value Drug’s allegation of an “injury of the type antitrust laws were intended to

prevent”; rather, Par challenges the injury “flows from that which makes [the] defendants’ acts

unlawful” because it did not have final approval to launch its generic drug in 2016 when

Takeda’s exclusivity expired.*” Value Drug sufficiently pleads antitrust injury at this stage.**

‘6 Establishing antitrust injury is required, but not sufficient, to establish antitrust standing. Jn re

Wellbutrin XL Antitrust Litig. Indirect Purchaser Class, 868 F.3d 132, 164, 164 n.54 (3d Cir.

2017). Par only challenges Value Drug’s failure to plead antitrust injury, no other element of

antitrust standing. We only review whether Value Drug adequately pleads antitrust injury.

47 We note the other Defendants seek to join Par’s motion which only substantively addresses the

facts plead against Par. But neither Watson nor Amneal offers substantive argument as to why

the claims against it should be dismissed based on antitrust injury aside from seeking to join

Par’s motion. ECF Doc. No. 169-1 at 5. This conclusory joinder does not meet their burden on a

motion to dismiss.

‘8 Antitrust injury is an “injury of the type the antitrust laws were intended to prevent and that

flows from that which makes [the] defendants’ acts unlawful.” Jn re Wellbutrin XLs, 868 F.3d at

164 (quoting Ethypharm S.A. France v. Abbott Lab’ys, 707 F.3d 223, 233 (3d Cir. 2013)

(emphasis added)). The anticompetitive conduct must be a material or proximate cause of the

antitrust injury, but a plaintiff need not allege the anticompetitive conduct solely caused the

injury “[nJor must a plaintiff ‘completely discredit in its initial pleadings all possible intervening

causes’ of its injury.” Zenith Radio Corp. v. Hazeltine Rsch., Inc., 395 U.S. 100, 114, n.9 (1969)

(“It is enough that the illegality is shown to be a material cause of the injury. . .”; Jn re Suboxone

(Buprenorphine Hydrochloride & Naloxone) Antitrust Litig., No. 13-2445, 2017 WL 4910673, at

*11 (E.D. Pa. Oct. 30, 2017). And while “a regulatory or legislative bar can break the chain of

causation in an antitrust case”, when a defendant has engaged in conduct to delay regulatory

approval in some manner, antitrust injury is met. Jn re Wellbutrin XL, 868 F.3d at 165; In re

Suboxone, 2017 WL 4910673, at *13; Takeda Pharm. Co. Ltd. v. Zydus Pharms. (USA) Inc., 358

F. Supp. 3d 389, 398-99 (D.N.J. 2018). But generally whether a plaintiff suffered antitrust injury

involves “complex questions of fact” ill-suited for resolution on a motion to dismiss. Schuylkill

Energy Res., Inc. v. Pa. Power & Light Co., 113 F.3d 405, 417 (3d Cir. 1997); see also In re

Suboxone, 2017 WL 4910673, at *14; In re Generic Pharms. Pricing Antitrust Litig., 338 F.

Supp. 3d 404, 457 (E.D. Pa. 2018) (“To the extent that the Court has been asked to analyze the

issue of antitrust standing on a motion to dismiss, the Court’s analysis falls under the

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Value Drug alleges the intricacies of the Hatch-Waxman Act’s statutory scheme under

which generic drug manufacturers obtain tentative and final approval to market their generics.*”

Value Drug alleges: when a generic drug manufacturer files its ANDA with a paragraph IV

certification, as all the Generics did here, the brand can sue for patent infringement, triggering a

thirty-month stay during which time the Food and Drug Administration can issue tentative

approval but will not issue final approval;°° the Food and Drug Administration will also not issue

final approval if the brand drug has exclusivity, like Takeda had here until July 2016;°! receiving

tentative approval from the Food and Drug Administration means the “ANDA meets the

technical and substantive requirements for final approval, but final approval cannot be granted

because of the existence of, for example, a patent which a Paragraph III certification has been

filed (meaning that the ANDA filers intend to wait unti[l] patent expiry before marketing its own

product) or that has been judicially determined to be infringed by the ANDA filer, or regulatory

exclusivity such as a 30-month stay”’;? the Food and Drug Administration does not

automatically grant final approval once the regulatory bar is lifted;>? the applicant with tentative

approval must request final approval and “generally [the generic] submits an amendment to its

Twombly/Igbal plausibility standard governing motions to dismiss under Rule 12(b)(6).”). While

antitrust injury involves complex questions of fact, we address the sufficiency of the plaintiff's

pleading at the outset to determine whether antitrust injury is plausibly pleaded. McCullough v.

Zimmer, Inc., 382 F. App’x 225, 230 (3d Cir. 2010).

49 ECF Doc. No. 163 9 42-48.

°° Id. 49 44-45.

5! Td. 99 35, 46, 70, 181 n. 47.

Id. 4 46.

3 Id. 447.

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ANDA explicitly requesting final approval to market its drug product”; and, “[a] request for

final approval with no new data, information, or other changes to the ANDA generally requires

90 days for FDA assessment.”>»

Par and Watson obtained tentative approval in February 2015 and October 2015,

respectfully — suggesting they met the “technical and substantive requirements” for final

approval before Takeda’s exclusivity ended.°° Amneal received final approval in September

2016.°’ Neither Par nor Watson obtained final approval, like Amneal, anywhere near July 2016

when Takeda’s exclusivity ended.** Value Drug pleads the earliest day Par could have applied

for final approval and pleads Par did not request final approval on this date, albeit in a footnote.*?

And while this is helpful and satisfies the pleading standard as to Par, based on Value Drug’s

pleading, we can also reasonably infer Watson and Par did not request final approval at the

earliest date they could have, and thus, they both delayed obtaining final approval. In other

words, Par and Watson needed to take an affirmative step to obtain final approval after meeting

the substantive and technical requirements to obtain it. We can reasonably infer from the pleaded

54 Ig

5 Id. 4 48.

Id. 44 70-71.

7 Id. 472.

Watson obtained final approval on July 31, 2019.

https://www.accessdata.fda.gov/scripts/cder/ob/results_product.cfm?Appl_Type=A&Appl No=2

04461#37139 (last visited Mar. 20, 2022). Par obtained final approval on August 12, 2021.

https://www.accessdata.fda.gov/scripts/cder/ob/results_product.ctm?Appl_Type=A&App!_No=2

03976#19172 (last visited Mar. 20, 2022).

°° ECF Doc. No. 163 4 70, 181 n. 47. Nothing in this Order should be construed to approve the

pleading of facts in footnotes arguably contrary to Federal Rule 8.

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facts they did not take this action at the earliest date possible given Value Drug’s pleading of the

estimated time it takes for the Food and Drug Administration to grant final approval and the fact

neither received it until years after Takeda’s exclusivity ended. It is reasonable to infer Par and

Watson’s own conduct caused the delay in final approval; thus, the chain of causation is not

broken here. Value Drug plausibly alleges antitrust injury at the motion to dismiss stage.”

KEARNEY, J 4

6° Zydus Pharms. (USA) Inc., 358 F. Supp. 3d at 398 (Nonetheless, Takeda maintains that

Zydus has failed to obtain regulatory or tentative FDA approval, and therefore, its alleged

injuries actually stem from the Hatch-Waxman’s statutory framework as opposed to the instant

dispute. However, Takeda’s arguments require a factually intensive analysis which this Court

cannot perform, because this case is still in its procedural infancy.”), 398-99 (collecting cases);

Otsuka Pharm. Co. v. Apotex Corp., 143 F. Supp. 3d 188, 193 (D.N.J. 2015) (finding plaintiff a

competitor for antitrust standing purposes absent FDA approval because it intended “to

manufacture and directly distribute/sell its proposed generic”); Jn re Suboxone (Buprenorphine

Hydrochloride & Naloxone) Antitrust Litig., 2017 WL 4910673, at *13 (The movant “fails to

establish that the FDA action was a purely independent cause fully accountable for the alleged

antitrust injury, rather than a merely intervening cause”); Jn re Restasis (Cyclosporine

Ophthalmic Emulsion) Antitrust Litig., 333 F. Supp. 3d 135, 159-60 (E.D.N.Y. 2018); Jn re

Metoprolol Succinate Direct Purchaser Antitrust Litig., No. 06-52, 2010 WL 1485328, at *7 (D.

Del. Apr. 13, 2010);; Jn re Gabapentin Pat. Litig., 649 F. Supp. 2d 340, 356 (D.N.J. 2009); Jn re

Neurontin Antitrust Litig., No. 02-1390, 2009 WL 2751029, at *12—13 (D.N.J. Aug. 28, 2009).

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