New Jersey District Court Issues First Written Opinion in REMS Antitrust Litigation Involving ANDA Biostudy Sample Procurement

By Kurt R. Karst –      

In what is, to our knowledge, a first-of-its-kind written decision, Judge Esther Salas of the U.S. District Court for the District of New Jersey issued an Oral Opinion and Order on December 22, 2014 granting without prejudice in part and denying in part a Motion to Dismiss filed by Celgene Corporation (“Celgene”) in litigation brought by Mylan Pharmaceuticals Inc. (“Mylan”) alleging that Celgene violated federal and state antitrust laws by preventing generic competition for two of Celgene’s drug products: THALOMID (thalidomide) Capsules (NDA 020785) and REVLIMID (lenalidomide) Capsules (NDA 021880).  (Copies of the Opposition and Reply Briefs in the case are available here and here.)  

As we previously reported, Mylan, in its April 2014 Complaint, is seeking preliminary and permanent mandatory injunctive relief to compel Celgene to sell Mylan sufficient quantities of THALOMID and REVLIMID at market prices for purposes of bioequivalence testing and ANDA submission, and compensatory damages for Mylan’s lost sales of generic versions of both drugs (and profits on those sales) determined to be caused by the delay in Mylan’s ability to submit ANDAs to FDA.  Both THALOMID and REVLIMID are the subject of Elements To Assure Safe Use (“ETASU”) Risk Evaluation and Mitigation Strategies (“REMS”) – here and here – providing for restricted distribution of the products because of safety concerns.  According to Mylan, “Celgene . . . has used REMS as a pretext to prevent Mylan from acquiring the necessary samples to conduct bioequivalence studies, even after the FDA determined that Mylan’s safety protocols were acceptable to conduct those studies.” 

In her Oral Opinion, Judge Salas denied Celgene’s Motion to Dismiss with respect to Mylan’s claims alleging violations of Section 2 of the Sherman Act (Monopolization, Attempted Monopolization and Conspiracy to Monopolize, and Denial of an Essential Facility or Resource Necessary to Compete), Section 56:9-4 of the New Jersey Antitrust Act, and New Jersey Common Law (Unfair Competition and Tortious Interference with an Economic Advantage).  Judge Salas, however, also dismissed Mylan’s allegations under Section 1 of the Sherman Act (Contract, Combination or Conspiracy in Restraint of Trade in that “Celgene devised an anticompetitive scheme to prevent Mylan and others from filing ANDAs for generic versions of Thalomid and Revlimid, and that Celgene entered into unlawful agreements with wholesale distributors and pharmacies to unduly restrain trade”) and Section 56:9-3 of the New Jersey Antitrust Act.

Under Sherman Act § 2, a plaintiff must plead two elements: (1) monopolization; and (2) under Verizon Communs., Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004), “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.”  Celgene and Mylan disputed the second element.  Celegene argued that “its conduct is not exclusionary as a matter of law because Section 2 does not impose an affirmative duty to deal with competitors except under limited circumstances, which it argues are inapplicable here,” while Mylan took the position that “Celgene’s conduct falls within the scope of cases where a duty to deal applies.”

In discussing the relevant refusal to deal law under Sherman Act § 2, Judge Salas found that a “prior course of dealing” between Celgene and Mylan was not strictly required under U.S. Supreme Court, Third Circuit, or district court precedent.  Rather, the District Court found that a prior course of dealing was simply an indicator or proxy for the larger inquiry of whether Celgene’s refusal to deal was legitimate or motivated by anticompetitive gain.  According to Judge Salas:

[T]he Supreme Court reasoned [in Trinko] that “prior course of dealing” was relevant to the § 2 inquiry insofar as it served as a proxy for the larger inquiry of whether the defendant’s conduct was anticompetitive. . . .  The Third Circuit cases to consider the scope of the “no duty to deal” do not appear to adopt a strict requirement that a party must plead “prior course of dealing” for its claims to proceed. . . .  [T]he cases in our Circuit that have considered the scope of the affirmative duty to deal suggest that a “prior course of dealing” is relevant but not dispositive in determining whether such a duty applies. . . .  Likewise, the district court cases in our Circuit do not appear to require pleading a prior course of dealing.

Judge Salas also rejected, as a matter of law, arguments raised by Celgene that the relevant product market, for Sherman Act § 2 monopolization purposes, could not be limited to a single drug and its generic equivalents, and that Celgene’s patents on THALOMID and REVLIMID precluded a finding of antitrust injury. 

The Mylan litigation is being watched closely by many in the pharmaceutical industry and in the government, because it could result in the first merits decision on the topic.  Previous antitrust cases involving restricted distribution products – Actelion Pharm. Ltd. v. Apotex, Inc., Case No. 12-5743 (D.N.J.) (see our previous posts here, here, and here) and Lannett Co., Inc. v. Celgene Corp., Case No. 8-3920 (E.D. Pa.) (see our previous post here) – although allowed proceed after motions to dismiss were denied based on facts similar to those before Judge Salas, were ultimately dismissed after the parties entered into settlement agreements.  The Federal Trade Commission filed an amicus brief in the Mylan case taking the position that a brand-name company’s refusal to sell samples to a an ANDA applicant can constitute exclusionary conduct under established U.S. Supreme Court precedent, that a brand-name company’s distribution agreements are not immune from antitrust scrutiny, and that a brand-name company’s patents alone do not establish a lack of antitrust injury.  And, as we previously reported, Congress has been considering legislation – H.R. 5657, the Fair Access for Safe and Timely Generics Act of 2014 – to amend the FDC Act to address the availability of products subject to a restricted distribution program.  Moreover, in December, FDA issued a draft guidance document to formalize the Agency’s long-standing process for prospective ANDA applicants to obtain a letter from the Agency stating FDA’s determination that the Agency will not consider it a violation of a REMS for the RLD sponsor to provide a sufficient quantity of a drug for bioequivalence testing purposes.