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An Analysis of a Failed Biosimilar Antitrust Class Action

On June 10th, Judge Manish S. Shah, U.S. District Court Judge for the Northern District of Illinois, dismissed (with out prejudice) a class motion lawsuit in opposition to AbbVie and AbbVie Biotechnology Ltd. by client teams, drug wholesalers, and unions (together with the City of Baltimore, Miami Police Department insurance coverage belief fund, and a Minnesota-based worker welfare advantages plan for employees within the pipe commerce industries), alleging antitrust violations below Sections 1 and a couple of of the Sherman Antitrust Act, in addition to corresponding state legislation causes of motion for Alaska, California, District of Columbia, Georgia, Illinois, Nevada, New Hampshire, North Carolina, Utah, and West Virginia, over AbbVie’s blockbuster biologic drug, Humira.

Humira (adalimumab) is the world’s Most worthy biologic drug, having gross sales of $56 billion from 2012-2018.  Originally permitted for rheumatoid arthritis, AbbVie has since obtained FDA approval for remedy of a selection of human autoimmune problems (together with Crohn’s illness and plaque psoriasis in response to the Opinion and Order).  Facing expiration of the patent on the adalimumab molecule (U.S. Patent No. 6,090,382) on December 31, 2016, AbbVie launched into a profitable marketing campaign (247 patent purposes, leading to 132 patents, which the opinion characterizes as a .534 “batting average”) to acquire further patents on ancillary facets of the know-how, together with formulation and manufacturing strategies.  Plaintiffs alleged that as a result of some (virtually half) of these purposes (continuations of earlier-filed purposes) have been filed two years after Humira was first marketed they need to be invalid as being anticipated by earlier Humira-related patents.  (Plaintiffs famous that 5 AbbVie patents have been challenged by inter partes overview, with three being invalidated and AbbVie abandoning the opposite two earlier than judgment.  AbbVie famous that IPRs in opposition to 13 different of its patents have been unsuccessful.)  Plaintiffs additionally alleged inequitable conduct in AbbVie’s acquisition of some of these patents, based mostly on prior use of claimed manufacturing strategies and failure to reveal these makes use of to the U.S. Patent and Trademark Office.

Nevertheless, this “patent thicket” was very efficient, and in 2019 a number of biosimilar candidates, together with Amgen (Amjevita), Samsung Bioepsis (Hadlima), and Sandoz (Hyrimoz), (in addition to Mylan (Hulio), Fresenius (Idacio), Momenta (subsequently deserted growth), Pfizer (Abrilada), Coherus (CHS-1420), and Boehringer (Cyltezo), non-defendants on this motion), entered into an settlement whereby AbbVie licensed them to enter the market with their Humira biosimilars in Europe in October 2018, and within the U.S. in January 2023.  While these dates have been sooner than any doubtless date for biosimilar entry even assuming all of AbbVie’s patents that may very well be asserted have been  both discovered invalid, unenforceable, or not infringed, nonetheless the category tried by antitrust legislation to get a judgment that would offer Humira biosimilar market entry much more shortly.

In dismissing the grievance below Ashcroft v. Iqbal and Bell Atl. Corp. v. Twombly, Judge Shah set forth Plaintiffs’ allegations in a method in step with the requirement that “a court must accept all factual allegations in the complaint as true and draw all reasonable inferences in plaintiffs’ favor.”  These embrace:

• that AbbVie “cornered the market” on Humira (and different, unnamed biosimilar medication) by “anticompetitive conduct”;

• that AbbVie obtained and asserted patents “to gain the power it needed to elbow its competitors” out of the Humira market;

• that AbbVie then entered into agreements with these rivals “to keep their competing drugs off the market” (after which, paradoxically, “gave those competitors permission to market their drugs in Europe”; unremarked is that AbbVie gave those self same rivals permission to enter the U.S. market a few years thereafter, with out having to face these dastardly and profuse patents).

While setting forth Plaintiffs’ allegations bluntly, Judge Shah’s determination was balanced on this regard; whereas noting within the first line of the opinion that “Defendant AbbVie Inc. makes a lot of money selling the prescription drug Humira,” he additionally notes that “AbbVie’s Humira-related patents (more than a hundred) make it difficult (if not impossible) to sell competing drugs” and that “the Food and Drug Administration’s lengthy approval process imposes additional costs on competitors hoping to reach the market.”  And that “a third reason might be the expensive, complicated, and contentious patent infringement litigation that often follows on the heels of FDA approval.”

The Court additionally famous AbbVie’s actions in Europe to keep away from adversarial judicial verdicts and take benefit of “a more fractured patent system (and a type of European patent application similar to the continuation application, known as a “divisional software”) to retain patent rights to assert against biosimilar applicants.  While not relevant to the antitrust issues before the Court, Plaintiff made these allegations to characterize AbbVie as a “dangerous actor.”

Judge Shah rebuts these arguments (with further particulars as set forth beneath) effectively:

Plaintiffs say that AbbVie’s plan to increase its energy over Humira quantities to a scheme to violate federal and state antitrust legal guidelines.  But what plaintiffs describe just isn’t an antitrust violation.  AbbVie has exploited benefits conferred on it by lawful practices and to the extent this has stored costs excessive for Humira, current antitrust doctrine doesn’t prohibit it.  Much of AbbVie’s petitioning was protected by the Noerr–Pennington doctrine, and plaintiffs’ principle of antitrust damage is simply too speculative.

The Judge set forth the next reasoning in help of his authorized conclusions.  The grievance sounded in antitrust legislation below the Sherman Antitrust Act, §§ 1 and a couple of, in addition to state antitrust legislation claims.  The Sherman Act Section 1 Count was asserted below a “pay-for-delay” principle in opposition to AbbVie, AbbVie Biotechnology, and the three biosimilar candidates (Amgen, Samsung Bioepsis, and Sandoz).  Count three was additionally alleged in opposition to all Defendants, based mostly on a market allocation settlement principle below § 1.  Count V asserted Section 2 violations in opposition to AbbVie alone.  Counts II, IV, and VI alleged state legislation claims on grounds analogous to the Federal Sherman Act Counts, and Count VII in opposition to AbbVie alleged state legislation unfair competitors legal guidelines.

With regard to the Sherman Act § 2 allegations in opposition to AbbVie, the Court agreed with AbbVie that “there is nothing illegal about amassing a broad portfolio of legitimate patents.”  To the extent that some of these patents grow to be improvidently granted, “the Noerr–Pennington doctrine immunizes them from liability.”  Regarding the Section 1 allegations, the Court equally agreed with Defendants that these settlement agreements do not violate the Sherman Act as a result of “they[] allow AbbVie’s competitors to enter the market before the expiration of AbbVie’s patents, do not involve any reverse payments from AbbVie (the patentee) to Amgen, Samsung Bioepis, and Sandoz (the alleged infringers), and only divvy up the market in ways consistent with AbbVie’s patent rights.”  Finally, the Court agreed that even when a single one of AbbVie’s patents are usually not invalid and infringed that will have been adequate to maintain the biosimilar candidates from advertising and marketing Humira biosimilars till that patent expired (a date that will have been very a lot later than January 2023).  For Plaintiffs’ antitrust allegations to create legal responsibility in opposition to Defendants, Plaintiffs would want to point out that AbbVie had obtained each one of its patents “unlawfully,” which the Court discovered was unlikely, as a “but-for” trigger of Plaintiffs’ alleged damage.

One foundation for the Court’s determination to dismiss was that Plaintiffs’ grievance comprised “a new kind of antitrust claim.”  The Court’s foundation for this characterization is that the Sherman § 2 allegations, which whereas analogous to the grounds of antitrust legal responsibility present in Walker Process Equip., Inc. v. Food Mach. & Chem. Corp. and to Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., Inc. relating to the exemption from Noerr–Pennington immunity raised by an objectively baseless assertion of an invalid patent, Plaintiffs had disclaimed these grounds of authorized treatment.  Moreover, the Sherman § 1 allegations have been grounded in F.T.C. v. Actavis, Inc., although there had been no reverse fee from AbbVie to any of the biosimilar candidatesIn the Court’s view, “[t]he complaint brings together a disparate set of aggressive but mostly protected actions to allege a scheme to harm competition and maintain high prices.  The allegations—even when considered broadly and together for their potential to restrain trade—fall short of alleging the kind of competitive harm remedied by antitrust law.”

Turning to the precise deficiencies of every of Plaintiffs’ allegations of Sherman Act violations, the Court first plumbed the bases of legal responsibility below Section 2 as pled by Plaintiffs.  The opinion units forth the weather of such a violation:  “a plaintiff must allege ‘(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'” citing United States v. Grinnell Corp.  The opinion summarizes Plaintiffs’ argument in help of this allegation to be that “AbbVie abused its monopoly over the U.S. market for adalimumab . . . when it gummed up progress toward lower prices by obtaining and asserting “swaths of invalid, unenforceable, or noninfringed patents with out regard to the patents’ deserves” (the “patent thicket” argument).  These allegations did not include that AbbVie had obtained its patents by “realizing and willful fraud” nor that asserting these patents in biosimilar litigation was objectively baseless.

The opinion acknowledges the equitable foundation for Plaintiffs’ argument as being “when a patentee acquires and asserts whole tracts of questionable patents as part of a bad-faith, intentional effort to prop up the market for an existing, expiring patented product,” then “petitioning the government (during patent prosecutions, the FDA approval process, and in the courts) can violate the antitrust laws if, in reality, that petitioning is nothing more than a sham meant to inhibit competition,” citing California Motor Transport Co. v. Trucking Unlimited for the premise that the Noerr–Pennington doctrine doesn’t immunize actions which are “means or the pretext for achieving substantive evils which the legislature has the power to control.”  But the Court additionally acknowledged that “because immunized conduct cannot be aggregated with nonimmunized conduct without nullifying the immunity, it is necessary to identify protected and unprotected conduct,” citing Mercatus Grp., LLC v. Lake Forest Hosp., and that, in the end, informs the Court’s determination that Plaintiffs shouldn’t be permitted to pursue their trigger of motion below the theories pled of their grievance.

Specifically, a just lately determined case — U.S. Futures Exch., L.L.C. v. Bd. of Trade of the City of Chicago, Inc. — held that the objectively baseless prong of the check for vitiating Noerr–Pennington immunity just isn’t happy “merely by showing that its competitor’s purposes were to delay the plaintiff’s entry into the market,” which was the premise for Plaintiffs’ allegations right here.  The opinion states that “AbbVie’s conduct is protected by Noerr–Pennington (and not subject to antitrust scrutiny) unless its petitions—its patent applications, patent dance exchanges, and the lawsuits that followed—were objectively baseless,” and assertions of “numerous flaws” in AbbVie’s patents just isn’t sufficient to quantity to their assertion being objectively baseless.  Moreover, the Court just isn’t satisfied in view of the 53.4% allowance charge, which the Court believes “compels the conclusion, as a matter of law, that more than half of AbbVie’s patent applications were not objectively baseless” below U.S. Futures Exch.  This conclusion is supported by case legislation from different Circuits the place comparable success charges led to the conclusion that assertion thereof was not objectively baseless.  This conclusion was bolstered by AbbVie’s success earlier than the PTAB in IPRs, the place 13 of 18 challenged patents have been upheld.  And though the Court did verify that some of the patent assertions made by AbbVie through the biosimilar “patent dance” and subsequent litigation could have been objectively baseless, “a settlement that provides substantial value to an antitrust defendant accused of initiating that lawsuit as a sham [which was the case here] is objectively reasonable,” citing New W., L.P. v. City of Joliet (the Court citing the advantages of the settlements for Plaintiffs and that the settlements “required concessions from each side’).

Taking these concerns under consideration, the Court concluded that:

[T]he overwhelming majority of the alleged scheme is immunized from antitrust scrutiny, and what’s left are a few sharp elbows thrown at subtle rivals collaborating in regulated patent and biologic-drug regimes.  Some of AbbVie’s conduct was not immunized by the Noerr–Pennington doctrine—together with what plaintiffs allege to be the guts of their monopolization declare—however a lot of what preceded and adopted that conduct was immunized, which makes everything of alleged monopolization scheme immune, as a result of plaintiffs’ principle will depend on all of the parts of AbbVie’s conduct because the means to suppress competitors.

The Court additionally distinguished Plaintiffs’ novel antitrust legal responsibility principle right here with circumstances the place a courtroom has discovered “a series of allegedly sham petitions” as a result of on this case the patent system was concerned.  Although the Court is cognizant that patenting doesn’t present blanket antitrust immunity and the patent system just isn’t good, the opinion rejects utilizing antitrust legislation to “launch a collateral attack” on AbbVie’s patents and associated adjudicative proceedings earlier than the Patent Office and the district courts.

Finally, the Court failed to acknowledge any antitrust damage based mostly on Plaintiffs’ Section 2 allegations as a result of “it is not plausible that AbbVie’s nonimmunized conduct intimidated the other defendants into delaying the launch of their biosimilars (or otherwise caused any antitrust injury).”

Turning to the allegations based mostly on Section 1 of the Sherman Act, the opinion units out what’s required for a well-pleaded grievance:  “[i]n order to state a claim under § 1, plaintiffs must plead ‘(1) a contract, combination, or conspiracy; (2) a resultant unreasonable restraint of trade in [a] relevant market; and (3) an accompanying injury,'” citing Deppe v. Nat’l Collegiate Athletic Ass’n, that are assessed below one of three classes of evaluation: “per se, quick-look, and rule of reason,” citing Agnew v. Nat’l Collegiate Athletic Ass’n.  The opinion shortly rejects a per se evaluation as a result of the agreements are usually not “facially anticompetitive” (not involving price-setting or the amount of Humira every defendant may promote), and the Court notes that even frank “pay-for-delay” agreements are usually not per se anticompetitive below FTC v. Actavis.

Regarding Plaintiffs’ market allocation argument (whereby Europe and the U.S. comprise the allotted markets), the Court as soon as once more considers the affect of patents, which enable the patentee to selectively license in numerous territories, citing Dunlop Co. v. Kelsey-Haynes Co.  And the Court notes that per se evaluation is disfavored when a Court considers novel antitrust legal responsibility theories as pled by Plaintiffs.

The Court additionally rejects the “quick look” evaluation, based mostly on whether or not “an observer with a rudimentary understanding of economics would []conclude that the agreements have an anticompetitive effect,” citing California Dental Ass’n v. F.T.C.  “Even if the rudimentary economist is informed that most of the patents are likely invalid and uninfringed and being asserted without regard to their validity, there are still legitimate, procompetitive justifications for the agreements that require full rule of reason analysis (for instance, the agreements provide certainty to both parties and avoid further litigation costs)” in response to the opinion.

Thus the Court concludes that the “rule of reason” method is the very best analytical software, in step with FTC v. Actavis for pay-for-delay or reverse fee settlements.  However, utilizing this evaluation the Court discovered that the settlements right here match into the “important exception” to antitrust legal responsibility in settlement agreements: “[p]arties remain free to settle on other terms—for example, ‘by allowing the generic manufacturer to enter the patentee’s market prior to the patent’s expiration, without the patentee paying the challenger to stay out prior to that point.'”  And the Court notes an vital distinction with FTC v. Actavis: there, below the 180-day exclusivity provisions of the Hatch-Waxman Act the patent holder and the first-to-file generic drug maker shared market exclusivity.  Here, in distinction, not simply Amgen however all the opposite settling defendants have been capable of enter the market competitively.  Accordingly, “the package of global patent settlements were not an Actavis-like unlawful reverse-payment” and the differential market entry dates between Europe and the U.S. are permissible below Actavis.  On this movement to dismiss, the Court requested “whether the complaint alleges a patent settlement that has Actavis-like anticompetitive features and that warrants further scrutiny under the rule of reason,” deciding that it didn’t.

Finally the Court thought of whether or not the grievance asserts information amounting to antitrust damage, concluding that it doesn’t.  There is “no hard-and-fast rule” in opposition to deciding the antitrust damage query on the pleadings, in response to the opinion, however “[d]ismissal is appropriate if the claim ‘rests at bottom on some abstract conception or speculative measure of harm,'” citing Associated Gen. Contractors of California, Inc. v. California State Council of Carpenters.  The antitrust damage right here is “monopoly pricing” below two allegations: first, that “if the biosimilar manufacturers had pursued the underlying infringement suits, they could have prevailed and, by invalidating the patents that were preventing them from entering the market, entered the market even sooner than they are now able to under their settlement agreements, driving prices down.”  Second, if AbbVie had restricted assertion of its patents to these not invalid and infringed, the biosimilar candidates would have been capable of negotiate extra favorable settlement phrases.  The Court discovered these allegations of “what might have happened in the underlying infringement litigation [to be] too speculative and would require legal and factual determinations that go beyond judicially manageable limits,” citing Associated Gen. Contractors of California.  These allegations describe “a world where [this] might have happened” however what’s conceivable “falls short of plausible” which is required for establishing antitrust damage on the pleadings stage.  “[I]t only takes one valid, infringed patent to render all the rest—whether invalid, infringed, or not—irrelevant for purposes of cause-in-fact analysis,” in response to the opinion. And additional, “[i]f the reason the biosimilar manufacturers could not make it to market was that AbbVie had a patent that prevented them from doing so, it was the patent—and not AbbVie’s other conduct—that was the but-for cause of the monopoly prices.”

The Court finds Plaintiffs’ allegations of patent invalidity to be insufficient as a result of AbbVie wanted to have the ability to assert however one not invalid, infringed patent to keep away from antitrust legal responsibility.  The Court additionally thought of the temporal facets affecting competitors, as a result of “litigation takes time” and for “complex patent portfolios, it can take a lot of time.”  And the timing of litigation between AbbVie and the totally different biosimilar candidates was not in step with (and is frankly speculative about) earlier market entry than January 2023 below the settlement agreements that Plaintiffs’ allege are anticompetitive.

The Court concludes this part of its opinion by stating:

Antitrust damage is a prerequisite for all of plaintiffs’ federal antitrust claims in opposition to not solely AbbVie but in addition defendants Amgen, Samsung Bioepis, and Sandoz.  Because plaintiffs have did not plausibly allege that the but-for trigger of Humira’s monopoly costs was the biosimilar producers’ failure to pursue infringement litigation to its conclusion, AbbVie’s illegal assertion of its patent thicket, or the biosimilar producers’ failure to make use of the leverage that they apparently did not know they needed to attain an settlement to enter the market prior to they did, all of the federal antitrust claims within the grievance fail.

The  Court then utilized the identical reasoning to the state law-based Counts and located them equally missing, based mostly on the events’ acquiescence that if the Federal legislation claims are dismissed the state legislation claims needs to be as properly.  And lastly, the Court dismissed Count VII as to “unconscionable and unfair” conduct for failure to offer enough discover of the declare absent the antitrust allegations that the Court thought of insufficient.

The interaction between patent legislation and antitrust legislation is advanced (see, e.g., Antitrust Issues in Intellectual Property Law).  There has been a nice deal of angst and upset relating to the Court’s determination to dismiss, based mostly on a concern that dismissal places the Court’s imprimatur on AbbVie’s strategic conduct (it doesn’t matter what one could give it some thought), and that it will chill biosimilar entry.  These sentiments, whereas maybe comprehensible, ignore the end result:  greater than half a dozen biosimilar candidates will carry their biosimilar Humira to market a few years sooner than would have occurred had the events engaged in a number of litigations over a number of rounds of the patent dance as offered by the statute.  What Judge Shah’s determination means is that antitrust legislation has established requirements within the pharmaceutical context for what constitutes antitrust conduct that may be utilized with out useful resource, as right here, to novel theories of antitrust legal responsibility.  By dismissing with out prejudice the Court has given the Plaintiffs a possibility to carry their case in response to these requirements.  Whether doing so will promote the trigger and objectives of bringing biosimilar medication to market extra shortly is much less sure.

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