In re Nexium (Esomeprazole) Antitrust Litigation, (D. Mass., August 7, 2015)

On August 7, 2015, Judge William G. Young, of the U.S. District Court for the District of Massachusetts, denied Plaintiffs’ post-trial motions seeking a new trial and entry of a permanent injunction in this complex, multi-district pharmaceutical antitrust litigation. These motions followed an October 2014 jury trial based on alleged antitrust violations stemming from reverse payment settlements between AstraZeneca (the manufacturer of heartburn medication, Nexium®) and generic manufacturers (Ranbaxy, Teva and Dr. Reddy’s Laboratories). Specifically, each settlement agreement AstraZeneca entered with generic manufacturers to end the Hatch-Waxman patent suit included a “no authorized generic clause.” The antitrust case was instituted by classes of plaintiffs (including wholesale drug distributors, end-payers and pharmaceutical retail outlets) claiming that the settlements between AstraZeneca and the generic manufacturers caused Plaintiffs to overpay for Nexium because generic entry was delayed. Following trial, the jury entered a judgment for the remaining defendants (AstraZeneca and Ranbaxy), and answered special questions relating to the claims tried. In re Nexium (Esomeprazole) Antitrust Litigation, Case No. 12-md-02409-WGY, ---F.R.D.--- (2015), 2015 WL 4720033 (D. Mass., August 7, 2015) (Young, D.J.).

Through the lens of Plaintiffs’ post-trial motions, the court reflected on the cost and value of the nearly month-long jury trial, given the defendants ultimately prevailed for reasons consistent with the court’s rulings on Defendants’ motions for summary judgments rendered one year earlier. The court provided an extensive procedural description of the case and trial, which set the stage for the court’s analysis of the post-trial motions. The court found it “most important” that, although the Federal Trade Commission (FTC) has not barred them, the jury found the no-authorized-generic (no-AG) clauses were un-justified reverse payments. *35. 

Summary of Case Background

In order to succeed, the plaintiffs had to prove the no-AG clauses caused “an ‘antitrust injury’—a real-world impact on the relevant market from the alleged monopolistic practice or practices.” *3 (citations omitted). Prior to trial, Defendants filed motions for summary judgment arguing that Plaintiffs lacked facts to establish causation. Because each of the AstraZeneca settlement agreements included a no-AG clause, the court concluded that “Plaintiffs would be able to make out their general civil conspiracy case.” *6. However, evidence of causation was lacking because first-filer Ranbaxy’s exclusivity and tentative approval were withdrawn by the U.S. Food and Drug Administration (FDA), and “there was simply no way . . . Ranbaxy was going to get to market with a generic version of Nexium prior to the expiry date in the AstraZeneca-Ranbaxy Settlement Agreement.” Therefore the AstraZeneca-Ranbaxy agreement “could not be the source of antitrust damages.” *7. Further, although defendant Teva was capable of bringing the product to market, due to the court’s erroneous belief about the method of calculating the reverse payment between AstraZeneca and Teva, the court determined that market injury could not be demonstrated. *7. Therefore, the court granted Defendants’ summary judgment motions.

Plaintiffs filed motions for re-consideration, and the court granted Plaintiffs’ motion for re-consideration on summary judgment “regarding the absence of reverse payment to Teva,” and while the court “thought that [p]laintiffs’ case was hanging by a thread,” set the pre-trial conference for September 2014 and trial for October 2014. *8. Because of the court’s “continuing unease with as to whether any reasonable jury could draw the Actavis inference from the AstraZeneca-Teva interactions, [the court] directed all evidence supportive of that inference to be introduced first.” *8.

A six-week trial ensued, and Plaintiffs pursued Sherman Act “Section 1 claims and their state law equivalents against all defendants, except Dr. Reddy’s Laboratories who settled before trial.” *10. As instructed, Plaintiffs led with expert testimony focused on the determining the value of the “fair settlement,” of the AstraZeneca settlements, which the expert commented was “not very germane . . . in the Hatch Waxman context.” *10. However, the turning point at trial was Plaintiffs’ presentation of an expert economist who explained the high value placed on no-AG provisions in the pharmaceutical industry. Specifically, Plaintiffs argued that “AstraZeneca paid first filer Ranbaxy to delay entry by agreeing to a no-AG provision.” *11. The economist testified that in the settlement negotiation, Ranbaxy wanted to maintain their first-filer 180-day exclusivity against other generic entrants, but also exclusivity against an authorized generic. The economist testified that Ranbaxy was willing to take a later entry date in exchange for sole exclusivity. This testimony re-aligned the courts understanding of the case, and the jury was refocused on plaintiffs’ theory that “AstraZeneca and Ranbaxy had conspired via the AstraZeneca-Ranbaxy Settlement Agreement to use Ranbaxy’s blocking position under the Hatch-Waxman regulatory scheme to artificially maintain the higher branded Nexium price.” *11. To prove antitrust damages, Plaintiffs had to show based on circumstantial evidence that but-for “the AstraZeneca-Ranbaxy Settlement Agreement, Ranbaxy would have teamed with Teva to launch a generic version of Nexium.” *12. After Defendants presented their case, Teva settled. 

Following the close of evidence, the court declined to issue a directed verdict in favor of the defendants based on Plaintiffs’ failure to prove causation. The case went to the jury on the theory that “but for the AstraZeneca-Ranbaxy Settlement Agreement, Ranbaxy would have agreed to an earlier launch date, which would have allowed Teva, the more launch-prepared generic, to work out an agreement with Ranbaxy to take over the generic launch as they had done on previous occasions.” **12–13. The question of “whether this scenario could have come to fruition” was posed to the jury in the form of a special question. The jury concluded that the AstraZeneca–Ranbaxy Settlement Agreement was un-reasonably anticompetitive under a rule of reason standard. However, the jury could not conclude that the agreement caused Plaintiffs’ damages, because Ranbaxy would have negotiated an earlier launch date but for the no-AG provision. Judgment was entered for AstraZeneca and Ranbaxy.

Motion for a New Trial

A new trial is to be granted “only when an error occurred in the conduct of the trial that was so grievous as to have rendered the trial unfair.” *15 (citations omitted). In view of this standard, the court concluded, “I did not try this case very well. I did try it fairly.” *1. The court analyzed each of the plaintiffs’ bases for seeking a new trial in turn. 

First, Plaintiffs’ main argument was that the court improperly limited Plaintiffs to presenting only one causation theory at trial—that Ranbaxy would have partnered with Teva to accelerate its generic launch but for the no-AG settlement provision). However, the court considered and rejected three other causation theories during the summary judgment phase. Post-trial, Plaintiffs advanced a new, reverse theory for causation that Ranbaxy would have forfeited its exclusivity sooner, and Teva would have pushed to enter the market sooner, but for the no-AG settlement provision. But, the court determined: (1) it never procedurally precluded Plaintiffs from making this causation argument at trial, at least because the relevant forfeiture facts did not arise until after summary judgment when the FDA revoked Ranbaxy’s first-filer exclusivity; and (2) on the merits, circumstantial evidence showed that Teva did not delay in developing and obtaining approval for its generic product. Therefore, this theory was un-likely to change the outcome of the trial. 

Defendants argued that Plaintiffs should be judicially estopped from using facts that occurred after May 27, 2014, to establish causation, because during trial plaintiffs moved in limine to preclude Defendants from offering information that arose after that date. Because the court denied Plaintiffs’ motion and, instead, ruled on the relevance of evidence as it arose at trial. Therefore, the court concluded that “Plaintiffs are not judicially estopped from arguing that this post-May 27, 2014, evidence is relevant and necessitates as new trial.” *17. 

Second, Plaintiffs argued that a new trial was warranted because the trial testimony by Ranbaxy’s corporate witnesses that Ranbaxy would not intentionally relinquish its first-to-file exclusivity was purportedly contradictory to an affidavit presented in the lawsuit with the FDA related to Ranbaxy’s exclusivity forfeiture and revocation of tentative approval. After evaluating the trial testimony and affidavit, the court concluded that the later affidavit was not contradictory. The affidavit indicated that partnership agreements were possible, but, for this product, Ranbaxy did not pursue a partnership due to the high value of first-to-file status, and Ranbaxy believed it would receive final FDA approval. Therefore, the court determined allowing the Ranbaxy corporate testimony to stand did not rise to a “miscarriage of justice” to warrant a new trial.

Third, Plaintiffs argued that newly discovered evidence that arose after the jury trial (FDA revocation of Ranbaxy’s tentative approval, Teva’s FDA approval and subsequent product launch) provided a basis for a new trial. However, the court found this information was not newly discovered information, because it was not “based on facts that were in existence at the time of trial,” even though the facts stemmed from the ongoing FDA review of Ranbaxy and Teva’s abbreviated new drug application (ANDA). *20. However, the court did find that pleadings and affidavits submitted in the Ranbaxy-FDA litigation were newly discovered facts because they were in existence prior to trial, described events preceding trial, and the court found Plaintiffs were excusably ignorant of the facts despite their diligence. The key inquiry then became whether the information “would probably change the result if a new trial [was] granted.” *20 (citations omitted). The court found insurmountable difficulties with proceeding to a new trial, even with this new evidence. Specifically, Plaintiffs’ new theory would require the stringing together of too many speculative interferences about Ranbaxy’s, the FDA’s, and Teva’s behavior, that are not supported by the trial record. For example, the court commented that inferences about the timeline to generic launch proceeding faster, if Ranbaxy had not been lulled into a slower development and regulatory timeline as a result of the AstraZeneca-Ranbaxy settlement, are not feasible in view of the complexity of the consent decree Ranbaxy entered with the FDA that was contingent upon meeting a variety of milestones and a lack of evidence that Teva could have actually brought the generic product to market faster than it did, in part because the FDA had not granted tentative approval. *22.

Finally, at the close of trial, select plaintiffs (end-payers, retailers and a direct purchaser via permissive joinder) moved for a permanent injunction under Section 16 of the Clayton Act to prevent AstraZeneca from using no-AG clauses for 10 years. Plaintiffs argued an injunction was appropriate because the jury found that the AstraZeneca-Ranbaxy settlement had an anticompetitive effect, and AstraZeneca and Ranbaxy are “serial antitrust violators.” *25. However, the court denied the motion because: (1) causation, and therefore, liability were not demonstrated; and (2) the no-AG provision against Ranbaxy became moot when the FDA revoked Ranbaxy’s first-filer exclusivity in January 2015.

In dicta, the court raised the U.S. Court of Appeals for the First Circuit’s affirmance of the certification of class members, and commented on a criticism found in the dissenting opinion relating to the difficulty and method for parsing class members with no antitrust injury (estimated at 24,000 customers). To “aid a likely appeal,” the court “articulate[s] the method [he] devised for culling the uninjured from the injured class members if ever we had gotten to the damages phase of the litigation.” *24 (emphasis added).    

The court concluded that the jury trial was valuable because “[w]hat emerged was a richly detailed picture of how these questioned settlement agreements came into being against real world economic incentives and realities. It is a picture with focus and precision that the pallid affidavits submitted in aid of summary judgement motions could not approach, much less equal.” *33-34.