Addressing standing for purposes of antitrust litigation related to reverse payment allegations and assignment of rights, the US District Court for the Northern District of Illinois explained standing in connection with reverse payment abbreviated new drug application (ANDA) litigation and granted Defendants’ motion to dismiss the complaint. However, it allowed Plaintiffs 21 days to file an amended complaint.In re Opana ER Antitrust Litigation, Case No. 14-C-10150 (N.D. Ill., Feb. 25. 2016) (Leinenweber, J.).

Endo Pharmaceuticals began selling Opana ER® (oxymorphone HCI), an extended release form of oxymorphone hydrochloride marked for the relief of moderate to severe pain, on June 21, 2006. At the time, Endo had three years of regulatory protection from generic competition. Knowing this, Endo bought the rights to four additional patents that could be used to block generic competition beyond 2009. In November 2007, Impax filed an ANDA seeking to market a generic version of Opana ER. Endo sued Impax, triggering the 30-month stay. Other generic companies also filed ANDAs and Endo sued each for patent infringement. One month before the 30-month stay was to expire, the US Food and Drug Administration (FDA) tentatively approved Impax’s ANDA for Opana ER. After two days of trial, and six days before the 30-month stay expired, Endo and Impax settled. The settlement consisted of two agreements: (1) the Settlement and License Agreement; and (2) the Development and Co-Promotion Agreement. Under the Settlement Agreement, Impax agreed to delay its launch of a generic Opana ER until various conditions were met; Endo also agreed not to launch an authorized generic during Impax’s 180-day exclusivity period. The Settlement was structured such that Impax would receive compensation based on the volume of Opana ER sales at the time Impax’s generic entered the market. By the time Impax entered the market in 2013, sales of Opana ER had declined and, pursuant to the Settlement Agreement, Endo paid Impax $102,049,000.

Walgreen Co. and Rite Aid Corporation, as assignees of various pharmaceutical wholesalers (the Wholesalers), brought claims in a multi-district litigation against Endo and Impax alleging violations of the Sherman Act based on the illegal reverse payment agreement. Each of the Wholesalers had purchased Opana ER from Endo pursuant to Distribution Sales Agreements (DSA). Each DSA included a provision that prohibited the Wholesalers from assigning the agreement without Endo’s consent. Endo did not consent to the assignments.

Endo sought to dismiss Walgreen and Rite Aid’s claims, arguing (1) the settlement was not a reverse payment; (2) the alleged reverse payment was not large and unjustified; (3) Walgreen and Rite Aid failed to allege antitrust injury; (4) Walgreen and Rite Aid lack standing to assert the claims; and (5) Walgreen and Rite Aid’s claims could only be pursued as part of a direct purchaser class and therefore should be dismissed or stayed until class certification is decided.

The court found Defendants’ argument that the Settlement Agreement was not a reverse payment unavailing. The court noted that “[w]hen the Court views the components of the Endo-Impax Settlement as a whole, it finds plausible and persuasive [Walgreen and Rite Aid’s] allegation” that the agreements “worked in conjunction with one another to ensure payment to Impax.” However, the court held that Walgreen and Rite Aid had failed to provide “some reliable foundation to show an estimated value of the reverse payment” and accordingly the court could not determine “whether the payment was large or unjustified in comparison to the avoided litigation costs and any other services provided from Impax to Endo.” Based on this failure, the court granted Endo’s motion to dismiss, but gave Walgreen and Rite Aid leave to amend their complaint within 21 days.

The court also held that “there was no dispute” that Walgreen and Rite Aid alleged that they had  been injured as a result of an illegal agreement between Endo and Impax, giving them Article III standing. The court went on to address the “more difficult” question of whether plaintiffs had antitrust standing, noting that the question turned on whether the assignments from the Wholesalers were valid. The court held that the DSA provision prohibiting assignment was “presumed as a matter of law to refer only to the delegation of contractual duties, not assignment of rights.” Accordingly, while the Wholesalers could not delegate performance under the DSA, they could assign a cause of action arising from the DSA. Accordingly, the court found the standing argument “lacks merit.”

Addressing whether the court should stay Walgreen and Rite Aid’s claims until after class certification, the court found that while the Wholesalers fit the description of membership in the direct purchaser class seeking certification, it was uncertain whether the class would ultimately be certified and if certified whether the Wholesalers would nonetheless opt out of the class. Accordingly, the court found the request to dismiss or stay the partially assigned claims premature because “it remains unclear whether the Wholesalers have reserved for themselves any portion of their right to sue Defendants, and if so, how they will choose to pursue that right.”