Ruling on a motion to dismiss, the US District Court for the Northern District of California dismissed AIDS Healthcare’s antitrust claims alleging that Gilead Sciences illegally tied and bundled its human immunodeficiency virus (HIV) drug, tenofovir alafenamide fumarate (TAF) with other drugs and sought to maintain its monopoly in the TAF market. The decision is notable because the court concluded that AIDS Healthcare’s illegal tying claims could not stand because Gilead did not have US Food and Drug Administration (FDA) approval for standalone TAF and, thus, could not have tied its sales to that of another product. AIDS Healthcare Foundation, Inc. v. Gilead Sciences, Inc., et al. (N.D. Cal. July 6, 2016) (Alsup, W.)
In 2015, Gilead sought FDA approval for three new combination drugs used to treat HIV—Genvoya®, Descovy® and Odefsey®—each of which consisted of TAF combined with other drugs. At the time, Gilead did not seek FDA approval for a standalone version of TAF. The FDA approved Genvoya in November 2015 and the other two drugs shortly thereafter, and granted Gilead a five-year new chemical entity (NCE) exclusivity period over any product containing TAF. Accordingly, no generic drug containing TAF can receive FDA approval until November 2020. In the first quarter of 2016, Gilead applied for FDA approval of a standalone version of TAF and anticipates FDA approval in November 2016.
AIDS Healthcare’s complaint alleged that Gilead and co-defendants Johnson & Johnson, Janssen Sciences Ireland UC and Japan Tobacco violated federal, California and Nevada antitrust laws. The complaint alleged that Gilead illegally tied and bundled TAF to sales of products sold by the other defendants by combining them into fixed-dose combination drugs Genvoya, Descovy and Odefsey.
The first element of a tying claim is the existence of two distinct products in different markets whose sales are tied together. In dismissing this claim, the court held that even though there may be consumer demand for standalone TAF, because the product does not have FDA approval, “[t]he extent of consumer demand for standalone TAF is irrelevant because TAF cannot be sold as a standalone product as a matter of law….As such AIDS Healthcare has failed to plead the existence of a market for a tying product…”
In its monopolization claim, AIDS Healthcare alleged that “by bundling TAF with the other ingredients, [Gilead] insulated the allegedly weak patents covering TAF from challenges, because any generic manufacturer seeking to produce a TAF product would need to invalidate all the patents listed in the Orange Book for those drugs before it could win FDA approval, rather than just the TAF patents.” The court dismissed this claim for several reasons. First, AIDS Healthcare alleged that Gilead had monopoly power over TAF-containing drugs but did not allege any facts to support its market definition. Second, AIDS Healthcare failed to allege that Gilead engaged in anticompetitive conduct, and the court noted that even a monopolist has a right to decide when to bring its products to market. Finally, the court stated that Gilead expects FDA approval on standalone TAF in November 2016 and, thus, “Gilead has already taken steps to expose the alleged vulnerabilities of the patents protecting TAF several years before its NCE exclusivity would expire and the first possible generic TAF products can enter the market.”
The court also dismissed AIDS Healthcare’s conspiracy and state antitrust claims for largely the same reasons that it relied on to dismiss its tying and monopolization claims. AIDS Healthcare’s complaint also brought a claim for declaratory judgment of patent invalidity, which the court dismissed as well. AIDS Healthcare has appealed the court’s ruling on the motion to dismiss to the Federal Circuit.