American Journal of Law & Medicine

First Circuit Certifies Class for Third Party Payors and Individual Consumers in Pharmaceutical "Pay-for-Delay" Case-In Re Nexium Antitrust Litigation

First Circuit Certifies Class for Third Party Payors and Individual Consumers in Pharmaceutical "Pay-For-Delay" Case--In re Nexium Antitrust Litigation (1)--On January 21, 2015, the U.S. Court of Appeals for the First Circuit certified a class action brought by third party payors ("TPPs") and individual consumers against pharmaceutical companies engaging in reverse payment settlement agreements. (2) Under a reverse payment settlement agreement, a patentee compensates an alleged infringing party for refraining from entering the patentee's market. (3) In re Nexium is the first reverse-payment-settlement-agreement class action that has been certified and has survived on appeal since the landmark Supreme Court decision in FTC v. Actavis, Inc. (4)

In 2001, AstraZeneca received FDA approval for Nexium, a heartburn drug. (5) AstraZeneca also received approval for a total of fourteen patents related to Nexium. (6) In 2005, Ranbaxy Pharmaceuticals filed an Abbreviated New Drug Application (ANDA) for a generic form of Nexium along with a Paragraph IV certification claiming that either AstraZeneca's Nexium patents were invalid, or if they were valid, Ranbaxy's ANDA was not infringing. (7) Thereafter, AstraZeneca sued Ranbaxy claiming that Ranbaxy's generic product infringed AstraZeneca's patents. (8) Teva Pharmaceuticals and Dr. Reddy's Laboratories (DRL) filed similar ANDAs and Paragraph IV certifications for their Nexium generics. (9) AstraZeneca sued Teva and DRL separately, alleging that Teva and DRL had also infringed AstraZeneca's patents. (10)

Under the Hatch-Waxman Act, (11) "if the branded drug manufacturer sues [for infringement], the [Food and Drug Administration (FDA)] may not approve the ANDA until 30 months pass or an appellate court finds the patent invalid or not infringed." (12) Thus, Ranbaxy could have entered the market on April 14, 2008--thirty months after AstraZeneca sued--even though the court had not yet ruled on the patent invalidity or infringement matter. (13) Ranbaxy, however, settled its litigation with AstraZeneca and agreed to "to delay the launch of its product until May 27, 2014," which was also the date AstraZeneca's two main Nexium patents were set to expire. (14) In return, AstraZeneca paid Ranbaxy over one billion dollars. …

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