Pharmaceutical companies may have engaged in “bad faith” by failing to inform a judge who oversaw a patent scheme in 2012 of an allegedly anti-competitive sub-contract, a federal judge said Thursday.
SAN FRANCISCO (CN) – In a class action lawsuit that requested billions of dollars from drug companies accused of raising the price of an essential diabetes drug, a federal judge said it could potentially be difficult for drug companies on Thursday to to justify the price increase to a jury.
“I don’t think you can ever tell a jury $ 51 a pill if it was $ 5 before,” said US District Judge William Alsup during a virtual trial Thursday. “I’m looking forward to an argument that market conditions might justify.”
In 2015, the price of the branded diabetes drug Glumetza rose nearly 800% from $ 5.72 to over $ 51 per pill. The drug wholesalers filed three lawsuits in 2019, which were later consolidated, alleging the extreme price hike was directly due to an anti-competitive pact signed between the pharmaceutical companies in February 2012.
The drug wholesalers claim Assertio Therapeutics, formerly known as Depomed Inc., partnered with Lupine Pharmaceuticals to delay the launch of lower-cost generic versions of Glumetza. In a 2012 patent dispute, Lupine agreed to postpone the launch of its generic version of Glumetza until February 2016. In return, Assertio and Santarus Inc., which at the time had the exclusive right to manufacture and sell Glumetza in the US, agreed to postpone the launch of their own generic to six months after Lupine entered the market. This gave Lupine a guaranteed six month period to sell only its generic version.
The drug wholesalers say the deal was worth at least $ 56 million to Lupine, but it actually became much more valuable in 2016 when the price of Glumetza went up almost nine times and Lupine was $ 44 per pill instead of the $ 4 Dollars he would have charged otherwise.
The drug wholesalers, referred to as “direct buyers” in the lawsuit, say this “pay-for-delay deal” is worth $ 280 million for Lupine and $ 280 million for Bausch Health Companies Inc., which has exclusively inherited, had additional sales of billions of dollars in rights to manufacture and sell Glumetza through a network of acquisitions and name changes.
The drug wholesalers say the program has led them to pay an additional $ 2.8 billion in overcharges since 2012.
During a virtual hearing on duel motions for a summary judgment on Thursday, Lupine attorney Leiv Blad argued that reaching a settlement in “good faith” to resolve a patent dispute could not form the basis for an antitrust violation.
“I know of no case in which an antitrust defendant was found to have entered into a good faith settlement agreement that is not collusive,” said Blad.
Judge Alsup responded that lawyers cannot decide what is considered “good faith”, especially when there are controversial facts in the case.
“If you say good faith, it is a question of the jury,” said Alsup. “I can’t just say it was in good faith.”
In order to hold drug companies accountable for conspiracies to monopolize the market, plaintiffs must demonstrate that they had “market power” over Glumetza and its generic equivalents.
The pharmaceutical companies claim that their market power was relatively weak because there were alternatives to Glumetza. Diabetes patients could switch to drugs that release the active ingredient in Glumetza – metformin – immediately rather than opting for Glumetza, which allows for a prolonged release. Metformin lowers the amount of sugar the body makes and absorbs to help people with type 2 diabetes control blood sugar levels.
Assertio’s attorney, Eric Stock, showed a graph showing that sales rose 40% through January 2016 within seven months of Glumetza’s June and July 2015 price hike.
“We’re going to convince a jury that there were a few fleeting months [Bauch’s predecessor] Valeant benefited from the price increase, it was not a sustainable price increase, ”said Stock.
Attorney Steve Shadowen, who represented direct buyers, countered this because the “gigantic price hike” did not drive so many customers away that Glumetza became unprofitable, which shows that the pharmaceutical companies wielded incredible market power.
When Judge Alsup asked why the price soared in 2015, Bausch attorney David Marriott replied, “Management at the time believed it was in the best interests of shareholders to raise the price.”
Lupine also argued that the lawsuit against it should be dismissed as it was filed after the statute of limitations had expired. The company said wholesalers filed their lawsuit in September 2019 more than four years after learning of Lupine’s allegedly secret anti-competitive deal with its business competitors.
The direct buyers say that a document Lupine sent out to customers in 2015 says it didn’t expect an authorized generic to be enough to make them aware of it. They claim the deal to give lupine six months without competition from an approved generic was “fraudulently concealed”.
Alsup appeared to agree with plaintiffs on this point, stating that a document that “does not expect an approved generic drug” does not tamper with a revelation that Lupine had a secret deal with its competitors.
Alsup also expressed concern about the pharmaceutical companies’ failure to inform a federal judge overseeing their patent lawsuit of a subsidiary contract in 2012 that gave Lupine six exclusive months without competition from an approved generic.
“There is a side agreement that has been hidden from a judge,” said Alsup. “It’s not just bad intent. Referring to the US attorney. “
After about two hours of debate, Judge Alsup took up the arguments put forward.
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