United States District Court, E.D. Pennsylvania
PAUL S. DIAMOND, District Judge.
Generic drug manufacturers, drug wholesalers, and retail pharmacies allege that Defendants Warner Chilcott and Mayne Pharmaceuticals have illegally thwarted competition in the sale of generic drugs. Defendants produce and sell Doryx, the branded version of delayed-release doxycycline hyclate, a prescription antibiotic used primarily to treat severe acne. Plaintiffs allege that Defendants conspired to protect their monopoly by "product hopping": making changes to the drug that ostensibly provided no significant improvements, but prevented pharmacists from automatically filling Doryx prescriptions with generic equivalents. Direct purchaser Plaintiffs, indirect purchaser Plaintiffs, and retailer Plaintiffs have all concluded modest settlements with Defendants, leaving generic drug maker Mylan Pharmaceuticals as the sole remaining Plaintiff. The Parties have filed cross motions for summary judgment. I will grant Defendants' Motions for Summary Judgment, deny Plaintiff's Motion, and enter judgment in favor of Defendants on all counts.
Plaintiff Mylan Pharmaceuticals is the third-largest generic pharmaceutical company in the world. (Doc. No. 84 at 1.) Mylan has a "global portfolio of approximately 1, 100 different products." (Id.) In 2011, Mylan reported $6.13 billion in revenue and estimated that one of every eleven prescriptions dispensed in the United States was for a Mylan product. (Id. at 3.) Defendant Mayne Pharmaceuticals is an Australian-based pharmaceutical company that has six products, including Doryx. Mayne reported $50.1 million in sales in 2011. (Id. at 4.) Defendant Warner Chilcott is a United States-based pharmaceutical company that distributes and promotes Doryx domestically pursuant to a License Agreement with Mayne. Warner Chilcott reported $2.7 billion in revenue in 2011, 93% of which came from eight products. (Id. at 4.)
Several oral tetracyclines are used to treat acne: doxycycline monohydrate, doxycycline hyclate, and minocycline. (W.C. Mot. S.J. at 22-23.) Doryx is the branded form of delayed-release doxycycline hyclate. (Id.) To decide the Motions before me, I must consider the product history of Doryx-branded and generic. In doing so, I have set out those record facts that are undisputed and construed them in the light most favorable to Mylan. I have disregarded Mylan's allegations that are without evidentiary support. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Jones v. UPS, 214 F.3d 402, 407 (3d Cir. 2000) ("unsupported allegations" cannot defeat summary judgment). I have accepted as true Mylan's remaining factual allegations and have construed them in the light most favorable to Mylan.
I. Regulatory Procedures
The Food, Drug and Cosmetic Act requires Food and Drug Administration approval before any drug may be marketed. 21 U.S.C. § 301 et seq. The manufacturer must submit to the FDA a "New Drug Application" and prove the drug's safety and efficacy through extensive clinical trials. The FDCA originally obligated an applicant seeking to market a new generic drug to meet the same requirements as one seeking FDA approval of a branded drug, including full clinical trials. With the 1984 adoption of the Hatch-Waxman Act, however, generic manufacturers could submit an "Abbreviated New Drug Application" to expedite the approval process and lower costs. See Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585. An "ANDA" filer must show only that its drug is bioequivalent to an already approved "reference" drug. Jessie Chang, Note, An Antitrust Analysis of Product Hopping in the Pharmaceuticals Industry, 108 Colum. L. Rev. 1471, 1479 (2008).
If the generic drug is the branded drug's bioequivalent and the two are the same dosage, strength, and form, the FDA identifies the generic as the branded version's "AB-rated" equivalent. 21 U.S.C. § 355. Most states have incorporated this AB-rating into their own statutes. Under these "Drug Product Selection" laws, a pharmacist who fills a prescription for a branded drug can-or, in some states, must-substitute an AB-rated generic version (which is usually less expensive than the branded version), unless the prescribing physician notes "dispense as written." Chang, Product Hopping, at 1479. Twelve states require pharmacists to substitute generic drugs, unless the physician prescribes otherwise. Thirty-nine states permit substitution in such circumstances. (W.C. Resp. to Mylan S.J. at 30.)
II. Doryx Development
Immediate-release doxycycline hyclate has been available to treat acne since the 1960s, when Pfizer launched Vibramycin. (W.C. Resp. to Mylan S.J. at 5.) Doryx capsules-delayed-released doxycycline hyclate-were first approved by the FDA in 1985 and launched by Mayne that same year. The capsules were not patent-protected. (Id.) They included enteric-coated pellets which would allow delayed release, intended to reduce the nausea and stomach irritation caused by immediate-release doxycycline. (Mayne S.J. at 5.) Mayne also produced an authorized generic version of Doryx. (W.C. Resp. to Mylan S.J. at 6.) Warner Chilcott, then a subsidiary of Warner Lambert, distributed branded and generic Doryx for Mayne in the United States. (Id.)
Sales of branded and generic Doryx capsules were sluggish in the early 1990s. (Id.) In 1994, Mayne (then known as F.H. Faulding & Co.), and Warner Chilcott entered into an exclusive license agreement intended to increase Doryx sales: (1) Mayne agreed to take its generic Doryx off the market and act as the exclusive manufacturer and supplier to Warner Chilcott of branded Doryx; (2) Warner Chilcott agreed to distribute branded Doryx in the United States and to market Doryx through targeted promotions to dermatologists in exchange for the rights to all income from the domestic sales of the drug. (W.C. Ex. 121.) Mayne agreed not to sell Doryx domestically, provided Warner met minimum Doryx purchase and sales thresholds. (Mayne S.J. at 9.) Although the License Agreement originally ran from 1997 to 2004, Mayne and Warner Chilcott have renewed the Agreement several times and it remains in force today. (Id. at 10.) The Agreement increased Doryx sales more than twenty-fold by 2005. (W.C. Resp. to Mylan S.J. at 33-34 & Table 2.)
III. "Product Hopping"
The 1997 License Agreement obligated Defendants to enter into negotiations "with respect to a new agreement pursuant to which [Mayne] would develop a doxycycline hyclate delayed release tablet" for Warner Chilcott to distribute in the United States. (W.C. Ex. 121 at 6.) That tablet development took over six years, during which Mayne: (1) reformulated delayed-release doxycycline hyclate, and (2) added a stabilizing coat solution to improve the drug's shelf-life. (Mayne S.J. at 16; W.C. Exs. 226, 191.)
In May 2005, the FDA approved Defendants' NDA for Doryx 75 and 100 mg tablets. (W.C. Ex. 211.) The tablets were introduced in September 2005, and Defendants took steps to switch the market for Doryx capsules to Doryx tablets. (Mylan S.J. at 12.) They: (1) stopped selling the capsules to wholesalers (Mylan Ex. 59); (2) removed Doryx capsules from the Warner Chilcott website (Mylan Ex. 62); (3) worked with retailers to "auto-reference" the Doryx tablet whenever a doctor filed a Doryx prescription (Mylan Ex. 61); (4) informed wholesalers, retailers, and doctors that "Doryx Capsules have been replaced by Doryx Tablets" (Mylan Ex. 63); (5) destroyed some of their remaining capsule inventory (Mylan Ex. 73); and (6) bought back some portion of the remaining capsule inventory (Mylan Ex. 68, 69, 71).
Beginning in January 2007, Defendants worked to develop a 150 mg strength Doryx tablet with a single "score"-a groove running across the tablet's surface. The "score" allows the user to split a 150 mg Doryx tablet into two 75 mg doses. Defendants submitted a supplemental NDA for the 150 mg single-scored tablet in December 2007. (W.C. Ex. 358.) The FDA granted its approval in June 2008 and Defendants launched the 150 mg Doryx single-scored tablet a short time later. (W.C. Ex. 216.)
In January 2009, Defendants stopped promoting the 75 and 100 mg tablets, and began an "aggressive marketing program" for the 150 mg dose tablet. (Mylan Ex. 130.) By late March 2009, the 150 mg tablet represented 71% of all new Doryx prescriptions and 61% of total Doryx prescriptions. (Id.) In May 2010, Warner Chilcott reported to investors that the company was able to transfer about 90% of its Doryx franchise into the 150 mg tablet. (Mylan Ex. 132.)
While they developed the 150 mg tablet, Defendants also developed scored versions of their existing 75 and 100 mg Doryx tablets. Defendants submitted the supplemental NDAs for 75 and 100 mg single-scored Doryx tablets in June and August 2008, and received approval in February and March 2009. (W.C. Exs. 360, 361, 248, 123.) Warner Chilcott stopped distributing the 75 and 100 mg single-scored Doryx tablets in March and August 2011, when the great majority of Doryx prescriptions were for the 150 mg tablet. (W.C. Exs. 362, 363.)
In March 2010, Defendants began developing a dual-scored 150 mg Doryx tablet, which could be broken into two or three pieces, thus providing dosing options of 50, 100, and 150 mg. (W.C. Ex. 251.) The firms submitted the supplemental NDA for the dual-scored 150 mg tablet in February 2011. (W.C. Ex. 223.) After receiving approval in September 2011, Warner Chilcott stopped distributing single-scored 150 mg tablets. (Id.; Mylan S.J. at 28.)
Finally, Defendants introduced an unscored 200 mg Doryx tablet in April 2013 as a once-a-day dosing regimen for chlamydia. (W.C. Resp. to Mylan S.J. at 17-18.) Today, Defendants produce and sell the 200 mg and 150 mg dual-scored Doryx tablets in the United States. (Id. at 18.)
IV. Mylan's Development of Generic Doryx
Although Mylan first began developing a generic Doryx capsule in April 2003, by the time Doryx tablets launched in September 2005, Mylan still had no viable generic capsule. (W.C. Resp. to Mylan S.J. at 19-21.) Mylan did not abandon the capsule effort until January 2006, after the FDA had approved a generic Doryx capsule manufactured by Sandoz, which launched in July 2006. (Id.; W.C. Exs. 261, 382.)
By September 2006, Mylan had prepared the tablet formulation for a wholly-coated Doryx tablet to achieve delayed release. (Mylan S.J. at 27.) In March 2008, Mylan submitted an ANDA for its generic 75 and 100 mg Doryx tablets; the FDA granted its approval in December 2010. (Mylan Ex. 207.)
While Mylan's ANDA application was pending in March 2009, Mayne and Warner Chilcott added score lines to their 75 and 100 mg tablets. The Parties dispute whether this alone delayed the market entry of Mylan's generic. (Mylan S.J. at 27.) It appears that at least part of the delay resulted from the FDA's issuance to Mylan of several deficiency notices unrelated to the scoring issue. (W.C. Ex. 377 (timeline of Mylan tablet development); Mylan Ex. 209, 210, 110.) I will nonetheless resolve this dispute in Mylan's favor, and find that the decision to add score lines to branded 75 and 100 mg Doryx tablets delayed the entry of Mylan's generic until December 2010. (Mylan Ex. 213.)
At that time, while Mylan's were the only generic Doryx tablets on the market, the FDA-acting in accordance with federal law-granted Mylan 180 days exclusivity, preventing other generic drug manufacturers from introducing their own generic versions of Doryx. 21 U.S.C. § 355; (Mylan Ex. 213 (FDA approval of 75 and 100 mg generics).) When Defendants stopped selling 75 and 100 mg Doryx tablets in 2011, Mylan was the exclusive seller of 75 and 100 mg tablets-branded or generic-for two and a half years. (W.C. Opp. at 23.) During that period, Mylan raised the tablet prices to levels that were higher than Defendants' last reported prices for Doryx. (W.C. Resp. to Mylan S.J. at 23; W.C. Ex. 267.)
After Defendants' June 2008 launch of a 150 mg single-scored tablet, Mylan immediately began working on a generic version, and submitted an ANDA in December 2008. The FDA tentatively granted approval in June 2011. (Mylan Exs. 217-219.)
Finally, Defendants launched the dual-scored 150 mg tablet in September 2011 and petitioned the FDA, asking-as they had with the single-scored 150 mg tablet-that ANDA generic applicants match the dual scoring. (Mylan Ex. 222.) An e-mail from Mayne's CFO predicted that it was "likely that the FDA will make Mylan alter their generic to be a dual scored product." (Mylan Ex. 146.) The FDA rejected the request, however, noting that it might approve an ANDA for a 150 mg generic Doryx with a single score. (Mylan Ex. 149.) The FDA determined in February 2012 that Mylan's single-scored 150 mg tablet would be AB-rated-at least initially-to Defendants' dual-scored 150 mg tablet. (Mylan Ex. 221.) Mylan thus launched its first 150 mg generic Doryx in February 2012. (Id.)
V. The Challenged "Hops"
Mylan alleges that each of the following changes to Doryx was an anti-competitive product hop:
1. 2005 change from 75 and 100 mg capsules to 75 and ...