IN RE: LIPITOR ANTITRUST LITIGATION Rite Aid Corporation; Rite Aid Hdqtrs. Corporation; JC (PJC) USA, LLC; Maxi Drug, Inc. d/b/a Brooks Pharmacy; Eckerd Corporation, Appellants in No. 14-4202 Walgreen Company; The Kroger Co.; Safeway, Inc.; Supervalu, Inc.; HEB Grocery Company L.P., Appellants in No. 14-4203 Giant Eagle, Inc., Appellant in No. 14-4204 Meijer, Inc.; Meijer Distribution, Inc., Appellants in No. 14-4205 Rochester Drug Co-Operative, Inc.; Stephen L. LaFrance Pharmacy, Inc. d/b/a SAJ Distributors; Burlington Drug Company, Inc.; Value Drug Company; Professional Drug Company, Inc.; American Sales Company LLC, Appellants in No. 14-4206 A.F.L.-A.G.C. Building Trades Welfare Plan; Mayor and City Council of Baltimore, Maryland; New Mexico United Food and Commercial Workers Union's and Employers' Health and Welfare Trust Fund; Louisiana Health Service Indemnity Company, d/b/a Blue Cross/Blue Shield of Louisiana; Bakers Local 433 Health Fund; Twin Cities Bakery Workers Health and Welfare Fund; Fraternal Order of Police, Fort Lauderdale Lodge 31, Insurance Trust Fund; International Brotherhood of Electrical Workers Local 98; New York Hotel Trades Counsel & Hotel Association of New York City, Inc., Health Benefits Fund; Edward Czarnecki; Emilie Heinle; Frank Palter; Andrew Livezey; Edward Ellenson; Jean Ellyne Dougan; Nancy Billington, on behalf of themselves and all others similarly situated, Appellants in No. 14-4602 RP Healthcare, Inc.; Chimes Pharmacy, Inc.; James Clayworth, R.Ph., d/b/a Clayworth Pharmacy; Marin Apothecaries, Inc., d/b/a Ross Valley Pharmacy; Golden Gate Pharmacy Services, Inc., d/b/a Golden Gate Pharmacy; Pediatric Care Pharmacy, Inc.; Meyers Pharmacy, Inc.; Tony Mavrantonis R. Ph., d/b/a Jack's Drugs; Tilley Apothecaries Inc., d/b/a Zweber's Apothecary, Appellants in No. 14-4632 IN RE: EFFEXOR XR ANTITRUST LITIGATION Walgreen, Co.; The Kroger, Co.; Safeway, Inc.; Supervalu, Inc.; HEB Grocery Company LP; American Sales Company, Inc., Appellants in No. 15-1184 Rite Aid Corporation; Rite Aid Hdqtrs., Corporation; JCG (PJC) USA, LLC; Maxi Drug, Inc. d/b/a Brooks Pharmacy; Eckerd Corporation; CVS Caremark Corporation, Appellants in No. 15-1185 Giant Eagle, Inc., Appellant in No. 15-1186 Meijer, Inc.; Meijer Distribution, Inc., Appellants in No. 15-1187 Professional Drug Company, Inc.; Rochester Drug Cooperative, Inc.; Stephen L. LaFrance Holdings, Inc.; Stephen L. LaFrance Pharmacy, Inc. d/b/a SAJ Distributors; Uniondale Chemist, Inc., Appellants in No. 15-1274 Painters District Council No. 30 Health & Welfare Fund; Medical Mutual of Ohio, Appellants in No. 15-1323 A.F.L.-A.G.C. Building Trades Welfare Plan; Daryl Deino; IBEW-NECA Local 505 Health & Welfare Plan; Louisiana Health Service Indemnity Company d/b/a Blue Cross/Blue Shield of Louisiana; Man-U Service Contract Trust Fund; MC-UA Local 119 Health & Welfare Plan; New Mexico United Food and Commercial Workers Union's and Employers' Health and Welfare Trust Fund; Plumbers and Pipefitters Local 572 Health and Welfare Fund; Sergeants Benevolent Association Health and Welfare Fund; Patricia Sutter (together "End-Payor Class Plaintiffs") on behalf of themselves and all others similarly situated, Appellants in No. 15-1342
Argued: September 27, 2016
Appeal from the United States District Court for the District
of New Jersey (MDL 2332) / (D.N.J. No. 3-12-cv-02389) /
(D.N.J. No. 3-12-cv-02478) / (D.N.J. No. 3-12-cv-02519) /
(D.N.J. No. 3-12-cv-04115) / (D.N.J. No. 3-12-cv-04537) /
(D.N.J. No. 3-12-cv-05129) / (D.N.J. No. 3-12-cv-06774) /
(D.N.J. No. 3-12-cv-07561) (D.N.J. No. 3-11-cv-05479) /
(D.N.J. No. 3-11-cv-05590) / (D.N.J. No. 3-11-cv-05661) /
(D.N.J. No. 3-11-cv-06985) / (D.N.J. No. 3-11-cv-07504) /
(D.N.J. No. 3-12-cv-03116) / (D.N.J. No. 3-12-cv-03523)
District Judge: Honorable Peter G. Sheridan
L. Rebuck Hangley Aronchick Segal Pudlin & Schiller,
Maureen S. Lawrence Barry L. Refsin [ARGUED] Hangley
Aronchick Segal Pudlin & Schiller One Logan Square 18th
& Cherry Streets, Counsel for Appellants Rite Aid Corp.,
Rite Aid Hdqtrs Corp., Maxi Drug Inc., Eckerd Corp. and JCG
(PJC) USA LLC
T. Neill Scott E. Perwin [ARGUED] Lauren C. Ravkind Kenny
Nachwalter, P.A. 1441 Brickell Avenue Counsel for Appellants
Walgreen Co., Kroger Co., Safeway Inc., Supervalu, Inc., HEB
Grocery Co. LP and American Sales Co. LLC
P. Germaine Joseph M. Vanek Vanek, Vickers & Masini,
P.C., Bradley J. Demuth Linda P. Nussbaum Nussbaum Law Group
P.C. Counsel for Appellants Meijer, Inc. and Meijer
Cain-Mannix Bernard D. Marcus Marcus & Shapira LLP One
Oxford Centre Counsel for Appellant Giant Eagle, Inc.
Gregory T. Arnold Kristen A. Johnson Kristie A. LaSalle
Thomas M. Sobol Hagens Berman Sobol & Shapiro LLP,
Caitlin Coslett Eric L. Cramer Jennifer MacNaughton, Esq.
Daniel Simons, Esq. David F. Sorensen, Esq. [ARGUED] Berger
& Montague, P.C., Elena K. Chan Bruce E. Gerstein
Kimberly Hennings Garwin Gerstein & Fisher LLP, Peter
Kohn Richard D. Schwartz Faruqi & Faruqi LLP, Miles
Greaves Barry S. Taus Taus Cebulash & Landau, LLP, Erin
C. Burns Dianne M. Nast NastLaw LLC, Counsel for Appellants
Direct-Purchaser Class Plaintiffs Rochester Drug
Co-Operative, Inc., et al.
E. Cecchi [ARGUED] Lindsey H. Taylor Carella, Byrne, Cecchi,
Olstein, Brody, & Agnello, P.C., Peter S. Pearlman Cohn
Lifland Pearlman Herrmann & Knopf LLP, Liaison Counsel
for Appellants Direct-Purchaser Class Plaintiffs Rochester
Drug Co-Operative, Inc., et al.
N. Boley Bethany R. Turke Kenneth A. Wexler Wexler Wallace
LLP, James W. Anderson Vincent J. Esades Renae Steiner David
Woodward Heins Mills & Olson, P.L.C., J. Douglas Richards
Sharon K. Robertson Cohen Milstein Sellers & Toll, PLLC,
Michael M. Buchman Alex Straus, Esq. Motley Rice LLC, Jeffrey
L. Kodroff John A. Macoretta Spector Roseman Kodroff &
Willis, Counsel for Appellants End-Payor Class Plaintiffs
AFL-AGC Building Trades Welfare Plan, et al.
J. Rodriguez Schnader Harrison Segal & Lewis LLP, Liaison
Counsel for Appellants End-Payor Class Plaintiffs AFL-AGC
Building Trades Welfare Plan, et al.
M. Alioto [ARGUED] Jamie L. Miller Theresa Driscoll Moore
Alioto Law Firm, Timothy A.C. May Gil D. Messina Messina Law
Firm, P.C., James M. Dombroski Law Office of James M.
Dombroski. Counsel for Appellants RP Healthcare, Inc., et al.
A. Fanning Marvin A. Miller Matthew E. Van Tine Miller Law
LLC, Kevin P. Roddy Wilentz, Goldman & Spitzer, P.A.,
Mark S. Sandmann Hill Carter Franco Cole & Black, P.C.,
Counsel for Appellants Painters District Council No. 30
Health & Welfare Fund and Medical Mutual of Ohio
D. Shadowen Hilliard & Shadowen LLP, Michael A. Carrier
Rutgers Law School, Counsel for 48 Law, Economics, and
Business Professors and the American Antitrust Institute as
Amici Curiae in support of Appellants
Jonathan E. Nuechterlein, Former General Counsel David C.
Shonka, Acting General Counsel Joel Marcus, Director of
Michele Arington, Assistant General Counsel Deborah L.
Feinstein, Director Markus H. Meier, Acting Deputy Director
Bradley S. Albert, Deputy Assistant Director Elizabeth R.
Hilder Heather Johnson Jamie R. Towey Federal Trade
Commission, Counsel for Federal Trade Commission as Amicus
Curiae in support of Appellants
Dimitrios T. Drivas Raj S. Gandesha Bryan D. Gant Sheryn E.
George Robert A. Milne [ARGUED] Brendan G. Woodard Amy E.
Boddorff White & Case LLP, Liza M. Walsh Connell Foley
LLP, Counsel for Appellees Pfizer, Inc., Pfizer Ireland
Pharmaceuticals, Warner-Lambert Company, Warner-Lambert
Company LLC, Wyeth, Inc., Wyeth Pharmaceuticals, Inc.,
Wyeth-Whitehall Pharmaceuticals LLC and Wyeth Pharmaceuticals
Jonathan D. Janow John C. O'Quinn Gregory L. Skidmore
Edwin J. U Karen N. Walker Kirkland & Ellis LLP, Jay P.
Lefkowitz, [ARGUED] Joseph Serino, Jr. Steven J. Menashi
Kirkland & Ellis LLP, Counsel for Appellees Ranbaxy,
Inc., Ranbaxy Pharmaceuticals, Inc., Ranbaxy Laboratories
Ltd., Teva Pharmaceutical Industries Ltd. and Teva
Pharmaceuticals USA, Inc.
Katherine A. Helm Noah M. Leibowitz [ARGUED] Simpson Thacher
& Bartlett LLP, David C. Kistler Blank Rome LLP, Counsel
for Appellees Daiichi Sankyo Co. Ltd and Daiichi Sankyo, Inc.
Victor E. Schwartz Philip S. Goldberg Cary Silverman Shook,
Hardy & Bacon L.L.P., Counsel for American Tort Reform
Association and Pharmaceutical Research and Manufacturers of
America as Amici Curiae in support of Appellees
Jonathan D. Hacker Edward Hassi O'Melveny & Myers
LLP, Counsel for Antitrust Economists as Amici Curiae in
support of Appellees Ashley Bass Stephen Bartenstein Andrew
D. Lazerow Covington & Burling LLP, Counsel for
Pharmaceutical Research and Manufacturers of America as
Amicus Curiae in support of Appellees
Chamcharas Peter J. Curtin William A. Rakoczy Rakoczy Molino
Mazzochi & Siwik LLP, Brian T. Burgess Goodwin Procter
LLP, Christopher T. Holding Goodwin Procter LLP, Counsel for
Generic Pharmaceutical Association as Amicus Curiae in
support of Appellees
Before: AMBRO, SMITH [*] and FISHER, [**] Circuit Judges.
FISHER, Circuit Judge.
pharmaceutical company holding the patent on a drug sues the
manufacturer of a generic version of that drug for patent
infringement. The patent-holder and the generic manufacturer
later settle, with the former paying the latter not to
produce a generic until the patents at issue expire. In
FTC v. Actavis, Inc., 133 S.Ct. 2233 (2013), the
Supreme Court recognized that such a settlement-commonly
known as a "reverse payment"-where large and
unjustified, can sometimes unreasonably diminish competition
in violation of the antitrust laws. To answer the antitrust
question, Actavis explained, "it is not
normally necessary to litigate patent validity" because
"the size of the unexplained reverse payment can provide
a workable surrogate for a patent's weakness."
Id. at 2236-37.
two sets of consolidated appeals involve allegations that the
companies holding the patents for Lipitor and Effexor XR
delayed entry into the market of generic versions of those
drugs. The companies did so, plaintiffs say, by engaging in
an overarching monopolistic scheme that involved fraudulently
procuring and enforcing the underlying patents and then
entering into a reverse-payment settlement agreement with a
generic manufacturer. With a single exception, every
complaint asserts one of these monopolization claims against
the patent-holders. The cases were assigned to the same
district judge, who ultimately dismissed the bulk of
opinion, we address two questions of federal jurisdiction.
First, do plaintiffs' allegations of fraudulent
procurement and enforcement of the patents require us to
transfer these appeals to the Court of Appeals for the
Federal Circuit? That court has exclusive jurisdiction over
appeals from civil actions "arising under" patent
law. 28 U.S.C. § 1295(a)(1). But not all cases
presenting questions of patent law necessarily arise under
patent law. See Christianson v. Colt Indus. Operating
Corp., 486 U.S. 800 (1986). Where, as here, patent law
neither creates plaintiffs' cause of action nor is a
necessary element to any of plaintiffs' well-pleaded
claims, jurisdiction lies in this Court, not the Federal
second jurisdictional question we confront is confined to one
of the Lipitor appeals, RP Healthcare, Inc. v.
Pfizer, Inc., No. 14-4632. That case, brought by a group
of California pharmacists, involves claims solely under
California law and was filed in California state court.
Following removal the District Court declined to remand the
case to state court, citing potential patent defenses. That
was error, as federal jurisdiction depends on the content of
the plaintiff's complaint, not a defendant's possible
defenses. Before final judgment, however, the remaining
non-diverse defendants were voluntarily dismissed, thus
raising the possibility that, notwithstanding the District
Court's failure to remand the case, it possessed
diversity jurisdiction before the time it entered judgment.
See Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996).
But because the state of the record before us is unclear with
regard to the citizenship of the parties, we cannot reach the
merits of this appeal until that question is resolved. We
will accordingly remand the RP Healthcare appeal to
the District Court so it can conduct jurisdictional discovery
and address the matter in the first instance.
necessary to begin by discussing the regulatory framework
that forms the foundation for the issues presented by these
most if not all reverse payment settlement agreements arise
in the context of pharmaceutical drug regulation, and
specifically in the context of suits brought under statutory
provisions allowing a generic drug manufacturer (seeking
speedy marketing approval) to challenge the validity of a
patent owned by an already-approved brand-name drug
owner." Actavis, 133 S.Ct. at 2227. With the
Drug Price Competition and Patent Term Restoration Act, 98
Stat. 1585, as amended, known as the Hatch-Waxman Act,
Congress "attempted to balance the goal of 'mak[ing]
available more low cost generic drugs' with the value of
patent monopolies in incentivizing beneficial pharmaceutical
advancement." King Drug Co. v. SmithKline Beecham
Corp., 791 F.3d 388, 394 (3d Cir. 2015) (alteration in
original) (quoting H.R. Rep. No. 98-857, pt. 1, at 14-15
(1984)), cert. denied, 137 S.Ct. 446 (2016).
"The Act seeks to accomplish this purpose, in part, by
encouraging 'manufacturers of generic drugs . . . to
challenge weak or invalid patents on brand name drugs so
consumers can enjoy lower drug prices.'"
Id. (alteration in original) (quoting S. Rep. No.
107-167, at 4 (2002)). In Actavis, the Supreme Court
identified four relevant features of Hatch-Waxman's
regulatory framework. 133 S.Ct. at 2227-29; see also King
Drug, 791 F.3d at 394-96.
a drug manufacturer seeking to market a new,
"pioneer" prescription drug must obtain approval
from the Food and Drug Administration (FDA). See 21
U.S.C. § 355(b)(1). This approval process involves
testing that is "long, costly, and comprehensive."
Actavis, 133 S.Ct. at 2228.
following FDA approval of a brand-name drug, a generic
manufacturer can file an Abbreviated New Drug Application
(ANDA) indicating that the generic "has the same active
ingredients as, and is biologically equivalent to, the
brand-name drug." Caraco Pharm. Labs., Ltd. v. Novo
Nordisk A/S, 566 U.S. 399, 405 (2012) (citing 21 U.S.C.
§ 355(j)(2)(A)(iv)). The ANDA process furthers drug
competition "by allowing the generic to piggy-back on
the pioneer's approval efforts." Actavis,
133 S.Ct. at 2228.
the Hatch-Waxman Act "sets forth special procedures for
identifying, and resolving, related patent disputes."
Id. The new drug applicant is required to list any
patents issued relating to the drug's composition or
methods of use. See 21 U.S.C. § 355(b)(1). If
the FDA approves the new drug, it publishes this patent
information, without verification, in its Orange Book
(officially known as Approved Drug Products with Therapeutic
Equivalence Applications). King Drug, 791 F.3d at
395 & n.5 (citing Caraco, 566 U.S. at 405-06).
In its ANDA, the generic manufacturer must "assure the
FDA that its proposed generic drug will not infringe the
brand's patents." Caraco, 566 U.S. at 406.
One method of assurance is known as "paragraph IV
certification, " whereby the generic may assert that the
relevant listed patents are "invalid or will not be
infringed by the manufacture, use, or sale of the [generic]
drug." 21 U.S.C. § 355(j)(2)(A)(vii)(IV). The
filing of a paragraph IV certification "means provoking
litigation, " Caraco, 566 U.S. at 407, as the
patent statute treats it as an act of automatic infringement,
see 35 U.S.C. § 271(e)(2)(A). If the brand-name
patentee brings an infringement suit within 45 days, the FDA
is required to withhold approving the generic for a 30-month
period. If the courts decide the matter during that period,
the FDA will follow that determination; if not, the FDA may
move forward on its own. See 21 U.S.C. §
"Hatch-Waxman provides a special incentive for a generic
to be the first to file an [ANDA] taking the paragraph IV
route." Actavis, 133 S.Ct. at 2228-29. From the
time it begins marketing its generic, the first-filer enjoys
a 180-day exclusivity period during which no other generic
can compete with the brand-name drug. See 21 U.S.C.
§ 355(j)(5)(B)(iv). This exclusivity period "can
prove valuable, possibly 'worth several hundred million
dollars.'" Actavis, 133 S.Ct. at 2229
(quoting C. Scott Hemphill, Paying for Delay:
Pharmaceutical Patent Settlement as a Regulatory Design
Problem, 81 N.Y.U. L. Rev. 1553, 1579 (2006)). The right
to exclusivity belongs to the first-filer alone and is
nontransferable. See 21 U.S.C. § 355(j)(5)(D).
However, Hatch-Waxman does not preclude the underlying
patent-holder from marketing a brand-generic version of its
drug-known as an "authorized generic"-during the
180-day exclusivity period. See Mylan Pharm., Inc. v.
FDA, 454 F.3d 270, 276-77 (4th Cir. 2006); Teva
Pharm. Indus. Ltd. v. Crawford, 410 F.3d 51, 55 (D.C.
Cir. 2005); see also King Drug, 791 F.3d at 393;
Sanofi-Aventis v. Apotex Inc., 659 F.3d 1171,
1174-75 (Fed. Cir. 2011).
Actavis, the Supreme Court addressed whether
reverse-payment settlements in the Hatch-Waxman context are
subject to antitrust scrutiny. The Court concluded that such
settlements "can sometimes violate the antitrust
laws." 133 S.Ct. at 2227. That is so, the Court held,
because "[a]n unexplained large reverse payment itself
would normally suggest that the patentee has serious doubts
about the patent's survival, " thus
"suggest[ing] that the payment's objective is to
maintain supracompetitive prices to be shared among the
patentee and the challenger rather than face what might have
been a competitive market." Id. at 2237.
rejected an approach known as the "scope of the
patent" test, a near-categorical rule that "absent
sham litigation or fraud in obtaining the patent, a reverse
payment settlement is immune from antitrust attack so long as
its anticompetitive effects fall within the scope of the
exclusionary potential of the patent." FTC v. Watson
Pharm., Inc., 677 F.3d 1298, 1312 (11th Cir. 2012),
rev'd sub nom. Actavis, 133 S.Ct. 2223. The
Court concluded that it would be "incongruous to
determine antitrust legality by measuring the
settlement's anticompetitive effects solely against
patent law policy, rather than by measuring them against
procompetitive antitrust policies as well."
Actavis, 133 S.Ct. at 2231. Instead, the Court's
precedents "indicated that patent and antitrust policies
are both relevant in determining the 'scope of the patent
monopoly'- and consequently antitrust law immunity-that
is conferred by a patent." Id. The Court viewed
these cases as "seek[ing] to accommodate patent and
antitrust policies, finding challenged terms and conditions
unlawful unless patent law policy offsets the antitrust law
policy strongly favoring competition." Id. at
2233; see id. at 2244 (Roberts, C.J., dissenting)
("The majority seems to think that even if the
patent is valid, a patent holder violates the antitrust laws
merely because the settlement took away some chance that his
patent would be declared invalid by a court."). Finally,
the Court observed, among other ...