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In re Generic Pharmaceuticals Pricing Antitrust Litigation

United States District Court, E.D. Pennsylvania

June 5, 2018

IN RE GENERIC PHARMACEUTICALS PRICING ANTITRUST LITIGATION THIS DOCUMENT RELATES TO: ALL ACTIONS

          MEMORANDUM OPINION

          HON. CYNTHIA M. RUFE, JUDGE.

         The State Attorneys General for 44 states, the District of Columbia, and the Commonwealth of Puerto Rico (collectively, the “State Plaintiffs”) have moved for leave to file a Consolidated Amended Complaint (“CAC”) and for a separate government track in this multidistrict litigation (“MDL”).[1] For the following reasons, the motions will be granted.

         I. BACKGROUND

         A. Formation of the MDL

         To place the motions into context, some background on the development of the MDL may be useful. On August 5, 2016, the Judicial Panel on Multidistrict Litigation (“JPML”) granted a motion under 28 U.S.C. § 1407, transferring a civil action to this Court for coordinated or consolidated pretrial proceedings with nine other cases then pending in this District, designating the MDL as “In re: Generic Digoxin and Doxycycline Antitrust Litigation.” The MDL encompassed actions by direct and indirect purchasers alleging that “defendants, all of which are manufacturers of generic pharmaceuticals, conspired to fix the prices of” the two named products.[2] After additional actions were filed or transferred into the MDL, the JPML on April 6, 2017, renamed the MDL as “In re: Generic Pharmaceuticals Pricing Antitrust Litigation” and expanded it to encompass actions in which:

(a) plaintiffs assert claims for price fixing of generic drugs in violation of the Sherman Act and/or state antitrust laws on behalf of overlapping putative nationwide classes of direct or indirect purchasers of generic pharmaceuticals; (b) the average market price of the subject generic pharmaceutical is alleged to have increased between 2012 and the present; (c) defendants are alleged to have effectuated the alleged conspiracy through direct company-to-company contacts and through joint activities undertaken through trade associations, in particular meetings of the Generic Pharmaceutical Association; and (d) the allegations stem from the same government investigation into anticompetitive conduct in the generic pharmaceuticals industry.[3]

         The JPML noted that “[a]lthough separate conspiracies are alleged, they may overlap significantly, ” and that the allegations in all the cases “stem from the same government investigation into price fixing, market allocation, and other anticompetitive conduct in the generic pharmaceuticals industry.”[4] These cases included proposed class actions filed by numerous Plaintiffs sorted into three groups (Direct Purchaser Plaintiffs, End-Payer Plaintiffs, and Indirect Reseller Plaintiffs); each group thereafter has filed 18 consolidated class action complaints, one complaint for each generic pharmaceutical at issue.[5]

         The JPML expanded the MDL again to include State Plaintiffs' litigation in the MDL, holding that State Plaintiffs “assert claims for price fixing of generic drugs . . . in violation of the Sherman Act and state antitrust laws; allege that the average market price of these pharmaceutical products increased between 2012 and the present; and allege that defendants effectuated the alleged conspiracy through direct company-to-company contacts and through joint activities undertaken through trade associations.”[6] The JPML noted that State Plaintiffs' claims “stem from the same government investigation into anticompetitive conduct in the generic pharmaceuticals industry.”[7] At that time, State Plaintiffs asserted claims as to glyburide and doxycycline hyclate delayed release. More recently, an action was filed in this Court on behalf of private plaintiffs who do not wish to be part of the class-action complaints (“Direct Action Plaintiffs”). Direct Action Plaintiffs have filed a complaint alleging an overarching conspiracy and naming 30 drugs (those named by Class Plaintiffs and those in State Plaintiffs' proposed CAC).[8]

         B. Factual Allegations

         The proposed CAC asserts claims for violation of federal antitrust laws and supplemental claims based upon state law. State Plaintiffs allege that Defendants, drug manufacturers and suppliers, have conspired to artificially inflate and maintain prices and reduce competition for 15 generic drugs: acetazolamide, doxycycline hyclate delayed release, doxycycline monohydrate, fosinopril-hydrochlorothiazide, glipizide-metformin, glyburide, glyburide-metformin, leflunomide, meprobamate, nimodipine, nystatin, paromomycin, theophylline, verapamil, and zoledronic acid.[9] The CAC additionally alleges that Defendants participated in an overarching conspiracy to “minimize if not thwart competition across the generic drug industry” through a series of specific conspiracies.[10] State Plaintiffs allege that competition is a key factor in the cost of generic drugs:

[W]hen the first generic manufacturer enters a market for a given drug, the manufacturer prices its product slightly lower than the brand-name manufacturer. A second generic manufacturer's entry reduces the average generic price to nearly half the brand-name price. As additional generic manufacturers market the product, the prices continue to fall slowly. For drugs that attract a large number of generic manufacturers, the average generic price falls to 20% or less of the price of the branded drug.[11]

         According to the CAC, Defendant Heritage Pharmaceuticals, Inc. is a key player in the conspiracies, but all Defendants have communicated with others in various configurations to determine how to divide market share and allocate customers for the drugs in question.[12] The “cozy nature” of the industry allegedly provides extensive opportunities for collusion through conferences and trade shows, industry dinners, private meetings, as well as telephone calls and texts.[13]

         State Plaintiffs allege illegal schemes as to each of the 15 drugs consisting of market allocation agreements to maintain market share and avoid price erosion and agreements to fix prices. These activities allegedly had the purpose or effect of unreasonably restraining and injuring competition, directly relating in an increase in consumer prices for generic pharmaceuticals.[14]

         II. LEGAL STANDARD

         Typically, a court's decision to grant leave to amend begins and ends with Federal Rule of Civil Procedure 15, which provides that leave to amend should be “freely give[n] when justice so requires, ” and therefore “counsels in favor of liberally permitting amendments to a complaint.”[15] “Denial of leave to amend can be based on undue delay, bad faith or dilatory motive on the part of the movant; repeated failure to cure deficiencies by amendments previously allowed; prejudice to the opposing party; and futility.”[16] “Amendment would be futile if the amended complaint would not survive a motion to dismiss for failure to state a claim.”[17] The court, acting within its discretion, also may “ground its decision, within reason, on consideration of additional equities such as judicial economy/burden on the court and the prejudice denying leave to amend would cause to the plaintiff.”[18] However, “prejudice to the non-moving party is the touchstone for the denial of an amendment.”[19]

         III. DISCUSSION

         A. Motion to Amend

         In seeking leave to amend, there is no dispute that State Plaintiffs have not acted with undue delay, bad faith, or dilatory motives. In opposing the motion to amend, Defendants argue amendment would be futile, because the CAC fails to allege an overarching conspiracy, and would prejudice Defendants, because of the ...


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