SAN FRANCISCO (CN) — A federal judge on Monday gave preliminary approval to a $246.75 million class action settlement between Gilead Sciences and KPH Health Services over allegations that Gilead used anticompetitive practices to slow the process of getting generic HIV drugs to market.
The settlement follows a lengthy antitrust trial in Northern California where customers accused Gilead of plotting to restrain market competition by colluding with Teva Pharmaceuticals, an Israeli generic drug company, to slow the entry of generic versions of HIV drugs, known as a “pay for delay” scheme.
Gilead charged “exorbitant” prices for critical HIV drug treatments while limiting the ability of any generic treatment to come to the market, according to the 2019 complaint, thanks to the supposed deal with Teva agreeing to "delay marketing its generic products." The agreement allowed Gilead to maintain “a monopoly in the market for drugs that comprise the modern HIV treatment regimen.”
However, Gilead prevailed in a jury trial at the end of June, with the jury deciding that the settlement between Teva and Gilead did not violate antitrust laws and was not a reverse payment.
In August, KPH Health Services, doing business as Kinney Drugs, formally sought a class action settlement with Gilead and its affiliated entities.
U.S. Senior District Judge Edward Chen, having assessed the fairness, reasonableness and adequacy of the settlement, handed down preliminary approval on Monday. Per the terms of the settlement, Gilead will pay $246.75 million into a settlement fund to benefit the certified class of direct customers.
“KPH’s agreement to dismiss with prejudice its and the direct purchaser classes’ claims against Gilead in exchange for the agreed-upon consideration to be paid by Gilead pursuant to the settlement agreement is, upon preliminary review, within the range of reasonableness based on the circumstances,” Chen wrote in his order. “The proposed settlement provides that Gilead will pay $246,750,000 into a settlement fund for the benefit of the class members.”
The direct purchaser classes consist of those who purchased the drugs Truvada or Atriplia or any of the two drugs’ generic versions from Gilead, its affiliated entities, or a generic drug manufacturer from Feb. 1, 2018, until the class certification order. In exchange for the settlement payment, the plaintiff class will dismiss its legal action against Gilead and its affiliates.
“Nothing in the settlement agreement, any settlement-related document, or this order shall constitute, be construed as, or deemed to be evidence of, or an admission or concession by Gilead, as to the validity of any claim that has been or could have been asserted against Gilead or any liability of Gilead in relation to those claims,” Chen wrote in his order. “Nor shall any such matter constitute, be construed as, or deemed to be evidence of, or an admission or concession by KPH as to the absence of merit in any of their allegations or claims against Gilead.”
If the settlement is terminated before it becomes final, the parties will resume litigation.
According to the complaint, Gilead’s actions violated sections 1 and 2 of the Sherman Act, forcing customers to pay more for name-brand HIV drugs since the generics were not available. The Sherman Act is an 1890 antitrust law which prescribes the rule of free competition among those engaged in commerce.
KCC Class Action Services LLC will serve as the settlement administrator and the Huntington National Bank will serve as escrow agent for the Gilead settlement fund. The final approval hearing for the settlement will be held on Jan. 18, 2024 in Judge Chen’s courtroom in San Francisco.
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