A federal judge found Thursday that pharmaceutical firms may have engaged in bad faith by keeping mum about an allegedly anticompetitive side deal to a patent settlement in 2012.
SAN FRANCISCO (CN) — In a class action seeking billions of dollars from pharmaceutical firms accused of plotting to jack up the price of an essential diabetes drug, a federal judge said Thursday drug companies may have a hard time justifying the price increase to a jury.
“I don’t think you’ll ever be able to explain to a jury $51 a pill when it was $5 before,” U.S. District Judge William Alsup said during a virtual court hearing Thursday. “I’m looking forward to an argument that that could be justified based on market conditions.”
In 2015, the price of the brand-name diabetes drug Glumetza jumped nearly 800% from $5.72 to more than $51 per tablet. Wholesale drug distributors filed three lawsuits — which were later consolidated — in 2019, claiming the extreme price hike directly resulted from an anticompetitive pact cooked up between drug companies in February 2012.
The drug wholesalers claim Assertio Therapeutics, formerly known as Depomed Inc., conspired with Lupin Pharmaceuticals to delay lower-cost generic versions of Glumetza from entering the market. As part of a 2012 settlement of patent lawsuit, Lupin agreed to delay introducing its generic version of Glumetza until February 2016. In exchange, Assertio and Santarus Inc., which had exclusive rights to make and sell Glumetza in the U.S. at that time, agreed to postpone launching their own generic until six months after Lupin entered the market. This gave Lupin a guaranteed six-month period to exclusively sell its generic version.
The drug wholesalers say that deal was worth at least $56 million to Lupin, but it actually became much more valuable in 2016 when the price of Glumetza increased nearly nine times over, allowing Lupin to charge $44 per tablet instead of the $4 it would have charged otherwise.
The drug wholesalers, referred to as “direct purchasers” in the litigation, say this “pay-for-delay deal” amounted to $280 million in value for Lupin and billions of dollars in extra sales for Bausch Health Companies Inc., which inherited exclusive rights to make and sell Glumetza through a web of corporate acquisitions and name changes.
The drug wholesalers say the scheme also caused them to pay an extra $2.8 billion in overcharges since 2012.
During a virtual hearing on dueling motions for summary judgment Thursday, Lupin attorney Leiv Blad argued that entering into a good-faith settlement to resolve a patent dispute can’t form the basis of an antitrust violation.
“I don’t know of a case in which an antitrust defendant has been found to have entered into a settlement agreement in good faith, non-collusively, has been found” liable for antitrust violations, Blad said.
Judge Alsup replied that lawyers don’t get to decide what is considered “good faith,” especially when disputed facts exist in the case.
“When you say good faith, that’s a jury issue,” Alsup said. “I can’t just say it was good faith.”
To hold the drug companies liable for conspiring to monopolize the market, the plaintiffs must show they had “market power” over Glumetza and its generic equivalents.
The drug companies maintain that because there were alternatives to Glumetza, their market power was relatively weak. Diabetes patients could switch to medications that immediately release Glumetza’s active ingredient — metformin — instead of opting for Glumetza, which provides extended release. Metformin lowers how much sugar the body produces and absorbs to help people with type 2 diabetes manage blood sugar levels.
Assertio attorney Eric Stock displayed a chart showing that within seven months of Glumetza’s price increase in June and July of 2015, sales tanked 40% by January 2016.
“We will convince a jury that while there was a fleeting couple of months that [Bauch’s predecessor] Valeant made a profit from increasing the price, it was not a sustainable price increase,” Stock said.
Representing direct purchasers, attorney Steve Shadowen countered that because the “gigantic price increase” did not drive so many customers away as to make Glumetza unprofitable, that shows the drug companies wielded incredible market power.
When Judge Alsup questioned why the price skyrocketed in 2015, Bausch attorney David Marriott replied that “the management at the time believed it was in the shareholders’ best interest to raise the price.”
Lupin also argued the case against it should be thrown out because it was filed after the statute of limitations expired. The company said wholesalers filed their September 2019 suit more than four years after they learned of Lupin’s allegedly secret anticompetitive deal with its business rivals.
The direct purchasers say a document Lupin sent to customers in 2015 stating it did not expect an authorized generic was not adequate to put them on notice. They claim the deal to give Lupin six months without competition from an authorized generic was “fraudulently concealed.”
Alsup appeared to agree with the plaintiffs on that point, noting that a document stating “no authorized generic is expected” is not the same as revealing that Lupin had a secret deal with its competitors.
Alsup also voiced concerns about the drug companies’ failure to inform a federal judge overseeing their patent lawsuit in 2012 of a side deal that gave Lupin six exclusive months without competition from an authorized generic.
“There’s a side agreement that was concealed from a judge,” Alsup said. “That’s not only bad faith. It ought to be referred to the U.S. attorney.”
After about two hours of debate, Judge Alsup took the arguments under submission.