Faruqi & Faruqi Overcomes Summary Judgment in Niaspan Antitrust Litigation, Claims Over Delayed Generic Competition Will Proceed to Trial

The U.S. District Court for the Eastern District of Pennsylvania has denied the defendants’ motions for summary judgment in In re Niaspan Antitrust Litigation, an antitrust case involving allegations that brand-name drug manufacturer Kos Pharmaceuticals and generic manufacturer Barr Pharmaceuticals entered into an unlawful agreement to delay generic competition for Niaspan, a prescription cholesterol medication.  Faruqi & Faruqi filed the first direct purchaser complaint in this case in 2013, and its attorneys have been aggressively prosecuting the action since, including through discovery, a victory over Defendants’ motion to dismiss, and drafting key briefing resulting in this most recent success.

The case centers on a 2005 patent litigation settlement between Kos and Barr. Under the settlement, Barr agreed to postpone entry of its generic Niaspan until September 20, 2013, despite having the ability to launch years earlier.  Plaintiffs allege that Kos made a “reverse payment” to Barr for this unlawful extension of its Niaspan monopoly through three separate side agreements including:

• A licensing agreement governing Barr’s eventual entry into the generic Niaspan market, including a promise that Kos would not launch its own authorized generic version of Niaspan to compete against Barr,
• A co-promotion agreement under which Kos paid Barr royalties for promotional services unrelated to Niaspan, and
• A manufacturing agreement providing payments to Barr for backup manufacturing services.

The Court emphasized that the agreements must be evaluated together rather than treated as independent commercial transactions.  Accordingly, the Court found that the economic arrangements between Kos and Barr, including the co-promotion payments, manufacturing payments, and no-authorized-generic commitment, could collectively constitute an unlawful reverse payment.

Barr Likely Could Have Prevailed in the Patent Litigation

One of the most significant aspects of the ruling concerns the underlying patent litigation between Kos and Barr.  Plaintiffs argued that, absent the challenged settlement, Barr likely would have prevailed in the patent litigation.  Barr would have been free to enter the market immediately upon FDA approval, which it received at the end of March 2005.

Plaintiffs’ evidence included the expert opinion of a patent lawyer, who opined on the strengths of Barr’s defenses in the patent litigation.  In a separate opinion, the Court endorsed the methodology by which Plaintiffs’ expert analyzed evidence from the underlying litigation to conclude that Barr’s patent invalidity defense, based on the public use of Niaspan during clinical trials, would have succeeded.

Notably, the Court also found sufficient evidence that Barr could have prevailed on a preliminary injunction and then launched “at risk”, i.e., without resolution of the patent litigation.  The court noted there was significant evidence that Barr was in fact preparing to launch its generic product in 2005, before the reverse payment derailed competition.

Court Rejects Litigation Risk as Procompetitive Justification

Defendants argued that the settlement and related side-agreements were justified because the deal eliminated uncertainty and business risks created by the patent litigation.  But the Court rejected that proposition, explaining that paying a generic competitor to eliminate the risk of patent invalidity is precisely the type of anticompetitive harm that warrants scrutiny under federal antitrust law: “Undoubtedly, the delayed generic entry extended Kos’s Niaspan monopoly, resulting in supracompetitive prices.”  The Court further pointed to evidence that Kos had been preparing to launch its own authorized generic in 2005 to compete with Barr.  This evidence, the Court concluded, could support a finding that Kos entered into the settlement because it feared the imminent loss of its monopoly.

The case is ongoing, and a trial date is expected to be set in the near future.