Recently, a new judge was assigned in a PAL-member national class action lawsuit, In re Modafinil Antitrust Litigation (“Provigil”). The case has been all too quiet since late 2006, when Defendant Cephalon filed for a still-pending motion to dismiss. However, in late April 2009, the case was assigned to a new judge, the Honorable Mitchell S. Goldberg. On July 14, 2009, the plaintiffs in the related patent anti-trust action by direct purchasers asserted that the court should deny defendant Cephalon corporation’s motion to dismiss, based on a supportive new policy taken by the Obama administration’s new Department of Justice. A recent brief filed by the Department of Justice state its new view that there should be a presumption against lawfulness of pay-for-delay settlements. (This brief by DOJ was filed in an appeal pending before the Second Circuit concerning the antibiotic drug Cipro).
Unfortunately for consumers, while this litigation drags on, Cephalon has continued to force consumers to pay a premium price for Provigil.
Background on the Provigil lawsuit: The Provigil lawsuit is being heard in the Eastern District of Pennsylvania. A separate but related case against Cephalon initiated by the FTC was transferred to the court in April 2008 to proceed alongside the consumer class action. [See previous post “Federal Trade Commission case on Provigil is moved to Eastern Pennsylvania.”]
The lawsuit alleges that Cephalon paid generic drug manufacturers substantial cash payments in exchange for delayed generic market entry. However, it is uncertain as to the amount received because pay-for-delay settlement agreements are not made available to the public. The settlement agreement challenged by plaintiffs in the Provigil case includes agreements made with one potential generic competitor, Teva, to keep its version of the sleep disorder drug Provigil off of the market until at least 2011 unless another generic competitor enters the market.
The lawsuit alleges that the settlement was intended to delay a generic version of Provigil from entering the market, continuing Cephalon’s monopoly on Provigil.
Although settlements may be useful to more fairly resolve a dispute in litigation, pay-for-delay settlements such as those between Cephalon and its generic competitors have been challenged as unfair or deceptive acts in violation of FTC Act § 5 and a restraint on trade in violation of §§ 1 and 2 of the Sherman Act. Cephalon maintains that the cash payments paid to Teva were part of a bargain for (1) licenses to intellectual property and (2) agreements relating to the manufacture and supply of the active ingredient in Provigil. Plaintiffs contend that the payments are only a ruse to conceal the underlying purpose and that the agreement does not reflect a reasonable compromise between the generic manufacturers and Cephalon.
Cephalon also entered into similar agreements with three other potential generic competitors (Ranbaxy, Mylan, and Barr). It is estimated that, in total, Cephalon paid as much as $136 million for the pay-for-delay settlements.
Consumer and FTC lawsuits challenging such pay-for-delay settlements face an increasingly uphill battle: three out of the four federal circuits to hear the issue have declined to hold them illegal. The U.S. Supreme Court has decline to consider the issue twice. Nevertheless developing public interest in eliminating these costly pay-for-delay settlements is growing. Pending federal legislation (H.R.1706 and S.369) has the potential to change the hostile atmosphere confronted by plaintiffs in Provigil and other pay-for-delay settlement cases deeming such settlements illegal. [See our blog “Protecting Consumer Access to Generic Drugs Act of 2009” H.R. 1706!] If current legislation passes, the FTC and consumer advocates may not have to wage such protracted lawsuits and campaigns against brand name drug makers. Stay tuned for developments on the Provigil case and updates on the legislation.