Opinion
No. 1:01CV66 (STAMP).
March 22, 2002.
MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS' MOTION TO DISMISS AND SETTING SCHEDULING CONFERENCE
I. Procedural Background
Pending before this Court is defendant Pfizer, Inc.'s ("Pfizer") motion to dismiss the complaint of plaintiffs Biovail Corporation and Biovail Laboratories, Inc. (collectively "Biovail"). Biovail has filed a memorandum in opposition to the motion to dismiss and Pfizer has filed a reply. Pfizer has also filed a supplemental memorandum in support of its motion to dismiss and Biovail has filed a supplemental memorandum in opposition to the motion to dismiss. This Court has reviewed the memoranda in support of and in opposition to the motion to dismiss and for the reasons set forth in this opinion, finds that Pfizer's motion to dismiss should be denied.
II. Facts
Biovail is a Canadian pharmaceutical company that is in the business of manufacturing pioneer and generic drugs. Biovail has brought this antitrust action alleging that defendants Pfizer, Mylan Laboratories, Inc. and Mylan Pharmaceuticals, Inc., have violated § 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, by agreeing, combining, and conspiring to unreasonably restrain interstate trade and commerce in the manufacture, distribution, and sale of the anti-hypertensive medication, Procardia XL, and its generic substitutes. Biovail seeks an award of actual damages plus interest, as well as treble damages, the cost of the suit, and reasonable attorneys' fees, pursuant to § 4 of the Clayton Act, 15 U.S.C. § 15.
The complaint also states that Biovail seeks injunctive relief pursuant to § 16 of the Clayton Act, 15 U.S.C. § 26.
Before delving into the factual background of this case, it is first important to briefly discuss the regulatory and statutory regime governing the approval and marketing of generic drugs.
The Drug Price Competition and Patent Term Restoration Act of 1984, Pub.L. No. 98-417, 98 Stat. 1585 (1984) ("Hatch-Waxman Amendments") amended the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301, et seq., ("FFDCA"), which regulates the manufacture and distribution of pharmaceuticals. The stated purpose of the Hatch-Waxman Amendments was to "make available more low cost generic drugs[.]" H.R. Rep. No. 98-857, pt. 1, at 14 (1984). The Hatch-Waxman Amendments created § 505(j) of the FFDCA ( 21 U.S.C. § 355 (j)), and established the Abbreviated New Drug Application ("ANDA") approval process which allows low-priced generic versions of previously approved innovator drugs to be approved and brought to market on an expedited basis. A generic drug contains the same active ingredients as the brand-name counterpart, but does not necessarily contain the same inactive ingredients. See Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1063 (D.C. Cir. 1998). Under the Hatch-Waxman Amendments, generic drug makers were permitted to file an ANDA which incorporated data that the "pioneer" manufacturer had already submitted to the Food and Drug Administration ("FDA") regarding the pioneer drug safety and efficacy. In order to obtain FDA approval, the ANDA must demonstrate, among other things, that the generic drug is "bioequivalent" to the pioneer drug. See Mylan v. Shalala, 81 F. Supp.2d 30, 32 (D.D.C. 2000). As protection for pioneer drug makers, the applicant is also required to certify in one of four ways that the generic drug will not infringe upon any patent which claims the pioneer drug. See 21 U.S.C. § 355 (j)(2)(A)(vii). As Judge Wald noted in Mova Pharm. Corp v. Shalala:
The Hatch-Waxman Amendments specify the contents of an ANDA in detail. One requirement is that, for each of the patents applicable to the pioneer drug, the ANDA applicant must certify whether the proposed generic drug would infringe that patent, and, if not, why not. The statute provides ANDA applicants with four certification options: they may certify (I) that the required patent information has not been filed; (II) that the patent has expired; (III) that the patent has not expired, but will expire on a particular date; or (IV) that the patent is invalid or will not be infringed by the drug for which the ANDA applicant seeks approval. 21 U.S.C. § 355 (j)(2)(A) (vii). We will call these paragraph I, II, III, and IV certifications respectively.140 F.3d at 1063-64.
This case involves a "IV certification." The Court of Appeals for the Federal Circuit explained the consequences of a "IV certification" as follows:
If the ANDA contains a paragraph IV certification, and all applicable scientific and regulatory requirements have been met, approval of the ANDA "shall be made effective immediately" unless the patent owner brings an action for infringement under 35 U.S.C.A. § 271(e)(2)(A) within forty-five days of receiving the notice required by 21 U.S.C. § 355 (j)(2)(B). 21 U.S.C. § 355 (j)(4)(B) (iii). The Hatch-Waxman Act further provides that, when a patent owner brings a section 271(e)(2)(A) infringement action, the FDA must suspend approval of the ANDA. Id. The suspension continues — and the FDA cannot approve the ANDA — until the earliest of three dates: (i) if the court decides that the patent is invalid or not infringed, the date of the court's decision; (ii) if the court decides that the patent has been infringed, the date that the patent expires; or (iii) subject to modification by the court, the date that is thirty months from the patent owner's receipt of the notice of the filing of the paragraph IV certification. 21 U.S.C. § 355 (j)(4)(B)(iii)(I)-(III); 35 U.S.C.A. § 271(e)(4) (A).Bristol-Myers Squibb Co. v. Royce Lab., 69 F.3d 1130, 1131-32 (Fed. Cir. 1995), cert. denied, 516 U.S. 1026 (1995); see also Mova, 140 F.3d at 1064.
The statute provides that if an ANDA contains a "IV certification" and is for a drug for which a previous ANDA has been submitted containing such a certification, the later application shall be made effective not earlier than 180 days after the earlier of: (1) the date the FDA received notice from the first ANDA applicant of the first commercial marketing of the drug, or (2) the date of decision of a court in a patent infringement action holding the patent which is the subject of the certification to be invalid or not infringed. This particular provision provides an advantage to the first entity seeking to market a generic version of an already approved drug to undertake a challenge to the patent (or patents) blocking generic competition with respect to that already approved drug.
Pfizer is the holder of a New Drug Application for nifedipine tablets, extended release, which it has sells under the brand-name Procardia XL. Procardia XL is sold exclusively by Pfizer in three available strengths (30, 60 and 90 mg.). In April 1997, Mylan became the first generic manufacturer to file an ANDA for a 30 mg. dosage generic equivalent of Procardia XL and received final approval from the FDA on December 17, 1999. After Mylan filed its ANDA, Biovail filed ANDAs for both 30 mg. and 60 mg. generic equivalents Procardia XL.
Mylan's ANDA filing triggered a patent infringement lawsuit by Pfizer. On March 2, 2000, Pfizer and Mylan announced that they had entered into a settlement agreement which, according to Biovail's complaint: (1) agreed to the dismissal, without prejudice, of Pfizer's patent action against Mylan; (2) granted Mylan a license to sell a private label version of 30, 60 and 90 mg. Procardia XL nifedipine extended release tablets supplied by Pfizer; and (3) agreed that Mylan would not market the generic product it had developed and which the FDA had approved, or in the alternative, the parties understood and intended that their agreement's effect would be that Mylan would not market its FDA-approved generic product.
Biovail contends that Pfizer and Mylan entered into this agreement consciously to delay and hinder the marketing of competitive products. As discussed above, a court decision or commercial marketing of the drug would trigger the 180-day period of marketing exclusivity for Mylan's generic version of Procardia XL. Biovail contends that the settlement agreement of Mylan and Pfizer avoided a court decision in the patent infringement action and avoided Mylan's commercial marketing of the generic drug.
Biovail's ANDA seeking FDA approval of its 30 mg. dosage of generic Procardia XL received tentative FDA approval on September 26, 2000, but the FDA did not grant final approval because it believed that the 180-day exclusivity period had not expired.
On August 10, 2000, Teva Pharmaceuticals, Inc., a licensee of Biovail, filed a Citizen Petition with the FDA seeking final approval for Biovail's 30 mg. generic Procardia XL. On February 6, 2001, the FDA granted Teva's Citizen Petition and granted final approval to Biovail. The FDA granted Teva's Citizen Petition on two grounds: First, the FDA held that, as a result of the settlement that Mylan had reached with Pfizer, Mylan's "IV certification" under the statute was effectively changed from a "IV certification" to a "III certification." Therefore, because applicants who change from a IV certification to III certification are no longer eligible for 180-day exclusivity, the FDA held that Mylan lost its eligibility for exclusivity. Second, the FDA held that Mylan, by marketing its private label generic version of Pfizer's Procardia XL product, as opposed to its own 30 mg. ANDA product, triggered the "commercial marketing" provision of 21 U.S.C. § 355 (j)(5)(B) (iv) (I), thereby commencing the running of the 180-day exclusivity period.
Until February 6, 2001, Mylan was the only generic manufacturer that was able to offer a 30 mg. dosage form of generic Procardia XL. Biovail contends that the Pfizer-Mylan settlement agreement unreasonably restrained trade because it substantially reduced competition for Procardia XL and its generic substitutes. Biovail contends that this agreement caused a 4-month delay of the entry into the market of Biovail's 30 mg. generic version of Procardia XL. Biovail states that:
But for the agreement between Pfizer and Mylan of March 2, 2000, Mylan would have then begun marketing its 30 mg. generic version of Procardia XL, more than 180 days before Biovail's 30 mg. product received tentative approval on September 26, 2000. But for the agreement, therefore, Biovail's September 26 approval would have been final and Biovail's 30 mg. product would have entered the marketplace then or shortly thereafter.
Compl. ¶ 40. Biovail also contends that the Pfizer-Mylan settlement agreement prevented it from effectively marketing its 60 mg. Procardia XL product. Biovail states that the 30 mg. dosage is the most important of the three available dosage strengths and many buyers want to obtain the 30 mg. and 60 mg. dosages from the same sources. Biovail contends that the Pfizer-Mylan agreement prevented it from being able to market the 30 mg. dosage along with the 60 mg. dosage that it was already marketing through Teva. Biovail further contends that defendants' actions had the effect of maintaining the prices for Procardia XL and its generic substitutes at artificially high non-competitive levels.
III. Rule 12(b)(6) Standards
In assessing a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), the court must accept the factual allegations contained in the complaint as true. See Advanced Health-Care Servs., Inc. v. Radford Community Hosp., 910 F.2d 139, 143 (4th Cir. 1990). Dismissal is appropriate pursuant to Rule 12(b)(6) only if "'it appears to be a certainty that the plaintiff would be entitled to no relief under any state of facts which could be proven in support of its claim.'" Id. at 143-44 (quoting Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir. 1969)).
Stated another way, it has often been said that the purpose of a motion under Rule 12(b)(6) is to test the formal sufficiency of the statement of the claim for relief; it is not a procedure for resolving a contest about the facts or the merits of the case. See 5A Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure § 1356, at 294 (2d ed. 1990) (citations omitted). The Rule 12(b)(6) motion also must be distinguished from a motion for summary judgment under Federal Rule of Civil Procedure 56, which goes to the merits of the claim and is designed to test whether there is a genuine issue of material fact. See id. § 1356, at 298. For purposes of the motion to dismiss the complaint is construed in the light most favorable to the party making the claim and essentially the court's inquiry is directed to whether the allegations constitute a statement of a claim under Federal Rule of Civil Procedure 8 (a). See id. § 1357, at 304, 310.
As many courts have stated, the motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted. See id. § 1357, at 321. As this district court noted in Williams v. Wheeling Steel Corp., 266 F. Supp. 651, 654 (N.D. W. Va. 1967), "[t]he plaintiff's burden in resisting a motion to dismiss for failure to state a cause of action is a relatively slight one. "In antitrust cases in particular, the Supreme Court has stated that 'dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly.'"Advanced Health-Care Servs., Inc. v. Radford Community Hosp., 910 F.2d 139, 144 (4th Cir. 1990) (quoting Hospital Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 747 (1976)).
IV. Discussion
Section 1 of the Sherman Antitrust Act provides in pertinent part that:
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal. . . .15 U.S.C. § 1. "To prove a violation of the Act, a plaintiff must establish two elements: (1) There must be at least two persons acting in concert and (2) the restraint complained of must constitute an unreasonable restraint on interstate trade or commerce." Estate Constr. Co. v. Miller Smith Holding Co., 14 F.3d 213, 220 (4th Cir. 1994) (citation omitted).
In order to prove that the defendants' concerted action established an unreasonable restraint of trade, the plaintiffs must show:
(1) that the conspiracy produced adverse, anti-competitive effects within the relevant product and geographic market; (2) that the objects and conduct pursuant to the conspiracy were illegal; and (3) that the plaintiff was injured as a proximate result of the conspiracy.Advanced Health-Care Servs., Inc., 910 F.2d at 144 (citing Terry's Floor Fashions v. Burlington Indus., 763 F.2d 604, 610 n. 10 (4th Cir. 1985)). In determining whether to dismiss this action, this Court must "first examine whether an antitrust violation has been alleged; then, if a violation has been alleged, the court will examine whether — as a result of all of the violations alleged — Biovail has suffered 'injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendant's acts unlawful.'" Biovail Corp. Int'l v. Hoechst Aktiengesellschaft, 49 F. Supp.2d 750, 760 (D. N.J. 1999) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)).
Pfizer's first argument in support of its motion to dismiss is that Biovail has failed to allege an antitrust violation because the Pfizer-Mylan settlement had the effect of eliminating Mylan's 180-day statutory exclusivity period and would not, as a matter of law, have the anti-competitive consequences alleged in the complaint. Pfizer states that the FDA ruled that the Pfizer-Mylan settlement agreement eliminated Mylan's right for 180-day exclusivity or triggered the start of the 180-day exclusivity period. Pfizer argues that the complaint fails to plead that the Pfizer-Mylan agreement had an anti-competitive effect because the complaint acknowledges the FDA's decision determining that the settlement agreement eliminated the exclusivity period. Thus, Pfizer contends that the Pfizer-Mylan settlement agreement "threw open the door to generic competition." Def.'s Mem. in Supp. Mot. to Dismiss at 10.
This Court finds that Biovail has alleged that the conspiracy produced adverse anti-competitive effects within the relevant product and geographic market and that the objects and conduct pursuant to the conspiracy were illegal. In ruling on a motion to dismiss, the court must accept the plaintiffs' allegations of adverse effects on competition as true and must consider the defendants' pro-competitive justifications as unproven. See Advanced Health-Care Servs., Inc., 910 F.2d at 145 (4th Cir. 1990). "Until some discovery is completed, there is no record upon which to assess the reasonableness of the restraints alleged by the plaintiff, so summary dismissal of the plaintiff's § 1 Sherman Act claims . . . [is] inappropriate." Id. Accordingly, this Court finds that Biovail has alleged an antitrust violation.
Pfizer's next argument centers around Pfizer's contention that Biovail has failed to allege and cannot allege facts establishing an antitrust injury. First, Pfizer argues that Biovail's only asserted injury stems from the FDA's decision-making process and not from the Pfizer-Mylan settlement agreement.
"The right to maintain a private cause of action for damages or injunctive relief due to violations of the Sherman Act stems from Sections 4 and 16 of the Clayton Act, 15 U.S.C. § 15, 26, respectively. In order to recover damages or seek injunctive relief, a party must have suffered, or be threatened with, antitrust injury."Biovail Corp. Int'l, 49 F. Supp.2d at 772 (citing 15 U.S.C. § 15 (a), 26 and Brunswick Corp., 429 U.S. at 489). In order to properly plead an "antitrust injury," Biovail must allege facts showing that (1) the injury is of the type that the antitrust laws were intended to prevent and (2) the injury flows from or is caused by the defendant's anti-competitive acts. See In re Cardizem CD Antitrust Lit., 105 F. Supp.2d 618, 646 (E.D. Mich. 2000); see also Brunswick Corp., 429 U.S. at 489. The Fourth Circuit has held that plaintiffs "need only make a 'colorable' showing that it was 'reasonably probable' that the behavior in question caused their injury." Virginia Vermiculite, Ltd. v. W.R. Grace Co., 156 F.3d 535, 539 (4th Cir. 1998) (citation omitted). The Court explained that "[s]uch a low standard is particularly justified in this context because in antitrust cases, where the proof is largely in the hands of the alleged conspirators, dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Id. (citations and internal quotation marks omitted).
Section 4 of the Clayton Act provides that "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws . . . shall recover threefold the damages by him sustained and the cost of the suit, including a reasonable attorney's fee." 15 U.S.C. § 15 (a). A person "threatened [with] loss or damage by a violation of the antitrust laws" can seek injunctive relief under Section 16 of the Clayton Act. 15 U.S.C. § 26.
Pfizer contends that Biovail has failed to allege antitrust injury because the allegations in the complaint demonstrate that the injury stems directly from the FDA's action and not from the Pfizer-Mylan agreement. Pfizer also contends that the complaint has not alleged that even in the absence of the Pfizer-Mylan agreement, Biovail would have been entitled to market its generic version of Procardia XL.
Pfizer states that on September 26, 2000 the FDA made an initial determination that Biovail was not entitled to final approval of its 30 mg. generic product because Mylan's exclusivity rights had not yet begun to run. Pfizer further states that four months later, the FDA basically reversed itself in response to Teva's Citizen Petition. Pfizer therefore contends that any injury allegedly suffered by Biovail stemmed directly from the FDA's interpretation of the Hatch-Waxman Act. Pfizer states that, at most, it was the FDA's delay in ruling on the citizen petition and not the Pfizer-Mylan settlement agreement that caused Biovail's alleged injury.
Biovail argues in response that it has shown that it suffered an injury of the type that the antitrust laws were intended to prevent and that flows from the defendants' anti-competitive acts. This Court agrees. There is no question that "the intentional attempt to exclude competitors from the market and maintain monopoly power is precisely the type of injury that the antitrust laws were intended to prevent." Biovail Corp. Int'l, 49 F. Supp.2d at 772. The Supreme Court has recognized that "a plaintiff need not exhaust all possible alternative sources of injury in fulfilling his burden of proving compensable injury under § 4 [of the Clayton Act]." Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n. 9 (1969)). It is too soon to tell whether Mylan and Pfizer entered into their settlement to circumvent the statutory and regulatory scheme. Even if the FDA and the manner in which the law is written may be partly to blame, Biovail has properly alleged that Pfizer and Mylan entered into this agreement in order to restrain trade and to keep the Procardia market to themselves for as long as possible.
Pfizer also argues that Biovail fails to allege an antitrust injury because it is entirely speculative when or if Mylan would have commenced commercial marketing in the absence of the Pfizer-Mylan settlement agreement and it is speculative when or if there would have been a court decision of patent invalidity or non-infringement in the absence of the Pfizer-Mylan settlement agreement.
Pfizer contends that while the FDA had given Mylan final approval to market its 30 mg. product in December 1999, Mylan was not obligated to begin marketing on that date, especially while it was subject to a patent infringement suit initiated by Pfizer. It is true that even with FDA approval, a company may keep its generic drug off the market until a patent suit is decided. See Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1070 (D.C. Cir. 1998). Pfizer contends that because Mylan could have waited until the end of the patent litigation before marketing its product, Biovail's injury is more directly caused by the statutory scheme rather than the Pfizer-Mylan settlement agreement.
Biovail argues in response that it alleged in ¶ 30 of the complaint that but for the anti-competitive agreement, Mylan would have brought its generic version to market when it received FDA approval in December 1999. Biovail's complaint even explains why it believed Mylan would have gone to market. Biovail contends that Mylan had not considered Pfizer's claims to be meritorious because an identical claim that Bayer AG and Bayer Corporation brought against Elan Pharmaceutical Research Corporation had been dismissed on summary judgment for non-infringement.
Biovail also points to Biovail Corp. Int'l v. Hoechst Aktiengesellschaft that dealt with arguments identical to Pfizer's. The court stated that "[t]hese are very persuasive arguments which may ultimately sway the trier of fact. However, on a motion to dismiss, this Court must view all allegations in the light most favorable to the non-moving party." Biovail Corp. Int'l, 49 F. Supp.2d at 767. Therefore, it is possible that Mylan did not market its generic product because it did not want to risk potential patent infringement damages, but it is also possible that Mylan did not market its generic product due to the agreement it made with Pfizer. As in Biovail Corp. Int'l, "[t]his Court simply cannot make this call on the pleadings." Id. at 768.
Because this Court has already determined that Biovail has adequately plead an antitrust injury, it is not necessary to discuss Pfizer's argument concerning the fact that it is too speculative to determine when the district could would have issued a decision on the merits of Pfizer's patent infringement claim and therefore impossible to determine when the 180-day exclusivity period would have begun to run. Biovail has alleged that the Pfizer-Mylan agreement caused Mylan to refrain from the commercial marketing of its generic version of Procardia. Biovail has also alleged that absent the agreement, it is possible that Mylan would have begun to market its generic drug, despite the patent lawsuit filed against it. This Court thus finds that Biovail has made a colorable showing that it was reasonably probable that defendants' behavior caused their injury, even if it may not have been the exclusive cause. It would be premature to dismiss this action without allowing Biovail the opportunity for discovery.
V. Conclusion
For the foregoing reasons, this Court finds that the plaintiffs have stated a claim upon which relief may be granted. The defendants' motion to dismiss is hereby DENIED. Because this Court stayed discovery in this matter until after it made a ruling on the motion to dismiss, a scheduling conference is now necessary in order to determine a discovery cut-off date, trial date, and all other deadlines in this case. Accordingly, a scheduling conference shall take place on Apri1 15, 2002 at 1:00 p.m. at the Wheeling Federal Courthouse . The parties are encouraged to meet prior to the conference to discuss some acceptable dates.
The Court will permit those out-of-town attorneys having their offices further than forty miles from the point of holding court to participate in the conference by telephone. Plaintiffs' counsel shall initiate the conference call.
IT IS SO ORDERED.
The Clerk is directed to transmit copies of this order to counsel of record herein.