Meijer, Inc. et al v. Ranbaxy Inc. et al
Filing
169
Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: Please see attached Memorandum and Order. Associated Cases: 1:19-md-02878-NMG et al. (Vieira, Leonardo)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
___________________________________
)
)
)
)
This Document Relates To:
)
)
All Cases
)
)
___________________________________)
In re: Ranbaxy Generic Drug
Application Antitrust Litigation,
MDL No. 19-md-02878-NMG
MEMORANDUM & ORDER
GORTON, J.
This multi-district ligation involves five actions which
are centralized in this Court and have been divided into two
putative classes against Ranbaxy Inc. and Sun Pharmaceutical
Industries Limited (collectively, “Ranbaxy” or “defendants”) for
allegedly causing the delayed market entry of three generic
drugs (Diovan, Valcyte and Nexium).
Direct purchaser plaintiffs (“DPPs”), such as wholesalers,
purchased brand name and generic drugs directly from drug
manufacturers.
End-payor plaintiffs (“EPPs”), such as consumers
and third-party payors, purchased brand name and generic drugs
at the end of the distribution chain from retailers and other
financial intermediaries.
The DPPs and EPPs (collectively,
- 1 -
“plaintiffs”) bring claims for violations of the Racketeer
Influenced and Corrupt Organizations Act (“RICO”), federal and
state antitrust law and state consumer protection law.
Following centralization, both the DPPs and the EPPs filed
amended consolidated complaints (Docket Nos. 20, 22)
(collectively, “the Consolidated Complaints”).
Pending before
the Court are the motions of Ranbaxy to dismiss both
Consolidated Complaints (Docket Nos. 63, 65).1
I.
Background
The facts of this case are described in detail in the
Report and Recommendation of Magistrate Judge Page Kelley with
respect to Ranbaxy’s motion to dismiss the complaint of
plaintiffs Meijer, Inc. and Meijer Distribution, Inc.
(collectively, “Meijer”) in the original action in this Court
prior to centralization. See Meijer, Inc. v. Ranbaxy, Inc.,
No.1:15-cv-11828-NMG (D. Mass. Sept. 7, 2016) (“Meijer I”).
For
that reason, the Court provides only an abbreviated background
here.
The Consolidated Complaints name Ranbaxy Laboratories Limited
and Ranbaxy USA, Inc. as additional defendants. These entities
no longer exist and, therefore, will be dismissed.
1
- 2 -
A. Statutory and Regulatory Framework
The Food and Drug Administration (“FDA”) is charged with
regulating prescription drugs under the Food, Drug and Cosmetic
Act (“FDCA”). 21 U.S.C. §§ 301 et seq.
The FDCA requires drug
manufacturers that create a new drug product to seek approval to
sell the drug by filing with the FDA a New Drug Application. 21
U.S.C. §§ 301-392.
Recognizing that the drug approval process is an onerous
one, Congress passed the Hatch-Waxman Amendments to the FDCA in
1984 (“the Hatch-Waxman Act”). Pub. L. No. 98-417, 98 Stat. 1585
(1984).
The Hatch-Waxman Act created the Abbreviated New Drug
Application (“ANDA”) as a “fast-track” for manufacturers seeking
to launch generic versions of branded drugs previously approved
by the FDA. 21 U.S.C. § 355.
The ANDA process allows a
manufacturer to demonstrate that its proposed generic has the
same therapeutically active ingredient and releases it at the
same rate and to the same extent as an FDA-approved drug.
§ 355(j)(2)(A)(vii).
The ANDA approval process proceeds in three phases. Ranbaxy
Labs., LTD. v. Burwell, 82 F. Supp. 3d 159, 170 (D.D.C. 2015).
In phase I, a generic drug manufacturer must “perfect” its
application. Id.
This requires the generic manufacturer to
- 3 -
certify that the marketing of its generic drug will not infringe
upon any existing patents. § 355(j)(2)(A)(vii)(I)-(IV).
If a
generic manufacturer certifies its application pursuant to
§ 355(j)(2)(A)(vii)(IV) (a “Paragraph IV certification”), it
claims that either an existing patent is invalid or will not be
infringed upon by the generic. Id.
A Paragraph IV certification is a per se patent
infringement upon the preexisting patent and prompts a 45-day
window for the patent holder to file suit. 35 U.S.C.
§ 271(e)(2).
To compensate for this risk, the first generic
manufacturer to file a successful ANDA with a Paragraph IV
certification (“first filer”) is rewarded with a 180-day
exclusivity period during which no other manufacturers, with the
exception of those authorized by the branded drug manufacturer,
may market competing generics. 21 U.S.C. § 355(j)(5)(B)(iv).
This period of exclusivity is the most profitable time for a new
generic drug because the first filer typically procures an
overwhelming majority of the sales of the drug while offering
only a modest discount off the brand drug price.
Phase II is tentative approval (“TA”).
An ANDA may be
tentatively approved if it could be unconditionally approved but
for the presence of blocking patents or other existing periods
- 4 -
of exclusivity. 21 U.S.C. § 355(j)(5)(B)(iv).
A TA does not
authorize the drug to be marketed but serves to preserve the
180-day exclusivity period. Id.
Phase III is final approval which may be granted once the
manufacturer has met the FDA’s requirements. 21 U.S.C.
§ 355(j)(4).
B. Factual Background
Plaintiffs allege that Ranbaxy violated RICO, federal and
state antitrust laws and state consumer protection laws by
submitting multiple ANDAs with missing, incorrect or fraudulent
information, thereby wrongfully acquiring exclusivity periods
and delaying the market entry of generic drugs.
The Consolidated Complaints focus on Ranbaxy’s manufacture
of generic versions of three drugs branded Diovan, Nexium and
Valcyte.
Diovan is the generic valsartan (“generic Diovan”) and
is used to treat high blood pressure and heart failure.
Valcyte
is the generic valganciclovir hydrochloride (“generic Valcyte”)
and is an antiviral medication.
Nexium is the generic
esomeprazole magnesium (“generic Nexium”) and is a proton-pump
inhibitor used to treat gastroesophageal reflux disease.
In late 2005, a whistleblower alerted the FDA to serious
and systemic issues of noncompliance with the FDA’s current Good
- 5 -
Manufacturing Practices at various Ranbaxy manufacturing
facilities.
Following the whistleblower’s complaint, the FDA
began a series of detailed inspections at Ranbaxy’s facilities.
In response, Ranbaxy hired the law firm of Buc & Beardsley LLP
(“Beardsley”) and an auditor, Parexel Consulting LLC
(“Parexel”), pursuant to an agreement whereby Beardsley and
Ranbaxy could control what information Parexel shared with the
FDA.
Beardsley reviewed Parexel’s audit reports and designated
them as privileged.
In June, 2006, the FDA issued a warning letter to Ranbaxy’s
facility in Paonta Sahib, India (“the Paonta Sahib facility”)
and recommended placing a hold on all ANDAs originating from
that facility.
Nearly one year later, Ranbaxy notified the FDA
that the identified compliance issues were resolved.
The FDA,
relying on Ranbaxy’s attestations, granted TAs for Ranbaxy’s
ADNAs for generic Diovan (in October, 2007), generic Nexium (in
February, 2008) and generic Valcyte (in June, 2008).
In July, 2008, the government subpoenaed the Parexel audits
and, upon examination, issued additional warning letters.
In
February, 2009, the FDA froze all ANDAs originating from the
Paonta Sahib facility.
- 6 -
In January, 2012, Ranbaxy and the FDA entered into a
consent decree and Ranbaxy withdrew several ANDAs.
With respect
to certain “excepted” ANDAs, Ranbaxy was permitted to retain its
first filer status upon demonstrating that the ANDA had been
substantially complete at the time of submission and did not
reflect a pattern or practice of data irregularities.
Ranbaxy’s
generic Diovan, generic Valcyte and generic Nexium ANDAs were
among those “excepted.”
1. Diovan
Ranbaxy filed its ANDA for generic Diovan in 2004.
In
2007, Ranbaxy amended its ANDA to include a Paragraph IV
certification, preserving eligibility for first filer status.
The patent holder filed suit and, pursuant to a settlement
agreement, Ranbaxy agreed to delay marketing generic Diovan
until September, 2012.
Ranbaxy’s generic Diovan ANDA was excepted from the FDA
consent decree and Ranbaxy was permitted to retain first filer
status.
Plaintiffs submit that other ANDA filers had received
TAs by July, 2012, but were unable to obtain final approval
because of Ranbaxy’s first filer status.
The FDA granted final
approval in June, 2014, and Ranbaxy launched generic Diovan the
following month.
- 7 -
2. Nexium
Ranbaxy filed its ANDA for generic Nexium in August, 2005,
and subsequently included a Paragraph IV certification,
preserving eligibility for first filer status.
holder filed suit in November, 2005.
The patent
In April, 2008, Ranbaxy
settled with the patent holder and agreed to delay launching
generic Nexium until May, 2014.
The agreed-upon entry date passed without Ranbaxy launching
generic Nexium.
In November, 2014, the FDA rescinded its TA for
generic Nexium and stripped Ranbaxy of first filer status.
That
same day, the FDA issued final approval to a competitor’s
generic Nexium ANDA and generic Nexium entered the market a few
weeks later.
3. Valcyte
Ranbaxy filed its ANDA for generic Valcyte in December,
2005 and included a Paragraph IV certification which made it
eligible for first filer status.
In April, 2006, the patent
holder filed suit and, by virtue of a settlement agreement,
Ranbaxy agreed to delay the marketing of generic Valcyte until
March, 2013.
Nearly one year after the passage of the agreed-
upon launch date, Ranbaxy was still unable to secure final
approval from the FDA.
In November, 2014, the FDA rescinded the
- 8 -
TA for Ranbaxy’s generic Valcyte ANDA and stripped Ranbaxy of
first filer status.
The FDA granted final approval to a
competitor that same day and generic Valcyte entered the market
shortly thereafter.
Ranbaxy sued the FDA for revoking its TA
but the FDA prevailed on summary judgment.
C. Procedural Background
The first case filed in this Court before centralization,
Meijer I, was filed in 2015.
to dismiss.
In September, 2015, Ranbaxy moved
This Court accepted and adopted the Report and
Recommendation of Magistrate Judge Kelley (“R&R”) denying
defendant’s motion to dismiss.
The Court certified its order
for interlocutory appeal, recognizing that defendant had raised
a complex legal question of first impression.
The First Circuit
Court of Appeals declined to hear the interlocutory appeal.
Meijer, Inc. v. Ranbaxy Inc., No. 17-8008 (1st Cir. Dec. 28,
2018).
Additional lawsuits were subsequently filed in the United
States District Courts for the Eastern District of Pennsylvania,
the Eastern District of New York and the District of Massachusetts.
The United States Judicial Panel on Multidistrict Litigation
determined the lawsuits involved common questions of fact and
centralized the action in this Court for pretrial proceedings
- 9 -
(Docket No. 2).
Upon centralization, the case was divided into
two putative classes of direct purchasers and indirect purchasers.
Each putative class filed an amended consolidated complaint
(Docket Nos. 20, 22).
Ranbaxy then moved to dismiss both
complaints (Docket Nos. 63, 65).
II.
Motions to Dismiss
A. Legal Standard
To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to “state a claim
to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007).
In considering the merits of
a motion to dismiss, the Court may only look to the facts
alleged in the pleadings, documents attached as exhibits or
incorporated by reference in the complaint and matters of which
judicial notice can be taken. Nollet v. Justices of Trial Court
of Mass., 83 F. Supp. 2d 204, 208 (D. Mass. 2000), aff’d, 228
F.3d 1127 (1st Cir. 2000).
Furthermore, the Court must accept all factual allegations
in the complaint as true and draw all reasonable inferences in
the plaintiff’s favor. Langadinos v. Am. Airlines, Inc., 199
F.3d 68, 69 (1st Cir. 2000).
If the facts in the complaint are
- 10 -
sufficient to state a cause of action, a motion to dismiss the
complaint must be denied. See Nollet, 83 F. Supp. 2d at 208.
Although a court must accept as true all the factual
allegations in a complaint, that doctrine is not applicable to
legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662 (2009).
Threadbare recitals of legal elements which are supported by
mere conclusory statements do not suffice to state a cause of
action. Id.
Accordingly, a complaint does not state a claim of
relief where the well-pled facts fail to warrant an inference of
any more than the mere possibility of misconduct. Id. at 1950.
B. Application
Ranbaxy moves to dismiss both Consolidated Complaints on
the grounds that: 1) Ranbaxy is entitled to Noerr-Pennington
immunity; 2) plaintiffs cannot demonstrate proximate cause and
3) plaintiffs cannot establish a predicate offense under RICO.
Although the motions overlap substantially, there are several
arguments unique to each plaintiff group.
With respect to the
DPPs, the parties disagree over whether the Court should
consider Ranbaxy’s motion anew or treat it as a motion for
reconsideration, given that the Court previously denied a motion
to dismiss filed by Ranbaxy in Meijer I.
Ranbaxy moves to
dismiss the DPPs’ complaint on the additional ground that the
- 11 -
federal antitrust claims of the DPPs are barred by the FDCA.
With respect to the EPPs, Ranbaxy moves to dismiss on the
grounds that 1) the FDCA preempts their state law claims;
2) their state law antitrust claims are unavailing; 3) their
state law consumer protection claims lack merit; and 4) the
statute of limitations bars several of their claims.
The Court will address arguments unique to the DPPs, unique
to the EPPs and common to both plaintiff groups seriatim.
1. Arguments Unique to the DPPs
a.
Effect of Meijer I
Preliminarily, the parties dispute whether the Court should
even entertain defendants’ motions to dismiss the claims of the
DPPs.
The DPPs submit that the Court should treat the motion as
one for reconsideration because, by Ranbaxy’s own admission,
“the Court previously considered [its] argument[s] and was
ultimately unpersuaded.”
Ranbaxy urges the Court to consider
its arguments anew because additional plaintiffs and a third
drug (Nexium) have altered the nature of the case.
This contest highlights an issue of substantial
disagreement among federal courts: the nature of a consolidated
complaint filed after MDL centralization.
Several courts have
referred to consolidated complaints as mere “procedural
- 12 -
device[s] used to promote judicial efficiency and economy” and
have declined to give such complaints the “same effect as an
ordinary complaint.” See, e.g., In re Propulsid Prods. Liab.
Litig., 208 F.R.D. 133, 141–42, 144 (E.D. La. 2002) (citing 9
Charles A. Wright & Arthur R. Miller, Federal Practice and
Procedure § 2382 (1971) and Diana E. Murphy, Unified and
Consolidated Complaints in Multidistrict Litigation, 132 F.R.D.
597 (1991)). Other courts have entertained motions to dismiss
consolidated complaints in the regular course. See, e.g., In re
Zimmer Nexgen Knee Implant Prods. Liab. Litig., MDL No. 2272,
2012 WL 3582708 (N.D. Ill. Aug. 16, 2012); In re Trasylol Prods.
Liab. Litig., No. 08–MD–1928, 2009 WL 577726 (S.D. Fla. Mar. 5,
2009).
Courts are more willing to consider a motion to dismiss a
consolidated complaint if it challenges the sufficiency of
factual allegations common to all plaintiffs. See, e.g., In re
Katrina Canal Breaches Litig., 309 F. App'x 836 (5th Cir. 2009)
(per curiam); In re Bextra & Celebrex Mktg., Sales Practices &
Prod. Liab. Litig., No. MDL 05–01699 CRB, 2007 WL 2028408, at *9
(N.D. Cal. July 10, 2007).
This Court will follow that approach and will consider
defendant’s motion to dismiss insofar as it challenges issues
- 13 -
common to all DPPs.
The Court will not apply the heightened
motion for reconsideration standard but, with respect to any
argument previously rejected by the Court in Meijer I, will
provide only a cursory analysis to determine whether the law has
substantially changed.
b.
FDCA Preclusion of DPPs’ Claims
Ranbaxy avers that, pursuant to Buckman v. Plaintiffs’
Legal Committee, 531 U.S. 341 (2001), the authority to enforce
violations of the FDCA belongs exclusively to the FDA.
As a
result, argues Ranbaxy, the FDCA precludes the DPPs’ federal
antitrust claims.
This Court previously recognized that the
issue is one of first impression in this Circuit.
this Court can discern, that has not changed.
As far as
Indeed, Ranbaxy
cites no new case law addressing FDCA preclusion of federal
antitrust claims involving fraud on the FDA.
Furthermore, Ranbaxy fails to proffer any persuasive
reason for this Court to reexamine its previous analysis of
Buckman’s application to federal antitrust claims.
Accordingly, the Court incorporates the reasoning in
Meijer I and holds the claims of the DPPs are not precluded
by the FDCA.
- 14 -
2. Arguments Unique to the EPPs
a. FDCA preemption of the EPPs’ Claims
Ranbaxy submits that whatever the merits of the
Court’s preclusion analysis in Meijer I with respect to the
federal antitrust claims of the DPPs, it is inapplicable to
the preemption analysis of the state law antitrust and
consumer protection claims of the EPPs.
To the extent that
Ranbaxy alleges that the EPPs’ federal RICO claim is
precluded by the FDCA, the Court rejects that argument for
the reasons articulated in Meijer I.
Ranbaxy avers that Buckman compels the Court to
dismiss the EPPs’ state law claims as preempted by the
FDCA.
In Buckman, the plaintiffs attempted to bring state
law tort claims against a manufacturer and a federal
regulatory consultant for injuries caused by orthopedic
bone screws. 531 U.S. at 344.
At summary judgment, the
only remaining defendant was the federal regulatory
consultant who had assisted the manufacturer in “navigating
the federal regulatory process” in an allegedly fraudulent
manner. Id. at 343.
According to the plaintiffs, the
consultant prepared a fraudulent FDA application on behalf
of the bone screw manufacturer in an effort to secure FDA
- 15 -
approval for the bone screws. Id. at 354.
The FDA did not,
however, make an independent determination of fraud. Id. at
354.
The United States Supreme Court held that the FDCA
preempted plaintiffs’ state law tort claims. Id. at 343.
The Court reasoned that the plaintiffs’ claims did not rely
on traditional state tort law independent of federal
regulations. Id. at 350-53.
Instead, the plaintiffs relied
on the anti-fraud provisions of the FDCA in support of
their claims. Id. at 343.
In that sense, the suit was one
for enforcement of the FDCA rather than for remediation of
tortious conduct and thus inevitably conflicted with the
FDA’s responsibility to police fraud pursuant to the FDCA.
Id. at 350.
Neither party proffers a citation that addresses the
applicability of Buckman to state law antitrust and
consumer protection claims.
The First Circuit has,
however, considered Buckman in similar circumstances.
In
Dumont v. Reily Foods Co., a customer brought a consumer
protection claim alleging that a coffee creamer
manufacturer mislabeled a product as containing hazelnut in
violation of the FDCA. 934 F.3d 35, 41 (1st Cir. 2019).
- 16 -
The court applied Buckman and held that the claim was not
preempted by the FDCA but declined to elucidate the
standard governing FDCA preemption of consumer protection
claims. Id.
Instead, because the parties agreed on a
standard, the court adopted it, in essence, without
prejudice. Id. at 42.
Although Dumont fails to clarify the applicable
standard, it is nonetheless instructive.
On the one hand,
the court dismissed so much of the complaint as attempted
to hold the defendant liable for violating federal false
labeling standards. Id.
On the other hand, the court
allowed to proceed a separate and independent consumer
protection claim. Id.
The court reasoned that
the preemptive force [of the federal regulations]
will restrict the factfinder to determining
whether conduct that does violate the federal
regulations is also deceptive under Massachusetts
law by virtue of its nature rather than its
federal illegality.
Id. at 43.
That reasoning is buttressed by the concurring opinion
of Justice Stevens in Buckman in which he notes the absence
of a determination by the FDA that the defendant in Buckman
had committed fraud. Buckman, 531 U.S. at 354 (Stevens, J.,
concurring).
Had the FDA found fraud, Justice Stevens
- 17 -
observed, the plaintiff would have been able to establish
causation for his state law claims without second-guessing
the FDA’s decision making. Id.
Under such circumstances,
state law remedies “would not encroach upon, but rather
would supplement and facilitate” federal enforcement. Id.
Here, the EPPs have alleged that the FDA found fraud.
Indeed, the FDA went so far as to rescind tentative
approval for Ranbaxy’s generic Valcyte and generic Nexium
ANDAs.
Furthermore, the fraud found by the FDA and
realleged by plaintiffs in the Consolidated Complaints is a
necessary element in the causation analysis of the EPPs’
claims but, as in Dumont and contrary to Buckman, their
claims do not seek to remedy only FDCA noncompliance.
The
EPPs must establish that they were injured by conduct of
Ranbaxy that is independently proscribed under state law by
virtue of its nature rather than its federal proscription.
Dumont, 934 F.3d at 43.
As pled by the EPPs, such an
indirect relationship between the state and federal claims
does not warrant preemption. Id.
This Court’s reluctance to broaden Buckman is
consistent with the “legion of cases upholding parallel
requirements to federal violations as actionable under
- 18 -
state law.”
See, e.g., In re Medtronic, Inc. Implantable
Defibrillators Litig., 465 F. Supp. 2d 886 (D. Minn. 2006);
Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996).
Other courts
that have considered the application of Buckman to state
consumer protection and antitrust claims have similarly
held. See In re Lipitor Antitrust Litig., 336 F. Supp. 3d
395, 411 (D.N.J. 2018); In re DDAVP Indirect Purchaser
Antitrust Litig., 903 F. Supp. 2d 198, 220-21 (S.D.N.Y.
2012).
Accordingly, the EPPs may utilize evidence of
Ranbaxy’s efforts to manipulate the regulatory process in
order to prove their state law antitrust and consumer
protection claims without converting them into preempted
fraud-on-the-FDA claims.
b. State Antitrust Claims
i.
Standing
Ranbaxy challenges the EPPs’ standing to bring
antitrust claims under the laws of Florida and
Massachusetts.
Both state statutes have, however, been
interpreted as permitting claims by indirect purchasers. In
re Solodyn (Minocycline Hydrochloride) Antitrust Litig.,
- 19 -
No. 14–md–02503–DJC, 2015 WL 5458570, *16 (D. Mass. Sept.
16, 2015).
Therefore, the EPPs have standing.
ii.
Jurisdiction and Venue
Ranbaxy submits that the Arizona, Michigan and North
Dakota claims of the EPPs must be dismissed for failure to
bring those claims in the proper jurisdictions but Ranbaxy
offers no support for its contention that the respective
state statutes provide for exclusive state court
jurisdiction.
Absent an express congressional prohibition
to the contrary, the Court declines to interpret the
applicable laws as depriving federal courts of
jurisdiction. See In re Remicade Antitrust Litig., 345 F.
Supp. 3d 566, 590 (E.D. Pa. 2018) (allowing Arizona
antitrust claim to proceed in federal court); Superior
Consulting Co. v. Walling, 851 F. Supp. 839 (E.D. Mich.
1994) (allowing Michigan antitrust claim to proceed in
federal court).
iii.
State Action Doctrine
Ranbaxy contends that the Iowa and Minnesota claims
of the EPPs fail because Ranbaxy is entitled to state
action immunity, which permits anticompetitive conduct if
authorized and supervised by government officials. FTC v.
- 20 -
Ticor Title Ins. Co.,504 U.S. 621, 627 (1992).
This
doctrine applies only to conduct “undertaken pursuant to a
clearly articulated and affirmatively expressed state
policy” that is “actively supervised” by government
officials. Mueller v. Wellmark, Inc., 818 N.W. 2d 244, 258
(Iowa 2012).
Ranbaxy provides no evidence whatsoever that
its alleged anticompetitive activities were expressly
approved or regulated as required by the state action
doctrine. See Crippen v. City of Cedar Rapids, 618 N.W. 2d
562, 567 (Iowa 2000).
iv.
Miscellaneous
Ranbaxy challenges the California claim of the EPPs
because the applicable statute “bans combinations,” but not
single firm monopolies. Asahi Kasei Pharma Corp. v.
CoTherix, Inc., 138 Cal. Rptr. 3d 620, 626 (Cal. Ct. App.
2012).
The EPPs have adequately alleged, however, that
Ranbaxy conspired with Beardsley and Parexel to mislead the
FDA.
Ranbaxy’s dispute with respect to the EPPs’ Vermont
antitrust claims will be analyzed below in tandem with its
dispute with the EPPs’ Vermont consumer protection claims
because the arguments substantially overlap.
- 21 -
c. State Consumer Protection Claims
i.
Notice and Demand
Ranbaxy urges dismissal of the California, Maine and
West Virginia claims of the EPPs for failure to serve
Ranbaxy with the required notice and demand prior to the
filing of the respective suits.
The EPPs concede that
notice was not provided but maintain that Ranbaxy cannot
convincingly argue that it had inadequate notice.
The EPPs
further maintain that any settlement demand would have been
futile but, alternatively, ask for leave to amend to meet
the statutory requirements.
The EPPs proffer no support for their contention that
the required notice and demand was either unnecessary or
futile.
Indeed, the EPPs failed even to plead as much.
Accordingly, the EPPs’ consumer protection claims under the
laws of California, Maine and West Virginia will be
dismissed without prejudice.
The EPPs may amend their
consolidated complaint to meet the statutory requirements.
Contrary to Ranbaxy’s assertions, dismissal with
prejudice under California law is unnecessary. See Morgan
v. AT&T Wireless Serv., Inc., 99 Cal.Rptr.3d 768, 789 (Cal.
App. Ct. 2009) (explaining that dismissal with prejudice is
- 22 -
not required where it is not necessary to further the
purpose of providing defendant with an opportunity to
correct the alleged wrong before a lawsuit is filed).
ii.
Standing
Ranbaxy asserts the EPPs lack standing under the
consumer protection laws of Maine, Michigan, Missouri,
Pennsylvania, North Carolina and Vermont because the EPPs
did not purchase the goods at issue primarily for personal,
familial or household purposes.
The EPPs explicitly exclude from their putative class
any persons or entities who purchased branded or generic
Diovan, Nexium or Valcyte for purposes of resale. The EPPs
pay costs of individual consumers for prescription drugs
used for personal, familial or household purposes.
Each challenged provision provides standing for
entities that purchase goods on behalf of their members for
the members’ personal, familial or household use. Sheet
Metal Workers Local 441 Health & Welfare Plan v.
GlaxoSmithKline, PLC, 737 F. Supp. 2d 380, 421-22 (E.D. Pa.
2010) (allowing consumer protection suit under Pennsylvania
and North Carolina statutes by health benefit plans that
purchased goods for their members’ personal use); Rathe
- 23 -
Salvage, Inc. v. R. Brown & Sons, Inc., 965 A.2d 355, 467
(Vt. 2008) (explaining Vermont statute was amended to
ensure businesses were provided the same protections as
individuals); Ports Petroleum Co. of Ohio v. Nixon, 37
S.W.3d 237, 240 (Mo. 2001) (explaining the Missouri statute
is “unrestricted, all-encompassing and exceedingly broad”);
Zine v. Chrysler Corp., 600 N.W.2d 384, 393 (Mich. Ct. App.
1999) (explaining the Michigan statute focuses on
the use to which the goods would be put, not on the
characterization of the plaintiff as a consumer).
Ranbaxy
cites no support for its suggestion that the Maine statute,
which has not been examined in this context, should be
otherwise construed.
iii.
Conduct within the Scope of the Statute
The consumer protection statutes of Minnesota,
Missouri, New Mexico, North Dakota and South Dakota relate
only to conduct that occurs “in connection with the sale”
of the goods at issue.
Ranbaxy maintains that its alleged
fraud was made in connection with the FDA approval process,
not with respect to any sale of goods.
Ranbaxy’s argument
fails all around. Sheet Metal Workers Local 441 Health &
Welfare Plan, 737 F. Supp. 2d at 414 (applying the
- 24 -
Minnesota statute to misleading statements and deceptive
acts made to the Patent and Trademark Office); Jackson v.
Barton, 548 S.W.3d 263, 270 (Mo. 2018) (interpreting the
Missouri statue to prohibit deceptive practices if there is
a relationship between the sale and unlawful conduct by any
person occurring before, during or after a sale); Lohman v.
Daimler-Chrysler Corp., 166 P.3d 1091, 1097 (N.M. Ct. App.
2007) (affording the New Mexico statute broad scope
“encompass[ing] misrepresentations which bear on downstream
sales by and between third parties”); A & R Fugleberg
Farms, Inc v. Triangle Ag, LLC, 2010 WL 1418870 (D.N.D.
Apr. 7, 2010) (interpreting the North Dakota statute
liberally to cover fraud and misrepresentation that induced
individuals to enter into a contract); In re DDAVP Indirect
Purchaser Antitrust Litig., 903 F. Supp. 2d at 229
(explaining the South Dakota statute applies to
misrepresentations made to the Patent and Trademark Office
because such representations, in turn, allow the defendant
to manufacture and market their product).
iv.
Facially inapplicable
The Michigan, Nevada and New Mexico statutes are,
according to Ranbaxy, facially inapplicable because
- 25 -
Ranbaxy’s conduct does not fall within the statutorily
enumerated practices.
With respect to Michigan and Nevada,
federal courts have sustained causes of action under the
state consumer protection statutes for similar allegedly
anticompetitive conduct. FTC v. Mylan Labs., Inc., 62 F.
Supp. 2d 25, 48 (D.D.C. 1999) (Michigan); Sergeants
Benevolent Association Health & Welfare Fund v. Actavis,
plc, No. 15 Civ. 6549 (CM), 2018 WL 7197233, *46-47
(S.D.N.Y. Dec. 26, 2018) (Nevada).
The New Mexico statute
is to be interpreted broadly in favor of consumer
protection and applies to misrepresentations that are
designed to enable manufacturers to sell goods. Lohman, 166
P.2d at 1097.
Consequently, the challenged provisions are
not facially inapplicable.
v.
Reliance
Ranbaxy urges dismissal of the Pennsylvania, South
Dakota and West Virginia consumer protection claims of the
EPPs for failure to plead that the EPPs relied on
defendant’s fraud to their detriment.
To establish a cause of action under the Pennsylvania
consumer protection statute, a plaintiff must demonstrate
that he justifiably relied on the defendant’s wrongful
- 26 -
conduct and that he suffered harm as a result. Yocca v.
Pittsburg Steelers Sports, Inc., 854 A.2d 425, 438-39 (Pa.
2004).
The South Dakota statute allows a party to
establish third party reliance whereby a defendant makes a
misrepresentation to a third party on which the plaintiff
relies. Brookings Mun. Utilities, Inc. v. Amoco Chemical
Co., 103 F. Supp. 2d 1169, 1178 (D.S.D. 2000).
The EPPs do not, however, identify any specific
misrepresentations upon which they relied to their detriment.
They allege that they purportedly bought branded and generic
drugs at an artificially inflated price but they do not
allege their decisions were made in reliance on Ranbaxy’s
conduct rather than out of necessity and a limited market.
Accordingly, the EPPs have not established reliance as
required by Pennsylvania and South Dakota law.
The Supreme Court of Appeals of West Virginia has
interpreted the West Virginia consumer protection statute
to cover both affirmative misrepresentations and omissions.
White v. Wyeth, 705 S.E.2d 828, 837-38 (Va. 2010).
Where
an omission is the alleged violative conduct, a plaintiff
may show proximate cause in the absence of any proof of
reliance. Id.
Plaintiffs have adequately alleged that
- 27 -
Ranbaxy’s omissions proximately caused them ascertainable
loss and may pursue their West Virginia consumer protection
claim.
vi.
Miscellaneous
Ranbaxy alleges that the Massachusetts claim of the
EPPs fails because Ranbaxy’s conduct did not “occur
primarily within the commonwealth.” M.G.L. c. 93A § 11.
Plaintiffs have alleged, however, that at least some EPPs
were injured by Ranbaxy’s conduct in Massachusetts.
Whether Ranbaxy can prove that the conduct did not occur
primarily in Massachusetts is an issue ill-suited for
disposition at this stage. See Workgroup Technology Corp.
v. MGM Grand Hotel, LLC, 246 F. Supp. 2d 102, 118 (D. Mass
2003).
Ranbaxy submits that the EPPs’ Minnesota claim fails
because “the sole statutory remedy for deceptive trade
practices” under the Minnesota consumer protection statute
is injunctive relief which plaintiffs do not seek. Sup.
Edge, Inc. v. Monsanto Co., 964 F. Supp. 2d 1017, 1041 (D.
Minn. 2013).
The EPPs do not contest the issue and the
Court agrees with Ranbaxy.
- 28 -
Ranbaxy avers that the Nebraska claim of the EPPs
fails because Ranbaxy’s conduct is regulated under laws
administered by a regulatory body or officer acting under
statutory authority of the United States. Neb. Rev. Stat
§ 59-1617(1).
As described above with respect to the EPPs’
state antitrust claims, the state action doctrine does not
bar such claims.
d. Statute of Limitations
Ranbaxy submits that the EPPs’ RICO claim, antitrust claims
under the laws of 18 states and consumer protection claims under
the laws of nine states are all barred by a four-year statute of
limitations.
Specifically, Ranbaxy contends that when the FDA
revoked Ranbaxy’s approval for Valcyte and Nexium on November 4,
2014, the claims of the EPPs accrued.
The EPPs’ complaints were
not, however, filed until November 6, 2018 and February 13,
2019, more than four years after that accrual and therefore
after the expiration of each applicable statute of limitations.
The statute of limitations is a “fact-intensive"
affirmative defense” and will be rejected unless shown “with
certitude” at the motion to dismiss stage. See Nat’l Assoc. of
Gov’t Workers v. Mulligan, 854 F. Supp. 2d 126, 131 (D. Mass
2012).
As explained in Meijer I, this case raises the issue of
- 29 -
a possible continuing violation which is ill-suited for
resolution at this stage.
3. Arguments Common to Both Plaintiff Groups
a.
Noerr-Pennington Immunity
Ranbaxy contends that it is entitled to NoerrPennington immunity which immunizes government petitioning
activity even if anticompetitive effects result and even if
the petitioner uses disingenuous tactics. See Eastern R.R.
Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127
(1961) and United Marine Workers v. Pennington, 381 U.S.
657 (1965) (“the Noerr-Pennington doctrine”).
There is an
exception to the Noerr-Pennington doctrine for “sham
petitioning”, however, which holds that immunity is
withheld if a defendant uses the petitioning process as a
mere “anticompetitive tool without legitimately seeking a
positive outcome.” See, e.g., A.D. Bedell Wholesale Co.,
Inc. v. Phillip Morris Inc., 263 F.3d 239, 250 n.29 (3d
Cir. 2001).
Ranbaxy submits one argument not rejected in Meijer I
in support of its contention that the sham petitioning
exception is inapplicable.
It argues that the exception
applies only when the alleged anticompetitive conduct is a
- 30 -
result of a defendant’s use of governmental process as
opposed to its use of the outcome of that process.
See
City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S.
365, 381 (1991).
The Supreme Court in Omni Outdoor
Advertising, Inc. explained
the purpose of delaying a competitor's entry into
the market does not render lobbying activity a
“sham,” unless . . . the delay is sought to be
achieved only by the lobbying process itself, and
not by the governmental action that the lobbying
seeks.
Id.
Ranbaxy submits that plaintiffs do not allege that it
gained an anticompetitive advantage by merely seeking a TA
for its ANDAs.
Any alleged anticompetitive advantage,
according to Ranbaxy, could have resulted only from the
outcome of that process: the FDA’s grant of the coveted
exclusivity period.
Ranbaxy provides no support, however,
for its limitation of the governmental process at issue to
include only the tentative approval stage as opposed to the
entire ANDA approval process.
A grant of tentative approval, even as a first filer,
is a mere step in the process of obtaining final approval
and taking a generic drug to market.
The grant of
exclusivity is, to be sure, a consequential stage of the
- 31 -
ANDA approval process but it does not authorize a party to
take a drug to market. 21 U.S.C. § 355(i)(5)(B)(iv).
Here,
plaintiffs adequately allege that Ranbaxy used a stage of
the ANDA approval process to secure exclusivity while
awaiting final approval to bar competition.
Drawing all reasonable inferences in favor of the
plaintiffs, they have adequately alleged that the sham
petitioning exception to the Noerr-Pennington doctrine
applies.
b.
Proximate Cause
Ranbaxy contends that plaintiffs have failed to allege
proximate cause with respect to their antitrust and RICO
claims because 1) the FDA’s regulatory activity was an
intervening factor and 2) no other manufacturer was in a
position to secure final approval of a generic competitor
during the relevant timeframe.
This Court already determined in Meijer I that
Ranbaxy’s obfuscation affected the FDA’s pace in granting
final approval to Ranbaxy and that plaintiffs have alleged
sufficient facts and legitimate inferences to raise a
factual question that is ill-suited for resolution at this
- 32 -
stage.
Ranbaxy provides no reason for the Court to deviate
from that holding.
c.
RICO Predicate Offenses
Ranbaxy proffers one new argument with respect to
plaintiffs’ RICO claims:
plaintiffs cannot demonstrate
that Ranbaxy committed the alleged predicate acts of mail
and/or wire fraud because Ranbaxy did not deprive the FDA
of “property.” See 18 U.S.C. § 1961(1).
Mail and wire fraud require proof of 1) a scheme or
artifice to defraud, 2) knowing and willing participation
in that scheme with the specific intent to defraud; and
3) the use of interstate mail or wire communications in
furtherance of the scheme. Sanchez v. Triple-S Mgmt.,
Corp., 492 F.3d 1, 9-10 (1st Cir. 2007).
Both statutes are
“limited in scope to the protection of property rights.”
Cleveland v. United States, 531 U.S. 12, 18 (2000);
Pasquantino v. United States, 544 U.S. 349, 355 & n.2
(2005).
In other words, the thing obtained by fraud must
be “property in the hands of the victim.” Cleveland, 531
U.S. at 15.
The parties’ primary disagreement involves the
application of the holding in Cleveland.
- 33 -
In that case, the
defendants were charged with engaging in a scheme that
involved fraudulent applications to obtain video poker
licenses in Louisiana. 531 U.S. at 15.
The Supreme Court
considered whether a government regulator conveys
“property” under the mail fraud statute when it issues a
license. Id. at 20.
The Court acknowledged that the
government had a substantial economic interest in the video
poker industry but ultimately held that a license is not
“property” in the hands of a government regulator. Id.
The
primary concern of the agency in issuing licenses is,
according to the Court, regulatory and, for that reason,
not actionable as mail fraud. Id.
The decision in Cleveland stands for the proposition
that a government regulator does not own licenses; instead,
it holds the regulatory power to issue licenses.
Pasquantino, 544 U.S. at 357; see also United States v.
Middendorf, No. 18-cr-36 (JPO), 2018 WL 3443117 (S.D.N.Y.
July, 17, 2018) (“To borrow an analogy from physics, what
is potential energy in the hands of the government becomes
kinetic energy in the hands of a license-holder.”).
Ranbaxy submits that a license to market drugs for a
180-day exclusivity period is virtually indistinguishable
- 34 -
from the license at issue in Cleveland and, therefore,
cannot be considered “property” in the hands of the FDA.
This case is, however, distinguishable from Cleveland.
In Cleveland, the citizens of the State of Louisiana and
the State itself were the only alleged victims of the
defendants’ scheme to obtain a video poker license
fraudulently. Cleveland, 531 U.S. at 15-17.
For that
reason, the only interests at stake were purely regulatory:
the State’s interest in “honest services” and in protecting
its people from unregulated video poker operators. Id. at
372.
Here, in contrast, plaintiffs have alleged that
Ranbaxy’s fraud affected the interests of individuals and
entities other than the government.
Specifically,
plaintiffs allege that Ranbaxy’s conduct caused a delay in
the availability of generic Diovan, Valcyte and Nexium
which caused them to purchase those drugs at artificially
inflated prices, an interest distinct from any regulatory
interests of the FDA.
Ranbaxy asserts that its alleged fraud was directed
solely at the FDA and, therefore, the FDA is necessarily
its only “victim.”
Not so.
Although the mail and wire
- 35 -
fraud statutes require a victim, the victim need not be the
one who would be named in an indictment for mail or wire
fraud. See United States v. Hatch, 926 F.2d 387, 392 (5th
Cir. 1991) (“The focus of the mail fraud statute is upon
the use of the mail to further a scheme to defraud, not
upon any particular kind of victim.”).
More importantly,
there is no requirement in the mail or wire fraud statutes
that the victim who is deprived of money or property be the
same party who was deceived by the defendant’s scheme. See
id.; accord. United States v. Valencia, No. 04–515, 2006 WL
3716657, at (S.D. Tex. Dec. 14, 2006), aff'd, 600 F.3d 389
(5th Cir. 2010); see also United States v. Howard, 619 F.3d
723, 727 (7th Cir. 2010)(“[E]ven if an indictment names
particular victims, the government need not prove intent to
harm those named victims.”).
Plaintiffs have alleged that Ranbaxy’s fraud resulted
in it securing an unfair and profitable market advantage
which caused plaintiffs to pay higher prices for brand and
generic Diovan, Valcyte and Nexium.
Accordingly, they have
sufficiently pled a predicate offense under RICO.
- 36 -
ORDER
For the forgoing reasons,
a.
the motion of defendant Ranbaxy to dismiss
(Docket No. 65) is, with respect to the complaint of
the Direct Purchaser Plaintiffs, DENIED;
b.
the motion of defendant Ranbaxy to dismiss
(Docket No. 63) is, with respect to the consumer
protection claims of the End-Payor Plaintiffs under
the laws of: California, Maine, Minnesota,
Pennsylvania, South Dakota and West Virginia, ALLOWED,
but is otherwise DENIED; and
c.
the motions of defendant Ranbaxy to dismiss the claims
against Ranbaxy Laboratories Limited and Ranbaxy USA,
Inc. (Docket Nos. 63, 65), are ALLOWED.
So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated November 27, 2019
- 37 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?