BURLINGTON DRUG CO., INC. et al v. PFIZER INC. et al

Filing 566

MEMORANDUM filed. Signed by Judge Peter G. Sheridan on 9/12/2014. (jjc)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

In re LIPITOR ANTITRUST LITIGATION

Civil Action No. 3:12-cv-02389 (PGS)

This Document Relates To:

MEMORANDUM

Direct Purchaser Class Actions

This matter comes before the Court on two motions to dismiss the Amended Complaint for
failure to state a claim. Fed. R. Civ. P. 12(b)(6). It is an antitrust action which concerns the legality
of a settlement between two drug manufacturers, Pfizer and Ranbaxy, regarding the
pharmaceutical drug atorvastatin calcium under the brand name Lipitor® (“Lipitor”). Plaintiffs
are direct purchasers of Lipitor seeking recovery of overcharges that were allegedly caused by the
delayed entry provision of the settlement. In their amended complaint (ECF No. 472), Plaintiffs
allege that a Settlement and License Agreement (“Settlement Agreement”) was entered between
the defendants which involved a non-monetary “reverse payment” of absolving Ranbaxy from
satisfying a claim of damages from the Accupril litigation in exchange for Ranbaxy’s promise to
stay out of the Lipitor market until an agreed-upon entry date (November 30, 2011). In addition,
the Amended Complaint alleged that defendants blocked generic competition in the Lipitor market.
Defendants Pfizer and Ranbaxy move to dismiss the Amended complaint. (ECF No. 493 and 490,
respectively.)
This matter is part of multi-district litigation coordinated by this Court involving four
groups of plaintiffs: (1) a proposed class of direct purchaser plaintiffs asserting claims under the
Sherman Act (“Direct Purchaser Plaintiffs”); (2) several opt-out groups of direct purchaser
plaintiffs asserting nearly identical claims to the direct purchaser class; (3) a proposed class of end1

payor plaintiffs asserting claims under various states’ laws; and (4) the RP Healthcare plaintiffs, a
group of pharmacist plaintiffs, asserting claims under California law.

This memorandum

addresses the Direct Purchaser Plaintiffs’ Amended Complaint only; however, portions of this
memorandum including the legal analysis may pertain to the other groups of plaintiffs as they rely
on the same allegations.
Procedural History
On April 23, 2012, the cases comprising the In Re: Lipitor Antitrust Litigation (MDL 2332)
were transferred to this Court by the United States Judicial Panel on Multidistrict Litigation.
On May 16, 2012, this Court abstained from determining the motions to dismiss in
anticipation of a decision by the Supreme Court of the United States in FTC v. Actavis, Inc., 133
S. Ct. 2223 (2013), because there was a split in the circuits as to what standard was to control (the
scope of the patent test or the quick look test) in evaluating a reverse payment settlement agreement
(RPSA). (ECF No. 397.)
On August 21, 2012, this Court granted in part and denied in part the Plaintiffs’ Motion to
Compel Documents, ordering limited discovery. (ECF No. 447.)

Because of the Court’s

inclination to await the Actavis decision, the Court allowed limited discovery during the interim
period.
On June 17, 2013, the FTC v. Actavis, 133 S. Ct. 2223 (2013), decision was published.
On September 5, 2013, this Court issued a Memorandum and Order dismissing some of
the claims based on Walker Process,

1

sham litigation, and sham citizen petition theories of

Plaintiffs’ prior Complaint. 2 (See reference on pages 5 and 8). Allegations under Sherman Act’s

1
2

Walker Process Eqpt., Inc. v. Food Machinery Corp., 382 U.S. 172 (1965).
In Re Lipitor Antitrust Litig., No. 3:12-cv-2389, 2013 U.S. Dist. LEXIS 126468 (D.N.J. Sept. 5, 2013).

2

Section 2 were also dismissed insofar as they were based on Pfizer’s alleged overarching
anticompetitive scheme; hence, the only allegations of Plaintiffs that remain to be addressed are
the reverse payment allegations. At the same time, the Court also granted Plaintiffs’ Motion for
Leave to Amend the Complaint. (ECF No. 455.) The rationale was that an amended complaint
would update the facts of the complaint that were disclosed during discovery, and would
incorporate changes based upon the recently decided Actavis case. 3
Plaintiffs filed the Consolidated Amended Class Action Complaint against the Defendants
on October 14, 2013. (ECF No. 472.) The Amended Complaint consists of three causes of action;
the first two counts are properly before this Court, while the third count has already been decided.
Count I alleges a violation of Section 1 of the Sherman Act. (Am. Compl. ¶ 296-305 (“Agreement
in restraint of trade against all defendants.”).) Count II alleges a violation of Section 2 of the
Sherman Act. (Am. Compl. ¶ 306-312 (“Conspiracy to monopolize against all defendants.”).)
Count III alleges a violation of “15 U.S.C. §§ 1 and 2,” but plaintiffs acknowledge “the Court
dismissed this count” and that it was being “restated here for purposes of appellate rights.” (Am.
Compl. ¶ 313-315.) As such, this memorandum only addresses the first two counts.
In November 2013, Ranbaxy and Pfizer each filed a Motion to Dismiss the Amended
Complaint. (ECF Nos. 490 and 493.)
On January 17, 2014, Plaintiffs filed a Brief in Opposition to the Defendants’ Motions to
Dismiss. (ECF No. 509; ECF No. 510 (redacted).)
On February 7, 2014, Defendants Pfizer and Ranbaxy filed a Reply Brief to Plaintiffs’
Opposition to Motion. (ECF No. 524; 533 (redacted).)
The Court held oral argument regarding this matter on March 6, 2014 (ECF No. 532).

3

3

At this time, the Court also ordered monthly meetings to discuss ongoing case management issues.

Parties
The following six direct purchaser plaintiffs are referred to collectively as the “Plaintiffs.”
Plaintiff Stephen L. LaFrance Holdings, Inc. is a corporation organized under the laws of
Delaware and located in Pine Bluff, Arkansas. Plaintiff Stephen L. LaFrance Pharmacy, Inc. d/b/a
SAJ Distributors (collectively with Stephen L. LaFrance Holdings, Inc., “SAJ”) is a wholly owned
subsidiary of Stephen L. LaFrance Holdings, Inc., organized under the laws of Arkansas and
located in Pine Bluff, Arkansas. During the class period, McKesson Corp., SAJ’s assignor,
purchased Lipitor directly from Pfizer and alleges injury as a result of all of the defendants’ alleged
unlawful conduct. McKesson Corp. resold, and will continue to resell, some of that Lipitor to SAJ.
SAJ is the assignee of the claims of McKesson Corp. to the extent of those direct purchases from
Pfizer. (Am. Compl. ¶ 14, ECF No. 472.)
Plaintiff Burlington Drug Co., Inc. is a corporation organized under the laws of the State
of Vermont and located at 91 Catamount Drive, Milton, Vermont, 05468. During the class period,
Burlington Drug Co. purchased Lipitor directly from Pfizer, and purchased generic Lipitor directly
from Ranbaxy, and alleges injury as a result of all of the defendants’ alleged unlawful conduct.
(Am. Compl. ¶ 15.)
Plaintiff Value Drug Company is a corporation organized under the laws of the
Commonwealth of Pennsylvania and located at One Golf View Drive, Altoona, Pennsylvania
16601. During the class period, Value Drug Company purchased Lipitor directly from Pfizer, and
purchased generic Lipitor directly from Ranbaxy, and alleges injury as a result of all of the
defendants’ alleged unlawful conduct. (Am. Compl. ¶ 16.)

4

Plaintiff Professional Drug Company, Inc. is a corporation organized under the laws of the
State of Mississippi with its principal place of business in Biloxi, Mississippi. During the class
period, Professional Drug Company, Inc. purchased Lipitor directly from Pfizer. (Am. Compl. ¶
17.)
Plaintiff Rochester Drug Co-Operative, Inc. (“RDC”) is a stock corporation duly formed
and existing under the New York Cooperative Corporations Law, with its principal place of
business located at 50 Jet View Drive, Rochester, New York 14624. During the class period, RDC
purchased branded Lipitor directly from Pfizer, and purchased generic Lipitor directly from
Ranbaxy. (Am. Compl. ¶ 18.)
Plaintiff American Sales Company LLC is a Delaware corporation with its principal place
of business located in Lancaster, New York. During the class period, Cardinal Health, Inc.,
American Sales Company’s assignor, purchased Lipitor directly from Pfizer and alleges injury as
a result of all of the defendants’ alleged unlawful conduct. Cardinal Health, Inc. resold, and will
continue to resell, some of that Lipitor to American Sales Company. American Sales Company is
the assignee of the claims of Cardinal Health, Inc., to the extent of those direct purchases from
Pfizer. (Am. Compl. ¶ 19.)
The defendants referenced in the following three paragraphs are referred to collectively or
alternatively as “Pfizer.”
Defendant Pfizer, Inc. is a corporation organized and existing under the laws of the State
of Delaware, and has a place of business at 235 East 42nd Street, New York, New York 10017. At
all relevant times, Pfizer, Inc. sold branded Lipitor directly to the direct purchasers and/or their
assignors, and to the other members of the Direct Purchaser Class. Pfizer, Inc. is also alleged to
have engaged in the conduct challenged in this case and attributed to Pfizer, itself and/or through
5

its various employees and/or other agents acting within the course and scope of their duties and/or
with actual, apparent, or ostensible authority in connection therewith. (Am. Compl. ¶ 21.)
Defendant

Pfizer

Manufacturing

Ireland,

formerly known

as

Pfizer

Ireland

Pharmaceuticals, formerly known as Warner Lambert Export, Ltd., is a partnership organized and
existing under the laws of Ireland, with registered offices at Pottery Road, Dun Laoghaire, Co.
Dublin, Ireland. Pfizer Ireland Pharmaceuticals, a wholly-owned indirect subsidiary of defendant
Pfizer, Inc., was the exclusive licensee of the ’995 patent and other patents (need full cite of patent).
At all relevant times, Defendant Pfizer Manufacturing Ireland engaged in the conduct challenged
in this case and attributed to Pfizer, itself and/or through its various employees and/or other agents
acting within the course and scope of their duties and/or with actual, apparent, or ostensible
authority in connection therewith. (Am. Compl. ¶ 22.)
Defendant Warner-Lambert Company is a corporation formerly organized under the laws
of the State of Delaware with offices for service of process at 235 East 42nd Street, New York,
New York 10017. In 1997, Warner-Lambert and Pfizer began co-promotion of Lipitor. On June
19, 2000, Pfizer completed its merger with Warner-Lambert whereby Pfizer purchased all
outstanding shares of Warner-Lambert common stock. Each share of Warner-Lambert stock was
converted into 2.75 shares of Pfizer common stock. The merger qualified as a tax-free
reorganization and was accounted for as a pooling of interests. Warner-Lambert Company became
a wholly-owned subsidiary of Pfizer Inc. At the end of 2002, Warner-Lambert Company became
a Delaware limited liability company and changed its name to Warner-Lambert Company LLC.
(Am. Compl. ¶ 23.)
The Defendants named in the following three paragraphs are referred to collectively or
alternatively as “Ranbaxy.”
6

Defendant Ranbaxy, Inc. is a corporation organized and existing under the laws of the State
of Delaware, and has a place of business located at 600 College Road East, Princeton, New Jersey,
08540. (Am. Compl. ¶ 26.)
Defendant Ranbaxy Pharmaceuticals, Inc. is a corporation organized and existing under
the laws of the State of Delaware, and has a place of business located at 600 College Road East,
Princeton, New Jersey, 08540. (Am. Compl. ¶ 27.)
Defendant Ranbaxy Laboratories Limited is a corporation organized and existing under the
laws of India, with a principal place of business located at Plot 90, Sector 32, Gurgaon - 122001
(Haryana), India. (Am. Compl. ¶ 28 4.)
Facts
The facts provided herein are limited to those pertinent to the issues impacting an alleged
reverse payment settlement agreement (RPSA). 5 Noted above, the Complaint pleads that Pfizer
made a reverse payment to Ranbaxy through forbearance of a claim of damages in the Accupril
litigation and resolution of Lipitor patent claims in foreign jurisdictions. However, the Settlement
Agreement resolved and terminated patent litigation on three drugs, Lipitor, Caduet and Accupril.
Each is discussed below.
Lipitor
Lipitor was developed and launched by Pfizer in 1997. (Am. Compl. ¶ 70.) The active
ingredient in Lipitor is called atorvastatin calcium. (Am. Compl. ¶ 46.) It belongs to a class of
drugs called statins, which lower cholesterol by inhibiting a liver enzyme that controls the rate of
the metabolic production of cholesterol. High cholesterol is widely recognized to be associated

4

Often, Pfizer and Ranbaxy are referred to collectively as defendants.
Additional information may be obtained from this Court’s September 5, 2013 opinion: In re Lipitor Antitrust Litig.,
No. 3:12-cv-2389, 2013 U.S. Dist. LEXIS 126468 (D.N.J. Sept. 5, 2013).

5

7

with coronary heart disease and atherosclerosis. Id. It is characterized as a “blockbuster” drug
with sales of about $1 billion per month.
Pfizer has obtained the following seven patents covering different aspects of the Lipitor
product: U.S. Patent No. 4,681,893 (the “‘893 patent”); U.S. Patent No. 5,273,995 (the “‘995
patent,” reissued later as U.S. Reissue Patent No. 40,667); U.S. Patent No. 6,126,971 (the “‘971
patent”); U.S. Patent No. 5,686,104 (the “‘104 patent”); U.S. Patent No. 6,087,511 (the “‘511
patent”); U.S. Patent No. 6,274,740 (the “‘740 patent”); and U.S. Patent No. 5,969,156 (the “‘156
patent”). See, e.g., Am. Compl. ¶ 68-69, 72-74. Presented below is a graph which shows the
expiry of the seven patents, and how they relate to Ranbaxy’s launch date under the Settlement
Agreement.

8

The ‘893 and ‘995 patents cover the active ingredient of Lipitor (atorvastatin calcium
ingredient patents). The remaining five patents cover other aspects of Lipitor: the ‘156 patent
covers the crystalline form of atorvastatin as used in Lipitor; the formulation of Lipitor is covered
by the ‘971 and ‘104 patents (the “Formulation Patents”); and the ‘740 and ‘511 patents are
directed to specific processes of making amorphous atorvastatin calcium using crystalline Form I
atorvastatin as a starting material (the “Process Patents”).
At the time of the 1997 launch of Lipitor, only the ‘893 and ‘995 patents were listed by
Pfizer in the Food and Drug Administration’s (FDA’s) book of Approved Drug Products with
Therapeutic Equivalence Evaluations (the “Orange Book”). (Am. Compl. ¶ 65.) Following the
1997 launch, Pfizer procured the remaining five patents. (Am. Compl. ¶ 71-74.) The Formulation
Patents and the ‘156 patent were then listed in the Orange Book. (Am. Compl. ¶ 75.) However,
the Process Patents are not listed in the Orange Book, because they are directed to processes of
making amorphous atorvastatin, rather than a new drug.
On August 19, 2002, Ranbaxy filed an Abbreviated New Drug Application (“ANDA”) to
seek approval to sell a generic version of Lipitor. (Am. Compl. ¶ 76.) Ranbaxy was the first
generic manufacturer to file an ANDA for generic Lipitor. (Am. Compl. ¶ 76-77.) By this time,
all Lipitor patents except the Process Patents were listed in the Orange Book. (Am. Compl. ¶ 75,
78.) Beginning in late 2002, Ranbaxy sent four Paragraph IV certifications 6 based on an
amorphous form of atorvastatin to Pfizer with respect to all patents listed in the FDA Orange Book
(i.e., the ’893, ’995, ’156, ’971 and ’104 patents). (Am. Compl. ¶ 94.) In its Paragraph IV

6

Pursuant to the Hatch-Waxman Act, 21 U.S.C. § 301, et. seq., in order to obtain FDA approval of an ANDA, a
generic manufacturer must certify that the generic drug will not infringe any patents listed in the Orange Book. An
ANDA must contain one of four certifications. A “Paragraph IV” certification must state “that the patent for the
brand name drug is invalid or will not be infringed by the generic manufacturer’s proposed product.” (Am. Compl.
¶ 36.) The impact of Hatch-Waxman on a pharmaceutical patent is discussed at length in Actavis. As such, it is not
discussed here in length.

9

certifications, Ranbaxy certified that no valid patent claims covering Lipitor would be infringed
by the sale, marketing, or use of Ranbaxy’s amorphous ANDA product. (Am. Compl. ¶ 78, 94.)
Ranbaxy was not required to — and did not — file any certification with respect to the non-listed
Process Patents (‘740 and ‘511 patents). (Am. Compl. ¶ 129.)
In response to Ranbaxy’s Paragraph IV certifications for generic Lipitor, Pfizer filed an
action in the United States District Court for the District of Delaware on February 21, 2003,
alleging that Ranbaxy’s ANDA product would infringe the ’893 and ’995 patents (Active
Ingredient Patent). (Am. Compl. ¶ 79.) In pre-trial proceedings, Pfizer attempted to amend its
complaint to add new patent infringement claims based on the Process Patents. (Am. Compl. ¶
82.) However, the district court denied Pfizer’s motion because claims under the Process Patents
would be “premature.” (Am. Comp. ¶ 82.) In 2005, the district court rejected all challenges to the
validity and enforceability of both the Active Ingredient Patents.

(Am. Compl. ¶ 84.) On

November 2, 2006, the Federal Circuit affirmed the district court’s ruling that the ’893 patent was
valid and would be infringed by Ranbaxy’s product. (Am. Compl. ¶ 86.) However, the Federal
Circuit reversed the district court’s ruling regarding the validity of the ’995 patent, holding that
claim 6 was invalid due to improper dependent claim structure. (35 U.S.C. § 112-14.) Claim 6
was the only claim Pfizer alleged was infringed by Ranbaxy’s ANDA product. Based upon the
Federal Circuit’s mandate in late 2006, the district court amended its final judgment order to enjoin
any approval of Ranbaxy’s ANDA for generic Lipitor until March 24, 2010 (the expiration date of
the ’893 patent) and to remove from its final judgment order any prohibition of effective FDA
approval of Ranbaxy’s ANDA based on the ’995 patent. (Am. Compl. ¶ 87.)
In January of 2007, Pfizer initiated reexamination proceedings with the United States
Patent and Trademark Office (“PTO”) by filing Reissue Patent Application No. 11/653,830 (“the
10

reissue application”) to rectify the error identified by the Federal Circuit in claim 6 of the ‘995
patent. (Am. Compl. ¶ 100.) In theory, this placed the entire ‘995 patent in jeopardy, because “a
reissue application, including all the claims therein, is subject to ‘be examined in the same manner
as a non-reissue, non-provisional application.’” Manual of Patent Examining Procedure Ed. 8,
Rev. 5, § 1445 (quoting 37 C.F.R. 1.176). “Accordingly, the claims in a reissue application are
subject to any and all rejections which the examiner deems appropriate . . . . Claims in a reissue
application enjoy no ‘presumption of validity.’” Id. (citing In re Doyle, 482 F.2d 1385, 1392, 179
USPQ 227, 232-233 (CCPA 1973); In re Sneed, 710 F.2d 1544, 1550 n.4, 218 USPQ 385, 389 n.4
(Fed. Cir. 1983)). However, in light of the federal circuit decision, it did not appear to be a highly
significant issue, as it was characterized as a scrivener’s error. Pfizer Inc. v. Ranbaxy Labs., 457
F.3d 1284, 1291-1292 (Fed. Cir. 2006).
Beginning in May 2007, Ranbaxy filed multiple protests against reissuance of the reissue
application with the PTO. (Am. Compl. ¶ 102.) On April 24, 2008, the PTO issued a non-final
rejection of claims 6, 13, and 14 of the reissue application based on obviousness. (Am. Compl. ¶
108.) During the reissue process, Pfizer changed its rationale to overcome the obviousness
rejection by arguing that the commercial success of Lipitor showed that the ’995 patent could not
have been obvious. (Am. Compl. ¶ 232.) On April 6, 2009, the PTO evidently agreed with Pfizer’s
commercial success rationale and reissued the ‘995 patent as U.S. Reissue Patent No. 40,667.
On March 24, 2008, Pfizer filed a declaratory judgment suit in the United States District
Court for the District of Delaware alleging that Ranbaxy’s generic Lipitor would infringe the
Lipitor Process Patents on the same grounds that had resulted in dismissal of Lipitor’s ANDA
litigation. (Am. Compl. ¶ 138.) Because the process patents were not listed in the Orange Book,
no automatic 30-month stay of FDA approval of Ranbaxy’s pending ANDA occurred. (Am.
11

Compl. p. 35, n. 6.) During the course of the ligation, the case was settled pursuant to the
Settlement Agreement wherein the parties filed a Consent Order and Stipulated Injunction with
Prejudice on or about June 20, 2008, entered on June 24, 2008. Consent Order and Stipulated
Injunction, Pfizer Inc. v. Ranbaxy Laboratories Limited, No. 1:08-cv-00164 (D. Del. June 24,
2008), ECF No. 20.
Accupril I Litigation (No.: 99-cv-922-DRD)
In January 1999, a generic manufacturer Teva Pharmaceuticals USA, Inc. (“Teva”) filed
ANDA with Paragraph IV certification as the first filer to seek approval to market generic
Accupril® (“Accupril”), another brand drug of Pfizer. (Am. Compl. ¶ 150.) On March 2, 1999,
Pfizer responded by filing suit against Teva (“Accupril I” litigation). (Am. Compl. ¶ 151.) In
December 2002, Ranbaxy filed an ANDA with Paragraph IV certification for generic Accupril.
(Am. Compl. ¶ 150.) Pfizer did not take any action under the Hatch-Waxman Act with respect to
Ranbaxy’s Paragraph IV certification letter. (Am. Compl. ¶ 151. 7)
During the course of the Accupril I proceedings, Pfizer and Teva had contested the meaning
of the term “saccharide” as used in the Accupril patent. 8 (Am. Compl. ¶ 153.) Eventually, the
parties stipulated that as used in the Accupril patent, the term “saccharide” means a “sugar” and
includes only lower weight molecular carbohydrates. (Am. Compl. ¶ 153.)
In October 2003, Pfizer established on summary judgment that Teva’s generic Accupril
product infringed numerous claims including claims 6 and 17 of Pfizer’s Accupril patent. (Am.
Compl. ¶ 152 (citing Warner-Lambert Co. v. Teva Pharms. USA, Inc., 289 F. Supp. 2d 515, 520
(D.N.J. 2003).) Teva did not challenge on appeal the district court’s grant of summary judgment

7
8

See page 13, infra, discussion of Accupril II litigation.
U.S. Patent No. 4,743,450.

12

for Pfizer regarding Teva’s infringement of claims 16 and 17. (Am. Compl. ¶ 152, 165.) Teva
did, however, challenge certain aspects of the district court’s grant of summary judgment on
infringement for other claims (i.e., claims 1, 4-10, and 12), which the Federal Circuit remanded to
the district court. (Am. Compl. ¶ 165.) On remand, the district court granted Pfizer’s motion for
summary judgment on infringement of those claims as well. Id.
On June 29, 2004, Judge Debevoise issued an opinion rejecting Teva’s obviousness and
anticipation arguments as to claims 16 and 17 and its enablement argument, as well as its
allegations of inequitable conduct. (Am. Compl. ¶ 154.) On the same day, Judge Debevoise
entered an injunction barring Teva from selling the generic quinapril product described in its
ANDA.
In August 2005, the Federal Circuit affirmed the finding of enforceability and validity of
the Accupril patent, except as to the enablement issue, aspects of which were remanded to the
district court. (Am. Compl. ¶ 165.) On remand, the district court held in Pfizer’s favor – i.e., that
all claims were enabled. Id. On January 18, 2008, Judge Debevoise entered a final judgment
finding the Accupril patent valid. Warner-Lambert Co. v. Teva Pharms. USA, Inc., No. 2:99-cv922 (D.N.J. Jan. 18, 2008), ECF No. 343.
Accupril II Litigation
On August 26, 2004 — after the Accupril I court’s order enjoining Teva from launching
generic Accupril — Teva and Ranbaxy entered into a distribution and supply agreement pursuant
to which Teva was appointed as the exclusive distributor of Ranbaxy’s generic Accupril product.
(Am. Compl. ¶ 155.) In return, Teva relinquished its 180-day exclusivity. Under the agreement,
Ranbaxy would provide Teva with its FDA-approved product for sale, the profits of which would
be shared by the parties equally. (Am. Compl. ¶ 156.) The agreement also provided that Ranbaxy
13

would fully indemnify Teva for any liability related to Ranbaxy’s launch.
Ranbaxy’s position of noninfringement was that, in light Pfizer’s narrow claim
construction in Accupril I and the stipulation entered into by the parties in that case (defining
saccharide as a sugar, limited to mono- and disaccharides), the microcrystalline cellulose contained
in Ranbaxy’s ANDA product did not constitute a “sugar” and therefore was outside the scope of
the Accupril patent. (Am. Compl. ¶ 158.)
Ranbaxy obtained final approval of its ANDA product in December 2004 and launched at
risk 9 a generic version of Accupril in December 16, 2004. (Am. Compl. ¶ 157.) Prior to this event,
the Complaint alleges that Pfizer had sales in 2004 of approximately $525 million for branded
Accupril, but a year later in 2005, the sales of branded Accupril were $71 million. (Am. Compl.
¶ 160.) Pfizer sued Ranbaxy and Teva for patent infringement on January 28, 2005, over which
Judge Debevoise again presided (“Accupril II” litigation). (Am. Compl. ¶ 159; ECF No. 493 at
3.)
With respect to infringement of the Accupril patent, Ranbaxy conceded that if the court in
Accupril II adopted the broader claim construction as Pfizer argued – namely that as used in the
’450 patent “saccharide” was not limited to “sugar” and encompassed polysaccharides – then it
“absolutely” infringed. (Am. Compl. ¶ 162.) On March 31, 2015, about 105 days after the suit
was commenced, Pfizer successfully obtained a preliminary injunction against Ranbaxy and Teva,
as Judge Debevoise had adopted the broad claim construction, and halted all generic sales. (Am.
Compl. ¶ 159-162l ECF No. 493.) The Court of Appeals for the Federal Circuit unanimously

9

“At risk” launch, in the context of Hatch-Waxman Act, occurs when a generic manufacturer launches a generic
version of the branded drug while the patent(s) on the branded drug is in litigation. Such a launch is called “at risk”
because the court could find that the launched generic drug infringes the patent(s), in which case the generic
manufacturer would owe damages to the branded company.

14

affirmed the district court’s preliminary injunction order (Am. Compl. ¶ 159) upon the condition
that Pfizer post a $200 million bond. (Am. Compl. ¶ 160.)
Teva informed the court that it would not seek to re-litigate the issues of validity and
enforceability of the Accupril patent because of the previous rulings in Accupril I. (Am. Compl.
¶ 161.) Pfizer agreed that Teva had exhausted all of its validity and enforceability defenses and
requested that the district court enhance the damages based on a willful infringement theory. (Am.
Compl. ¶ 163, 172.) Prior to the preliminary injunction decision, Ranbaxy, on the other hand,
advised the court that it was relying entirely on its non-infringement position, and did not have any
invalidity or unenforceability theory. (Am. Compl. ¶ 164.) But thereafter Ranbaxy asserted that
it was entitled to present different variations of the same invalidity theories (including, inter alia,
obviousness, anticipation, and non-enablement) on which Teva had lost in Accupril I. (Am.
Compl. ¶ 166.) As of February 2008, when most of the discovery in Accupril II was complete
(Am. Compl. ¶ 169) and Pfizer was denied summary judgment, the case was settled as part of the
alleged Settlement and License Agreement with the filing of Consent Order on or about June 19,
2008. That Consent Order dismissed all claims and counterclaims of Ranbaxy, Pfizer, and Teva.
Pfizer, Inc. v. Teva Pharms. USA, Inc., No. 05-cv-620 (D.N.J. June 19, 2008), ECF No. 187.
Caduet ANDA and Process Litigations
The following two lawsuits are not mentioned in the Plaintiffs’ Complaint, but they are
germane because they were settled as part of the Settlement Agreement. 10 (ECF No. 493 at 13.)
“Caduet ANDA” litigation was filed on March 9, 2007 by Pfizer in the United States
District Court for the District of Delaware in response to Ranbaxy’s Paragraph IV certifications
for generic Caduet® (“Caduet”). (ECF No. 493, at 13.) Caduet is Pfizer’s product which is a

10

15

See page 26 for use of judicial proceedings as part of the record on a motion to dismiss.

combination of atorvastatin and amlodipine. Id. Pfizer argued that Ranbaxy’s generic Caduet
would infringe the ‘893 patent and another U.S. patent not relevant to the case at bar. 11 Pfizer Inc.
v. Ranbaxy Laboratories Limited, No. 1:07-cv-00138 (D. Del. Mar. 9, 2007), ECF No. 1. As part
of the Settlement Agreement, a Consent Order dismissing the case was filed on June 20, 2008,
entered on June 24, 2008. Pfizer Inc. v. Ranbaxy Laboratories Limited, No. 1:07-cv-00138 (D.
Del. June 20, 2008), ECF No. 65.
“Caduet Process” litigation was a declaratory judgment suit filed on March 24, 2008 by
Pfizer in the United States District Court for the District of Delaware, in which Pfizer alleged that
Ranbaxy’s generic Caduet would infringe the Process Patents. Pfizer Inc. et al v. Ranbaxy
Laboratories Limited, No. 1:08-cv-00162 (D. Del. Mar. 24, 2008), ECF No. 1. Similar to above,
as part of the Settlement Agreement, a Consent Order dismissing the case was filed on June 20,
2008, entered on June 24, 2008. Pfizer Inc. et al v. Ranbaxy Laboratories Limited, No. 1:08-cv00162 (D. Del. June 24, 2008), ECF No. 20.
Settlement Agreement
On June 17, 2008, Pfizer and Ranbaxy executed the Settlement Agreement. (Am. Compl.
¶ 145.) The Settlement Agreement identifies multiple legal proceedings within the United States
as well as foreign jurisdictions as being resolved “without further litigation.” This includes the
proceedings discussed in the previous pages. Settlement Agreement at 1. Specifically, the U.S.
actions identified were Accupril II litigation, Lipitor Process litigation, Caduet ANDA litigation,
and Caduet Process litigation. (Am. Compl. ¶ 26.)
With respect to Lipitor Process litigation, Ranbaxy agreed to, inter alia, refrain from
participating in the atorvastatin market until November 30, 2011. Settlement Agreement at 2, 24.

11

U.S. Patent No. 6,455,574.

16

Ranbaxy also agreed not to challenge, directly or indirectly, the validity or enforceability of the
Process Patents (the ‘511 or the ’740 patents). Settlement Agreement at 2.
In addition, Caduet ANDA litigation and Caduet Process litigation were dismissed on terms
that, inter alia, Ranbaxy would be enjoined from offering for sale or selling in the United States
any generic Caduet, until November 30, 2011. Settlement Agreement at 3, 24. Ranbaxy also
allegedly promised not to challenge, directly or indirectly, the validity or enforceability of the
patent specific to Caduet. Settlement Agreement at 3. Since there is very little mentioned about
Caduet within the Amended Complaint, it cannot be discerned whether the Caduet portion of the
Settlement Agreement is a substantive factor in the settlement, or whether it is a pro or anticompetitive factor.
Accupril II litigation was different because it was not a Hatch-Waxman suit and Ranbaxy
was subject to damages for any infringement that may have occurred in the Accupril II case. As
such, Ranbaxy paid $1 million to Pfizer “in full and complete settlement of all past damages
claimed by [Pfizer] in the [Accupril II litigation] as to all parties in that action.” The Settlement
Agreement also stipulated that $200 million bond posted by Pfizer was released to Pfizer.
Settlement Agreement at 3.
In addition to the settlement of the above litigations in the United States, 23 proceedings
in 13 foreign countries were also terminated as a result of this Settlement Agreement. Id., at 1, 2629. Many of the foreign settlement terms prohibited Ranbaxy from selling its generic atorvastatin
products until an agreed upon date. Id., at 4-10. Also in conjunction with the termination of
proceedings in Canada, Ranbaxy agreed to appoint Pfizer as its exclusive supplier of the active
ingredients of Ranbaxy’s generic form of Lipitor until Ranbaxy notified Pfizer that it was capable
of manufacturing the bulk active pharmaceutical ingredient, atorvastatin. Id., at 8, Exhibit 9, at
17

11. The Settlement Agreement also contains royalty-free licensing provisions for patents related
to Lipitor in several countries including U.S., Germany, Italy, Belgium, the Netherlands, Sweden,
Australia, and Canada. Id. at 10-13.
On June 18, 2008, Ranbaxy publicly announced its Settlement Agreement with Pfizer,
including the Ranbaxy’s launch date of November 30, 2011 for generic Lipitor. (Am. Compl. ¶
192.) Ranbaxy submitted this information to the FDA shortly thereafter. Id. Ranbaxy also
informed the FDA its proposed generic product was now crystalline atorvastatin calcium, as
opposed to the amorphous version, pursuant to a license from Pfizer. Id.
In short, the Plaintiffs contend that this Settlement Agreement was Pfizer and Ranbaxy’s
purposeful intent to restrain and monopolize trade by extending the Lipitor patent duration until
November 30, 2011, when Ranbaxy’s generic amorphous version would not have infringed the
Lipitor process patents. Plaintiff allege that this was accomplished by Pfizer forgiving its claim
for infringement damages by settling the Accupril claim for $1 million when the value of the
Accupril claim was far higher; and allowing the defendants to market generic Lipitor in foreign
markets. As a result, Ranbaxy agreed to delay entry of its generic until November 30, 2011. This
delay injured the direct purchasers through the payment overcharges.
Supreme Court Decision in Federal Trade Commission v. Actavis, Inc.
Since this case revolves around the propriety of an alleged reverse payment settlement
agreement (RPSA), and Actavis addresses the issue as it applies to pharmaceutical related patent
litigation settlements, it is discussed below.
The Supreme Court has described a RPSA as “unusual” because “‘where only one party owns
a patent, it is virtually unheard of outside of pharmaceuticals for that party to pay an accused infringer
to settle a lawsuit.’” FTC v. Actavis, Inc. 133 S. Ct. 2223, 2235 (2013) (quoting 1 H. Hovenkamp, M.
18

Janis, M. Lemley, & C. Leslie, IP and Antitrust § 15.3, at 15–45, n. 161 (2d ed. Supp. 2011)). The
Court explained that a RPSA occurs as follows:
Company A sues Company B for patent infringement. The two companies settle
under terms that require (1) Company B, the claimed infringer, not to produce the
patented product until the patent’s term expires, and (2) Company A, the patentee,
to pay B many millions of dollars.
Actavis, 133 S. Ct. at 2227. “Because the settlement requires the patentee to pay the alleged
infringer, rather than the other way around, it is often called a ‘reverse payment’ settlement
agreement.” Id. Some of this atypical behavior occurs due to the workings of the Hatch-Waxman
Act, wherein the first generic to file enjoys the 180 day exclusivity period during which the “‘vast
majority of potential profits for a generic drug manufacturer materialize . . . .’” Id. at 2229 (quoting
Pet’r Br. 6)).
Prior to the Actavis decision, there was a dispute within the circuits as to the standard for
analyzing a RPSA. Some circuits applied the scope-of-the-patent test, under which an antitrust
attack will be dismissed so long as the anticompetitive effects fall within the exclusionary potential
of the patent. See, e.g., FTC v. Watson Pharms., 677 F.3d 1298 (11th Cir. 2012). In contrast, the
Third Circuit implemented a “quick look” approach wherein a RPSA is considered prima facie
evidence of unreasonable restraint of trade. In re K–Dur Antitrust Litigation (“K–Dur”), 686 F.3d
197 (3d Cir. 2012), vacated, Merck & Co. v. La. Wholesale Drug Co., 133 S.Ct. 2849, (2013)
(mem.), Upsher–Smith Labs., Inc. v. La. Wholesale Drug Co., 133 S.Ct. 2849 (2013) (mem.). This
in effect shifts to “a defendant the burden to show empirical evidence of [the settlement’s]
procompetitive effects.” Actavis, 133 S. Ct. at 2237 (quoting California Dental Assn. v. FTC, 526
U.S. 756, 776 n. 12 (1999)).
In Actavis, the Supreme Court rejected both camps and in lieu thereof employed the rule-ofreason approach in order to strike a balance “between the lawful restraint on trade of the patent
19

monopoly and the illegal restraint prohibited broadly by the Sherman Act.” Actavis, 133 S. Ct. at
2231. The basic question before the Supreme Court was “whether . . . an agreement [between a
patentee and a generic] can sometimes unreasonably diminish competition in violation of the antitrust
laws.” Id. at 2227; see also 15 U.S.C. §1 (Sherman Act prohibition of “restraint[s] of trade or
commerce”).
In Actavis, Solvay Pharmaceuticals initiated patent litigation against Actavis, Inc. and
Paddock Laboratories, in response to their Paragraph IV certifications that Solvay’s listed patent
for its drug AndroGel was invalid and not infringed.

Actavis, 133 S. Ct. at 2229. Par

Pharmaceutical did not file an ANDA with the FDA, but agreed to share the litigation costs with
Paddock in exchange for a share of profits if Paddock gained approval for its generic drug. Id.
FDA approved Actavis’ first-to-file generic product, but in 2006, within the 30 month litigation
period, all the parties settled. Id. The terms of the settlement between Solvay and Actavis were
that (a) Actavis agreed to not bring its generic to market 65 months before Solvay’s patent expired
(unless someone else marketed a generic sooner); and (b) Actavis agreed to promote AndroGel to
urologists. Id. The other two manufacturers made similar promises. Id. In return, Solvay agreed to
pay millions of dollars to each generic—$12 million in total to Paddock; $60 million in total to
Par; and an estimated $19–$30 million annually for nine years to Actavis. Id.
The Federal Trade Commission (FTC) filed suit against Solvay and the three generics
alleging violation of § 5 of the Federal Trade Commission Act, 15 U. S. C. §45, by unlawfully
agreeing “to share in Solvay’s monopoly profits, abandon their patent challenges, and refrain from
launching their low-cost generic products to compete with AndroGel for nine years.” Id. at 222930 (internal quotation and citation omitted). The District court, later affirmed by the Eleventh
Circuit, applied the scope-of-the-patent test and found that FTC had no standing because “absent
20

sham litigation or fraud in obtaining the patent, a [RPSA] is immune from antitrust attack so long
as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.”
Watson Pharm., 677 F.3d at 1312.
In rejecting the Eleventh Circuit’s “scope-of-the-patent” test, the Supreme Court noted
there was “reason for concern” that RPSAs “tend to have significant adverse effects on
competition.” Actavis, 133 S. Ct. at 2231. While the court conceded that settlement on terms of
permitting the patent challenger to enter the market before the expiration of the patent bring about
competition, it also noted that a payment for staying out of the market causes anticompetitive harm.
Id. at 2234-35. Such an arrangement “simply keeps prices at patentee-set levels” at the consumers’
expense, i.e., the resulting benefit is shared only between the patentee and the challenger. Id.
The scope-of-the-patent test finds support in a general policy favoring settlements and thus,
truncates any inquiry into patent validity or infringement regardless of the merits of the patent. Id.
at 2230-31. The court cautioned that “whether a particular restraint lies beyond the limits of the
patent monopoly is a conclusion . . . not . . . its starting point.” Id. at 2231-32 (emphasis in original)
(internal quotations omitted). An invalid patent confers its owner no right to exclude others from
the market. Even if a patent is valid, it does not carry with it the power to exclude products or
processes that do not infringe upon it. Id. at 2231. While recognizing that settling parties may
have other reasons to prefer RPSA, the Supreme Court found that the scope-of-the-patent test
overlooked the possibility that “the patentee has serious doubts about the patent’s survival” and
“the payment’s objective is to maintain supracompetitive prices.” Id. at 2235, 2236-37. The
majority opinion wrote:
In our view, these considerations, taken together, outweigh the single strong
consideration—the desirability of settlements—that led the Eleventh Circuit to
provide near-automatic antitrust immunity to reverse payment settlements.
21

Id. at 2237.
On the other hand, the Supreme Court was cognizant of the value of settlements and the
strong interest in settling complex and expensive patent infringement litigations. Id. at 2234 (citing
Schering–Plough Corp. v. FTC, 402 F.3d 1056, 1074–1075 (11th Cir. 2005); In re Tamoxifen
Citrate, 466 F.3d 187, 202 (2d Cir. 2006) (noting public's “‘strong interest in settlement’” of
complex and expensive cases)). The Court made clear that “it is not normally necessary to litigate
patent validity to answer the antitrust question.” Actavis, 133 S. Ct. at 2236. Rather, the court
proposed to initially look at the size of a reverse payment. Id. According to the Supreme Court,
an “unexplained large reverse payment” may “provide strong evidence” of antitrust activity,
because it “can provide a workable surrogate for a patent’s weakness, all without forcing a court
to conduct a detailed exploration of the validity of the patent itself.” Id. at 2235, 2236-37. The
Court further noted that the size of a reverse payment can also serve as “a strong indicator of
power” possessed by the patentee to bring about anticompetitive harm. Id. at 2236.
The Supreme Court in Actavis further rejected the presumptive illegality of the “quick
look” approach. Id. at 2237. Because some reverse payments could be justified under antitrust
analysis, the court held that a finding of reverse payment alone is insufficient to conclude its
illegality. Id. The court reasoned that:
the likelihood of a reverse payment bringing about anticompetitive
effects depends upon its size, its scale in relation to the payor’s
anticipated future litigation costs, its independence from other
services for which it might represent payment, and the lack of any
other convincing justification. The existence and degree of any
anticompetitive consequence may also vary as among industries.
These complexities lead us to conclude that the FTC must prove its
case as in other rule-of-reason cases.
Id. Additionally, the Court commented that presumptive rules like the “quick look” approach are
appropriate only where “an observer with even a rudimentary understanding of economics could
22

conclude that the arrangements in question would have an anticompetitive effect on customers and
markets.” Id. (internal quotation marks omitted). Since the complexity of a RPSA is far beyond
“rudimentary,” the Court determined that the “quick-look” approach was not applicable. Id.
In formulating the rule of reason analysis, the Supreme Court enumerated several factors
to consider: (1) there must be a “payment”; (2) it must be a “reverse” payment, i.e., the payment
must be from the alleged patentee to the alleged infringer; (3) it must be “large” which to the
Supreme Court is a “surrogate for a patent’s weakness” and a “strong indicator of power” —
namely, “the power to charge prices higher than the competitive level”; and (4) the large reverse
payment is “unexplained.” Id. at 2236-37. Regarding the fourth factor, valid explanations include
the cost of litigation, payments for other services promised to be rendered by the generic challenger
and “any other convincing justification.” Id. at 2237.
Sometimes there are types of settlements that do not fall within the Actavis rationale. The
Supreme Court provided two types of “commonplace forms” of settlement that are not subject to
Actavis scrutiny. The first one is when A sues B for patent infringement and demands $100 million
in damages; and then B pays A $40 million as settlement. Actavis, 133 S. Ct. at 2233. The
“implicit net payment” or reduction in demand of $60 million by A does not trigger antitrust
scrutiny. Id. The second situation occurs when B has a counterclaim for damages against A, the
patentee, and A pays B to settle B’s counterclaim. Id. Such settlements between a patentee and a
generic manufacturer are permissible.
Furthermore, the Supreme Court specifically raised the following five sets of
considerations to guide its rule of reason analysis: (i) whether the restraint at issue has the
“potential for genuine adverse effects on competition”; (ii) whether there are justifications for the
anticompetitive consequences; (iii) whether the patentee has the market power to bring about the
23

anticompetitive harm, which tends to be true when a reverse payment threatens to work unjustified
anticompetitive harm; (iv) whether the size of the unexplained settlement payment suggests a
workable surrogate for the patent’s weakness, which in turn suggests the intent of the patentee to
maintain supracompetitive prices; and (v) whether the parties could have settled in a way that did
not involve the use of reverse payment. Id. at 2234-2237.
The Supreme Court left “to the lower courts the structuring of the present rule-of-reason
antitrust litigation.” Id. at 2238. With this new Actavis framework in mind, this Court will analyze
the Defendants’ motion to dismiss under Fed. R. Civ. P. 12(b)(6).
Twombly and Iqbal
Under FED. R. CIV. P. 12(b)(6), a court may grant a motion to dismiss if the complaint fails
to state a claim upon which relief can be granted. The Supreme Court explained the standard for
addressing a motion to dismiss under Rule 12(b)(6) in Bell Atl. Corp. v. Twombly, 550 U.S. 544
(2007). The Twombly Court stated that, “[w]hile a complaint attacked by a Rule 12(b)(6) motion
to dismiss does not need detailed factual allegations, . . . a plaintiff's obligation to provide the
grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Id. at 555 (internal citations and
quotations omitted); see also Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 2007)(stating that
standard of review for motion to dismiss does not require courts to accept as true “unsupported
conclusions and unwarranted inferences” or “legal conclusion[s] couched as . . . factual
allegation[s]” (internal quotation marks omitted)). Therefore, for a complaint to withstand a
motion to dismiss under 12(b)(6), the “[f]actual allegations must be enough to raise a right to relief
above the speculative level, . . . on the assumption that all the allegations in the complaint are true
(even if doubtful in fact) . . . .” Twombly, 550 U.S. at 555 (internal citations quotations omitted).
24

In Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009), the Court
built upon its decision in Twombly. Id., 556 U.S. at 684. The Court acknowledged that although a
complaint need only contain a “short and plain statement of the claim showing that the pleader is
entitled to relief” id. at 677-78 (quoting Fed. R. Civ. P. 8(a)(2)), this statement must nevertheless
contain “factual content that allows the court to draw the reasonable inference that the defendant
is liable for the misconduct alleged.” Id. at 678. Iqbal reiterated two benchmarks of Twombly.
That is, “[t]o 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.’” Id. (quoting Twombly, 550
U.S. 544, 570 (2007)). Plausibility as explained by the court “is not akin to a ‘probability
requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.”
Id. at 678 (quoting Twombly, 550 U.S. at 556).
Thus, when assessing the sufficiency of a complaint, a district court must distinguish
factual contentions and “[t]hreadbare recitals of the elements of a cause of action, supported by
mere conclusory statements.” Id. at 678. When evaluating a motion to dismiss for failure to state
a claim, district courts must conduct a three-part analysis:
First, the court must “tak[e] note of the elements a plaintiff must plead to state a
claim.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1947, 173 L. Ed. 2d 868
(2009). Second, the court should identify allegations that, "because they are no
more than conclusions, are not entitled to the assumption of truth." Id. at 1950.
Third, "whe[n] there are well-pleaded factual allegations, a court should assume
their veracity and then determine whether they plausibly give rise to an entitlement
for relief." Id. This means that our inquiry is normally broken into three parts: (1)
identifying the elements of the claim, (2) reviewing the complaint to strike
conclusory allegations, and then (3) looking at the well-pleaded components of the
complaint and evaluating whether all of the elements identified in part one of the
inquiry are sufficiently alleged.
Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011) (alterations in original).

25

A complaint will be dismissed unless it “contain[s] sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting
Twombly, 550 U.S. at 570). “Determining whether a complaint states a plausible claim for relief
will . . . be a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Id. at 679. “The plausibility standard is not akin to a ‘probability
requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully”;
mere consistency with liability is insufficient. Id. at 678. A plaintiff may not be required to plead
every element of a prima facie case, but he must at least make allegations that “‘raise a reasonable
expectation that discovery will reveal evidence of’ the necessary element.” Phillips v. County of
Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).
Significantly, the dilemma the Supreme Court faced in deciding Twombly is before the
Court now, because as in Twombly the Court is concerned with an antitrust case. Twombly, 550
U.S. at 558-59. The Supreme Court explained “that something beyond the mere possibility of loss
causation must be alleged, lest a plaintiff with ‘a largely groundless claim’ be allowed to ‘take up
the time of a number of other people, with the right to do so representing an in terrorem increment
of the settlement value.’” Id. at 557-558 (quoting Dura Pharms., Inc. v. Broudo, 544 U.S. 336,
347, 125 S. Ct. 1627, 161 L.Ed.2d 577 (2005)). Most notably, “‘this basic deficiency should . . .
be exposed at the point of minimum expenditure of time and money by the parties and the court.’”
Twombly, 550 U.S. at 558 (alterations in original) (quoting 5 Wright & Miller, Federal Practice &
Procedure - Civil Rules: 2010 Quick Reference Guide, Vol. 12B, § 1216, at 233-234). As one
hornbook writer has noted, “this standard is best understood as a flexible pleading benchmark that
varies depending on the type of claim chosen and the type of allegations pleaded: a ‘plausible’
auto accident may be very concisely pleaded, whereas a ‘plausible’ antitrust or RICO case may
26

demand a far fuller factual presentation.” Wright & Miller, 2010 Quick Reference Guide, Vol.
12B, at 152 (2014).
Here, Defendants allege, among other things, that Plaintiffs have not presented sufficient
facts to show that Defendants’ Settlement Agreements violated antitrust laws. This Court applies
the Twombly and Iqbal standards with the factors of Actavis in analyzing the Plaintiff’s Complaint.
Specifically, where the anticompetitive effects of a settlement agreement which falls within the
scope of the exclusionary potential of a patent, a court must determine whether there was a reverse
payment that is large and unjustified.
The facts of this case are educed from the Consolidated Amended Class Action Complaint
(the “Complaint,” ECF No. 472), which was filed on Oct. 14, 2013 and after limited discovery
was obtained including the Settlement Agreement between Pfizer and Ranbaxy. This Court also
considers public records, including judicial proceedings and relevant patents. See, e.g., Jean
Alexander Cosmetics, Inc. v. L’Oreal USA, Inc., 458 F.3d. 244, 256 n.5 (3d Cir. 2006) (citing S.
Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Group Ltd., 181 F.3d 410, 426 (3d Cir.
1999)); Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196-97 (3d
Cir. 1993). Based on same, the Court addresses the plausibility of Plaintiff’s complaint.
In Actavis, the Supreme Court dealt with only one patent for AndroGel which was the
subject of the Paragraph IV litigation involving three generic companies. Yet the Supreme Court
declined to “measure the length or amount of a restriction solely against the length of the patent’s
term or its earning potential.” Actavis, 133 S. Ct. at 2231. Here, the Defendants claim that Lipitor
is protected by seven patents; and three of those expire in 2016 (the ‘511, ‘740, and ‘156 patents).
(Am. Compl. ¶ 73, 74) (see chart on page 8). In the Court’s prior opinion, it found the expiration

27

date of the ‘995 patent concerning the active ingredient atorvastatin calcium would have ended on
June 28, 2011, but the Court made no judgment upon the five other patents. 12
Here, Plaintiffs have set forth a plausible fact that the five “back up” patents — the ‘156
patent, the two Formulation Patents (the ‘971 and ‘104 patents), and the Process Patents (the ‘740
and ‘511 patents) — were designed around by Ranbaxy. This seems plausible because the
Paragraph IV certifications of Ranbaxy, in and of themselves, are sworn statements of Ranbaxy’s
management to a governmental agency (FDA) with specifications on how to do so.13 Moreover,
courts often find that companies are able to design around Process Patents. In one study, generic
applicants prevailed seventy-three percent of the time in lawsuits involving patent infringement of
drug products. See, Generic Drug Entry Prior to Patent Expiration: An FTC Study, p. 16 (July
2002). See also In Re K-Dur Antitrust Litigation, 686 F. 3d 197, 218 (3d Cir. 2012) vacated Merck
& Co. v. La. Wholesale Drug Co., 133 S. Ct. 2849 (2013) (mem.). Taking that fact as plausible,
the Court focuses on the antitrust allegations.
The heart of the issue here is whether there was a settlement agreement between Pfizer and
Ranbaxy that constituted a RPSA that warrants antitrust scrutiny. According to the Complaint, the
parties entered into a RPSA on June 17, 2008 by signing the Settlement Agreement. (Am. Compl.
¶ 145.) The Settlement Agreement resolved multiple litigations pending worldwide, including law

12

As held in In re Lipitor Antitrust Litig., 2013 U.S. Dist. LEXIS 126468 (D.N.J. Sept. 5, 2013).

13

The Court had some difficulty with the Plaintiff’s rationale underlying plausibility. That is, Plaintiffs contend that
Ranbaxy’s amorphous atorvastatin would have been approved by FDA because the FDA was “under immense
pressure” to approve generic Lipitor. (Am. Compl. ¶ 194.) For example, Plaintiffs allege that Senate Health,
Education, Labor, and Pensions Committee Chairman Tom Harkin and other public officials sent a letter to FDA on
March 10, 2011, urging FDA to “clarify the relevant regulatory issues” so the public could afford generic atorvastatin.
(Am. Compl. ¶ 195.) This statement does not meet the plausibility standard because a public statement by public
officials about an active political issue is not a plausible conclusion without other support, especially when the
statements, like Senator Harkin’s letter, have no other legally binding effect. In addition, Ranbaxy’s amorphous
atorvastatin was never approved by the FDA because Ranbaxy amended with a crystalline version after the Settlement
Agreement was entered.

28

suits on three brand drugs pending in the United States. Settlement Agreement at 1 and Ex. 2;
ECF No. 493, at 11. According to the Plaintiffs, the alleged RPSA constituted an unlawful
contract, combination and conspiracy to allocate the entire United States market for atorvastatin
calcium to Pfizer until November 30, 2011. (Am. Compl. ¶ 6.)
Evidently, Pfizer sought the delay because it had a significant economic reason, which was
that Lipitor grossed $1 billion per month – the largest selling drug of all time.
In exchange for Ranbaxy’s agreement to delay its launch of generic Lipitor until November
30, 2011, Pfizer allegedly gave substantial financial inducements to Ranbaxy, including: (a)
Pfizer’s “sweetheart” agreement to dismiss damages claims likely worth hundreds of millions of
dollars in Accupril II litigation in exchange for a token “pretextual” payment of $1 million; and
(b) the right to market generic Lipitor in at least eleven foreign markets outside the United States.
(Am. Compl. ¶¶ 7, 148.) The Plaintiffs assert that Pfizer and Ranbaxy characterized the Settlement
Agreement as, in part, settling the “Lipitor Process” litigation in order to “disguise the
[Agreement’s] true anticompetitive purpose.” (Am. Compl. ¶ 146.) Although not specifically
addressed in the Complaint, the Settlement Agreement also resolved two other U.S. litigations:
Caduet Process litigation, which involved the same Process Patents as Lipitor Process litigation;
and Caduet ANDA litigation, which involved the ‘893 patent and another U.S. patent which
Plaintiffs argue is not relevant to the case at bar and is not alleged in the Complaint. ECF No. 493
at 13; see supra note 9. Furthermore, the Settlement Agreement also settled twenty-three legal
actions pending overseas. ECF No. 493 at 13; Settlement Agreement p. 26 Exhibit 2. Plaintiffs
maintain that the financial inducements from Pfizer were “extraneous” to any possible results that
Ranbaxy might achieve in any U.S. Lipitor patent disputes that were, or ever could, exist between
Ranbaxy and Pfizer. (Am. Compl. ¶ 7.)
29

Ranbaxy allegedly agreed, in exchange for payments by Pfizer, that it would: (a) not enter
the market or compete with Pfizer in the atorvastatin calcium market in the United States until
November 30, 2011; (b) not relinquish or selectively waive its first-to-file 180-day marketing
exclusivity such that any other ANDA filer would be unable to market a generic version of Lipitor
in the United States before November 30, 2011 (which had the effect of creating a “bottleneck”
that blocked FDA approval of any later would-be generic); (c) not contest the validity of process
patents that Pfizer was allegedly misusing to delay the efforts of other would-be generic entrants;
and (d) stop protesting Pfizer’s application for reissuance of the ‘995 patent that had been declared
invalid, in part, by the Federal Circuit and pending before the PTO. (Am. Compl. ¶ 8.)
Obviously, use of the words “sweetheart agreement” and “pretextual” payment of
“extraneous” inducements are characterizing rather than factually analyzing the settlement in order
to meet the Twombly/Iqbal standard. But in light of Actavis, this Court examines whether the
terms of the Settlement Agreement constitute a RPSA and violate antitrust laws.

More

specifically, the Court examines whether the factual allegations are sufficient to make plausible
that Pfizer made a large and unexplained reverse payment to Ranbaxy in support of antitrust
activities.
Payment
In providing the rule of reason analysis to a RPSA, Actavis does not define payment or
provide any clarity as to whether a payment can be something other than a monetary payment.
Since the Actavis decision, there has been much discussion by other courts, the parties, and
commentators regarding the question of what constitutes a payment.
The common use of the term payment is described as something given to discharge a debt
or obligation and does not require the payment to be in the form of money. See Hill v. United
30

States, 263 F.2d 885, 886 (3d Cir. 1959); Staff Builders of Philadelphia, Inc. v. Koschitzki, 989
F.2d 692, 695 (3d Cir. 1993). In Black’s Law Dictionary, payment is defined as “performance of
an obligation by the delivery of money or some other valuable thing accepted in partial or full
discharge of the obligation.” Black’s Law Dictionary (9th ed. 2009). Payment may also be defined
as “the discharge of a pecuniary obligation by money or what is accepted as the equivalent of a
specific sum of money.” 60 Am. Jur. 2d Payment § 1. Furthermore, it is widely held that a payment
may refer to a transfer of something of value other than money. See 60 Am. Jur. 2d Payment § 26;
Sousa v. First Cal. Co., 101 Cal. App. 2d 533, 540, 225 P.2d 955, 960 (1950); Dynair Electronics,
Inc. v. Video Cable, Inc., 55 Cal. App. 3d 11, 18, 127 Cal. Rptr. 268, 272 (Cal. Ct. App. 1976). A
non-monetary payment includes something of value that can be converted to a concrete, tangible
or defined amount which yields a reliable estimate of a monetary payment. In this case, the
Plaintiffs principally argue that the settlement of Pfizer’s claim in Accupril is a non-monetary
payment.
Other courts have reviewed whether Actavis requires that the payment must be cash. One
court held that “[n]owhere in Actavis did the Supreme Court explicitly require some sort of
monetary transaction to take place for an agreement between a brand and generic manufacturer to
constitute a reverse payment.” In re Nexium (Esomeprazole) Antitrust Litig., 968 F. Supp. 2d 367,
392 (D. Mass. 2013). 14 Another decision (by one of my esteemed New Jersey colleagues) found

14
In In re Nexium, AstraZeneca and three generic defendants—Ranbaxy, Teva, and Dr. Reddy’s, were alleged to
have entered into reverse payment agreements to keep a generic version of Nexium off the market. All three generic
defendants agreed to refrain from selling generic versions of Nexium until May 27, 2014 when some (but not all) of
the patents had expired, though this was years after the generic defendants were initially proposing in their
Paragraph IV certifications and arguing in the resulting litigations. In return, AstraZeneca agreed to not to produce
its own authorized generic version of Nexium during Ranbaxy’s 180–day exclusivity period, allegedly accruing a
value to Ranbaxy of over $1 billion. It is unclear from the opinion if there was a cash payment made to Ranbaxy.
Also, AstraZeneca forgave contingent liabilities of both Teva and Dr. Reddy’s related to “at risk” launches of
generic versions of non-related products. The generic defendants urged the court to read Actavis to apply only to
monetary payments and the court declined. At the motion to dismiss stage, the In re Nexium court found the
allegations sufficient to allege an antitrust violation. In re Nexium (Esomeprazole) Antitrust Litig., 968 F. Supp. 2d

31

otherwise and held that “the Supreme Court considered a reverse payment to involve an exchange
of money” and therefore did “not extend the holding of Actavis to the non-monetary facts before
it.” In re Lamictal Direct Purchaser Antitrust Litig., No. 12-CV-995 WHW, 2014 WL 282755, at
6-7 (D.N.J. Jan. 24, 2014). 15 This Court somewhat agrees with the analysis of both cases. That
is, it is true that Actavis never indicated that a reverse payment had to be a cash payment; but it is
also true that Actavis emphasized cash payments. In applying Actavis here, the non-monetary
payment must be converted to a reliable estimate of its monetary value so that it may be analyzed
against the Actavis factors such as whether it is “large” once the subtraction of legal fees and other
services provided by generics occurs.
The Supreme Court’s general concern is to determine if there are “genuine adverse effects
on competition.” Actavis, 133 S. Ct. at 2234 (quoting FTC v. Indiana Federation of Dentists, 476
U.S. 447, at 460–461, 106 S.Ct. 2009 (citing 7 Areeda ¶ 1511, at 429 (1986))). Although Actavis
addressed cash payments, reading the opinion as a whole, it is clear that the Supreme Court focuses
on the antitrust intent of the settling parties rather than the manner of payment. For example, Justice
Breyer stated: “the relevant antitrust question is: What are [the] reasons [for preferring reverse
payment settlements]? If the basic reason is a desire to maintain and to share patent-generated
monopoly profits, then, in the absence of some other justification, the antitrust laws are likely to

367, 392 (D. Mass. 2013). Later, at the summary judgment stage, the court denied summary judgment made on
similar grounds. In re Nexium (Esomeprazole) Antitrust Litig., 12-md-02409-WGY (D. Mass. Sept. 4, 2014), ECF
No. 977.
15

In this case, GlaxoSmithKline (GSK) and the generic defendant Teva are alleged to have entered into reverse
payment agreements to keep a generic version of Lamictal off the market. GSK allowed certain generic forms of
Lamictal to enter the market before all patent claims had expired, though later than Teva was initially proposing in
the Paragraph IV certification and arguing in the resulting litigation. In return, GSK agreed not to produce its own
authorized generic version of Lamictal during Teva’s 180-day exclusivity period. The court held that application of
Actavis did require a monetary payment to have occurred in the settlement and the no-authorized generic agreement
was not a payment within Actavis. The court concluded that “the settlement was reasonable and not the sort that
requires Actavis scrutiny.”

32

forbid the arrangement.” Actavis, 133 S. Ct. at 2237.
The distinction between non-monetary and cash payments impacts the plausibility standard
of Rule 12(b)(6). When Justice Breyer explained RPSA through the use of a simple hypothetical
“Company A, the patentee, to pay [Company] B [the claimed infringer] many millions of dollars,”
it is easy to identify the reverse payment; however, in a non-monetary payment it is not as easily
recognized. Actavis, 133 S. Ct. at 2227. The pleading must show some reliable foundation for
estimating the alleged reverse payment. Cf. IIA Phillip E. Areeda, Herbert Hovenkamp, et al.,
Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶397, at 417 (3d ed.
2007).
As noted previously, Twombly and Iqbal establish a flexible pleading benchmark, and in a
case where a non-monetary payment is alleged in an antitrust suit, the pleading must demonstrate
the reliable foundation showing a reliable cash value of the non-monetary payment through the
use of more facts upon which Plaintiff depends. As the Third Circuit noted in an antitrust case:
[i]t is, of course, true that judging the sufficiency of a pleading is a contextdependent exercise. Some claims require more factual explication than others to
state a plausible claim for relief. For example, it generally takes fewer factual
allegations to state a claim for simple battery than to state a claim for antitrust
conspiracy.
W. Penn Allegheny Health Sys., Inc. v. Univ. Pittsburg Med. Ctr., 627 F.3d 85, 98 (3d Cir. 2010)
(internal citations omitted). It is not like changing plausibility to probability; it simply requires a
showing of a reliable foundation used within the industry to convert the non-monetary payment to
a monetary value. The Complaint here does not do so.
Plaintiffs allege that Pfizer made two “payments” to Ranbaxy in order to keep Ranbaxy off
the atorvastatin market: (i) the forfeiture of Pfizer’s claim for damages in the Accupril II litigation
in exchange for Ranbaxy’s payment of $1 million; and (ii) foreign patent litigation settlements
33

permitting Ranbaxy to launch generic Lipitor in at least eleven non-U.S. markets prior to patent
expiration. (Am. Compl. ¶ 7, 148, 178, 182.) To this Court, Plaintiffs must plead a reliable
foundation upon which to estimate the value of the compromise of Pfizer’s damages in the
Accupril II litigation. In defining the payment prong of the Actavis rule of reason analysis, one
commentator noted where the non-monetary payment is consideration, it must be valued. The
commentator wrote:
The payment prong involves the following steps: (a) valuing any consideration
flowing from the patentee to the claimed infringer, which may be made over time
and may take forms other than cash; (b) deducting from that payment the patent
holder’s avoided litigation costs; and (c) deducting from that payment the value of
goods, services, or other consideration provided by the claimed infringer to the
patent holder as part of the same transaction (or linked transactions)....
Valuing this consideration, step (a) above, is sometimes an intricate proposition.
For example, the payment could include forgiving a debt owed by the claimed
infringer to the patent holder. The debt may include patent infringement damages.
The claimed damages could pertain to the product whose infringing entry is at issue
(if there has been entry) or another product.... Although sometimes intricate,
handling this complexity is well within the competence of a district court.
(emphasis added)
(quoting Aaron Edlin, et. al., Activating Actavis, 28 Antitrust 16, 18 (2013) (hereinafter “Activating
Actavis”)). In this case, in order to approximate the amount of Pfizer’s alleged consideration to
Ranbaxy, it is necessary to consider the monetary value of Pfizer’s claim at the time of the
settlement. As the commentator stated, this can be “intricate” because Pfizer’s claim for damages
was still contingent, i.e., Pfizer’s claim “[had] not yet accrued and [was] dependent on some future
event that may never happen.” Black’s Law Dictionary (9th ed. 2009). In other words, the success
of Pfizer’s full claim for damages in Accupril II was dependent upon the court’s judgment finding
the Accupril patent valid and infringed, i.e., a “future event that may never happen.” Moreover,
circumstances surrounding the parties often change as a litigation progresses. Because the parties
settled before the actual judgment, it is unclear what Ranbaxy’s liability would have been if a trial
34

occurred.
In considering the monetary value of a patent infringement claim Plaintiff must allege facts
as if Plaintiff was standing in the shoes of the parties at the time of settlement. Cf. Singh v. Bradford
Regional Med. Center, 752 F. Supp. 2d 602, 619-20 (W.D. Pa. 2010). That is, to value the claim
for damages in Accupril II, one must demonstrate the evidence upon which Pfizer would have
most likely relied upon at that time. In the Accupril matter, the claim was for an alleged award of
profits lost because of diverted sales, price erosion and increased costs, or a royalty fee due to
Ranbaxy’s infringement. Patent Law and Practice § 8.11, p. 228-231 (Fed. Jud. Center 6th Ed.
2008). To prove profits lost, the patent owner must show he would have made some or all of the
infringers’ sales. In addition, the patent owner must show four major elements: (1) demand for
the product; (2) absence of noninfringing substitutes; (3) manufacturing and marketing capability;
and (4) the amount of profit. Id.; see also Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F. 2d
1152, 1156 (6th Cir. 1978). Some of the major elements have subparts. For example, the fourth
element, the amount of profit, has three components, including the number of sales the patentee
would have made, the price change for those sales, and the cost to produce and market same.
Patent Law and Practice, Sixth Edition (BNA), Herbert F. Schwartz; Robert J. Goldman § 8.11, p.
2 (2008) Here, the Complaint does not allege any such formulation. Plaintiffs generally argue that
the non-monetary payment could be the same amount as the bond posted ($200 million) or it could
be the difference in gross sales ($525 million to $70 million); however, the Plaintiffs never attempt
to value this non-monetary payment to a reliable measure of damages as articulated in the Panduit
case. As noted above, neither of Plaintiff’s figures easily plug into the lost profits criteria; hence,
they are not plausible because they do not provide a reliable foundation or methodology to estimate
the monetary value of Pfizer’s claim for infringement damages.
35

Assuming Plaintiffs relied on a reliable foundation (which Plaintiffs did not), the amount
of a settlement varies due to the mindset of the parties at the time of the settlement as to the risk
of trial. Hence, the monetary value of the claim must include some evaluation of those risks. For
example, the Third Circuit set forth factors the district court should use approving a class action.
Some of those factors such as the risks of establishing liability or damages, the ability of the
defendant to withstand a greater judgment and the range of reasonableness in light of the best
possible recovery. Girsh v. Jepson, 521 F. 2d 153, 157 (3d Cir. 1973). Although Girsh normally
has a different application than here, the fact remains that some acknowledgement of settlement
consideration must be plead. Here, the Complaint does not do so except that it characterizes
Pfizer’s claim as “slam dunk” and Pfizer had Ranbaxy “over the barrel.” In a RPSA case, the facts
rather than broad characterizations must be alleged. More specifically, one recent law review
article listed some other settlement factors to be considered in an Actavis analysis. Such factors
include: the branded company’s perceived probability of winning the patent litigation; the branded
company’s monopoly profits and duopoly profits (if the generic were to enter the relevant market);
the remaining lifetime of the patent at issue and the proposed market entry date for the generic
manufacturer; and the branded company’s litigation costs and the amount of payment from the
brand to the generic. Activating Actavis at 14. As part of the conversion from a non-monetary
payment to an estimate of the monetary payment for the claim, Plaintiff cannot bypass those
settlement factors by declaring it was a “slam dunk” case. Most experienced lawyers would
acknowledge that most claims are discounted in order to achieve settlement. Again, Plaintiffs must
plead the allegations of the Complaint as if they were standing in the shoes of the parties at the
time the alleged wrong occurred. This means Plaintiffs must allege a measure of damages accepted
within the industry and a discussion of the settlement factors relating to the claim of damages
36

settled at that time. None of this is adequately alleged in the Complaint.
The lack of any reliable foundation pervades the entire Complaint. For example, Pfizer’s
second alleged payment to Ranbaxy is even more challenging. That is, Plaintiffs allege that Pfizer
allowed Ranbaxy to market generic Lipitor in at least eleven foreign countries in the form of
license agreements. (Am. Compl. ¶ 7, 148, 178.) These provisions allegedly “added to the
financial inducements provided by Pfizer to Ranbaxy, and were not of a kind that Ranbaxy could
ever expect to achieve through success in any litigation of U.S. Lipitor patents.” (Am. Compl. ¶
178.) Again, when looking at this from the Actavis rationale, the Complaint lacks any foundation
to estimate the cash value of the alleged licenses granted in other countries. Since no such
allegations were pled, the allegations are implausible 16.
Legal Fees
Within Actavis, a reverse payment occurs when a net positive payment flows from the
patentee to the alleged infringer. Id. Even if the reverse payment is shown, any traditional
settlement considerations or services provided by the generic are deducted to determine whether
there is a net positive payment flowing from the patentee to the alleged infringer. That is,
Ranbaxy’s prior litigation costs may be deducted from the total payment made by Pfizer. Actavis
provides a rationale for this framework by stating: “[w]here a reverse payment reflects traditional
settlement considerations, such as avoided litigation costs or fair value for services, there is not
the same concern that a patentee is using its monopoly profits to avoid the risk of patent
invalidation or a finding of noninfringement.” Actavis at 2236; see also generally Activating
Actavis at 18.

16

The Complaint seems to set forth “bottlenecking” as a separate cause of action. The Court views bottlenecking as
an effect of the RPSA. Hence, the restraint of trade, if any, focuses on the RPSA rather than the bottlenecking. See
Actavis, 133 S. Ct. 2223, 2231.

37

In this case, with the exception of paragraphs 180 and 255, the Complaint is devoid of any
discussion about saved litigation costs to either party. This is far from fulfilling “a plaintiff’s
obligation to provide the grounds of his entitlement to relief that requires more than labels and
conclusions.” Twombly, 550 U.S. at 555 (citations omitted). Plaintiffs failed to cite to two
published surveys regarding legal fees which may have constituted a reliable foundation within
the industry. According to a survey reported in 2005, a median expense of patent litigation was
$4.5 million and the patentee is “likely to spend more, as it has more at stake in the case.” C. Scott
Hemphill, Paying for Delay: Pharmaceutical Patent Settlement As A Regulatory Design Problem,
81 N.Y.U. L. Rev. 1553, 1623 n. 89 (2006) (citing American Intellectual Property Law
Association, Report of the Economic Survey). Another study cited by the dissenting Justices in
Actavis suggests that the cost of patent infringement litigation for a generic challenging a brand
name pharmaceutical patent can be as much as $10 million per suit. Actavis, 133 S. Ct. at 224344 (Roberts, J., dissenting) (citations omitted). In light of the two surveys, it is readily conceivable
that the cost of patent litigation for Ranbaxy may have been between $4.5 million and $10 million
per suit. Considering that the Agreement settled three other U.S. patent infringement or ANDA
litigations and 23 foreign legal actions, the saved cost of litigation for Ranbaxy may have been
between $117 million (26 suits at $4.5 million) and $260 million (26 suits at $10 million each).
Despite the value, the Complaint fails to consider the legal fees aspect of the case in such a light.
Since Plaintiffs failed to adequately address this point, the Complaint is implausible.
Large Payment
The Supreme Court in Actavis did not define what constitutes “large.” Instead, the court
noted that “[a]n unexplained large reverse payment itself would normally suggest that the patentee
has serious doubts about the patent’s survival. And that fact, in turn, suggests that the payment’s
38

objective is to maintain supracompetitive prices to be shared among the patentee and the challenger
rather than face what might have been a competitive market.” Actavis, 133 S. Ct. at 2236.
Therefore, “the size of the unexplained reverse payment can provide a workable surrogate for a
patent’s weakness” (Actavis, 133 S. Ct. at 2236-37) as well as “‘a strong indicator of power’ —
namely, the power to charge prices higher than the competitive level. Actavis, 133 S. Ct. at 2236
(citation omitted).
One way to measure the “largeness” of a reverse payment is to assess whether the amount
is larger than what the generic would gain in profits if it won the Paragraph IV litigation and
entered the market. The Actavis majority found this to be “strong evidence” of anticompetitive
activity. Actavis 133 S. Ct. at 2235 (citing See Hemphill, 81 N.Y.U. L.Rev. at 1581) See also Br.
for 118 Law, Economics, and Business Professors et al. as Amici Curiae 25. Whatever the
definition “large” is meant to represent, this Court looking at the Complaint is unable to perform
the analysis, as the Plaintiffs failed to plausibly allege an estimate of the monetary value of the
non-monetary payment, and the amount of legal fees of Ranbaxy should have been subtracted from
same.
Statements by Pfizer’s Management
There are several statements of Pfizer’s management upon which Plaintiffs rely in order to
show plausibility of their RPSA cause of action. The first concerns a statement by Hank
McKinnell, Pfizer’s former Chairman and Chief Executive Officer (CEO) concerning the date on
which the exclusivity period of the Lipitor patents ended. The quote is an excerpt from a book he
authored and published in 2005. The quote reads:
There are dozens of generic drug manufacturing companies with a red circle around
June 28, 2011. That’s the day the patent for our anti- cholesterol medication Lipitor
expires. . . . Shortly thereafter a number of generic alternatives to Lipitor will be
introduced and consumers will have a choice of generic tablets containing
39

atorvastatin calcium[.]
(Am. Compl. ¶ 205.) The Plaintiffs argue that the statement constitutes an admission by Pfizer’s
former CEO about the final expiration date (June 28, 2011). It shows Pfizer’s mindset about the
life of the Lipitor patents. Plaintiffs argue that the June 28, 2011 is a key date because it recognizes
that the Formulation Patents, the Process Patents, and the ’156 patent could not block generics
from entering the market . (Am. Compl. ¶ 206 (see chart, page 8). This quote may constitute an
admission under Federal Rule of Evidence 801(d)(2)(D), which provides that a statement is not
hearsay if it “was made by the party's agent or employee on a matter within the scope of that
relationship and while it existed.” See also Davis v. Mobil Oil Exploration & Producing Se., Inc.,
864 F.2d 1171 (5th Cir. 1989). In the Court’s view, it is difficult to rely upon five lines from a
book, or its context, without analyzing the gist of the entire book. As a result, the quote, on its
own, cannot be the sole basis of a cause of action. It does not meet the plausibility standard or
support Plaintiffs’ argument that the five patents are irrelevant without further plausibility.
Moreover, broad assumptions about the quote are not warranted because it was written three years
before the Settlement Agreement was entered, and it was not directly connected with the
negotiations concerning the Settlement Agreement.
The second statement was made by Pfizer’s Chief Executive Officer Kindler to company
shareholders wherein he declared that “[Pfizer] had very, very substantial damages in the way of
lost profits that we intend to recover from Ranbaxy” in the Accupril case. (Am. Compl. ¶ 170.)
Since the statement does not disclose the monetary value of a non-monetary payment, it is of little
impact as to its measurement within the Actavis rationale.
The third statement is by a Pfizer attorney who in a brief submitted to the Federal Circuit
in the Accupril I litigation, wrote “Pfizer will be claiming hundreds of millions of dollars in
40

damages in for the infringing sales that were made prior to the injunction.” Br. for PlaintiffsAppellees at 5, Warner-Lambert Co. v. Teva Pharms. USA, Inc., No. 08-1150-1190, 2008 WL
2444724 (Fed. Cir. May 28, 2008). This statement sounds more like a demand than a plausible
value of the claim.
These statements are corroborative evidence, but plausibility requires some reasonable
foundation to estimate the cash value of the non-monetary reverse payment.
Agreement Must be Considered as a Whole
As outlined, the Agreement concerns the settlement of patent litigation concerning three
drugs – Lipitor, Accupril and Caduet. In order to analyze whether an alleged RSPA occurred to
delay entry of generic Lipitor, as plaintiffs allege, the terms of the entire Settlement Agreement
must be analyzed to determine plausibility. To rely only on certain sections (Accupril) of the
Settlement Agreement and disregard other sections (Caduet) is not a reasonable analysis. The
Complaint does not plead the Settlement Agreement as a whole. In the rule of reason analysis, “the
finder of fact must decide whether the questioned practice imposes an unreasonable restraint on
competition, taking into account a variety of factors, including specific information about the
relevant business, its condition before and after the restraint was imposed, and the restraint’s
history, nature and effect.” In re Tamoxifen Citrate Antitrust Litig. 466 F.3d 187, 201 n. 13 (2d
Cir. 2006), cert. denied sub. nom., Joblove v. Barr Labs, Inc., 127 S.Ct. 3001 (2007) (Tamoxifen
II”) (quoting State Oil Co. v. Kahn, 522 U.S. 3, 10 (1997)). Generally, “the courts must look to
the monopolist's conduct taken as a whole rather than considering each aspect in isolation.”
LePage’s Inc. v. 3M, 324 F.3d 141, 162 (3d Cir. 2003); see also In re Niaspan Antitrust Litig., No.
13-MD-2460, 2014 WL 4403848, *11 and n.13 (E.D. Pa. Sept. 5, 2014) (holding, where three
separate settlement agreements had been entered by the antitrust defendants, that defendants were
41

not entitled to examine “each of the three settlement agreements in isolation,” but should be read
as one agreement). Here, the Complaint fails to adequately address (1) the Caduet litigation; (2)
the costs of all litigation; (3) the agreement to utilize Pfizer’s bulk active pharmaceutical
ingredient, atorvastatin, in Canada. As such, the claim is implausible for failure to consider the
Settlement Agreement as a whole, and to “account [for] a variety of factors.” In Re Tamoxifen
Citrate Antitrust Litigation, 466 F. 3d at 201.
To the Court, the analysis of Caduet and the other terms which resolved other litigation
globally appear critical to determining the monetary value of the settlement claim under Actavis.
The contention that other provisions of the Agreement do not matter (like Caduet) makes little
sense. At the very least, those factors must be plead to show why they do not alter Plaintiffs
antitrust claims. Hovenkamp, Sensible Antitrust Rules for Pharmaceutical Competition, 39
U. S. F. L. Rev. 11, 24 (2004). Moreover, there is a sliding scale in appraising reasonableness.
California Dental Assn., 526 U. S. at 780. As such, this selective look at certain provisions of the
agreement and bypassing others renders the complaint implausible. 17 The Court must look at the
Settlement Agreement as a whole and cannot extricate individual provisions. In re: The Prudential
Insurance Company of America Sales Practice Litigation, 962 F. Supp. 459 (D.N.J. 1997), aff’d

17

Similarly, Defendants argue that Pfizer’s forbearance of Ranbaxy’s potential liability did not constitute a “payment”
because Accupril II settlement falls within an exception to Actavis and is a “safe harbor” from RPSA liability. ECF
No. 490, p. 19-20; see also ECF No. 493, p. 20. That is, the Accupril II resolution stands on its own and is not related
to Lipitor Process settlement or the Caduet settlement. The Court disagrees. The Agreement was signed at one single
time, and the corporate management of each party most likely comingled the facts to determine the settlement’s
adequacy. To divide the Settlement Agreement into segments, as defendants propose, is opposite of what most likely
occurred. Here, the facts give rise to the conclusion that the Accupril II settlement was likely reviewed in conjunction
with the other litigations, and other terms of the Agreement. The settlements of three branded drugs in one Agreement
circumstantially combines all three drugs into one contemporaneous settlement. Settlement Agreement at 26 This is
an obvious indication that the parties negotiated each settlement with other cases in mind, it is implausible to analyze
the agreement unless it is considered as a whole. See Weiss v. Mercedes-Benz of North America, 899 F. Supp. 1297,
aff’d 66 F. 3d 314 (D.N.J. 1995). Thus, Pfizer’s safe harbor argument does not hold water.

42

148 F. 3d 283, cert. denied, Krell v. Prudential Ins. Co. of America, 525 U.S. f1114, 119 S.Ct. 890
(1999).
Re-Pleading the Matter
Plaintiffs have failed to plead their Amended Complaint with the plausibility required by
the Federal Rules of Civil Procedure and the relevant case law. The Amended Complaint
constitutes the plaintiffs’ second attempt to plead the relevant facts. However, the pleading itself
has changed little from the original Complaint filed in this matter. The plaintiffs have not argued
that they should be given leave to re-plead facts in a second Amended Complaint, nor have they
asserted any facts that would meet the required standard of pleading. Therefore, the Amended
Complaint is dismissed with prejudice. LaFlamme v. Societe Air Fr., 702 F. Supp. 2d 136, 155
(E.D.N.Y. 2010) (citing Horoshko v. Chase Manhattan Mortgage Corp., 373 F.3d 248, 249 (2d
Cir. 2004); Nat’l Union of Hosp. & Health Care Employees v. Carey, 557 F.2d 278, 282 (2d Cir.
1977); Trautenberg v. Paul, Weiss, Rifkind, Wharton, Garrison LLP, 351 Fed. App’x 472, 474 (2d
Cir. 2009); and Anatian v. Coutts Bank (Switz.) Ltd., 193 F.3d 85, 89 (2d Cir. 1999)).
Conclusion
Plaintiffs argue that “this court need not, now, engage in . . . the ‘intricate proposition’ of
valuing the payment from Pfizer to Ranbaxy.” (ECF No. 509 at 44). The Court disagrees. Pursuant
to Twombly and Iqbal, the standard for considering a motion to dismiss a complaint is a based
upon a flexible pleading benchmark. In this case, where Plaintiffs rely on a non-monetary reverse
payment of an inchoate claim, they must plead plausible facts including an estimate the monetary
value of same so the Actavis rationale can be applied. The Plaintiffs have failed to delineate any
type of methodology to connect the claim to its monetary value. To meet this standard, Plaintiffs
must stand in the shoes of the underlying parties at the time of the settlement, and determine an
43

estimate of the monetary value of the settlement at that time. The Complaint as pleaded does not
do so, despite it being the second attempt by Plaintiffs to plead their causes of action. The flexible
pleading benchmark established by Twombly requires such pleading same in these difficult cases.
Remember, this is not a car accident where plausible facts are easily set forth; it is a non-monetary
payment in an antitrust suit which is at the opposite end of the benchmark scale. Guesswork -like the use of the bond amount ($200 million) or the difference in sales ($225 million to $70
million) -- coupled with non-specific statements of Pfizer management is insufficient. A reliable
foundation need not yield a precise amount of the alleged non-monetary payment, but one that fits
within the ballpark like using the loss of profit standard. See infra at 34-36. The Complaint fails
to provide same. For the reasons stated above, Defendant’s motion to dismiss the Direct
Purchaser's Complaint is granted with prejudice.

s/Peter G. Sheridan
PETER G. SHERIDAN, U.S.D.J.

September 12, 2014

44