The State of Alaska has won an important victory relating to the investigation of the drug maker Lupin by the state’s Attorney General. A Motion to Dismiss filed by the
Attorney General’s office was granted by U.S.District Judge Richard D. Bennett. The ruling defeats Lupin’s challenge in federal court to the State’s investigation into what is known as “Pay for Delay” conduct. In February of this year, Attorney General Craig Richards, on behalf of the State of Alaska, issued Civil Investigative Demands (CIDs) to investigate potential violations of Alaska’s Antitrust, Unfair Trade Practices, and Consumer Protection laws.
Alaska hired our firm, along with the Miner, Barnhill & Galland firm and The Fosler Law Group, a local Alaska firm, to assist with its investigation into whether certain pharmaceutical manufacturers violated Alaska State law by entering into what are known as “reverse settlement agreements” or “pay-for-delay” agreements.
In these agreements, a brand-name drug maker and a generic rival locked in patent litigation reach a settlement — the brand name drug maker may offer cash or something else of value to the generic drug maker and, in return, the brand name drug maker gains more time to sell its brand drug without encountering lower-cost generic competition. The generic drug maker, meanwhile, comes away with a large payment and an agreement to sell its generic equivalent at a specified future date.
The Alaska Attorney General issued a CID to several drug manufacturers, including Lupin Pharmaceuticals, Inc. and Lupin Ltd., to investigate whether they engaged in the conduct of delaying generic entry for the drugs Loestrin and Effexor in exchange for some form of consideration from the brand manufacturer. As part of the CID, the State requested that Lupin produce all documents relevant to the investigation.
Lupin refused to comply with Alaska’s investigation and filed a Complaint in the U.S. District Court for the District of Maryland to block the State from forcing the drug manufacturer to turn over documents that pertained to any alleged pay-for-delay settlement for Loestrin and Effexor. Alaska’s Attorney General subsequently filed a Motion to Dismiss Lupin’s Complaint. A hearing was held by Judge Bennett on June 26, 2015.
Judge Bennett granted the State’s Motion on July 2, 2015, and dismissed Lupin’s case. Alaska argued that Lupin was attempting to block the Attorney General from using his statutory authority to pursue violations of Alaska law and enforce CIDs in state court. Judge Bennett agreed with the State that the federal court should abstain from exercising jurisdiction over the case under the precedent set by a 1971 U.S. Supreme Court ruling in Younger v. Harris.
Alaska argued that, “Since the seminal case of Younger v. Harris … the Supreme Court has held that due deference to the principles of federalism and comity require federal courts to abstain from consideration of cases aimed at enjoining state proceedings where the state proceeding represents an important sovereign interest, provided that the state forum is available to hear any federal claims.” Judge Bennett agreed, stating in his ruling:
The Alaska proceeding implicates the state’s interest in enforcing the orders and judgments of its courts. The Lupin Plaintiffs’ speculation about the purported inadequacy of the Alaska proceeding fails to prevent the application of Younger abstention in this case.
On the same day the State filed its Motion to Dismiss in the Maryland federal court, Alaska also filed a Petition in the Alaska Superior Court for an order to show cause why Lupin should not be held in contempt for failure to respond to the CIDs under Alaskan state law, thereby triggering judicial oversight of the CIDs. Judge Bennett ruled that Lupin failed to cite to any authority from Alaska that suggests constitutional or jurisdictional challenges cannot be raised in response to the show cause petition. “Indeed, such limitation is unlikely because the Alaska Superior Court is the court of general jurisdiction in the State,” the Judge stated in his Order.
According to Judge Bennett, the parallel Alaska State proceedings will afford an adequate remedy; therefore, Lupin’s challenges to turning over the requested materials will have to be raised in the Alaska Superior Court. As a result, Lupin has now filed its notice that it will appeal Judge Bennett’s order to the Fourth Circuit Court of Appeals.
This is a great victory for the State of Alaska and will allow the state to combat these anticompetitive agreements. We have learned that they have cost American citizens $3.5 billion annually in higher health care costs. Once the appeal by Lupin is over, assuming the lower court’s order is affirmed, the next step for the State will be to pursue the investigation in the State of Alaska. I believe Lupin will have to convince an Alaska State Court judge why they should not have to comply with the State’s investigation.
Lawyers at Beasley Allen continue to investigate Pay for Delay cases. If you have any questions regarding these cases, or any other case involving fraudulent and anticompetitive conduct, contact Ali Hawthorne, a lawyer in our firm’s Consumer Fraud and Commercial Litigation Section, at 800-898-2034 or by email at Alison.Hawthorne@beasleyallen.com.
