Sanofi-Aventis and Allergan PLC units have agreed to pay classes of consumers and third-party payors $100 million to settle pay-for-delay claims involving Bayer Corp. illegally paying generic-drug manufacturers $400 million to delay launching lower-cost versions of its blockbuster antibiotic Cipro. If the settlement involving Sanofi’s Hoechst Marion Roussel Inc., its former owner, The Rugby Group, and Allergan’s Watson Labs, is granted preliminary approval, it would end nearly all claims in litigation that had been in court for more than 15 years.
Teva Pharmaceutical Industries Ltd-owned Barr Pharmaceuticals is the sole remaining Defendant. The all-cash settlement will be placed in an escrow account that the Plaintiffs recommended be administered by Citibank NA, which had been the administrator in a related settlement with Bayer. Each named consumer plaintiff would get up to $1,500 and each named third-party payor Plaintiff would receive up to $9,000.
The settling Defendants agreed to help the Plaintiffs as they pursue their claims against Barr, including making employees or representatives available and allowing some business records at trial. California consumers and insurance groups brought their lawsuit against the pharmaceutical companies in California Superior Court in San Diego County in 2002, challenging the settlement Bayer reached with Barr in 1997 that paid the generic-drug maker $398 million.
In 2009, the trial court granted the drugmakers summary judgment based on a 2006 Second Circuit ruling laying out the rule that courts should presume pharmaceutical patent settlements to be legal as long as they don’t exceed the scope of the patent. That ruling was overturned in the U.S. Supreme Court’s landmark 2013 ruling in FTC v. Actavis. In May 2015, the California Supreme Court decided that the U.S. Supreme Court’s decision allowing Hatch-Waxman Act payments to be challenged under federal antitrust law also supported permitting similar lawsuits under state competition laws. The ruling overturned decisions by two lower courts regarding the long-running litigation and paved the way for Cipro purchasers to forge ahead with their claims against Watson, HMR and Rugby.
Bayer itself has settled for $74 million with the Plaintiffs shortly before Actavis. The California justices said lower courts should use the rule-of-reason test, which balances the harm an agreement would cause to competition against its benefits, to evaluate pharmaceutical patent settlements. The ruling further instructed courts to determine whether a settlement delayed generic market entry based on the chance the patent had of being upheld if the drugmakers had litigated a challenge to its conclusion.
The Plaintiffs are represented by Richard M. Heimann, Eric B. Fastiff, Dean M. Harvey, Lin Y. Chan, Yaman Salahi and Wilson M. Dunlavey of Lieff Cabraser Heimann & Bernstein LLP, Dan Drachler of Zwerling Schachter & Zwerling LLP and Joseph R. Saveri and Ryan J. McEwan of Joseph Saveri Law Firm Inc. Ralph B. Kalfayan of Krause Kalfayan Benink & Slavens, LLP is Plaintiffs’ local liaison counsel.
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