Generic drug maker barred from filing ‘sham’ lawsuit by previous settlement

On July 21, 2022, the United States Court of Appeals for the Third Circuit unanimously upheld a district court judge’s finding that a prior settlement had made public a claim by plaintiff, a manufacturer of Pharmaceuticals (the “Company”), that the defendants were engaging in “sham” patent litigation to prevent it from launching a generic version of the defendants’ brand name drug. Perrigo Co, et al. vs. AbbVie Inc, et 21-3026 (3rd Cir. July 21, 2022).

At the time of the litigation in question, the defendants were co-owners of a patent covering a pharmaceutical composition used to treat hypogonadism, or low testosterone, which they market in the form of a brand name topical gel called AndroGel. In 2011, the applicant developed a generic version of AndroGel. Pursuant to Hatch-Waxman, 21 U.S.C § 355(b)(2)(A)(iv), Plaintiff sent Defendants Notice that it sought FDA approval, to which Defendants responded. by filing a patent infringement action. The lawsuit triggered the Hatch Waxman Act’s automatic 30-month stay on the FDA’s ability to approve the proposed new drug. The parties settled shortly after the lawsuit was filed, agreeing that the plaintiff could begin selling its product in 2012. The FDA approved the generic version in 2013, and the plaintiff launched its product in 2014. In 2020, plaintiff filed a complaint under the Sherman Act in the District of New Jersey. to research. The plaintiff alleged that the 2011 trial was a “sham” that “delayed [plaintiff’s] launch of its generic version of AndroGel 1%” and, therefore, defendants “were able to maintain monopoly power “delaying the entry of much cheaper competing generic products”.

The defendants sought judgment on the pleadings, arguing that the plaintiff’s claim was barred by the 2012 settlement agreement, which provided for a mutual release of claims arising from the litigation. The plaintiff argued that the settlement agreement only released claims accrued prior to the effective date of March 27, 2012, and for this reason his case was not statute-barred as he had not suffered immediate harm when defendants sued in 2011. Plaintiff argued that because the FDA had not yet approved its application to sell the generic version of Androgel, its damages were therefore speculative, and its claim n did not arise when the defendants allegedly brought a “sham” lawsuit. U.S. District Judge Brian Martinotti sided with defendants, noting that a moot litigation claim generally arises at the time the alleged moot litigation is filed, and such a claim would be within the scope of the release.

On appeal, the Third Circuit accepted and affirmed Judge Martinotti’s decision, holding that a cause of action based on sham litigation arises at the time the litigation is filed. Although a plaintiff’s cause of action does not accrue if the damages are speculative, the Third Circuit has ruled that to invoke this principle, the plaintiff would have to show “that before March 27, 2012, he was not not sure he would take any damage, not just that we didn’t know how much they would suffer. Expanding on this, the panel said the difficulty in determining damages should not be “confused with the right of recovery” and noted that the plaintiff’s complaint itself showed that damages could reasonably have been estimated before the date of the claim. FDA approval because it cited specific sales and market share data. before the alleged mock lawsuit was filed. The panel also noted that due to the automatic stay of the Hatch-Waxman Act, the plaintiff “felt the negative impact of the litigation when it was filed.”

Because Plaintiff’s allegedly spurious claims accrued prior to settlement, the Third Circuit ruled that Plaintiff had released them.