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Searching for Causation in ACTOS Complaint

How explicitly must a complaint sounding in antitrust allege causation?  At oral argument last week, the Court of Appeals for the Second Circuit evaluated the sufficiency of the plaintiffs’ allegations that certain Takeda entities, in their representations to the FDA, falsely described patents for the antidiabetic drug ACTOS in order to delay the entry of generic competitors into the market—specifically, whether the plaintiffs had pleaded enough facts to show that these representations plausibly caused the delay.

The plaintiffs are a group of end payors for Takeda’s drug.  In their complaint, the plaintiffs allege that the Takeda entities misrepresented their patent for ACTOS to the FDA by describing it as a “drug product patent” rather than a “method patent” that covers methods of using the drug.  According to the plaintiffs, the “drug product patent” description required any generic manufacturer seeking approval to enter the market to file a Paragraph IV certification with the FDA, which in turn triggered a 180-day exclusivity period for the first generic that files its abbreviated new drug application (“ANDA”).  Plaintiffs allege that Defendants’ conduct violated a multitude of states’ antitrust statutes and injured them by imposing a 180-day delay in other generics’ market entry that would not otherwise have occurred.  The District Court, however, agreed with the Takeda entities that the complaint did not allege a link between the alleged false descriptions and delayed market entry, as the District Court found when it granted Defendants’ motion to dismiss.  The plaintiffs appealed.

Although at the oral argument, Takeda also argued that the patent descriptions were not false, the Second Circuit panel seemed more interested in evaluating the sufficiency of Plaintiffs’ allegations, as Deirdre A. McEvoy of Patterson Belknap Webb & Tyler LLP predicted.   The panel, composed of Circuit Judges Livingston and Jacobs and District Judge Rakoff (sitting by designation), probed both parties on specific allegations of the complaint, attempting to locate a claim that the need for Paragraph IV certifications caused the delayed entry of generics into the market.  Judge Rakoff pointed out that Plaintiffs had not pleaded any plausible reason to believe the generics would have filed earlier in the absence of Takeda’s drug product patent description.

The plaintiffs pressed the fact that, on the day immediately following the end of the 180-day entry barrier, seven generics entered the market.  Plaintiffs’ counsel at oral argument underscored that the allegation of that fact alone was sufficient to plausibly allege causation—that is, the fact that seven generic manufacturers entered the market on Day 181 creates what he described as a “natural, plausible, compelling inference” that the 180-day provision triggered by the drug product patent description caused the generics’ delayed entry.  For plaintiffs, that fact “distinguishes this case from all sorts of cases where you have to theorize how somebody would have been able to enter the market—we didn’t have to do that in this case.”

But defendants’ counsel described plaintiffs’ causation claims as “theories very frankly that, if they had been in the complaint, we would have taken them apart step by step because they don’t make any sense—but we never had that opportunity because they were never alleged.”

Judge Jacobs engaged defendants’ counsel by asking, “You would concede, would you not, that filing a drug product description that includes a drug that is about to come off patent . . .  as a drug product rather than a method of use . . . that that can cause delay?”  “Theoretically, it can,” Takeda’s counsel responded, though he also asked “Where in the complaint do they allege that patent descriptions caused a delay in generic entry?”  Moreover, defendants emphasized that the supposed false descriptions were not published in the FDA’s Orange Book, and therefore could not have caused the generics’ delayed market entry.

The plaintiffs also highlighted the complaint’s “general” allegation that the need to make a Paragraph IV certification resulted from the false description.”  But defendants maintained that the case could “absolutely” be resolved on a motion to dismiss.

We will continue to monitor this case, including the ultimate decision by the Second Circuit. Any decision by the Second Circuit may have important impacts on pharmaceutical antitrust cases in general, and may provide further clarity toward the standard for pleading causation in antitrust cases in general under Twombly.