H&S is lead trial counsel for plaintiffs in pay-for-delay trial

H&S is lead trial counsel for plaintiffs in pay-for-delay trial

Law360, Boston (March 19, 2018, 5:39 PM EDT) -- One of the architects of an Impax Laboratories Inc. deal panned as a pay-for-delay scheme by big retailers and a class of consumers told a Massachusetts federal jury Monday that the 2008 agreement with Medicis Pharmaceuticals Corp. actually rushed the generic version of an acne medication to the market ahead of schedule.

Impax Vice President of Litigation Margaret Snowden testified during the fourth day of the likely monthlong trial that the license and settlement and joint development agreements she helped craft put the generic version of Solodyn, an oral antibiotic used to treat acne, on the shelves in November 2011 — six and a half years before the Medicis patents were set to expire.

The patent accord was reached at the same time as the joint development agreement that included an up-front, $40 million payment that the consumers and retailers say was a bribe meant to keep the Impax generic off the shelves for three years, but Snowden told the jury that the two deals stood alone financially and represented the fastest way for Impax to get its generic acne medication to customers.

“There was obviously patent risk, Impax was not even at the starting gate to litigate the patent,” Snowden testified, “so the (license and settlement agreement) gave us a date certain to launch in November 2011, which was six and a half years before patent expiration, and eliminated all of the patent risk.”

Steve D. Shadowen of Hilliard & Shadowen LLP, an attorney for the consumer class, pressed Snowden on direct examination about a list of payments tucked into the joint development agreement. The document, presented on a screen inside the courtroom, showed several payments of $2 million, $3 million or $5 million from Medicis to Impax tied to specific benchmarks, such as U.S. Food and Drug Administration approval of future joint projects.

A one-time, $40 million payment was also made within five days of the signing of the 2008 accord, the document showed. Shadowen suggested that the money was not needed to close either the license and settlement agreement or the joint development agreement, but was meant to push Impax to delay launching its generic Solodyn by three years.

“The payments were related to the development work being done,” Snowden pushed back, “they stood alone in that regard, Impax would have been happy to do either of them separately.”

The retailers, which include CVS, Walgreens, Rite Aid and Safeway, among others, along with the direct purchasers, argue that Impax could have gone to market with the generic acne medicine in early 2009. Impax has pushed back, saying it would not have launched without a court clarifying whether it would be at risk for patent violations and the substantial damages and litigation costs that could ensue.

In an attempt to counter the Impax argument, Shadowen showed Snowden a letter she had written, downplaying the strength of the Medicis patent on Solodyn.

“The patent was so worthless, if Medicis asserting it, Impax might have an antitrust claim?” Shadowen said, referencing the 2008 letter.

“That’s what the letter is saying, yes,” Snowden said.

On cross-examination, Impax attorney James Douglas Baldridge of Venable LLP asked Snowden whether launching without clarity regarding the patent could be risky, despite her letter saying that Impax had a strong case.

“We did know there was a significant risk of losing that patent litigation at some point,” Snowden said. “It would certainly have been bad for Impax, because Impax wouldn't be able to launch until the patent expired in 2018, and patent litigation is very expensive.”

In questioning Snowden, who was called as an adverse witness, Shadowen said Impax had two ways around the Medicis patent: either launch at risk or settle the patent case but “do it without accepting a $40 million payoff.”

The comment prompted a quick objection, which was sustained by U.S. District Judge Denise J. Casper. The trial continues Tuesday morning with the jury of eight women and two men expected to hear testimony from prerecorded video depositions.

Few pay-for-delay cases have made it to trial since the 2013 U.S. Supreme Court decision in Federal Trade Commission v. Actavis. That decision said that settlements between branded drug companies and generic manufacturers ending patent suits brought under the Hatch-Waxman Act could be considered anti-competitive, but that the agreements should be reviewed under the rule of reason, which left wiggle room for drug companies to argue that the payments were aboveboard.

The instant litigation was centralized in Massachusetts federal court in early 2014 after a host of suits were filed targeting Medicis’ settlements.

The trial comes after a flurry of settlements, including a $35 million accord this month between Impax and direct purchaser class representatives Ahold USA Inc. and Rochester Drug Co-Operative Inc.

Sandoz Inc. and Lupin Ltd. settled in April 2017 for a combined $6.7 million to escape the lawsuit. Valeant Pharmaceuticals International Inc., which counts Medicis as one of its subsidiaries, fought the allegations until the First Circuit declined to delay the trial to consider whether the class certification was improper, as Medicis argued; the brand-name manufacturer settled earlier this month for $58 million.

The direct purchasers are represented by Hagens Berman Sobol Shapiro LLP and Berger & Montague PC.

The consumers are represented by Motley Rice LLC, Hilliard & Shadowen LLP and Berman DeValerio.

Walgreens is represented by Kenny Nachwalter PA.

CVS and Rite Aid are represented by Hangley Aronchick Segal Pudlin & Schiller.

Impax is represented by Venable LLP, Coppersmith Brockelman PLC, Demeo LLP, O’Melveny & Myers LLP and Harkins Cunningham.

The case is In re: Solodyn (Minocycline Hydrochloride) Antitrust Litigation, case number 1:14-md-02503, in the U.S. District Court for the District of Massachusetts.