Case 1:20-cv-05735-LJL Document 438 Filed 02/21/23 Page 1 of 53
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`IN RE BYSTOLIC ANTITRUST LITIGATION
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`LEWIS J. LIMAN, United States District Judge:
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`2/21/2023
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`20-cv-5735 (LJL)
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`OPINION AND ORDER
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`On January 24, 2022, this Court dismissed without prejudice Direct Purchaser and
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`Retailer Plaintiffs’ Second Amended Complaints and End-Payor Plaintiffs’ First Amended
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`Complaint (collectively, “Prior Complaints”),1 together alleging that Defendants engaged in an
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`illegal scheme to delay competition from generic versions of Bystolic (nebivolol hydrochloride),
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`a drug used to treat high blood pressure, in violation of the Sherman Act, 15 U.S.C. § 1 et seq.,
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`and state antitrust and consumer protection laws.2 Dkt. No. 350; Dkt. No. 354 (“January 2022
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`1 The “Direct Purchaser Plaintiffs” (“DPP”) are J M Smith Corporation d/b/a Smith Drug
`Company and KPH Healthcare Services, Inc. a/k/a Kinney Drugs, Inc., on behalf of themselves
`and all others similarly situated. The “Retailer Plaintiffs” are CVS Pharmacy, Inc., Rite Aid
`Corporation, Rite Aid Hdqtrs. Corp., Walgreen Co., The Kroger Co., Albertsons Companies,
`Inc., and H-E-B, L.P. The “End-Payor Plaintiffs” (“EPP”) are the Mayor and City Council of
`Baltimore, UFCW Local 1500 Welfare Fund, Teamsters Western Region & Local 177 Health
`Care Plan, Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund, Law Enforcement
`Health Benefits, Inc., Teamsters Local No. 1150 Prescription Drug Benefit Plan, Teamsters
`Local 237 Welfare Fund, and Teamsters Local 237 Retirees’ Benefit Fund, on behalf of
`themselves and all others similarly situated. Together, they are referred to as “Plaintiffs.”
`2 Defendants include the manufacturers and marketers of Bystolic (“Forest”) and their generic-
`drug competitors (“Generic Defendants”). “Forest” refers collectively to: Forest Laboratories,
`Inc., Forest Laboratories Holdings, Ltd., Forest Laboratories, LLC, and Forest Laboratories
`Ireland Ltd.; AbbVie, Inc.; and Allergan, Inc., Allergan Sales, LLC, and Allergan USA, Inc.
`“Generic Defendants” refers collectively to: Hetero USA Inc., Hetero Labs Ltd., and Hetero
`Drugs Ltd. (collectively, “Hetero”); Torrent Pharmaceuticals Ltd. and Torrent Pharma Inc.
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`Case 1:20-cv-05735-LJL Document 438 Filed 02/21/23 Page 2 of 53
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`Opinion”). Direct Purchaser Plaintiffs subsequently filed a Third Amended Complaint (“DPP
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`Complaint”), Retailer Plaintiffs filed Third Amended Complaints (“Retailer Plaintiffs’
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`Complaints”), and End-Payor Plaintiffs filed a Second Amended Complaint (“End-Payor
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`Plaintiffs’ Complaint”) (collectively, “Complaints”), in an attempt to redress the gaps that the
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`Court previously identified in the Prior Complaints. Dkt. Nos. 426, 427.3
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`Defendants have filed four motions to dismiss the Complaints. All Defendants move to
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`dismiss the Direct Purchaser and Retailer Plaintiffs’ Complaints for failure to state a claim
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`pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. No. 393. All Defendants also move
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`to dismiss End-Payor Plaintiffs’ Complaint for lack of subject matter jurisdiction pursuant to
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`Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim pursuant to Federal Rule
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`of Civil Procedure 12(b)(6). Dkt. No. 397. Defendant Teva Israel moves pursuant to Federal
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`Rule of Civil Procedure 12(b)(2) to dismiss the claims against it for lack of personal jurisdiction.
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`Dkt. No. 388. Finally, a group of Defendants allegedly not at home in New York (“Nonresident
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`Defendants”)4 move pursuant to Federal Rule of Civil Procedure 12(b)(2) to dismiss for lack of
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`personal jurisdiction the EPP Complaint’s non-New York, state-law claims. Dkt. No. 386.
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`(collectively, “Torrent”); Ascend Laboratories, LLC and Alkem Laboratories Ltd. (collectively,
`“Alkem”); Indchemie Health Specialties Private Ltd. (“Indchemie”); Glenmark Generics Inc.,
`USA, Glenmark Generics Ltd., Glenmark Pharmaceuticals Ltd., and Glenmark Pharmaceuticals
`S.A. (collectively, “Glenmark”); ANI Pharmaceuticals, Inc., Amerigen Pharmaceuticals, Inc.,
`and Amerigen Pharmaceuticals, Ltd. (collectively, “Amerigen”); Teva Pharmaceuticals
`Industries Ltd. (“Teva Israel”); Watson Laboratories, Inc. (NV), Watson Laboratories, Inc. (DE),
`Watson Laboratories, Inc. (NY), Watson Laboratories, Inc. (CT), Watson Pharma, Inc., Watson
`Pharmaceuticals Inc., Actavis, Inc., and Teva Pharmaceuticals USA, Inc. (collectively with Teva
`Israel, “Watson”). Forest and Generic Defendants are collectively referred to as “Defendants.”
`3 Retailer Plaintiffs filed their third amended complaints in the related cases of CVS Pharmacy,
`Inc. et al v. AbbVie Inc. et al, 20-cv-10087 (S.D.N.Y.), ECF No. 43, and in Walgreen Co. et al v.
`AbbVie Inc. et al, 20-cv-9793 (S.D.N.Y.), ECF No. 47.
`4 Nonresident Defendants include all Defendants except for Watson Laboratories, Inc. (NY),
`Forest Laboratories, Inc., and the latter’s successors—Forest Laboratories, LLC and Allergan
`Sales, LLC.
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`2
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`Case 1:20-cv-05735-LJL Document 438 Filed 02/21/23 Page 3 of 53
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`For the following reasons, Defendants’ motions to dismiss the Complaints pursuant to
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`Federal Rule of Civil Procedure 12(b)(6) are granted and the Complaints are dismissed with
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`prejudice. The motions to dismiss based on a lack of personal jurisdiction are denied as moot.
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`BACKGROUND
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`Familiarity with the facts and the Hatch-Waxman regulatory framework for the approval
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`of generic equivalents of branded drugs is presumed. On each of the four motions to dismiss, the
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`Court accepts as true the factual allegations of the Complaints and the documents incorporated
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`therein by reference.5 The Court first briefly summarizes the alleged scheme and then describes
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`the general terms of the Agreements. In the Discussion section, the Court reiterates the principal
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`holdings from the January 2022 Opinion and discusses whether any new allegations in the
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`Complaints address the shortcomings that the Court identified in the Prior Complaints.
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`I.
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`Overview of the Alleged Scheme
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`Forest manufactures Bystolic, a “beta blocker” approved by the U.S. Food and Drug
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`Administration (“FDA”) to treat high blood pressure that generates nearly $1 billion in annual
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`sales in the United States. Dkt. No. 427 ¶ 1.6 Bystolic is the brand name of a drug otherwise
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`known as nebivolol hydrochloride or nebivolol HCl. Id. at ECF p. 1; id. ¶ 122. Nebivolol itself
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`is a mixture of two “stereoisomers,” which are different configurations of the structure of a
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`5 Because the Complaints refer extensively to the agreements between the Defendants
`(“Agreements”) and their effects, the Court may consider them on a motion to dismiss. See
`Broder v. Cablevision Sys. Corp., 418 F.3d 187, 196 (2d Cir. 2005) (“Where a plaintiff has
`‘rel[ied] on the terms and effect of a document in drafting the complaint,’ and that document is
`thus ‘integral to the complaint,’ [the court] may consider its contents even if it is not formally
`incorporated by reference.” (alteration in original) (quoting Chambers v. Time Warner, Inc., 282
`F.3d 147, 153 (2d Cir. 2002))).
`6 This opinion cites to the DPP Complaint as the other Plaintiffs’ complaints are substantially
`identical.
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`Case 1:20-cv-05735-LJL Document 438 Filed 02/21/23 Page 4 of 53
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`chemical compound. Id. ¶¶ 120–21. As the source of the desired pharmacological effects,
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`nebivolol constitutes the active pharmaceutical ingredient (“API”) of Bystolic. Id. ¶ 122.
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`In December 2011, Generic Defendants, seeking FDA approval for manufacture of
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`generic versions of Bystolic, filed Abbreviated New Drug Applications (“ANDAs”) with
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`Paragraph IV certifications. Those certifications provide that the underlying Bystolic patents are
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`“invalid or will not be infringed by the generic manufacturer’s proposed product.” Id. ¶ 99.
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`Forest subsequently filed patent infringement lawsuits against Generic Defendants (“Nebivolol
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`Patent Litigation”). Under the Hatch-Waxman regulatory framework, the filing of those lawsuits
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`delayed FDA approval of the ANDAs by a period of time not to exceed thirty months.
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`From October 2012 through November 2013, Forest entered into a series of reverse-
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`payment deals (described by Plaintiffs as “pay for delay” deals) with Generic Defendants
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`described in more detail below. Among other things, in connection with the settlement of the
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`Nebivolol Patent Litigation, each Generic Defendant (1) agreed not to compete with Forest or
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`enter the market with its generic version of Bystolic prior to September 17, 2021 (three months
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`before patent expiration), unless another Generic Defendant entered that market earlier; and in
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`exchange, (2) received cash payments from Forest; and (3) entered into “side deals” with Forest.
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`Id. ¶ 3. Plaintiffs allege that those “side deals” had the intent and effect of allowing Forest to
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`maintain its monopoly profits from the sale of Bystolic and delayed the entry of less expensive
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`generic forms of Bystolic. Id. ¶¶ 2, 3.
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`Plaintiffs’ factual allegations in the Complaints generally mirror their allegations in the
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`Prior Complaints. The introduction and sections on the regulatory background—including the
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`descriptions of the regulatory approval process of generic drugs, the competitive effects of
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`generic competition, and the financial incentives for brand and generic companies to agree to
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`Case 1:20-cv-05735-LJL Document 438 Filed 02/21/23 Page 5 of 53
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`anticompetitive terms—remain unchanged in the Complaints. See id. ¶¶ 1–114. Plaintiffs also
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`reiterate the point which was clear from the Prior Complaints—that “each side deal was entered
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`into contemporaneously with the settlement of the Nebivolol Patent Litigation and the Generic
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`Defendants’ agreement to delay generic entry.” Id. ¶ 158. Plaintiffs, citing FTC v. Actavis, Inc.,
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`570 U.S. 136 (2013), further reiterate that each side deal provided payments to each generic
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`manufacturer with first-filer exclusivity “even though none of them had any claim to damages as
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`a result of the Nebivolol Patent Litigation.” Dkt. No. 427 ¶¶ 159–60.7
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`Plaintiffs, citing a law review article, also add several paragraphs to their Complaints
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`describing what they allege to be the “history of reverse payments.” See id. ¶¶ 154–57 (citing C.
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`Scott Hemphill, An Aggregate Approach to Antitrust: Using New Data and Rulemaking to
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`Preserve Drug Competition, 109 Colum. L. Rev. 629 (2009)). Those paragraphs allege that “the
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`earliest reverse payments were naked cash payments to compensate generic companies for
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`delaying generic entry,” id. ¶ 154, that “as antitrust scrutiny of reverse payments increased, the
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`use of ‘side deals’ to disguise reverse payments has become common,” id., that the “most
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`common type of ‘side deal’ involves the brand company overpaying the generic company for a
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`product or service provided by the generic company, via a patent license, supply of raw
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`materials, manufacturing, product development or co-promotion agreement,” id. ¶ 155, and that
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`“outside of settlement, brand-name firms seldom contract with generic firms for help with the
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`activities that form the basis of side deals,” id. ¶ 157 (citation omitted). The paragraphs and
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`article otherwise do not discuss the Agreements or Defendants’ conduct.
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`7 Plaintiffs also allege that “Forest has a history of using side deals,” citing Forest’s outside and
`in-house counsel’s usage of the term “side deal” with respect to a separate patent dispute
`involving Namenda, “another of Forest’s blockbuster products.” Id. ¶ 161. Plaintiffs further rely
`on the “Agovino email” to allege that outside and in-house counsel referred to the Agreements as
`“side deals,” but that allegation was included in the Prior Complaints. See Dkt. No. 250 ¶ 151.
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`II.
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`The Agreements
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`The Agreements alleged by Plaintiffs took different forms and were entered into in
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`different time periods. Each set of agreements included a Settlement Agreement and a License
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`Agreement. The terms of the Settlement Agreements and License Agreements were generally
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`uniform but differed in some respects. For example, some of the License Agreements provided
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`for Forest to reimburse the generic manufacturer for Forest’s saved litigation costs and the
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`manufacturer’s expended litigation costs up to a specified maximum, while others provided for a
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`fixed payment.
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`The first agreements alleged by Plaintiffs are Forest’s agreements with Hetero, which
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`took the form of a Settlement Agreement and License Agreement dated October 24, 2012 and a
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`Final Term Sheet dated October 5, 2012. Id. ¶ 163. The Settlement Agreement and License
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`Agreement provided that Forest would grant Hetero a non-exclusive license to sell generic
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`Bystolic three months before the patent expired (subject to an earlier launch if a third party
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`commenced a launch at risk), that Forest and Hetero would agree to dismiss all claims and
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`counterclaims asserted against one another in the Nebivolol Patent Litigation and grant each
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`other releases, and that Forest would pay Hetero up to $200,000 for Hetero’s expended litigation
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`fees and costs and Forest’s saved legal fees in connection with the Nebivolol Patent Litigation.
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`Dkt. No. 270-1. The Final Term Sheet obligated Hetero to sell and Forest to purchase at a fixed
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`price a supply of nebivolol API equal to at least 50% of Forest’s requirements for use in
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`manufacturing Bystolic. Dkt. No. 427 ¶ 163; Dkt. No. 270-2. Plaintiffs allege that the Final
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`Term Sheet never resulted in a final supply agreement. Dkt. No. 427 ¶ 170.
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`Approximately one month later, Forest entered into a Settlement Agreement and License
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`Agreement with Torrent dated November 21, 2012 and a Patent Assignment Agreement of the
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`same date. Id. ¶ 176. The Torrent Settlement Agreement and License Agreement contained
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`similar terms to the Hetero Settlement Agreement and License Agreement, including the terms of
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`the license and the settlement of the Nebivolol Patent Litigation, but also included the
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`requirement that Forest pay Torrent up to $1 million for Torrent’s expended litigation fees and
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`costs and Forest’s saved legal fees. Dkt. No. 270-12. The Patent Assignment Agreement
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`provided that in exchange for a payment from Forest of up to $17 million, Torrent would sell to
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`Forest ten patents covering compositions and/or manufacturing processes used in the
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`manufacture of nebivolol drug product. Dkt. No. 427 ¶ 176; Dkt. No. 270-13.
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`Shortly thereafter, Forest entered into agreements dated November 27, 2012 and
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`November 28, 2012 with a third generic manufacturer, Alkem/Indchemie, to settle the Nebivolol
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`Patent Litigation and for Alkem/Indchemie to both license Bystolic and supply Forest with the
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`finished product of two drugs for a period of at least five years. Dkt. No. 427 ¶ 181. Under the
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`Settlement Agreement and License Agreement dated November 27, 2012, in addition to the grant
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`of the license and the dismissal of claims and mutual releases, Forest agreed to pay
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`Alkem/Indchemie a fixed sum of $1 million for Alkem/Indchemie’s expended litigation fees and
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`costs and Forest’s saved legal fees. Dkt. Nos. 270-7, 270-8. Under a Term Sheet dated
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`November 28, 2012, Alkem/Indchemie agreed to sell to Forest and Forest agreed to purchase, for
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`a payment of “at least $20 million,” 45% of its required supply of Bystolic and Byvalson
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`(nebivolol and valsartan) tablets in the United States and Canada for five years with automatic
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`renewal periods of one year each. Dkt. No. 427 ¶ 181; Dkt. No. 270-9.
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`The following month, Forest entered into agreements with a fourth generic manufacturer,
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`Glenmark. Dkt. No. 427 ¶ 188. The Settlement Agreement and License Agreement between
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`Forest and Glenmark dated December 21, 2012 provided—in addition to the settlement and
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`mutual releases—for Forest to pay Glenmark up to $1.2 million for Glenmark’s expended
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`litigation fees and costs and Forest’s saved legal fees and provided Glenmark a license to sell
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`generic Bystolic. Dkt. No. 270-14. A Collaboration and Option Agreement of the same date
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`gave Forest the right to jointly develop microsomal prostaglandin e synthase-1 (“mPEGS-1”)
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`products with Glenmark for a period of at least 27 months absent earlier termination and an
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`option right of first negotiation for exclusive commercialization rights of those products. In
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`exchange, Forest made an aggregate payment of $15 million to Glenmark. Dkt. No. 427 ¶ 188;
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`Dkt. No. 270-15.
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`Over six months later, Forest entered into agreements with a sixth generic manufacturer,
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`Amerigen. The agreements with Amerigen were both dated July 18, 2013. Dkt. No. 427 ¶ 195.
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`The Settlement Agreement and License Agreement provided, in addition to the settlement of the
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`litigation and the releases and the grant of a non-exclusive license to sell generic Bystolic, for
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`Forest to pay $2 million to Amerigen for Amerigen’s expended litigation fees and costs and
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`Forest’s saved legal fees. Dkt. No. 270-17. A Binding Term Sheet Collaboration Agreement
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`(“Collaboration Agreement”) provided for Forest’s investment in the development of eight
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`Amerigen products as reflected by a fixed up-front payment of $5 million and $20 million in
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`milestone payments contingent upon certain product development and launch events, and an
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`option for Forest to commercialize up to eight Amerigen products in Latin and South America
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`for which Amerigen would be the supplier. Dkt. No. 427 ¶ 195; Dkt. No. 270-19.
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`Forest’s last set of agreements occurred in November 2013 with Watson. Dkt. No. 427
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`¶ 200. In addition to the same terms with respect to settlement, releases, and a non-exclusive
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`license as reflected in the agreements with the other generic manufacturers, the Settlement
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`Agreement and License Agreement dated November 6, 2013 between Forest and Watson
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`entities8 required Forest to pay up to $2 million for Watson’s expended litigation fees and costs
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`and Forest’s saved legal fees. Dkt. No. 270-4. A Letter Agreement dated November 1, 2013
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`between Forest and Moksha8 committed Forest to extend approximately $7 million in additional
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`“Term C” loans in exchange for releases to Forest from Moksha8 and other parties. Dkt. No.
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`270-5. Finally, a Termination and Release Agreement dated November 1, 2013 between Actavis
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`and Moksha8 terminated a series of agreements between Watson and Moksha8 entered into from
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`2010 to 2012, and released each other from any obligations arising from those agreements, as
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`well as obligations in any way related to transactions contemplated by an Agreement and Plan of
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`Merger, dated October 22, 2012, by and among Forest, M8 Holdings LLC, and Moksha8 Parent
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`(the “Merger Agreement”), or any agreement contemplated by the Merger Agreement. Dkt. No.
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`427 ¶ 200; Dkt. No. 270-6.
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`In all, Forest agreed to pay a total of up to $7.4 million to the six generic manufacturers
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`for the expended litigation costs of each of those manufacturers and the saved legal fees of Forest
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`in connection with the patent litigation over a drug alleged to generate nearly $1 billion in annual
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`sales in the United States. As befitting the settlement of litigation, those generic manufacturers
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`with whom Forest settled later, and thus who presumably incurred more expenses, were paid
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`more than the generic manufacturers who settled earlier. At the same time, Forest entered into
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`side deals with each of the manufacturers pursuant to which it made payments that totaled close
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`to $100 million in exchange for a variety of different rights from each manufacturer. Dkt. No.
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`427 ¶ 142. Forest also provided each generic manufacturer a license to sell generic Bystolic
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`three months before patent expiration. Finally, each agreement contained a “contingent launch”
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`8 Those Watson Entities included Watson Laboratories, Inc. (NV), Watson Laboratories, Inc.
`(DE), Watson Laboratories, Inc. (NY), Watson Laboratories, Inc. (CT), and Watson Pharma, Inc.
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`provision that accelerated the launch date to the date that any other generic manufacturer
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`launched, if any of the other generic manufacturers launched earlier than the three months before
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`patent expiration.
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`The upshot of the settlements is that Forest was able to continue to exploit the monopoly
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`its patent gave over Bystolic past any FDA approval of Generic Defendants’ ANDAs on June 18,
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`2015 (or an earlier favorable decision in the patent suit for Generic Defendants) until September
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`17, 2021, which is three months before the patent would have expired. The further upshot is that
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`each of the generic manufacturers were able to market generic Bystolic three months earlier than
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`they otherwise would have had the rights to do so, had those manufacturers lost the Nebivolol
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`Patent Litigation. The principal question in this case is whether those Agreements constitute
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`impermissible pay-for-delay agreements in violation of the federal antitrust laws.
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`PROCEDURAL HISTORY
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`The first actions in this case were filed in July 2020. Direct Purchaser Plaintiffs and
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`Retailer Plaintiffs first brought claims for damages under federal antitrust law. End-Payor
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`Plaintiffs then brought claims under state antitrust and consumer-protection laws and for
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`injunctive relief under federal antitrust law. The Direct Purchaser Plaintiffs’ actions were
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`consolidated, the End-Payor Plaintiffs’ actions were consolidated, and the two consolidated
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`actions and the two Retailer Plaintiffs’ actions were coordinated with one another under one
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`docket to promote efficiency in managing and litigating the cases. Dkt. Nos. 50, 82, 86, 204;
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`CVS Action, 20-cv-10087 (S.D.N.Y.), ECF No. 19; Walgreen Action, 20-cv-9793 (S.D.N.Y.),
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`ECF No. 20. Defendants moved to transfer the cases to the District of New Jersey, Dkt. No. 79,
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`but the Court denied the motion to transfer venue, Dkt. No. 178.
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`On December 3, 2020, Direct Purchaser Plaintiffs filed their Consolidated and Amended
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`Class Action Complaint, Dkt. No. 111, and End-Payor Plaintiffs filed their Consolidated Class
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`Action Complaint, Dkt. No. 113. On December 23, 2020, Retailer Plaintiffs filed their
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`respective amended complaints. CVS Action, 20-cv-10087 (S.D.N.Y.), ECF No. 20; Walgreen
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`Action, 20-cv-9793 (S.D.N.Y.), ECF No. 21.
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`Thereafter, Nonresident Defendants moved to dismiss the End-Payor Plaintiffs’
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`complaint for lack of personal jurisdiction, Dkt. No. 215; Teva Israel moved to dismiss all claims
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`against it for lack of personal jurisdiction, Dkt. No. 218; Defendants moved to dismiss Direct
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`Purchaser and Retailer Plaintiffs’ complaints for failure to state a claim, Dkt. No. 223; and
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`Defendants moved to dismiss End-Payor Plaintiffs’ complaint for failure to state a claim, Dkt.
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`No. 226. In response to Defendants’ various motions to dismiss, all Plaintiffs elected to amend
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`their complaints, Dkt. No. 240, and the Court denied the motions to dismiss without prejudice as
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`moot, Dkt. No. 241.
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`On March 15, 2021, the Prior Complaints in this case were filed: the DPP Prior
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`Complaint, Dkt. No. 250; the Retailer Plaintiffs’ Prior Complaints, CVS Action, 20-cv-10087
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`(S.D.N.Y.), ECF No. 35; Walgreen Action, 20-cv-9793 (S.D.N.Y.), ECF No. 34; and the EPP
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`Prior Complaint, Dkt. No. 251. On April 23, 2021, Defendants moved to dismiss the Direct
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`Purchaser and Retailer Plaintiffs’ Complaints, Dkt. No. 267, and moved to dismiss End-Payor
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`Plaintiffs’ Complaint, Dkt. No. 271. That same day, Defendant Teva Israel moved pursuant to
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`Federal Rule of Civil Procedure 12(b)(2) to dismiss the claims against it for lack of personal
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`jurisdiction, Dkt. No. 260, and the Nonresident Defendants moved pursuant to Federal Rule of
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`Civil Procedure 12(b)(2) to dismiss for lack of personal jurisdiction the EPP Complaint’s ninety-
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`nine non-New York, state-law claims, Dkt. No. 265. After the four motions to dismiss the Prior
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`Complaints were fully briefed, the Court held oral argument on the motions on December 14,
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`2021. Dkt. No. 343. On January 24, 2022, the Court granted the motions to dismiss the Direct
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`Purchaser, Retailer, and End-Payor Plaintiffs’ Prior Complaints for failure to state a claim
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`without prejudice and denied the motions to dismiss for lack of personal jurisdiction without
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`prejudice as moot. Dkt. Nos. 350, 354.
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`On February 22, 2022, the Complaints were filed: the DPP Complaint, Dkt. No. 427; the
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`Retailer Plaintiffs’ Complaints, CVS Action, 20-cv-10087 (S.D.N.Y.), ECF No. 43; Walgreen
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`Action, 20-cv-9793 (S.D.N.Y.), ECF No. 47; and the EPP Complaint, Dkt. No. 426. On April
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`19, 2022, Nonresident Defendants moved pursuant to Federal Rule of Civil Procedure 12(b)(2)
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`to dismiss for lack of personal jurisdiction the End-Payor Complaint’s non-New York, state-law
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`claims, Dkt. No. 386, Defendant Teva Israel moved pursuant to Federal Rule of Civil Procedure
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`12(b)(2) to dismiss the claims against it for lack of personal jurisdiction, Dkt. No. 388, all
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`Defendants moved to dismiss Direct Purchaser and Retailer Plaintiffs’ Complaints for failure to
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`state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), Dkt. No. 393, and all
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`Defendants moved to dismiss End-Payor Plaintiffs’ Complaint for a lack of subject matter
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`jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim
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`pursuant to Federal Rule of Civil Procedure 12(b)(6), Dkt. No. 397. On May 5, 2022, the New
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`Civil Liberties Alliance and the International Center for Law and Economics filed an amicus
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`brief. Dkt. Nos. 403–405. After the four motions to dismiss were fully briefed, the Court held
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`another oral argument on the renewed motions on November 3, 2022. Dkt. No. 435.
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`STANDARD OF REVIEW
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`To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for
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`failure to state a claim upon which relief can be granted, a complaint must include “sufficient
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`factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft
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`v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570
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`(2007)). A complaint must offer more than “labels and conclusions,” “a formulaic recitation of
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`the elements of a cause of action,” or “naked assertion[s]” devoid of “further factual
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`enhancement” in order to survive dismissal. Twombly, 550 U.S. at 555, 557. The ultimate
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`question is whether “[a] claim has facial plausibility, [i.e.,] the plaintiff pleads factual content
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`that allows the court to draw the reasonable inference that the defendant is liable for the
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`misconduct alleged.” Iqbal, 556 U.S. at 678. “Determining whether a complaint states a
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`plausible claim for relief will . . . be a context-specific task that requires the reviewing court to
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`draw on its judicial experience and common sense.” Id. at 679. Put another way, the plausibility
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`requirement “calls for enough fact to raise a reasonable expectation that discovery will reveal
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`evidence [supporting the claim].” Twombly, 550 U.S. at 556; see also Matrixx Initiatives, Inc. v.
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`Siracusano, 563 U.S. 27, 46 (2011).
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`DISCUSSION
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`Defendants argue that the Complaints failed to cure the deficiencies the Court identified
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`in the Prior Complaints in its January 2022 Opinion. They argue, inter alia, that the Complaints
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`failed to add sufficient factual allegations to state a plausible claim that each of the payments
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`were “unjustified” under Actavis.
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`The Court first summarizes its January 2022 Opinion and then addresses the putatively
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`new facts asserted to remedy the flaws in the Prior Complaints.
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`I.
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`The Court’s Prior Opinion and Order
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`The Court’s prior opinion closely analyzed the Supreme Court’s decision in FTC v.
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`Actavis, 570 U.S. 136 (2013), and surveyed the case law that followed that seminal decision both
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`in this Circuit and elsewhere. See Dkt. No. 354 at 16–27.
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`As noted in the January 2022 Opinion, the Supreme Court in Actavis held that antitrust
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`cases premised on reverse-payment settlements of patent litigation—“reverse,” because the
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`settlement required the patentee plaintiff to pay the alleged infringer rather than the other way
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`around—can sometimes violate the antitrust laws and must be evaluated under the rule of reason.
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`Id. at 16 (citing Actavis, 570 U.S. at 140, 159).
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`The Actavis Court rejected the argument that any agreement pursuant to which a generic
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`manufacturer agreed to honor a patent and to refrain from entering the market prior to the
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`patent’s expiration would be presumptively unlawful if the generic manufacturer received
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`payment in exchange for that promise. The Court stated that “a valid patent excludes all except
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`its owner from the use of the protected process or product,” Actavis, 570 U.S. at 147 (quoting
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`United States v. Line Material Co., 333 U.S. 287, 308 (1948) (alterations and emphasis
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`omitted)), and that the “exclusion may permit the patent owner to charge a higher-than-
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`competitive price for the patented product,” id. The Actavis Court also recognized “the value of
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`settlements,” supported by “traditional settlement considerations, such as avoided litigation
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`costs” in which the payment reflects “a rough approximation of the litigation expenses saved
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`through the settlement,” id. at 153–54, 156, and that “settlement on terms permitting the patent
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`challenger to enter the market before the patent expires would also bring about competition,” id.
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`at 154. The Court also recognized that “payment may reflect compensation for other services
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`that the generic has promised to perform.” Id. at 156. A rule that such agreements were
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`presumptively unlawful would deter many agreements that enhanced consumer welfare and
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`would, in effect, inappropriately place the burden on a defendant to prove that any money that
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`changed hands was for something other than delay, such as the generic manufacturer’s provision
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`of property or services unrelated to the brand manufacturer’s monopoly. Id. at 158–59.
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`At the same time, the Supreme Court also rejected the argument that agreements to settle
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`patent litigation for a reverse payment could never be subject to antitrust scrutiny. An agreement
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`to settle litigation over the validity of a patent “has the ‘potential for genuine adverse effects on
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`competition.’” Id. at 153 (quoting FTC v. Indiana Federation of Dentists, 476 U.S. 447, 460–61
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`(1986)). If the payment is made by the brand manufacturer to keep the generic manufacturer out
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`of the market and to keep prices at patentee-set levels, “potentially producing the full patent-
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`related . . . monopoly return while dividing that return between the challenged patentee and the
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`patent challenger[,] [t]he patentee and the challenger gain; the consumer loses.” Id. at 154.
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`The Supreme Court settled on the rule that “[a] reverse payment, where large and
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`unjustified, can bring with it the risk of significant anticompetitive effects,” noting that “one who
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`makes such a payment may be unable to explain and to justify it.” Id. at 158. The Supreme
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`Court left it to the “lower courts” to “structur[e] . . . the present rule-of-reason antitrust
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`litigation.” Id. at 160.9
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`In its January 2022 Opinion, the Court noted the ambiguity within Actavis itself, see Dkt.
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`