Hagens Berman has been appointed interim lead counsel for direct purchasers in the class-action lawsuit against pharma giant Merck and up-and-coming generic drug company Glenmark, for allegedly colluding to illegally delay the market entry of generic versions of Merck's blockbuster cholesterol drug, Zetia. The complaint filed by Hagens Berman alleges that the defendants’ pay-for-delay settlement – in which Merck promised not to launch its own generic version of Zetia – likely caused those who bought Zetia from Merck to pay hundreds of millions in overcharges. Zetia purportedly reduces cholesterol and prevents the buildup of plaques in arteries.
In developing the drug, Merck obtained three patents for the discovery of lead compound, SCH48461, its metabolites, and metabolite-like analogues (one reissued as U.S. Patent No. RE37,721). In 2006, Merck sued Glenmark, the first generic manufacturer to seek FDA approval to market generic Zetia, alleging it had infringed the RE37,721 patent. Glenmark argued the RE’721 patent was invalid and unenforceable, in part because Merck had intentionally failed to tell the Patent Trade Office that compounds it claimed in the patent were actually inherent metabolites of compounds Merck publicly disclosed years earlier. Glenmark argued this intentional failure to disclose information about the inherent qualities rendered its invention unpatentable and voided the patent. Merck later conceded that the patent was invalid in seeking yet-another reissue.
Merck chose to settle its case against Glenmark. "The Supreme Court holds that resolving patent infringement litigation by having the plaintiff make a large and unjustified payment to the allegedly infringing defendant violates federal antitrust law (assuming the other elements are satisfied)," the lawsuit states. "Nevertheless, Merck paid Glenmark to stay out of the market for almost five years. Merck’s payment took the form of an agreement not to launch its own generic version of Zetia (called an “authorized generic”). Merck’s no-authorized-generic promise was worth an additional $800 million in sales to Glenmark."
Glenmark, as the first generic company to seek FDA approval, had earned the right to a 180-day period with no other generic companies’ products in the market. But it could not keep Merck’s generic out. "Brand companies launch authorized generics, particularly during a first filer’s so-called 180-day exclusivity period, in an effort to staunch the massive loss of revenue attending generic entry. The brand’s authorized generic takes up to 50% of generic sales away from the first filer. So even though they are selling at a lower price point than the brand, authorized generics let the brand hold on to sales that it otherwise would lose," the suit explains.
Had Merck not made a massive payment to Glenmark, the complaint alleges, both companies would have expectedly launched a generic version of Zetia as early as December 2011 (and, in any event, well before Glenmark actually launched in late 2016). Several additional generic versions would have launched six months later. This healthy competition would have driven down prices, and direct purchasers would have spent far less on these drugs.
Recently, the magistrate judge assigned to the case denied Merck’s motion to compel arbitration as to the direct purchaser plaintiffs and has separately ordered the parties to begin discovery.
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