Monday, July 27, 2020

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Drug Companies Fail to Show Injury From New ‘Pay-for-Delay’ Law—Ninth Circuit

By a MetNews Staff Writer

Drug companies seeking to block enforcement of legislation enacted last year to boost scrutiny of settlement agreements between makers of patented and generic drugs were thwarted by a Ninth U.S. Circuit Court of Appeals decision Friday that said they failed to show how the law would harm them.

The law, Health & Safety Code §134002(a)(1), went into effect Jan. 1. It was created by AB 824, authored by Assembly member Jim Woods, D-Santa Rosa.

The legislation is aimed at thwarting “pay-for-delay” tactics used by prescription drug makers to slow down or halt lower-cost alternatives from entering the market by paying off generic drug makers. The practice is criticized for driving up prescription drug prices and leaving consumers with fewer low-cost options.

After AB 824 was signed into law by Gov. Gavin Newsom, the lobbying group Association for Accessible Medicines filed an action in which it sought a preliminary injunction to block the law.

The motion was denied by District Court Judge Troy L. Nunley of the Eastern District Court of California on the ground that the plaintiff failed to show ripeness.

On appeal, a three-judge Ninth Circuit panel, in a memorandum opinion, viewed the matter from the standpoint of standing, rather than ripeness. It vacated Nunley’s order and remanded with instructions to dismiss the action without prejudice.

The panel was comprised of Circuit Judges Sandra S. Ikuta and Andrew D. Hurwitz, joined by District Court Judge Hilda G. Tagle of the Southern District of Texas, sitting by designation.

Lack of Standing

The judges declared that the association lacked standing because it failed to demonstrate AB 824 injures its members, as required under Article III.

“AAM has not shown that there is a ‘substantial risk’ that AB 824 will cause any of its members to suffer injury that is concrete, particularized, and imminent,” the judges wrote, citing the 2013 Supreme Court case Clapper v. Amnesty International USA that describes the elements required in proving an injury in fact.

The judges said that none of the declarations submitted by the association’s members in support of the preliminary injunction demonstrate actual or imminent injury.

“At most, AAM’s members state that they are engaged in patent-infringement lawsuits involving pharmaceutical products and that they historically have settled such lawsuits, but they do not allege that they intend to enter into settlement agreement of the sort prohibited by AB 824,” the judges wrote.

Economic Injury

The judges also concluded that the drug companies failed to establish economic injury due to complying with AB 824. Instead, drug companies described their injuries as “likely” to happen.

“These declarations allege only ‘possible future injury’ and do not establish a substantial risk of harm,” the judges said.

The new Health and Safety Code section says that, in general, “an agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a pharmaceutical product, shall be presumed to have anticompetitive effects and shall be a violation of this section” where two circumstances exist.

The circumstances are that the generic manufacturer “receives anything of value from another company asserting patent infringement” and that manufacturer “agrees to limit or forego research, development, manufacturing, marketing, or sales of [its] product for any period of time.”

Attorney General Xavier Becerra released a statement saying:

“Today’s victory is a win for every family who has unfairly shouldered higher prices for life-saving medicine, simply because pharmaceutical companies staved off competition to pocket higher profits. Californians shouldn’t have to pay an arm and leg to afford a prescription, particularly amidst a public health crisis of historic proportions. This Ninth Circuit ruling should serve as a reminder that the well-being of loved ones must come first.”

The case is Association for Accessible Medicines v. Becerra, 20-15014.