In re Lidoderm Antitrust Litigation

Updated: October 31, 2017

Status: Ongoing Case

Plaintiffs defeat motion to dismiss in pay-for-delay case

On May 29, 2014, Labaton Sucharow filed a class action complaint on behalf of consumers and third party payors who purchased, paid for or were reimbursed for prescriptions of 5% lidocaine topical patches, patches marketed jointly by Endo Pharmaceuticals and Teikoku Pharma USA under the brand name Lidoderm. A consolidated amended complaint was filed in June 2014.

The plaintiffs allege that absent the Lidoderm pay-for-delay agreements, generic versions of Lidoderm® would have been on the market as early as August 23, 2009. This pay-for-delay agreement caused the plaintiffs and the class to continue paying supracompetitive prices for Lidoderm throughout the class period, beginning August 23, 2009.

On November 17, 2014, the court ruled largely in favor of the plaintiffs on the defendants' motion to dismiss, finding that the plaintiffs had adequately pleaded an unlawful pay-for-delay agreement and providing plaintiffs' leave to amend their monopolization claims. Pursuant to the Supreme Court's FTC v. Actavis decision, the court found that defendants' agreement constituted a "reverse payment"-i.e., a payment in which the brand manufacturer pays the generic manufacturer to stay out of the market. The court rejected the defendants' attempts to constrain Actavisto only apply to agreements that bar generics from the market entirely. The court found that even an agreement that permits a generic to enter prior to the expiration of the patent term-as the agreement did in Lidoderm-can still be unlawful if the agreement failed to provide any procompetitive benefit, such as increased output, reduced price, or increased consumer choice. The court found that the plaintiffs sufficiently pleaded the absence of a procompetitive benefit.

In addition, the court rejected defendants' arguments that Endo's provision of over $100 million in free-of-cost Lidoderm and promise not to launch an authorized generic did not constitute "payments" for purposes of the Actavis decision. The court found that plaintiffs' plausibly pleaded sufficient facts to show that payments were for the purpose of inducing Watson to delay the entry of its competing generic product. As a result, the court found that plaintiffs' sufficiently pleaded a "large unjustified payment" for the purposes of triggering antitrust scrutiny under Actavis.

In February 2017, the court certified the end-payor class. The defendants appealed the certification order, and in June 2017, the Ninth Circuit declined to hear the appeal. A summary judgement is pending.   

The case is In re Lidoderm Antitrust Litigation, MDL14-md-02521 (N.D. Cal.). Plaintiffs are end-payors. Defendants are Endo Pharmaceuticals, Inc., Teikoku Seiyaku Co., Ltd., Teikoku Pharma USA, Inc., Actavis, Inc., Watson Pharmaceuticals, Inc., Watson Laboratories, Inc., Anda, Inc., Anda Pharmaceuticals, Inc. and Valmed Pharmaceuticals, Inc.

If you would like more information about this case, please contact Matthew Perez at (212) 907-0776.

Lidoderm, a topical pain reliever that is typically used to treat post-herpetic neuralgia, was a blockbuster drug for Endo and Teikoku, generating over a billion dollars in 2012. Watson (now named Actavis), a generic manufacturer, wanted to enter the market with lower-priced generic alternatives to the brand-named drug, which would provide significant cost savings to consumers. Watson challenged the validity and enforceability of the patents covering Lidoderm. Plaintiffs allege that rather than risk a court determination that the Lidoderm patents were invalid or unenforceable, Endo and Teikoku agreed to pay Watson with up to $240 million in free-of-cost Lidoderm for resale to abandon their patent challenge and refrain from launching a generic version of Lidoderm until at least September 2013. This agreement substantially delayed entry of low-cost generic alternatives into the market, thereby reducing competitive options to consumers and maintaining high Lidoderm prices. The payment agreement that defendants entered into are typically referred to as "reverse payment" or "pay-for-delay" agreements.