(Reuters) - California’s highest court on Thursday revived an antitrust class action accusing a drugmaker since acquired by Teva Pharmaceutical Industries Ltd of keeping a generic version of Bayer AG’s antibiotic Cipro off the market in exchange for payment.
The unanimous opinion, written by Justice Kathryn Werdegar, marks the first time an appellate court has tackled so-called “pay for delay” deals since a landmark 2013 decision by the U.S. Supreme Court held that such deals may be illegal. Bayer was originally a defendant in the case, but settled in 2013.
The case, which began in 2000 in California state court, centers on a series of settlements in the late 1990s under which Bayer allegedly paid Barr Pharmaceuticals, since bought by Teva, $398 million to refrain from marketing a generic version of Cipro until Bayer’s patent on the drug expired in 2003.
The plaintiffs in the antitrust class action - a group of non-profits and individuals in California who bought Cipro - claimed that the settlements violated California’s antitrust law, the Cartwright Act, and drove up the price of Cipro.
In 2009, the California state court dismissed the case, finding that the settlement was not anticompetitive because Bayer had a patent on the drug. After a state appellate court upheld that ruling, the state’s Supreme Court agreed in 2012 to hear the plaintiff’s appeal.
While the appeal was pending in California, the U.S. Supreme Court in 2013 ruled in another case, FTC v. Actavis, that settlements in which a brand-name drug maker pays a generic drugmaker to stay off the market may be anticompetitive. But, it did not issue any firm rule about when settlements are anticompetitive, leaving that to lower courts.
Although Actavis dealt with federal antitrust law, while the Cipro case is about state law, Werdegar wrote in Thursday’s decision that the same principles applied.
She said the fact that Bayer had a patent on Cipro was not enough to dismiss the case, because Bayer might have lost if it had tried to enforce the patent in court instead of settling.
Mark Lemley, who represents the plaintiffs, said he was pleased with the decision. An attorney for Barr could not be reached for comment.
Michael Carrier, a professor at Rutgers Law School who specializes in pharmaceutical antitrust law, said that while the decision dealt with California law, it could “nudge” federal courts toward adopting a similar interpretation of Actavis.
The case is In re Cipro Cases I & II, Supreme Court of the State of California, No. S198616.
Reporting By Brendan Pierson in New York; Editing by Ted Botha, Andrew Hay, Alexia Garamfalvi and Bernard Orr