March 12, 2018

A rare pay-for-delay trial kicked off Monday in a Massachusetts federal court with classes of consumers and big retailers such as CVS, Walgreens, Rite Aid and Safeway hammering Impax Laboratories Inc. over claims that it agreed to hold off on launching a generic version of acne medicine Solodyn in exchange for a $40 million payoff.

Richard Alan Arnold of Kenny Nachwalter PA, an attorney for the retailers, told the jury during opening statements that Impax entered into a joint development agreement with Solodyn’s manufacturer, Medicis Pharmaceutical Corp., that included $40 million tucked into the deal in exchange for dropping its bid to invalidate the drug’s patent. But Impax countered that the agreement was aboveboard, the payment was made to cover joint work on future products, Medicis did not have a monopoly on acne medication as the class claims, and plenty of generic alternatives to Solodyn were on store shelves.

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Few pay-for-delay cases have made it to trial since the 2013 U.S. Supreme Court decision in Federal Trade Commission vs. Actavis that settlements between branded drug companies and generic manufacturers ending patent suits brought under the Hatch-Waxman Act could be considered anti-competitive, but that the agreements should be reviewed under the rule of reason, which left wiggle room for drug companies to argue that the payments were aboveboard.

The instant litigation was centralized in Massachusetts federal court in early 2014 after a host of suits were filed targeting Medicis’ settlements for the oral antibiotic used to treat acne.

The trial is expected to last about a month and comes after a flurry of settlements, including a $35 million accord Saturday between Impax and direct purchaser class representatives Ahold USA Inc. and Rochester Drug Co-Operative Inc.

Sandoz Inc. and Lupin Ltd. settled early in the litigation process, agreeing in April 2017 to pay a combined $6.7 million to escape the lawsuit. Valeant Pharmaceuticals International Inc., which counts Medicis as one of its subsidiaries, fought the allegations until the First Circuit declined to delay the trial to consider whether the class certification was improper, as Medicis argued; the brand-name manufacturer settled last week for $58 million.

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Cohen Milstein is a member of the Plaintiffs' Executive Committee in In re Solodyn Antitrust Litigation.