United States: Second Circuit's Mandate Rule Limits New Causation Theories On Remand

On remand, indirect purchasers of the drug ACTOS sought to amend their antitrust complaint to modify their causal theory of harm. The district court denied plaintiffs' first set of amendments under the mandate rule, which prohibits re-litigation of issues decided by an appellate court in the same case. However, the court permitted a second set of amendments that may have the same practical effect as the first. In re Actos End-Payor Antitrust Litig., Case No. 13-9244, 2018 (S.D.N.Y., Feb. 12, 2018).

In 1999, Takeda gained US Food and Drug Administration (FDA) approval to sell the diabetes drug ACTOS, which is covered by three patents. In the FDA's Orange Book, Takeda listed its 4,687,777 patent as a drug-product patent, and its 5,965,584 and 6,329,404 patents as method-of-use patents. Takeda also allegedly made non-public statements to the FDA in 1999 and 2002 that the '584 and '404 patents were method-of-use and drug-product patents.  

Starting in 2003, several generics began the process of applying to enter the ACTOS market upon expiration of the '777 patent. With their abbreviated new drug applications (ANDAs), they submitted two types of certifications: (1) a Paragraph IV certification, which states that the branded company's patents are "invalid or will not be infringed" by the generic company's drug, and (2) a "Section viii statement," which is a specific mechanism by which a generic may seek to market only new methods of using a particular drug, by "carving out" the methods of use covered by the branded company's patent. Submitting an ANDA application with a Section viii statement presents a lower risk of a patent infringement lawsuit. Most of the generic companies filed both the Paragraph IV certification and a Section viii statement, but Teva filed only a Section viii statement.

Takeda sued the Paragraph IV filers in 2003 for patent infringement and six years later sued Teva. In 2010, the FDA received a citizen petition asking the FDA to deny Teva's ANDA for failing to file a Paragraph IV certification. Takeda (again) informed the FDA that its '584 and '404 patents were drug-product and method-of-use patents. Relying on that representation, the FDA granted the citizen petition and required all ANDAs, including Teva, to file Paragraph IV certifications for the '584 and '404 patents. Takeda then settled its infringement claims, allowing the first-filers and Teva to begin marketing generics four years before the '584 and '404 patents expired.

Indirect purchasers of ACTOS brought state antitrust claims alleging that Takeda delayed generic entry by filing false patent descriptions and making false statements to the FDA. The court dismissed the complaint for failing to plausibly allege a causal theory of harm. Plaintiffs appealed, relying on their two causation theories:

  • That Takeda's false descriptions and false statements in 1999 and 2002 required generics to file Paragraph IV certifications, which delayed generic entry
  • That Takeda's misrepresentations caused the FDA to grant the citizen petition in 2010, which required Teva to file a Paragraph IV certification and delayed its entry

On remand, plaintiffs sought to amend their complaint in two ways. First, even if the generics did not originally know of Takeda's false patent descriptions, in the absence of these false statements the FDA would have required the generics to amend their ANDAs to address only methods of use. The generics would have then learned of Takeda's false descriptions, filed only Section viii statements and entered earlier than they did. The district court denied this amendment under the "mandate rule." The Second Circuit had created the "law of the case" by ruling that the generics would not likely have known about Takeda's allegedly false descriptions, and the district court was bound by that ruling. These amendments were thus precluded by the mandate rule.

Second, plaintiffs sought to add to their theory that Takeda's 2010 statements on the citizen petition delayed not only Teva's entry, but other generics' as well. The district court found this "a closer question." The Second Circuit had found this theory plausible, at least as to Teva, because it did not depend on Teva's knowledge of Takeda's statements; instead, it relied on the FDA's ruling on the citizen petition, which itself relied on Takeda's statements. The district court also held that plaintiffs could add other generics' delayed entry to this theory. The generics would have learned of the FDA's ruling because such rulings are public and the generics would have been following the matter closely. These amendments were not barred by the mandate rule.

Ultimately, plaintiffs were allowed to allege "that Takeda's misrepresentations caused the FDA's ruling and that the FDA's ruling in turn caused a delay in the generic's entry." Thus, the mandate rule may have foreclosed a route, but it did not foreclose the destination.

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