Attorney Joseph Saveri Comments On “Pay-For-Delay” Case To Be Heard by California Supreme Court Involving Drug Companies’ Scheme that Cost Consumers Millions of Dollars

Attorney Joseph Saveri of San Francisco’s Joseph Saveri Law Firm announced that he and other lawyers representing California consumers have filed their final brief today in a California Supreme Court in the “pay-for-delay” case involving the drug Cipro.  The parties’ briefing is now complete.

The California Supreme Court agreed to take the high-profile case, known as In re Cipro Cases I & II, Case Number S198616, earlier this year, signaling that the action raises important legal questions affecting Californians.  Questions include the applicability of California’s antitrust law to drug companies’ pay-for-delay agreements, which generally involve one company buying off potential generic patent challengers in order to keep generics off pharmacy shelves, and name brand drug prices high.

Plaintiffs in the Cipro Cases allege that pharmaceutical giant Bayer conspired with its generic challengers to prevent the introduction of affordable generic alternatives to Bayer’s profitable drug Ciproflaxin, and that Bayer paid one potential market competitor, Barr Laboratories, nearly $400 million to drop a challenge to Bayer’s weak patent and share in Bayer’s Cipro monopoly profits instead. Unfortunately, say Plaintiffs’ lawyers, California consumers lose big in this type of deal because they are denied the benefits of generic drug competition, which would have driven drug prices down here if the drug companies hadn’t conspired to keep prices high.

“Bayer paid Barr nearly $400 million not to compete—to drop a challenge to Bayer’s Cipro patent, and to keep generic Cipro alternatives off pharmacy shelves,” said plaintiffs’ attorney Joseph Saveri. “On behalf of Californians, we say that under California law—and under federal law, as the recent Third Circuit federal decision in In re K-Dur Antitrust Litigation confirms—such a massive payment not to compete casts serious doubt on the patent’s validity.  Our Supreme Court filing today confirms there is no good reason why the drug companies’ agreement not to compete should not be subject to ordinary antitrust liability,” Saveri said.

Although both the Superior Court and the Court of Appeal ruled in favor of the drug companies, Saveri believes it is likely the decision will be overturned.  “We hope the California Supreme Court will confirm that such agreements are illegal under California law and give our clients and Californians like them their day in court.”

Background on the Litigation
The Joseph Saveri Law Firm, with co-counsel, represents a certified class of consumers in a California state court antitrust lawsuit against Bayer Corporation, a unit of Bayer A.G., the manufacturer of the blockbuster antibiotic prescription drug Ciprofloxacin.  Sold throughout the United States as Cipro, the drug has generated billions of dollars in revenue for Bayer since 1987.  The complaint also names Barr Laboratories and two other generic drug companies as defendants.

In addition to Joseph Saveri, lawyers representing the plaintiffs on the appeal include Dan Drachler of the law firm of Zwerling, Schacter & Zwerling, LLP; Eric Fastiff of the law firm of Lieff, Cabraser, Heimann & Bernstein, LLP; and Mark Lemley of the law firm of Durie Tangri.

Factual Allegations: Bayer Paid Its Competitors Not to Enter the Market
The lawsuit arises from Bayer’s agreement to pay $398.1 million between 1997 and 2003 to Barr Laboratories and two other generic drug companies in exchange for their agreement not to produce a generic version of Cipro.  Bayer made the payment to settle patent litigation in which Barr claimed that Bayer’s Cipro patent was void and unenforceable.  After Barr prevailed on summary judgment, Bayer made the payment, rather than risk patent invalidation at trial and face competition.

With the $398.1 million payment, Bayer agreed to share some of its monopoly profits in exchange for the generic companies’ agreement to stay out of the Cipro market.  The resulting absence of competition enabled Bayer to raise the price of Cipro at rates that were among the highest in the pharmaceutical industry.

Consumers in California and across the United States had no choice but to pay inflated monopoly prices for the critical drug throughout the seven-year class period.  Their injuries resulted from an agreement that is per se illegal under California law, the complaint alleges.

Case History
On November 26, 2002, the Superior Court denied the defendants’ motion to dismiss the case.  The Court found the complaint contained sufficient facts to state a claim for violations of California’s Cartwright Act (its antitrust law) and Unfair Competition Law.  On August 21, 2009, the Superior Court granted summary judgment to the defendants.

The California plaintiffs appealed the summary judgment decision in a brief filed July 2, 2010.  Seventy-eight intellectual property law, antitrust law, economics, and business professors filed an amici curiae brief in support of plaintiffs.  Kamala Harris, the California Attorney General, also filed papers in support of plaintiffs.

On October 31, 2011, the appellate court affirmed the trial court’s grant of summary judgment for Bayer.  On December 12, 2011, the plaintiffs filed a petition for review with the California Supreme Court seeking reversal of the appellate court’s decision. On February 15, 2012, the California Supreme Court granted the petition for review.

With today’s filing, the parties’ briefing to the California Supreme Court is now complete.  Under Court rules, amicus curiae may petition to file briefs in connection with the appeal.  The Supreme Court has not yet set a date for hearing.

For more information, please contact:
Joseph R. Saveri
Joseph Saveri Law Firm
Tel. (415) 500-6800

Dan Drachler
Zwerling, Schacter & Zwerling, LLP
Tel. (206) 223-2053