Cipro Buyers, Barr Reach $225M Deal in Pay-For-Delay Suit

(Law360)  A class of buyers of the antibiotic drug Cipro on Wednesday asked a California court to approve a $225 million settlement with Barr Laboratories Inc. over allegations the company was involved in a pay-for-delay scheme to delay the introduction of a generic version of the drug.

The purchasers informed the court that they had reached the agreement with Barr after more than 16 years of litigation over allegations that Barr, now a subsidiary of Teva Pharmaceutical Industries Ltd., and other generic drug makers dropped challenges to Bayer’s Cipro patents in exchange for cash payments.

The settlement follows agreements reached with Bayer AG, Hoechst Marion Roussel Inc., The Rugby Group Inc., and Watson Laboratories Inc. totaling $174 million, bringing the total recovery to $399 million, the buyers said. Barr was the last remaining defendant in the case.

The case has gone all the way up to the California Supreme Court, which reversed a grant of summary judgment in favor of the pharmaceutical companies.

“The Barr settlement is particularly fair and reasonable considering the long history and the current procedural posture of the case,” the purchasers said.

Co-lead counsel Eric B. Fastiff of Lieff Cabraser Heimann & Bernstein LLP said the settlement was a good result for the class and shows that the perseverance of the lead firms on behalf of the class was justified.

Co-lead counsel Joseph R. Saveri of Joseph Saveri Law Firm Inc. said, “When we filed this case in 2000, it was hard to predict that we would have to prosecute the case for 17 years and come to the eve of trial to achieve a favorable result.”

A Teva spokeswoman said the company was “pleased that this longstanding litigation has been resolved.”

California consumers and insurance groups brought their lawsuit against the pharmaceutical companies in California Superior Court in San Diego County in 2002, challenging the settlement Bayer reached with Barr in 1997 that paid the generic drug maker $398 million.

In 2009, the trial court granted the drugmakers summary judgment based on a 2006 Second Circuit ruling laying out the rule that courts should presume pharmaceutical patent settlements to be legal as long as they don’t exceed the scope of the patent.  That ruling was overturned in the U.S. Supreme Court’s landmark 2013 ruling in FTC v. Actavis.

In May 2015, the California Supreme Court decided that the U.S. Supreme Court’s decision allowing Hatch-Waxman Act payments to be challenged under federal antitrust law also supported permitting similar lawsuits under state competition laws.  The ruling overturned decisions by two lower courts nixing the long-running litigation and paved the way for Cipro purchasers to forge ahead with their claims against Watson, HMR, and Rugby.

The California justices said lower courts should use the rule-of-reason test, which balances the harm an agreement would cause to competition against its benefits, to evaluate pharmaceutical patent settlements.  The ruling further instructed courts to determine whether a settlement delayed generic market entry based on the chance the patent had of being upheld if the drugmakers had litigated a challenge to its conclusion.

Watson had urged the California Supreme Court to rehear the case, saying the high court hadn’t considered its argument that Watson wasn’t involved in the Cipro deals and didn’t unreasonably restrain trade, but the high court in July 2015 declined, sending the case back to trial court.

The buyers are represented by co-lead counsel Eric B. Fastiff of Lieff Cabraser Heimann & Bernstein LLP, Dan Drachler of Zwerling Schachter & Zwerling LLP, Joseph R. Saveri of Joseph Saveri Law Firm Inc., and local liaison counsel Ralph B. Kalfayan of Krause Kalfayan Benink & Slavens.

Representation information for Barr was not immediately available.

The case is Cipro Cases I and II, case judicial council coordination proceeding nos. 4154 and 4220, in the Superior Court of the State of California, County of San Diego.

(Reporting by Eric Kroh.  Additional reporting by Dani Kass. Editing by Jack Karp.)