Blog Big Molecule Watch September 10, 2020

AAM Renews Challenge to California’s Law Targeting Pharmaceutical Patent Infringement Settlements

On August 25, 2020, the Association for Accessible Medicines filed a new Complaint challenging California’s Assembly Bill 824 (“AB 824”).  Enacted in October 2019 and in effect as of January 1, 2020, AB 824 imposes a presumption of anticompetitive effect on certain agreements that involve generic or biosimilar manufacturers and that resolve patent infringement claims in connection with the sale of pharmaceutical products.

Specifically, Section 134002(a)(1) of the Act provides that “an agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a pharmaceutical product, shall be presumed to have anticompetitive effects and shall be a violation of this section if both of the following apply”:

  1. A nonreference drug filer receives anything of value from another company asserting patent infringement, including, but not limited to, an exclusive license or a promise that the brand company will not launch an authorized generic version of its brand drug.
  2. The nonreference drug filer agrees to limit or forego research, development, manufacturing, marketing, or sales of the nonreference drug filer’s product for any period of time.

Cal. Health & Safety Code § 134002(a)(1)

The Act imposes civil penalties on “[e]ach person that violates or assists in the violation of this section.”  Specifically, it provides that:

Each person that violates or assists in the violation of this section shall forfeit and pay to the State of California a civil penalty sufficient to deter violations of this section, as follows:

(i) If the person who violated this section received any value due to that violation, an amount up to three times the value received by the party that is reasonably attributable to the violation of this section, or twenty million dollars ($20,000,000), whichever is greater.

(ii) If the violator has not received anything of value as described in clause (i), an amount up to three times the value given to other parties to the agreement reasonably attributable to the violation of this section, or twenty million dollars ($20,000,000), whichever is greater.

Cal. Health & Safety Code § 134002(e)(1)(A)

AAM’s new complaint, which follows a previously filed complaint that was dismissed without prejudice for failure to allege sufficient facts to establish associational standing, alleges that AB 824 is unconstitutional and preempted by federal patent law.  These allegations include claims that AB 824 violates the Commerce Clause of the Constitution in regulating agreements not negotiated, completed, or entered in California, that AB 824 conflicts with the Patent Act, the Hatch-Waxman Act, and the BPCIA, that AB 824 imposes excessive fines in violation of the Eighth Amendment, and that AB 824 violates the Due Process clause by establishing an effectively irrebuttable presumption that covered settlements are anti-competitive and unlawful.

 

The case is pending in the Eastern District of California.

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