Lieff Cabraser Heimann & Bernstein, LLP

Introduction: Massive Payment Not to Compete with Cipro Charged

Lieff Cabraser 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 in the U.S. 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.

The suit charges the companies with having colluded to block consumer access to affordable, generic versions of Cipro through a massive payment not to compete.

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.

With the $398.1 million payment, Bayer shared 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 U.S. had no choice but to pay inflated monopoly prices for this 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.

Trial Court Proceedings

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 Court granted summary judgment to the defendants, adopting the legal standard set forth in a decision by the U.S. Court of Appeals for the Second Circuit in a case involving a similar payment to avoid patent litigation over the drug Tamoxifen. On April 29, 2010, however, a panel of Second Circuit judges considering a federal case that arises out of the Cipro payment identified "compelling reasons" to reconsider the Tamoxifen standard, going so far as to invite the plaintiffs to petition the entire court to address "the difficult questions at issue and the important interests at stake."

Appellate Court Proceedings

The California plaintiffs appealed the summary judgment decision in a brief filed July 2, 2010.

In the appellate brief filed by plaintiffs/appellants, as noted by Jim Edwards of BNET.com, "Bayer purportedly claims that two executives who may have concealed evidence showing its patents on Cipro were invalid must be mistaken because they suffer from 'depression,' 'confused thinking,' were elderly, had a 'cerebral hemorrhage' and 'Parkinson's or related degenerative disease involving extreme mental degeneration.'"

Seventy-eight intellectual property law, antitrust law, economics, and business professors filed an amici curiae brief in support of plaintiffs/appellants. The trial court erred, explained the Academic Amici, noting:

"The precedent that the trial court believed compelled the outcome in this case contains fundamental errors of economic reasoning and would shield many anti-competitive agreements from the reach of antitrust law, causing great harm to competition, to consumers, and (by unjustifiably raising the costs of needed medicines) to public health.... The interests of consumers are given no weight at all in the trial court's calculus."

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.