On March 23, 2022, Sun Pharmaceutical Industries Ltd. reached a $485 million settlement to resolve class action lawsuits that alleged its subsidiary, Ranbaxy, Inc., engaged in an anticompetitive scheme to delay the release of competitor’s generic drugs. The class action lawsuits started as five actions, which were consolidated in the United States District Court District of Massachusetts in 2019 and divided into two classes, direct purchaser plaintiffs (DPPs) and end-payor plaintiffs (EPPs).
The settlement stems from claims by generic drug buyers who claimed they were owed billions of dollars for being overcharged. DPPs include wholesalers and distributors and purchase generic drugs directly from drug manufacturers. EPPs are third-party payors that indirectly purchase and/or provide reimbursement for generic drugs at the end of the distribution chain from retailers and other intermediaries (such as health plans and insurance companies).
The buyers accused Ranbaxy of wrongly obtaining tentative approvals from the United States Food and Drug Administration (FDA) to produce generic versions of Diovan (a blood pressure medication), Nexium (an acid reflux medication), and Valcyte (an antiviral medication).
Under the Hatch-Waxman Act, the first company to substantially complete an Abbreviated New Drug Application (ANDA) will have a 180-day period of marketing exclusivity. The FDA may revoke that exclusivity period of the generic manufacturer does not receive tentative approval from the FDA within 30 months of submission.
Ranbaxy obtained tentative approval for each of the three drugs in 2007 and 2008. Despite its early success, Ranbaxy failed to secure final approval for its generic version of Diovan until June 2014 and did not bring that generic to market until July 2014. However, before Ranbaxy obtained final approval for the generic Nexium and Valcyte ANDAs, the FDA revoked its tentative approval for both drugs. Ranbaxy’s generic versions of these two drugs were never brought to market.
Plaintiffs alleged that Ranbaxy violated RICO, federal and state antitrust laws and state consumer protection laws by submitting multiple ANDAs with missing, incorrect, or fraudulent information, thereby fraudulently acquiring exclusivity periods and delaying the market entry of generic Diovan, Nexium and Valcyte. Plaintiffs assert that but for defendants’ allegedly anti-competitive conduct, generic versions of those three drugs would have entered the market and been available at lower prices much sooner. As a result, plaintiffs contend they paid artificially inflated prices for Diovan, Nexium and Valcyte during the Class Periods.
The direct purchasers claimed $7.1 billion in damages, which are subject to treble damages under RICO and federal antitrust laws. End payors claimed up to $3.3 billion in damages.
Both parties filed for summary judgment and Judge Gorton denied both on November 22, 2021. Trial was scheduled to start in April 2022, but this settlement has been submitted to Judge Gorton to sign off on and prevent trial.
Binding Term Sheet
Sun Pharma submitted a regulatory filing that indicated it signed a binding term sheet to resolve the lawsuits brought by purchasers of the drugs, including drug wholesalers and indirect purchasers (such as health plans), accusing Ranbaxy of racketeering and antitrust violations.
Sun continues to dispute the allegations, but agreed to the deal to “resolve this dispute and avoid uncertainty.”
While the settlement may seem small to some, Sun is a smaller company in the pharmaceutical arena, with 2021 total drug sales in the United States of $370 million.
It will be interesting to see if additional information is outlined in the settlement agreement, once fully executed and approved, or if additional comments are made by any of the involved parties.