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Hospital Authority of Metropolitan Government of Nashville and Davidson county v. Momenta Pharmaceuticals, Inc.

United States District Court, M.D. Tennessee, Nashville Division

March 21, 2017

THE HOSPITAL AUTHORITY OF METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY, TENNESSEE, d/b/a/ NASHVILLE GENERAL HOSPITAL, Plaintiff,
v.
MOMENTA PHARAMCEUTICALS, INC., and SANDOZ, INC. Defendants.

          MEMORANDUM OPINION

          WAVERLY D. CRENSHAW, JR.UNITED STATES DISTRICT JUDGE.

         Before the Court is a Report and Recommendation of the Magistrate Judge (“R&R”) (Doc. No. 114) recommending that the Court deny Defendants' joint Motion to Transfer (Doc. No. 58), Defendant Momenta Pharmaceuticals, Inc.'s (“Momenta”) Motion to Dismiss or Transfer for Improper Venue (Doc. No. 62), and Defendants' joint Motion to Dismiss (Doc. No. 65). Defendants have filed timely objections to the R&R (Doc. Nos. 117 & 119), and Plaintiff has responded (Doc. Nos. 123-24). Defendants have filed two Motions for Leave to File a Reply (Doc. Nos. 125-26), which Plaintiff has opposed (Doc. No. 127). Those motions for leave to reply are hereby GRANTED. The Court has reviewed the R&R, the parties' briefs, and conducted a de novo review of the record. For the following reasons, the Court ADOPTS in part and DECLINES TO ADOPT in part the R&R. Momenta's Motion to Dismiss or Transfer and the joint Motion to Transfer are DENIED. Defendants' joint Motion to Dismiss is GRANTED in part and DENIED in part, and Plaintiff's claims for damages are DISMISSED.

         I. BACKGROUND[1]

         Plaintiff is a metropolitan hospital authority that purchases the drugs it administers, including the anticoagulant enoxaparin, from the wholesaler McKesson Corporation (“McKesson”). (Doc. No. 1 at ¶¶ 10-11.) Pursuant to its contract with McKesson, Plaintiff pays the cost of enoxaparin plus a percentage adjustment. (Id.) Enoxaparin itself was formerly subject to a patent held by non-party Sanofi-Aventis (“Aventis”), but that patent was held to be unenforceable in 2007. (Id. at ¶ 23.) Defendant Momenta, however, is the assignee of a patent for a chemical process used to test the quality of enoxaparin (“Method <207>”). In 2003, Momenta entered into a collaboration agreement with Sandoz, whereby Sandoz eventually began manufacturing and selling generic enoxaparin. (Id. at ¶¶ 39, 50) In addition to profit-sharing, the agreement calls for Momenta to receive several million dollars in “milestone payments” if Sandoz remains the sole supplier of generic enoxaparin. (Id. at ¶ 27.) Put simply, the agreement gives Momenta a powerful incentive to use whatever rights it has to prevent other parties from entering the generic enoxaparin market.

         The United States Pharmacopeial Convention (“USP”) is a scientific nonprofit organization that sets standards related to the strength, quality, and purity of medications. (Id. at ¶ 32.) USP standards are enforceable as binding by the United States Food and Drug Administration (“FDA”). 21 U.S.C. § 351(b). As a “biologic” pharmaceutical-that is to say, a pharmaceutical produced through an organic process using animal tissue-with diverse-sized molecules, enoxaparin presents significant challenges in assuring consistency between batches produced. (Doc. No. 1 at ¶¶ 37-38.) In light of those challenges, by 2007, USP was considering the adoption of mandatory, standardized testing to assure that enoxaparin produced met the chemical criteria approved by the FDA. (Id. at ¶ 39.) Aventis-which, at the time, had its own patent application pending that would reach Method <207>-proposed that that method be adopted as the USP-approved test. (Id. at ¶¶ 39-42.) Defendants, who participated in the relevant USP review panel, objected to adopting a method to which Aventis would have a patent. (Id. at ¶ 42.) After discussions with USP, Aventis agreed to abandon its patent application. (Id. at ¶ 44.) Unbeknownst to the rest of the panel, however, Momenta had its own patent application pending that, when granted, would give Momenta patent rights that could arguably be asserted against third parties that used Method <207>. In December of 2009, the USP adopted Method <207>. (Id. at ¶ 47.) Momenta's patent was issued not long thereafter. (Id. at ¶ 48.) Plaintiff posits that, if Momenta had properly disclosed its patent application, USP would either have required Momenta to abandon the application as it did with Aventis, or USP would have selected an alternative test that would not have been subject to patent protection. (Id. at ¶ 46.)

         Defendants became the first entities authorized by the FDA to produce generic enoxaparin. (Id. at ¶ 50.) Amphastar Pharmaceuticals, Inc. (“Amphastar”), which is not a party to this case, received FDA approval to sell generic enoxaparin later, but Defendants promptly sued Amphastar in the District of Massachusetts to prevent it from using Method <207>. (Id. at ¶¶ 50-52.) Although Defendants initially obtained a temporary restraining order (“TRO”) and preliminary injunction, the injunction was eventually stayed and Amphastar became able to manufacture and sell generic enoxaparin-albeit belatedly. (Id. at ¶¶ 61-63.) Plaintiff alleges that, between the time the TRO was issued and when the preliminary injunction was stayed, Defendant enjoyed monopoly power in the market for generic enoxaparin. (Id. at ¶ 64.) Plaintiff claims to have been harmed by the resultant inflated prices paid for enoxaparin. (Id. at ¶¶ 66-74.) The underlying litigation in the District of Massachusetts remains ongoing.

         Plaintiff brought this case pleading four counts under the Sherman Act arising out of Defendants' conspiracy to take advantage of the USP process to secure Sandoz's position as the sole supplier of generic enoxaparin. (Id. at ¶¶ 81-104.) Plaintiff seeks damages, declaratory relief, and injunctive relief. (Id. at ¶¶ A-I.) Defendants seek either dismissal or transfer to the District of Massachusetts based on inappropriate venue or dismissal on the merits. The R&R recommends that those requests be denied.

         II. OBJECTIONS

         Although not so numbered by the Defendants, the Court identifies the following objections to the R&R from Defendants' briefing:

1. Venue in this Court is statutorily barred under 28 U.S.C. § 1391 and the Clayton Act, 15 U.S.C. § 22 (Doc. No. 118 at 5-18);
2. If the Court determines that venue is not statutorily barred, it should nevertheless transfer the case to the district of Massachusetts as the more convenient forum (Doc. No. 120 at 15-25);
3. Plaintiff's claims should also be dismissed because Plaintiff is an indirect purchaser who is not entitled to the so-called “cost-plus” exception (Id. at 9-13); and
4. Plaintiff's claims should be dismissed as barred by the Noerr-Pennington doctrine[2] (Id. at 5-9);
5. Plaintiff's claims should be dismissed because they are premised on a non-mandatory industry standard (Id. at 13-15).

         The Court will not unnecessarily recapitulate the reasoning in the R&R on issues ...


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