Association for Accessible Medicines v. Becerra

          MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

          Troy L. Nunley United States District Judge

         This matter is before the Court on Plaintiff Association for Accessible Medicine's (“Plaintiff” or “AAM”) Motion for Preliminary Injunction requesting the Court enjoin the implementation or enforcement of Assembly Bill 824 (“AB 824”). (ECF No. 10.) Defendant Attorney General Xavier Becerra (“Defendant” or the “State”) filed an opposition on December 10, 2019. (ECF No. 24.) Plaintiff filed a reply on December 17, 2019. (ECF No. 27.) The Court also considered Amicus Curiae briefs submitted by various interested parties (ECF Nos. 21, 25), and the Court heard oral argument on December 19, 2020 (See ECF No. 28, hearing minutes). After carefully considering all material presented to the Court and for the reasons set forth below, Plaintiff's Motion is DENIED.

         I. Factual and Procedural Background^[1]

         AB 824 creates a presumption that “reverse payment” settlement agreements regarding patent infringement claims between brand-name and generic pharmaceutical companies are anticompetitive and unlawful.

         Reverse payment settlements arise primarily - if not exclusively - in the context of pharmaceutical drug regulations and suits brought under the statutory provisions of the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. Under the Hatch-Waxman Act, once a brand-name company has submitted a new prescription drug to the FDA and gained approval to market it, a manufacturer of a generic drug with the same active ingredients that is biologically equivalent to the approved brand-name drug can gain approval to market the generic through an abbreviated FDA process. The New Drug Application (“NDA”) process is long, comprehensive, and expensive whereas the Abbreviated New Drug Application (“ANDA”) process that a generic drug is subjected to is substantially less expensive and requires far less testing.

         In order to gain approval through the FDA, the generic company must file an ANDA. As part of this application, the generic company must assure the FDA that its drug will not infringe on any patents owned by the brand-name drug company. One way to do so is for the generic company to certify that any listed, relevant patent is invalid or will not be infringed by the manufacture, use, or sale of the generic drug. This is called a Paragraph IV certification. Because filing under Paragraph IV indicates that there are current patents that the generic company asserts are invalid or uninfringed by its product, the Paragraph IV certification is per se a patent infringement and thus the brand-name company can, and often does, bring suit against the generic drug manufacturer.

         Settlements of the resulting lawsuits sometimes include reverse payments in which the plaintiff, the brand-name drug company, pays the defendant, the infringing generic drug company, a sum of money for the promise that the generic drug company will keeps its drug off the market for an agreed-upon length of time.

         AB 824 targets these types of settlements. According to the State, AB 824 closes this loophole in the Hatch-Waxman Act and ensures that a brand-name drug company cannot continue to enforce an otherwise weak patent against generics through these reverse payment settlements.

         AB 824 imposes a presumption that a settlement agreement involving a brand-name company compensating the generic for keeping its drug off the market is anticompetitive under California Antitrust Law. It also levies a civil penalty against any individual who assists in the violation of the section of three times the value received by the individual due to the violation or $20 million, whichever is greater.

         Plaintiff asserts the following causes of action, all in an attempt to invalidate AB 824: (1) Declaratory/Injunctive Relief - Commerce Clause - Extraterritoriality; (2) Declaratory/Injunctive Relief - Preemption; (3) Declaratory/Injunctive Relief - Excessive Fines Clause; (4) Declaratory/Injunctive Relief - Due Process - Burden Shifting; (5) 42 U.S.C. § 1983 and 42 U.S.C. § 1988. (ECF No. 1 at 30-51.) More specifically, Plaintiff alleges AB 824 violates the Dormant Commerce Clause by directly regulating out-of-state conduct; is preempted by federal patent law and the delicate balance between the competing interests of patent protections and anti-trust law struck by the Supreme Court in FTC v. Actavis, Inc., 570 U.S. 136 (2013); violates the constitutional prohibition of excessive fines under the Eight Amendment; and violates due process in that it creates a burden shift with no meaningful opportunity for defendant to rebut the presumption applied. Presently before the Court is Plaintiff's Motion (ECF No. 10) seeking a preliminary injunction prohibiting the enforcement of this law, which would otherwise take effect January 1, 2020.

         II. Standard

         Injunctive relief is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008) (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam)). “The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held.” Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981); see also Costa Mesa City Emps. Ass'n v. City of Costa Mesa, 209 Cal.App.4th 298, 305 (2012) (“The purpose of such an order is to preserve the status quo until a final determination following a trial.”); GoTo.com, Inc. v. Walt Disney, Co., 202 F.3d 1199, 1210 (9th Cir. 2000) (“The status quo ante litem refers not simply to any situation before the filing of a lawsuit, but instead to the last uncontested status which preceded the pending controversy.”).

         “A plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.” Winter, 555 U.S. at 20. A plaintiff must “make a showing on all four prongs” of the Winter test to obtain a preliminary injunction. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011). In evaluating a plaintiff's motion for preliminary injunction, a district court may weigh the plaintiff's showings on the Winter elements using a sliding-scale approach. Id. A stronger showing on the balance of the hardships may support issuing a preliminary injunction even where the plaintiff shows that there are “serious questions on the merits . . . so long as the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest.” Id. Simply put, a plaintiff must demonstrate, “that [if] serious questions going to the merits were raised [then] the balance of hardships [must] tip[ ] sharply in the plaintiff's favor, ” in order to succeed in a request for preliminary injunction. Id. at 1134-35 (emphasis added).

         III. Standing

         Neither party has raised any issues with respect to standing. Nevertheless, “federal courts are required sua sponte to examine jurisdictional issues such as standing.” Chapman v. Pier 1 Imports (U.S.) Inc., 631 F.3d 939, 954 (9th Cir. 2011) (quoting Bernhardt v. Cty. of L.A., 279 F.3d 862, 868 (9th Cir. 2002)). And “[t]he existence of Article III standing is not subject to waiver.” Chapman, 631 F.3d at 954. To establish Article III standing, a plaintiff must have “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016).

         “[A]n association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Hunt v. Washington State Apple Advert. Comm'n, 432 U.S. 333, 343 (1977). Further, “[w]hether an association has standing to invoke the court's remedial powers on behalf of its members depends in substantial measure on the nature of the relief sought. If in a proper case the association seeks a declaration, injunction, or some other form of prospective relief, it can reasonably be supposed that the remedy, if granted, will inure to the benefit of those members of the association actually injured. Indeed, in all cases in which we have expressly recognized standing in associations to represent their members, the relief sought has been of this kind.” Id. (citing Warth v. Seldin, 422 U.S. 490, 515 (1975)).

         Here, Plaintiff is a nonprofit, voluntary association representing the leading manufacturers and distributors of generic and biosimilar medicines, manufacturers and distributors of bulk active pharmaceutical ingredients, and suppliers of other goods and services to the generic and biosimilar pharmaceutical industry. (ECF No. 1 ¶ 12.) As clarified at oral argument, Plaintiff asserts representational standing on behalf of its members, alleging that its members have many ongoing cases involving patent infringement, and other members are currently developing generics and/or contemplating filing ANDAs. (ECF No. 1 ¶¶ 14-15.) Plaintiff seeks injunctive relief while claiming its members will be injured by the implementation of AB 824. (ECF No. 1 ¶ 16.) The Court finds Plaintiff has sufficiently alleged the elements of representational standing to bring the instant motion for preliminary injunction.

         IV. Request for Judicial Notice

         At the outset, Defendant requests the Court take judicial notice of five documents pursuant to Federal Rule of Evidence 201: (1) Assembly Committee on Health AB 824 Bill Analysis (March 26, 2019), attached to Defendant's Request for Judicial Notice (“RJN, ” ECF No. 24-1) as Exhibit A; (2) Assembly Floor Analysis of AB 824 (September 4, 2019), attached to RJN as Exhibit B; (3) Letters of Support for AB 824, attached to RJN as Exhibit C; (4) Table 8: Total All Payers State Estimates by State of Residence (1991-2014) - Drugs and Other Nondurable Products (Millions of Dollars), attached to RJN as Exhibit D; and (5) Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions, FTC Staff Study (Jan. 2010), attached to RJN as Exhibit E. The State contends judicial notice of Exhibits A, B, and C is appropriate because they are documents that are part of the legislative history of AB 824. The State asserts Exhibits D and E are appropriate for judicial notice because the documents were “administered by or filed with an administrative agency that is not subject to reasonable dispute and is ‘capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.'” (ECF No. 24-1 at 2, quoting Fed. R. Evid. 201.) Plaintiff does not oppose the State's request, and the Court finds all five documents are appropriate for judicial notice.

         Exhibits A, B, and C are part of the legislative history of AB 824, and courts routinely take judicial notice of legislative history documents. Anderson v. Holder, 673 F.3d 1089, 1094 n.1 (9th Cir. 2012) (citing Chaker v. Crogan, 428 F.3d 1215, 1223 n. 8 (9th Cir.2005)) (“Legislative history is properly a subject of judicial notice.”); Korematsu v. United States, 584 F.Supp. 1406, 1414 (N.D. Cal. 1984) (citing Territory of Alaska v. American Can Co., 358 U.S. 224, 227 (1959)) (“[C]ourts frequently take judicial notice of legislative history, including committee reports.”). Similarly, a court “may take judicial notice of ‘records and reports of administrative bodies.'” Anderson, 673 F.3d at 1094 (citing Mack v. South Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir.1986)). Exhibit D - a summary table from the Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, available on CMS.gov; and Exhibit E - an “FTC Staff Study” available on ftc.gov, are such reports.

         Defendant's unopposed Request for Judicial Notice (ECF No. 24) is therefore GRANTED and the Court hereby judicially notices Exhibits A through E attached thereto.

         V. Preliminary Injunction Analysis

         Plaintiff's Complaint asserts five causes of action, the first four of which encompass the present request for preliminary injunction. As explained below, and primarily due to the nature of Plaintiff's pre-enforcement attack on AB 824, the Court finds Plaintiff has failed to establish a likelihood of success on the merits of its claims, nor has it raised serious questions going to those merits. Moreover, the Court finds that absent a constitutional violation Plaintiff has failed to establish an irreparable harm that is both likely and - at this time - imminent. And lastly, even if the Court were to find serious questions going to the merits of Plaintiff's claims, the question of balance of harms and public interest are too speculative at this point for the Court to find that either factor favors Plaintiff, sharply or otherwise.

         A. Likelihood of ...