United States District Court, E.D. California
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 ...