For Immediate Release: February 25, 2021 Contact: Matt Baca -- (505) 270-7148
Attorney General Balderas Files Suit Against Manufacturers of Antiretroviral HIV/AIDS Treatment Drugs
Santa Fe, NM---Attorney General Balderas today filed a lawsuit in the First Judicial District Court of New Mexico against Gilead Sciences, Inc., Bristol-Myers Squibb, Gilead Sciences, LLC, and Teva Pharmaceuticals USA, Inc., for violating the New Mexico Antitrust Act and New Mexico Unfair Practices Act. The lawsuit stems from the development, marketing, and manufacturing of several antiretroviral medications used in the prevention and treatment of Human Immunodeficiency Virus (“HIV”) – a disease which, if left untreated, destroys the immune system and leads to Acquired Immunodeficiency Syndrome (“AIDS”). The antiretroviral medications at issue include VIREAD®, TRUVADA®, ATRIPLA®, VEMLIDY®, and DESCOVY®.
“Putting profits over the critical needs of New Mexican patients and risking their health and safety is unacceptable,” said Attorney General Balderas. “My office will hold anyone accountable who takes advantage of or harms our families.”
The lawsuit alleges that the defendants engaged in coordinated schemes and anti- competitive agreements to suppress the entry of cheaper generic versions of each drug into the market, and to delay the development of safer, more effective treatment drugs in order to maintain a stranglehold on the market for antiretroviral treatment. The defendants’ schemes resulted in vastly inflated prices for these lifesaving drugs, and hundreds of millions of dollars in anticompetitive profits to the defendants. These profits came at the expense of government payors like the State of New Mexico, and patients living with HIV.
A copy of the complaint filed in New Mexico Court is attached.
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FILED 1st JUDICIAL DISTRICT COURT Santa Fe County 2/24/2021 9:37 AM STATE OF NEW MEXICO KATHLEEN VIGIL CLERK OF THE COURT COUNTY OF SANTA FE Leah Baldonado FIRST JUDICIAL DISTRICT COURT
STATE OF NEW MEXICO, ex rel. Case No. ______D-101-CV-2021-00377 HECTOR H. BALDERAS, Attorney General, Case assigned to Sanchez-Gagne, Maria
Plaintiff,
v.
GILEAD SCIENCES, INC., a Delaware JURY TRIAL DEMANDED Corporation, GILEAD SCIENCES, LLC (f/k/a BRISTOL-MYERS SQUIBB & GILEAD SCIENCES, LLC), a Delaware Limited Liability Company, BRISTOL-MYERS SQUIBB, a Delaware Corporation, and TEVA PHARMACEUTICALS USA, INC., a New Jersey Corporation,
Defendant.
COMPLAINT FOR VIOLATIONS OF NEW MEXICO’S ANTI-TRUST ACT AND UNFAIR PRACTICES ACT
i
I. INTRODUCTION ...... 1 II. JURISDICTION AND VENUE ...... 9 III. PARTIES ...... 10 IV. NATURE OF THE CASE ...... 12 a. Defendants Entered into Unlawful and Anti-Competitive Settlement Agreements That Delayed and Suppressed Generic Competition and Artificially Inflated Pricing for Crucial, Life-Saving TDF-Based HIV Medications ...... 12 b. Instead of Innovating, Gilead Engaged in Multi-Tiered Schemes and Collusive Collaborations Aimed at Insulating Vulnerable Patents and Its TDF-Based HIV Medications from Generic Competition ...... 14 c. In the Face of Imminent Generic Competition, Gilead Employed Unfair and Deceptive Sales and Marketing Schemes to Shift Market Share for its HIV Medications ...... 16 V. FACTUAL ALLEGATIONS...... 20 a. Background ...... 20 i. State Payments Under Medicaid Program ...... 20 ii. Drug Approval Background ...... 24 iii. Hatch-Waxman Background ...... 26 b. Defendants’ Anti-Competitive Patent Infringement Settlement Agreements with Most Favored Entry Provisions Delayed and Suppressed Generic Competition ...... 30 i. Viread (TDF) ...... 30 1. Viread was a Significant Source of Gilead Revenue ...... 30 2. Gilead’s Viread Hatch-Waxman Exclusivities and Weak, Evergreened and Ancillary Patent Portfolio ...... 31 3. Multiple Generic Challenges to Viread Patents ...... 33 4. Gilead and Teva Settled the Viread Patent Infringement Litigation the Day Before Trial on Terms Outwardly and Highly Favorable to Gilead ...... 35 5. The Parties are Forced to Disclose to the Court the Existence of a “No Authorized Generic” Agreement After the FTC Objects to the Settlement Based on Antitrust Grounds 36 6. Teva Would Not Have Agreed to Simply Give Up Millions of Dollars of Revenue, As Was Represented to the Court ...... 39 7. Defendants Improvised with Unfair and Anti-Competitive Most Favored Entry Provisions That Achieve the Same Objective ...... 42 8. Effect on State Reimbursements and New Mexico Commerce, Market Power and Competition ...... 50 ii. Truvada (TDF/FTC) and Atripla (TDF/FTC/EFV) ...... 51 1. Truvada is a Significant Source of Gilead Revenue ...... 52
ii 2. Atripla is a Significant Source of Gilead Revenue ...... 53 3. Gilead’s Truvada and Atripla Hatch-Waxman Exclusivities and Weak, Evergreened and Ancillary Patent Portfolios...... 54 4. Multiple Generic Challenges to Truvada and Atripla ...... 58 5. Teva Would Not Have Agreed to Give Up Millions of Dollars of Revenue Absent Unfair and Anti-Competitive Most Favored Entry Clauses ...... 64 6. Effect on State Reimbursements and New Mexico Commerce, Market Power and Competition ...... 67 c. Gilead and BMS Conspire to Extend Their Monopolistic Positions Through Unfair Business Dealings and Fraudulent Marketing Schemes Aimed at Insulating Their Vulnerable Patents and Restraining Generic Competition ...... 69 i. Gilead’s and BMS’s No Generics Agreement to Market Brand Atripla ...... 70 1. Defendants Entered Their No Generics Restraint Agreement to Insulate Their Vulnerable Patents ...... 73 2. Defendants’ No Generics Restraint Agreement Unlawfully Allows for Royalty Payments After Patents Expire and/or Are Invalidated ...... 75 3. Defendants’ Deceptive and Fraudulent Joint Marketing and Promotion of Atripla ... 77 ii. Effect on State Reimbursements and New Mexico Commerce and Markets ...... 78 d. Gilead’s Unconscionable Product Hopping Scheme Reduced Access and Affordability of Preventative HIV Medications at the Expense of Government Payors ...... 81 i. Gilead Deliberately and Deceitfully Delayed Development and Introduction of Allegedly Safer and More Effective TAF To Extend Its TDF-Based Franchise Monopolies and Profits 83 1. Development of TAF – Shelved by Gilead for Over a Decade ...... 84 2. Gilead’s Unlawful No Generics Deal with BMS Gave Gilead the Incentive and Ability to Delay TAF ...... 86 ii. Gilead Deliberately and Unconscionably Delayed Development of Tenofovir for PrEP Indications to Unfairly Profit from Government Research and Innovations, Funded by Tax- Payer Dollars, In Order to Extend Its Monopolies and Profits ...... 89 1. Government and Tax Payer Funded Research Was Used to Support FDA’s Approval for Gilead’s Truvada for PrEP in 2012 ...... 92 a. Gilead Delayed PrEP Involvement Until After Truvada’s Commercial Success to Fund Descovy for PrEP Research as Part of Its Product-Hopping and Deceptive Marketing Scheme...... 94 2. Gilead’s Unlawful and Anti-Competitive Patent Settlement Agreements with Teva Gave Gilead Additional Incentive and Ability to Delay PrEP Research and Development 95 iii. Gilead Deceptively Promoted Prescription Switches From TDF-Based to TAF-Based HIV Medications To Reinforce Its Anti-Competitive Arrangements ...... 97 1. Gilead’s Fraudulent Marketing and Targeting of HCPs in New Mexico ...... 98 VI. FRAUDULENT CONCEALMENT AND TOLLING ...... 101
iii VII. CAUSES OF ACTION ...... 104 COUNT I ...... 104 COUNT II ...... 106 COUNT III ...... 109 COUNT IV ...... 112 COUNT V ...... 114 COUNT VI ...... 117 COUNT VII...... 120 VIII. CONCLUSION ...... 125 IX. REQUEST FOR RELIEF ...... 125
iv COMES NOW Plaintiff, the State of New Mexico, by the Honorable Hector Balderas,
Attorney General of the State of New Mexico (“Plaintiff” or “State”), and brings this action against defendants GILEAD SCIENCES, INC. (“Gilead”), BRISTOL-MYERS SQUIB (“BMS”),
GILEAD SCIENCES LLC f/k/a BRISTOL-MYERS SQUIBB & GILEAD SCIENCES, LLC
(“Gilead-BMS JV”), and TEVA PHARMACEUTICALS USA, INC. (“Teva”) (collectively
“Defendants”). In support of its Complaint, the State avers as follows:
I. INTRODUCTION
1. Plaintiff, by and through its Attorney General, Hector Balderas, brings this civil action to redress unlawful and deceptive practices, to obtain declaratory and equitable relief, restitution, statutory penalties and all damages recoverable at law or in equity to remedy
Defendants’ willful and deliberate violations of the New Mexico Anti-Trust Act, NMSA 1978,
Sections 57-1-8 to -19, (“NM Anti-trust Act”) and the New Mexico Unfair Practices Act, NMSA
1978, Sections 57-12-1 to -22, (“NM UPA”)).
2. This action arises out of Defendants’ long-running fraudulent and coordinated schemes, improper restraints of trade, and unfair and deceptive business practices that have effectively curtailed generic competition, resulting in excessively inflated pricing for crucial antiretroviral medications used in the prevention and treatment of Human Immunodeficiency Virus
(“HIV”) – a disease which, if left untreated, destroys the immune system, and leads to Acquired
Immunodeficiency Syndrome (“AIDS”). The antiretroviral medications at issue include Gilead’s
VIREAD® (tenofovir disoproxil fumarate (“TDF”)) and generic versions of same, TRUVADA®
(a combination of Viread (TDF) and emtricitabine (“FTC”)), ATRIPLA® (a combination of
Truvada (TDF and FTC) and efavirenz (“EFV”)), (collectively referred to as “TDF-Based”), as well as Gilead’s VEMLIDY® ( tenofovir alafenamide fumarate (“TAF”)) and DESCOVY® (TAF
1 and FTC) (collectively referred to as “TAF-Based”). Each of these HIV Medications1 consists of one or more component drugs of the nucleotide/nucleoside analogous reverse transcriptase inhibitor (“NRTI”) class, which include tenofovir disproxil fumarate (“TDF”), tenofovir alafenamide fumarate (“TAF”), and emtricitabine (“FTC”). The following chart summarizes each branded drug and its component drugs:
Branded Drug 1st NTRI 2nd NRTI Third Agent
VIREAD® TDF
TRUVADA® TDF FTC
ATRIPLA®2 TDF FTC EFV3
VEMLIDY® TAF
DESCOVY® TAF FTC
3. Gilead owns the patents (or has obtained exclusive licenses to the technology) for the component drugs TDF, TAF and FTC, as well as patents for the branded drugs Viread,
Truvada, Atripla, Vemlidy and Descovy. As each drug’s patent was challenged or set to expire,
Gilead entered into unlawful, deceptive and anticompetitive arrangements with BMS, Teva and other unnamed entities to delay and suppress entry of cheaper generic versions of each drug. The net result of Gilead’s and other Defendants’ unlawful actions resulted in unwarranted and excessively over-priced HIV Medications costing the State millions of dollars in drug reimbursements.
1 “HIV Medications” include Viread, Truvada, Atripla, Vemlidy, Descovy and any generic versions of same. 2 Atripla was marketed by Gilead Sciences LLC, a joint venture between Gilead and BMS, and is currently marketed solely by Gilead. 3 Efavirenz (“EFV”), known by trade name SUSTIVA®, is commercialized by BMS.
2 4. HIV is one of the deadliest human pandemics in history. Since the first cases were reported in the summer of 1981, more than 700,000 people United States (“U.S.”) and 35 million worldwide, have perished from the disease. In the United States, the HIV epidemic is still ongoing.
The Centers for Disease Control and Prevention (“CDC”) reported that in 2017, the last year for which data is available, an estimated 1.1 million people in the U.S. were living with HIV, nearly
40,000 people were newly diagnosed with it, and more than 5,000 Americans perished from it.
5. U.S. government payors, including State Medicaid programs, are one of the single largest sources for insurance coverage and accessibility to antiretroviral medications for people living with HIV.4 State Medicaid reimbursements for Gilead’s HIV Medications are also a primary source of Gilead’s profits, as Gilead sells its HIV Medications in the U.S. at exponentially higher prices compared to other countries around the world, where pricing is much closer to the cost of manufacturing. By way of example, several of Gilead’s HIV Medications cost less than $10 to produce, yet for years Gilead has been able to consistently charge U.S. government payors over one thousand dollars for a 30-day supply.5
6. Improved access to antiretroviral therapies (“ART”) that durably suppress the virus prevents the development of AIDS in persons living with HIV and decreases the likelihood of transmission of HIV to others. Current HIV treatments are highly effective, but not curative.
Available treatments help people with HIV live longer, healthier lives, but do not eliminate the virus from the human body or prevent reemergence of the virus when the treatment is discontinued.
4 See Kaiser Family Foundation, Medicaid and HIV, (Oct. 1, 2019), available at: https://www.kff.org/hivaids/fact- sheet/medicaid-and-hiv/ (last accessed Aug. 26, 2020). 5 In 2017, Gilead charged on average $1,500 for a 30-day supply of Truvada and $1,028 for a 30-day supply of Viread. Of note, Truvada costs less than $9 to produce. Centers for Medicare & Medicaid Services (“CMS”), National Average Drug Acquisition Cost Database, https://data.medicaid.gov/Drug-Pricing-and-Payment/NADAC-as-of-2017-07- 26/yv6n-8hzz (last accessed Aug. 26, 2020).
3 Access to affordable HIV medications is an absolute necessity to preventing infections and maintaining treatment for those living with HIV.
7. As drug-resistant strains of HIV continue to rise, today treatment strategies often combine multiple ART from different drug classes, also known as (“cART”). The backbone for most cART regimes typically consists of NRTIs, which function as analogs of the naturally occurring deoxynucleosides and deoxynucleotides needed to synthesize the viral DNA. Thus, they can disrupt the reverse transcription process needed to generate the HIV DNA, thereby preventing integration of the proviral DNA into the genome of human cells.
8. During all times relevant, Gilead was the exclusive maker, and/or remains the dominant maker, of TDF and TAF – two of the principal NRTIs used in any cART regime. TDF and TAF are prodrugs of the same parent molecule tenofovir and are similar in structure. Prodrugs are pharmacologically inactive compounds that, once administered, undergo a conversion by the body’s metabolic processes to become an active pharmacological agent.
9. TDF and TAF are almost always used alongside another NRTI, specifically either
FTC or lamivudine (“3TC”). When an HIV virus becomes resistant to either FTC or 3TC, the virus’s susceptibility to TDF and TAF increases. Thus, the combination of TDF or TAF with either
FTC or 3TC makes it more difficult for the virus to develop resistance to a cART regimen.
10. FTC and 3TC are remarkably similar, varying by the substitution of only a single hydrogen atom in 3TC, with a fluorine atom in FTC in the 5-prime position of the cytosine ring.
Both the U.S. Department of Health and Human Services (“HHS”) and the World Health
Organization (“WHO”) guidelines stipulate that the drugs, when used for HIV treatment, can be used interchangeably. Any cART regimen using FTC can use 3TC instead, and vice versa, without a reduction in therapeutic efficacy.
4 11. The ability to use 3TC instead of FTC is important to the antitrust claims here.
Gilead owns and currently still has patent protection for FTC, but generic 3TC has been available in the U.S. since 2012. Thus, when generic TDF became available in December 2017, the price of cART regimens should have dropped precipitously because two generic NRTIs—3TC and TDF— were available in the marketplace. This complaint outlines how Gilead and its co-conspirators prevented those price drops from occurring.
12. Gilead deliberately and deceitfully delayed generic competition of life-saving TDF-
Based products, including Viread, Truvada and Atripla, for years through sham patent litigation against generic manufacturers and by entering into anticompetitive settlement agreements with
Teva (as well as other generic manufacturers). As a result, Gilead and Teva, individually and collectively, were able to retain hundreds of millions of dollars in anticompetitive profits at the expense of government payors, like Plaintiff. Defendants engaged in such exclusionary conduct, with full knowledge that the launch of generic versions of TDF-Based HIV Medications would dramatically reduce pricing,6 to wrongfully insulate themselves from competition, in order to maintain exorbitant pricing and earn outsized profit margins.7 Defendants’ duplicitous actions and unfair business practices directly resulted and continue to result in the State and New Mexico participants paying excessive amounts for TDF-Based HIV Medications.
13. Gilead deliberately and purposefully withheld development and introduction of superior TAF for over a decade in order to extend its monopoly and earn out-sized profit margins on its TDF-Based HIV Medications. Only after generic competition was imminent, did Gilead
6 See e.g., Gilead Sciences, Inc. SEC Form 10-K 2017 Annual Report (“[s]ales of generic versions of [its] products could significantly reduce [its] sales and adversely affect [its] results of operations.”). 7 See e.g., Gilead Sciences, Inc., Financial Presentation, Third Quarter Earnings Slides at 39 (Oct. 27, 2015) (In 2015, Gilead was able to earn an astonishing 90% Non-GAAP Product Gross Margins).
5 introduce TAF, engaging in a fraudulent and unlawful product-hopping scheme to switch TDF-
Based prescriptions to TAF-Based prescriptions.
14. Gilead engaged in deceptive, misleading and fraudulent marketing schemes targeting government payors and healthcare providers (“HCPs”) to switch patients from its HIV
Medications facing generic competition (and thus reduced pricing) to higher-cost HIV Medications purportedly protected by weak evergreened and ancillary patents and/or protected from competition through unfair business arrangements with BMS shielding products from generic competition. Such marketing schemes were employed to deceitfully induce prescriptions for and switches to Gilead’s HIV Medications.
15. In connection with these unfair settlement agreements, collusive collaborations and product-hopping schemes, when faced with imminent generic competition, Gilead would unfairly increase the already exorbitant pricing for its HIV Medications to wring the last bit of available profits from its HIV franchises. As a result, Medicaid reimbursements for Gilead’s HIV
Medications have substantially increased over time. In 2012 the State reimbursed over $2 million for Gilead’s HIV Medications, that number increased to $5.8 million in 2014 and $7.3 million by
2016.
16. One of Gilead’s most lucrative and shameless product-hopping and deceptive marketing schemes involves Truvada and Descovy, which are used as a pre-exposure prophylaxis
(“PrEP”) - one of the most effective ways to prevent infections in individuals not currently diagnosed with HIV. The use of PrEP is of the utmost importance to public health and PrEP
6 medications are indispensable in terms of ending the HIV/AIDS epidemic in the U.S. As a result,
Truvada for PrEP is covered in all respective State Medicaid programs.8
17. Gilead has unfairly profited from taxpayer dollars that funded government clinical research for the use of Truvada and Descovy in a PrEP regime. After Truvada’s initial approval, the government took it upon itself to conduct clinical research and obtain patents covering the use of tenofovir, including both TDF and TAF, in a PrEP regime. Gilead relied on the government’s research and patents in its submissions to the FDA to gain approval for a PrEP indication for
Truvada.
18. Gilead has clearly benefitted from the government’s patents and research as the use of Truvada and Descovy for PrEP have sky-rocketed (along with its sales). Yet, to date, Gilead has not fairly obtained a license to the government’s patents or paid reasonable royalties to the government for its ground-breaking PrEP research. Instead, Gilead implemented another deceptive product-hopping marketing scheme to switch prescriptions from Truvada, now facing imminent generic competition and lower pricing, to Gilead’s patent protected TAF-Based Descovy, in order to keep prices artificially high and maintain its inflated profit margins. Gilead’s unconscionable business practices drastically reduce access to crucial preventative HIV Medications at the expense of government payors, like Plaintiff, and to the detriment of public health.
19. Defendants’ unlawful settlement agreements, unfair and anti-competitive conspiracies and coordinated efforts to limit competition to maintain sky-high pricing and profits, along with Gilead’s deliberate deception and fraudulent product-hopping and marketing schemes, targeting HCPs and participants reimbursed under the State’s Medicaid Program, knowingly
8 See N. Seiler, Leveraging Financing and Coverage Benefits: Medicaid Strategies to Deliver PrEP Intervention Services, ACADEMY HEALTH (Jan. 2019).
7 caused false claims to be submitted to the State for reimbursement for prescriptions of HIV
Medications that concealed such unfair and anti-competitive settlement agreements, collusive collaborations and fraudulent and deceptive business practices in violation of state laws and regulations and that were inappropriate and not cost-effective.
20. Defendants’ calculated and concerted conduct produced billions of dollars in profits for Defendants. Indeed, today more than 80% of U.S. patients on an HIV treatment regimen take one or more of Gilead’s products, and Gilead’s blockbuster HIV Medications comprise a substantial portion of its total sales and financial portfolio. In 2019 alone, annual U.S. sales for
Truvada in 2019 were calculated at an incredible $2.64 billion with Descovy sales topping billion dollars.9
21. Government payors, as the last line of defense, are responsible for a large portion of those sales.10 Defendants’ unfair business practices and anti-competitive actions needlessly raised prices for life-saving medications, stifled innovation, and have been and continue to be a burden to government payors, like the State, and catastrophic for many participants.
22. Plaintiff seeks restitution, damages, civil penalties, injunctive and equitable relief as a result of Defendants’ unconscionable and unfair business practices to suppress generic competition and manipulate the market for life-saving and preventative HIV Medications, which caused false and fraudulent claims to be presented and reimbursed by the State at exorbitantly excessive prices.
9 Gilead Sciences, Inc., Press Release, Gilead Sciences Announces Fourth Quarter and Full Year 2019 Financial Results, (Feb. 4, 2020). 10 As Gilead itself has repeatedly stated: “[s]uccessful commercialization of [its] products depend, in part, on the availability of governmental . . .payer reimbursement for the cost of. . .[its] products and related treatments…”
8 II. JURISDICTION AND VENUE
23. The State brings this action exclusively under the law of the State of New Mexico.
No federal claims are being asserted, and to the extent that any claim or factual assertion set forth herein may be construed to have stated any claim under federal law, such claim is expressly undeniably disavowed and disclaimed by the State.
24. The State does not bring this action on behalf of a class or any group of persons that can be construed as a class. Nor does the State bring this as a mass action or state its claims and causes of action in any way that can be construed as a mass action. The claims asserted herein are brought solely by the State and are wholly independent of any claims that individual users of
Viread, Truvada, Atripla, Vemlidy, Descovy or their respective generic versions or standalone subcomponents may have against Defendants.
25. The courts of New Mexico have jurisdiction over the subject matter of this action pursuant to, inter alia, Article IV, Section 13 of the New Mexico Constitution.
26. This Court has personal jurisdiction over Defendants because Defendants’ acts, practices, and conduct that give rise to this civil action and the submissions of claims for prescriptions occurred in the State of New Mexico and because Defendants conduct business in
New Mexico and/or have the requisite minimum contacts with New Mexico to constitutionally permit the Court to exercise jurisdiction. Moreover, such jurisdiction is also within the contemplation of the New Mexico “long arm” statute, NMSA 1978, Section 38-1-16.
27. Defendants did distribute, supply, market, sell, promote, advertise, and/or otherwise distribute their HIV Medications and otherwise commit the wrongful acts and omissions described herein in New Mexico, including in Santa Fe County.
9 28. Venue is proper in Santa Fe County pursuant to NMSA 1978, Section 38-3-1 because: (1) the Attorney General resides in Santa Fe County, New Mexico; and (2) the causes of action alleged herein originated in part in Santa Fe County. Venue is also proper in Santa Fe
County pursuant to NMSA 1978, Section 57-12-8 because Defendants have used methods, acts or practices in Santa Fe County which are unlawful under the Unfair Practices Act.
29. The instant Complaint does not confer diversity jurisdiction upon the federal courts pursuant to 28 U.S.C. § 1332. Likewise, federal question subject matter jurisdiction pursuant to 28
U.S.C. § 1331 is not invoked by the instant Complaint, as it sets forth herein exclusively state law claims against Defendants. Nowhere herein does Plaintiff plead, expressly or implicitly, any cause of action or request any remedy which is founded upon federal law. The issues presented in the allegations of the instant Complaint do not implicate significant federal issues; do not turn on the substantial federal interpretation of federal law; nor do they raise a substantial federal question.
Indeed, Plaintiff expressly avers that the only causes of action claimed, and the only remedies sought herein, are for those founded upon the statutory and decisional laws of the State of New
Mexico. Further, assertion of federal jurisdiction over the claims made herein would improperly disturb the congressionally approved balance of federal and state responsibilities. Neither this case, nor any issue in this case, has any effect on the federal system as a whole. Accordingly, any improvident and dilatory attempt by Defendants to remove this case to federal court would be without a reasonable legal basis in fact or law.
III. PARTIES
30. Plaintiff, the State of New Mexico, is a body politic created by the Constitution and the laws of the State of New Mexico, and as such is not a citizen of any State. Attorney General
Hector Balderas is the present Attorney General of the State of New Mexico. Attorney General
10 Hector Balderas is acting pursuant to his authority under, inter alia, NMSA 1978, Section 8-5-1 et seq.; the NM Anti-trust Act; the NM UPA; the NM MFA; the NM FATA; and the NM FCA.
31. Defendant Gilead Sciences, Inc. (“Gilead”) is a Delaware corporation, with a principal place of business at 333 Lakeside Drive, Foster City, California 94404. At all times relevant, Gilead has engaged in the business of manufacturing, developing, advertising, labeling, marketing, promoting, selling and/or distributing Viread, Truvada, Atripla Vemlidy and Descovy in the U.S., and has, either directly or indirectly, systemically and continuously advertised, marketed, promoted, sold, and/or distributed its HIV Medications within the State of New Mexico.
32. Defendant Gilead Sciences, LLC (formerly known as Bristol-Myers Squibb &
Gilead Sciences, LLC) (“Gilead Sciences, LLC” of “Gilead-BMS JV”) is a limited liability company organized and existing under the laws of the State of Delaware, with a principal place of business at 333 Lakeside Drive, Foster City, California 94404. Gilead Sciences, LLC is a wholly- owned subsidiary of Gilead Sciences, Inc. At all times relevant, Gilead Sciences, LLC has engaged in the business of manufacturing developing, advertising, labeling, marketing, promoting, selling, and/or distributing of Atripla in the U.S., and has either directly or indirectly, systematically and continuously advertised, marketed, promoted, sold, and/or distributed its HIV Medications within the State of New Mexico.
33. Defendant Bristol-Myers Squibb Company (“BMS”) is a corporation organized and existing under the laws of the State of Delaware, with a principal place of business at 430 East
29th Street, 14th Floor, New York, NY 10016. BMS has engaged in the business of manufacturing, developing, advertising, labeling, marketing, promoting, selling and/or distributing versions of
Atripla and certain NRTIs in the United States, and has, either directly or indirectly, systemically
11 and continuously advertised, marketed, promoted, sold, and/or distributed same within the State of New Mexico.
34. Defendant Teva Pharmaceuticals USA, Inc., (“Teva”) is a corporation is a corporation organized and existing under the laws of the State of Delaware, with its principal place at 400 Interpace Parkway, #3. Parsippany, NJ 07054. Teva is a subsidiary of Teva Pharmaceutical
Industries, Ltd. At all times relevant, Teva has engaged in the business of manufacturing, developing, advertising, labeling, marketing, promoting, selling and/or distributing generic versions of Viread, Truvada, and Atripla in the United States, and has, either directly or indirectly, systemically and continuously advertised, marketed, promoted, sold, and/or distributed generic
Viread within the State of New Mexico.
IV. NATURE OF THE CASE
35. The sale of lifesaving and preventative HIV products comprise the vast majority of
Defendant Gilead’s total revenues. To unlawfully maintain its supra-competitive profits, Gilead entered into a series of fraudulent, anticompetitive, and deceptive arrangements with co-
Defendants, which resulted in the State reimbursing millions of dollars for HIV Medications that otherwise would have been cheaper absent Defendants’ unlawful activities.
36. While Gilead engaged in a multitude of interlocking deceptive and anticompetitive conduct, its efforts can be broadly characterized by three different yet interdependent prongs, each of which is summarized below.
a. Defendants Entered into Unlawful and Anti-Competitive Settlement Agreements That Delayed and Suppressed Generic Competition and Artificially Inflated Pricing for Crucial, Life-Saving TDF-Based HIV Medications
37. First, Gilead concocted a way to unlawfully extend the market exclusivity for its various HIV Medications.
12 38. In 2001, Gilead began marketing TDF, raking in hundreds of millions of dollars.
Gilead, however, expected that generic manufacturers would challenge the validity of Gilead’s
TDF-related patents. Indeed, Gilead had reason to expect that generic versions of its TDF would enter the market as early 2009. To head off the price erosion caused by anticipated generic competition, Gilead coaxed generic manufacturers – i.e., its would-be market competitors – to agree not to compete against each other. Essentially, Gilead paid off would-be market competitors and, in exchange, was able to unlawfully extend the exclusivity and market-dominance of its TDF
(and later other TDF-Based HIV Medications) well beyond the point when generic competition would be reasonably expected. Indeed, Gilead’s scheming was so successful that it even thwarted generic competition after Gilead’s TDF patents expired.
39. For instance, in 2008, when Teva sought to introduce generic versions of Viread
(TDF), Gilead sued Teva for patent infringement. Then, Gilead enticed Teva to enter into an unlawful arrangement whereby Teva agreed to drop its challenge to Gilead’s patents. In exchange for the lengthy delay, Teva received assurances that no generic would enter the market before it and Teva would receive the most favorable entry position. This sham patent litigation and settlement pattern was similarly followed for Truvada and Atripla. Gilead enticed Teva to delay its generic versions of TDF-Based HIV Medications in exchange for assurances that Teva’s generics would launch exclusively and on the most favorable terms at a date certain.
40. By significantly delaying generic versions of its TDF-Based HIV Medications
(Viread, Truvada and Atripla), purchasers and government payors had no choice but to pay supra- competitive prices for Gilead’s HIV Medications. Gilead accomplished this in a number of ways.
For years, it manipulated the market, unlawfully extending its monopolies through sham patent litigation against generic manufacturers, engaging in deceptive marketing and promotional
13 schemes, and by entering into anticompetitive settlement agreements containing exclusive and most favorable entry clauses.
41. Defendants’ collective fraudulent actions, deception, and unlawful agreements resulted in delays of generic Viread for approximately four and a half (4.5) years, and prevented generic versions of Truvada and Atripla for over five years and counting. Defendants’ synchronized schemes enabled Gilead and Teva, individually and collectively, to retain millions of dollars in anticompetitive profits at the expense of the State by (1) charging supra-competitive prices for essential maintenance medications needed by those living with HIV and (2) over- charging for vital preventative medications needed to end the HIV/AIDS public health epidemic.
b. Instead of Innovating, Gilead Engaged in Multi-Tiered Schemes and Collusive Collaborations Aimed at Insulating Vulnerable Patents and Its TDF-Based HIV Medications from Generic Competition
42. Knowing the patents covering its TDF-Based HIV Medications were weak and likely to be invalidated, Gilead anticipated early on that it would face generic competition. In anticipation of inevitable generic challenges and competition, Gilead manipulated the process, strategically evergreening patents to roll out Truvada in 2004, just a few years after launching
Viread and well before the TDF patents were set to expire. Truvada is a non-novel fixed-dose combination (“FDC”) medication, which simply incorporates two of Gilead’s previously approved
HIV active pharmaceutical ingredients (“API”) already on the market (i.e. TDF and FTC). FDC products are not new to the pharmaceutical industry. Merely combining previously approved APIs into single dosage form would have been obvious to a person skilled in the industry at the time.
43. Knowing the patents purporting to cover TDF, FTC and the combination for
Truvada were weak, ancillary and likely to be invalidated, Gilead had reason to anticipate generic patent challenges and expected generic Truvada competition as early as 2011. So, around the same
14 time it launched Truvada in 2004, Gilead reached out to Defendant BMS to combine forces and commercialize and market yet another FDC, Atripla, incorporating Gilead’s patent protected TDF and FTC with BMS’s patent protected EFV to further deter generic competition. The objective of the Atripla collaboration and agreement was to create an FDC product, with brand only sub- components, that would insulate Gilead’s and BMS’s weak patents covering TDF, FTC and EFV, to further impair and suppress generic competition to unfairly extend their monopolistic positions and maintain supra-competitive pricing and profit margins.
44. To this end, in December 2004, Gilead and BMS agreed to develop a new HIV product, Atripla. Atripla combined three active ingredients: Gilead’s TDF and FTC, and BMS’s
EFV.
45. The FDA approved Atripla in 2006. The parties coordinated marketing and sales efforts on Atripla in the United States from July 2006 through 2010. A Joint Pricing Committee, comprised of Gilead and BMS representatives, determined the price of Atripla. This ensured that
Atripla would not undercut Gilead’s own HIV Medications at the time, such as Truvada. This is in fact what bore out. In 2017, the price of a 30-day supply of Truvada was approximately $1,600, whereas the price of Atripla was approximately $2,600.
46. Gilead’s agreement with BMS provided that BMS would supply its EFV exclusively to the Gilead-BMS JV for sole use in a combination product with Gilead’s TDF and
FTC. Thus, Gilead and BMS effectively foreclosed BMS itself, and any other potential competing manufacturer, from competing against Atripla with any product incorporating EFV – even after patent expiration.
47. BMS also irrationally agreed to punitive terms providing that, in the event BMS wanted to sell its EFV to any other manufacturer, BMS would have to terminate the joint venture
15 arrangement with Gilead and become the sole owner of the venture. Furthermore, BMS would be required to pay a substantial penalty to Gilead, in the amount of three years of additional royalty payments. This economic disincentive ensured Gilead that BMS would not allow its EFV to be used for any competing product. For its part, BMS benefited and profited from this arrangement by enjoying supra-competitive prices for its EFV that it otherwise would not be able to enjoy in a competitive market. A similar termination penalty was agreed-to in the event Gilead sought to back-out of Defendants’ illicit arrangement and create competing products.
48. Essentially, this agreement allowed for known delay in generic competition, an unfair extension of time without competition that mimics a no-AG agreement in a manipulated market. The “no generics” restraint in Defendants’ agreement ensured that pricing remained artificially inflated for Atripla and its standalone components and was designed to reinforce the exclusionary effects of Gilead’s patent settlements delaying generic entry of TDF and TDF/FTC.
49. Gilead’s and BMS’s agreement resulted in years of supra-competitive pricing for
TDF-Based FDC Atripla as well as its standalone components and further diminished competitive pressures for either to bring innovative or rival products to the market.
50. Further, Defendants’ unfair and anti-competitive agreement prevented the expected drastic cuts in Atripla pricing as patents for its sub-components expired in 2018.11
c. In the Face of Imminent Generic Competition, Gilead Employed Unfair and Deceptive Sales and Marketing Schemes to Shift Market Share for its HIV Medications
51. With the anti-competitive delays achieved through its patent settlements, on the one hand, and the collusive product development scheme with BMS on the other, Gilead had
11 A. Hill & A. Pozniak, How can we achieve universal access to low-cost treatment for HIV?, J. VIRUS ERAD. 2016 Oct.; 2(4): 193-197, (Oct. 5, 2016), available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5075345/.
16 unlawfully protected its profits and insulated itself from competition on two fronts. All that remained was to ensure that Gilead maintained its premiere position as the biggest, and most profitable, player in the HIV product space.
52. Gilead accomplished its illicit goal through unfair, deceptive, and anticompetitive marketing schemes that wrongfully suppressed competition, deceived patients and payors, and artificially inflated the prices for HIV Medications.
53. Rather than allowing the free market to compete to produce better products and investing in innovation, Gilead schemed to effectively delay and stifle generic competition for its
TDF-Based HIV Medications, allowing it to purposefully delay introduction of TAF-Based HIV
Medications for over a decade to maximize its profits.
54. Gilead withheld safer and more effective TAF products in reserve for years to maximize profits and earn as much revenue as possible for its TDF-Based HIV franchise. After developing new and improved TAF products, Gilead deliberately chose not to market them so that it could continue to sell its inferior TDF products at supra-competitive prices. This activity, coupled with the delays provided by Gilead’s unfair and anti-competitive agreements with Teva and BMS, afforded Gilead the time it needed to fraudulently switch prescriptions from TDF
(Viread) to TDF-Based FDCs (Truvada and Atripla), and when those faced inevitable generic competition, to TAF-Based products.
55. Another step, as alluded to above, Gilead knew generic competition was on the horizon for TDF-Based products. To ensure it maintained its monopolistic position, Gilead engaged in unfair, deceptive and fraudulent marketing tactics in a relentless effort to cannibalize the sales of its own HIV Medications with sales of others. For instance, Gilead implemented aggressive, misleading marketing and sales campaigns to dupe prescriptions for TDF-Based HIV
17 Medications into being switched for higher-priced and patented protected TAF-Based HIV
Medications.
56. Gilead’s unlawful sales propaganda concocted to reinforce Defendants’ unlawful conduct were aimed at inducing TAF-Based (as opposed to TDF-Based) prescriptions and were specifically and unconscionably targeted to Medicaid prescribing HCPs and participants, as well as reimbursors, directly impacting (and increasing) reimbursements made by government payors, like the State.
57. Gilead continued apace with its fraudulent interlocking schemes after entering into the aforementioned unfair and anti-competitive patent settlement agreements and collusive collaborations with potential competitors and co-conspirators. To thwart generic competition for
Viread, Truvada and Atripla, Gilead embarked on a deceptive product-hopping scheme: it finally decided to dust TAF off from its development shelves. Gilead had been holding TAF (another pro- drug of tenofovir) in reserve for over a decade, despite early 2000 clinical trials showing promising results and a safer and more effective profile when compared to TDF-Based HIV Medications.
Gilead’s 2016 timing and decision to roll-out TAF were shamefully strategic and profit-driven –
Gilead wanted to move market share and prescriptions from its TDF-Based franchise to TAF-
Based products, like Descovy for PrEP, in anticipation of Teva’s agreed-to generic Viread launch date in 2017 and subsequent generic TDF entrants.
58. Gilead’s sales force engaged in elaborate and fraudulent product-hopping marketing schemes designed to suppress competition and maximize combined profits for its HIV
Medications. Gilead’s three-step plan of impairing generic entry, bottling up competition through collusive joint venture arrangements, and then fraudulently and misleadingly encouraging HCPs
18 to switch patients to Gilead products still covered by patents (and thus higher priced), thereby directly harmed the State.
59. Gilead employed sales representatives to carry out its deceptive product-hopping scheme to fraudulently switch prescriptions for PrEP from TDF-Based Truvada to more-expensive
TAF-Based Descovy.12 Gilead’s tiered plan of first delaying and restraining potential competitors and then once faced with imminent competition, fraudulently and improperly encouraging HCPs to switch patients to higher priced Gilead drugs, has resulted in excessively over-priced HIV
Medications for years and directly harmed the State. It is unjustifiable for Gilead to engage in such fraudulent conduct, rendering HIV Medications and PrEP medications unaffordable and inaccessible for many.
60. Gilead’s deceptive marketing campaign to convert prescriptions was coincidentally launched around the same time the federal government filed suit against Gilead alleging Truvada deliberately induced infringement of tax-payer funded clinical trials demonstrating effectiveness of PrEP and CDC-owned patents covering Truvada for PrEP.13
61. The consequences of Defendants’ unlawful and deceitful actions resulting in dramatically over-priced HIV Medications were, and continue to be, overly burdensome to governmental payors, like the State, and detrimental to public health and New Mexico participants.
Most devastating, the high-cost of these life-saving medications and unaffordability presents a barrier for many to gaining access to treatment. For example, it is estimated that 1.2 million persons
12 As noted in Gilead’s SEC filings, its marketing scheme is and continues to be effective: “We expect a decline in our sales of Truvada in the United States as patients switch to Descovy for PrEP from Truvada for PrEP and the expected generic entry of generic versions in late 2020.” See Gilead Sciences, Inc. SEC Form 10-K 2020, available at: https://www.sec.gov/ix?doc=/Archives/edgar/data/882095/000088209520000006/a2019form10-k.htm. 13 The United States of America v. Gilead Sciences, Inc., et al., Case No. 1:19-cv-02103 (D. Del.) (complaint alleging that scientists at the Centers for Disease Control and Prevention discovered a way to prevent HIV infection after two decades of research, confirming the regime is effective at preventing HIV in at-risk populations when used properly).
19 in the United States are diagnosed with HIV/AIDS, yet only 200,000 persons currently take PrEP medications, which could effectively reduce the rate of infection by 90%.
V. FACTUAL ALLEGATIONS
a. Background
i. State Payments Under Medicaid Program
62. The New Mexico Medicaid program covers prescription medications. Most prescription medications, including the HIV Medications relevant here, are dispensed to Medicaid recipients by pharmacies pursuant to a prescription written by a physician or other licensed HCPs authorized to prescribe medications in the State. Pharmacies submit claims to Medicaid and are reimbursed for the prescription medications according to a formula set by law.
63. Before submitting claims for payment to the State’s Medicaid program, whether in paper or electronic form, providers, including physicians and pharmacies, are required to affirmatively certify, as a condition of payment of the claims submitted for reimbursement by
Medicaid, compliance with applicable laws and regulations. The New Mexico Provider
Participation Agreement, which is governed by the laws of the State of New Mexico, clearly states that a “Provider [s]hall . . . [a]bide by all federal, state, and local laws, rules, and regulations.”14
More specifically, the Agreement requires a Provider to provide information regarding NM FCA, establish written policies for “preventing and detecting fraud, waste and abuse” in health care programs and further imposes fines and/or civil monetary penalties under NM MFA if a Provider
“obtains an excess payment or benefit willfully, by means of a false statement, representation, concealment of any material fact, or other fraudulent scheme or devise with intent to defraud.”15
14 Human Services Department, State of New Mexico Medical Assistance Division Provider Participation Agreement, MAD 335 (rev. May 2015), at Section 1.1. 15 Id. at Sections 8.1, 9.1. See also, NMSA 1978, Sections 27-14-1 to -15 and NMSA 1978, Sections 30-44-1 to -8.
20 64. In addition to reimbursement for HIV medications under the State’s Medicaid
Program, the New Mexico Department of Health operates an HIV/AIDS Services, Care &
Treatment program designed to “support primary medical care and essential support services to persons living with HIV/AIDS.”16 The program is co-funded by the Federal Ryan White
HIV/AIDS17 Program and State General Funds.18
65. A key operation of the program is the New Mexico AIDS Drug Assistance Program
(“NM ADAP”), which strives to provide “stable and accessible treatment to extend life and improve health for qualified individuals with HIV disease; to promote access to HIV treatment and care;. . .[and] ensure that persons living with HIV/AIDS in New Mexico. . .have access to HIV care, treatment, and medications.”19 The NM ADAP has a medical advisory body of infectious disease and other HIV specialty physicians and program staff that meet at least annually to review the NM ADAP formulary and make recommendations for improvements in the medical aspects of the program. Effective July of 2018, the NM ADAP adopted an enhanced formulary to improve medication access, including coverage for HIV Medications relevant to the instant Complaint.20
At all relevant times hereto, but for Defendants’ anticompetitive and deceptive conduct, the NM
ADAP could have implemented formulary management or similar tools to restrict or control the use of Defendants’ HIV Medications, including but not limited to recommendations that generic
16 New Mexico Dept. of Health, HIV/AIDS Services, Care & Treatment, last accessed July 23, 2020 at: https://www.nmhealth.org/about/phd/idb/hats/. 17 Ryan White HIV/AIDS Treatment Extension Act of 2009 (Public Law 111-87). 18New Mexico Dept. of Health, HIV/AIDS Services, Care & Treatment, last accessed July 23, 2020 at: https://www.nmhealth.org/about/phd/idb/hats/. 19 Id. 20New Mexico Dept. of Health, New Mexico AIDS Drug Assistance Program (ADAP) Enhanced Formulary to Improve Medication Access, (Eff. July 1, 2018), available at: https://www.nmhealth.org/publication/view/general/4529/
21 or comparable standalones and FDC medications be used and covered in lieu of Defendants’ HIV
Medications.
66. Upon information and belief, NM ADAP funds and State Medicaid reimbursements have been used for prescriptions for HIV Medications subject to unlawful and anti-competitive settlement agreements, collusive collaboration agreements delaying and impairing generic competition, unfair and deceptive business practices, and/or induced through fraudulent marketing schemes as alleged herein and in violation of NM laws and regulations.
67. Compliance with these State statutes, regulations, or requirements is a condition of payment under the Medicaid programs of the State, and the State will not pay for claims tainted by violations of same.
68. Medicaid reimbursement claims made in violation of the State’s statutes, regulations and requirements are material to the State’s decision to pay for those claims.
69. By knowingly entering unlawful and unfair settlement agreements in violation of
NM Anti-Trust Act that significantly raised and maintained pricing contrary to market dynamics, and engaging in deceitful and fraudulent marketing in violation of NM UPA relative to prescriptions for HIV Medications for which reimbursement is/was sought from the State’s
Medicaid Program, and causing the presentation and/or submission of reimbursement claims that billed the State’s Medicaid Program as if in compliance with the State’s laws, Defendants caused false or fraudulent reimbursement claims to be submitted to the State’s Medicaid Program and thereby violated the State’s laws as alleged herein. Gilead’s wrongful actions tainted the medical and scientific discourse by encouraging the prescription of HIV Medications; reimbursement submissions by private pharmacy benefits managers or third-party payors on behalf of their
22 insureds or members who were prescribed HIV Medications; and direct payment or reimbursement for HIV Medications by the State.
70. As a result of Gilead’s anticompetitive and deceptive conduct, the State reimbursed or paid for thousands of HIV Medication prescriptions. For example, the State reimbursed for the following approximate number of Viread, Truvada, Atripla, and Descvoy prescriptions (not counting Vemlidy prescriptions) from 2011 to 2019:
2011 2012 2013 2014 2015 2016 2017 2018 2019
Viread 167 211 109 179 206 192 158 46 25
Truvada 782 962 924 2,194 3,130 3,046 2,281 2,025 2,318
Atripla 413 579 461 1,233 1,276 773 627 184 96
Descovy ------679 2,008 2,586 2,160
71. For the 2011 to 2019 time period, the State reimbursed at least tens of millions of dollars collectively for the HIV Medications.
72. Yet, at all relevant times, absent Gilead’s wrongful conduct, less expensive generic versions of, or comparable treatments to, the HIV Medications would have been available, and would have been reimbursed for by the State instead of the more expensive HIV Medications.
73. The State’s Medicaid Program paid these reimbursement claims unaware that they were the result of unfair and deceptive business practices, fraudulent marketing, anti-competitive settlements and otherwise collusive agreements. If the State Medicaid Program had known that the
23 claims resulted from conduct that violated State statutes, regulations, or requirements, it would not have paid for such claims.
ii. Drug Approval Background
74. Branded pharmaceutical drugs are submitted to the FDA through a New Drug
Application (“NDA”) pursuant to 21 U.S.C. §§ 355, et seq. The FDA typically approves the NDA upon a showing – through several randomized controlled clinical trials – that the drug is safe and effective for the proposed indication.
75. Generic drugs are prescription drugs that contain the same API as their branded counterparts. In contrast to the extensive clinical trial requirements for branded drugs, generic drug approval is generally subject to the Hatch-Waxman Act of 1984, 21 U.S.C. §§ 355(j), et seq., which was enacted by Congress to streamline generic drug approval and encourage generic drug competition.
76. Generic drug applications are referred to as Abbreviated New Drug Applications
(“ANDAs”), and are approved by the FDA upon a showing that the ANDA product is bioequivalent (i.e., no substantial differences) and bioequivalent to the FDA-approved reference listed drug (“RLD”), which usually refers to an NDA drug.
77. Given the paramount importance to public health, drugs that treat HIV/AIDS are fast-tracked by the FDA and reviewed under an accelerated and priority review. Gilead’s NDAs for its HIV Medications, as well as the majority of ANDAs submitted to market generic versions of same, were reviewed under 21 C.F.R. §§ 314.500 et seq., under expedited review provisions of the President’s Emergency Plan for AIDS Relief.
24 78. Upon granting final approval for a generic drug, the FDA will typically state the generic drug is “therapeutically equivalent” to the branded drug. The FDA codes generic drugs as
“A/B rated” to the RLD branded drug.
79. Patients and their prescribing physicians can thus expect to substitute “A/B rated” generic drugs with the full expectation that the generic drug will carry the same safety and efficacy profile as the branded RLD. Generic drug approval is streamlined because generic drugs are typically sold at much lower prices than their branded equivalents.
80. The branded pharmaceutical company may also elect to license what is commonly referred to as an “Authorized Generic” version of its branded drug. “Authorized Generic” drugs are launched by brand manufacturers as a means to retain revenue upon generic entry, and typically involve the brand manufacturer licensing its NDA formulation (as well as any intellectual property) to an authorized generic partner. The licensee partner then sells the authorized generic as a generic version of the brand drug (including during any generic exclusivity period, infra), and remits a royalty to the brand manufacturer. For major drugs, the licensing of an authorized generic has become commonplace.
81. Upon the market entry of a generic drug, substitution of the brand drug for the generic (“generic substitution” or “generic erosion”) occurs very swiftly. Typically, the brand drug
(which holds 100% market share as of generic entry) will lose as much as 70% within weeks of generic entry. By one year, the process of generic erosion usually results in the brand drug holding
10% or less market share, with generic equivalents capturing the remaining 90% or greater.
82. Price erosion occurs swiftly as well. As more generics enter the market, a price collapse for both the branded product, and the generic products occurs, with generic price erosion
25 reaching approximately 90%. With multiple generics on the market, generic drugs prices may fall to as low as 10% of pre-generic entry brand price.
83. There are several forces that drive generic substitution. First, most states have generic substitution laws that mandate and require pharmacies to substitute therapeutically equivalent generics absent exceptional circumstances. These statutes are enacted as consumer protection laws, and are designed to ensure that payors benefit from the availability of less costly medications.
84. Second, managed care organizations (“MCOs”) including health insurance companies and pharmacy benefits managers (“PBMs”) and government payors, like the State – as entities that reimburse a large portion of prescription drug costs – encourage generic substitution by their participants and HCPs through the use of prescription drug formularies. MCOs implement various measures, including drug formularies with structures providing for different tiers of co- payments to control ever-increasing prescription drug costs and to encourage participants to utilize cheaper drugs. As co-payors for prescription drugs, it is in both the State’s and participants’ interest that less expensive generic equivalents or interchangeable standalone substitutes be utilized when available. MCOs routinely place generic drugs on the lowest co-payment tier of the formulary, while branded medications are found on higher co-payment tiers. Moreover, many MCOs consider
HIV medications to be specialty products, with their own higher co-payment tiers when compared to other maintenance medications, making generic availability all the more important.
iii. Hatch-Waxman Background
85. The Drug Price Competition and Patent Term Restoration Act of 1984 – more commonly referred to as the “Hatch-Waxman Act” – is codified at 21 U.S.C. § 355(j).
26 86. The stated purpose of Hatch-Waxman is to strike a balance between rewarding genuine innovation and drug discovery by affording longer periods of brand drug marketing exclusivity while at the same time encouraging generic patent challenge and streamlining generic drug competition so that consumers gain the benefit of generic drugs at lower prices as quickly as possible.
87. Brand drug companies submitting an NDA are required to demonstrate clinical safety and efficacy through well-designed clinical trials. 21 U.S.C. §§ 355 et seq.
88. By contrast, generic drug companies submit an ANDA. Instead of demonstrating clinical safety and efficacy, generic drug companies need only demonstrate bioequivalence to the brand or RLD. Bioequivalence is the “absence of significant difference” in the pharmacokinetic profiles of two pharmaceutical products. 21 C.F.R. § 320.1(e).
89. The bioequivalence basis for ANDA approval is premised on the generally accepted proposition that equivalence of pharmacokinetic profiles of two drug products is accepted as evidence of therapeutic equivalence. In other words, if (1) the RLD is proven to be safe and effective for the approved indication through well-designed clinical studies accepted by the FDA, and (2) the generic company has shown that its ANDA product is bioequivalent to the RLD, then
(3) the generic ANDA product must be safe and effective for the same approved indication as the
RLD.
90. To encourage generic companies to challenge weak or improperly listed patents, the Hatch-Waxman Act sets up an artificial act of infringement to allow patent litigation to commence as soon as possible. When a generic company files an ANDA, it is required to submit to the FDA a certification regarding the patent status of the RLD. 21 U.S.C. § 355(j)(2)(A)(vii). If the ANDA applicant seeks to market its drug prior to expiration of a listed patent, it must submit
27 a certification asserting that “such patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted.” § 355(j)(2)(A)(vii)(IV). This is commonly referred to as a “Paragraph IV certification.”
91. A generic company must then serve upon the patent owner and NDA holder a notice letter regarding its Paragraph IV certification. The Hatch-Waxman Act then provides the patent/NDA holder forty-five (45) days in which to file a patent infringement suit. If such a suit is filed within this timeframe, Hatch-Waxman provides for a thirty (30) month stay on FDA approval of the ANDA. 21 U.S.C. § 355(j)(5)(B)(iii).
92. After expiration of the 30 month stay (unless a court has prior to this entered judgment that the patent is invalid, unenforceable, or not infringed), FDA may approve the ANDA, at which point the generic company may commercially market its ANDA product either “at risk”
(if there has not been a final resolution of the patent litigation) or without risk (by waiting until conclusion of the patent litigation). 21 U.S.C. § 355(j)(5)(B)(iii).
93. As an inducement to challenge weak or improperly listed patents, Hatch-Waxman rewards the first generic company to file a substantially complete ANDA containing a Paragraph
IV certification with a 180-day period of marketing exclusivity (“180-day exclusivity”). 21 U.S.C.
§ 355(j)(5)(B)(iv). The 180-day exclusivity period is triggered upon either a first commercial marketing of the drug (including of the RLD) by the 180-day exclusivity holder or the date on which a court has entered a judgment finding that the patent subject to the Paragraph IV certification is invalid, unenforceable, or not infringed.
94. The first generic company to file a substantially complete ANDA that is otherwise entitled to 180-day exclusivity period can forfeit it. When a second-filer gets a final court decision that the brand manufacturer’s patents are invalid or not infringed, the first-filer forfeits its ANDA
28 exclusivity if it does not enter the market within 75 days of the court decision. 21 U.S.C. § 505
(j)(5)(D)(i)(I)(bb). Similarly, a first-filer may forfeit its 180-day exclusivity period if it fails to market its product within 75 days of receiving FDA approval or fails to market its product within
30 months after first submission of its ANDA. 21 U.S.C. § 505(j)(5)(D)(i)(I)(aa). Forfeiture occurs on the later date of the aforementioned.
95. The Hatch-Waxman Amendments also provide periods of exclusivity that benefit branded pharmaceutical manufacturers, one of which is a 5-year new chemical entity (“NCE”) exclusivity. The NCE exclusivity provision states that, where the FDA has approved a new chemical entity (a drug substance that the FDA had not previously approved), no other manufacturer may seek FDA approval for a product containing that drug substance until five years after the FDA first approved it. 21 U.S.C. §§ 355 (j)(5)(F)(ii) & (c)(3)(E)(ii).
96. Under the FDA’s implementing regulations, if a drug product contains a new chemical entity, the FDA is precluded from accepting any ANDA or application under 21 U.S.C.
§ 355(b)(2), for a drug product that contains the same chemical entity until the 5-year NCE exclusivity period has expired. 21 C.F.R. § 314.108(b)(2). Under FDA policy, an existing NCE exclusivity for a new standalone drug will also apply to later approved FDCs containing that standalone drug.
97. An NCE exclusivity has a profound impact on the timing of generic approvals, generally precluding an applicant from even filing an ANDA for the entire 5-year NCE exclusivity life span. As an exception, if the ANDA contains a Paragraph IV certification, it may be filed after the first four years of the 5-year exclusivity. Any 30-month stay of FDA approval to such a
Paragraph IV certification would not commence until the 5-year NCE exclusivity expires. Thus,
29 obtaining NCE exclusivity over a patent-protected drug may prevent the FDA from approving a generic ANDA for as long as 7.5 years from the start the of NCE exclusivity.
b. Defendants’ Anti-Competitive Patent Infringement Settlement Agreements with Most Favored Entry Provisions Delayed and Suppressed Generic Competition
i. Viread (TDF)
1. Viread was a Significant Source of Gilead Revenue
98. Viread is an NRTI indicated for the treatment of HIV-1 infection in adults and pediatric patients two years of age or older. Viread is also indicated for the treatment of chronic
Hepatitis B in adults and patients 12 years of age or older. The FDA approved Viread in October of 2001.
99. Viread (TDF) is a prodrug formulation of tenofovir. Prodrugs are pharmacologically inactive compounds that, once administered, undergo a conversion by the body’s metabolic processes to become an active pharmacological agent.
100. Tenofovir is one of the most common NRTI drugs used in the U.S. for antiretroviral therapy. Gilead did not invent tenofovir. Tenofovir was first invented and patented in the 1980’s by Czech scientists.21 The patents covering the API for tenofovir have long since expired.
101. Gilead created Viread as a prodrug formulation of tenofovir that could be absorbed through the patient’s intestine. However, Gilead was never issued a patent based on the parent molecule tenofovir. Instead, Gilead’s patents pertain to converting tenofovir into the prodrug TDF that could be absorbed through the patient’s intestine. The process for converting such compounds
21 Gilead entered into agreements with the Institute of Organic Chemistry and Biochemistry of the Academy of Sciences of the Czech Republic and Rega Stichting (IOCB/REGA), the institutions who discovered the nucleotide compound tenofovir, for an exclusive right to manufacture, use and sell tenofovir subject to undisclosed “minimum royalty payments.” The agreement was amended in 2000 for a reduced royalty payment in exchange for an up-front payment from Gilead. See Gilead Sciences, Inc. SEC Form 10-K 2006, available at: https://www.sec.gov/Archives/edgar/data/882095/000119312507041203/d10k.htm.
30 into prodrugs would have been obvious to those reasonably trained in the field for years. Prodrugs were not new or novel at the time Gilead obtained its patents.
102. Viread has been an enormously successful drug for Gilead. After launching in late
2001,22 Viread quickly became a blockbuster drug. In 2003, Gilead earned $566.5 million in sales and royalty revenues from Viread. In 2004, that number jumped to $782.9 million.23 After many years of stable sales of approximately $650-$950 million per year, Viread crossed the $1 billion plateau in 2014. Viread was a $1 billion per year drug to Gilead thereafter through 2017, despite the fact that Teva launched generic Viread on December 15, 2017.
2. Gilead’s Viread Hatch-Waxman Exclusivities and Weak, Evergreened and Ancillary Patent Portfolio
103. Gilead’s Viread patent portfolio consists of U.S. Patent Nos. 5,922,695 (“the ‘695
Patent”); 5,977,089 (“the ‘089 Patent”); 6,043,230 (“the ‘230 Patent”). These three (3) patents all derive from the same patent application and cover Gilead’s tenofovir disoproxil prodrug. The
5,935,946 (“the ‘946 Patent”) claims the fumarate salt of tenofovir disoproxil (collectively the four patents are referred to herein as “the TDF patents”). Gilead obtained patent and pediatric exclusivity up to and including January 25, 2018 on the four Viread TDF Patents listed in the FDA
Orange Book.
104. Of significance, Gilead did not invent tenofovir or the majority of patents allegedly protecting Viread. Instead of innovating itself, Gilead heavily relies on licenses to intellectual property from other’s prior inventions and research. TDF was invented by Czech institutions,
22 FDA approved Gilead’s NDA 21356 for Viread (300mg) on October 26, 2001. Gilead submitted limited clinical data supporting approval and had not completed Phase III clinical studies at the time. 23 In 2006 SEC filing, Gilead notes “[s]ubstantially all of our revenues are derived from sales of a limited number of products. If we are unable to maintain or continue increasing sales of our HIV products, our results of operations may be adversely affected…We are currently dependent on sales of our HIV products, especially Truvada and Viread, to support our existing operations.” https://www.sec.gov/Archives/edgar/data/882095/000119312507041203/d10k.htm
31 whereby Gilead obtained an exclusive license to manufacture and use same. In 1991 and 1992,
Gilead entered into agreement with the Czech institutions for the exclusive right to manufacture, use and sell Viread in exchange for payment of a percentage of net revenues received “subject to minimum royalty payments.”24 In 2000, in anticipation of Viread’s launch, the agreements were amended to provide for a reduced royalty rate on future sales of products incorporating tenofovir in return for a modest upfront payment from Gilead.
105. Patents are intended to encourage innovation by offering a monopoly period for inventions that are novel, useful, and non-obvious. However, the reality is that a large number of issued patents should have been rejected. A 2003 report by the Federal Trade Commission (“FTC”) found that the average patent application gets approximately 15-20 hours of review time by the
U.S. Patent and Trademark Office’s (“PTO”) assigned examiner. Despite the PTO receiving hundreds of thousands of patent applications each year, approximately eighty-five percent (85%) of patent applications ultimately result in an issued patent.
106. Brand pharmaceutical companies seeking to take advantage of the PTO’s limited resources have increasingly applied a patent procurement strategy known as “evergreening.”
“Evergreened” patents are patents not on the API, but instead are non-API patents on some ancillary aspect of the drug, such as its delivery method or release mechanism. These
“evergreened” patents – if litigated to judgment – have a high rate of being found invalid or not infringed.
24 Gilead Sciences, Inc. 2005 Annual Report, SEC Form 10-K, available at: https://www.sec.gov/Archives/edgar/data/882095/000119312506045128/d10k.htm
32 107. Because the API tenofovir was off-patent, the Viread TDF Patent portfolio covers only Gilead’s prodrug formulation, tenofovir disoproxil and its fumarate salt. These ancillary patents were considered weak and likely to be invalidated.
108. The Viread NCE exclusivity expired on October 26, 2006, so any 30-month stay blocking FDA approval of competing generics could have expired as early as April 26, 2009.
Meaning if a generic manufacturer had brought a successful patent challenge (or launched “at risk”), it could have launched a generic version of TDF as early as 2009. Even in the best of circumstances for Gilead, the Orange Book listed patents for Viread expired on their own terms by January 2018.
3. Multiple Generic Challenges to Viread Patents
109. On or about July 1, 2009, Teva filed a substantially complete ANDA with the FDA to manufacture and sell a generic formulation of Viread 300mg tablets it had developed. The
300mg strength of Viread constitutes the lion’s share of all Viread sales.25
110. Teva’s ANDA included a Paragraph IV certification as to all four (4) TDF Patents, which as described supra is a declaration by the ANDA filer that it believes the patents covering the registered listed drug are either invalid or not infringed by the ANDA product. Upon service of its Paragraph IV certification, Gilead elected to initiate Hatch-Waxman patent litigation by filing a patent infringement lawsuit within forty-five (45) days. Gilead’s filing of the lawsuit triggered a stay preventing the FDA from approving Teva’s ANDA until the earlier of thirty (30) months has elapsed or the issuance of a “court decision” finding the patents at issue invalid or not infringed by the ANDA drug.
25 Aurobindo was the first to file ANDA for 150mg, 200mg and 250mg strengths. Aurobindo received FDA approval for its ANDA on January 18, 2018.
33 111. Teva’s 300mg ANDA, as the first-filed ANDA, entitled Teva to the lucrative 180- day exclusivity. The 180-day exclusivity is a statutory incentive set forth in the Hatch-Waxman generic drug approval provisions, 21 U.S.C. § 355(j), for generic pharmaceutical companies to challenge brand manufacturers’ patents. The first filer’s ANDA – once approved and if containing a Paragraph IV certification – entitles the first filer to 180 days of generic marketing exclusivity during which the FDA cannot approve other generic companies’ later-filed ANDAs. As frequently noted by generic pharmaceutical industry trade groups, the “vast majority” of generic drug profits occur during the 180-day exclusivity period.
112. As set forth in the Hatch-Waxman Act, the 180-day exclusivity commences upon a
“first commercial marketing” by the 180-day exclusivity holder (which applies to both ANDA and authorized generic launches) or upon a “court decision” finding the patents invalid, unenforceable, or not infringed.
113. Knowing its patents were weak and likely to be invalidated, Gilead filed baseless patent infringement litigation against nearly each and every single generic challenger of the TDF
Patents. And in turn, Gilead entered into settlement agreements with nearly each and every challenger before a final court decision rendering the TDF Patents invalid and/or not infringed was issued. Gilead’s goal was simple: to delay generic competition for its billion dollar a year blockbuster drug as long as possible.
114. Shortly after Gilead’s Viread TDF Patents expired in January 2018, at least eight
ANDAs for 300mg Viread were finally approved by the FDA, despite many earning tentative approval years earlier.26 Despite multiple generics entering the market, the pricing for Viread and
26 ANDA filers include Aurobindo Pharma Ltd., Casi Pharms Inc., Cipla Ltd., Hetero Labs Ltd. III, Macleods Pharms Ltd., Qilu Pharmaceuticals, Strides Pharma, and Teva Pharmaceuticals USA.
34 its generics remains artificially high as a result of Defendants’ anti-competitive settlement agreements, which provided Teva with a date certain for an exclusive launch that bottle-necked competition and deterred other generics from seeking earlier entry.
4. Gilead and Teva Settled the Viread Patent Infringement Litigation the Day Before Trial on Terms Outwardly and Highly Favorable to Gilead
115. As a result of Teva’s ANDA containing a Paragraph IV certification, Gilead commenced patent litigation against Teva with the lead case styled as Gilead Sciences, Inc. v. Teva
Pharmaceuticals USA Inc., No. 1:10cv1796 (S.D.N.Y. filed March 5, 2010).
116. The issue presented was a relatively simple obviousness patent analysis. As characterized by Teva in its pretrial memorandum:
This is a straightforward obviousness case. Three of the patents in suit are directed to a prodrug of the known drug tenofovir (PMPA). The prior art made clear that PMPA is a highly potent anti-HIV drug with poor oral bioavailability. The prior art also disclosed improving PMPA’s bioavailability by making a prodrug of it. The particular prodrug disclosed in the prior art, called bis(POM)PMPA, was known to exhibit a manageable but undesirable side effect, whose cause was well understood.
The person of ordinary skill in the art (“POSA”) would therefore have sought an alternative prodrug form that would not exhibit that side effect, and would have selected the carbonate prodrug (bis(POC)PMPA) claimed in three of the patents in suit.
The fourth patent relates to a fumarate salt of the bis(POC)PMPA prodrug claimed in the other three patents. As in Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1362 (Fed. Cir. 2007), the prior art disclosed salts of bis(POC)PMPA and identified a motivation to make others, including the fumarate salt. Just as in Pfizer v. Apotex, the selection of the fumarate salt from the limited number of available pharmaceutically acceptable salts would have been routine.
Gilead v. Teva, No. 1:10cv1796 (Dkt. No. 112, at 1 (filed Jan. 28, 2013)) (emphasis added).
35 117. The court had set a bench trial for February 20, 2013. Teva had agreed not to launch at risk until June 1, 2013 at the latest. Accordingly, Teva could have launched its generic at any point the court found Gilead’s patents invalid, not infringed, or unenforceable, or on June 1, 2013 if the court had not issued its judgment.
118. Although an outcome in Teva’s favor was not inevitable, such a result would have been immediately devastating to Gilead, costing the company billions of dollars of Viread revenues (as well as likely pricing pressure and discounts for its TDF-Based FDC medications) over the next several years. And Teva had the litigation advantage given the weakness of Gilead’s patents.
119. The day before trial, February 19, 2013, the parties notified the court they had reached a settlement in principle. Gilead’s announcement – issued the same day – stated that the parties had resolved Gilead’s claims as to the TDF Patents for not only Viread, but also for Teva’s generic challenges to Gilead’s Truvada and Atripla products as discussed herein. In other words,
Gilead’s settlement with Teva extended far beyond the specific TDF Patent dispute then between, successfully delaying, impairing and/or suppressing potential generic competition for three of its blockbuster drugs in one fell swoop.
120. Under the terms of the settlement, Teva would be allowed to launch its generic
Viread on December 15, 2017, more than 4.5 years later and only one and a half months prior to
Viread’s Orange Book listed patent expiration. Gilead thus had bought itself another 4.5 years of exclusivity and supra-competitive pricing and profits for Viread.
5. The Parties are Forced to Disclose to the Court the Existence of a “No Authorized Generic” Agreement After the FTC Objects to the Settlement Based on Antitrust Grounds
36 121. Pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“the Medicare Modernization Act”), the parties to such patent litigation settlements are required to disclosed the terms of the settlements to the FTC and the U.S. Department of Justice
(“US DOJ”), who are afforded forty-five (45) days to review the terms of such settlements.
122. On or about June 28, 2013, the FTC sent Gilead and Teva a letter objecting to and/or expressing concerns relating to the terms of the settlement agreement, which prompted the parties to request that the court extend the automatic dismissal deadline for the case. See Gilead v. Teva,
No. 1:10cv1796 (Dkt. No. 132 (filed June 28, 2013)).
123. As a result, the Court ordered a telephonic status conference for August 29, 2013.
At the status conference, which was transcribed but originally redacted in certain relevant places, the parties described the FTC’s objection to the court in response to the court’s question about the
“offending provision” of the agreement:
THE COURT: OK. That sounds pretty good. Maybe the upside is I don’t have to do a darn thing. All right. Do you mind my asking what is the offending provision?
[GILEAD COUNSEL OF RECORD]: Not at all, your Honor. Just a little bit of background, if I may. The Federal Trade Commission has historically taken issue with settlements between brand companies and generics when those settlements have what are called reverse payments in them where the brand name company pays a sum of money to the generic company, allegedly in exchange for the generic company’s agreement to stay off the market longer than the generic company might have otherwise done so.
Not too long ago, as your Honor may be aware, the Supreme Court addressed such provisions in a very split court five-three and they found that the such provisions could potentially violate antitrust laws that had to be evaluated under the rule of reason. That has emboldened the FTC and has breathed new life into its enforcement efforts.
So now they have reached out in our agreement, and, as I understand it, in some others, to challenge the agreements even though there is no reverse payment provision. No money was to change hands under our agreement. There was, however, a provision in which Gilead agreed that if it were to independently and unilaterally determine that it would launch a
37 generic, an authorized generic of its own, it would do so but only if it gave Teva six weeks head start on the Gilead authorized generic. This so-called, in the FTC’s view, “no authorized generic clause,” they have now tried to analogize, in our case and others, to a reverse payment. That song, quite frankly, has never had too many folks singing in its choir.
Gilead v. Teva, No. 1:10cv1796 (Dkt. No. 134, at 4:17-5:21 (Aug. 29, 2013)) (emphasis added).
124. Since the August 29, 2013 hearing, numerous courts have agreed with the FTC and found that “no authorized generic” clauses can and indeed do constitute anticompetitive reverse payments under many circumstances.
125. Gilead’s counsel continued by assuring the Court that the parties had simply removed the “no authorized generic” agreement from the settlement:
[GILEAD COUNSEL OF RECORD]: … as of late yesterday afternoon, the parties have determined that they will drop the “offending” provision from the agreement. So we simply now have to prepare and execute a simple amendment to the underlying settlement agreement, send that down to the Federal Trade Commission, and then your Honor will be able to dismiss the case.
…
[GILEAD COUNSEL OF RECORD]: … Fortunately, for all concerned, we have resolved it, but we have eliminated the so-called “no AG clause” from the agreement so it is truly inconceivable to us that the Federal Trade Commission can have any other complaints ….”
Id. at 3:23-4:3 & 6:5-9.
126. It is noteworthy that Gilead’s counsel simply says the “no AG” language is removed from the agreement; at no point does Gilead’s counsel represent that Gilead and Teva no longer have an agreement preventing Gilead from launching an AG for 6 weeks, solidifying an exclusive and favorable launch for Teva or that any consideration was given for the change in the lucrative terms of the agreement.
127. The above-reproduced language disclosing the existence of a no AG agreement was and is redacted in several versions of this transcript.
38 6. Teva Would Not Have Agreed to Simply Give Up Millions of Dollars of Revenue, As Was Represented to the Court
128. As counsel for Gilead and Teva represented to the court, the no AG clause was simply dropped from the patent settlement agreement and no other changes were made to the settlement agreement including specifically to the negotiated generic entry date of December 15,
2017. That is, Gilead and Teva simply dropped the no AG clause from the formal patent settlement agreement for optics, but continued to honor the clause in purpose and effect – evidenced by, among other things, Gilead’s never launching an AG version of Viread to compete with Teva’s generic.
129. The economics of the generic exclusivity period for a blockbuster drug like Viread and of competing authorized generics make this purported scenario highly implausible. According to the FTC, in a scenario without a competing authorized generic, the first filer generic immediately gains about 30% of the market within days of going generic, and by the end of the first month has attained nearly 55% of the total molecule market. The greater the market share the first filer is able to secure also results in long term advantages, as the first filer usually retains the majority of its exclusive market share even with the presence multiple generics. The following is an FTC-prepared chart showing molecule market shares without an authorized generic over the course of the 180-day exclusivity period.
39 130. Applying these observed market dynamics to this case, Viread earned Gilead annual revenues of approximately $1 billion before going generic (or $125 million during the 6- week exclusivity period). Teva, as the first filer generic (which, upon information and belief, launched its ANDA with an approximate 10% discount to the brand), has claimed more than half of that revenue during the exclusivity period and will retain a significantly higher portion of the overall market even beyond the exclusivity period. In such a situation, Teva can expect revenues over $50 million during the 6-week exclusivity period without a competing AG.
131. A much less profitable scenario unfolds when the brand company – Gilead – launches a competing authorized generic. According to the FTC, in such an event, Teva obtains only approximately 30% of the market during 6-week exclusivity period. And Teva would not reach a much higher market share thereafter.
132. Greater price erosion also cuts into the first filer’s revenues. In the above $1 billion drug example, instead of launching at a 10% discount to the brand and making over $50 million
40 in revenues during the 6-week exclusivity period, the first filer must launch at a greater discount to compete with the authorized generic. Assuming Teva launches at a 25% discount to the brand and maintains an average 30% market share during the 6-week exclusivity period, Teva only earns revenues of approximately $28 million during the 6-week exclusivity period. Gilead’s decision to launch an AG has thus cost Teva over $20 million in revenues during the 6-week exclusivity period, and additional hundreds of millions of dollars are lost beyond the exclusivity period as
Teva’s market share does not ever recover.
133. It is inconceivable that Teva not only provided Gilead close to its best day in court with regards to the negotiated generic entry date (only 1 month prior to patent expiry), and also agreed to simply drop the most important provision of the settlement agreement – worth millions of dollars to Teva – without any other change(s) to the agreement or consideration provided.
134. The No AG agreement is further supported by Teva’s press release announcing its
“exclusive” generic Viread launch.27 Although the “no AG agreement” language was excised from the settlement agreement itself, the existence of such an agreement between Gilead and Teva continued and was indeed honored by Gilead when it did not launch a competing AG in December
2017.
135. Gilead’s decision not to launch a competing AG defies rational business logic, as such a move could have offset the expected generic erosion. Moreover, a “no AG agreement” runs contrary to Gilead’s decision to recognize such profits and launch AGs with respect to multiple
27 As noted by Teva Executive Vice President, Brendan O’Grady, “The launch of generic Viread is an important addition to [Teva’s] portfolio; but, more importantly, it brings an effective, affordable treatment option to these patients in an area that’s lacking.” See Teva Pharmaceutical Industries, Ltd., Teva Announces Exclusive Launch of Generic Viread® in the United States, (Dec. 15, 2017), available at: https://www.businesswire.com/news/home/20171215005157/en/Teva-Announces-Exclusive-Launch-Generic- Viread%C2%AE-United
41 other products in its portfolio, including its blockbuster hepatitis C drugs Harvoni and Epclusa, through its subsidiary Asegua Therapeutics.28 Yet, Gilead never launched a Viread AG.
136. The parties’ intentions for entering the settlement agreement were clear - in exchange for delayed generic entry, Teva would be granted exclusive entries into the market without competition from a Gilead AG.
137. Indeed, when Teva finally did launch its generic Truvada (and generic Atripla) equivalents, it quickly began to capture market share.
7. Defendants Improvised with Unfair and Anti-Competitive Most Favored Entry Provisions That Achieve the Same Objective
138. Facing FTC scrutiny and an investigation into potential anti-trust issues, the
Defendants removed the aggravating language from the Viread settlement agreement but conspired to make certain the agreements achieved the same objective - to delay generic entry in exchange for Teva’s guaranteed, truly exclusive generic entry.
139. To achieve this objective, Gilead included “most-favored entry” (“MFE”) provisions in its patent settlements with Teva and other generic manufacturers to maintain and manipulate control of the TDF market. More specifically, Gilead used MFE clauses to entice Teva to delay entry of its generic version of Viread into the market in return for assurances that no other generic manufacturer would enter the Viread / TDF market before Teva. Such agreements provided Gilead with a sneak-preview as to when generic entry would have an impact on pricing, supply and demand and allowed Gilead to place a thumb on the scale of competition in the TDF market. Having information as to the timing of generic TDF was also essential to Gilead’s multi- layered product-hopping schemes and compounded the anti-competitive effects of Defendants’
28 Gilead Sciences, Inc., 2019 Annual Report, SEC Form 10-K (Feb. 25, 2020), available at: https://www.sec.gov/ix?doc=/Archives/edgar/data/882095/000088209520000006/a2019form10-k.htm.
42 concerted plans to delay and suppress generic competition in the FDC TDF-Based HIV Medication market.
140. Agreements with MFE clauses primarily benefit first-filers. MFE clauses arise when the brand manufacturer and the first generic ANDA filer settle patent infringement litigation, with the generic manufacturer agreeing to delay entering the market until a certain specified date in the future. MFE clauses provide that if any subsequent generic ANDA filer (“second-filers”) succeed in entering the market, before the agreed upon date for the first-filer, the first-filer’s entrance will be accelerated and it may enter at the same time as second-filers. MFEs can delay generic entry by reducing a second-filer’s incentive to try to enter the market before the first-filer.
In other words, if second-filer(s) are aware that they will face immediate competition from a first- filer, that first-filer is guaranteed entry on same date as second-filer even if a second-filer is able to successfully prove patent invalidity or non-infringement, the second-filer is less likely to pursue costly patent infringement litigation against the brand – knowing its entry will not be exclusive – that it will face generic competition immediately from the first-filer pursuant to the MFE. This is largely because a second-filer entry into the market concurrently with a first-filer means reduced market share and lower pricing for both generics.
141. A similar but related MFE provision benefiting a first-filer provides that the brand manufacturer will not grant a license to any second-filer to enter the market until a defined period of time after the first-filer enters. For example, such MFE clauses may provide that a brand manufacturer will not grant a license to any second-filer(s) to enter the market until a number of days, weeks or months after the first-filer enters. Such MFE clauses, likewise, dramatically reduce a second-filer’s incentive to try and enter the market before the first-filer, because they ensure first- filer’s exclusive entry for a set period of time.
43 142. Absent brand manufacturer’s withholding of licensing under an MFE, a second- filer could use its challenge to the patents as leverage to negotiate from the brand manufacturer a license to enter the market before the first-filer. This is particularly salient where the first-filer has forfeited its 180-day exclusivity by failing to get tentative FDA approval within 30 months. 21
U.S.C. 355 § (j)(5)(D)(i)(I)(aa)(BB). The second-filer could thereby enjoy a substantial period of de facto exclusivity in the generic sector of the market. The MFE would eliminate that possibility by ensuring that the second-filer could not successfully negotiate for an earlier licensed entry date.
143. In short, the Hatch-Waxman Amendments leave open at least two pathways for second-filers to enter the market before a first-filer that has agreed to delay entry into the market.
The second-filer could win the patent litigation and trigger forfeiture of the first-filer’s statutory exclusivity when it fails to enter the market within 75 days of the court decision; and the second- filer could negotiate an earlier entry date from the brand manufacturer and enter the market if the first-filer has forfeited statutory exclusivity by having failed to get FDA approval within 30 months. MFEs can potentially close the two pathways to earlier generic entry that Congress left open. This is particularly disconcerting here, where legislative intent clearly calls for expedited review and approval of critical antiretroviral medications for the treatment of HIV and where challenging weak patents could bring such products to the market more quickly.
144. The anticompetitive effects of MFEs may be compounded by increasing the number of generic manufacturers to which the clauses apply. When a second-filer is deciding whether to initiate or continue a patent challenge, knowing that multiple other generic manufacturers have already started a patent challenge or may be poised to do so. Knowing that the brand manufacturer has already granted an MFE to the first-filer and has offered to grant one to the second-filer, the
44 second-filer know that the brand manufacturer will also likely grant one to subsequent second- filers (i.e. the third, fourth, fifth, and sixth filers).
145. In these circumstances, the second-filer faces the prospect that, even if it expends substantial resources to win the patent case, its “victory” would trigger simultaneous entry into the market by the first-filer, possibly an “authorized generic” marketed by the brand manufacturer, and four other generics. It is well-established that simultaneous entry of multiple manufacturers would quickly compete prices down to near marginal cost.
146. The MFEs can thus be used to prevent or significantly deter another generic manufacturer from profitably using its patent challenge to get earlier entry than the first-filer. In short, MFEs often deter second-filers from pursuing earlier entry and reducing costs of the product.
147. Gilead used MFEs to delay the onset of generic competition to Viread and standalone TDF. The MFE agreements set a date for initial generic entry and provided that the first-filer, Teva, could enter sooner should a second-filer gain entry into the market by, for example, proving the TDF Patents invalid and/or not infringed. The MFE clauses compounded the anticompetitive effects of these provisions by promising that Gilead would not authorize further generic entry for a defined period after the initial entry. These anticompetitive MFE clauses, proved to be effective tools for Gilead. All generic manufacturers agreed to stay out of the market for the period of time that Gilead granted to Teva in the MFE, and in exchange Teva agreed to delay entry into the market until December 15, 2017.
148. From March 2010 to February 2013 (when Gilead enticed Teva into the TDF Patent settlement), six more generic-drug manufacturers—Lupin, Cipla, Hetero, Aurobindo, Strides
Pharma, and Macleods Pharmaceuticals—filed ANDAs seeking FDA approval to sell generic
Viread. The first two of those six manufacturers included Paragraph IV certifications with respect
45 to the TDF Patents. Gilead and Teva fully understood that the other four of those six intended to enter the market as soon as possible and would amend their ANDAs to include Paragraph IV certifications (as is common in the industry) if it appeared that they had an opportunity for a period of de facto exclusivity.
149. These competitors posed a significant threat to Teva. The FD&C Act’s forfeiture provisions created the prospect that, if Teva agreed to a long delay in entry, without the protection of MFEs, a second-filer would: (a) obtain a judgment of invalidity or noninfringement and enter the market years before Teva; or (b) would use the leverage of its patent challenge to negotiate a better licensed-entry date from Gilead. Without the MFE clauses, Teva faced a substantial risk that it would be stuck on the sidelines while second-filers entered the market years in advance and reaped the corresponding gains of being the first generic TDF standalones.
150. Gilead enticed Teva to enter into the settlement for Viread in part by using MFE clauses to forestall generic competition to Teva until after it entered the market. This reduction in generic competition was enormously valuable to Teva. For every week that Teva was on the market as the only generic manufacturer of a standalone TDF / Viread, it could expect to sell all of the
TDF units at about 90% of the price of brand. Entry of multiple generics would swiftly deteriorate
Teva’s unit sales and the profits per sale and significantly lower brand pricing.
151. When Teva exclusively entered the Viread market in December of 2017 it expected to earn substantially greater sales than if it had entered with seven other generics on day one.
Gilead’s efforts to forestall generic competition increased Teva’s sales by millions every week in which it was the only generic Viread seller. Moreover, Teva’s competitive advantage would not be limited to just the period when no other manufacturer was selling the product. With a date certain, single-entrant launch date, Teva could ramp up its production and negotiate contracts with
46 its customers to effectively infiltrate the distribution channel with product before the second-filers entered the market, and lock in high prices with long-term sales contracts. The difference between the single-generic price and the price with multiple generic competitors would translate into a significant cost to payors, like Plaintiff, and New Mexico participants.
152. In order to delay entry of generic TDF, Gilead in fact gave Teva MFE clauses in all of its settlement agreements with the generic manufacturers. Those MFE clauses persuaded Teva to agree to delay entry, and they prompted all of the second-filers to agree to delay entry until at least six weeks after Teva’s entrance into Viread market.
153. The first MFE appeared on November 27, 2012 in an interim agreement between
Gilead and Teva, in which Teva agreed that it would not enter the market with Viread or Truvada while the TDF patent litigation was pending, until the earlier of (i) various events in the patent litigation (e.g., a finding of invalidity), or (ii) a second-filer entered the market. Gilead and Teva put this MFE in the public record, so all of the second-filers knew that any final agreement between
Gilead and Teva very likely included an MFE.
154. In February 2013, Gilead and Teva agreed in principle to settle their litigation over the TDF Patents, and they finalized the agreement in April 2013. Under the agreement, Teva agreed to delay marketing its generic Viread and any other TDF-Based HIV Medication until
December 15, 2017.
155. The MFEs allowed Gilead to extract an exceedingly late entry date—just six weeks before the end of the patent term in mid-January 2018. The MFE provided that, if any second-filer entered the market before December 15, 2017, Teva’s entry date would be moved up accordingly.
The MFEs further provided that Gilead would not grant any other manufacturer a license to enter the market with generic TDF until at least six weeks after Teva’s agreed entry date. This also
47 provided Teva with an important head-start to securing contracts and establishing manufacturing and distribution for standalone TDF (as well as potentially lucrative deals), especially given the fact that Gilead was at the time marketing several other TDF-Based HIV Medications.
156. The MFE allowed Gilead to obtain a later entry date than Teva otherwise would have agreed to. Without the clauses, Teva faced the prospect of simultaneous entry by as many as six other generic manufacturers. With the clauses, Teva was nearly guaranteed no generic manufacturer would enter before it.
157. When agreeing to the delayed December 15, 2017 entry date, Teva knew that: (1)
Gilead was willing to include the anticompetitive MFEs in settlement agreements with second- filers; (2) it was in Gilead’s financial interest to include such clauses in agreements with all second- filers; (3) the second-filers knew that the Gilead/Teva agreement included an MFE; (4) given the
MFEs, it was not in any second-filer’s interest to incur the costs of patent litigation to try to enter the market before Teva; and (5) the MFEs’ deterrent effect would grow with every additional one that Gilead included in another settlement.
158. Upon information and belief, Gilead advised the second-filers of the existence of the MFEs in the Gilead/Teva agreement and/or second-filers were aware of the MFEs.
159. In entering into this settlement (or series of settlements), Teva was assured that the
MFEs would protect it from competition from any other generic manufacturer until the end of the
TDF Patent terms on January 26, 2018—six weeks after Teva entered.
160. By the time that Gilead and Teva finalized their agreement in April 2013, Gilead had filed patent infringement lawsuits against Lupin and Cipla, both of which had provided
Paragraph IV certifications with respect to the TDF Patents. In July of 2014, Gilead settled its litigations with Cipla, with respect to the patents covering Viread (TDF) and the patents covering
48 Emtriva (FTC). Under the settlement, Cipla agreed not to launch a generic Viread until six weeks after Teva.
161. Just as Gilead intended, the MFEs in the Teva agreement, and the MFEs in the
Cipla agreement, caused the other ANDA filers—Hetero, Aurobindo, Strides, and Macleods—to not amend their ANDAs to include Paragraph IV certifications. Absent Gilead’s anticompetitive conduct, at least Hetero and Aurobindo would have done so; as those manufacturers made
Paragraph IV certifications with respect to Truvada.
162. On January 26, 2018, six weeks to the day after Teva entered the market, five additional generic manufacturers (Cipla, Hetero, Aurobindo, Strides, and Macleods) received final
FDA approval, and four of them immediately began marketing their generic Viread.
163. During the six weeks secured by the MFEs, Teva had the only generic Viread on the market, and it stuffed the supply chain with heightened supply of product, locking in high prices through long-term sales contracts. Thus, Teva made millions more than it would have absent the MFEs. Absent their anticompetitive conduct, Teva and the second-filers would have entered the market much sooner than they did. The delay in generic entry protected more than $2 billion in Gilead’s Viread branded sales, all at the expense of patients and payors.
164. Gilead’s delaying the entry of a generic Viread and standalone TDF allowed Gilead to reap substantial sales and profits and further provided the incentive and ability for Gilead to delay development of its TAF-Based line as discussed herein. By unfairly suppressing competition for TDF and taking steps to protect its profits by marketing TDF as a component of FDC HIV
Medications like Truvada and Atripla, Gilead was able to maintain profits without innovating and rolling out safer and more effective TAF. Gilead withheld TAF-Based HIV Medications from the market until the entry of generic TDF was imminent. In the interim, Gilead launched multi-layered
49 schemes to stall generic competition and maximize profits for its TDF-Based HIV Medication franchise to the detriment and at the expense of public health and government payors, like Plaintiff.
8. Effect on State Reimbursements and New Mexico Commerce, Market Power and Competition
165. As alleged herein, there is direct proof of Gilead’s market (or monopoly) power over the price of Viread. This direct proof includes, but is not limited to: (a) Gilead’s exclusion of competition from the market by way of its agreements with Teva and later ANDA applicants;
(b) the actual date of generic competition for Viread versus that expected; (c) Gilead’s ability to raise its prices without losing sufficient sales to render the price increases unprofitable; and/or (d) the lack of non-Viread drug products that can be reasonably substituted for Viread.
166. The relevant product markets are (i) branded Viread; and (ii) generic Viread equivalents, each in all forms and strengths.
167. The relevant geographic market is nationwide or alternatively, the State of New
Mexico. Through the illegal conduct described herein, Defendants were able to charge artificially high prices without losing substantial sales, and thus, by definition, maintained monopoly power over Viread products sold in the United States, including in New Mexico.
168. Through the illegal conduct described herein, Defendants intentionally, purposefully, and successfully suppressed competition. Defendants’ exclusionary conduct impaired competition for Viread in the United States, including in New Mexico, and unlawfully enabled Defendants to sell Viread brand and generic products at artificially inflated prices.
169. During the relevant time period, Defendants were reimbursed by Plaintiff for claims made as to their respective brand and generic Viread products. As a result of Defendants’ anticompetitive and illegal conduct, Plaintiff was forced to pay excessive prices and New Mexico
50 participants paid more money in the form of higher patient co-pays for “brand name” medications, even though it was precisely the same as the generic Viread products.
170. The State was deprived of the ability to purchase lower-priced generic Viread products at competitive market prices. Absent Defendants’ deceptive and unfair conduct and settlement agreements, generic Viread would have been available earlier at lower costs. Plaintiff paid more for brand and generic Viread products than it would have absent Defendants’ anticompetitive conduct.
171. Thus, Plaintiff, as a result of Defendants’ illegal conduct, have suffered monetary losses and damages.
ii. Truvada (TDF/FTC) and Atripla (TDF/FTC/EFV)
172. Shortly after Defendants’ Viread patent settlement agreements, Gilead again entered into anti-competitive settlement agreements, with the active aid, consent and assistance of
Teva to successfully delay the entry of lower-cost generic competition for Truvada and Atripla.
These agreements were highly effective at impairing generic competition. At present, Teva is the only generic version of either on the market or available for purchase in the U.S., despite multiple manufacturers receiving tentative approval from the FDA.
173. Like Viread, generic erosion in the case of Truvada and Atripla would have occurred swiftly. Introduction of generic versions of Truvada and Atripla could drastically reduce pricing and make these crucial HIV medications more affordable and accessible to those living with HIV. Of import, reduced pricing to Truvada for PrEP would greatly benefit efforts to end the public health AIDS/HIV epidemic. Defendants’ deceptive conduct and unfair settlement agreements delaying and impairing competition for Truvada and Atripla constitutes an illegal restraint of trade, an illegal monopoly, unlawful attempted monopolization, and/or an unlawful
51 combination or conspiracy to monopolize the Truvada and Atripla markets, and substantially harmed the State and New Mexico participants, in violation of NM Anti-Trust Act, as well as NM
MFA, NM FCA, NM FATA and NM UPA.
1. Truvada is a Significant Source of Gilead Revenue
174. Truvada is of the NTRI drug class and is a FDC antiretroviral medication combining two previously approved HIV medications in a single pill: 300mg TDF and 200mg
FTC. Presently, Truvada is one of only two FDA approved drugs for PrEP, the most effective method of preventing HIV infection in HIV negative individuals.
175. Gilead submitted its Truvada NDA as a “priority” submission of “Type 4 – New
Combination” in late March 2004 and it was approved by the FDA a few months later on August
2, 2004 for use in combination antiretroviral treatments for HIV-1 infection in adults.
176. Unlike typical NDA submissions, which require lengthy and costly clinical trials, investigation and research, Gilead’s Truvada NDA was approved based on a mere showing that
Truvada was bioequivalent to its separate components (TDF/FTC). This is largely because
Truvada is a simple combination of previously FDA approved medications - already shown to be safe and effective. Gilead’s NDA approval for Truvada relied on a single pharmacokinetic study, a previously submitted drug-drug interaction study and dissolution data29 - akin to the abbreviated approval process and requirements for generic manufacturers to market versions of branded products.
29 The previously submitted drug-drug interaction study (FTC-114) was an open-label, randomized, three-way crossover study that evaluated steady-state PK of TDF and FTC when administered alone and in combination in healthy volunteers. The study was originally submitted and reviewed with the EMTRIVA NDA 21-500, which was approved in July 2003. See Center for Drug Evaluation and Research, Clinical Pharmacology and Biopharmaceutics Review(s), Application Number 21-752, at p.2, available at: https://www.accessdata.fda.gov/drugsatfda_docs/nda/2004/021752s000_Truvada_BioPharmr.pdf.
52 177. Truvada quickly became a blockbuster drug and has been one of Gilead’s top selling HIV products, historically accounting for approximately one-quarter of its HIV sales and almost 12% of its total sales. Within two years of its launch in 2004, Truvada became a billion- dollar earner for Gilead.
178. In 2012, the FDA approved Truvada for PrEP indication. Following the new 2012 guidelines and the expansion of Truvada for PrEP, Truvada sales skyrocketed. In 2016 there were
77,120 PrEP users in the U.S. compared to just over 8,000 in 2012.30 Gilead acknowledges such, stating the increase in 2016 Truvada sales was “primarily due to higher average net selling price and higher sales volume in the U.S., as a result of the increased usage of Truvada for PrEP.”31
Without generic competition in the U.S. market until only recently, Gilead has been able to elevate prices year after year, consistently earning in excess of $2 billion annually for Truvada sales.
2. Atripla is a Significant Source of Gilead Revenue
179. Atripla is an FDC antiretroviral medication combining three previously approved and manufactured HIV medications in a single pill: 300mg TDF, 200mg FTC and 600mg EFV.
180. Atripla was approved roughly two years after Truvada on July 12, 2006 for use alone or in combination antiretroviral treatment of HIV-1 infection in adults. Similar to Gilead’s
Truvada NDA, Gilead was not required to conduct lengthy clinical trials and investigations to support its Atripla NDA, because the three subcomponents (TDF/FTC/EFV) were not new or novel and had previously been tested and proven safe and effective on their own. For approval of its Atripla NDA, Gilead merely had to conduct bioequivalence testing. Approximately three
30 Mapping PrEP: First Ever Data on PrEP Users Across the U.S., AIDSVU, available at: https://aidsvu.org/prep; see also AIDSVu graphic, available at: https://aidsvu.org/wp-content/uploads/2018/03/2-AIDSVu-PrEP_77000- Graphic-1024-x-512-v10.png [https://perma.cc/2YZJ-XLK5] 31 See Gilead Sciences, Inc. SEC Form 10-K 2016, p.51 available at: https://www.sec.gov/Archives/edgar/data/882095/000088209517000006/a2016form10-k.htm
53 months after Gilead’s initial submission, the FDA approved Atripla largely based on the same requirements for approval of a generic under an ANDA review.
181. Like Truvada, Atripla became a top earner for Gilead, within two years of its approval in 2006, sales reached approximately $1.5 billion.32 For a decade thereafter, and without generic competition in the U.S. market until only recently, Atripla sales have consistently been at or above $1 billion. Indeed, like Truvada and Viread, Atripla has been a significant source of revenue for Gilead.
3. Gilead’s Truvada and Atripla Hatch-Waxman Exclusivities and Weak, Evergreened and Ancillary Patent Portfolios
182. Gilead’s TDF and FTC patent portfolios consist of weak, evergreened and ancillary patents and heavily rely on prior innovations. None of the API components in Truvada (TDF/FTC) or Atripla (TDF/FTC/EFV) are new or novel. Each API component was discovered decades earlier and marketed in the U.S. as a branded product for years.
183. The Orange Book listed patents for Truvada and Atripla covering the FTC component include the 6,642,245 (“the ‘245 patent”) and 6,703,396 (“the ‘396 patent”)
(collectively “the FTC Patents”). Truvada and Atripla were also covered by the TDF Patents (the
‘695 patent, the ‘089 patent, the ‘230 patent, and the ‘946 patent), which expired in January of
2018. As discussed below, the third subcomponent in Atripla, EFV, was covered by BMS patents, which expired in July and August of 2018.33
32 Gilead Sciences, Inc., 2008 Annual Report, SEC Form 10-K (DATE) at p.3, available at: https://www.sec.gov/Archives/edgar/data/882095/000119312509040769/d10k.htm 33 The composition of matter patent for EFV expired in 2013 and the method of use patent for the treatment of HIV infection expired in September 2014. The ancillary and weaker formulation patents covering EFV, which would have been likely to be found invalid, expired in July and August of 2018.
54 184. In addition to patents covering the sub-components of Truvada and Atripla, Gilead sought and obtained obvious and non-novel methods of use and treatment and formulation related patents in an attempt to stave off generic competition. These later-listed Orange Book patents, issued after Gilead began filing baseless patent infringement cases against potential generic rivals, do not cover API but concern “method of use,” “dosing,” and/or “formulation,” are considered weak and ancillary and would have likely been found invalid. These patents include U.S. Patent
Nos. 8,592,397 (“the ‘397 patent”), 8,716,264 (“the ‘264 patent”), and 9,457,036 (“the ‘036 patent”) (collectively “Later-Listed Atripla Patents”).
185. The patents allegedly protecting the Truvada and Atripla combination of TDF and
FTC or TDF, FTC and EFV into a single pill for treatment of HIV are not innovative, novel or new. Simply combining drugs in fixed-dosage form would have been obvious to a person skilled in the art at the time of development of Truvada and Atripla. Yet in efforts to extend its flagship
TDF-Based HIV top sales earners, Gilead obtained such patents of dubious validity, prosecuted weak patent litigations against any potential generic rival and unfairly and fraudulently marketed
Truvada and Atripla in order to suppress competition.
186. In lieu of innovating itself, Gilead acquired the majority of the core intellectual property allegedly protecting Truvada and Atripla by obtaining exclusive licenses and assignments from others’ prior inventions and research to support its HIV product franchises. Indeed, from
2004 to 2017, Gilead made tens of billions of dollars from HIV medications while introducing only a single new pharmaceutical compound.
187. Tenofovir, as noted above, was not invented by Gilead but by Czech institutions in the 1980s. Gilead obtained an exclusive license to manufacture and use same in 1991 and 1992 in exchange for “minimum royalty payments.” In 2000, in anticipation of launching Viread, Gilead
55 amended its agreement with the Czech institutions and inventors of tenofovir, to reduce future royalty rates for tenofovir containing products. In 2004, Gilead again amended the agreements with the inventors of tenofovir to include Truvada and any future fixed-dose combination products that contain the licensed technology (i.e. in anticipation of Atripla). At the same time, the Czech institutions, understanding the need for accessible and affordable medications to end the HIV epidemic, agreed to waive any right to royalty payments for Viread or Truvada in developing countries where products are sold at or near cost.34
188. Similarly, Gilead’s patents allegedly covering the FTC component in Truvada and
Atripla, depend heavily on and/or are derived from research and patents issued earlier to Emory
University. Funding for many of the FTC related studies was provided in part through National
Institutes of Health grants. Purified forms of FTC for use in HIV and Hepatitis B treatments were invented and patented, not by Gilead, but by Emory University. In 1996, Triangle Pharmaceuticals,
Inc. (“Triangle Pharma”) obtained an exclusive worldwide license to all of Emory’s rights for
FTC. Gilead acquired Triangle Pharma and the rights to Emory’s FTC intellectual property in
January 2003.
189. Gilead’s branded standalone FTC, marketed as Emtriva®, acknowledges Emory
University’s substantial contribution to the use of FTC for HIV treatment, as the “Em” in
“Emtriva®” stands for Emory University.35
190. Indeed, the heavy lifting in terms of research and development of FTC as an effective treatment for HIV was done prior to Gilead obtaining its ‘245 and ‘396 patents. Acquiring
34 Gilead Sciences, Inc. 2005 Annual Report, SEC Form 10-K, available at: https://www.sec.gov/Archives/edgar/data/882095/000119312506045128/d10k.htm. 35 M. Terrazas, Drug royalty sale fuels Emory research, EMORY REPORT Vol 57, No.36 (Aug. 1, 2005), available at: https://www.emory.edu/EMORY_REPORT/erarchive/2005/August/August%201/drugsale.htm#:~:text=Also%20kn own%20as%20emtricitabine%20and,infected%20people%20throughout%20the%20world.
56 Emory’s patent rights and research allowed Gilead to rush standalone FTC and Truvada to the market on an extremely expedited timeline. After acquiring an exclusive license to FTC in January
2003, roughly six months later in July 2003, standalone FTC was approved. Less than a year later,
Gilead filed its NDA for Truvada in March of 2004, which the FDA approved in August of 2004
(just four months after Gilead’s initial submission).
191. In July 2005, after launching Truvada, but before Atripla launched, Gilead made arrangements to purchase Emory’s royalty interest for FTC intellectual property in order to eliminate its obligation to pay royalties on FTC to Emory. Emory (a leader at the forefront of HIV research for decades) assigned its patent rights to Gilead in 2005 in exchange for a modest lump- sum payment from Gilead.36 Under the terms of the Bayh-Dole Act, passed by Congress in 1980 to encourage universities to move scientific discoveries rapidly into the marketplace, proceeds from the royalty sale must be used for scientific research and education and Emory pledged
“[t]hese dividends will be plowed back into our mission of research and discovery for the benefit of our state, our nation and the world. . .”37
192. Emory, as the bona fide inventor of FTC, like the Czech institutions and bona fide inventors of Viread, understood the undeniable need for accessible and affordable HIV medications. As such, Emory, like the Czech institutions, agreed to waive their rights to royalty payments on sales of Truvada in certain countries around the world to ensure lower pricing for products where the HIV epidemic has hit the hardest.38
36 Id. (Emory itself publicly recognized as early as 2005 that “[b]y 2021, the total revenue for FTC could well have reached more than $540 million . . .”). 37 Emory University, Press Release, Gilead Sciences and Royalty Pharma Announce $525 Million Agreement With Emory University to Purchase Royalty Interest for Emtricitabine (July 18, 2005), available at: https://www.emory.edu/news/Releases/emtri/. 38 Gilead Sciences, Inc. 2005 Annual Report, SEC Form 10-K, available at: https://www.sec.gov/Archives/edgar/data/882095/000119312506045128/d10k.htm.
57 193. Receiving Emory’s patent rights was crucial to Gilead’s long-game and protecting the profits of its HIV Medication franchises. It enabled Gilead to file meritless patent infringement lawsuits against nearly each and every potential generic rival to stifle competition based on innovations it did not develop or create but from which it continues to receive unjustifiably excessive profits.
194. The relevant NCE exclusivities for Truvada and Atripla expired on July 2, 2008,39 so any 30-month stay blocking FDA approval of competing generics could have expired as early as January 2, 2011. Meaning a generic manufacturer bringing a successful patent challenge against
Truvada or Atripla could have launched generic versions of Truvada or Atripla as early as 2011.
Even in the best of circumstances for Gilead, the Orange Book listed patents would expire by their own terms in January of 2018 for TDF and in September of 2021 for FTC in Truvada and Atripla.
4. Multiple Generic Challenges to Truvada and Atripla
195. On or about September 26, 2008, Teva filed a substantially complete ANDAs with the FDA to manufacture and sell generic formulations of Truvada and Atripla.
196. Teva’s Truvada ANDA included a “Paragraph IV certification” as to the FTC
Patents asserting the patents were either invalid or not infringed by its Truvada ANDA product.
The FTC Patents were set to expire on May 4, 2021 and September 9, 2021.
197. Teva’s Atripla ANDA also included a “Paragraph IV certification” as to Gilead’s
FTC Patents as well as its four TDF Patents and as to BMS’s EFV Patents, asserting the Patents were either invalid, unenforceable or not infringed by Teva’s Atripla ANDA product.
39 See FDA Review of Atripla ANDA No. 021937, Administrative Document(s) & Correspondence, available at: https://www.accessdata.fda.gov/drugsatfda_docs/nda/2006/021937s000_AdminCorres.pdf.
58 198. Like Teva’s ANDA for Viread, Teva’s ANDAs for Truvada and Atripla were each the first substantially complete applications to be filed, entitling Teva to statutory ANDA exclusivity. As set forth in the Hatch-Waxman Act, the 180-day exclusivity commences upon a
“first commercial marketing” by the first-filer ANDA holder (which applies to both ANDA and authorized generic launches) or upon a “court decision” finding the patents invalid, unenforceable, or not infringed.
199. Upon service of Teva’s Paragraph IV certifications, Gilead elected to initiate
Hatch-Waxman patent litigation by filing patent infringement lawsuits within forty-five (45) days.
Gilead’s filing of the lawsuit triggered a stay preventing the FDA from approving Teva’s ANDAs for Truvada and Atripla until the earlier of thirty (30) months has elapsed or the issuance of a
“court decision” finding the patents at issue invalid or not infringed by the ANDA drugs.
200. Gilead filed suit against Teva on December 12, 2008 alleging its generic Truvada would infringe on Gilead’s FTC Patents. On September 25, 2009, Gilead amended its patent infringement complaint, adding allegations that Teva’s generic Atripla would infringe its FTC
Patents. The cases were consolidated and patent infringement issues relating to the FTC patents were litigated in the consolidated action Gilead Sciences, Inc., et al. v. Teva Pharms., Case No.
08-cv-10838 (S.D.N.Y.).
201. Gilead filed its Truvada and Atripla patent infringement lawsuits knowing the patents were weak, without regard to the merits, and fully anticipating that generic manufacturer(s) would bring successful patent challenge(s) and imminent generic competition. When it filed in
December of 2008, Gilead knew there was a substantial probability that it would lose the patent infringement litigation to first-filer Teva given the weakness of its patents:
Teva alleges that two of the patents associated with emtricitabine, owned by Emory University and licensed exclusively to [Gilead],
59 are invalid, unenforceable and/or will not be infringed by Teva’s manufacture, use or sale of a generic version of Truvada. In December 2008, we filed a lawsuit in U.S. District Court in New York against Teva for infringement of the two emtricitabine patents. We cannot predict the ultimate outcome of the action, and we may spend significant resources defending these patents. If we are unsuccessful in the lawsuit, some or all of our original claims in the patents may be narrowed or invalidated, and the patent protection for Truvada in the United States would be shortened to expire in 2017 instead of 2021.40
202. Following various amendments and pretrial proceedings in Gilead’s patent litigation against Teva, only the FTC Patents, as they related to both Truvada and Atripla, were left for trial.
203. The October 8, 2013 trial, which concluded on October 28, 2013, focused on one of Teva’s strongest contentions that the patents were invalid for obviousness-type double patenting because the (-)-enantiomer “species” patents were anticipated by earlier expiring “genus” patents, which claimed all enantiomeric forms of the FTC compound, and that the claimed (-)-enantiomer was disclosed as part of the genus patents’ claims.
204. More specifically, Teva asserted that Gilead’s Orange Book listed FTC Patents, which resulted from Gilead’s exclusive license to Emory’s previously issued patents and discovery of the FTC API, were invalid and an improper attempt to extend Gilead’s monopoly (and patent- pricing and profits) beyond the scope of the previously issued patents. As explained in Teva’s Pre-
Trial Memorandum, Gilead was trying to parlay Emory’s earlier invention and the associated patent rights it acquired from Emory to justify obtaining additional patents (and exclusivities) for uses that were not novel or new and would have been obvious to person skilled in the art at the time. The claims disclosed in Emory’s initial FTC patents (the ‘639 and ‘085 patents) relating to
40 Gilead Sciences, Inc., 2008 Annual Report SEC Form 10-K, p. 14, available at: https://www.sec.gov/Archives/edgar/data/882095/000119312509040769/d10k.htm (emphasis added).
60 the discovery of FTC for HIV treatment render Gilead’s later-obtained FTC Patents (the ‘245 and
‘396 patents) invalid as obvious and/or anticipated.
What is relevant is that [Gilead et al.] are entitled only to a single patent term for emtricitabine, irrespective of the value or properties of that drug. Plaintiffs received the complete protection the law allows when they received the ’639 and ’085 patents, which claim emtricitabine and its only use. [Gilead et al.] are not entitled to an extra six-year monopoly simply for recycling those patents and again claiming emtricitabine and that use. Upon the expiration of the ’639 and ’085 patents, the population that suffers from AIDS is entitled to obtain that drug, and the generic drug industry is entitled to offer it to that population, at a non-monopoly price. That is the promise of the Hatch-Waxman Act, Congress’s expression of the public policy that favors the introduction and distribution of generic drugs not protected by valid patents.41
205. Other generic manufacturers, well aware of the inherent weaknesses of Gilead’s patents, similarly challenged Gilead’s Truvada and Atripla patents. Gilead in response, filed lawsuits against nearly each and every potential generic rival, alleging infringement of its duplicitous and ancillary patent portfolios.
206. Teva received approval of its Truvada ANDA on June 8, 2017. To date, five other
ANDA filers have received tentative approval to launch a generic version of Truvada.42 Teva received FDA approval of its Atripla ANDA on November 9, 2018 and at least two other ANDA filers have received tentative approval to launch a generic version of Atripla.43 However, only
Teva’s single generic version of either TDF-Based HIV Medication, Truvada or Atripla, has launched to date as a result of Defendants’ unfair and anti-competitive settlement agreements resolving sham patent litigations, which have effectively created a bottle-neck to generic
41 Gilead Sciences, Inc., et al. v. Teva Pharmaceuticals USA, Inc., et al., Case No. 08-cv-10838 (RJS) (S.D.N.Y), Defendants’ Memorandum in Opposition to Plaintiffs’ Pre-Trial Memorandum (Dkt. 152 (filed Sept. 23, 2013)) (emphasis added). 42 Including Laurus Laboratories, Ltd., Aurobindo Pharmaceuticals Ltd., Amneal Pharmaceuticals of New York L.L.C., Strides Pharma, Inc. and Zydus Pharmaceuticals. 43 Aurobindo Pharmaceuticals, Ltd. and Cipla.
61 competition and deterred others from actively pursuing patent challenges and attempting to obtain earlier generic entry.
Gilead and Teva Settled the Truvada and Atripla Patent Infringement Litigations Before a Trial Court Decision on Terms Outwardly and Favorable to Gilead 207. Gilead and Teva settled the FTC Patent case in February of 2014 while they were awaiting the trial court’s decision. Notably, Defendants’ FTC Patent infringement settlement agreement came shortly after their settlement agreement in mid-2013 resolving TDF Patent infringement litigation as to Viread, Truvada and Atripla and shortly before Gilead’s July 2014 settlement with Cipla, which resolved patent litigations involving both FTC and TDF Patents.
208. Having successfully entered into the TDF Patent settlement agreement with the inclusion of MFE provisions, Gilead and Teva negotiated the FTC Patent settlement with MFE clauses guaranteeing a future date certain for Teva’s generic entry for Truvada and Atripla in exchange for assurances that no generic manufacturer would enter the market prior to Teva.
Similar to the MFEs Gilead used to delay the onset of generic competition for Viread, Defendants’ settlement agreements resolving patent infringement litigation for Truvada and Atripla included provisions manipulating and impairing generic entry.
209. The MFE-containing agreements set a date certain for Teva’s initial generic entry and further provided that Teva, as the first-filer, could enter sooner should a second-filer gain entry into the market by, for example, proving that Gilead patents were invalid.
210. Gilead’s settlement agreements with other generic manufacturers challenging the
FTC Patents reinforced and compounded the anti-competitive effects of these MFEs by promising that Gilead would not authorize further generic entry for a defined period after Teva’s initial entry
62 and delaying other generics from entering the market for an additional 6 months after Teva’s most favorable initial entry position.
211. In sum, Teva agreed to delay its generic versions of Truvada and Atripla for years in exchange for de facto 6 months of exclusivity, free from competition. This exclusivity and entry position were of significant value.
212. The MFE clauses in the Truvada and Atripla settlement agreements were extremely effective at delaying and suppressing generic competition. Each generic manufacturer in turn agreed to stay out of the market for the period of time that Gilead granted to Teva in the MFEs with respect to TDF and FTC Patents, and in exchange Teva agreed to delay entry of its generic
Truvada and Atripla products into the market until September 30, 2020, just one year before expiration of the FTC Patents.
213. After Defendants entered into a settlement agreement securing the absence of generic competition for Truvada and Atripla until September 30, 2020, Gilead struck another fraudulent deal with Cipla. The unfair and deceptive settlement agreement with Cipla contained
MFEs and additional anti-competitive provisions creating yet another roadblock to generic entry of Truvada and Atripla. Upon information and belief, Cipla agreed to substantially delay the launch of its generic stand-alone FTC product until August of 2020 (approximately one month prior of the agreed upon date certain for generic entry of Truvada and Atripla) in exchange for undisclosed payments and assurances of exclusivities with respect to Defendants’ HIV Medications, despite
Cipla having received final FDA approval for its generic FTC since July of 2018. The terms of the settlement agreement were never disclosed.
214. As discussed below, these delays in generic competition were crucial to reinforcing
Gilead’s collusive collaboration with BMS and to enable Gilead the time necessary to employ its
63 fraudulent marketing schemes to switch prescriptions from TDF-Based products to its patent protected and higher priced TAF-Based products before generic TDF-Based products launched.
5. Teva Would Not Have Agreed to Give Up Millions of Dollars of Revenue Absent Unfair and Anti- Competitive Most Favored Entry Clauses
215. The nature and circumstances of the settlements between Gilead and Teva, whereby
Teva agreed to substantially delayed generic entry dates until September of 2020, one year before
FTC Patent expiration, in exchange for guarantees to be the first generic on the market with exclusive or limited competition for 180-days, despite having forfeited and/or Teva’s ANDA exclusivities being uncertain, have effectively delayed and suppressed generic competition for
Truvada and Atripla.
216. The ’396 patent (the later of the two FTC Patents) does not expire (with pediatric exclusivity) until September 9, 2021. As with Viread, a number of second-filers had lined up behind first-filer Teva challenging Gilead’s FTC Patents. At the time of Teva’s and Gilead’s
February 2014 settlement, Gilead had filed multiple patent infringement lawsuits relating to the
FTC Patents against Cipla, Lupin, Mylan, Aurobindo, Hetero, and Amneal, almost all of which had provided Paragraph IV certifications with respect to Truvada. And Gilead had filed a patent infringement lawsuit against other generic manufacturers, including Lupin, that had provided
Paragraph IV certifications with respect to Atripla.
217. Teva and these second-filers faced the same economic dynamics as in Viread: Teva receiving MFEs would dissuade the second-filers from continuing to litigate and would provide
Teva a period of exclusivity. Moreover, Teva had forfeited its 180-day ANDA exclusivity with respect to Truvada, and may have forfeited it with respect to Atripla, by having failed to obtain
64 tentative FDA approval within 30 months of submitting its application. 21 U.S.C. 355 §
(j)(5)(D)(i)(I)(aa)(BB).
218. Under the February 2014 settlement agreement, Teva was not be able to launch a generic version of Truvada or Atripla until September 30, 2020.44 Gilead was able to extract such a late entry date— this time one year before the end of the patent term—and induce Teva to delay entry of its generic versions of Truvada and Atripla by including MFE provisions in its patent infringement settlement agreements, which provide Teva with a guarantee that no generic manufacturer would enter before it.
219. The MFEs ensured that Gilead would not grant a license to any other manufacturer to enter the market with generic Truvada or generic Atripla until at least six months after Teva’s agreed entry date. This is of particular import to Teva because, Teva had forfeited its eligibility for the 180-day statutory exclusivity period and/or its eligibility was uncertain.45 The MFEs provided
Teva with assurances of 180-day exclusivities when it was not necessarily granted exclusivities as of right. Ensuring Teva’s then unknown and uncertain 180-day exclusivity period in exchange for delaying entry of its generics made the deal more lucrative and attractive for Teva to accept.
220. The MFEs further provided that, if any second-filer entered the market before
Teva’s agreed entry date, Teva’s permitted entry would be moved up accordingly. No generic
Truvada or Atripla would enter the market prior to Teva.
44 See Gilead Sciences, Inc. 2019 Annual Report, SEC Form 10-K (Feb. 20, 2020), available at: https://www.sec.gov/ix?doc=/Archives/edgar/data/882095/000088209520000006/a2019form10-k.htm (“Pursuant to a settlement agreement relating to patents that protect Truvada and Atripla, Teva Pharmaceuticals is permitted to launch generic fixed-dose combinations of FTC and TDF and generic fixed-dose combinations of FTC, TDF, and [EFV] in the [U.S.] on September 30, 2020.”). 45 FDA Letter to Teva Pharmaceuticals USA, Inc. re ANDA 090894 Approval, (June 8, 2017), available at: https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2017/090894Orig1s000Ltr.pdf (FDA “is not. . .making a formal determination at this time of TEVA’s eligibility for 180-day generic drug exclusivity” as Teva failed to market within 30 months of submission of its ANDA).
65 221. Upon information and belief, Gilead advised the second-filers of the existence of the MFEs in the Gilead/Teva agreement.
222. Gilead succeeded in delaying entry of generic Truvada and Atripla just as it did with respect to Viread. Gilead settled the FTC Patent litigations with Cipla in May 2014; with
Lupin in September 2014; with Mylan in October 2015; with Aurobindo in September 2016; with
Hetero in August 2016; and with Amneal in April 2017. Gilead included an MFE in each of those settlement agreements, and all of the manufacturers agreed to delay entering the market until six months after Teva’s entry.
223. The reduction in generic competition provided by the MFE provisions had enormous value to Teva. At the time of settlement in 2014, annual combined U.S. sales for Atripla and Truvada were approximately $4 billion. For every week that Teva is on the market as the only generic manufacturer of Truvada and/or Atripla, it could expect to sell all of its units at about 90% of the price of brand. Entry of multiple generics, however, would swiftly deteriorate Teva’s unit sales and the profits per sale and significantly lower brand pricing. Granting MFEs and exclusive sales was worth more than $1 billion to Teva.
224. Moreover, Teva’s competitive advantage would not be limited to just the period when no other manufacturer selling the products. With a date-certain, single-entrant launch date,
Teva could ramp up its production and negotiate contracts with its customers to effectively infiltrate the distribution channel with products before the second-filers entered the market, and lock in high prices with long-term sales contracts. The difference between the single-generic price and the price with multiple generic competitors would translate into a significant cost to payors, like Plaintiff and New Mexico participants.
66 225. Absent the MFEs, Teva and/or the second-filers would have entered the market much sooner than they did. The delay in generic entry protected more than $25 billion in Gilead’s
Truvada and Gilead/BMS’s Atripla branded sales, at the expense of participants and government payors, like the Plaintiff.
6. Effect on State Reimbursements and New Mexico Commerce, Market Power and Competition
226. Defendants’ agreements unfairly hinder competition and unjustifiably extended higher patent pricing for brand Truvada and Atripla, despite the FDA giving its stamp of approval for multiple ANDAs to market generic Truvada and Atripla years earlier. Increased generic competition from such tentatively approved ANDA applicants, absent Defendants’ agreements, would have substantially reduced pricing.
227. There is direct proof of Gilead’s market power over the price of Truvada and
Atripla. This direct proof includes, but is not limited to: (a) Gilead’s exclusion of competition from the market by way of its agreements with Teva and later ANDA applicants; (b) the anticipated date of generic competition for Truvada and Atripla versus that expected; (c) price data demonstrating
Gilead’s ability to raise its prices without losing sufficient sales to render the price increases unprofitable; and/or (d) the lack of non-Truvada and non-Atripla drug products that can be reasonably substituted for Truvada and Atripla.
228. The relevant product markets are (i) Truvada, Truvada generic equivalents and its generic standalone subcomponents in all dosage forms and strengths and (ii) Atripla, Atripla generic equivalents and its generic standalone subcomponents in all dosage forms. In the alternative, relevant product markets are (i) Truvada and comparable substitutes of generic standalone components TDF and 3TC and (ii) Atripla and comparable substitutes of generic standalone components TDF, 3TC and EFV.
67 229. The relevant geographic market is the U.S., or alternatively the State of New
Mexico. Through the illegal conduct described herein, Defendants were able to charge artificially high prices without losing substantial sales, and thus, by definition, maintained monopoly power over Truvada and Atripla products sold in the United States, including products reimbursed by
Plaintiff and in New Mexico.
230. Through the illegal conduct described herein, Defendants intentionally, purposefully, and successfully suppressed competition. Defendants’ exclusionary conduct deceptively impaired competition for Truvada and Atripla in the U.S., including in New Mexico, and unlawfully enabled Gilead to sell Truvada and Atripla products for years at artificially inflated prices.
231. During the relevant time period, Gilead was reimbursed for claims made as to their
Truvada and Atripla products. As a result of Defendants’ anticompetitive and illegal conduct,
Plaintiff was forced to pay more money in the form of higher costs for “brand name” medications despite several generic Truvada and Atripla products being approved by the FDA and ready and able to enter the market.
232. Of note, Plaintiff’s reimbursements for Atripla more than doubled from 2013 to
2014 around the time of Defendants’ entered into their unfair settlement agreements, which all but ensured that generic versions of Atripla would not enter the market before 2020. Defendants’ agreements allowed Gilead to consistently raise already supra-competitive pricing for Truvada and
Atripla for years in the absence of generic competitors.
233. The State was deprived of the ability to purchase lower-priced generic Truvada and
Atripla at competitive market prices for years as a result of Defendants’ deceptive and anti- competitive conduct. In addition, upon information and belief, Plaintiff would pay more for
68 generic Truvada and Atripla (if/when made available) than they would have absent Defendants’ anticompetitive conduct.
234. Thus, Plaintiff, as a result of Defendants’ unconscionable and unlawful conduct, have suffered monetary losses and damages.
c. Gilead and BMS Conspire to Extend Their Monopolistic Positions Through Unfair Business Dealings and Fraudulent Marketing Schemes Aimed at Insulating Their Vulnerable Patents and Restraining Generic Competition
235. In or around 2004, Defendants Gilead and BMS entered into a collusive collaboration aimed at insulating their weak patents from generic competition to maintain supra- competitive pricing and artificially inflated profit margins for Atripla, an FDC to be comprised of only Gilead’s branded TDF and FTC and BMS’s branded EFV. Defendants’ unfair and anti- competitive business arrangement expressly prohibited the marketing of Atripla with any generic component (TDF/FTC/EFV) (“No Generics Restraint”), which would have dramatically reduced pricing. By ensuring that only one version of Atripla would be marketed, with branded components at inflated prices under the arrangement, Defendants unreasonably restrained trade.
236. Defendants’ agreement contained unlawful termination provisions, in the event a generic version of TDF, FTC and/or EFV became available, requiring the terminating party
(wishing to market a version of Atripla with a generic component) to pay the other party three years of royalty payments. The substantial penalty resulting from the termination provision discouraged either party from terminating the agreement, discouraged the marketing of Atripla with any lower-priced generic components and unfairly and unlawfully allowed for post-patent expiration royalty payments.
237. In further support of their collusive collaboration, Defendants engaged in an aggressive co-promotional marketing campaign to cannibalize prescription bases for the
69 components of Atripla and to fraudulently and deceptively promote and induce prescription switches from TDF, FTC and EFV, which would soon be facing generic competition, to Atripla, insulated from generic competition under Defendants’ agreement.
238. Defendants’ collusive and concerted schemes provided several means for them to share in supra-competitive profits that the unlawful agreement and collaboration generated. The agreement substantially increased Gilead’s incentive to move sales and market share from TDF and/or FTC to TDF-Based FDC Atripla. The switched sales resulted in BMS selling significantly more EFV than they would have otherwise. Defendants’ deceptive and unfair business tactics unlawfully allowed them to maintain a monopoly on the Atripla market, generating higher than normal prices for not only Atripla FDC but the individual standalone components as well, at the expense of participants and government payors, like the State.
i. Gilead’s and BMS’s No Generics Agreement to Market Brand Atripla
239. In December 2004 (shortly after Truvada was approved), Gilead and BMS entered into an agreement to develop and commercialize an FDC comprised exclusively of Gilead’s branded TDF and FTC and BMS’s branded EFV. In 2006, the FDA approved Defendants’ combination drug, marketed under the brand name Atripla.
240. Gilead and BMS structured their collaboration as a joint venture that operated as a limited liability company named Bristol-Myers Squibb & Gilead Sciences, LLC. Gilead and BMS granted royalty-free sublicenses to the Gilead-BMS joint venture for the use of the companies’ respective technologies and, in return, were granted a license by the joint venture to use intellectual property that results from the collaboration.
70 241. Defendants’ agreement provided that BMS would supply its EFV exclusively to the joint venture for use in an FDC with Gilead’s TDF and FTC. Likewise, Gilead would provide a royalty-free sub-license to the joint venture for supply of its TDF and FTC.46
242. The agreement thus prevented Gilead and BMS (along with other manufacturers) from competing against Atripla with an FDC comprised of brand or generic TDF, FTC, and/or
EFV, even after the patents expired or generics had gained access to the market. The agreement provided that if either Defendant wanted to avoid this exclusivity by terminating its respective participation in the joint venture with the other, it would become the sole entity in the venture.
243. In addition, either party’s terminating the joint venture would terminate the other’s ability to continue making and selling Atripla. Gilead and BMS thus conspired to arrange that, regardless of whether or not one of the co-conspirators terminated the agreement once generic versions of the other’s composition(s) became available, purchasers would never benefit from a marketplace in which two versions of the Atripla FDC compete against each other. If neither party terminated the agreement, both would continue to be bound by the exclusivity provision and could not make a competing generic-composition-based version of the FDC; if a party did terminate, then the other would no longer have access to the continuing party’s composition(s) and could no longer make a version of Atripla.
244. Defendants’ No Generics Restraint agreement made no economic sense. Without such agreed to restraint, competitors like Gilead and BMS would challenge patents and incorporate generic components or comparable components to produce a competing Atripla FDC as soon as
46 See Gilead Sciences, Inc., 2013 Annual Report, SEC Form 10-K (Feb. 25, 2014), available at: https://www.sec.gov/Archives/edgar/data/882095/000088209514000013/a2013form10-k.htm (“We and BMS granted royalty-free sublicenses to the joint venture for the use of our respective company owned technologies and, in return, were granted a license by the joint venture to use any intellectual property that results from the collaboration.”).
71 possible. Absent sharing supra-competitive profits, it would have been in Gilead’s and BMS’s economic interest to market a competing generic-drug-based or comparable-drug-based FDCs as soon as possible.
245. Defendants’ agreement made no economic sense unless they impaired competition.
The agreement to not launch a generic version did not benefit Gilead or BMS in the period of time before it lost statutory exclusivity (exclusivity from its patents or from NCE exclusivity); during that time Defendants already had exclusivity and no one could make a competing FDA that contained Defendants’ exclusivity protected component products. Defendants benefitted from the
No Generics Restraint agreement only during the period after its statutory exclusivity expired. And that is precisely the period in which Defendants could not legitimately obtain private, contractual relief from competition.
246. When generic TDF finally became available in December of 2017, pursuant to the unfair and anti-competitive settlement agreement between Gilead and Teva, government payors like the Plaintiff and New Mexico participants should have benefitted. Because an untainted competitor in BMS’s position would have been motivated to market a competing version of the
FDC, with Gilead selling the original version of Atripla, and the unrestrained competitor selling an FDC comprised of generic TDF, generic FTC (once it becomes available), and EFV or alternatively generic TDF, generic 3TC and EFV. The combined price of those either combination of three products would plummet due to competition that should have ensued with the availability of generic TDF. The Gilead/BMS non-compete scheme prevented payors, like Plaintiff, and New
Mexico participants from obtaining those competitive benefits.
247. Absent Gilead’s and BMS’s agreement to forgo use of generic subcomponents in
Atripla FDC formulation(s), an unrestrained competitor in BMS’s position would have challenged
72 Gilead’s patents and entered the market with a competing FDC even before the expiration of the
TDF and EFV Patents in 2018 and/or the FTC patents in 2021.
1. Defendants Entered Their No Generics Restraint Agreement to Insulate Their Vulnerable Patents
248. In 2004, when Gilead and BMS entered into their noncompete agreement, Gilead fully expected generic competition for TDF and TDF/FTC years before the January 2018 and 2021 expiration of its respective patents and BMS, likewise, expected generic competition years before the July and August 2018 expiration of its patents covering EFV. Defendants’ unscrupulous business arrangement to combine their branded TDF/FTC/EFV components into an FDC while agreeing not to market any other Atripla FDC with generic components substantially increased the probability that Defendants could shield their branded products and profits from competition.
249. As discussed herein, Gilead’s patents allegedly covering TDF and FTC drew endless challenges from generics. Knowing its patents were inherently weak and likely to be deemed invalid, Gilead initiated numerous baseless patent infringement lawsuits, resolving nearly each and every patent challenge with a settlement delineating the delayed terms for generic entry.47
250. Likewise, BMS’s patents purportedly protecting EFV, the third component of
Atripla, were ancillary covering formulation, method of use and/or dosing, known to be weak and likely to be found invalid. The composition of matter patent for EFV expired in 2013 and the method of use patent for treatment of HIV infection expired in September 2014. BMS’s weaker ancillary patents covering the chemical formulation of the EFV component of Atripla include U.S.
47 Contrary to Gilead’s customary practice of suing every potential generic rival challenging its patents (and previously litigating baseless claims against Cipla relating to TDF and FTC Patents), Gilead chose not to bring a patent infringement suit against Cipla in connection with its proposed generic version of Atripla. Cipla received tentative FDA approval for its Atripla ANDA on June 3, 2019.
73 Patent Nos. 6,639,071 (“the ‘071 patent”) and 65,939,964 (“the ‘964 patent”) (collectively “the
EFV Patents”).48 The EFV Patents expired on July 20, 2018 and August 14, 2018.
251. BMS, like Gilead, received multiple generic challenges to its EFV Patents.
252. BMS filed suit against Teva in March of 2010 alleging its generic Atripla would infringe on BMS’s EFV Patents.49 Of note, BMS was initially represented by the very same counsel of record for Gilead in its Viread patent infringement litigation against Teva.50
253. Like Gilead, BMS (and Gilead’s counsel of record) filed the baseless Atripla EFV patent infringement lawsuit without regard to the merits –knowing the EFV Patents were weak and likely to be invalidated and fully anticipating imminent generic competition. More specifically, BMS knew that there was a substantial probability that it would lose the patent litigation given the weakness of its EFV Patents and that it would likely face generic competition years prior to the expiration of its patents.
254. The EFV Patents merely covered the crystalline form of efavirenz. In the patent infringement litigation, Teva presented dispositive facts that the claimed compound “inevitably results from the practice of the processes described in the prior art” (the ‘726 patent) and that the
EFV Patents were thus inherently anticipated and/or obvious and invalid.51 Because the “prior method” of making efavirenz in the ‘726 patent was clearly described in the specifications of the
‘071 and ‘964 patents and because that work was not done by the inventors of the ‘071 or ‘964 patents, it must be admitted as prior art. Thus, the EFV Patents were inherently anticipated.
48 Technically the EFV Patents are owned by Merck Co., who licenses the EFV Patents to BMS as part of a previous acquisition deal involving the companies. 49 Merck Sharp & Dohme Corp., et al. v. Teva Pharmaceuticals USA Inc., et al., Case No. 1:10-cv-01851 (S.D.N.Y.). 50 Id. Gilead counsel was terminated in the BMS EFV Patent lawsuit in May of 2010, months after filing. 51 See Id., Defendants’ Memorandum in Opposition to Plaintiffs’ Opening Pretrial Brief, (Dkt. 96 (filed May 28, 2013).
74 255. On June 5, 2013, weeks before the scheduled trial concerning the EFV Patents (and just days after the date which Teva could launch a generic TDF “at risk”), BMS and Teva informed the Court “that they reached a settlement in principle.”52 The case was officially closed on August
16, 2013.53 The terms of the parties’ settlement agreement were never fully disclosed.
256. BMS later issued a press release announcing the resolution of all its EFV and
Atripla patent infringement litigation, regarding anticipation of generic EFV it stated: “we believe that loss of exclusivity in the U.S. for efavirenz should not occur until December 2017.”54
Coincidentally, BMS’s announcement indicated that it anticipated loss of exclusivity for EFV in or around the same time that Teva had secured a date certain for the launch of its generic TDF via its unfair and anti-competitive agreement with Gilead.55
257. There are presently several versions of generic EFV on the market. Mylan
Pharmaceuticals, Inc. (the first-filer for EFV) received tentative FDA approval in 2011 and final approval in 2016. 56 However, Mylan did not launch its generic EFV until February 1, 2018, months before the EFV Patents were set to expire.57 The terms of the parties’ settlement agreement were never fully disclosed.
2. Defendants’ No Generics Restraint Agreement Unlawfully Allows for Royalty Payments After Patents Expire and/or Are Invalidated
52 See Id. Joint Letter to Court re Settlement (Dkt. 99 (filed June 5, 2013)). 53 See Id. Order (Dkt. 101 (filed Aug. 16, 2013)). 54 Bristol Myers Squibb, Press Release, Bristol-Myers Squibb Statement on Sustiva (efavirenz) in the U.S. (Oct. 8, 2014), available at: https://news.bms.com/press-release/bristol-myers-squibb-statement-sustiva-efavirenz-us. 55 Because BMS’s EFV Patents allegedly protecting Atripla expired in 2018 before Gilead’s FTC Patents, BMS sued and settled with Teva fully knowing that the generic entry date would be determined by the resolution of Gilead’s lawsuit against Teva. See BMS SEC Form 10-K 2016. 56 https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2016/091471Orig1s000ltr.pdf 57 See Mylan N.V. Press Release, Mylan Expands Access to HIV/AIDS Medicines with Launch of First Generic Sustiva® Tablets, (Feb. 1, 2018), available at: http://newsroom.mylan.com/2018-02-01-Mylan-Expands-Access-to- HIV-AIDS-Medicines-with-Launch-of-First-Generic-Sustiva-R-Tablets.
75 258. Defendants’ agreement provided that BMS would supply its EFV exclusively to the
Gilead-BMS JV for use in an Atripla FDC with Gilead’s TDF and FTC. The agreement thus prevented BMS and other manufacturers from competing against Atripla with an FDC comprising
EFV and generic TDF and/or FTC, even after Gilead’s patents expired. Moreover, the agreement provided that the only way for BMS to avoid this No Generic Restraint and exclusivity provision was to terminate Gilead’s participation in the Gilead-BMS JV with BMS becoming the sole entity in the venture.
259. The co-conspirators provided that BMS could terminate Gilead’s participation in the joint venture if generic versions of TDF and/or FTC became available. The agreement further provided, however, that if BMS elected to terminate Gilead’s interest on that ground, BMS would be required to pay a substantial penalty to Gilead, comprising three years of additional royalty payments, at declining percentages over the three years. The purpose and effect of the penalty provision was to dissuade BMS from terminating Gilead’s participation in the joint venture even after its patents on TDF and/or FTC expired or were invalidated by generics.
260. The co-conspirators provided to Gilead a similar right of termination, with a similar termination-penalty provision, permitting it to terminate the joint venture if a generic version of
EFV became available.
261. Gilead did in fact terminate the agreement shortly after generic EFV became available and is presently paying, under the terms of Defendants’ agreement, BMS royalties on the
EFV Patents which are no longer in effect.
262. When generic TDF became available, purchasers and patients should have benefitted because an untainted competitor in BMS’s position would market a competing version of the FDC, with Gilead selling the original version of Atripla, and the untainted competitor selling
76 an FDC comprising generic TDF, generic FTC (once it becomes available), and EFV. The combined price of those three products would plummet due to competition that should have ensued with the availability of generic TDF. The Gilead/BMS noncompete scheme prevents purchasers from obtaining those competitive benefits.
263. Absent the No Generics Restraint, moreover, an untainted competitor in BMS’s position would have challenged Gilead’s patents and entered the market with a competing FDC even before the expiration of the FTC patents in 2021. The NCE exclusivity protecting Atripla expired on July 2, 2008. Assuming that BMS were subject to that exclusivity, an untainted competitor in its position would have challenged Gilead’s patents one year before expiration of the NCE exclusivity. If Gilead timely sued BMS for patent infringement, an untainted competitor in its position would have entered the market as early as the expiration of the 30-month stay in
January 2011.
264. Even in the best of circumstances, Atripla’s Orange Book listed patents would expire by their own terms in July and August of 2018 for EFV, January of 2018 for TDF and
September 2021 for FTC.
3. Defendants’ Deceptive and Fraudulent Joint Marketing and Promotion of Atripla
265. In addition to Defendants’ unlawful and anti-competitive No Generics Restraint agreement, Gilead and BMS engaged in fraudulent marketing to induce and/or reward switching prescriptions to Atripla.
266. Defendants initially shared marketing and sales efforts, co-promoting Atripla in the
U.S. from July 2006 through 2010.
267. Defendants’ No Generics Restraint agreement and joint promotion of Atripla exploited a substantial imperfection in the HIV prescription pharmaceuticals marketplace. Doctors
77 who have switched a patient from one HIV drug to another HIV regime are very reluctant to switch patients back, despite the availability of a generic or lower cost product. Switching costs impair a move back to the original product.
268. These and other factors make HIV prescription pharmaceutical sales, “sticky”— doctors and patients are much less likely than in fully competitive markets to switch prescriptions back to the original product. Brand manufacturers can impair imminent generic competition by using their robust (and combined) sales forces to cannibalize the sales of brand drugs—to move the prescription base from an original product to one that does not face imminent generic competition—before the generic enters the market. Once the generic becomes available, doctors might in theory begin prescribing it rather than the new brand product. But having switched the patient from the old to the new product, the “stickiness” in these markets means that doctors are unlikely to change the patient’s regimen back again. The timing is critical. If the new product beats the generic onto the market, it makes as much as 10 times more sales than it otherwise would have made.
269. Knowing this, Gilead and BMS agreed to join sales forces to co-promote Atripla, employing various marketing schemes to exploit this market defect. Gilead and BMS conspired to fraudulently switch much of the prescription base from TDF and/or FTC to its more expensive and over-priced Atripla, which was insulated from competition under Defendants’ agreement.
270. As contemplated, and within strength in combined sales forces, Defendants cannibalized TDF and/or FTC sales, encouraging HCPs to switch their prescribing from those products to Atripla. This cannibalizing had significant anticompetitive effects – one of which is that it enabled Gilead to delay introduction of safer and more effective TAF, as alleged herein.
ii. Effect on State Reimbursements and New Mexico Commerce and Markets
78
271. The economic interests of the Gilead-BMS JV (including share of revenues and out-of-pocket expenses) were based on the portion of the net selling price of Atripla attributable to Sustiva (EFV) and Truvada (TDF/FTC). A Joint Pricing Committee, comprising representatives of Gilead and BMS, determined the selling price of Atripla. In 2017 (before generic entry for
EFV), the price for a 30-day supply of Truvada was approximately $1,600; the price of Sustiva was approximately $1,010; and the price of Atripla was approximately $2,600.
272. Absent Gilead’s and BMS’s unlawful and anti-competitive agreement, untainted competitors in the position of Gilead and BMS would have begun marketing an FDC with lower- cost generic(s) and/or comparable ingredient(s) as soon as they became available. In sum, absent the unlawful conduct alleged herein, generic Atripla and/or a generic comparable FDC would have been available much earlier at substantially discounted prices of Atripla. Making FDCs with lower- cost generic(s) or comparable ingredient(s) would have resulted in lower pricing of the FDC thereby increasing sales, while still maintaining at least the same profit margin.
273. FDCs that are originally formulated with a generic composition and a brand composition sell for about 40-50% less than the combined prices of the brand versions of the two compositions. As a result of Gilead and BMS arrangement, Atripla FDC was sold for years at
100% of the combined prices of the brand components. Moreover, as alleged herein, Gilead’s pricing for TDF, FTC and Truvada (in particular) were already unjustifiably inflated given their anti-competitive conspiracies and unfair business practices and the absence of generic competition for each of its respective subcomponents.
274. Defendants’ agreement essentially closed the door to competition and divided the markets for drugs to the benefit and profits of both Defendants, Gilead and BMS, and at the expense of higher costs for patients and government payors, like the State.
79 275. The agreement with respect to Atripla prohibited BMS from making a generic version of Atripla when generic TDF and/or generic FTC became available but did not prohibit
BMS from making a comparable version comprising a substitutable generic. Generic 3TC a known and acceptable substitute for EFV has been available generically since 2012. BMS could have marketed FDC comprised of TDF, generic 3TC (instead of Gilead’s FTC), and EFV as early as
2012. Absent Defendants’ collusive agreements regarding the manufacture of Atripla, generic 3TC could have been used in a similar and substitutable FDC product, which would have significantly reduced pricing. Indeed, when generic TDF became available, BMS licensed Mylan
Pharmaceuticals to produce that comparable version, which the FDA approved in February 2018.
Mylan sells the generic TDF/3TC/EFV version of the product at a 40% discount to the price of branded Atripla.
276. Gilead recently terminated BMS’s participation in the Atripla joint venture, triggering Gilead’s obligation to make the penalty payments described above. Had the agreement not existed or either party would have terminated sooner, Plaintiff’s payments for such products would have been lower and more cost-effective.
277. While Gilead and BMS profit from the agreement. government payors, like the
State, lose in three principal ways from Defendants’ anti-competitive conduct: (1) artificially reduced prescription bases of Gilead’s Viread (TDF), Emtriva (FTC) and/or Truvada (TDF/FTC) available for automatic generic substitution with which much of the prescription base having been cannibalized to TDF-Based FDC Atripla; (2) robbing participants of generic or comparable versions of those FDCs (i.e. TDF/3TC and/or TDF/3TC/EFV); and (3) impairing price competition of FDCs and standalone components.
80 d. Gilead’s Unconscionable Product Hopping Scheme Reduced Access and Affordability of Preventative HIV Medications at the Expense of Government Payors
278. Gilead purposefully and deliberately delayed its development and introduction of safer and more effective TAF, delayed its development and clinical research for PrEP HIV
Medications (forcing the government and charitable foundations to fund and conduct costly research and investigations of HIV Medications for PrEP), and has further delayed generic competition for Truvada and Descovv that would have dramatically reduced pricing and increased access to such preventative HIV medications sooner. Indeed, Gilead’s deceptive and unconscionable product-hopping58 and targeted switch marketing schemes were designed to delay and suppress competition to maintain artificially inflated pricing and have resulted in limited access and affordability to PrEP medications.
279. To reinforce the unfair business practices and exclusionary conduct alleged herein, and with generic competition for its blockbuster Truvada on the horizon, Gilead pivoted, launching aggressive and shamelessly profit-driven product-hopping marketing schemes aimed at switching the prescription base from TDF-Based Truvada to its patent-protected and higher priced TAF-
Based Descovy. The timing of Gilead’s plan was crucial - it needed to cannibalize the market for
Truvada and induce switches to Descovy prior to the anticipated entry of Teva’s generic Truvada.
To accomplish this, Gilead enlisted a robust sales force to fraudulently promote TAF-Based
Descovy to improperly reward and/or induce such prescription switches and prop up its anti- competitive arrangements in contravention of state laws and regulations. Gilead espoused and
58 The Federal Trade Commission (“FTC”) has stated that product hopping “can be an effective way to game the regulatory structure that governs the approval and sale of generic drugs, thereby frustrating the efforts of federal and state policymakers to facilitate price competition in pharmaceutical markets.” See Brief for FTC as Amicus Curiae at 6, Mylan Pharms. Inc. v. Warner Chilcott Pub. Ltd. Co., No. 2:12-cv-03824, No. 116-2 (Nov. 21, 2012).
81 disseminated propaganda mischaracterizing the inappropriateness of Truvada and its associated adverse events and risk profiles while touting the alleged benefits of Descovy. The goal of Gilead’s deceptive marketing was to switch as many prescriptions from Truvada facing a patent cliff and generic erosion of pricing to Descovy.
280. Gilead’s fraudulent scheme was successful. The company boasted abouts its better- than-expected success in switching 10% of Truvada patients to Descovy in just the first few months after Descovy’s launch.59 By the end of the second quarter of 2020, Gilead had reportedly switched
38% of Truvada patients to Descovy, and is well on its way to reaching its 40-45% switching goal.
Gilead persists in its deceitful switching campaign even though recent studies suggest Descovy offers no advantages over branded or generic Truvada.60
281. Gilead’s deceitful business tactics, as alleged herein, have resulted in years of artificially inflated and over-priced TDF-Based HIV Medications, unfairly restraining competition, and reducing incentives to innovate and bring safer more effective products to the market. Such schemes allowed Gilead to delay PrEP research and further substantially delay the introduction of TAF and TAF-Based Descovy. Moreover, Gilead’s TDF to TAF product-hopping scheme has deceptively and fraudulently cannibalized prescriptions and market share.
282. Absent Defendants’ concerted anti-competitive conduct and Gilead’s unconscionable product-hopping and marketing schemes, Plaintiff would have reimbursed for
TDF-Based and TAF-Based HIV Medications that were more cost-effective and/or at substantially reduced pricing sooner.
59 See, e.g., Gilead’s Truvada faces Teva generics assault amid Descovy switching campaign, available at https://www.fiercepharma.com/manufacturing/gilead-sciences-truvada-will-face-teva-generic-challenger-amid- descovy-switching (last visited Oct. 5, 2020). 60 See id.
82 i. Gilead Deliberately and Deceitfully Delayed Development and Introduction of Allegedly Safer and More Effective TAF To Extend Its TDF-Based Franchise Monopolies and Profits
283. Gilead’s deceptive business practices, entering into unfair and anti-competitive patent settlement agreements and generic restraining arrangements with BMS, severely impaired competitive forces and manipulated the markets for both TDF-Based and TAF-Based HIV
Medications, substantially increasing prices and reducing innovation. Indeed, Defendants’ deceitful conduct, as alleged herein, created the perfect storm – providing incentives and the ability for Gilead to delay introduction of TAF containing products for years. Through its concerted anti- competitive schemes, Gilead was able to stall bringing TAF to the market until the very last moment before the effects of its unlawful delays ceased, ensuring it maximized the combined period of market exclusivities (at higher prices and profit margins) for its TDF-Based and TAF-
Based franchises.
284. Knowing that two exclusivity periods for TDF and TAF would earn higher total revenues, Gilead wanted to earn as much revenue as possible by maximizing every last profit from the exclusivities and higher-pricing of its TDF-Based franchise before transitioning to its newly introduced TAF-Based franchise, despite having researched and full recognition of the safety and efficacy benefits of TAF for years prior.
285. In a maliciously strategic and profit-driven fashion, Gilead delayed the introduction of safer and more effective TAF and its superior side effect profile, which notably lacks the adverse side effects associated with TDF-Based products.61 Gilead held TAF in reserve for over a decade despite its known advantages – withholding TAF until just before generic competition was about to erode pricing and profits for its flagship TDF-Based HIV Medications Viread, Truvada and
61 Two well-known TDF side effects are impaired kidney function and declining bone mineral density.
83 Atripla. Knowing its TDF-Based franchise would be facing competition from Teva’s generic TDF in December of 2017 pursuant to Defendants’ unlawful patent settlement agreement, and presumably lower pricing for its TDF-Based FDC products, Gilead launched TAF and Descovy in or around 2016.
286. Defendants’ unlawful conduct, alleged herein, substantially diminished the competitive pressures that force manufacturers to innovate and introduce better and safer products sooner. Gilead’s collusive collaboration with BMS to market Atripla and its numerous patent infringement settlement agreements abating generic competition for Atripla’s sub-components
(Viread (TDF), Emtriva (FTC) and Truvada (TDF/FTC)) shielded Gilead from competitive pressures, with predictable consequences. Gilead was able to raise prices year after year for inferior
TDF-Based HIV Medications, allowing it to delay introduction of improved TAF until it had generated as much revenue as possible out of its TDF-Based franchise, propped up by dubious patent portfolios and further supported by calculated and unfair business arrangements that effectively restrained generic competition and prevented price erosion. Defendants’ conspiracies to corner the market and profit with such deceitful and exclusionary business dealings precluded the market from forcing Defendants to do what manufacturers in competitive markets must do in order to thrive – make better products as soon as possible.
287. Defendants’ collective actions reduced innovation and effectively prevented safer, more effective and/or more affordable preventative HIV Medications from entering the market.
Most importantly it created a cost barrier and limited access to life-saving HIV Medications necessary to prevent and treat the spread of HIV infections and impairing efforts to end the HIV public health epidemic.
1. Development of TAF – Shelved by Gilead for Over a Decade
84
288. Before the FDA approved Viread (TDF) in 2001, Gilead had already discovered a second pro-drug version of tenofovir, known as TAF. TDF and TAF are both prodrugs from the same parent drug tenofovir. However, TAF offers the advantage of requiring a fraction of the dose
TDF requires to achieve the same therapeutic effect. The lowered plasma concentrations needed with TAF results in correspondingly reduced toxicities compared to TDF, making TAF safer to use. Despite early awareness that TAF had superior safety, efficacy and side effect profiles, Gilead deliberately and strategically chose to delay development of TAF and withheld TAF-Based products from entering the market to bolster its unfair and anti-competitive business tactics and arrangements and extend its ill-gotten TDF-Based monopoly and profits.
289. As early as 2002 Gilead had realized the benefits of TAF’s smaller doses and lowered plasma concentrations compared to TDF. Indeed, Gilead conducted clinical trials of TAF in humans in 2002, with the explicit goal, as articulated by Gilead’s senior executive, of
“deliver[ing] a more potent version of tenofovir that can be taken in lower doses, resulting in better antiviral activity and fewer side effects….”
290. In 2003 Gilead reported to investors regarding the TAF clinical trials that the
“[i]nitial data look promising,” and that Gilead was “excited” about TAF’s prospects. In January
2004 Gilead again reported to investors that the TAF results were “promising,” and that it was
“continuing the clinical development of [TAF] … based on favorable Phase I/II results.” In March
2004 Gilead reported that “[b]ased on data from our Phase 1/2 clinical trials of [TAF], we have begun developing a Phase 2 program for the treatment of HIV infection….”
291. In May 2004 Gilead reported that the TAF clinical studies had confirmed that TAF gets higher concentrations of tenofovir into the blood than does TDF, thus allowing the patient to take a far smaller dose, thereby significantly reducing the risk of adverse side effects. Gilead
85 represented to investors that smaller TAF doses could “give greater antiviral response. . .[s]o, the theory holds that you can target and treat HIV differently using these kinds of prodrug and targeting technologies.”
292. Gilead continued to praise the advantages of TAF and potential for HIV treatment for years to investors through at least June 2004, shortly before receiving approval for Truvada in
July of 2004. A few months later on October 21, 2004, Gilead abruptly changed course, announcing that it had decided to shelve further development of promising TAF treatments. The announcement attributed the decision to “an internal business review.”
293. Gilead’s patenting strategy also reveals its anticompetitive scheme and intent.
Despite having allegedly abandoned TAF research in 2004, Gilead continued to file numerous patent applications allegedly covering TAF.62
294. It wasn’t until Gilead was faced with multiple generic challenges to its weak, evergreened and ancillary TDF Patents that Gilead decided it was finally time to prepare for its
TAF-Based line extension. Gilead told investors in 2010 that “a new molecule” would replace its
TDF-Based sales and add “a great deal of longevity” to its HIV franchise. This “new molecule” was not new at all—it was the TAF prodrug that Gilead had discovered a decade earlier but that
Gilead had been withholding in reserve in order to maximize its profits, only to be rolled out much later in conjunction with its deceptive product-hopping and marketing schemes when needed in the line extension.
2. Gilead’s Unlawful No Generics Deal with BMS Gave Gilead the Incentive and Ability to Delay TAF
62 Gilead filed seven patent applications for TAF between 2004 and 2005.
86 295. Gilead’s alleged business decision to abandon development of TAF in 2004 coincidentally came around the same time as Defendants Gilead’s and BMS’s collusive collaboration and agreement to market TDF-Based Atripla without generic sub-components and the prospect of competition. In fact, Gilead had concluded that it could use the unfair No Generic
Restraints provisions and marketing of Atripla to shield its TDF-Based HIV Medications and franchise from competition for years. With the BMS deal in place, Gilead could safely shelve its
TAF project to use much later as part of its product-hopping strategy once generic competition to its TDF-Based HIV Medications became imminent. And Gilead was able to further delay the potential for such generic competition, as well as the introduction of TAF, through its unfair patent settlement agreements as alleged herein.
296. On December 17, 2004, Gilead formally entered into its anti-competitive agreement with BMS for Atripla. Gilead’s December 2004 Press Release noted that Gilead and BMS’s joint work on developing the project had “been ongoing throughout most of 2004.” Notably, in October
2004—the same month that Gilead announced the shelving of its TAF project—the co- conspirators announced favorable results from an ongoing clinical trial of Atripla.
297. Gilead’s arrangement with BMS gave it the means to protect TDF from prospective generic competition, even if generic manufacturers were to successfully challenge the TDF
Patents. Thus, it no longer made economic sense for Gilead to do what competition would otherwise have forced it to do—to bring out TAF as soon as possible in order to take sales from its rivals in the ART class. The economic calculus changed: Gilead could make more profits by defeating generic competition to its TDF-Based HIV Medications and then rolling out TAF much later as part of a line extension.
87 298. Gilead itself eventually made explicit the connection between its anticompetitive deal with BMS and the shelving of TAF. At an investor conference in March 2011, Kevin Young, the executive vice president of Gilead’s commercial operations, admitted that in 2004 Gilead
“didn't bring TAF through development because at the time we were launching Truvada, launching
Atripla….” Gilead never amended the BMS joint venture agreement at this time to provide BMS with the opportunity to commercialize a TAF-Based successor to Atripla. Nor did Gilead, at the time, file an NDA to market a TAF-Based successor product to Atripla.
299. And on May 3, 2011, another Gilead executive confirmed why Gilead had sat on
TAF for over a decade. Holding TAF in reserve to later reformulate TDF-Based FDCs would
“bring quite a bit of longevity to the Gilead portfolio,” securing an “important opportunity for
Gilead long-term.” It allowed Gilead to have another line extension and TAF-Based franchise.
300. In addition to its deliberate withholding of a drug that would reduce enormous human suffering, Defendants’ unlawful conduct also caused a delay in the ability of generic manufacturers and other competitors to challenge Gilead’s TAF-related patents. As noted above,
NCE exclusivity prohibits a generic manufacturer from even filing an ANDA with respect to the branded product until a year before the end of the NCE exclusivity. Moreover, the Hatch-Waxman automatic 30-month stay does not commence until after the five-year NCE exclusivity expires. So, a generic version of an NCE-protected drug cannot realistically launch until at least 7.5 years after the brand manufacturer first receives approval of the NCE-protected drug.
301. Accordingly, Gilead’s delay in marketing TAF-Based HIV Medications dramatically delayed the date on which generic manufacturers could challenge Vemlidy and
Descovy patents. Earlier generic challenges and competition would have significantly reduced pricing for same.
88 302. If Gilead’s and BMS’s agreement had not resulted in Gilead’s delay in marketing of TAF, these dates would have been much earlier. If Gilead had not shelved TAF development, an untainted manufacturer in its position would have begun marketing TAF and TAF-Based FDCs like Descovy no later than 2007.
303. Thus, instead of the NCE protection for the TAF-Based products, like Descovy, expiring in November 2020, and the Hatch-Waxman 30-month stays expiring in May 2023, the
NCE exclusivity protecting those products would have expired in November 2011, and the Hatch-
Waxman 30-month stays would have expired in May 2013. And those living with HIV or at risk for infection of HIV would already have generic versions of TAF-Based products.
304. Foregoing introduction of TAF caused Gilead to lose millions of dollars in TAF-
Based HIV Medications sales every year. But impairing competitors’ entry into the marketplace with TAF-Based products and lower priced generic and/or comparable products was far more lucrative and valuable to Gilead. Withholding TAF only made economic sense for Gilead because of its anticompetitive effects, including impairing and delaying competition for its TAF-Based line extension, supported by it employing product-hopping and deceptive marketing schemes to switch prescriptions from TDF-Based to TAF-Based products. As a result of Gilead’s unfair, anti- competitive and fraudulent business tactics, government payors, like the State, have been presented with claims for reimbursement for artificially high and over-priced TAF-Based HIV Medications that are not cost-effective.
ii. Gilead Deliberately and Unconscionably Delayed Development of Tenofovir for PrEP Indications to Unfairly Profit from Government Research and Innovations, Funded by Tax-Payer Dollars, In Order to Extend Its Monopolies and Profits
305. Not only did Gilead delay the introduction of safer and more effective TAF in order to unlawfully extend its monopolistic position and unfairly reap the maximum amount of profits
89 from its TDF-Based franchise, Gilead also intentionally postponed research and development regarding the use of tenofovir for PrEP indications in order to free-load and take unfair advantage of ground-breaking government research funded by taxpayer dollars. Around the same time that
Gilead decided to abandon its efforts with TAF and instead enter into a collusive collaboration with BMS to fraudulently insulate its weak and vulnerable TDF and FTC Patents and unscrupulously shield Atripla from competition, thereby boosting the longevity of its TDF-Based franchise, the government and charitable foundations were investing millions of dollars in pivotal investigations and research for the use of tenofovir (TAF and TDF) with FTC for PrEP.
306. Indeed, the FDA’s approval of Truvada for PrEP indication in 2012 was largely based on government issued patents and pre-clinical models, studies and research, funded by hundreds of millions of taxpayer dollars. However, unlike the licenses received and the modest royalties paid by Gilead for access and licenses to Emory and Czech TDF and FTC technologies,
Gilead has yet to obtain licenses to the government’s patents or pay the government reasonable royalties for the use of its novel discoveries relating to tenofovir for PrEP. The government’s patent protected innovations, on one hand, have generated billions of dollars in profits for Gilead and on the other hand, resulted in government payors, like the State, paying an unfair premium and exorbitant pricing for Truvada and Descovy PrEP medications as a result of Defendants’ unlawful and anti-competitive conduct.
307. Following the 2012 guidelines and the expansion of Truvada for PrEP, Gilead’s sales and profits skyrocketed. The base for PrEP users in the U.S. vastly increased in the years thereafter. In 2016 there were 77,120 PrEP users in the U.S. compared to just over 8,000 in 2012.63
63 Mapping PrEP: First Ever Data on PrEP Users Across the U.S., AIDSVU, available at: https://aidsvu.org/prep; see also AIDSVu graphic, available at: https://aidsvu.org/wp-content/uploads/2018/03/2-AIDSVu-PrEP_77000- Graphic-1024-x-512-v10.png [https://perma.cc/2YZJ-XLK5]
90 Year after year following the FDA approval for Truvada for PrEP, Gilead unfairly and unconscionably implemented price hikes for Truvada. Gilead acknowledges such, stating the increase in 2016 Truvada sales was “primarily due to higher average net selling price and higher sales volume in the U.S., as a result of the increased usage of Truvada for PrEP.”64
308. It was only after enjoying the fruits of the government’s labor and patents along with the massive expansion in sales and commercial success of Truvada for PrEP, only after generic competition for TDF was imminent, and only after launching TAF-Based Descovy in 2016 to further preclude competition and lower pricing, did Gilead begin to actively participate and contribute to research and development of tenofovir for PrEP. And Gilead’s late participation and contributions were targeted specifically on its recently launched and still-patented protected
Descovy.
309. Gilead’s delayed interest in research and development of PrEP, like its delayed development of TAF had a clear objective - avoid losses in revenue from generic competition and erosion of pricing for Truvada – to support its product-hopping and deceptive marketing scheme to induce prescription switches from Truvada to Descovy before Teva’s anticipated generic
Truvada launch. Gilead’s deceptive and unconscionable conduct in delaying research and development of PrEP HIV Medications as part of its profit-driven product-hopping scheme, while at the same time relying on government issued patents and research without payment of reasonable royalties to achieve those objectives, has injured government payors, including the State, in terms of claims being presented for reimbursements for inappropriate and excessively priced prescriptions for HIV Medications.
64 See Gilead Sciences, Inc. SEC Form 10-K 2016, p.51 available at: https://www.sec.gov/Archives/edgar/data/882095/000088209517000006/a2016form10-k.htm
91 1. Government and Tax Payer Funded Research Was Used to Support FDA’s Approval for Gilead’s Truvada for PrEP in 2012
310. Rather than innovate and invest in costly research and development, Gilead passively sat on its hands for years letting the government do the foundational work. Gilead’s business model is built on around structured deals and unlawful and anti-competitive business arrangements as opposed to innovation. Like Gilead’s reliance on licenses to intellectual property for TDF and FTC, the game-changing 2012 approval for use of Truvada for PrEP and one of the primary drivers for the growth of Gilead’s HIV sales, was also primarily based on research and development done by others – namely the government and charitable foundations.
311. The FDA’s 2012 approval for Truvada for PrEP and the eventual expansion and massive sales of Truvada can be traced back to CDC’s patented research.65 In particular,
“[e]fficacy as measured by risk reduction in acquiring HIV infections was robustly demonstrated in iPrEx and PARTNERS PrEP” government, university and charitable-foundation funded studies.66 As documented in the FDA’s supplemental review and approval of Truvada for PrEP, these crucial studies demonstrated that Truvada was safe and effective at preventing HIV transmission in populations at increased risk of infection.67
312. Gilead’s sales of Truvada and Descovy for PrEP allegedly infringes on four of the government’s patents covering research relating to tenofovir (TDF/TAF) and FTC regimes to
65 See Center for Drug Evaluation and Research, Summary Review, Application Number: 021752Orig1s030, (July 16, 2012) at p.4, available at: https://www.accessdata.fda.gov/drugsatfda_docs/nda/2012/021752Orig1s030SumR.pdf (CDC’s Phase 2 trial 4323 was reviewed in support of safety. Datasets from Phase 3 studies, iPrEx and Partners PrEP were used to support safety and efficacy conclusions and PK/PD analyses. Pertinent findings from the thorough clinical/statistical and clinical pharmacology reviews of the iPrEx and Partners PrEP trials are described below.) 66 Id. at p.17. 67 See generally, Center for Drug Evaluation and Research, Summary Review, Application Number: 021752Orig1s030, (July 16, 2012), available at: https://www.accessdata.fda.gov/drugsatfda_docs/nda/2012/021752Orig1s030SumR.pdf
92 effectively prevent new HIV infections.68 The claims of these ground-breaking CDC PrEP Patents encompass innovative processes for protecting a primate or human host from a self-replicating infection by an immunodeficiency retrovirus, including HIV.69 Major contributions from the government’s research and PrEP Patents include pre-clinical models, focus on the two-drug regime of TDF or TAF and FTC for HIV prevention, and establishing the appropriate dosages for optimal effectiveness.
313. Gilead’s sole contribution to the government’s patented research was limited to providing the government with the drugs it used for testing purposes. Gilead had no substantial role in the accrual or analysis of the data or preparation of any manuscripts relating to the government’s pivotal clinical studies and research.
314. Pursuant to an agreement between Gilead and the government, public health services would “retain title to any patent or other intellectual property rights in inventions made by its employees in the course of the Research Project.”70 The Agreement also contemplates
“reasonable consideration to Provider’s request for a non-exclusive or exclusive license on commercially reasonable terms under PHS’s intellectual property rights in or to any Inventions.”71
315. Contrary to this agreement, however, Gilead to this day refuses to obtain a license to the CDC’s PrEP Patents. Gilead’s astronomical sales of Truvada and Descovy infringe on the government’s patents and despite multiple attempts by the government, Gilead has rejected repeated offers of a license to the patents and continues to unjustifiably withhold payment of
68 In November 2019, the government filed a patent infringement lawsuit against Gilead. The patents-in-suit include U.S. Patent Nos. 9,044,509, 9,579,333, 9,937,191, and 10,335,423 (collectively “CDC PrEP Patents”) owned by the U.S. Department of Health and Human Services, by virtue of its administrative control over the CDC. See The United States of America v. Gilead Sciences, Inc. et al. Case No. 1:19-cv-02103 (D. Del. Nov. 6, 2019). 69 Id. 70 Id. at 31, Exhibit 30, Public Health Service Material Transfer Agreement Between Centers for Disease Control and Prevention and Gilead Sciences, Inc. (executed Jan. 31, 2005). 71 Id.
93 reasonable royalties, despite the patents issued to the government and agreement entitling it to license such PrEP regimes.72
a. Gilead Delayed PrEP Involvement Until After Truvada’s Commercial Success to Fund Descovy for PrEP Research as Part of Its Product-Hopping and Deceptive Marketing Scheme
316. Prior to Truvada’s approval for PrEP and commercial success, Gilead openly expressed skepticism regarding the CDC’s innovative research, and Gilead was reluctant to become involved with the initial PrEP investigations.73
317. It was only after profits for Truvada for PrEP skyrocketed that Gilead became involved with clinical research and investigations for PrEP. In other words, it was only after Gilead had reaped the benefits from the government patent issued PrEP research, enjoying increases in the amount of Truvada sales at artificially inflated pricing, did Gilead substantially increase its funding for clinical trials and research relating to PrEP. And Gilead’s interest resided not in tenefovir generally for PrEP, but in particular to investigations relating specifically to its newly introduced and patent protected Descovy for PrEP.
318. Gilead intentionally delayed research and development of crucial PrEP HIV
Medications until it benefitted Gilead’s deceptive and anti-competitive product-hopping and marketing schemes. Gilead’s motive for investing in PrEP research specifically for Descovy at this point in time is crystal clear – to promote and reinforce its anticompetitive schemes to switch
72 Indeed, multiple generic manufacturers of Truvada have been granted licenses to the government’s patents for their respective generic Truvada products sold outside of the U.S. To date, only Mylan Pharmaceuticals has received FDA approval to market its generic Truvada and obtained a license from the government and agreed to pay royalties for products sold or manufactured in the U.S. 73 See Jon Cohen, Anti-HIV Pill Protects Against AIDS, SCIENCE, Nov. 23, 2010, available at: https://www.sciencemag.org/news/2010/11/anti-hiv-pill-protects-against-aids (“Gilead says it wants to have ‘frank’ talks with the [FDA] and other stakeholders before it decides to seek licensure for Truvada as a preventive. ‘We'll have, I imagine, a very interesting discussion about the potential risks and benefits associated with this kind of a modality, and I think that will govern what we choose to do,’ says Howard Jaffe, president of the Gilead Foundation.”).
94 prescriptions from Truvada, facing imminent generic competition, to its higher-priced and patent and exclusivity protected Descovy. Gilead’s unconscionable business practices and unlawful conduct placed a premium on profits over people, to the detriment of public health and government payors, like the State.
319. Gilead’s peaked interest came only after the government had funded and laid the substantive groundwork with pre-clinical models and research for PrEP and its unstated purpose was to create comparison marketing propaganda in order to justify its unconscionable delay in developing TAF and in furtherance of implementing its profit-driven product-hopping schemes to switch prescriptions from Truvada to Descovy before the arrival of expected generic Truvada in
September 2020. Indeed, Gilead’s launch of TAF and corresponding interest in Descovy for PrEP was deliberate and strategically executed with enough time in advance of anticipated generic competition to allow Gilead to enlist a robust sales force to fraudulently promote and deceptively induce prescription switches from Viread (TDF) and Truvada (TDF/FTC) to Vemlidy (TAF) and
Descovy (TAF/FTC).
2. Gilead’s Unlawful and Anti-Competitive Patent Settlement Agreements with Teva Gave Gilead Additional Incentive and Ability to Delay PrEP Research and Development
320. Gilead held on to its TAF design for over a decade, knowing it could extend the longevity of its TDF-Based HIV franchise and maximize profits by first rolling out TDF-Based products, filing sham patent litigation and entering into unlawful settlement agreements to delay generic competition and price erosion until as long as possible, and then secondly rolling-out TAF-
Based products alongside fraudulent marketing campaigns to effectively move the prescription base from TDF to TAF regimes, to unlawfully and unfairly maintain inflated pricing (and unprecedented profit margins) for Gilead HIV Medications.
95 321. But Gilead also knew that timing for its classic bait and switch schemes was key.
Gilead’s plan to transition HCPs and participants from its TDF-Based franchise to a TAF-Based franchise would be disrupted if generic versions of Viread, Truvada and/or Atripla entered the market before Gilead could accomplish the marketing switch to TAF-Based products. Gilead prevented the disruption of its bait and switch schemes by enticing Teva (and the other generic manufacturers) into unlawful and anti-competitive agreements to delay entry of generic TDF-
Based products into the market in exchange for guarantees of most favored entry positions and other exclusivities. Defendants’ agreements further deterred other generic manufacturers from challenging Gilead’s weak and vulnerable patents and/or seeking earlier entry.
322. In summary, Defendants’ unfair patent settlement agreements and inclusion of
MFE provisions provided Gilead with assurance and full knowledge of the line-up for generic entrants on future dates certain for its TDF-Based HIV Medications, allowing Gilead to execute its deceptive product-hopping schemes with precision and timing.
323. While Gilead wanted to delay development and introduction of TAF-Based products to maximize profits on its TDF-Based franchise, it also knew that it had to get its TAF-
Based products on the market sufficiently in advance of TDF Patent expiration and generic competition in order for its deceitful product-hopping plan to work.
324. Only after realizing billions of dollars in sales of its TDF-Based franchise, through most of the patent life as delayed by settlement agreements with Defendant Teva and other generic manufacturers, did Gilead roll-out its TAF-Based franchise, implementing an aggressive marketing sales blitz, fueled by false and fraudulent promotional materials to achieve the conversion.
96 iii. Gilead Deceptively Promoted Prescription Switches From TDF-Based to TAF-Based HIV Medications To Reinforce Its Anti-Competitive Arrangements
325. After engaging in the exclusionary and anti-competitive conduct alleged herein, unfairly delaying the development and introduction of superior TAF and taking advantage of government funded PrEP research without payment of reasonable royalties, Gilead proceeded with aggressive marketing campaigns and promotional materials deceptively and fraudulently targeted at promoting switches in prescriptions from its legacy TDF-Based products to its exorbitantly priced TAF-Based products.
326. Gilead targeted prescriptions for HIV Medications covered and reimbursed under the State Medicaid Program, knowing that once HCPs switched their patients and participants from a TDF-Based to a TAF-Based regime, HCPs would be highly unlikely to switch their patients back to TDF-Based regimens once generic TDF-Based products became available. By converting TDF-
Based prescriptions to TAF-Based prescriptions (which cannot be automatically substituted at the pharmacy counter with generic and/or comparable products), Gilead could save a substantial percentage of its sales from going generic or being converted to known acceptable substitutes or comparable regimes under WHO and/or CDC guidelines.
327. Taking advantage of this fact, and Defendants’ anti-competitive arrangements already in place, Gilead embarked on a fiercely fraudulent and misleading marketing scheme to convince HCPs to switch prescriptions from TDF to its TAF-Based HIV Medications in violation of state laws and regulations.
328. Gilead’s own 2019 Annual Report acknowledges the market dynamics and likely impact of its deceptive marketing efforts and product-hopping schemes to switch prescriptions
97 from Truvada soon to be facing generic competition (and reduced pricing), to patent and exclusivity protected Descovy for PrEP:
Truvada (FTC/TDF)-based product sales decreased in the United States. . .in 2019 compared to 2018. The decrease in U.S. sales was primarily due to lower sales volume as a result of patients switching to newer regimens containing FTC/TAF, partially offset by the increased usage of Truvada for PrEP. The decrease in Europe sales was primarily due to lower sales volumes of Truvada and Atripla as a result of broader availability of generic versions and patients switching to newer regimes containing FTC/TAF. We expect a decline in our sales of Truvada in the United States as patients switch to Descovy for PrEP from Truvada for PrEP and expected entry of generic versions in late 2020.74
329. Gilead was able to fully anticipate the outcome here only because it had unfairly manipulated the market dynamics, creating the backdrop for such results.
330. Gilead’s untruthful and improper marketing campaigns concealed such anti- competitive settlement agreements, collusive business collaborations, anti-competitive conduct and violations of NM Anti-Trust Act and NM UPA, causing hundreds if not thousands of false claims to be presented to and reimbursed by the State’s Medicaid Program that were inappropriate, not cost effective, and in contravention of state laws and regulations.
1. Gilead’s Fraudulent Marketing and Targeting of HCPs in New Mexico
331. Gilead employed a ubiquitous fraudulent marketing campaign that tainted the entire medical discourse, including the information available to and relied upon by HCPs in New Mexico who prescribed HIV Medications to New Mexico citizens for whom the State reimbursed for the
74 Gilead Sciences, Inc. 2019 Annual Report, SEC Form 10-K (Feb. 25, 2020) (emphasis added), available at: https://www.sec.gov/ix?doc=/Archives/edgar/data/882095/000088209520000006/a2019form10-k.htm (emphasis added).
98 drugs and to the HCPs who advised and recommended that the State cover and reimburse for
Defendants’ over-priced HIV Medications.
332. Gilead-funded research has found its way into a myriad of publications referenced in and relied on by Gilead’s promotions, marketing literature and labels reviewed and considered by HCPs and payors, like the State.
333. Gilead’s deceptive business practices and illegal tactics – necessary in order to maintain its franchise and to effectuate its concerted product hopping schemes including promoting switches from its HIV Medications facing competition (and thus pricing erosion and decreased profit margins for Gilead) to its higher-priced franchise products, purportedly protected by evergreened and ancillary patents likely to be found invalid – have fraudulently caused and continue to cause movement of market share for its HIV Medications, including in New Mexico.
334. Furthermore, Gilead-generated or funded materials were part of the body of scientific literature and information regularly taken into consideration by the State and the advisory panel of the NM ADAP, which make formulary placement, control, and related reimbursement/coverage recommendations to the State as to medications for the prevention and treatment of HIV/AIDS. Because Gilead’s clinical trials, package labeling and inserts, and related promotional materials and marketing deliberately omitted material information set forth above
(e.g., the availability and efficacy of more affordable generics or comparable treatment regimens),
Gilead misled the State and the NM ADAP advisory board, and in turn the State’s coverage and reimbursement decisions as to the HIV Medications.
335. Upon information and belief, the same or similar Gilead-generated and/or funded materials set forth above were also regularly presented to or relied upon by PBMs, claims administrators and/or other third-party payors. These entities, in turn, submitted claims for
99 reimbursement or payment to the State for the HIV Medications, which the State paid, based on
Gilead’s misleading representations or omissions.
336. Gilead’s unconscionable and deceptive conduct in withholding TAF and PrEP research until its TDF-Based HIV Medications faced imminent generic competition placed a premium on profits over people and robbed government payors, like Plaintiff, and participants of affordable and accessible treatment and preventative HIV Medications.
337. Withholding standalone TAF from the market while fraudulently moving TDF-
Based HIV prescription bases to TAF-Based FDC Descovy, Gilead used its control over tenofovir to unjustifiably impair competitive forces to maintain it monopolistic position in the market, allowing it to charge unnecessarily excessive pricing to government payors, like Plaintiff.
338. Gilead’s unfair and deceptive marketing campaigns aggressively and inappropriately targeted HCPs, induced prescriptions for TAF-Based HIV Medications Vemlidy and Descovy using misleading marketing materials in violation of state laws, causing false and fraudulent claims to be presented for reimbursement under the State Medicaid program that were also artificially and exorbitantly over-priced, inappropriate and not cost-effective.
339. Neglecting to seek approval for Vemlidy (standalone TAF) for HIV treatment further reinforced and supported Gilead’s unfair, deceptive and unconscionable business practices, limiting the potential for TAF-Based FDCs and preventing substitution of TAF (in combination with generic and/or comparable standalone components) for Gilead’s TDF-Based FDCs. For example, Gilead’s degradation of TAF standalone effectively prevented TAF-Based versions of
Atripla consisting of TAF/generic EFV/generic 3TC or TAF/generic EFV/FTC, which would have reduced pricing.
100 340. But-for Gilead’s delays and deceptive product-hopping and marketing schemes,
HCPs could have prescribed less expensive generic versions of, or comparable treatments to,
Gilead’s HIV Medications.
341. In turn, both public and private formularies for New Mexico insureds would have been able to include less expensive generic versions of, or comparable treatments to, the HIV
Medications. These less expensive generics or comparable treatments would have been available earlier absent Defendants’ wrongful conduct. Accordingly, both private PBM and third-party payors that sought reimbursement from the State for their insureds’ or members’ prescriptions of
HIV Medications, as well as State prescription drug coverage programs that directly covered some or all of the cost of HIV Medications, such as the NM ADAP, would have charged or paid less for more affordable generic versions of, or comparable treatments to, the HIV Medications.
VI. FRAUDULENT CONCEALMENT AND TOLLING
342. New Mexico applies the doctrine of nullum tempus, which recognizes that the statute of limitations does not run against the sovereign unless expressly or by necessary implication.75 Further, New Mexico recognizes the doctrine of fraudulent concealment, which is
“based upon the principle that a defendant who has prevented the plaintiff from bringing suit within the statutory period should be estopped from asserting the statute of repose as a defense based on equitable estoppel.”76
343. Upon information and belief, Defendants each affirmatively concealed from
Plaintiff and the public their unlawful conduct. Defendants planned and implemented the unlawful
75 See e.g., In re Bogert’s Will, 1958-NMSC-104, ¶12, 64 N.M. 438, 442 (N.M. 1958). 76 See e.g., Tomlinson v. George, 2005-NMSC-020, ¶¶13-14, 138 N.M. 34, 39-40 (N.M. 2005).
101 and unfair schemes in private, and affirmatively strove to avoid discussing or disclosing the schemes and took other actions to hide and conceal their unlawful and unfair conduct.
344. For instance, the patent infringement litigations proceeded mostly under seal, and the nature of these settlement agreements and most favored entry arrangements and other side deals in order to delay generic entry were fraudulently concealed from the public, including
Plaintiff.
345. Furthermore, counsel for Gilead and Teva misleadingly informed the federal judge overseeing the Gilead v. Teva patent litigation that the parties had dropped the “no AG agreement” from the settlement when this was not the case. And indeed, the transcript of the hearing where this was disclosed was redacted in large part.
346. Further, the actual settlement documents (or any other terms that were not publicly disclosed) have not been made available to full public scrutiny. Nor were the precise terms of these agreements ever revealed to the public, including Plaintiff. Gilead and Teva never disclosed the anticompetitive negotiations and terms set forth above, as it was Gilead’s and Teva’s intent to deceive Plaintiff and other government payors.
347. Also, the precise terms and actual agreement between Gilead and BMS to restrain generic and comparable competition for Atripla have not been publicly disclosed or subject to full public scrutiny. Gilead and BMS never disclosed the extent of their anticompetitive negotiations and arrangements to unfairly limit the market to a single version of Atripla as set forth above, as it was Gilead’s and BMS’s intent to deceive Plaintiff and other government payors.
348. Gilead’s deceptive and anti-competitive conduct in withholding TAF in reserve for more than a decade to reinforce the exclusionary effects of its conspiracies with Teva and BMS, aimed at suppressing generic competition and maintaining monopoly profits was also never fully
102 disclosed to the public. Likewise, Gilead never fully disclosed the deceitful and fraudulent marketing schemes it employed to unlawfully induce HCPs and participants to switch prescriptions from TDF products to TAF products. Gilead’s intent was to deceive Plaintiff and other government payors.
349. Because of the above, Plaintiff did not discover, nor would they discover through reasonable and ordinarily diligence, Gilead’s, BMS’s and Teva’s deceptive, fraudulent, anticompetitive, and unlawful conduct alleged herein until, at the earliest, (i) April 4, 2016, upon
Gilead’s delayed launch of TAF-Based Descovy, months prior to launching a standalone TAF product to impair competition once generic entry was imminent and/or (ii) December 15, 2017, when Teva exclusively launched its generic Viread without AG or generic competition from
Gilead and under most favorable entry conditions.
350. Gilead’s, BMS’s and Teva’s false and misleading explanations, or obfuscations, lulled Plaintiffs and other government payors into believing that the excessive prices paid for
Viread, Atripla, Truvada, Vemlidy and Descovy were the result of competitive market forces rather than collusive or monopolistic, anticompetitive practices.
351. As a result of Defendants’ affirmative and other acts of concealment, any applicable statute of limitations affecting the rights of Plaintiff has been tolled. Plaintiff exercised reasonable diligence by among other things promptly investigating and bringing the allegations contained herein. Despite these or other efforts, Plaintiff was unable to discover, and could not have reasonably discovered, the unlawful conduct alleged herein at the time it occurred or at an earlier time to enable this complaint to be filed sooner.
352. Defendants’ unlawful conduct alleged herein, and the effects thereof are continuing and, as a direct and proximate result, Plaintiff has and continues to suffer ascertainable losses.
103 VII. CAUSES OF ACTION
353. The following causes of action are alleged by Plaintiff:
COUNT I Violations of New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-1 et seq. Against Gilead and Teva (Unreasonable Restraint of Trade, Section 57-1-1)
354. Plaintiff re-alleges and incorporates by reference the allegations contained in all preceding paragraphs of this Complaint as though set forth fully herein.
355. The New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-1, prohibits “[e]very contract, agreement, combination or conspiracy in restraint of trade or commerce, any part of which trade or commerce is within this state.” It also states “a person commits an unlawful act. .
.if the person” attempts to monopolize or combines or conspires with any other person(s) to monopolize. NMSA 1978, §57-1-2.
356. Pursuant to NMSA 1978, Section 57-1-3, any person “threatened with injury or injured in his business or property, directly or indirectly. . .may bring an action for appropriate injunctive relief, up to threefold damages sustained and costs and reasonable attorneys’ fees.” It further authorizes the attorney general to bring an action on behalf of the State, a political subdivision, or any public agency, to enjoin, restrain and prevent violations in the State. Id.; NMSA
1978, § 57-1-8.
357. Gilead’s and Teva’s anticompetitive conduct alleged herein, including but not limited to their reverse payment settlement agreements, and other deceptive, unfair and anti- competitive arrangements to suppress competition the market with Viread and/or its generic equivalents, with Truvada and/or its generic equivalents, with Atripla and/or its generic
104 equivalents constitute illegal contracts, agreements, combinations and conspiracies in restraint of trade and commerce. Such actions constitute violations of the NM Anti-Trust Act.
358. The contracts, agreements, combinations, and conspiracies as alleged herein, individually and collectively, restrained trade and commerce with respect to Viread, Truvada, and
Atripla, and their respective generic or comparable equivalents, by limiting or reducing production, and increasing the price of said products, and prevented competition in the manufacturing, making, sale and/or purchase of said products and their generic equivalents.
359. Defendants’ conduct, individually and collectively, had and continues to have an anticompetitive purpose and effect on competition, was not offset by any procompetitive justifications, and was not the least restrictive means of achieving any procompetitive benefits.
Defendants, individually and collectively, erected substantial barriers to entry and competition, and each Defendant’s procompetitive justifications if any are pretextual or are substantially outweighed by the anticompetitive effects of its conduct.
360. Competition, actual and potential, has been, and will continue to be, unreasonably restrained as a result of Defendants’ individual and collective actions.
361. Defendants’ conduct and various arrangements alleged herein, individually and collectively, are unlawful per se under New Mexico law.
362. Alternatively, Defendants’ conduct and various arrangements alleged herein, individually and collectively, constitute one or more unreasonable restraints under the “quick look” or “rule of reason” analysis to the extent applicable under New Mexico law. An antitrust market need not be defined exhaustively because of the direct evidence of Defendants’ ability to control prices or to exclude competition, e.g., the implementation of schemes (including reverse payment patent settlement agreements) to thwart or delay generic or other competition. Yet to the extent
105 necessary, there is a product market consisting of Viread, Truvada, Atripla and their respective generic equivalents. Each HIV Medication, individually or by component drug, constitutes a relevant antitrust product market along with its generic or comparable equivalents in all dosages and strengths. In addition, there is a geographic market comprised of the State of New Mexico, and alternatively and to the extent necessary, there is a geographic market comprised of the entire
United States. Because of the conduct alleged herein, Gilead controls at least 65-70% of the relevant product market, and in fact during the relevant time period, controlled upwards to 100% of it.
363. As a direct and proximate cause of Defendants’ contracts, agreements, combinations and conspiracies, government payors like Plaintiff and New Mexico persons were injured by paying supra-competitive prices for the above-mentioned products. Plaintiff and New
Mexico persons’ injuries are of the kind intended to be protected by the NM Anti-Trust Act. The
State was injured in its business or property in the form of reimbursements for Defendants’ drugs as alleged here in, and is entitled to “injunctive relief, up to threefold the damages sustained and costs and reasonable attorneys' fees. If the trier of fact finds that the facts so justify, damages may be awarded in an amount less than that requested, but not less than the damages actually sustained.”
NMSA 1978 § 57-1-3.
364. Accordingly, and pursuant to the NM Anti-Trust Act, the State seeks treble damages, prejudgment and post-judgment interest on actual damages, injunctive relief, reasonable attorneys’ fees and costs, and any other relief deemed necessary and proper.
COUNT II Violations of New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-1 et seq. Against Gilead, BMS and Gilead-BMS JV (Unreasonable Restraint of Trade, Section 57-1-1)
106 365. Plaintiff re-alleges and incorporates by reference the allegations contained in all preceding paragraphs of this Complaint as though set forth fully herein.
366. The New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-1, prohibits “[e]very contract, agreement, combination or conspiracy in restraint of trade or commerce, any part of which trade or commerce is within this state.” It also states “a person commits an unlawful act. .
.if the person” attempts to monopolize or combines or conspires with any other person(s) to monopolize. NMSA 1978, § 57-1-2.
367. Pursuant to NMSA 1978, Section 57-1-3, any person “threatened with injury or injured in his business or property, directly or indirectly. . .may bring an action for appropriate injunctive relief, up to threefold damages sustained and costs and reasonable attorneys’ fees.” It further authorizes the attorney general to bring an action on behalf of the State, a political subdivision, or any public agency, to enjoin, restrain and prevent violations in the State. Id.; NMSA
1978, § 57-1-8.
368. Gilead’s, BMS’s, and Gilead-BMS JV’s anticompetitive conduct alleged herein, including but not limited to the joint venture agreement respecting Gilead-BMS JV and the arrangements concerning the development and commercialization of Atripla and/or its generic or comparable equivalents, and the related restraints concerning the component drugs therefore, as well as other deceptive, unfair and anti-competitive arrangements to suppress competition with
Viread and/or its generic or comparable equivalents, with Truvada and/or its generic or comparable equivalents, with Atripla and/or its generic or comparable equivalents, constitute illegal contracts, agreements, combinations and conspiracies in restraint of trade and commerce. Such actions constitute violations of the NM Anti-Trust Act. Because of the conduct alleged herein, Gilead
107 controls at least 65-70% of the relevant product market, and in fact during the relevant time period, controlled upwards to 100% of it.
369. The contracts, agreements, combinations, and conspiracies as alleged herein, individually and collectively, restrained trade and commerce with respect to Viread, Truvada,
Atripla and/or their component drugs, and their respective generic or comparable equivalents, by limiting or reducing production, and increasing the price of said products, and prevented competition in the manufacturing, making, sale and/or purchase of said products and their generic equivalents.
370. Defendants’ conduct, individually and collectively, had and continues to have an anticompetitive purpose and effect on competition, was not offset by any procompetitive justifications, and was not the least restrictive means of achieving any procompetitive benefits.
Defendants, individually and collectively, erected substantial barriers to entry and competition, and each Defendant’s procompetitive justifications if any are pretextual or are substantially outweighed by the anticompetitive effects of its conduct.
371. The anticompetitive and other unfair, deceptive, or unlawful terms in Defendants’ joint venture arrangement were not ancillary restraints to an otherwise pro-competitive endeavor, but rather were intentional, material, and deliberate.
372. Competition, actual and potential, has been, and will continue to be, unreasonably restrained as a result of Defendants’ individual and collective actions.
373. Defendants’ conduct and various arrangements alleged herein, individually and collectively, are unlawful per se under New Mexico law.
374. Alternatively, Defendants’ conduct and various arrangements alleged herein, individually and collectively, constitute one or more unreasonable restraints under the “quick look”
108 or “rule of reason” analysis to the extent applicable under New Mexico law. An antitrust market need not be defined exhaustively because of the direct evidence of Defendants’ ability to control prices or to exclude competition, e.g., the implementation of schemes (including joint venture arrangement and related development and commercialization arrangements) to thwart or delay generic or other competition. Yet to the extent necessary, there is a relevant antitrust product market consisting of Viread, Truvada, Atripla, individually or by component drug, along with its generic or comparable equivalents. In addition, there is a geographic market comprised of the State of New Mexico, and alternatively and to the extent necessary, there is a geographic market comprised of the entire United States.
375. As a direct and proximate cause of Defendants’ contracts, agreements, combinations and conspiracies, government payors like Plaintiff and New Mexico persons were injured by paying supra-competitive prices for the above-mentioned products. Plaintiff and New
Mexico persons’ injuries are of the kind intended to be protected by the NM Anti-Trust Act. The
State was injured in its business or property in the form of reimbursements for Defendants’ drugs as alleged here in, and is entitled to “injunctive relief, up to threefold the damages sustained and costs and reasonable attorneys' fees. If the trier of fact finds that the facts so justify, damages may be awarded in an amount less than that requested, but not less than the damages actually sustained.”
NMSA 1978 § 57-1-3.
376. Accordingly, and pursuant to the NM Anti-Trust Act, the State seeks treble damages, prejudgment and post-judgment interest on actual damages, injunctive relief, reasonable attorneys’ fees and costs, and any other relief deemed necessary and proper.
COUNT III Violations of New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-1 et seq. Against Gilead Only
109 (Unlawful Monopolization, Section 57-1-2)
377. Plaintiff re-alleges and incorporates by reference the allegations contained in all preceding paragraphs of this Complaint as though set forth fully herein.
378. The New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-2, provides: “It is hereby declared to be unlawful for any person to monopolize or attempt to monopolize, or combine or conspire with any other person or persons to monopolize, trade or commerce, any part of which trade or commerce is within this state.”
379. Pursuant to NMSA 1978, Section 57-1-3, any person “threatened with injury or injured in his business or property, directly or indirectly. . .may bring an action for appropriate injunctive relief, up to threefold damages sustained and costs and reasonable attorneys’ fees.” It further authorizes the attorney general to bring an action on behalf of the State, a political subdivision, or any public agency, to enjoin, restrain and prevent violations in the State. Id.; NMSA
1978, § 57-1-8.
380. Gilead’s conduct as alleged herein constitutes unlawful monopolization under
Section 57-1-2.
381. There is a product market consisting of all HIV Medications and/or their generic equivalents. Alternatively, each HIV Medication, individually or by component drug, constitutes a relevant antitrust product market along with its generic or comparable equivalents. In addition, there is a geographic market comprised of the State of New Mexico, and alternatively and to the extent necessary, there is a geographic market comprised of the entire United States. Gilead controls at least 65-70% of the relevant product market, and in fact during the relevant time period, controlled upwards to 100% of it.
110 382. Gilead has gained and exercised unlawful monopoly power over the relevant product market in New Mexico (or, alternatively, the United States). But for Gilead’s exclusionary practices alleged herein, Gilead would not have been able to maintain its monopoly power over the relevant product market in New Mexico (or, alternatively, the United States).
383. Gilead willfully and unlawfully maintained its monopoly power by controlling the price and availability of the products in the relevant product market, and by excluding competition in the relevant geographic market. The goal, purpose, or effect of Gilead’s scheme was to artificially inflate the price of HIV Medications, each individual HIV Medication or component drug thereof, and/or generic or comparable equivalents, and to exclude competition. Gilead has willfully acquired and/or maintained its monopoly power over New Mexico (or, alternatively, the
United States) not through superior skill or product, business acumen, or enterprise, but rather through the foregoing anticompetitive and exclusionary conduct.
384. There is no appropriate, procompetitive, or legitimate business justification for the actions and conduct that have facilitated Gilead’s monopolization.
385. Competition, actual and potential, has been, and will continue to be, unreasonably restrained as a result of Defendants’ individual and collective actions.
386. As a direct and proximate cause of Gilead’s unlawful conduct, government payors like Plaintiff and New Mexico persons, were injured by paying supra-competitive prices for the above-mentioned products. Plaintiff and New Mexico persons’ injuries are of the kind intended to be protected by the NM Anti-Trust Act. The State was injured in its business or property in the form of reimbursements for Defendants’ drugs as alleged here in, and is entitled to “injunctive relief, up to threefold the damages sustained and costs and reasonable attorneys' fees. If the trier
111 of fact finds that the facts so justify, damages may be awarded in an amount less than that requested, but not less than the damages actually sustained.” NMSA § 57-1-3.
387. Accordingly, and pursuant to the NM Anti-Trust Act, the State seeks treble damages, interest on actual damages, injunctive relief, reasonable attorneys’ fees and costs, and any other relief deemed necessary and proper.
COUNT IV Violations of New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-1 et seq. Against Gilead Only (Unlawful Attempted Monopolization, Section 57-1-2)
388. Plaintiff re-alleges and incorporates by reference the allegations contained in all preceding paragraphs of this Complaint as though set forth fully herein.
389. The New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-2, provides: “It is hereby declared to be unlawful for any person to monopolize or attempt to monopolize, or combine or conspire with any other person or persons to monopolize, trade or commerce, any part of which trade or commerce is within this state.”
390. Pursuant to NMSA 1978, Section 57-1-3, any person “threatened with injury or injured in his business or property, directly or indirectly. . .may bring an action for appropriate injunctive relief, up to threefold damages sustained and costs and reasonable attorneys’ fees.” It further authorizes the attorney general to bring an action on behalf of the State, a political subdivision, or any public agency, to enjoin, restrain and prevent violations in the State. Id.; NMSA
1978, § 57-1-8.
391. Gilead’s conduct as alleged herein constitutes unlawful attempted monopolization under Section 57-1-2.
112 392. There is a product market consisting of all HIV Medications and/or generic equivalents. Alternatively, each HIV Medication, individually or by component drug, constitutes a relevant antitrust product market along with its generic or comparable equivalents. In addition, there is a geographic market comprised of the State of New Mexico, and alternatively and to the extent necessary, there is a geographic market comprised of the entire United States. Gilead controls, or has attempted to control or has come dangerously close to controlling, at least 65-70% of the relevant product market, and in fact during the relevant time period, controlled upwards to
100% of it.
393. Gilead has unlawfully attempted to gain, and has come dangerously close to obtaining, unlawful monopoly power over the relevant product market in New Mexico (or, alternatively, the United States). But for Gilead’s exclusionary practices alleged herein, Gilead would not have been able to maintain its monopoly power over the relevant product market in New
Mexico (or, alternatively, the United States), or have come dangerously close to doing so.
394. Gilead willfully and unlawfully attempted to gain, and has come dangerously close to obtaining, monopoly power by controlling the price and availability of the products in the relevant product market, and by excluding competition in the relevant geographic market. The goal, purpose, or effect of Gilead’s scheme was to artificially inflate the price of HIV Medications, each individual HIV Medication or component drug thereof, and/or generic equivalents, and to exclude competition. Gilead has willfully attempted to acquire and/or maintain, or has come dangerously close to acquiring and/or maintaining, its monopoly power over New Mexico (or, alternatively, the United States) not through superior skill or product, business acumen, or enterprise, but rather through the foregoing anticompetitive and exclusionary conduct.
113 395. There is no appropriate, procompetitive, or legitimate business justification for the actions and conduct that have facilitated Gilead’s unlawful attempted monopolization.
396. Competition, actual and potential, has been, and will continue to be, unreasonably restrained as a result of Defendants’ individual and collective actions.
397. As a direct and proximate cause of Gilead’s unlawful conduct, government payors like Plaintiff and New Mexico persons, were injured by paying supra-competitive prices for above- mentioned products and their generic or comparable equivalents. Plaintiff and New Mexico persons’ injuries are of the kind intended to be protected by the NM Anti-Trust Act. The State was injured in its business or property in the form of direct reimbursements for Defendants’ drugs as alleged here in, and is entitled to “injunctive relief, up to threefold the damages sustained and costs and reasonable attorneys' fees. If the trier of fact finds that the facts so justify, damages may be awarded in an amount less than that requested, but not less than the damages actually sustained.”
NMSA 1978 § 57-1-3.
398. Accordingly, and pursuant to the NM Anti-Trust Act, the State seeks treble damages, interest on actual damages, injunctive relief, reasonable attorneys’ fees and costs, and any other relief deemed necessary and proper.
COUNT V Violations of New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-1 et seq. Against Gilead and Teva (Conspiracy to Monopolize, Section 57-1-2)
399. Plaintiff re-alleges and incorporates by reference the allegations contained in all preceding paragraphs of this Complaint as though set forth fully herein.
400. The New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-2, provides: “It is hereby declared to be unlawful for any person to monopolize or attempt to monopolize, or combine
114 or conspire with any other person or persons to monopolize, trade or commerce, any part of which trade or commerce is within this state.”
401. Pursuant to NMSA 1978, Section 57-1-3, any person “threatened with injury or injured in his business or property, directly or indirectly. . .may bring an action for appropriate injunctive relief, up to threefold damages sustained and costs and reasonable attorneys’ fees.” It further authorizes the attorney general to bring an action on behalf of the State, a political subdivision, or any public agency, to enjoin, restrain and prevent violations in the State. Id.; NMSA
1978, § 57-1-8.
402. Gilead and Teva conspired to suppress generic competition with Viread and/or its generic or comparable equivalents, with Truvada and/or its generic or comparable equivalents, with Atripla and/or its generic or comparable equivalents constitute illegal contracts, agreements, combinations and conspiracies in restraint of trade and commerce. Gilead and Teva further conspired to jointly gain monopoly power in the relevant market, and/or to vest one or the other monopoly in the relevant market. Such actions constitute violations of the NM Anti-Trust Act.
403. The contracts, agreements, combinations, and conspiracies as alleged herein, individually and collectively, restrained trade and commerce with respect to Viread, Truvada,
Atripla, and their respective generic or comparable equivalents, by limiting or reducing production, and increasing the price of said products, and prevented competition in the manufacturing, making, sale and/or purchase of said products and their generic or comparable equivalents.
404. There is a relevant antitrust product market consisting of Viread, Truvada, Atripla, individually or by component drug, along with its generic or comparable equivalents. In addition, there is a geographic market comprised of the State of New Mexico, and alternatively and to the extent necessary, there is a geographic market comprised of the entire United States. Gilead and
115 Teva, either individually or collectively, controls or has attempted to control at least 65-70% of the relevant product market, and in fact during the relevant time period, controlled upwards to
100% of it.
405. Gilead and Teva, individually or collectively, with specific intent, have unlawfully gained, or attempted to gain, unlawful monopoly power over the relevant product market in New
Mexico (or, alternatively, the United States). But for Gilead’s and Teva’s exclusionary practices alleged herein, Gilead and Teva would not have been able to maintain or gain monopoly power over the relevant product market in New Mexico (or, alternatively, the United States), or come dangerously close to doing so.
406. Gilead and Teva willfully and unlawfully gained or attempted to gain monopoly power by controlling the price and availability of the products in the relevant product market, and by excluding competition in the relevant geographic market. The goal, purpose, or effect of
Gilead’s scheme was to artificially inflate the price of each individual HIV Medication or component drug thereof, and/or generic or comparable equivalents, and to exclude competition.
Gilead and Teva, individually or collectively, have acquired or willfully attempted to acquire monopoly power over New Mexico (or, alternatively, the United States) not through superior skill or product, business acumen, or enterprise, but rather through the foregoing anticompetitive and exclusionary conduct.
407. There is no appropriate, procompetitive, or legitimate business justification for the actions and conduct that have facilitated Gilead’s and Teva’s unlawful, willful, specifically intended anticompetitive conduct.
408. Competition, actual and potential, has been, and will continue to be, unreasonably restrained as a result of Defendants’ individual and collective actions.
116 409. As a direct and proximate cause of Gilead’s and Teva’s unlawful conduct, government payors like Plaintiff and New Mexico persons, were injured by paying supra- competitive prices for above-mentioned products and their generic equivalents. Plaintiff and New
Mexico persons’ injuries are of the kind intended to be protected by the NM Anti-Trust Act. The
State was injured in its business or property in the form of direct reimbursements for Defendants’ drugs as alleged here in, and is entitled to “injunctive relief, up to threefold the damages sustained and costs and reasonable attorneys' fees. If the trier of fact finds that the facts so justify, damages may be awarded in an amount less than that requested, but not less than the damages actually sustained.” NMSA 1978 § 57-1-3. Accordingly, and pursuant to the NM Anti-Trust Act, the State seeks treble damages, interest on actual damages, injunctive relief, reasonable attorneys’ fees and costs, and any other relief deemed necessary and proper.
COUNT VI Violations of New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-1 et seq. Against Gilead, BMS, and Gilead-BMS JV (Conspiracy to Monopolize, Section 57-1-2)
410. Plaintiff re-alleges and incorporates by reference the allegations contained in all preceding paragraphs of this Complaint as though set forth fully herein.
411. The New Mexico Anti-Trust Act, NMSA 1978, Section 57-1-2, provides: “It is hereby declared to be unlawful for any person to monopolize or attempt to monopolize, or combine or conspire with any other person or persons to monopolize, trade or commerce, any part of which trade or commerce is within this state.”
412. Pursuant to NMSA 1978, Section 57-1-3, any person “threatened with injury or injured in his business or property, directly or indirectly. . .may bring an action for appropriate injunctive relief, up to threefold damages sustained and costs and reasonable attorneys’ fees.” It
117 further authorizes the attorney general to bring an action on behalf of the State, a political subdivision, or any public agency, to enjoin, restrain and prevent violations in the State. Id.; NMSA
1978, § 57-1-8.
413. Gilead, BMS, and Gilead-BMS JV conspired to suppress generic competition with
Viread and/or its generic or comparable equivalents, with Truvada and/or its generic or comparable equivalents, with Atripla and/or its generic or comparable equivalents constitute illegal contracts, agreements, combinations and conspiracies in restraint of trade and commerce. Gilead, BMS, and
Gilead-BMS JV further conspired to jointly gain monopoly power in the relevant market, and/or to vest one or the other monopoly in the relevant market. Such actions constitute violations of the
NM Anti-Trust Act.
414. The contracts, agreements, combinations, and conspiracies as alleged herein, individually and collectively, restrained trade and commerce with respect to Viread, Truvada,
Atripla, and their respective generic or comparable equivalents and/or components, by limiting or reducing production, and increasing the price of said products, and prevented competition in the manufacturing, making, sale and/or purchase of said products and their generic or comparable equivalents and/or components.
415. There is a relevant antitrust product market consisting of Viread, Truvada, Atripla, each individually and by respective generic or comparable equivalents and/or component drugs.
In addition, there is a geographic market comprised of the State of New Mexico, and alternatively and to the extent necessary, there is a geographic market comprised of the entire United States.
Gilead, BMS, and Gilead-BMS JV, either individually or collectively, controls or has attempted to control at least 65-70% of the relevant product market, and in fact during the relevant time period, controlled upwards to 100% of it.
118 416. Gilead, BMS, and Gilead-BMS JV, individually or collectively, with specific intent, have unlawfully gained, or attempted to gain, unlawful monopoly power over the relevant product market in New Mexico (or, alternatively, the United States). But for Gilead’s, BMS’s, and
Gilead-BMS’s exclusionary practices alleged herein, Gilead, BMS, and Gilead-BMS JV would not have been able to maintain or gain monopoly power over the relevant product market in New
Mexico (or, alternatively, the United States), or come dangerously close to doing so.
417. Gilead, BMS, and Gilead-BMS JV willfully and unlawfully gained or attempted to gain monopoly power by controlling the price and availability of the products in the relevant product market, and by excluding competition in the relevant geographic market. The goal, purpose, or effect of Gilead’s, BMS’s, and Gilead-BMS JV’s scheme was to artificially inflate the price of each individual HIV Medication or component drug thereof, and/or generic or comparable equivalents, and to exclude competition. Gilead, BMS, and Gilead-BMS JV, individually or collectively, have acquired or willfully attempted to acquire monopoly power over New Mexico
(or, alternatively, the United States) not through superior skill or product, business acumen, or enterprise, but rather through the foregoing anticompetitive and exclusionary conduct.
418. There is no appropriate, procompetitive, or legitimate business justification for the actions and conduct that have facilitated Gilead’s, BMS’s, and Gilead-BMS’s unlawful, willful, specifically intended anticompetitive conduct.
419. Competition, actual and potential, has been, and will continue to be, unreasonably restrained as a result of Defendants’ individual and collective actions.
420. As a direct and proximate cause of Gilead’s, BMS’s, and Gilead-BMS’s unlawful conduct, government payors like Plaintiff and New Mexico persons, were injured by paying supra- competitive prices for above-mentioned products and their generic or comparable equivalents.
119 Plaintiff and New Mexico persons’ injuries are of the kind intended to be protected by the NM
Anti-Trust Act. The State was injured in its business or property in the form of direct reimbursements for Defendants’ drugs as alleged here in, and is entitled to “injunctive relief, up to threefold the damages sustained and costs and reasonable attorneys' fees. If the trier of fact finds that the facts so justify, damages may be awarded in an amount less than that requested, but not less than the damages actually sustained.” NMSA 1978 § 57-1-3.
421. Accordingly, and pursuant to the NM Anti-Trust Act, the State seeks treble damages, interest on actual damages, injunctive relief, reasonable attorneys’ fees and costs, and any other relief deemed necessary and proper.
COUNT VII Violations of New Mexico Unfair Practices Act, NMSA 1978, Section 57-12-1 et seq. Against All Defendants
422. Plaintiff re-alleges and incorporates by reference the allegations contained in all preceding paragraphs of this Complaint as though set forth fully herein.
423. Plaintiff brings this claim under the NM UPA, Section 57-12-3, which prohibits
Defendants from engaging in “unfair or deceptive trade practices and unconscionable trade practices in the conduct of any trade or commerce.”
424. The NM UPA defines an “unfair or deceptive trade practices” as an “act specifically declared unlawful pursuant to the NM UPA, a false or misleading oral or written statement, visual description or other representation of any kind knowingly made in connection with the sale, lease, rental or loan of goods or services . . . which may, tends to or does deceive or mislead any person.”
NM UPA § 57-12-2(D).
425. The NM UPA further defines an “unfair or deceptive trade practice” as:
120 (5) representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation or connection that he does not have; .… (7) representing that goods or services are of a particular standard, quality or grade or that goods are of a particular style or model if they are of another;
(11) making false or misleading statements of fact concerning the price of goods or services, the prices of competitors or one’s own price at a past or future time or the reasons for, existence of or amounts of price reduction; or .… (14) using exaggeration, innuendo or ambiguity as to a material fact or failing to state a material fact if doing so deceives or tends to deceive.
Id.
426. Unconscionable trade practices include taking “advantage of the lack of knowledge, ability, experience or capacity of a person to a grossly unfair degree; or (2) results in a gross disparity between the value received by a person and the price paid.” Id.
427. Defendants engaged in deceptive and unconscionable conduct in the course of their arrangements, agreements, marketing and sales of HIV Medications in violation of Section 57-12-
3.
428. Specifically, and as described herein, Defendants made the following misrepresentations, expressly or by implication to Plaintiff and New Mexico persons about:
a. The prices for HIV Medications being the result of normal competitive market
forces, not the anticompetitive, deceptive, and unfair acts alleged herein;
b. The patent protection for HIV Medications;
c. The timing and availability of generic or comparable equivalents for HIV
Medications;
d. The availability and/or non-availability of cheaper, superior, and/or equally
efficacious treatments instead of HIV Medications; and
121 e. The arrangements alleged herein as being procompetitive and/or not unlawful.
429. These representations or omissions were false and misleading that may, tend to or do deceive or mislead any person.
430. Defendants violated and continue to violate the NM UPA by engaging in various practices proscribed by Section 57-13-2(D), including but not limited to:
Delaying and preventing generic competition to Defendants’ products, thereby causing Plaintiff to pay overcharges on those products; Delaying and preventing competition from FDCs comparable to Defendants’ FDCs, thereby causing Plaintiff to pay overcharges on Defendants’ FDCs; Impairing generic competition to Viread, Truvada, Atripla and Descovy, thereby causing Plaintiff to pay overcharges on those products; Causing Gilead to delay the introduction of TAF and TAF-Based FDCs, thereby denying Plaintiff the benefits of those products and causing them to continue to pay overcharges on Viread and Defendants’ TDF-Based FDCs; Intentionally degrading standalone TAF, thereby causing Plaintiff to pay overcharges on Viread, TAF and other FDCs; Delaying and preventing generic competition to Viread, Truvada, and Atripla, thereby causing Plaintiff to pay overcharges on those products; and Through misrepresentation, omission, and/or deceit, manipulating the information available about cheaper, superior, and/or equally efficacious treatments,
431. As a result of Defendants’ unlawful conduct alleged herein, the price of HIV
Medications at issue were artificially inflated. Plaintiff was further deprived of the opportunity to purchase lower-priced generic and/or comparable versions of the branded products sooner and the quality of the products was artificially reduced.
432. Defendants violated the NM UPA by failing to state material facts that would adequately warn New Mexico persons and Plaintiff about the anti-competitive deals, unfair and deceptive business practices, and increasingly inflated pricing of HIV Medications as alleged herein.
122 433. Defendants’ actions as described herein were done knowingly, willfully, and with conscious disregard of the rights of New Mexico persons and Plaintiff.
434. Pursuant to NMSA 1978, Section 57-12-8(B), Plaintiff seeks injunctive relief in the form of an order requiring Defendants to cease the unlawful and unfair practices described herein.
435. More specifically, Defendants’ anti-competitively delaying generic versions of
Viread, Truvada and Atripla is causing ongoing harm that requires this Court’s intervention.
Unless enjoined by this Court, Defendants’ anti-competitive conduct with respect to Truvada will cause all other generic manufacturers that are stacked up behind Teva’s recent launch to delay entry until March 30, 2021. That delay will cost payors, like the State, millions of dollars in addition to the millions that Defendants’ other unlawful conduct has already caused.
436. Delays relating to generic Truvada are particularly destructive because Truvada is one of only two FDA-approved drugs indicated for PrEP and preventing HIV in HIV-negative people. Defendants anti-competitively delaying generic Truvada will result in hundreds of New
Mexico participants being unable to access PrEP, causing many of them to needlessly become infected with HIV.
437. Additionally, unless enjoined by this Court, Defendants’ anti-competitive conduct will also cause all other generic manufacturers that are stacked up behind Teva’s recent launch to delay generic Atripla entry until March 30, 2021. That delay will cost payors, like the State, millions of dollars in addition to the millions that Defendants’ other unlawful conduct has already caused on purchases of Atripla.
438. Plaintiff and the people of New Mexico will be irreparably harmed if such orders are not granted.
439. NMSA 1978, Section 57-12-11 states,
123 [i]n any action brought under Section 57-12-8. . ., if the court finds that a person is willfully using or has willfully used a method, act or practice declared unlawful by the Unfair Practices Act, the attorney general, upon petition to the court, may recover, on behalf of the state of New Mexico, a civil penalty of not exceeding five thousand dollars ($5,000) per violation.
440. Defendant committed a separate and independent violation of the NM UPA through each and every unfair, deceptive, false or misleading statement or other representation, or omission of material facts.
441. Each and every time Defendants advertised, marketed, promoted, and/or presented claims for reimbursement, directly or indirectly, in the State of New Mexico, Defendants committed a separate and independent violation of the NM UPA through unconscionable, unfair and deceptive trade practices.
442. Defendants have engaged in countless violations of the NM UPA by making unfair, deceptive, false or misleading statements and/or other misrepresentations and by omitting material information with respect to their HIV Medications since they began developing and selling the products, beginning at least as early as 2001 through the present, with multiple violations occurring each and every day during this period throughout the State.
443. Defendants should therefore be assessed a civil penalty of $5,000 for each of those violations.
444. Plaintiff and New Mexico persons have lost money as a result of Defendants’ deceptive conduct. The State and New Mexico persons would not have reimbursed for or purchased the HIV Medications if they had known the products were over-priced, not cost- effective, inferior, and/or harmful.
124 445. Defendants collected substantial profits from these illegal sales. Such sales produced astronomical profit margins for each sale than would have been absent Defendants’ deceptive practices.
446. Accordingly, Plaintiff also seeks restitution for the disgorgement of unlawful profits obtained by Defendants through the sale of their respective HIV Medications pursuant to
NMSA 1978, Section 57-12-8(B), as well as any other such relief that the Court may deem necessary and appropriate.
VIII. CONCLUSION
447. Defendants’ unlawful and anticompetitive settlement agreements, business arrangements and deceptive and fraudulent marketing tactics severely restrained competition and innovation resulting in unjustifiably inflated pricing, causing harm to the Plaintiff, as a government payor, and New Mexico participants.
IX. REQUEST FOR RELIEF
WHEREFORE, Plaintiff, the State of New Mexico, respectfully requests that the Court enter judgment in its favor and against Defendant by granting relief as follows:
A. On Counts I – VII, judgment for the State, as applicable, against Defendants for the
maximum amount under State law under which each respective Count is brought and
enjoining Defendants from such deceptive and unlawful acts as alleged herein;
B. On Counts I-VII, judgment for the State, awarding the maximum amount of
statutory penalties available;
1. Awarding the maximum amount of statutory penalties available for each
violation of the New Mexico Unfair Practices Act;
125 2. Awarding the maximum amount of statutory penalties available for each
violation of the New Mexico Anti-Trust Act;
C. Judgment for the State, in an amount equal to three times the damages the State,
respectively, has sustained because of Defendants’ actions;
D. Awarding restitution and disgorgement of the unlawful profits collected by
Defendants;
E. Awarding prejudgment and post-judgment interest at the prevailing legal rate;
F. Awarding Plaintiff’s attorneys’ fees and costs of suit; and
Awarding any equitable and other further relief as the Court may deem necessary and
appropriate.
Dated: This 24th day of February, 2021.
Respectfully submitted,
HECTOR H. BALDERAS NEW MEXICO ATTORNEY GENERAL
/s/ Brian L. Moore Brian L. Moore P. Cholla Khoury Assistant Attorneys General 201 Third Street NW, Suite 300 Albuquerque, NM 87102 (505) 717-3500 [email protected] [email protected]
Attorneys for Plaintiff/Petitioner
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