Pharma ‘pay for delay’ deal cost Merck, Glenmark $70M in cholesterol drug lawsuit

A federal judge in Virginia approved a $70 million settlement agreement Thursday between several municipal employee benefit funds and two pharmaceutical companies—Merck & Co. and Glenmark Pharmaceuticals – over the cholesterol-lowering medication Zetia, and allegations that drug manufacturers colluded to delay the introduction of a less-expensive generic version.

U.S. District Senior Judge Rebecca Beach Smith of the Eastern District of Virginia approved the final settlement agreement between the municipal benefit funds and pharmaceutical companies, Merck and Glenmark Pharmaceuticals, which also requires the defendants to pay one-third of the settlement fund in attorney fees, or $23 million, as well as $3.9 million in costs—as requested by plaintiffs’ counsel.

The plaintiffs, which include several municipal employee benefit funds, alleged that defendants violated antitrust law by entering into an unlawful agreement to delay the less-expensive generic version of Merck’s cholesterol-lowering medication, Zetia, which allegedly caused artificially high prices for branded Zetia and its generic equivalents.

The drugmakers’ alleged unlawful agreement is a 2010 settlement agreement resolving a patent infringement dispute Merck brought against Glenmark after Glenmark filed an abbreviated new drug application seeking to manufacturer, market, and sell a less expensive, generic form of Zetia, according to the opinion.

Merck agreed to drop patent infringement claims over Glenmark’s proposed generic version of Zetia, and Glenmark agreed not to launch its version for almost five years, the plaintiffs alleged.

The plaintiffs also claimed that Glenmark, which had challenged the validity of Merck’s patent claims, would have prevailed had it not settled, and would then have launched generic Zetia earlier. Merck paid off Glenmark by agreeing to not launch its own authorized generic version of Zetia to compete with Glenmark’s, a concession worth $800 million, the plaintiffs said.

Such agreements are known as “reverse payment” or “pay for delay” deals, which have been the subject of numerous antitrust lawsuits.

As a result, the plaintiffs claim they paid more for the medication than they would have paid if it weren’t for the defendants’ allegedly unlawful conduct, the opinion said.

The defendants have denied the plaintiffs’ allegations of unlawful conduct or that any of the alleged conduct caused any damage.

“The court finds: (1) the $70 million settlement is a favorable result for the Class; (2) there were no objections to the Settlement Agreement or the attorneys’ fees request; (3) counsel for EPPs are experienced and highly skilled in pharmaceutical antitrust class action cases; (4) this case was litigated for nearly five years and involved numerous complex issues of fact and law; and (5) EPPs faced significant risks in proving their case at trial, so there was a significant risk that counsel would not receive any compensation for their efforts,” U.S. District Senior Judge Rebecca Beach Smith of the Eastern District of Virginia, wrote in her opinion. “Each of these factors supports the reasonableness of the requested fee.”

In considering public policy of the plaintiffs’ proposed fee award, Smith said that class action litigation often requires attorneys to “front costs at significant risk of nonpayment,” while on the contrary, an oversized award may undermine the public’s trust in class action litigation. She also held that the award was within the “typical range” for pharmaceutical antitrust matters within the district, citing In re Peanut Farmers Antitrust Litigation, a settlement out of the Eastern District of Virginia in August 2021 in which one-third of the fund was a common award.

“The court is satisfied that the requested attorneys’ fees of one-third of the Settlement Fund properly balances these policy goals. A significant award is appropriate for the attorneys because they litigated the case vigorously for nearly five years, managed the interests of the EPP Class, and fronted significant costs,” she wrote. “The court finds that the one-third percentage of the fund is not excessive so as to undermine public trust in class action litigation.”

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Additionally, the pharmaceutical companies will have to pay $300,000 for incentive awards to be divided among seven class representative plaintiffs. The following plaintiffs will receive an “extraordinary service” award of $75,000 including: the Painters District Council No. 30 Health & Welfare Fund and the city of Providence, Rhode Island.

The remaining plaintiffs will receive a $30,000 award: Sergeants Benevolent Association; Uniformed Firefighters’ Association of Greater New York Security Benefit Fund and Retired Firefighters’ Security Benefit Fund of the Uniformed Firefighters’ Association; United Food and Commercial Workers Local 1500 Welfare Fund; Philadelphia Federation of Teachers Health & Welfare Fund; and the International Union of Operating Engineers Local 49 Health and Welfare Fund.

Smith also entered a final order and judgment, officially closing the case Thursday.