15-3364-cv
In re ACTOS End-Payor Antitrust Litigation


                         UNITED STATES COURT OF APPEALS
                               FOR THE SECOND CIRCUIT
                                             _____________________

                                               AUGUST TERM 2016

   (ARGUED: SEPTEMBER 16, 2016                                         DECIDED: FEBRUARY 8, 2017)

                                               Docket No. 15-3364
                                             _____________________

                             IN RE ACTOS END-PAYOR ANTITRUST LITIGATION

            UNITED FOOD AND COMMERCIAL WORKERS LOCAL 1776 & PARTICIPATING
          EMPLOYERS HEALTH AND WELFARE FUND, INDIVIDUALLY AND ON BEHALF OF ALL
               OTHERS SIMILARLY SITUATED, 199 SEIU-NATIONAL BENEFIT FUND,

                                                           Plaintiffs-Appellants,

           CROSBY TUGS, LLC, INTERNATIONAL UNION OF OPERATING ENGINEERS LOCAL
          132 HEALTH AND WELFARE FUND, PAINTERS DISTRICT COUNCIL NO. 30 HEALTH
         AND WELFARE FUND, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
         SITUATED, NECA-IBEW WELFARE TRUST FUND, INDIVIDUALLY AND ON BEHALF
            OF ALL OTHERS SIMILARLY SITUATED, CITY OF PROVIDENCE, RHODE ISLAND
         INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, MINNESOTA
        AND NORTH DAKOTA BRICKLAYERS AND ALLIED CRAFTWORKERS HEALTH FUND, ON
          BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, NEW ENGLAND
           ELECTRICAL WORKERS BENEFIT FUND, INDIVIDUALLY AND ON BEHALF OF ALL
            OTHERS SIMILARLY SITUATED, MAN-U SERVICE CONTRACT TRUST FUND, ON
                 BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED,

                                                     Consolidated Plaintiffs-Appellants,

             PLUMBERS & PIPEFITTERS LOCAL 178 HEALTH & WELFARE TRUST FUND,
         FRATERNAL ORDER OF POLICE, FORT LAUDERDALE LODGE 31, INSURANCE TRUST
          FUND, A.F. OF L. A.G.C. BUILDING TRADES WELFARE PLAN, INDIVIDUALLY AND
         ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, GREATER METROPOLITAN HOTEL
              EMPLOYERS-EMPLOYEES HEALTH AND WELFARE FUND, ON BEHALF OF
        THEMSELVES AND ALL OTHER SIMILARLY SITUATED, LOCAL 17 HOSPITALITY BENEFIT
            FUND, ON BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED, DENNIS
        KREISH, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, TEAMSTERS
          UNION LOCAL 115 HEALTH & WELFARE FUND, ON BEHALF OF THEMSELVES AND
                               ALL OTHERS SIMILARLY SITUATED,


                                                       1
                                                      Consolidated Plaintiffs,

                                               -v.-

          TAKEDA AMERICA HOLDINGS, INC., TAKEDA PHARMACEUTICALS, U.S.A., INC.,
          TAKEDA DEVELOPMENT CENTER AMERICAS, INC., TAKEDA PHARMACEUTICALS
                                 COMPANY LIMITED,

                                                      Defendants-Appellees,

          RANBAXY LABORATORIES, LTD., MYLAN, INC., MYLAN PHARMACEUTICALS INC.,
           ACTAVIS PLC, F/K/A ACTAVIS, INC., WATSON LABORATORIES, INC., RANBAXY,
          INC., RANBAXY PHARMACEUTICALS, INC., TEVA PHARMACEUTICALS INDUSTRIES,
                          LTD., TEVA PHARMACEUTICALS USA, INC.,

                                                           Defendants.

Before:        JACOBS and LIVINGSTON, Circuit Judges, and RAKOFF, District Judge.1
                                _______________________

         Plaintiffs-appellants allege that defendants-appellees delayed competitors from marketing
generic versions of a drug by falsely describing two patents to the Food and Drug
Administration, thereby causing plaintiffs to pay monopoly prices for the drug in violation of
state-law analogs of the Sherman Act. The district court (Abrams, J.) dismissed the complaint for
failure to plausibly allege that the false descriptions caused the delay. The judgment of the
district court is AFFIRMED IN PART, VACATED IN PART, and REMANDED for further
proceedings consistent with this opinion.
                                 _______________________

               STEVE D. SHADOWEN (Jayne A. Goldstein, Pomerantz LLP, Weston, FL; Kenneth
               A. Wexler, Wexler Wallace LLP, Chicago, IL, on the brief), Hilliard & Shadowen
               LLP, Austin, TX, for Plaintiffs-Appellants.

               ROHIT K. SINGLA (Blanca F. Young, Munger, Tolles & Olson LLP, San Francisco,
               CA; Jeffrey I. Weinberger, Adam R. Lawton, Munger, Tolles & Olson LLP, Los
               Angeles, CA, on the brief), Munger, Tolles & Olson LLP, San Francisco, CA, for
               Defendants-Appellees.

               Thomas M. Sobol, Davis S. Nalven, Gregory T. Arnold, Kristen A. Johnson,
               Hagens Berman Sobol Shapiro LLP, Cambridge, MA; Linda P. Nussbaum,
               Bradley J. Demuth, Nussbaum Law Group, P.C., New York, NY, for amicus
               curiae Direct Purchasers in support of no party.

1
  Judge Jed S. Rakoff, of the United States District Court for the Southern District of New York,
sitting by designation.
                                                2
                                    _______________________

RAKOFF, District Judge:

        Plaintiffs allege that the defendants-appellees (collectively “Takeda”) prevented

competitors from timely marketing a generic version of Takeda’s diabetes drug ACTOS by

falsely describing two patents to the Food and Drug Administration. Plaintiffs claim that these

false patent descriptions channeled Takeda’s competitors into a generic drug approval process

that granted the first-filing applicants a 180-day exclusivity period, which in turn acted as a 180-

day “bottleneck” to all later-filing applicants. Of the ten generic applicants, nine took that route.

However, one generic manufacturer, Teva Pharmaceutical Industries, Ltd. and Teva

Pharmaceuticals USA, Inc. (collectively “Teva”), sought approval via another regulatory

mechanism, but was thwarted when the FDA announced that all generic manufacturers would be

required to take the bottlenecked route. The FDA’s announcement was expressly based on

Takeda’s representations that it had correctly described its patents. Thereafter, Takeda settled

pending patent infringement suits with the three first-filing generic manufacturers and Teva on

terms that kept them out of the market until August 2012 (though Teva, unlike the three first-

filing generics, could only enter the market as an authorized distributor at that time), and with the

other six later-filing generic manufacturers on terms that kept them out of the market for another

180 days after that, i.e., until at least February 2013.

        Plaintiffs and the class they seek to represent are drug purchasers who allege that they

were wrongfully obliged to pay monopoly prices for ACTOS from January 2011, when Takeda’s

patent on the active ingredient in ACTOS expired, to at least February 2013, when the mass of

generic market entry occurred.

        The district court dismissed plaintiffs’ antitrust claims for failing to plausibly allege that



                                                   3
Takeda’s false patent descriptions caused any delay in generic market entry. The district court

reasoned that, inter alia, plaintiffs failed to identify a viable regulatory route for generic drug

approval that would have avoided the 180-day bottleneck, and that even if they had, they failed

to plausibly allege how the generic manufacturers would have avoided Takeda’s infringement

lawsuits, all of which were voluntarily settled. Plaintiffs appealed.

       To the extent plaintiffs’ theory posits a delay in the marketing of generic alternatives to

ACTOS by all the generic applicants other than Teva, we affirm, because plaintiffs’ theory

presupposes that these applicants were aware of Takeda’s allegedly false patent descriptions

when they filed their applications, which is not supported by well-pleaded allegations. However,

because plaintiffs’ theory as to Teva does not require any knowledge of the false patent

descriptions, we reach other issues as to Teva and find that plaintiffs plausibly alleged that

Takeda delayed Teva’s market entry. We therefore vacate the judgment of the district court to

that limited extent.

                                             Discussion

       Although the violations of which plaintiffs ultimately complain are antitrust violations,

they occur in the context of the pharmaceutical regulatory scheme governed by the Federal Food,

Drug, and Cosmetic Act, as amended by the Drug Price Competition and Patent Term

Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (the “Hatch-Waxman Act”), and

various rules promulgated thereunder. We focus in this appeal on two complementary aspects of

that regulatory scheme: an initial applicant’s duty to inform the FDA of patents covering a

proposed new drug, and a subsequent applicant’s duty to assure the FDA that a proposed generic

version of the drug will not infringe those patents.




                                                   4
        More specifically, under the Hatch-Waxman Act, an initial or “brand” manufacturer,

before marketing a new drug, must obtain approval from the FDA by filing a New Drug

Application (“NDA”). 21 U.S.C. § 355(b).2 An NDA must include, inter alia, “the patent

number and the expiration date of any patent which claims the drug for which the applicant

submitted the application or which claims a method of using such drug and with respect to which

a claim of patent infringement could reasonably be asserted if a person not licensed by the owner

engaged in the manufacture, use, or sale of the drug.” Id. § 355(b)(1). The NDA must classify

these patents as “drug” (or “drug substance”), “drug product,” or “method of use” patents. See 21

C.F.R. §§ 314.53(c)(1)(ii), 314.53(b) (1999) & (2002).

        The FDA publishes the brand applicants’ patent submissions, including the patent

descriptions, in a tome titled Approved Drug Products with Therapeutic Equivalence Evaluation,

commonly known as the “Orange Book.” See Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S,

132 S. Ct. 1670, 1676 (2012); 21 C.F.R. § 314.53(e). The FDA considers its role in publishing

the Orange Book to be purely ministerial. See, e.g., aaiPharma Inc. v. Thompson, 296 F.3d 227,

237 (4th Cir. 2002). Thus, it does not review the brand applicants’ patent submissions for

substantive accuracy; instead, it simply publishes them as submitted. See Caraco, 132 S. Ct. at

1677.

        After a new drug has been approved, an applicant seeking to market a generic version

may file an Abbreviated New Drug Application (“ANDA”). See 21 U.S.C. § 355(j)(2)(A).

Among the many requirements a generic applicant must fulfill is to “assure the FDA that its

proposed generic drug will not infringe the brand’s patents.” See Caraco, 132 S. Ct. at 1676.

Generic applicants learn which patents they must address by consulting the Orange Book, see id.,

2
 Unless otherwise indicated, this opinion cites the here-applicable 2000 edition of Title 21 of the
U.S. Code and 2003 edition of Title 21 of the Code of Federal Regulations.
                                                 5
and may satisfy their obligation of assuring the FDA of non-infringement in several different

ways. See 21 U.S.C. § 355(j)(2)(A)(vii)–(viii). Of relevance here, when a generic applicant

wishes to market a drug in seeming competition with one or more of an existing brand

manufacturer’s patents, it has two choices:

        One option is to certify that each of the brand’s patents “is invalid or will not be infringed

by the manufacture, use, or sale of the new drug for which the application is submitted.” Id.

§ 355(j)(2)(A)(vii)(IV). Filing such a “Paragraph IV certification” is a justiciable act of patent

infringement entitling the patent holder to sue. See 35 U.S.C. § 271(e)(2)(A). To encourage these

certifications despite the risk of litigation, the first generic filer that submits a Paragraph IV

certification and has its ANDA approved receives a valuable 180-day window of exclusivity

during which it alone is permitted to market a generic version of the drug. 21 U.S.C.

§ 355(j)(5)(B)(iv); see also FTC v. Actavis, Inc., 133 S. Ct. 2223, 2228–29 (2013). Before

December 8, 2003, the Hatch-Waxman Act did not provide any mechanism by which this 180-

day exclusivity period could be lost. See Teva Pharm. USA, Inc. v. Sebelius, 595 F.3d 1303,

1306–07 (D.C. Cir. 2010).

        A second option is available when a brand’s patent covers a method of using a drug. In

that circumstance, an applicant seeking to market a generic version of the drug for a non-

patented use can submit a “Section viii statement” that “carves out” any patented uses from its

proposed label. 21 U.S.C. § 355(j)(2)(A)(viii). This route “is typically used when the brand’s

patent on the drug compound has expired and the brand holds patents on only some approved

methods of using the drug.” See Caraco, 132 S. Ct. at 1677. Filing a Section viii statement is not

a justiciable act of infringement, so applicants that take this route are not immediately vulnerable

to suit. Moreover, while a successful applicant is not entitled to an exclusivity period, it is



                                                   6
exempt from any other generic’s exclusivity period pursuant to Paragraph IV. See Purepac

Pharm. Co. v. Thompson, 354 F.3d 877, 879–80 (D.C. Cir. 2004). In other words, a successful

Section viii application is not subject to the 180-day “bottleneck” delay.

       In the instant case, three patents are principally at issue. In the 1980s, Takeda obtained

U.S. Patent No. 4,687,777 (the “‘777 patent”), which claims the invention of pioglitazone

hydrochloride (commonly known simply as pioglitazone), the active ingredient in ACTOS.

Plaintiffs do not allege any invalidity connected to the filing of the ‘777 patent. Its relevance here

is simply that its expiration date of January 17, 2011 marks the earliest point at which generic

forms of ACTOS could have been marketed with appropriate label carve-outs or certifications.

       The alleged misconduct involves two other patents related to ACTOS: U.S. Patent Nos.

5,965,584 (the “‘584 patent”) and 6,329,404 (the “‘404 patent”), both of which expired on June

19, 2016. These patents claim pharmaceutical compositions consisting of pioglitazone with a

biguanide (the ‘584 patent) and with an insulin secretion enhancer (the ‘404 patent); and both

also claim methods of using ACTOS. Takeda also has eight other patents that cover only

methods of using ACTOS.

       On January 15, 1999, Takeda submitted its NDA for ACTOS to the FDA, which

approved the application on July 15, 1999. In connection with the ACTOS NDA, Takeda

submitted the ‘777 patent for listing in the Orange Book as a drug substance patent.

Subsequently, however, Takeda represented to the FDA (on November 5, 1999 and January 3,

2002, respectively) that both the ‘584 and ‘404 patents were drug product, as well as method-of-

use, patents relating to ACTOS. Plaintiffs allege that Takeda’s descriptions of the ‘584 and ‘404

patents as drug product patents were false, because neither one “claims” ACTOS (i.e.,

pioglitazone) by itself; they only claim combinations of ACTOS and other drugs, as well as



                                                  7
methods of using ACTOS. In other words, according to plaintiffs, neither patent actually

prohibits a generic marketing of pioglitazone after January 17, 2011, but Takeda in effect falsely

misrepresented that such a marketing would infringe the later-expiring patents.

       On July 15, 2003, Actavis plc f/k/a Watson Laboratories, Inc. (“Actavis”), Mylan

Pharmaceuticals, Inc. (“Mylan”), and Ranbaxy Laboratories, Ltd. (“Ranbaxy”) became the first

manufacturers to file ACTOS ANDAs. These first-filers all submitted Paragraph IV

certifications as to the drug product claims of the ‘584 and ‘404 patents, and Section viii

statements as to Takeda’s assorted method-of-use claims. Because they all filed their ANDAs on

the same day, the FDA found that they were entitled to share the 180-day exclusivity period.

Seven other generic manufacturers ultimately also filed ANDAs. Six of these generics, like the

first-filers, made Paragraph IV certifications as to the ‘584 and ‘404 patents.

       Teva, however, took a different course. On or around July 14, 2004, Teva filed an ANDA

that made only Section viii statements as to the ‘584 and ‘404 patents. According to plaintiffs,

this was because Teva believed that Takeda had falsely described these patents as drug product

patents.

       The FDA tentatively approved the ANDAs filed by Mylan and Actavis in November

2004 and December 2005, respectively.3 In 2006, the FDA also tentatively approved Teva’s

ANDA.4




3
  In general, the FDA grants tentative approval when a generic’s drug meets all regulatory
requirements, but final approval may be prohibited because of another manufacturer’s
exclusivity period. See 21 U.S.C. § 355(j)(5)(B)(iv)(II)(dd) (2003).
4
  See FDA, Tentative Approvals – February 2006,
http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/
DrugandBiologicApprovalReports/ANDAGenericDrugApprovals/ucm064278.htm. Teva’s
tentative approval date is judicially noticeable because it is publicly available and its accuracy
                                                 8
       On October 17, 2003, Takeda filed suit against Mylan, Ranbaxy, and Actavis, alleging

that their generic ACTOS products would infringe the drug product claims of the ‘584 and ‘404

patents, as well as induce infringement of the method-of-use claims of those patents and

Takeda’s other method-of-use patents. Takeda filed similar infringement suits against the six

other generics whose later-filed ANDAs also made Paragraph IV certifications as to the ‘584 and

‘404 patents. In March 2010, Takeda settled its infringement suits with the first-filers under

terms that allowed them to begin marketing generic ACTOS on August 17, 2012. Takeda settled

its lawsuits with the six other generics under terms that allowed them to begin marketing generic

ACTOS 180 days later, in February 2013.

       In May 2009, Takeda also filed an infringement suit against Teva in the Southern District

of New York.5 While the suit was pending, Sandoz, Inc. (“Sandoz”), one of the six later-filing

generics that relied on Paragraph IV certifications, filed a “citizen petition”6 with the FDA in

August 2009, arguing that a generic application for ACTOS without a Paragraph IV certification

as to the ‘584 and ‘404 patents—i.e., Teva’s Section viii application—should not be approved.

See Sandoz Citizen Pet., Dkt. No. FDA-2009-P-0411-0001 (Aug. 25, 2009). In connection with



cannot reasonably be questioned. See Apotex Inc. v. Acorda Therapeutics, Inc., 823 F.3d 51, 60
(2d Cir. 2016).
5
  See Takeda Pharm. Co. Ltd. v. Teva Pharm. Indus., Ltd., No. 09-cv-4665 (S.D.N.Y. 2009).
Because Teva’s 2004 ACTOS ANDA did not make Paragraph IV certifications as to the ‘584
and ‘404 patents, Takeda was not eligible to immediately sue Teva for infringement. Takeda’s
2009 suit followed Teva’s application to market a generic version of a related Takeda drug
(ACTOplus met). Although the complaint here also alleges a variety of misconduct connected to
that drug, plaintiffs have not pursued on their appeal claims arising out of that alleged
misconduct.
6
  “Citizen petitions are a means by which any ‘interested person’ can request that the FDA
‘issue, amend, or revoke a regulation or order,’ or ‘take or refrain from taking any other form of
administrative action.’” Michael A. Carrier & Daryl Wander, Citizen Petitions: An Empirical
Study, 34 Cardozo L. Rev. 249, 260 (2012) (quoting 21 C.F.R. §§ 10.25, 10.30).
                                                 9
the citizen petition, Takeda, on January 22, 2010, confirmed to the FDA that its patents had been

(in its view) correctly described as both drug product and method-of-use patents in its ACTOS

NDA. See Takeda Comment, Dkt. No. FDA-2009-P-0411-0008 (Jan. 22, 2010). On March 15,

2010, the FDA granted the citizen petition, see FDA Resp. to Sandoz Citizen Pet., No. FDA-

2009-P-0411-0010, at 11 (Mar. 15, 2010), stating that the “FDA will consider any ANDA

referencing Actos that lacks appropriate [Paragraph IV] certifications to the ‘584 and ‘404

patents ineligible for final approval.” The FDA’s ruling was expressly based on the fact that

Takeda had described these patents to the FDA as drug product patents. As was its practice, the

FDA declined to make its own independent evaluation of these representations. Id. at 9–10.

       After the FDA granted the Sandoz citizen petition, Teva moved to amend its answer in

the Takeda infringement litigation to assert a counterclaim challenging Takeda’s patent

descriptions. Before the court in the Southern District of New York could rule on that motion,

however, Takeda and Teva settled under terms that allowed Teva to distribute Takeda-

manufactured ACTOS product beginning in August 2012, and otherwise enter the market 180

days later. This was considerably later than Teva could have begun marketing the drug if its

tentatively approved ANDA had not been derailed by the FDA’s decision on the citizen petition

based on Takeda’s representations about the nature and scope of its ‘584 and ‘404 patents.

       Plaintiffs timely commenced this lawsuit on December 31, 2013. On August 22, 2014,

plaintiffs filed a third amended complaint (the operative complaint here) alleging, inter alia, that

Takeda falsely described the ‘584 and ‘404 patents to the FDA as claiming the ACTOS drug

product, which ultimately delayed Takeda’s competitors from selling generic ACTOS until after

the expiration of the ‘777 patent and thereby caused plaintiffs to pay monopoly prices after

January 2011. Specifically, because no generic entry took place until August 2012, and mass



                                                 10
generic entry did not take place until February 2013, plaintiffs claim that they were forced to pay

monopoly prices for ACTOS from January 2011, when the ‘777 patent covering the active

ingredient in ACTOS expired, until at least February 2013.

        Claims 1 and 2—the only claims at issue on this appeal—allege monopolization and

attempted monopolization of the market for ACTOS under various state antitrust laws, to wit,

state-law analogs to Section 2 of the Sherman Act, which imposes liability on “[e]very person

who shall monopolize[] or attempt to monopolize . . . any part of the trade or commerce among

the several States.”7 See 15 U.S.C. § 2. It is not disputed that the standards governing federal

antitrust claims apply to these claims so far as the issues raised on this appeal are concerned.

        As noted, the district court dismissed the complaint for failing to adequately plead

causation with respect to the alleged delay. The Court of Appeals reviews a district court’s grant

of a motion to dismiss de novo. Stratte-McClure v. Morgan Stanley, 776 F.3d 94, 99–100 (2d

Cir. 2015). “To survive a motion to dismiss, a complaint must contain sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2009)). “A claim

has facial plausibility when the plaintiff pleads factual content that allows the court to draw the

reasonable inference that the defendant is liable for the misconduct alleged.” Id.

        “Causation in fact is, of course, a necessary element of any claim for relief . . . .” Argus

Inc. v. Eastman Kodak Co., 801 F.2d 38, 41 (2d Cir. 1986). An antitrust plaintiff must show that

a defendant’s anticompetitive act was a “material” and “but-for” cause of plaintiff’s injury,

although not necessarily the sole cause. See In re Publ’n Paper Antitrust Litig., 690 F.3d 51, 65–

66 (2d Cir. 2012). Further, “a plaintiff need not exhaust all possible alternative sources of injury

7
 Federal jurisdiction in this case is provided by the Class Action Fairness Act of 2005. See 28
U.S.C. § 1332(d).
                                                   11
in fulfilling his burden of proving compensable injury.” Zenith Radio Corp. v. Hazeltine

Research, Inc., 395 U.S. 100, 114 n.9 (1969); see also In re DDAVP Direct Purchaser Antitrust

Litig., 585 F.3d 677, 695 (2d Cir. 2009). For purposes of analyzing causation, we, like the district

court, will assume that plaintiffs plausibly alleged that Takeda falsely described its patents in its

submissions to the FDA.

       Here, the plaintiffs offer two causal theories, one applying to the generic applicants who

addressed the ‘584 and ‘404 patents with Paragraph IV certifications, and one applying just to

Teva, which instead relied on Section viii statements. We find that plaintiffs’ former theory does

not satisfy Iqbal and Twombly, but that the latter does.

       For their first theory, plaintiffs argue that Takeda’s allegedly false descriptions of its ‘584

and ‘404 patents forced the generics to file Paragraph IV certifications, which triggered a 180-

day exclusivity period for first-filers and a corresponding 180-day delay (the “bottleneck”) for all

subsequent filers. Under the law and regulations in place at that time, first-filers could not

disclaim or lose their statutory exclusivity period, so when Takeda settled its infringement suits

against the first-filers on terms that allowed them to begin selling ACTOS in August 2012, all

subsequent filers were kept out of the market for at least another 180 days. Consistent with that

exclusivity requirement, Takeda thereafter settled by granting licenses to the subsequent filers

allowing them to begin selling ACTOS after the statutory exclusivity period ended. Plaintiffs

claim that but for the false patent descriptions, applicants would not have been forced to make

Paragraph IV certifications, no bottleneck would have arisen, and one or more generics would

have entered the market as early as January 2011.

       Although we agree with the district court that this causal theory does not satisfy Iqbal and

Twombly, we do so on a somewhat different basis than the district court relied upon. We find that



                                                 12
this theory is implausible because it rests on a necessary premise that is not supported by well-

pleaded factual allegations.

       In particular, because plaintiffs claim that the generic manufacturers filed their Paragraph

IV certifications as to the ‘584 and ‘404 patents under duress, their theory presupposes that the

generic manufacturers knew that Takeda had described them as drug product patents when they

filed their ANDAs. If the generic manufacturers did not know this, then the causal chain would

be broken at the first link, because the generic applicants would necessarily have filed their

Paragraph IV certifications for some other reason, such as a belief that the Hatch-Waxman Act

required them to do so. It was thus incumbent upon plaintiffs to allege that the generic applicants

were aware of the descriptions when they filed their ANDAs in 2003 and 2004. The complaint is

bereft of any such allegations.

       Given that generic applicants must themselves assure the FDA that they will not infringe

brand patents, and given that this duty turns at least in part on how a brand describes its patents,

see Caraco, 132 S. Ct. at 1677, one might expect that plaintiffs could easily allege how the

generics learned of Takeda’s patent descriptions. But it turns out that the Orange Book—the go-

to source of brand patent information—had a significant flaw at the time: for patents submitted

before August 2003, it could reflect only one description (i.e., drug substance, drug product, or

method of use) per patent. If a brand indicated that a patent claimed both a method of using a

drug and the drug product itself, the Orange Book would only list it as a method-of-use patent.

Indeed, there is no dispute that the Orange Book listed the ‘584 and ‘404 patents as only method-

of-use patents. The Orange Book therefore cannot plug the gap in plaintiffs’ causal theory.8



8
 The FDA’s approach to this difficulty at that time created a “Catch-22” in which generic
applicants were required to address brand patents submitted to the FDA, but directed to consult a
source that did not always reflect what the brands submitted. See FDA Resp. to Sandoz, Inc.
                                                 13
       In their papers, plaintiffs suggest that the generics could plausibly have learned of the

allegedly false patent descriptions through an FDA-specific information disclosure provision or

by consulting a supplemental Takeda filing on the FDA’s website. Even if this had been alleged

in their complaint, it would not have sufficed. For one thing, nothing in the plain terms of the

disclosure provision suggests that a generic could obtain patent descriptions thereunder. See 21

C.F.R. § 314.53(e). As for the supplemental filing, while it lists the ‘584 patent as both a drug

product and method-of-use patent, it lists the ‘404 patent only as a method-of-use patent, and so

plainly was not a dependable source of patent information for generic applicants.9 But the more

fundamental flaw is that even if these were viable methods to learn of the alleged false patent

descriptions, plaintiffs needed to allege facts in support of these theories in their complaint,

which—even after amending their complaint several times—they totally failed to do.

       Even more abstractly, plaintiffs argue that because the generic applicants were required

to address Takeda’s patents in their ANDAs, there must have been some way to learn how

Takeda described them, and that it is therefore reasonable to infer that they did so. See, e.g.,

Chase Grp. Alliance LLC v. City of N.Y. Dep’t of Fin., 620 F.3d 146, 150 (2d Cir. 2010) (“[W]e



Citizen Pet., Dkt. No. FDA-2009-P-0411-0010, at 10 (Mar. 15, 2010) (“[T]he statute requires
certification where the patent (or patent claim) claims a listed drug, and where the NDA holder is
required to submit and has submitted that patent information to FDA. This obligation to certify
attaches regardless of whether that submission is accurately reflected in the Orange Book.”). We
do not doubt that this made it more difficult for generics to comply with the Hatch-Waxman Act,
but that does not change the fact that the plaintiffs here cannot simply rely on the Orange Book
listings at that time to show that generics had notice of the patent descriptions.
9
 See Center for Drug Evaluation & Research, Approval Package for Application Number NDA
21-073/S-020, at 109, available at
http://www.accessdata.fda.gov/drugsatfda_docs/nda/2003/021073_S020_ACTOS%20TABLETS
_AP.pdf (last visited Feb. 7, 2017). Moreover, plaintiffs fail to show that this document, which is
easily accessible today, was as readily available in 2003 and 2004, when the generics filed their
ACTOS ANDAs.

                                                 14
review the grant of a Rule 12(b)(6) motion to dismiss de novo, . . . drawing all reasonable

inferences in the plaintiff’s favor.”). We cannot sustain plaintiffs’ antitrust claims on the basis of

wishful thinking. Plaintiffs are due all reasonable inferences, but they must allege some factual

basis from which to make those inferences. Here, there are simply no allegations from which we

can infer that the generics were aware of the alleged false patent descriptions at the core of this

case. In the absence of such facts, plaintiffs’ theory of causation must fail.

        However, plaintiffs propose a different causal mechanism for Teva, which addressed the

‘584 and ‘404 patents with Section viii statements rather than Paragraph IV certifications. Teva’s

application received preliminary approval from the FDA in 2006, see supra note 4, and if Teva

had been granted final approval, then it would not have been subject to the first-filers’ 180-day

exclusivity period, and could have begun marketing generic ACTOS for non-patented uses as

soon as the ‘777 patent expired in January 2011. Teva’s application stalled, however, when the

FDA, on the express basis of Takeda’s own patent descriptions, announced in response to a

citizen petition that it would not finally approve an ACTOS ANDA that made only Section viii

statements to the ‘584 and ‘404 patents. See FDA Resp. to Sandoz, Inc. Citizen Pet., No. FDA-

2009-P-0411-0010 (Mar. 15, 2010). Plaintiffs claim that but for the false patent descriptions, the

FDA would not have made this announcement, and Teva would have entered the market sooner

than it did.

        Unlike plaintiffs’ first theory of causation, this second theory does not depend on Teva’s

knowledge of Takeda’s description of its patents as drug product patents, because the FDA’s

2010 announcement was itself expressly based on Takeda’s repeated and allegedly false patent

descriptions. See id. at 9–10 (explaining that because “Takeda’s original patent declaration to

FDA for the ‘584 and ‘404 patents stated that the patents included drug product claims and



                                                  15
method-of-use claims,” the agency “will consider any ANDA referencing Actos that lacks

appropriate certifications to the ‘584 and ‘404 patents ineligible for final approval”). Thus, even

if Teva originally filed only a Section viii ANDA, not because it knew of Takeda’s false

descriptions but, e.g., because the Orange Book failed to include such descriptions, their

otherwise valid Section viii ANDA was derailed because the FDA, made aware of the product

claims in the ‘584 and ‘404 patents, automatically credited Takeda’s allegedly false assurances

of the accuracy of those claims.

       This theory of causation is highly plausible. As noted, the FDA first preliminarily

approved Teva’s application, then entertained a citizen petition seeking to force all applicants to

make Paragraph IV certifications as to the ‘584 and ‘404 patents, and then publicly announced

that certifications would indeed be required. In so doing, the FDA expressly stated that

certifications would be required precisely because Takeda had described these patents as drug

product patents. In other words, the FDA made no attempt to evaluate whether the descriptions

were true, but simply accepted them at face value—thus frustrating Teva’s Section viii

application. While Teva thereafter sought to challenge the truthfulness of these descriptions in its

litigation with Takeda (but settled before the issue was resolved), the damage had been done. A

plaintiff could hardly ask for a clearer causal connection.10

       Takeda nonetheless argues (and the district court seemingly agreed) that this theory is

implausible because it fails to rule out a litany of alternative possible causes of Teva’s delayed



10
   Gatt Communications, Inc. v. PMC Associates, LLC, 711 F.3d 68 (2d Cir. 2013), upon which
Takeda relies, is not to the contrary. There, we found that a member of a bid-rigging conspiracy
lacked antitrust standing to sue the orchestrator of the scheme in part because it failed to allege
that it could lawfully have won the contracts absent the conspiracy. See id. at 79. For one thing,
Takeda has never challenged plaintiffs’ antitrust standing; and for another, Teva had no trouble
in receiving tentative approval to market generic ACTOS notwithstanding the alleged antitrust
violation, and ultimately did succeed in entering the market.
                                                 16
market entry. Takeda claims, for example, that Teva’s market entry was also delayed because

Teva voluntarily settled Takeda’s infringement suit on terms that kept it out of the market until

August 2012; because Takeda had lawfully sought to delay Teva’s market entry through its own

citizen petition, which was still pending when Teva eventually did enter the market; and because

the FDA did not ultimately grant final approval to Teva’s ANDA until 2014. Takeda argues that

since the complaint does not allege how any of these barriers would have been overcome,

plaintiffs’ theory that Takeda delayed Teva’s market entry is too speculative to survive a motion

to dismiss.

       It is Takeda, however, that is here engaging in gross speculation. While it is possible that

one or more of these factors may turn out to be barriers to plaintiffs’ causation theory at later

stages of the litigation, they do not mandate dismissing the complaint now. See Zenith Radio

Corp., 395 U.S. at 114 n.9; see also DDAVP, 585 F.3d at 695. Indeed, even at summary

judgment, an antitrust plaintiff may be entitled to a presumption of causation where the

anticompetitive conduct “is deemed wrongful because it is believed significantly to increase the

risk of a particular injury” and that injury occurred. See Publ’n Paper, 690 F.3d at 66. If

plaintiffs reach the summary judgment stage and make that showing, then it would be Takeda’s

burden to show that some other factors, such as the ones identified above, are the “true” cause of

the delay, and therefore the “true” cause of the artificially high drug prices plaintiffs paid.

Dismissal at this early stage on the basis of speculation about possible and not inherently more

plausible alternative causes would be premature.11



11
  Takeda also argues that even if it had not described the ‘584 and ‘404 patents as drug product
patents, the generics—including Teva—would have been required to submit Paragraph IV
certifications anyway. The district court appeared to accept a version of Takeda’s argument,
holding that because the patents were listed in the Orange Book as method patents, generics
would have had to make an “appropriate certification” even if Takeda had not elsewhere
                                                  17
       Finally, we note in passing that the parties have here raised on appeal several arguments

not reached by the district court. Takeda argues, for example, that it in fact correctly described

the ‘584 and ‘404 patents as drug product patents under 21 U.S.C. § 355(b). In the alternative,

Takeda argues that even if it incorrectly described the patents, plaintiffs have failed to plausibly

allege that Takeda did so fraudulently and in bad faith. See, e.g., Phonetele, Inc. v. AT&T Co.,

664 F.2d 716, 737–38 (9th Cir. 1981) (“If a defendant can establish that, at the time the various

anticompetitive acts alleged here were taken, it had a reasonable basis to conclude that its actions

were necessitated by concrete factual imperatives recognized as legitimate by the regulatory

authority, then its actions did not violate the antitrust laws.”). On remand, the district court can

consider such issues in the first instance.12

       For the foregoing reasons, the district court’s decision is affirmed in part, vacated in part,

and remanded for further proceedings consistent with this decision.




described the ‘584 and ‘404 patents as drug product patents. The district court went on to explain
that such an “appropriate certification” would have to be either a Paragraph IV certification or “a
request for FDA approval for a ‘carve out’ label that did not overlap with the patented methods
of use,” and that plaintiffs’ allegations that the generics could have relied on Section viii
statements were “inconsistent with the applicable statutory requirements[.]”

This, however, is not correct. Indeed, as the district court recognized elsewhere, a Section viii
statement is a request for a label carving out non-patented uses, so to the extent the district court
treated them separately, it erred. See Caraco, 132 S. Ct. at 1677 (“[W]hether section viii is
available to a generic manufacturer depends on how the brand describes its patent.”). We do not
reach Takeda’s broader argument that the generics would have been required to submit
Paragraph IV certifications in any event, and leave that issue for the district court to address in
the first instance.
12
  Takeda also asks that we affirm the dismissal of the claims plaintiffs did not pursue on appeal,
including the portions of the monopolization and attempted monopolization claims premised on
supposedly anticompetitive settlements. Because these questions are not properly before us, we
decline to do so.
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