| Litigation | Litigation Sandoz Litigation In April 2019, Sandoz Inc. ( Sandoz ) and its marketing partner RareGen, LLC (now known as Liquidia PAH, LLC, a subsidiary of Liquidia Corporation) ( RareGen ), filed a complaint in the U.S. District Court for the District of New Jersey against us and Smiths Medical ASD, Inc. ( Smiths Medical ), alleging that we and Smiths Medical engaged in anticompetitive conduct in connection with the plaintiffs’ efforts to launch their generic version of Remodulin. In particular, the complaint alleged that we and Smiths Medical unlawfully impeded competition by entering into an agreement to produce CADD-MS ® 3 ( MS-3 ) cartridges specifically for the administration of subcutaneous Remodulin for our patients, without making these cartridges available for the administration of Sandoz’s generic treprostinil injection. In March 2020, the plaintiffs filed an amended complaint to add a count alleging that we breached our earlier patent settlement agreement with Sandoz by refusing to grant Sandoz access to cartridges purchased for our patients. Smiths Medical was dismissed from the case in November 2020, based on a settlement resolving the disputes between the plaintiffs and Smiths Medical. As part of this settlement, Smiths Medical paid the plaintiffs $4.25 million, disclosed and made available to the plaintiffs certain specifications and other information related to the MS-3 cartridges, and granted to the plaintiffs a non-exclusive, royalty-free license in the United States to Smiths Medical’s patents and copyrights associated with the MS-3 cartridges and certain other information related to the MS-3 pumps and cartridges. In March 2022, the court granted our motion for summary judgment with respect to all claims brought by the plaintiffs except the breach of contract claim. As a result, all antitrust claims, all claims under state competition laws, and the common law tortious interference claim were resolved in our favor. These were the only claims in the case that gave rise to any potential for trebling of damages, punitive damages, and/or the award of attorneys’ fees. The court also denied the plaintiffs’ request for injunctive relief. The court granted Sandoz’s motion for summary judgment with respect to Sandoz’s breach of contract claim. The issue of what, if any, damages Sandoz is entitled to based on the contract claim went to trial on April 29, 2024, and the court heard closing arguments on June 4, 2024. The court’s decision is pending. The trial was limited to determining the amount of damages under the breach of contract claim. RareGen has no claim for breach of contract and, as a result, has no remaining claims in the litigation. The parties will have the right to appeal the summary judgment decisions and the result of the trial upon entry of final judgment following the trial decision. We intend to continue to vigorously defend ourselves against the claims made in this litigation. Among other things, we believe that the plaintiffs, who were on notice that Smiths Medical would discontinue the MS-3 system, failed to fulfill their duty to properly mitigate their exposure as a result of such discontinuation, and any damages they incurred are the result of their own failure to properly plan their own product launch. However, due to the uncertainty inherent in any litigation, we cannot guarantee that an outcome adverse to us will not result. Any litigation of this nature could involve substantial cost, and an adverse outcome could result in substantial monetary damages. We currently are not able to reasonably estimate a range of potential losses due to the number of variables that may affect the outcome of the damages trial and any potential appeals, including potential damages amounts sought, the strength of our defenses, the variety of potential legal and factual determinations yet to be made by the court, the rulings that may be subject to appeal, and the inherent unpredictability of any outcome associated with these issues. Litigation with Liquidia Technologies, Inc. In March 2020, Liquidia Technologies, Inc. ( Liquidia ) filed two petitions for inter partes review ( IPR ) with the Patent Trial and Appeal Board ( PTAB ) of the U.S. Patent and Trademark Office ( USPTO ). In its petitions, Liquidia sought to invalidate U.S. Patent Nos. 9,604,901 (the ’901 patent ) and 9,593,066 (the ’066 patent ), both of which relate to a method of making treprostinil, the active pharmaceutical ingredient in Tyvaso DPI, nebulized Tyvaso, Remodulin, and Orenitram. These patents were issued in March 2017 and are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations publication, also known as the Orange Book , for Tyvaso DPI, nebulized Tyvaso, Remodulin, and Orenitram. In October 2020, the PTAB declined to institute IPR proceedings on the ’066 patent because Liquidia failed to establish a reasonable likelihood of prevailing on any claim relating to the ’066 patent. The PTAB instituted IPR proceedings on the ’901 patent in October 2020 and issued a final written decision in October 2021. The final written decision found that Liquidia had proven the invalidity of seven of the claims of the ‘901 patent but failed to prove the invalidity of two other claims. Each party appealed portions of this decision. The Federal Circuit affirmed the PTAB final written decision on June 27, 2024. We are evaluating whether to further pursue our appeal. No cancellation of patent claims takes effect until any IPR appeals are exhausted. In January 2020, Liquidia submitted an NDA to the FDA for approval of Yutrepia™, a dry powder inhalation formulation of treprostinil, to treat pulmonary arterial hypertension ( PAH ). This NDA was submitted under the 505(b)(2) regulatory pathway with nebulized Tyvaso as the reference listed drug. In November 2021, the FDA granted tentative approval of Liquidia’s NDA. In April 2020, we received a Paragraph IV Certification Notice Letter ( Notice Letter ) from Liquidia, stating that it intends to market Yutrepia before the expiration of all patents listed in the Orange Book for nebulized Tyvaso. The Notice Letter stated that Liquidia’s NDA for Yutrepia contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use, or sale of Yutrepia. In June 2020, we filed a lawsuit in the U.S. District Court for the District of Delaware against Liquidia for infringement of the ’901 patent and the ’066 patent, both of which expire in December 2028. We filed our lawsuit within 45 days of receipt of notice from Liquidia of its NDA filing. As a result, under the Hatch-Waxman Act, the FDA was precluded by regulation from approving Liquidia’s NDA for up to 30 months or until the resolution of the litigation, whichever occurs first. In July 2020, Liquidia filed an answer to our complaint that included counterclaims alleging, among other things, that the patents at issue in the litigation are not valid and will not be infringed by the commercial manufacture, use, or sale of Yutrepia. In July 2020, the USPTO issued a new patent to us related to Tyvaso. The new patent, U.S. Patent No. 10,716,793 (the ’793 patent ), expires in May 2027, and is listed in the Orange Book for Tyvaso DPI and nebulized Tyvaso. In July 2020, we filed an amended complaint against Liquidia to include a claim for infringement of the ’793 patent. The ’793 patent relates to a method of administering treprostinil via inhalation and includes claims covering the dosing regimen used to administer Tyvaso DPI and nebulized Tyvaso. In December 2021, we filed a stipulation that the ’901 patent would not be infringed by Liquidia based on the court’s claim construction ruling. Trial took place during March 2022, and the court issued its decision in August 2022. The court found that Liquidia’s product would infringe the ’793 patent and that Liquidia had not proved that any claim of that patent is invalid. The court also determined that Liquidia had proved certain claims of the ’066 patent were invalid and that we had not proved Liquidia’s infringement of another ’066 patent claim. Accordingly, the court issued a final judgment that bars the FDA from approving Yutrepia until expiration of the ’793 patent in May 2027. The parties appealed portions of the decision adverse to each of them, and on July 24, 2023, the appellate court issued its decision affirming the district court decision in its entirety. The court subsequently denied the parties’ requests for rehearing, so the appellate court decision is now final. On January 23, 2024, Liquidia filed a petition for writ of certiorari seeking review by the U.S. Supreme Court, and that petition was denied on February 20, 2024. Liquidia also filed a motion with the district court seeking to modify the portion of the judgment that bars the FDA from finally approving Yutrepia until the ’793 patent expires. On March 28, 2024, the court granted the motion to permit the FDA to grant final approval for Yutrepia. We appealed that decision, and our appeal is pending with oral argument scheduled for September 3, 2024. In January 2021, Liquidia filed another petition for IPR with the PTAB. In its petition, Liquidia sought to invalidate the ’793 patent. In July 2022, the PTAB issued a final written decision finding all claims of the ’793 patent to be unpatentable. We filed a request for rehearing and for precedential opinion panel review. On October 26, 2022, the PTAB denied our request for precedential opinion panel review, but “determine[d] that the Board’s Final Written Decision did not address adequately whether the [references relied upon as the basis for canceling claims] qualify as prior art.” Thus, the PTAB directed the original panel “in its consideration on rehearing, to clearly identify whether the … references qualify as prior art.” The original panel issued its decision on our request for rehearing in February 2023. The original panel agreed that it had overlooked our arguments and that its rationale for determining that certain references are prior art was erroneous. Nonetheless, the original panel determined the references qualify as prior art under a new rationale. Thus, the original panel maintained that the claims of this patent are not valid. We appealed this decision, and the appellate court affirmed the PTAB decision. On January 19, 2024, we filed a petition for rehearing, and the court denied that motion on March 15, 2024. On June 10, 2024, we filed a petition seeking review by the U.S. Supreme Court. All claims of this patent remain valid until any IPR appeals are exhausted. On September 5, 2023, we filed a lawsuit in the U.S. District Court for the District of Delaware against Liquidia for infringement of the ’793 patent based on Liquidia’s efforts to obtain FDA approval for a PH-ILD indication for Yutrepia. On November 30, 2023, we filed an amended complaint to assert a new patent: U.S. Patent No. 11,826,327 (the ’327 patent ). The claims of the ’327 patent generally cover improving exercise capacity in patients suffering from PH-ILD by inhaling treprostinil at specific dosages. On January 22, 2024, we filed a stipulation withdrawing the ’793 patent from the case. As a result, the only patent at issue in the case is the ’327 patent. Liquidia answered the complaint asserting a variety of defenses. The case is pending, and the court has not yet set a schedule for the case. As noted below under FDA Litigation Regarding Yutrepia , we believe this lawsuit could entitle us to a 30-month stay, preventing the FDA from approving Yutrepia for the treatment of PH-ILD until the resolution of this lawsuit, or the expiration of the 30-month period following receipt of a Paragraph IV notice, whichever occurs first. Because the issue of whether a 30-month stay is appropriate remains unresolved, we filed a motion for preliminary injunction in the patent case on February 26, 2024. The court denied the motion on May 31, 2024. On May 10, 2024, we filed a citizen petition with the FDA asking the FDA to rescind its tentative approval of Yutrepia and issue a complete response letter to address an issue with Liquidia’s treprostinil supplier. That supplier is currently under a consent decree to address purported long-standing violations of the Food, Drug, and Cosmetics Act. The citizen petition seeks to ensure that Yutrepia is not approved until the supplier has fully and successfully discharged its obligations under the consent decree and that Liquidia supplies the FDA with sufficient data and information to establish that the identity, strength, quality, and purity of its proposed Yutrepia drug product in fact meets all the statutory and regulatory requirements for approval. The FDA’s response to our citizen petition is pending. In June 2021, we filed a motion in the patent case in the U.S. District Court for the District of Delaware to file an amended complaint adding trade secret misappropriation claims against Liquidia and a former Liquidia employee, Dr. Robert Roscigno. The court denied the motion based on a finding that adding the additional claims would impact the case schedule. Thus, we filed those claims as a separate case against Liquidia and Robert Roscigno in North Carolina state court. Discovery is complete. On July 3, 2024, Liquidia filed a motion for summary judgment, which is pending. We plan to continue to vigorously enforce our intellectual property rights related to Tyvaso DPI and nebulized Tyvaso. FDA Litigation Regarding Yutrepia On February 20, 2024, we filed an action against the FDA in the U.S. District Court for the District of Columbia regarding the FDA’s review of Liquidia’s efforts to obtain a PH-ILD indication for its Yutrepia product. Liquidia submitted an amendment to its pending Yutrepia NDA to pursue approval for a PH-ILD indication. The suit alleges that FDA rules, precedents, and procedures require that such a new indication be pursued in a new NDA rather than as an amendment to a pending NDA. Thus, we asked the FDA to require Liquidia to submit a new NDA if it wishes to further pursue approval for a PH-ILD indication. On March 4, 2024, we filed a motion for preliminary injunction and temporary restraining order seeking to prevent the FDA from approving the PH-ILD indication for Yutrepia by amendment. The court denied that motion on March 29, 2024, following a hearing on the motion. The FDA represented at the hearing that it continues to assess the situation, so in the court’s view, there is no final agency action to review. The court requires the FDA to provide notice three business days before it acts on Liquidia’s amendment, so the parties can seek meaningful review when a decision is imminent. The FDA and Liquidia have filed motions to dismiss, and the parties are currently briefing those motions. No hearing date has been set. If Liquidia is required to submit a new NDA, we believe that we would be entitled to a 30-month stay of any PH-ILD approval based on our assertion of the ’327 patent against Liquidia as discussed under Litigation with Liquidia Technologies, Inc. That is, Liquidia could not obtain final approval for a PH-ILD indication until the earlier of the expiration of the 30-month stay or a district court decision in Liquidia’s favor. MSP Recovery Litigation In July 2020, MSP Recovery Claims, Series LLC; MSPA Claims 1, LLC; and Series PMPI, a designated series of MAO-MSO Recovery II, LLC, filed a “Class Action Complaint” against Caring Voices Coalition, Inc. ( CVC ) and us in the U.S. District Court for the District of Massachusetts. The complaint alleged that we violated the federal Racketeer Influenced and Corrupt Organizations ( RICO ) Act and various state laws by coordinating with CVC when making donations to a PAH fund so that those donations would go towards copayment obligations for Medicare patients taking drugs manufactured and marketed by us. The plaintiffs claim to have received assignments from various Medicare Advantage health plans and other insurance entities that allow them to bring this lawsuit on behalf of those entities to recover allegedly inflated amounts they paid for our drugs. In April 2021, the court granted our motion to transfer the case to the U.S. District Court for the Southern District of Florida. In October 2021, the plaintiffs filed an amended complaint that includes state antitrust claims based on alleged facts similar to those raised by Sandoz and RareGen in the matter described above. The amended complaint added MSP Recovery Claims Series 44, LLC as a plaintiff and Smiths Medical and CVC as defendants. In December 2021, we filed a motion to dismiss all of the plaintiffs’ claims in the amended complaint, including the new antitrust claims. Smiths Medical also filed a motion to dismiss the plaintiffs’ claims against Smiths Medical. In September 2022, the court dismissed all of the plaintiffs’ claims against us and Smiths Medical without prejudice. In October 2022, the plaintiffs filed a second amended complaint, which added federal antitrust claims and consumer protection claims under other states’ laws to the claims previously asserted. The second amended complaint also named Accredo Health Group, CVS Health Corporation, Express Scripts, Inc., and Express Scripts Holding Company (collectively, the Specialty Pharmacies ), and the Adira Foundation as additional defendants. In March 2023, we filed our motion to dismiss the second amended complaint. The Specialty Pharmacies filed their own motion to dismiss, as did Smiths Medical. On March 22, 2024, the magistrate judge recommended dismissal of the plaintiffs’ complaint against all defendants in its entirety with prejudice, and for administrative purposes, issued an order dismissing the complaint. On April 12, 2024, the plaintiffs filed an objection to the magistrate judge’s recommendation. On May 10, 2024, we filed a response to the plaintiffs’ objection, as did the other defendants. If the district court judge adopts the magistrate judge’s recommendation and dismisses the case, the plaintiffs will have the right to appeal. We intend to continue to vigorously defend ourselves against the claims made in this lawsuit. Litigation with Humana and United Healthcare Humana Inc. ( Humana ) and United Healthcare Services, Inc. ( United ) filed separate lawsuits against us in the U.S. District Court for the District of Maryland in December 2022 and November 2022, respectively. Each of these lawsuits includes allegations similar to those in the MSP Recovery matter discussed above concer ning our charitable contributions to CVC. In particular, these lawsuits allege that our donations to CVC violated RICO and various state laws. We filed motions to dismiss both of these lawsuits in March 2023. On March 25, 2024, the court dismissed both the Humana and United complaints in their entirety. In both cases, the RICO claims were dismissed with prejudice. In the Humana case, the state law claims were dismissed without prejudice, and in the United case, some of the state law claims were dismissed with prejudice, while others were dismissed without prejudice. To date, neither Humana nor United has appealed these decisions. On April 24, 2024, Humana and United each filed lawsuits against us in the Circuit Court for Montgomery County, Maryland. These lawsuits include allegations similar to those in Humana and United’s lawsuits discussed above concerning charitable contributions. Humana and United allege that our donations to CVC give rise to common law causes of action, violations of state consumer protection statutes, and violations of insurance fraud statutes under the laws of various states. On July 22, 2024, we filed motions to dismiss both of these lawsuits. We intend to continue to vigorously defend ourselves against the claims made in these lawsuits. 340B Program Litigation We participate in the Public Health Service’s 340B drug pricing program (the 340B program ), through which we sell our products to covered entities at no more than a statutory ceiling price. Increasing use of pharmacies that have contracts with such covered entities ( 340B contract pharmacies ), coupled with a lack of oversight and transparency, has resulted in increased risks of 340B statutory violations related to the diversion of 340B-purchased drugs to individuals who are not patients of the 340B covered entity, and to prohibited “duplicate discounts” when a Medicaid rebate is triggered on 340B-purchased drugs. In November 2020, we notified the U.S. Health Resources and Services Administration ( HRSA ) that we would begin implementing narrowly-tailored 340B contract pharmacy policies with the goal of stemming abuses of the 340B program without upsetting the status quo or creating hardship for covered entities or their patients. At around the same time, a number of other manufacturers also announced their own contract pharmacy policies. In December 2020, the U.S. Department of Health and Human Services ( HHS ) General Counsel issued a non-binding Advisory Opinion (the Advisory Opinion ) concluding that, among other things, pharmaceutical manufacturers are obligated to sell their drugs at the 340B discounted price to an unlimited number of 340B contract pharmacies. In May 2021, HRSA sent a letter to us stating that our 340B contract pharmacy policies violated the 340B statute. HRSA also sent materially similar letters to other pharmaceutical manufacturers. We responded to that letter by clarifying our policies and requesting additional information from HRSA. To date, HRSA has not responded. The federal government’s pronouncements regarding the use of 340B contract pharmacies have triggered a variety of litigation. In one of those cases, the court concluded that the Advisory Opinion was “legally flawed,” and in response HHS withdrew the Advisory Opinion. Notwithstanding the withdrawal of the Advisory Opinion, HRSA has made clear that it is not withdrawing its May 2021 letter to us and the threat of enforcement action. In June 2021, we commenced litigation against HRSA and HHS in the U.S. District Court for the District of Columbia seeking to vindicate the lawfulness of our 340B program contract pharmacy policies. Despite the litigation, in September 2021, HRSA sent to us, along with the other manufacturers challenging HRSA’s 340B interpretation, letters stating that HRSA was referring “this issue to the HHS Office of the Inspector General ( OIG )” for potential enforcement action. We have not received any communication from the OIG regarding our 340B contract pharmacy policy. Meanwhile, the parties submitted and fully briefed cross-motions for summary judgment, and the court heard oral argument on those motions, and also similar motions in a related case involving Novartis, in October 2021. In November 2021, the court granted our motion for summary judgment in part, and issued a decision holding that the HRSA letters threatening enforcement action “contain legal reasoning that rests upon an erroneous reading of Section 340B.” The court explained that “[t]he statute’s plain language, purpose, and structure do not prohibit drug manufacturers from attaching any conditions to the sales of covered drugs through contract pharmacies. Nor do they permit all conditions. Accordingly, any future enforcement action must rest on a new statutory provision, a new legislative rule, or a well-developed legal theory that Section 340B precludes the specific conditions at issue here.” HRSA and HSS appealed to the U.S. Court of Appeals for the District of Columbia Circuit in December 2021 and oral arguments were heard in October 2022. The court issued a decision affirming the district court on May 21, 2024, stating that “we hold that section 340B does not categorically prohibit manufacturers from imposing conditions on the distribution of covered drugs to covered entities. We further hold that the conditions at issue here do not violate section 340B on their face.” The government has not indicated whether it intends to further pursue the case. Litigation involving other manufacturers is also moving forward in parallel with our case, and some of the decisions issued in those cases have reached different conclusions regarding HRSA’s and HHS’s interpretation of the 340B statute than our case. We intend to continue to vigorously defend our 340B program contract pharmacy policies. |
