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Farag v. Health Care Service Corp.

United States District Court, N.D. Illinois, Eastern Division

July 5, 2017



          Harry D. Leinenweber, Judge

         Before the Court are Motions to Dismiss filed by Defendant Novartis Pharmaceuticals Corporation (“Novartis”) [ECF No. 16] and Defendant Health Care Service Corporation d/b/a Blue Cross Blue Shield of Illinois (“BCBSIL”) [ECF No. 15]. For the reasons to follow, the Court dismisses Plaintiffs' claims against Novartis with prejudice under Rule 12(b)(1) or, alternatively, under Rule 12(b)(6). Absent those federal question claims, the Court declines to hear Plaintiffs' state law claims against BCBSIL or rule on the latter's Motion. Instead, the Court remands the balance of the case to Kane County Circuit Court.

         I. BACKGROUND

         Plaintiffs Tarek and Soona Farag (referred to collectively as “Plaintiffs” and individually as “Tarek” or “Soona”) have employer-sponsored health insurance coverage through Defendant BCBSIL. (ECF No. 1 at Ex. 1 (“Compl.”) ¶ 1.) Tarek has high blood pressure, and his doctors have tried many medications to treat his condition. (Id. ¶ 4.) All have caused side effects with the exception of the brand-name drug Diovan, manufactured by Defendant Novartis, which Tarek's doctors “settled on and prescribed for him long before January 2011.” (Ibid.) For a brief period “[a]round the beginning of 2013, ” Tarek tried taking the generic form of Diovan (valsartan), but it “caused him serious side effects.” (Id. ¶ 5.) Unsurprisingly, valsartan had a cheaper copay than Diovan, for which Tarek paid $30.00 until around June 2013 (when BCBSIL increased the copay for Diovan to $50.00). Plaintiffs allege that the overall price of a one-month supply of Diovan was about $207 during 2013, $270 during 2014, $310 during 2015, and about “$400 during 2017.” (Id. ¶ 25.)

         On April 11, 2015, Tarek's doctor prescribed him twice his usual dose of Diovan. (Compl. ¶ 7.) At some point thereafter, Tarek took medication for numbness in his hands, which caused his blood pressure and heart rate to collapse, leading his doctor to advise that Tarek stop taking Diovan and only add it back into his medication regimen as he recovered. (Id. ¶ 8.) On September 19, 2015, Tarek sought to refill his Diovan prescription and expected to pay his usual $50 copay. However, BCBSIL refused to cover it on the same terms it had previously and instead requested “preauthorization” from Tarek's doctor. (Id. ¶ 9.) Tarek's doctor completed the required forms, but BCBSIL denied coverage because Tarek had not taken Diovan “for more than 90 days.” (Id. ¶ 10.) As a result, BCBSIL required that Tarek pay $173.11 instead of $50.00. (Id. ¶ 11.) Despite placing several calls to BCBSIL, Tarek was unable to get the company to remedy the situation. (Id. ¶¶ 12-13, 15-17.) On these calls, BCBSIL agents typically justified the denial of coverage on the grounds that Diovan is considered “a Step Therapy medication, ” requires preauthorization, is dispensed in prescriptions that are valid only for one year, must be taken “for the past 90 days to qualify for the copay of $50, ” and must be precipitated by an attempt to take the generic. (Id. ¶ 27.) Tarek continued taking Diovan and paying the higher rate “with accumulated difference of about $700.” (Id. ¶ 14.)

         Proceeding pro se, Plaintiffs filed suit against BCBSIL on May 19, 2016 in Kane County Circuit Court. On May 24, 2016, Tarek “was in a very stressful situation due to the ongoing court case and the denial of his proper coverage, which caused his blood pressure to go high and fluctuate in a dangerous way that caused him symptoms of a stroke.” (Compl. ¶ 19.) He was rushed to the hospital and, roughly $16, 000 later, restored to good health. (Ibid.) The Kane County court dismissed the claims in Plaintiffs' original complaint without prejudice, and Plaintiffs then filed an Amended Complaint against BCBSIL on October 5, 2016. BCSBIL moved to dismiss the Amended Complaint, and the court obliged - dismissing two claims with prejudice and two claims without prejudice. On March 1, 2017, Plaintiffs amended again, this time adding Novartis as a defendant. This is the operative Complaint.

         On the basis of federal question jurisdiction over patent and antitrust claims that Plaintiffs brought against Novartis, Defendants removed the Complaint to this Court on April 4, 2017. (ECF No. 1 ¶¶ 3-6.) Both Defendants now move to dismiss all counts.


         When considering a motion to dismiss a complaint, the Court accepts the facts stated in the complaint as true and draws reasonable inferences in favor of the plaintiff. Newell Operating Co. v. Int'l Union of United Auto., Aerospace, and Agr. Implement Workers of Am., 532 F.3d 583, 587 (7th Cir. 2008). A document filed pro se is to be liberally construed, and a pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers. Erickson v. Pardus, 551 U.S. 89, 94 (2007).

         Although the Federal Rules of Civil Procedure do not require a complaint to include “detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). To survive a Rule 12(b)(6) motion, “the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Independent Trust Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 934 (7th Cir. 2012) (internal quotation marks omitted). The plausibility standard, while not akin to a probability requirement, “asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). Where a complaint pleads facts that are merely consistent with liability, it “stops short of the line between possibility and plausibility.” Id. (internal quotation marks omitted).

         Standing is an essential component of Article III's case-or-controversy requirement. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). Rule 12(b)(1) allows a party to raise by motion a federal court's lack of subject-matter jurisdiction, including a lack of standing. See, Ret. Police Ass'n v. City of Chicago, 76 F.3d 856, 862 (7th Cir. 1996). The plaintiff then bears the burden of establishing jurisdiction with competent proof of jurisdictional facts. Scanlan v. Eisenberg, 669 F.3d 838, 841-42 (7th Cir. 2012).

         III. ANALYSIS

         A. Novartis

         Against Novartis, Plaintiffs seek a judgment for at least $18, 000, compensatory damages, punitive damages, costs and attorneys' fees. They do not seek injunctive relief. According to Plaintiffs, the inventors listed on Novartis' U.S. Patent No. 6, 294, 197 (“the '197 patent”), which covers a tablet form of valsartan “mixed with additives by compression, ” are not the same inventors that Novartis lauded for inventing Diovan, meaning that Novartis committed fraud on the United States Patent and Trademark Office (“the PTO”) by listing the wrong inventors on the face of the '197 patent. (Compl. ¶ 30.) Plaintiffs further allege that, because the “generic drug for Diovan” caused Tarek “serious side effects” whereas Diovan did not, Novartis defrauded the PTO by seeking protection for a patent that (it knew) flunked the enablement requirement of 35 U.S.C. § 112(a). (Id. ¶¶ 5, 31.) Plaintiffs claim that - ostensibly through these actions and by emerging from the 1996 merger of “two giants Ciba-Geigy and Sandoz” - Novartis has wrongfully “kept others away from manufacturing or selling Diovan or its generic Valsartan” and “unlawfully monopolize[d] the market for Diovan, ” allowing it to charge higher prices for Diovan than generic drug manufacturers charge for valsartan. (Id. ¶¶ 30, 33.)

         Without citing any provision of law authorizing their claims, Plaintiffs bring three counts against Novartis: “fraudulently claiming that Novartis' team is the inventors of Diovan, ” “fraudulently claiming that it has patent protection for Diovan and monopolizing it, ” and “violating the antitrust laws and abusing of [sic] monopoly power.” (Compl. ¶¶ 30-32.) The Court finds these counts best characterized as a Walker Process claim based on fraudulent procurement of the '197 patent and its subsequent unlawful monopolization under Section 2 of the Sherman Act, 15 U.S.C. § 2, plus a claim under Section 7 of the Clayton Act, 15 U.S.C. § 18, challenging the merger that spawned Novartis as “obvious[ly] . . . against the antitrust laws.” (Compl. ¶ 33.) (To the extent Plaintiffs might be seeking relief under the Illinois Antitrust Act, 740 Ill. Comp. Stat. 10/3, it is preempted inasmuch as it relates to the Walker Process claim. Because there is “simply no theory for proving a Walker Process antitrust violation in this case that would not require a showing of misconduct before the PTO, ” “federal patent law preempts any state antitrust cause of action premised on [such] conduct before the PTO.” In re Ciprofloxacin Hydrochloride Antitrust Litig., 363 F.Supp.2d 514, 543 (E.D.N.Y. 2005); see also, Semiconductor Energy Lab. Co., Ltd. v. Samsung Elec. Co., Ltd., 204 F.3d 1368, 1382 (Fed. Cir. 2000) (finding preemption where “the wrong alleged and for which state tort damages [were] sought [was] no more than bad faith misconduct before the PTO”); accord, In re K-Dur Antitrust Litig., No. 01-1652, 2007 WL 5297755, at *24-25 (D.N.J. Mar. 2, 2007).)

         Novartis moves to dismiss Plaintiffs' counts against it both on Rule 12(b)(1) subject-matter jurisdiction and Rule 12(b)(6) plausibility grounds. Novartis maintains that the Court does not have jurisdiction to grant Plaintiffs their requested relief because neither Plaintiff has standing to challenge the validity or enforceability of the '197 patent - or any patent Novartis holds on Diovan. In the same vein, Novartis asserts that Plaintiffs lack antitrust standing and that their complaint fails to allege a plausible monopolization violation under federal or state antitrust law. Finally, Novartis contends that Plaintiffs' claim for damages is time-barred.

         1. Declaratory Judgment of Invalidity or Unenforceability

         Article III of the Constitution requires an actual “case” or “controversy” between litigating parties before a court may adjudicate a dispute. A party may bring an action under the Declaratory Judgment Act only if an “actual controversy” exists, “which is the same as an Article III case or controversy.” Arris Group, Inc. v. British Telecomms. PLC, 639 F.3d 1368, 1373 (Fed. Cir. 2011) (citations omitted). The party seeking a declaratory judgment must show an Article III case or controversy at the time it filed for declaratory relief. Id. at 1373 (citing King Pharm., Inc. v. Eon Labs., Inc., 616 F.3d 1267, 1282 (Fed. Cir. 2010)). When the underlying merits of the declaratory judgment action involve issues of conduct before the PTO, Federal Circuit law controls whether an actual controversy exists. 3M Co. v. Norton Co., 929 F.2d 670, 672 (Fed. Cir. 1991).

         This Court must ask whether “the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 132 n.11 (2007). A proper dispute must “admit of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” Id. at 127 (internal quotation marks omitted). “A mere adverse economic interest is insufficient to create declaratory judgment jurisdiction.” Arris, 639 F.3d at 1374-75 (emphasis in original).

         Plaintiffs' interest in having the '197 patent declared invalid or unenforceable is adverse to Novartis' interest only in a pure economic sense, and is thus far too attenuated to support jurisdiction under the Declaratory Judgment Act. At best, securing such a judgment would merely inhibit Novartis from excluding competitors, thus leading indirectly to a decrease in the price of Diovan for Tarek. Indeed, Federal Circuit law suggests that purchasers of goods covered by a patent who do not compete with the patentee and otherwise face no threat of an action for infringement “cannot challenge [the] patent's validity or enforceability through a declaratory judgment action.” Ritz Camera & Image, LLC v. SanDisk Corp., 700 F.3d 503, 506 (Fed. Cir. 2012).

         The Court therefore dismisses Plaintiffs' claims to the extent they can be construed as a plea for a declaratory judgment that the '197 patent is invalid or unenforceable as a result of fraud on the PTO.

         2. Walker Process ...

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