7th Circuit revives Teva's lawsuit against Eli Lilly, ruling Teva plausibly alleged Lilly breached a…

Record source: CourtListener

In the United States Court of Appeals For the Seventh Circuit ____________________ No. 25-2125 TEVA PHARMACEUTICALS USA, INC., Plaintiff-Appellant, v. ELI LILLY AND COMPANY, Defendant-Appellee. ____________________ Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:24-cv-02008-MPB-TAB — Matthew P. Brookman, Judge. ____________________ ARGUED FEBRUARY 11, 2026 — DECIDED JULY 13, 2026 ____________________ Before HAMILTON, JACKSON-AKIWUMI, and KOLAR, Circuit Judges. HAMILTON, Circuit Judge. A generic drug manufacturer sued a brand-name manufacturer for violating a settlement agreement from an earlier lawsuit. The brand-name manufac- turer moved to dismiss, arguing that the agreement had ex- pired before the alleged breaches. The district court granted dismissal. We reverse and remand. The generic manufacturer has plausibly alleged breaches of contract terms that were still 2 No. 25-2125 in effect. Its complaint and briefing did not need to specify the agreement’s termination date more precisely. I. Factual Allegations and Procedural History We review de novo a district court’s decision to dismiss on the pleadings. Ratfield v. U.S. Drug Testing Laboratories, Inc., 140 F.4th 849, 851 (7th Cir. 2025). We accept as true all the well- pleaded factual allegations in the complaint and draw all rea- sonable inferences in the plaintiff’s favor. Id. at 851–52. We may also consider documents attached to the complaint as part of the pleadings, and we do so frequently in contract dis- putes like this one. Fed. R. Civ. P. 10(c); see, e.g., Barwin v. Vil- lage of Oak Park, 54 F.4th 443, 453 (7th Cir. 2022) (employment agreement attached to complaint). The pleadings must “con- tain sufficient factual matter … to state a claim to relief that is plausible on its face.” Flores v. City of South Bend, 997 F.3d 725, 728–29 (7th Cir. 2021), quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A. The 2016 Lawsuit This lawsuit begins where another one ended. In 2016, Eli Lilly and Company sued Teva Pharmaceuticals USA under the Hatch-Waxman Act. Lilly asserted that Teva had infringed several patents that covered Lilly’s drug Forteo, a treatment for osteoporosis. Eli Lilly & Co. v. Teva Pharmaceuticals USA, Inc., No. 16-cv-596 (S.D. Ind.). Teva had filed with the Food and Drug Administration (FDA) an Abbreviated New Drug Application for a generic equivalent of Forteo. In so doing, Teva followed a path charted by the Hatch-Waxman Act, a federal statute that allows generic manufacturers like Teva to create and market their own versions of a patented drug “by allowing the generic to piggyback on the [brand-name manu- No. 25-2125 3 facturer’s] approval efforts.” FTC v. Actavis, Inc., 570 U.S. 136, 142 (2013). In this case, Teva had filed a “paragraph IV certifi- cation,” where it certified that any listed, relevant patent for the Forteo drug “is invalid or will not be infringed by the manufacture, use, or sale” of the generic equivalent of Forteo. 21 U.S.C. § 355(j)(2)(A)(vii)(IV). A paragraph IV certification counts as “an act of infringement” under the patent statute and exposes the generic manufacturer to an infringement suit by the patent holder. Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, 566 U.S. 399, 407 (2012), citing 35 U.S.C. § 271(e)(2)(A); see also Hikma Pharmaceuticals USA Inc. v. Am- arin Pharma, Inc., 608 U.S. —, —, 146 S. Ct. 1391, 1396–97 (2026) (summarizing process). The Hatch-Waxman Act offers generic manufacturers powerful incentives to take this risk. If the generic manufac- turer wins the infringement suit (or the brand-name manufac- turer declines to sue the first-filing applicant), the FDA will grant that generic drug 180 days of marketing exclusivity— that is, 180 days in which no other generic competitor can en- ter the market. Actavis, 570 U.S. at 143–44, citing 21 U.S.C. § 355(j)(5)(B)(iv); see also C. Scott Hemphill, Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, 81 N.Y.U. L. Rev. 1553, 1578–79 (2006) (describing other ways in which the generic manufacturer could receive exclusivity). During that time, the generic manufacturer can typically un- dercut the brand-name manufacturer’s prices but need not price at even lower levels expected in a market with several generic competitors. See C. Scott Hemphill & Mark A. Lemley, Earning Exclusivity: Generic Drug Incentives and the Hatch-Wax- man Act, 77 Antitrust L.J. 947, 951–55 (2011). The statute thus encourages generic manufacturers to press sound challenges to shaky patents. Id. at 947. 4 No. 25-2125 Two years after Lilly sued Teva, in January 2018, the par- ties reached a settlement agreement. The agreement governed six patents related to the Forteo drug.1 In broad terms, the deal required Teva not to sell a generic version of Forteo in the United States until a defined “Entry Date” of no later than Au- gust 12, 2019. In return, and in the provision at the center of this lawsuit, Lilly covenanted that it would not “take any ac- tion … to prevent or delay the approval, launch, [or] manu- facture” in the United States of Teva’s generic drug. Lilly also granted Teva “a royalty-free and fully paid-up, non-exclusive … right and license … to the [Forteo patents] to make, have made, use, sell, offer to sell, import, and distribute [Teva’s] Product in or for the United States” as of the Entry Date. As part of the license, Lilly promised to “waive any reg- ulatory … exclusivities necessary to effectuate the license as of the Entry Date.” So that Teva could fully make use of the license, the Settlement Agreement also gave Teva sixty days before the Entry Date to accumulate inventory of the generic product and to begin some marketing. If properly used, the license promised to give Teva a headstart in the generic com- petition with Forteo. The Forteo patents relevant to the Settlement Agreement had all expired by August 19, 2019. If the Entry Date was August 12, 2019 or earlier, then Teva could enter the market at least one week before any of its generic competitors. And re- 1 The six patents covered by the Settlement Agreement are: U.S. Patent Nos. 6,770,623; 6,977,077; 7,144,861; 7,163,684; 7,351,414; and 7,550,434. Another patent related to Forteo, No. 7,517,334, is governed by a separate agreement not part of the current litigation. References in this opinion to the Forteo patents cover only the six patents governed by the Settlement Agreement unless otherwise specified. No. 25-2125 5 member, once the FDA approved the generic, the 180-day pe- riod of exclusivity would have been available, so Teva could have kept other generic competitors out of the market during that time. Within ten days of Teva’s “written request,” Lilly was obliged to “provide the FDA with written confirmation of the Entry Date and the licenses, covenants and waivers herein” and to “submit to the FDA” the license agreement. B. This Lawsuit By the time the Forteo patents expired on August 19, 2019, Teva had still not entered the market as permitted under the Settlement Agreement. Several months later, in January 2020, Lilly filed a supplement to Forteo’s New Drug Application for “certain efficacy-related changes to the package insert.” The FDA approved Lilly’s supplement on November 16, 2020. Lilly then relied on the supplement as a basis to request three additional years of regulatory exclusivity, lasting from No- vember 16, 2020, until November 1

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