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From Antitrust Law Daily, November 25, 2014

Abbott cannot dodge antitrust claims in HIV drug price increase case

By Linda O’Brien, J.D., LL.M.

In GloxoSmithKline’s antitrust and unfair trade practices action against Abbott, over the licensing and pricing of human immunodeficiency virus (HIV) medications, the federal district court in Oakland, California has denied Abbott’s motion for judgment as a matter of law (SmithKline Beecham Corporation v. Abbott Laboratories, November 24, 2014, Wilken, C.).

Global pharmaceutical company SmithKline Beecham Corporation, d/b/a/ GlaxoSmithKline (GSK), filed suit against Abbott Laboratories, alleging violations of the implied covenant of good faith and fair dealing, the Sherman Act, and North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA). Specifically, GSK contended that Abbott—after licensing to GSK the rights to market Abbott HIV drug Norvir, in conjunction with one of GSK’s—greatly increased the price of the Abbott drug in order to drive business to its own HIV combination drug, Kaletra.

After Abbott’s motion for judgment as a matter of law was denied, the case was submitted to a jury. The jury entered a verdict in favor of GSK on its implied covenant claim and in favor of Abbott on GSK’s other claims. The U.S. Court of Appeals in San Francisco remanded the case for a new trial. Subsequently, Abbott renewed its motion for judgment as a matter of law.

Monopoly power. Abbott contended that GSK failed to demonstrate Abbott’s monopoly power in the market in which Kaletra competes. According to the court, GSK contended that the relevant market of highly effective protease inhibitors (PIs) was defined as Kaletra and two other drugs—GSK’s Lexiva and Reyataz, a drug made by another pharmaceutical company. GSK’s expert opined that the drugs constituted the relevant market because they were close therapeutic and economic substitutes. In rejecting Abbott’s challenge to the expert’s testimony on the grounds he had no medical or pharmacological expertise, the court declined to make a credibility determination and found that GSK presented sufficient evidence for a reasonable jury to conclude there was adequate interchangeability between the products.

Although Abbott asserted that the decline in its market share from 81 to 50 percent showed that it did not possess market power, GSK presented evidence of significant barriers to entry, including obtaining patents, investing in research and development, and obtaining approval from the Food and Drug Administration, the court noted.

Anticompetitive conduct. GSK presented sufficient evidence of anticompetitive conduct, including: (1) Abbott’s previous pattern of increasing prices only at the rate of inflation; (2) a marketing presentation on its plan to delay announcement of the price increase to “make GSK look bad”; and (3) an email from an Abbott executive discussing its supply restraint program. According to the court, the evidence, combined with Abbott’s sudden price increase, was sufficient for a reasonable jury to find in favor of GSK’s claim of Abbott’s refusal to deal.

Business justification. The court rejected Abbott’s argument that GSK failed to present evidence to rebut its legitimate business justification for profiting from its intellectual property rights in Norvir. It noted that GSK presented evidence that the price increase was timed to disrupt the launch its drug, Lexiva, and that Abbott considered taking Norvir off the market or implementing the price increase in response to concerns that competitors were taking market share from Kaletra. Based on the evidence, a reasonable jury could find that Abbott’s purported legitimate business justification was pretextual, the court concluded.

The case is No. C 07-5702.

Attorneys: Alexander Frank Wiles (Irell & Manella LLP) for SmithKline Beecham Corp. Charles B. Klein (Winston & Strawn LLP) for Abbott Laboratories.

Companies: SmithKline Beecham Corporation; Abbott Laboratories

MainStory: TopStory Antitrust CaliforniaNews

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