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From Antitrust Law Daily, June 9, 2014

Drug company did not violate antitrust duty to deal by limiting supplies of ADHD treatment to generic rivals

By Jeffrey May, J.D.

Wholesale pharmaceutical product dealers could not pursue monopoly claims against the patent holders for attention-deficit/hyperactivity disorder (ADHD) drug Adderall XR (AXR) for allegedly breaching agreements with generic rivals to supply an unbranded version of the drug for resale. In affirming dismissal of Louisiana Wholesale Drug Company's complaint against Shire LLC and Shire U.S., Inc., the U.S. Court of Appeals in New York City rejected the plaintiff's theory that Shire's failure to supply all of the competitors' requirements for AXR breached a duty to deal that was enforceable under the antitrust laws by third-party customers, such as the wholesalers (In re Adderall XR Antitrust Litigation, June 9, 2014, Sack, R.).

Louisiana Wholesale Drug (LWD) filed suit on behalf of a putative class of purchasers to recover overcharges for AXR. The plaintiff alleged that Shire engaged in monopolization by breaching its contracts to supply unbranded AXR for resale to two competitors—Teva Pharmaceuticals USA, Inc. and Impax Laboratories, Inc.—as required by the terms of 2006 patent litigation settlements. According to the plaintiff, by supplying Teva and Impax with less than their requirements of unbranded AXR, Shire was able to maintain a higher price for the drug.

Neither Teva nor Impax was a party to the antitrust litigation. Shire, Teva, and Impax settled litigation arising from the contract disputes.

The plaintiff's theory did not fit within the single, narrow exception to the broad right of a firm to refuse to deal with its competitors, the court explained. The court noted that the antitrust duty to deal under the U.S. Supreme Court's 1985 decision in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 1985-2 Trade Cases ¶66,653, comes into play where a monopolist seeks to terminate a prior, voluntary course of dealing with a competitor. However, that was not the situation between Shire and the generic rivals.

“The plaintiffs allegations amount to the self-defeating claim that Shire monopolized the market by ceding its monopoly,” the court concluded. By entering into the supply agreements, Shire created competition in the market and lost market share. Moreover, Shire did not completely cut off supply to Teva and Impax. According to the court, “the complaint does little more than attach antitrust 'labels and conclusions' to what is, at most, an ordinary contract dispute to which the plaintiffs are not even parties.”

"Intersection of antitrust and patent law." Although the contracts were executed in connection with the patent litigation settlements, the appellate court did not consider the patent litigation. Nor did it assess the potentially anticompetitive effects of the underlying settlements in its analysis. The plaintiffs had dismissed reliance on these facts. The court noted that, as a result of the plaintiff’s theory of the case, it was “freed from the complexities that attend cases at the intersection of antitrust and patent law.”

In dismissing the case, the district court had relied principally on a 2006 Second Circuit decision (In re Tamoxifen Citrate Antitrust Litigation, 466 F.3d 187, 2006-2 Trade Cases ¶75,382) that was later abrogated by U.S. Supreme Court in FTC v. Actavis, Inc., 133 S. Ct. 2223, 2013-1 Trade Cases ¶78,419. The district court concluded that the wholesaler's claims failed because the terms of the patent settlement agreements did not exceed the scope of the patents in question. Actavis overturned the so-called “scope-of-patent” test, which effectively provided immunity from antitrust scrutiny for anticompetitive effects of reverse payment settlements that fall within the scope of the exclusionary potential of the patent.

LWD had narrowed the theory of the case to the requirements contracts. The plaintiff suggested that its claims would be no different if Shire had no patents respecting AXR. Thus, the appellate court was not required to consider the patent litigation and the settlements. The appellate court noted that its decision expressed “no view as to the viability of a monopolization claim based on similar factual circumstances in which the plaintiffs did not—as LWD unequivocally did here—narrow the scope of our inquiry.”

The case is No. 13–1232.

Attorneys: Joseph Opper (Garwin Gerstein & Fisher LLP) for Louisiana Wholesale Drug Company, Inc. Michael F. Brockmeyer (Frommer Lawrence & Haug LLP) for Shire LLC.

Companies: Louisiana Wholesale Drug Company, Inc.; Shire LLC; Shire U.S., Inc.; Teva Pharmaceuticals USA, Inc.; Impax Laboratories, Inc.

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