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From Antitrust Law Daily, August 27, 2015

Monopolization claims proceed against Mucinex patent holder

By Greg Hammond, J.D.

A generic pharmaceutical company could move forward with monopolization and attempted monopolization claims against a consumer products company for allegedly withholding supply of its authorized generic in breach of a patent infringement settlement agreement. The federal district court in Philadelphia denied the consumer products company’s motion to dismiss the monopoly claims, finding that the plaintiff adequately pleaded monopoly power, a relevant market, dominant share and barriers to entry, anticompetitive conduct and effects, and anticompetitive effects outweighing any procompetitive justifications (URL Pharma, Inc. v. Reckitt Benckiser, Inc., August 25, 2015, Tucker, P.).

In 2007, multinational consumer goods company Reckitt Benckiser, Inc. held the patent for the only FDA-approved form of extended-release guaifenesin (ERG), an over-the-counter expectorant sold under the brand name Mucinex. Reckitt sued generic drug manufacturer Mutual Pharmaceuticals for patent infringement, after Mutual planned to sell a generic version of ERG. The parties reached a settlement agreement in which Mutual was required to refrain from entering the ERG market until another generic drug manufacturer began offering generic ERG. Once a third party began offering generic ERG, Reckitt agreed that it would supply an authorized generic ERG to Mutual so that Mutual also would be able to enter the generic ERG market. Mutual, however, claims that Reckitt refused to supply ERG after Perrigo Co. began legally selling a generic version of 600 mg ERG, bringing claims for monopolization and attempted monopolization, as well as claims for breach of contract and declaratory judgment. Reckitt moved to dismiss the complaint.

Monopolization. Reckitt first argued that the monopolization and attempted monopolization claims fail because Mutual’s definition of the relevant market was insufficient and Mutual has not suffered antitrust injury. Mutual claimed that the relevant market is the market for ERG products, a single product market. Specifically, Mutual alleged: (1) guaifenesin drugs are shelved separate and apart from other cold and flu remedies, demonstrating their unique therapeutic features; (2) alternative remedies are ineffectual or may cause side effects not associated with guaifenesin; (3) Mucinex ERG is marketed as providing 12-hours of symptom relief, while immediate release guaifenesin (IRG) products provide only short-term relief, demonstrating IRG products are an unacceptable substitute for ERG; and (4) Reckitt’s ability to charge monopoly prices for Mucinex demonstrates ERG constitutes a separate market than IRG. Accepting Mutual’s factual allegations as true, the court found that Mutual satisfactorily pleaded a relevant market. The motion to dismiss was therefore denied with regard to an alleged failure to plead a relevant market.

The court also found that the facts alleged in this case supports Mutual’s assertion that Reckitt possesses monopoly power in the relevant market for ERG products. Mutual alleged that Reckitt possesses a significant percentage of the ERG market; little competition exists; Reckitt controls its development of ERG; and Reckitt’s patent provides a barrier to entry for competitors.

Next, the court determined that Mutual pleaded facts to show that Reckitt’s actions had an antitrust effect because Reckitt’s alleged repudiation of the settlement agreement constituted an anticompetitive act that prevented Mutual from entering the ERG market with a generic product. This ultimately deprived Mutual and consumers of the economic benefits of increased supply and a lower-priced ERG product, constituting antitrust injury.

Reckitt’s procompetitive justifications were primarily limited to its patent rights. Specifically, Reckitt claimed that its patent lawfully excluded Mutual from the ERG market and challenged that Mutual’s grievance amounted to nothing more than a breach of contract claim. Conversely, Mutual argued that (1) when Reckitt offered Mutual a patent license to enter the ERG market, Reckitt agreed to relinquish its rights to exclude Mutual from the ERG market under the patent; (2) now that the supply agreement has been triggered, Reckitt should not be able to use its patent against Mutual; and (3) Reckitt’s conduct falls outside the scope of the rights conferred by its patent, forces the parties into further litigation, and unlawfully extends Reckitt’s monopoly. The court determined that Mutual’s allegations are not confined to refusal to deal arguments.

Lastly, the court rejected Reckitt’s argument that Mutual cannot show the anticompetitive effects of Reckitt’s repudiation of the settlement agreement because Perrigo provides some competition in the ERG market to challenge Reckitt’s monopoly. Mutual argued that no real competition exists to challenge Reckitt’s monopoly power because Reckitt knew Perrigo possessed a limited supply of the competing product, and therefore, acted intentionally to continue excluding Mutual from the ERG market. The court found that Mutual pleaded sufficient facts to demonstrate that Reckitt’s conduct may have anticompetitive effects and that those effects outweigh the procompetitive justification offered by Reckitt. The motion to dismiss was therefore denied with regard to a purported failure to allege anticompetitive effect.

Attempted monopolization. Mutual additionally alleged that Reckitt possessed the specific intent to monopolize the market for ERG products because Reckitt understood that if it met the obligations under the settlement, it would have lost its ability to freely extract monopoly profits; and that Reckitt’s specific intent in the anticompetitive acts was to reduce competition and build a monopoly in the ERG market by denying Mutual access to ERG. These allegations adequately stated a claim for attempted monopolization and claimed that Reckitt possessed the requisite intent to monopolize the ERG market. The motion to dismiss the attempted monopolization claim was therefore dismissed.

The motion to dismiss the state law breach of contract claims was also denied. However, the court partially granted the motion with regard to Mutual’s claim for declaratory judgment as to third-party formulations other than Perrigo’s 600 mg ERG formulation.

The case is No. 2:15-cv-00505-PBT.

Attorneys: Daniel P. Shapiro (Katten Muchin Rosenman LLP) and John J. Grogan (Langer Grogan & Diver PC) for URL Pharma, Inc., Mutual Pharmaceutical Co., Inc., and United Research Laboratories, Inc. Richard L. Bazelon (Bazelon, Less & Feldman, PC) for Reckitt Benckiser Inc.

Companies: URL Pharma, Inc.; Mutual Pharmaceutical Co., Inc.; United Research Laboratories, Inc.; Reckitt Benckiser Inc.

MainStory: TopStory Antitrust PennsylvaniaNews

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