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From Antitrust Law Daily, July 31, 2014

Pharmaceutical maker unable to avoid allegations over acquisition

By Greg Hammond, J.D.

Pharmaceutical manufacturer and developer Patheon Inc., was unable to evade allegations it violated the Sherman Act, by entering into a collaboration agreement with a softgel competitor, and subsequently acquiring another. In partially denying the company’s motion for summary judgment, the federal district court in Miami determined that there were genuine issues of material fact regarding whether the collaboration agreement violated the Sherman Act after Patheon acquired a competing business, and whether the plaintiff suffered antitrust injury (Procaps S.A. v. Patheon Inc., July 30, 2014, Goodman, J.).

Background. Procaps S.A. is a Columbia-based developer and manufacturer of softgel capsules—an oral dosage form of medications and nutritional supplements. Procaps and Patheon entered into a collaboration agreement to market softgel manufacturing and developing services. Although the agreement allocated markets and customers among the horizontal competitors, the companies agreed that it was lawful, as it brought a new competitor and product into the territory and field. However, after lackluster performance, Patheon decided to acquire another horizontal competitor, Banner Pharmcaps Europe B.V.

After the Banner acquisition, Procaps believed that it could no longer perform under the collaboration agreement, claiming that the agreement became an illegal horizontal restraint on trade. After Pantheon refused to pay Procaps to leave the agreement or to divest Banner, Procaps filed suit, alleging antitrust violations under the Sherman Act, and violations of state unfair trade and deceptive practices laws. Both Pantheon and Procaps filed motions for summary judgment.

Agreement. The court concluded that the collaboration agreement could provide a basis for establishing concerted action required under the Sherman Act. Pantheon had argued that there was no requisite agreement, because Procaps did not agree to the activity that created the alleged unreasonable restraint, and it did not participate in the attempted allocation post-acquisition. The court stated that there is no requirement that Procaps had to agree to all future circumstances in order to establish a requisite contract under Section 1.

Mode of analysis. Both parties disputed the mode of analysis that should be applied to unreasonable restraints under the Sherman Act: per se or rule of reason. The court concluded that rule of reason analysis applies in this case, because: (1) the acquisition of Banner was a change of circumstance that militates against the use of a per se analysis; (2) the rule of reason analysis originally applied to the collaboration agreement, and should consequently be applied to it now; and (3) the agreement is not a naked restraint, because a finder of fact could find that the agreement was not entered into with the sole purpose of stifling of competition.

Antitrust injury. Pantheon argued that it was entitled to summary judgment because Procaps failed to establish it suffered an antitrust injury. Specifically, Pantheon asserted that: (1) there was no evidence the market division reduced output or increased prices, and (2) Procaps suffered the same injury it would have if Patheon breached the collaboration agreement. However, the court found Patheon’s arguments unavailing, because exclusion from the market as a result of an antitrust violation constitutes antitrust injury. Consequently, Patheon’s motion for summary judgment was denied with regard to the antitrust claims.

Deceptive practices. Procaps also asserted a Florida Deceptive and Unfair Trade Practices Act (FDUTPA) claim and a common law unfair competition claim, based on Procaps’ confidential information that Patheon now possesses. The FDUTPA claim was dismissed, however, as Procaps failed to meet the requisite showing that Patheon disclosed confidential information to a third party. The common law claim was also dismissed, as Procaps was unable to demonstrate Patheon engaged in deceptive or fraudulent conduct, or that any likelihood of consumer confusion existed.

The case number is 12-24356-CIV-GOODMAN.

Attorneys: Chris S. Coutroulis (Carlton Fields Jorden Burt, PA) for Procaps S.A. David A. Vogel (Cooley, LLP) for Patheon Inc.

Companies: Procaps SA; Patheon Inc.

MainStory: TopStory Antitrust StateUnfairTradePractices FloridaNews

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