Antitrust Law Daily Wrap Up, ANTITRUST—D. Del.: Pharmacy not direct purchaser in suit alleging delayed generic competition for antibiotics, (Aug 20, 2015)

By Linda O’Brien, J.D., LL.M.

A pharmacy could not maintain antitrust claims as a direct purchaser against three pharmaceutical companies for allegedly engaging in anticompetitive practices to delay generic competition for brand drugs Zymar and Zymaxid, the federal district court in Wilmington, Delaware has held. Thus, the drug companies’ motion to dismiss was granted (Hartig Drug Company Inc. v. Senju Pharmaceutical Co., Ltd., August 19, 2015, Robinson, S.).

Kyorin Pharmaceutical Co. developed Zymar and Zymaxid—gatifloxacin ophthalmic formulations used to treat bacterial infections. In June 2014, retail pharmacy chain Hartig Drug Company filed a putative class action suit on behalf of all direct purchasers of Zymar and Zymaxid against Kyorin and its licensees, Senju Pharmaceutical Co. and Allergan Inc. Hartig alleged that the drug companies engaged in anticompetitive practices in violation of Section 1 of the Sherman Act by (1) filing sham patent litigation against competitors, (2) engaging in “product hopping,” and (3) making misrepresentations to the U.S. Patent and Trademark Office to delay generic competition for Zymar and Zymaxid. The defendants moved to dismiss the complaint.

The court determined it lacked jurisdiction over the subject matter. The U.S. Supreme Court decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) established the general rule that only direct purchasers from alleged antitrust violators may recover damages in antitrust suits, the court explained. In this case, Hartig purchased Zymar and Zymaxid from distributor AmeriSourceBergen Drug Corporation and AmeriSource directly purchased the products from Allergan pursuant to a distribution services agreement (DSA).

Hartig’s contention that it had standing to sue as a direct purchaser in that AmeriSource assigned to Hartig all of its rights to all causes of action against the defendants under the antitrust laws arising out of AmeriSource’s purchase of Zymar and Zymaxid was rejected. The court noted that the DSA between Allergan and AmeriSource expressly prohibited the assignment of the parties’ rights and obligations under the agreement with the prior consent of other party. Under the plain meaning of the provision, the anti-assignment provision referred to both rights and obligations, and extended to the assignment of the right to bring suit.

Moreover, Hartig’s antitrust claim was based on pricing and purchases of Zymar and Zymaxid made pursuant to the DSA. An interpretation that the DSA prohibited the assignment of the right to bring a cause of action in the antitrust context was consistent with the DSA as a whole, as well as the circumstances surrounding the execution of the agreement. Since Hartig did not allege that AmeriSource sought the permission of Allergan prior to the execution of the assignment, such assignment was invalid, the court concluded.

The case is No. 1:14-cv-00719-SLR.

Attorneys: J. Clayton Athey and Eric J. Juray (Prickett, Jones & Elliot, P.A.) for Hartig Drug Company Inc. Stephen B. Brauerman (Bayard, P.A.) for Senju Pharmaceutical Co. Ltd. David Evan Ross and Benjamin J. Schladweiler (Seitz Ross Aronstam & Moritz LLP) for Kyorin Pharmaceutical Co. Ltd. Jack B. Blumenfeld (Nichols, Arsht & Tunnell LLP) for Allergan Inc.

Companies: Hartig Drug Company Inc.; Senju Pharmaceutical Co. Ltd.; Kyorin Pharmaceutical Co. Ltd.; Allergan Inc.

Cases: Antitrust DelawareNews