Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: Generic antibiotic manufacturer’s delayed competition claims tossed, (Apr 17, 2015)

By Greg Hammond, J.D.

Mylan Pharmaceuticals, Inc., one of the largest generic drug manufacturers in the world, could not support claims that brand name drug manufacturers illegally thwarted competition in the sale of generic drugs. The federal district court in Philadelphia granted the brand name drug manufacturers’ motion for summary judgment, finding that Mylan failed to demonstrate the manufacturers had monopoly power or engaged in anticompetitive conduct (Mylan Pharmaceuticals, Inc. v. Warner Chilcott Public Limited Co., April 16, 2015, Diamond, P.).

Background. Generic drug manufacturers, pharmaceutical wholesalers, and retail pharmacies that purchased a prescription antibiotic (doxycycline hyclate) sold under the brand name Doryx filed a class action against pharmaceutical manufacturers of Doryx, including Warner Chilcott Public Limited and Mayne Pharmaceuticals, for anticompetitive conduct and monopolization by delaying generic competition to Doryx in violation of Sections 1 and 2 of the Sherman Act. The plaintiffs, including Mylan, alleged that the brand name manufacturers conspired to protect their monopoly by implementing product changes to exempt Doryx from state laws that would otherwise allow pharmacies to substitute generic drugs for Doryx prescriptions, without providing any real benefits to patients. The defendants settled claims with all plaintiffs except Mylan. Mylan and the defendants moved for summary judgment.

Monopoly power. The court first determined that Mylan failed to demonstrate that the defendants had monopoly power. There was no direct evidence, such as of defendants’ “price-cost margins” for Doryx, or any explanation as to whether those margins were abnormally high. Mylan’s economic expert also elected to forego analysis of defendants’ margins, claiming that other evidence of monopoly power was “more compelling.” In addition, Mylan failed to show that the defendants restricted Doryx output to maintain monopoly profits and failed to discuss the quantity of Doryx the defendants manufactured during the relevant period.

Indirect evidence of monopoly power also was unavailing. In support of its claims, Mylan alleged a single-product market: branded and generic Doryx, excluding all other oral tetracyclines prescribed for acne. The court, however, determined that the relevant market necessarily includes other oral tetracyclines, reducing the defendants’ purported 60 percent market share to 18 percent. The record was also full of uncontradicted evidence, confirming and reconfirming the interchangeability of Doryx with other oral tetracyclines, the court stated.

In the absence of a predominant market share, the court considered other factors to determine whether the defendants held monopoly power, including size and strength of competing firms; freedom of entry; pricing trends and practices in the industry; the ability of consumers to substitute comparable goods; and consumer demand. These factors, according to the court, weighed against finding that the defendants had monopoly power, as Mylan is much larger than the defendants; there is freedom of entry into the tetracycline market; Mylan frequently enjoyed exclusive sales of generic Doryx; and consumers could substitute comparable goods.

Anticompetitive conduct. The court also found that Mylan failed to produce any evidence of anticompetitive conduct because the defendants did not exclude competition when they reformulated Doryx, introduced new versions of Doryx into the marketplace, marketed the new versions of Doryx, and withdrew old versions. Rather, the record evidence demonstrated that Mylan competes with the defendants, and that the defendants have not excluded Mylan from competition. Specifically, Mylan enjoyed exclusive sales of certain generic Doryx tablets over a number of years; raised its generic 75 and 100 mg Doryx to a higher price than the last reported price of branded Doryx in 2011; and was able to develop and sell its own 150 mg generic tablet at a gross profit of $146 million over the course of three years. During this time, doctors were free to prescribe generic Doryx, pharmacists could substitute generics where medically appropriate, and patients were free to ask their doctors and pharmacists for generic versions of Doryx.

The court concluded that, even if defendants’ product changes prevented Mylan from taking advantage of more profitable means of distributing its generic Doryx, the changes did not “bar” Mylan from the market or “severely restrict the market’s ambit.” Instead, the court found that Mylan remains able to reach consumers through advertising, promotion, cost competition, or superior product development, but Mylan seeks to take advantage of generic substitution laws and increase its profits. Summary judgment was therefore granted for the monopolization and attempted monopolization claims.

Restraint of trade. The court also granted summary judgment on Mylan’s challenge to the defendants’ exclusive licensing agreement as a restraint of trade in violation of Section 1 of the Sherman Act. It found that because the defendants’ development and introduction of the Doryx tablet were not anticompetitive, Mylan failed to demonstrate the second prong of the Gordon test—that the defendants’ concerted action produced anticompetitive effects within the relevant product and geographic markets.

The case number is 12-3824.

Attorneys: Christopher A. Williams (Wilson Sonsini Goodrich & Rosati) for Mylan Pharmaceuticals Inc. Christel Green (White & Case LLP) for Warner Chilcott Public Limited Co., Warner Chilcott Company, LLC, Warner Chilcott U.S., LLC, Warner Chilcott Holdings Company III, Ltd., and Warner Chilcott Laboratories Ireland Ltd. John E. Flaherty (McCarter & English LLP) for Mayne Pharma Group Ltd., and Mayne Pharma International Pty. Ltd.

Companies: Mylan Pharmaceuticals, Inc.; Warner Chilcott Public Limited Co.

Cases: Antitrust PennsylvaniaNews