Antitrust Law Daily Wrap Up, ANTITRUST—S.D. Fla.: Pharmaceutical manufacturer failed to show anticompetitive effects of collaborative agreement, (Nov 2, 2015)

By Greg Hammond, J.D.

A pharmaceutical manufacturer could not move forward with claims that a collaboration agreement amounted to a horizontal agreement to restrain trade in the softgel capsule market. The federal district court in Miami granted the defendant’s motion for summary judgment, finding: (1) the manufacturer did not provide any actual empirical evidence of detrimental effects; and (2) there was no genuine dispute of material fact that the manufacturer failed to demonstrate substantial anticompetitive actual effects (Procaps S.A. v. Patheon Inc., October 29, 2015, Goodman, J.).

Procaps S.A. is a Columbia-based developer and manufacturer of softgel capsules. Procaps and Patheon entered into a collaboration agreement to market softgel manufacturing and developing services. After Patheon acquired another softgel company, Banner Pharmcaps, Procaps believed that it could no longer perform under the collaboration agreement, claiming that the agreement became an illegal horizontal restraint on trade. When Patheon refused to pay Procaps to leave the agreement or to divest Banner, Procaps filed suit, alleging antitrust violations under the Sherman Act. Patheon moved for summary judgment.

Anticompetitive effects. The court first determined that Procaps did not meet its burden of demonstrating actual anticompetitive effects with empirical evidence of events that have already occurred. In particular, Procaps failed to establish any specific damage was actually done to consumers because there was no evidence that: (1) any consumer’s price in fact increased; (2) output in the relevant markets in fact decreased; or (3) the quality of softgels actually decreased. In addition, the court determined that Procaps based its case on economic predictions, not on what actually happened. Summary judgment was therefore granted for lack of actual detrimental effects.

Substantial market harm. The court also granted summary judgment on the ground that there was no genuine factual dispute on substantial anticompetitive effects because Procaps never measured the magnitude of the alleged effects on the relevant markets. Procaps conceded that it did not present an individualized accounting of specific competitive harm on a customer-by-customer basis and that it has no quantitative evidence that any customer paid a measurably higher price for softgels as a result of the alleged market allocation. There was consequently no evidence of “marketwide” effects.

Procaps’ argument that 17 customers were affected by Patheon’s conduct was rejected because the alleged harm to such a small subset of customers could not be considered a marketwide anticompetitive effect. The seven-month duration of the alleged restraint was also “far too short as a matter of law” to create the required substantial marketwide harm of actual detrimental effects.

Procompetitive justifications. Patheon was not entitled to summary judgment, however, on the ground that Procaps failed to meet its burden to show an absence of procompetitive justifications for the alleged restraint. Patheon alleged three justifications or efficiencies, including that: (1) post-acquisition, it used Banner’s assets to compete more aggressively in the relevant markets, thereby increasing competition and benefitting consumers; (2) the Banner acquisition reduced the costs of manufacturing softgels in the relevant markets; and (3) the collaboration could have been successful with Banner’s assets, but Procaps blocked this possibility by refusing to participate in the collaboration.

The first argument was rejected because the court was not convinced that Patheon’s use of the Banner assets flowed from the alleged restraint. The second argument was similarly inadequate because none of the purported efficiencies flowed from the restraint in the collaboration agreement or related to competition in the relevant markets. The third argument was deemed purely hypothetical.

Standing. Lastly, Patheon argued that Procaps lost standing to bring its antitrust action by not pursuing opportunities in the relevant markets. The court rejected this argument as a ground for summary judgment, however, finding that Patheon could not assert new factual arguments for the first time in a summary judgment reply memorandum.

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

Attorneys: Chris S. Coutroulis (Carlton Fields Jorden Burt, PA) and Karen L. Hagberg (Morrison & Foerster) for Procaps S.A. David A. Vogel (Cooley, LLP) and Robert Mark Brochin (Morgan, Lewis & Bockius LLP) for Patheon Inc.

Companies: Procaps S.A.; Patheon Inc.

Cases: Antitrust FloridaNews