Antitrust Law Daily Wrap Up, TOP STORY—11th Cir.: Denial of class certification upheld in hospital’s tying claim against drug manufacturer, (Aug 15, 2014)

By Linda O’Brien, J.D., LL.M.

A federal district court properly denied a hospital’s motion for class certification in an antitrust action against a drug manufacturer that was the exclusive licensee of two relevant patents involving adenosine—a drug used to increase the accuracy of cardiac stress tests, the U.S. Court of Appeals in Atlanta has held (Lakeland Regional Medical Center v. Astellas US, LLC, August 15, 2014, Ebel, D.).

Astellas US holds patents for performing cardiac stress tests and the drug, adenosine, used to increase the accuracy of the tests. Astellas’ product was the only adenosine product approved by the Food and Drug Administration (FDA) for use during a cardiac stress test. Lakeland Regional Medical Center filed suit, alleging that Astellas was able to overcharge the hospital for its adenosine product, Adenoscan, by unlawfully tying its right to perform the patented cardiac test to the purchase of the drug.

The hospital brought the suit as a class action on behalf of all healthcare providers who purchased Adenoscan during a four-year period. The district court declined to certify the class, ruling Lakeland was not a viable class representative because of the direct purchaser rule. Lakeland appealed.

The district court properly determined that Lakeland’s claims were barred by the direct purchaser rule, according to the appellate court. Under the direct purchaser rule set forth in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), only the customer who purchased the goods or services directly from the alleged antitrust violator could recover damages. In this case, Lakeland purchased Astellas’ adenosine products from distributors. Although the distributors may have passed on to Lakeland all or a portion of the overcharge paid to Astellas, Lakeland could not recover damages from Astellas for that overcharge, since it was an indirect purchaser of the tied product.

Lakeland’s argument that Astellas did not exert tying pressure on the distributors to buy the tied product—since the distributors had no use for the tied product—was rejected. While the distributors had no need for a license to perform the cardiac test, the license had economic value for the distributors who sought to sell Adenoscan to their healthcare customers. Since the distributors could sell Adenoscan only for its FDA-approved use, they needed to assure their customers – the hospitals – that they could use the drug. Thus, only the distributors, as direct purchasers of Adenoscan, could recover damages from Astellas, the court concluded.

The case is No. 13-12709.

Attorneys: Stephen R. Senn (Peterson & Myers, PA) and Andrew E. Brashier (Beasley Allen Crow Methvin Portis & Miles, PC) for Lakeland Regional Medical Center, Inc. Chris S. Coutroulis (Carlton Fields Jorden Burt, PA), Susan Griffen, David Frazier, and Bill Raich (Finnegan Henderson Farabow Garrett & Dunner, LLP), and Daniel Greenfield (Sidley Austin, LLP) for Astellas U.S., LLC and Astellas Pharma U.S., Inc.

Companies: Lakeland Regional Medical Center, Inc.; Astellas US, LLC; Astellas Pharma U.S., Inc.

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