State of West Virginia v. Chas. Pfizer & Co.
| Decision Date | 18 September 1970 |
| Citation | 314 F. Supp. 710 |
| Parties | STATE OF WEST VIRGINIA, Plaintiff, v. CHAS. PFIZER & CO., Inc., American Cyanamid Company, Bristol-Myers Company, Olin Mathieson Chemical Corporation, and The Upjohn Company, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Dickstein, Shapiro & Galligan, New York City, for plaintiffs States of Alabama, Florida, Georgia, Iowa, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Mississippi, Missouri, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Texas, Vermont, Virginia and Wisconsin; Cities of New York (counterclaim plaintiff) and Memphis; District of Columbia.
G. Kent Edwards, Atty. Gen., Juneau, Alaska, for plaintiff State of Alaska.
Harrison, Strick & Myers, Phoenix, Ariz., for plaintiffs State of Arizona and County of Maricopa.
Joe Purcell, Atty. Gen., Jerry D. Pinson, Asst. Atty. Gen., Little Rock, Ark., for plaintiff State of Arkansas.
Perry Goldberg, Friedman, Koven, Shapiro, Salzman, Koenigsberg, Specks & Homer, Chicago, Ill., for plaintiffs States of Connecticut, Idaho, Maryland, New Jersey, New Mexico, and Wyoming; City and County of Denver; Mayor and City Council of Baltimore.
Lee A. Freeman, Chicago, Ill., for plaintiffs States of Colorado, Illinois, Indiana, Michigan, New Hampshire, Pennsylvania, West Virginia; City of Chicago; Metropolitan Government of Nashville and Davidson County.
Robert L. Woodahl, Atty. Gen., James R. Anderson, Douglas J. Wold, Asst. Attys. Gen., Helena, Mont., for plaintiff State of Montana.
Clarence A. H. Meyer, Atty. Gen., Lincoln, Neb., for plaintiff State of Nebraska.
Louis J. Lefkowitz, Atty. Gen., Albany, N. Y., George C. Mantzoros, Asst. Atty. Gen., New York City, for plaintiff State of New York.
Robert E. Sher, Washington, D. C., for plaintiff Commonwealth of Puerto Rico.
Daniel R. McLeod, Atty. Gen., John Bowen, Asst. Atty. Gen., Columbia, S. C., for plaintiff State of South Carolina.
George F. McCanless, Atty. Gen., C. Hayes Cooney, Elmer D. Davies, Asst. Attys. Gen., Nashville, Tenn., for plaintiff State of Tennessee.
Dilworth, Paxson, Kalish, Kohn & Levy, Cohen, Shapiro, Berger, Polisher & Cohen, Philadelphia, Pa., for plaintiffs City of Philadelphia, City of Detroit et al., and Sun Ray Drug Co., et al.
Leo Schwartz, Boston, Mass., for plaintiffs City of Boston, Richardson Drug Co., Inc., et al.
Schein, Askounis, Stavins & Wald, Chicago, Ill., for plaintiffs Alpine Pharmacy, Inc., et al.
Peck, Shaffer & Williams, Cincinnati, Ohio, for plaintiffs Herbert Beins, d/b/a Waverly Drugs, et al.
Schwartz & Alschuler, Beverly Hills, Cal., for plaintiff Domaro, Inc. and counterclaim plaintiff Benalen Corporation.
Edward A. Berman, Lawrence Walner, Chicago, Ill., for plaintiffs Cotler Drugs, Inc., et al.
James P. Chapman, James B. Sloan, Chicago, Ill., for plaintiffs DeKoven Drug Co., Inc., et al.
Donald B. Brown, Los Angeles, Cal., for plaintiffs Mario De Modena, d/b/a The Apothecary Shop, et al.
Levy & Erens, Chicago, Ill., for plaintiffs Ford Hopkins Co., et al.
Sager, Silverman, Bodne & Burns, Miami, Fla., for plaintiff Lee's Prescription Shops, Inc.
Dene T. Lusby, Baltimore, Md., for plaintiff Rockdale Pharmacy, Inc., et al.
Cochrane & Bresnahan, St. Paul, Minn., for plaintiffs Peterson's Pharmacy, Inc., et al.
Antonio M. Bird, Old San Juan, P. R., for plaintiffs Weiwall Drug Corporation et al.
Dewey, Ballantine, Bushby, Palmer & Wood, New York City, for defendant Chas. Pfizer & Co., Inc.
Donovan Leisure Newton & Irvine, New York City, for defendant American Cyanamid Co.
Winthrop, Stimson, Putnam & Roberts, New York City, for defendant Bristol-Myers Co.
Cravath, Swaine & Moore, New York City, for defendants Olin Mathieson Chemical Corporation and Squibb Beech-Nut, Inc.
No. 68 Civ. 240. and other antibiotic drug antitrust actions.
This is an application by defendants and by plaintiffs in these class actions for approval of a proposed compromise under which the actions and all claims of the classes therein will be settled and dismissed with prejudice. Fed.R.Civ.P. 23 (e) The application is granted and the proposed compromise is approved.
These are 66 civil actions, 26 of which were commenced in this District and 40 of which were transferred to this District by the Judicial Panel on Multidistrict Litigation (the Panel) "for coordinated or consolidated pretrial proceedings" (28 U.S.C. § 1407; see 295 F.Supp. 1402, 297 F.Supp. 1126, 299 F.Supp. 1403, 301 F.Supp. 1158, 303 F.Supp. 1056, 309 F.Supp. 155). The 66 civil actions which are the subject of the present application are sometimes referred to in this opinion as simply "these actions".
The same five companies are defendants in each of these actions (Squibb Beech-Nut, Inc. is also a defendant in some actions); they may be referred to as Pfizer, Cyanamid, Bristol, Squibb (a division of defendant Olin Mathieson Chemical Corporation until about January 1, 1966 and ultimately a part of Squibb Beech-Nut, Inc.), and Upjohn. They have been for some years sellers of broad spectrum antibiotic drugs, the most important of which is tetracycline and on which a patent, owned by Pfizer and often called "the Conover patent", issued on January 11, 1955. Pfizer, Cyanamid and Bristol made tetracycline and sold it in dosage form. Bristol sold tetracycline in bulk to Squibb and Upjohn which sold it in dosage form.
Antibiotic drugs are prescription drugs used for infectious diseases. Broad spectrum antibiotic drugs, such as tetracycline, are effective against a wider range of germs than are the narrow spectrum antibiotic drugs, such as penicillin. The word "antibiotics" when used in this opinion refers to broad spectrum antibiotic drugs.
There are in total before this Court some 150 similar civil actions against the same defendants, either commenced in this District or transferred here by the Panel. These some 150 actions are divided into the following groups: (a) the 66 actions which are the subject of the present application; (b) some actions in which plaintiffs were offered but rejected the same proposed settlement on which the present application is based; (c) some actions in which plaintiffs have not been offered any settlement by defendants; and (d) about 26 actions in which plaintiffs are private hospitals to which a separate offer of settlement has been made by defendants.
The claim in each of the actions is that defendants violated the antitrust laws in the sale of antibiotics, specifically Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2); treble damages are sought, as authorized in 15 U.S.C. § 15.
Data as to the four principal broad
spectrum antibiotics are as follows
Generic Name Trade Name First Introduced By Whom
chlortetracycline Aureomycin December 1948 Cyanamid
chloramphenicol Chloromycetin January 1949 Parke, Davis
oxytetracycline Terramycin March 1950 Pfizer
tetracycline Achromycin November 1953 Cyanamid
Tetracyn January 1954 Pfizer
Polycycline April 1954 Bristol
Steclin September 1954 Squibb
Panmycin October 1954 Upjohn
Cyanamid owns the patent for chlortetracycline (the Duggar patent) issued September 1949, and an improvement patent (Niedercorn) issued September 1952.
Pfizer owns the patent for oxytetracycline (the Sobin patent) issued July 1950.
When the Duggar and Sobin patents issued, the chemical structure of the antibiotics produced—trade names, Aureomycin and Terramycin—were not known.
In 1952, a Pfizer research team made the first discovery of the chemical structure of Aureomycin and Terramycin. On June 17, 1952, Conover, a member of the Pfizer team, discovered tetracycline by removing the chlorine atom from Aureomycin.
Tetracycline proved to be highly superior to the earlier antibiotics.
The discovery of tetracycline was announced to the world in an article on August 8, 1952 in the Journal of the American Chemical Society. On October 23, 1952, application for the Conover patent was filed. Thereafter, applications for tetracycline patents were filed by Cyanamid and by Bristol, among others.
It eventually developed that to produce tetracycline, it was necessary to use the Duggar and Niedercorn patents for the fermentation process. If a patent on the Conover invention were issued to Pfizer, then neither Cyanamid nor Pfizer could make tetracycline except by agreement between them. Each would be blocked by a patent of the other.
After meetings on November 7 and 15, 1953 between McKeen (Pfizer) and Malcolm (Cyanamid) an agreement was made by which Cyanamid would license Pfizer under the Duggar and Niedercorn patents; in addition, it was agreed that proofs of priority on tetracycline would be exchanged; that the party found (on such exchange of proofs) not to have priority would then concede priority to the other; and that the party receiving the patent on tetracycline would then license the other.
Bristol began making and selling tetracycline in May 1954. It sold the drug in bulk to Squibb and to Upjohn, who in turn sold in dosage form under their respective trade names. Bristol also sold in dosage form under its trade name.
Cyanamid brought an action against Bristol in September 1954, asserting that in making tetracycline Bristol infringed the Duggar and Niedercorn patents. This action was settled in December 1954 and Bristol received a license (with royalty to Cyanamid) for use of the Duggar and Niedercorn processes in making tetracycline.
After an exchange of evidence as to priority, Cyanamid conceded in February 1954 that Conover was prior in discovery of tetracycline.
The Conover patent issued on January 11, 1955 and has since been owned...
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