In re Cardizem Cd Antitrust Litigation

• Citation: 332 F.3d 896
• Decision Date: 13 June 2003
• Docket Number: No. 00-2483.,00-2483.
• Parties: In re: CARDIZEM CD ANTITRUST LITIGATION. Louisiana Wholesale Drug Co., et al., Plaintiffs-Appellees, v. Hoechst Marion Roussel, Inc., and Andrx Pharmaceuticals, Inc., Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

332 F.3d 896

In re: CARDIZEM CD ANTITRUST LITIGATION.

Louisiana Wholesale Drug Co., et al., Plaintiffs-Appellees, v. Hoechst Marion Roussel, Inc., and Andrx Pharmaceuticals, Inc., Defendants-Appellants.

No. 00-2483.

United States Court of Appeals, Sixth Circuit.

Argued: April 30, 2002.

Decided and Filed: June 13, 2003.

Rehearing and Rehearing En Banc Denied: July 24, 2003.

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Richard W. Cohen (argued and briefed), Stephen Lowey (briefed), Peter D. St Phillip, Jr. (briefed), Lowey, Dannenberg, Bemporad & Selinger, White Plains, NY, Bruce E. Gerstein (briefed), Barry S. Taus (briefed), Garwin, Bronzaft, Gerstein & Fisher, New York City, Elwood S. Simon, Lance C. Young, Elwood S. Simon & Associates, Birmingham, MI, Joseph J. Tabacco, Jr. (briefed), Jennifer S. Abrams (briefed), Berman, DeValerio, Pease & Tabacco, San Francisco, CA, Patrick E. Cafferty (briefed), Miller Faucher, Chertow Cafferty & Wexler, Ann Arbor, MI, Richard B. Drubel (argued and briefed), Boies, Schiller & Flexner, Hanover, NH, Scott E. Perwin (briefed), Kenny, Nachwalter, Seymour, Arnold, Critchlow & Spector, Miami, FL, Douglas H. Patton (briefed), Dewsnup, King & Olsen, Salt Lake City, UT, Steve D. Shadowen (argued and briefed), Michael J. colleran (briefed), Schnader, Harrison, Segal & Lewis, Harrisburg, PA, Neill W. Clark, Eric L. Cramer (briefed), Daniel Berger (briefed), Berger & Montague, Philadelphia, PA, Angela K. Green (briefed), William W. Sellers (briefed), Niewald, Waldeck & Brown, Kansas City MO, for Appellees.

Louis M. Solomon (argued and briefed), Solomon, Zauderer, Ellenhorn, Frischer & Sharp, New York City, Kathleen McCree Lewis (briefed), Dykema Gossett, Detroit, MI, James R. Eiszner (briefed), Joseph M. Rebein (briefed), Shook, Hardy & Bacon, Kansas City, MO, Craig L. John, Dykema Gossett, Bloomfield Hills, MI, David E. Everson (argued), Stinson, Mag & Fizzell, Kansas City, MO, Norman C. Ankers, Honigman, Miller, Schwartz & Cohn, Bingham Farms, MI, for Appellants.

Marjorie E. Powell (briefed), Pharmaceutical Research & Manufacturers of America, Karen N. Walker (briefed), Edwin J. U (briefed), Kirkland & Ellis, Washington, DC, Paul E. Slater (briefed), Sperling, Slater & Spitz, Chicago, IL, Paul F. Novak, Asst. Atty. General (briefed), Office of the Attorney General, Natural Resources Division, Lansing, MI, Jay Himes (briefed), Attorney General, State of New York, Kathleen L. Harris (briefed), New York, NY, Michael R. Schuster (briefed), Sarah L. Lock (briefed), American Association of Retired Persons, Washington, DC, Donald Louis Bell II (briefed), Alexandria, VA, for Amici Curiae.

Before: SILER and CLAY, Circuit Judges; OBERDORFER, District Judge.^*

OPINION

OBERDORFER, District Judge.

This antitrust case arises out of an agreement entered into by the defendants, Hoescht Marion Roussel, Inc. ("HMR"), the manufacturer of the prescription drug Cardizem CD, and Andrx Pharmaceuticals, Inc. ("Andrx"), then a potential manufacturer of a generic version of that drug. The agreement provided, in essence, that Andrx, in exchange for quarterly payments of $10 million, would refrain from marketing its generic version of Cardizem CD even after it had received FDA approval (the "Agreement"). The plaintiffs are direct and indirect purchasers of Cardizem CD who filed complaints challenging the Agreement as a violation of federal and state antitrust laws. After denying the defendants' motions to dismiss, see In re Cardizem CD Antitrust Litigation, 105 F.Supp.2d 618 (E.D.Mich.2000) ("Dist.Ct.Op. I") and granting the plaintiffs' motions for partial summary judgment, id., 105 F.Supp.2d 682 (E.D.Mich. 2000) ("Dist.Ct.Op. II"), the district court certified two questions for interlocutory appeal:

(1) ... In determining whether Plaintiffs have properly pled antitrust injury, does the language of the Sixth Circuit's decisions in Valley Products Co. v. Landmark, 128 F.3d 398, 404 (6th Cir. 1997) and Hodges v. WSM, Inc., 26 F.3d 36, 39 (6th Cir.1994) require dismissal of Plaintiffs' antitrust claims at the pleading stage if Plaintiffs cannot allege facts showing that Defendants' alleged anticompetitive conduct was a "necessary predicate" to their antitrust injury; i.e., that dismissal is required unless Plaintiffs plead facts showing that the alleged antitrust injury could not possibly have occurred absent Defendants' alleged anticompetitive conduct?

(2) ... In determining whether Plaintiffs' motions for partial judgment were properly granted, whether the Defendants' September 24, 1997 Agreement constitutes a restraint of trade that is illegal per se under section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, and under the corresponding state antitrust laws at issue in this litigation.

JA 607. Our answers, explained more fully herein, are as follows:

Answer to First Certified Question: As framed, the certified question is not susceptible to a yes or no answer because it incorporates a definition of "necessary predicate" that we reject. Hodges and Valley Products stand for the proposition that in order to survive a motion to dismiss for failure to allege antitrust injury, a plaintiff must allege that the antitrust violation is either the "necessary predicate" for its injury or the only means by which the defendant could have caused its injury. Under the "necessary predicate" option, dismissal is warranted only where it is apparent from the allegations in the complaints that the plaintiffs' injury would have occurred even if there had been no antitrust violation. Here, Andrx could have made a unilateral and legal decision to delay its market entry, but the plaintiffs have alleged it would not have done so but for the Agreement and HMR's payment to it of $40 million per year. The plaintiffs' allegations satisfy the "necessary predicate" test. The defendants' claim that Andrx's decision to stay off the market was motivated not by the $40 million per year it was being paid by HMR, but by its fear of damages in the pending patent infringement litigation, merely raises a disputed issue of fact that cannot be resolved on a motion to dismiss. Accordingly, the district court properly denied the defendants' motions to dismiss for failure to allege antitrust injury.

Answer to Second Certified Question: Yes. The Agreement whereby HMR paid Andrx $40 million per year not to enter the United States market for Cardizem CD and its generic equivalents is a horizontal market allocation agreement and, as such, is per se illegal under the Sherman Act and under the corresponding state antitrust laws. Accordingly, the district court properly granted summary judgment for the plaintiffs on the issue of whether the Agreement was per se illegal.

I. BACKGROUND

As the district court has set forth a complete outline of the relevant statutory framework, see Dist. Ct. Op. I, at 627-29; Dist. Ct. Op. II, at 685-86, facts, see Dist. Ct. Op. I, at 629-32; Dist. Ct. Op. II, at 686-89, and procedural history, see Dist. Ct. Op. I, at 632-33; Dist. Ct. Op. II, at 689-90, we repeat here only what is necessary to our analysis of the issues on appeal.

A. Statutory Framework

In 1984, Congress enacted the Hatch-Waxman Amendments, see Drug Price Competition & Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (1984), to the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301-399. Those amendments permit a potential generic¹ manufacturer of a patented pioneer drug to file an abbreviated application for approval with the Food and Drug Administration ("FDA") (known as an Abbreviated New Drug Application ("ANDA")). See 21 U.S.C. § 355(j)(1). Instead of submitting new safety and efficacy studies, an ANDA may rely on the FDA's prior determination, made in the course of approving an earlier "pioneer" drug, that the active ingredients of the proposed new drug are safe and effective. Id. § 355(j)(2)(A). Every ANDA must include a "certification that, in the opinion of the applicant and to the best of his knowledge, the proposed generic drug does not infringe any patent listed with the FDA as covering the pioneer drug." Id. § 355(j)(2)(A)(vii). That certification can take several forms. Relevant here is the so-called "paragraph IV certification" whereby the applicant certifies that any such patent "is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted." Id. § 355(j)(2)(A)(vii)(IV). An applicant filing a paragraph IV certification must give notice to the patent-holder, id. § 355(j)(2)(B); the patent-holder then has forty-five days to file a patent infringement action against the applicant. Id. § 355(j)(5)(B)(iii). If the patent-holder files suit, a thirty-month stay goes into effect, meaning that unless before that time the court hearing the patent infringement case finds that the patent is invalid or not infringed, the FDA cannot approve the generic drug before the expiration of that thirty-month period. Id. § 355(j)(5)(B)(iii)(I). In order to encourage generic entry, and to compensate for the thirty-month protective period accorded the patent holder, the first generic manufacturer to submit an ANDA with a paragraph IV certification receives a 180-day period of exclusive marketing rights, during which time the FDA will not approve subsequent ANDA applications. Id. § 355(j)(5)(B)(iv). The 180-day period of exclusivity begins either (1) when the first ANDA applicant begins commercial marketing of its generic drug (the marketing trigger) or (2) when there is a court decision ruling that the patent is invalid or not infringed (the court decision trigger), whichever is earlier. Id.

B. Facts

Unless otherwise noted, the following facts are undisputed. HMR manufactures and markets Cardizem CD, a brand-name prescription drug which is used for the treatment of angina and hypertension and for the prevention of heart attacks and strokes. The active...