Fed. Trade Comm'n v. Lundbeck Inc.

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Citation650 F.3d 1236,2011 Trade Cases P 77570
Docket Number10–3459.,Nos. 10–3458,s. 10–3458
PartiesFEDERAL TRADE COMMISSION; State of Minnesota, by and through its Attorney General, Lori Swanson, Plaintiffs–Appellants,v.LUNDBECK, INC., Defendant–Appellee,Ben Venue Laboratories, Inc., Intervenor Below.American Antitrust Institute; States of Missouri, Illinois, Arkansas, Iowa, Maryland, Nevada, New Mexico, North Dakota, South Dakota, and West Virginia, Amici Curiae on behalf of Appellants.
Decision Date22 November 2011

650 F.3d 1236
2011-2 Trade Cases P 77,570

FEDERAL TRADE COMMISSION; State of Minnesota, by and through its Attorney General, Lori Swanson, Plaintiffs–Appellants,
v.
LUNDBECK, INC., Defendant–Appellee,Ben Venue Laboratories, Inc., Intervenor Below.American Antitrust Institute; States of Missouri, Illinois, Arkansas, Iowa, Maryland, Nevada, New Mexico, North Dakota, South Dakota, and West Virginia, Amici Curiae on behalf of Appellants.

Nos. 10–3458

10–3459.

United States Court of Appeals, Eighth Circuit.

Submitted: June 16, 2011.Filed: Aug. 19, 2011.Rehearing and Rehearing En Banc Denied Nov. 22, 2011.


[650 F.3d 1237]

Mark S. Hegedus, argued, Washington, DC, David C. Shonka, John F. Daly, Markus H. Meier, Peter J. Levitas, Richard A. Feinstein, Elizabeth R. Hilder, Jon J. Nathan, Washington, DC, Lori Swanson, AG, Karen D. Olson, Deputy AG, Benjamin Velzen, AAG, St. Paul, MN, on the brief, for appellants.Alfred C. Pfeiffer, Jr., argued, San Francisco, CA, for appellee.W. Joseph Bruckner, Minneapolis, MN, Anne E. Schneider, AAG, Jefferson City, MO, Tom Miller, AAG, Des Moines, IA, Marty J. Jackley, AAG, Pierre, SD, Wayne Stenehjem, AAG, Bismarck, ND,

[650 F.3d 1238]

Dustin McDaniel, AAG, Little Rock, AR, Douglas F. Gansler, AAG, Baltimore, MD, Catherine Cortez Masto, AAG, Carson City, NV, Lisa Madison, AAG, Chicago, IL, Gary King, AAG, Santa Fe, MN, Darrell V. McGraw, AAG, Charleston, WV, Christopher L. Sagers, Cleveland, OH, Richard M. Brunell, Washington, DC, on the amicus brief.Before COLLOTON and BENTON, Circuit Judges, and KOPF 1, District Judge.BENTON, Circuit Judge.

The Federal Trade Commission and Minnesota (collectively the FTC) sued Lundbeck, Inc., alleging its acquisition of the drug NeoProfen violated the Federal Trade Commission Act, the Sherman Act, the Clayton Act, the Minnesota Antitrust Law of 1971, and unjustly enriched Lundbeck. After a bench trial, the district court 2 ruled for Lundbeck based on the FTC's failure to identify a relevant market.

Patent ductus arteriosus (PDA) is a life-threatening heart condition that primarily affects low-birth-weight, usually premature, babies. There are two primary treatments: pharmacological and surgical. Pharmacological treatment (a drug) is the first-line treatment; surgical ligation is considered after other treatments are ineffective. Approximately 30,000 cases of PDA are treated with drugs in the U.S. yearly.

When this case was brought, there were two FDA-approved drugs for PDA: Indocin IV and NeoProfen. (In 2010, two generic alternatives to Indocin IV were introduced by Bedford Laboratories and APP Pharmaceuticals, LLC.) Indocin IV—an off-patent, injectable drug with the active ingredient indomethacin—has been FDA-approved for PDA since 1985. NeoProfen—a patented injectable drug with the active ingredient ibuprofen lysine—has been FDA-approved for PDA since 2006. Because their active ingredients differ, Indocin IV and NeoProfen are not bioequivalents and have different side effects.

Lundbeck purchased the rights to Indocin IV from Merck & Co. in 2005, and the rights to NeoProfen from Abbott Laboratories in 2006 (before it was put on the market). Until generics appeared in 2010, Lundbeck owned all the drugs for PDA.

When Lundbeck purchased Indocin IV, Merck charged $77.77 per treatment. Lundbeck immediately raised the price of Indocin IV. Two days after acquiring the rights to NeoProfen, Lundbeck raised the price thirteen-fold. By 2008, the price of Indocin IV settled at $1614.44. When Lundbeck introduced NeoProfen in 2006, it charged $1450 per NeoProfen treatment, and its price eventually settled at $1522.50.

Both Indocin IV and NeoProfen are hospital-based drugs dispensed and used in inpatient care. Most hospitals assemble a formulary—a list of recommended drugs—to streamline purchasing. The formulary-listed drugs are chosen by pharmacy and therapeutics committees who often seek input from specialist physicians. Some hospitals use closed formularies (special approval is required to prescribe non-listed drugs). Others apply open formularies (physicians can prescribe non-listed drugs at their discretion). Hospitals use inclusion in the formulary to extract better prices from sellers of clinically-substitutable drugs.

[650 F.3d 1239]

After a bench trial, the district court determined that the FTC did not meet its burden to prove that Indocin IV and NeoProfen were in the same product market and thus failed to identify a relevant market.

“The determination of the relevant market is an issue for the trier of fact.” Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215, 1232 (8th Cir.1987). See also General Indus. Corp. v. Hartz Mountain Corp., 810 F.2d 795, 805 (8th Cir.1987). After a bench trial, this court reviews for clear error the district court's fact-findings supporting its ultimate determination of the existence of a relevant market. See Community Publishers, Inc. v. DR Partners, 139 F.3d 1180, 1183–84 (8th Cir.1998); see also Pullman–Standard v. Swint, 456 U.S. 273, 287, 102 S.Ct. 1781, 72 L.Ed.2d 66 (1982) (noting that Fed.R.Civ.P. 52(a) does not “purport to exclude certain categories of factual findings” from the clearly erroneous standard of review. “[I]t does not divide findings of fact into those that deal with ‘ultimate’ and those that deal with ‘subsidiary’ facts”). “Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.” Anderson v. City of Bessemer City, 470 U.S. 564, 574, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). If the district court's fact-findings are “plausible in light of the record viewed in its entirety,” they must be affirmed, regardless of how this court might have weighed the evidence in the first instance. Moore v. Forrest City Sch. Dist., 524 F.3d 879, 884 (8th Cir.2008) (quotations omitted). When a factual finding is supported by substantial evidence, it is not clearly erroneous. Dixon v. Crete Med. Clinic, P.C., 498 F.3d 837, 847 (8th Cir.2007).

The FTC argues that this court should review the district court's judgment de novo because the court “applied an incorrect legal standard” by failing to “examin[e] all the pertinent factors” determining a relevant market. United States v. Empire Gas Corp., 537 F.2d 296, 303, 304 (8th Cir.1976). See also Universal Title Ins. Co. v. United States, 942 F.2d 1311, 1314 (8th Cir.1991), quoting Bose Corp. v. Consumers Union of United States, Inc., 466 U.S. 485, 501, 104 S.Ct. 1949, 80 L.Ed.2d 502 (1984) (despite Rule 52(a), a court can correct “a finding of fact that is predicated on a misunderstanding of the governing rule of law”). Contrary to the FTC's argument, the district court examined the pertinent factors determining a relevant market, including the “readiness and ability of consumers to turn to reasonable alternatives to the product in question.” Empire Gas Corp., 537 F.2d at 303. Though cloaked as a legal argument, the FTC really challenges the district court's weighing of the relevant market factors, which this court reviews for clear error.

To prevail, the FTC bears the burden of identifying a relevant market. See HDC Med., Inc. v. Minntech Corp., 474 F.3d 543, 547 (8th Cir.2007) (“The relevant product market is a question of fact, which the plaintiff bears the burden of proving.”); see also FTC v. Tenet Health Care Corp., 186 F.3d 1045, 1051 (8th Cir.1999) (“The determination of a relevant market is a necessary predicate to the finding of an antitrust violation.”); FTC v. Freeman Hosp., 69 F.3d 260, 268 (8th Cir.1995) (relevant market is a threshold determination under the FTC Act and the...

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