Mylan Pharm. Inc. v. Warner Chilcott Pub. Ltd.

• Decision Date: 28 September 2016
• Docket Number: No. 15-2236,15-2236
• Citation: 838 F.3d 421
• Parties: Mylan Pharmaceuticals Inc., Appellant v. Warner Chilcott Public Limited Company; Warner Chilcott Company, LLC; Warner Chilcott US, LLC ; Mayne Pharma Group Limited; Mayne Pharma International PTY. LTD.
• Court: U.S. Court of Appeals — Third Circuit

838 F.3d 421

Mylan Pharmaceuticals Inc., Appellant

v.Warner Chilcott Public Limited Company; Warner Chilcott Company, LLC; Warner Chilcott US, LLC ; Mayne Pharma Group Limited; Mayne Pharma International PTY. LTD.

No. 15-2236

United States Court of Appeals, Third Circuit.

Argued on July 14, 2016

Opinion Filed: September 28, 2016

Courtney Armour, Esq., Seth C. Silber, Esq., Christopher A. Williams, Esq., Wilson Sonsini Goodrich & Rosati, 1700 K Street, NW, 5th Floor, Washington, DC 20006, Jeffrey C. Bank, Esq., Jonathan M. Jacobson, Esq. [ARGUED], Michael S. Sommer, Esq., Daniel P. Weick, Esq., Wilson Sonsini Goodrich & Rosati, 1301 Avenue of the Americas, 40th Floor, New York, NY 10019, Joseph M. Donley, Esq., Clark Hill, 2005 Market Street, One Commerce Square, Suite 1000, Philadelphia, PA 19103, Counsel for Appellant Mylan Pharmaceuticals, Inc.

Peter J. Carney, Esq., Eileen M. Cole, Esq., John M. Gidley, Esq. [ARGUED], White & Case, 701 13th Street, N.W., Washington, DC 20005, Michael J. Gallagher, Esq., Jack E. Pace, III, Esq., White & Case, 1155 Avenue of the Americas, New York, NY 10036, Paul J. Koob, Esq., Ballard Spahr, 1735 Market Street, 51st Floor, Philadelphia, PA 19103, Counsel for Appellees Warner Chilcott Public Limited Company; Warner Chilcott Company, LLC; and Warner Chilcott US, LLC;

Richard Hernandez, Esq., Jonathan M.H. Short, Esq. McCarter & English, 100 Mulberry Street, Four Gateway Center, 14th Floor, Newark, NJ 07102, Counsel for Appellees Mayne Pharma Group Limited; Mayne Pharma International PTY. LTD.

Mark A. Ford, Esq., WilmerHale, 60 State Street, Boston, MA 02109, Counsel for Amicus Curiae Pharmaceutical Research and Manufacturers of America

Mark A. Jacobson, Esq., Karla M. Vehrs, Esq., Lindquist & Vennum, 80 South 8th Street, 4200 IDS Center, Minneapolis, MN 55402, Counsel for Amicus Curiae Antitrust Economists

James B. Reed, Esq., Baird Williams & Greer, 6225 North 24th Street, Suite 125, Phoenix, AZ 85016, Counsel for Amicus Curiae Gregory Dolin, Adam Mossoff, and Kristin Osenga

Daniel A. Cummings, III, Esq., Rothschild Barry & Myers, 150 South Wacker Drive, Suite 3025, Chicago, IL 60606 Counsel for Amicus Curiae Arizona Bioindustry Association, BIONJ, California Manufacturers & Technology Association, Healthcare Institute of New Jersey, Industry University Research Center Inc., Orange County Business Council, Oregon Bioscience Association, Texas Association of Manufacturers, Texas Healthcare and Bioscience Institute, and BIOUTAH

William F. Cavanaugh, Jr., Esq. Patterson Belknap Webb & Tyler, 1133 Avenue of the Americas, New York, NY 10036, Counsel for Amicus Curiae Donald E. Hatfield, Riitta Katila, Jeffrey T. Macher, Tammy L. Madsen, Mitrabarun Sarkar, Rajshree Agarwal, Jay Barney, Barry L. Bayus, Benjamin A. Campbell, Laura B. Cardinal, Russell Coff, Raj Echambadi, Charles Eesley, Alfonso Gambardella, Martin Ganco, and Nile Hatch

Julie Nepveu, Esq., AARP Foundation Litigation, 601 E Street N.W., Room B4–245, Washington, DC 20049, Counsel for Amicus Curiae AARP, National Health Law Program, Sergeants Benevolent Association, United States Public Interest Research Group, Center for Medicare Advocacy, Consumer Action, Consumer Federation of America, Consumers Union, and District Council 37 Health & Security Plan, Families USA

Phillip Malone, Esq., Jeffrey T. Pearlman, Esq., Stanford Law School, Juelsgaard Intellectual Property and Innovation Clinic, Mills, Legal Clinic, 559 Nathan Abbott Way, Stanford, CA 94305, Counsel for Amicus Curiae Scott Hemphill, Herbert Hovenkamp, Mark A. Lemley, Christopher R. Leslie, Michael A. Carrier, Stacey L. Dogan, and Harry First

Richard M. Brunell, Esq., American Antitrust Institute, Suite 1100, 1730 Rhode Island Avenue, N.W., Washington, DC 20036, Counsel for Amicus Curiae American Antitrust Institute

Masrk S. Hegedus, Esq., Joel R. Marcus, Esq., Federal Trade Commission, 600 Pennsylvania Avenue, N.W., MS–582, Washington, DC 20580, Counsel for Amicus Curiae Federal Trade Commission

William S. Consovoy, Esq., Wiley Rein, 1776 K Street NW, Washington, DC 20006, Counsel for Amicus Curiae National Association of Manufacturers

Before: FUENTES,^* SHWARTZ, and BARRY, Circuit Judges

OPINION OF THE COURT

FUENTES, Circuit Judge.

Mylan Pharmaceuticals, Inc., a generic drug manufacturer, and several other Plaintiffs (hereinafter “Mylan”) originally brought this action against Defendants, Warner Chilcott and Mayne Pharma, both name-brand drug manufacturers. Defendants manufacture and sell “Doryx,” the name-brand version of delayed-release doxycycline hyclate, an oral antibiotic of the tetracycline class used to treat severe acne. Tetracyclines are a broad category of antibiotics, the most common being doxycycline monohydrate and minocycline, which vary in their use and efficacy. Mylan alleges, among other things, that Defendants conspired to protect their position in the market through “product hopping,” which involves making various insignificant modifications to a drug to keep generic competitors out of the market by forcing them to re-enter a cumbersome regulatory approval process.

After several Plaintiffs in this action settled their cases, Mylan was the only remaining Plaintiff. Mylan claims that Defendants are liable for: (1) creating an unlawful monopoly under § 2 of the Sherman Act; (2) attempted unlawful monopolization under § 2 of the Sherman Act; (3) entering into an agreement in restraint of trade under § 1 of the Sherman Act; and (4) tortiously interfering with prospective contractual relationships under Pennsylvania law. The Parties filed cross-motions for summary judgment, and the District Court granted Defendants' and denied Plaintiff's. In doing so, the District Court held that Defendants' conduct was not anticompetitive, and that, even if it was, Mylan's claims failed because it did not establish that Defendants had the requisite market power in the relevant product market. For the reasons that follow, we will affirm.

I. BACKGROUND ¹

We begin by describing the complex regulatory and industry-specific framework involved in most, if not all, pharmaceutical “product hopping” cases.²

A. Federal and State Law Governing Drug Approval

The pharmaceutical industry consists of both name-brand and generic drug manufacturers. In general, generic drugs are priced lower than, and compete with, their name-brand counterparts.³ Both types of drugs are subject to certain approval requirements before they can be sold to the public. In particular, a company that wishes to market a new pharmaceutical product in the United States must first obtain approval from the Food and Drug Administration (“FDA”).⁴ This is called the New Drug Application (“NDA”) process.⁵

Prior to 1984, both name-brand and generic drug manufacturers were required to go through the same NDA process. That year, Congress passed the Drug Price Competition and Patent Term Restoration Act, also known as the Hatch–Waxman Act.⁶ The Act loosened the approval rules for generics by creating an Abbreviated New Drug Application (“ANDA”) process.⁷ The ANDA process permits generic drug companies to rely on a name-brand drug company's original NDA approval for a particular drug in order to gain quicker, less costly FDA approval of a generic version of the drug.⁸ By enabling generic manufacturers to “piggy-back on a brand drug's scientific studies” and the significant costs associated with their NDA, Hatch–Waxman “speeds the introduction of low-cost generic drugs to market, thereby furthering drug competition.”⁹

To rely on a name-brand's NDA, however, the generic drug manufacturer must demonstrate that the proposed generic product is both a “bioequivalent” and a “pharmaceutical” equivalent of the name- brand drug.¹⁰ Put simply, these two equivalencies require a generic company filing an ANDA to show a certain level of design and formulaic similarity between its product and the approved drug. ANDA filers that successfully show that their drug is bioequivalent and pharmaceutically equivalent can then have their product deemed “AB-rated” to the name-brand drug by the FDA.

To be sure, once obtained, the AB rating carries a considerable corollary benefit for generics under state law. Every state in the United States has drug substitution laws.¹¹ These state substitution laws “either permit or require pharmacists to dispense a therapeutically equivalent, lower-cost generic drug in place of a brand drug absent express direction from the prescribing physician that the prescription must be dispensed as written.”¹² Taken together, these laws oftentimes make obtaining a prescription cheaper for the consumer, and they can also prove to be highly profitable for generic drug companies.¹³

As the Court of Appeals for the Second Circuit recently noted in New York ex rel. Schneiderman v. Actavis PLC (hereafter “Namenda ”),¹⁴ Hatch–Waxman and state substitution laws also reflect the fact that the pharmaceutical market functions in a unique way.¹⁵ As the Namenda Court put it, “[i]n a well-functioning market, a consumer selects and pays for a product after evaluating the price and quality of the product.”¹⁶ In the prescription drug market, by contrast, the doctor selects the drug, which creates a certain separation between the buyer and the manufacturer.¹⁷ Moreover, in most cases, a third-party, such as a health insurance company, pays for the drug.¹⁸ As a result, consumer buying behavior may have less of an impact on manufacturer pricing than it otherwise would in a traditional open market.

With this regulatory and market framework in mind, we turn to the facts in this case.

B. The Parties and Product Development

The parties in this case are manufacturers and sellers of generic and name-brand pharmaceutical drugs worldwide. Defendant Mayne is a pharmaceutical company headquartered in Australia. Defendant Warner Chilcott acted as a United States distributor of Mayne's Doryx product, in both name-brand and generic form, for a number of years. Plaint...