Bayer Schering Pharma AG v. Sandoz, Inc., s. 08 Civ. 03710(PGG)

• Decision Date: 28 September 2011
• Docket Number: 08 Civ. 08112(PGG).,Nos. 08 Civ. 03710(PGG),s. 08 Civ. 03710(PGG)
• Citation: 813 F.Supp.2d 569
• Parties: BAYER SCHERING PHARMA AG and Bayer Healthcare Pharmaceuticals, Inc., Plaintiffs, v. SANDOZ, INC., Watson Pharmaceuticals, Inc., and Watson Laboratories, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

813 F.Supp.2d 569

BAYER SCHERING PHARMA AG and Bayer Healthcare Pharmaceuticals, Inc., Plaintiffs,

v.SANDOZ, INC., Watson Pharmaceuticals, Inc., and Watson Laboratories, Inc., Defendants.

Nos. 08 Civ. 03710(PGG)

08 Civ. 08112(PGG).

United States District Court, S.D. New York.

Sept. 28, 2011.

Adam K. Mortara, Paul J. Skiermont, Peter Benjamin Bensinger, Jr., Matthew Raymond Ford, Bartlit Beck Herman Palenchar & Scott LLP, Chicago, IL, Bradford J. Badke, Jeanne C. Curtis, Matthew A. Traupman, Ropes & Gray LLP, New York, NY, Sundeep K. Addy, Bartlit Beck Herman Palenchar & Scott, Denver, CO, Kevin D. McDonald, Phillip A. Proger, Jones Day, Washington, DC, for Plaintiffs.

August T. Horvath, Paul Wendell Garrity, Kelley Drye & Warren, Ronald William Meister, Thomas Kjellberg, Cowan, Liebowitz & Latman, P.C., New York, NY, Joseph A. Hynds, Lisa N. Phillips, Steven M. Lieberman, Rothwell Figg Ernst & Manbeck, PC, Cedric Chia Yang Tan, Kristen Marie Cooklin, Kilpatrick Townsend and Stockton LLP, Washington, DC, Steven Jerome Moore, Kelley Drye & Warren, LLP, Stamford, CT, Mark T. Jansen, Nancy Lynn Tompkins, Townsend and Townsend and Crew LLP, Byron R. Chin, Kilpatrick Townsend & Stockton LLP, San Francisco, CA, for Defendants.

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, District Judge.

These actions arise from Defendants' filing of Abbreviated New Drug Applications concerning two of Plaintiffs' brand-name oral contraceptive prescription drugs: Yasmin and Yaz. As a result of two prior decisions ¹ and certain stipulations between the parties,² only Defendant Sandoz, Inc.'s Sherman Act counterclaims remain to be decided.

In a March 29, 2010 Memorandum Opinion and Order, this Court dismissed Sandoz's Sherman Act counterclaims but granted leave to amend. Bayer Schera Pharma AG v. Sandoz, Inc., Nos. 08 Civ. 03710(PGG), 08 Civ. 8112(PGG), 2010 WL 1222012, *1 (S.D.N.Y. Mar. 29, 2010).

In its original Sherman Act counterclaims, Sandoz posited two separate markets for Yaz and Yasmin based on the active ingredients of each drug: for Yasmin, “the drospirenone (=dihydrospirorenone)/ethinylestradiol market” (Yasmin Cntrcl. ¶¶ 71–73), and for Yaz, “the ethinylestradiol/ drospirenone market, including any low-dose of ethinylestradiol/ drospirenone submarket.” (Yaz Cntrcl. ¶ 70) Sandoz thus alleged that Yasmin and Yaz are unique as against all other contraceptives and unique as to each other, even though they share the same active ingredients. Sandoz offered no explanation for this assertion, nor did it cite any case law suggesting that its alleged product markets were appropriate. After Bayer moved to dismiss, the Court ruled that the two separate product markets posited by Sandoz were implausible and irrational and dismissed the antitrust counterclaims with leave to amend. Bayer Schera Pharma AG, 2010 WL 1222012, at *4–5. In granting leave to amend, the Court cautioned Sandoz that if it chose “to file amended counterclaims alleging antitrust violations, it must be mindful that ‘the natural monopoly every manufacturer has in the production and sale of its own product cannot be the basis for antitrust liability.’ ” Id. at *6 n. 10 (quoting Belfiore v. New York Times Co., 654 F.Supp. 842, 846 (D.Conn.1986)).

In its amended counterclaims, Sandoz now alleges a product market encompassing both Yasmin and Yaz—specifically, a market of “oral contraceptives commonly prescribed also to treat PMDD [premenstrual dysphoric disorder] and associated symptoms.” ³ (Yasmin Am. Cntrcl. ¶ 49; Yaz Am. Cntrcl. ¶ 52) Plaintiffs Bayer Schering Pharma AG and Bayer Healthcare Pharmaceuticals Inc. (“Bayer”) have moved to dismiss the amended counterclaims. For the reasons stated below, Bayer's motion to dismiss will be granted.

DISCUSSION

I. MOTION TO DISMISS STANDARD

“To survive a motion to dismiss, a [counterclaim] must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). In making this determination, this Court is mindful of two corollary rules. “First, the tenet that a court must accept as true all of the allegations contained in a [counterclaim] is inapplicable to legal conclusions.” Id. In other words, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955). “Second, only a [counterclaim] that states a plausible claim for relief survives a motion to dismiss.” Id. at 1950 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). The Supreme Court has noted that “[d]etermining whether a [counterclaim] states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. (citation omitted).

“In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint.” DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir.2010) (citing Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir.2002); Hayden v. County of Nassau, 180 F.3d 42, 54 (2d Cir.1999)). Additionally, “[w]here a document is not incorporated by reference, the court may never[the]less consider it where the complaint ‘relies heavily upon its terms and effect,’ thereby rendering the document ‘integral’ to the complaint.” Id. (quoting Mangiafico v. Blumenthal, 471 F.3d 391, 398 (2d Cir.2006)).

II. RELEVANT PRODUCT MARKETA. Pleading Standard

As in its original counterclaims, Sandoz's amended Sherman Act counterclaims allege four types of antitrust violations: (1) monopolization in violation of § 2 of the Sherman Act ⁴ (Yasmin Am. Cntrcl. ¶ 92; Yaz Am. Cntrcl. ¶¶ 87, 90); (2) conspiracy to monopolize in violation of § 2 of the Sherman Act (Yasmin Am. Cntrcl. ¶ 92; Yaz Am. Cntrcl. ¶ 87); (3) conspiracy in restraint of trade in violation of § 1 of the Sherman Act ⁵ (Yasmin Am. Cntrcl. ¶ 94; Yaz Am. Cntrcl. ¶ 91); and (4) attempted monopolization in violation of § 2 of the Sherman Act.⁶ (Yasmin Am. Cntrcl. ¶¶ 92, 93; Yaz Am. Cntrcl. ¶¶ 87, 89)

“ ‘In order to survive a motion to dismiss, a claim under Sections 1 and 2 of the Sherman Act must allege a relevant geographic and product market in which trade was unreasonably restrained or monopolized.’ ” Arista Records LLC v. Lime Group LLC, 532 F.Supp.2d 556, 575 (S.D.N.Y.2007) (quoting Xerox Corp. v. Media Sciences Int'l, Inc., 511 F.Supp.2d 372, 382–83 (S.D.N.Y.2007)).

“The relevant market for purposes of antitrust litigation is the ‘area of effective competition’ within which the defendant operates.” AD/SAT, Div. of Skylight, Inc. v. Associated Press, 181 F.3d 216, 227 (2d Cir.1999) (quoting Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327–28, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961)). In other words, “[t]he goal in defining the relevant market is to identify market participants and competitive pressures that restrain an individual firm's ability to raise prices or restrict output.” Geneva Pharma. Tech. Corp. v. Barr Laboratories, Inc., 386 F.3d 485, 485 (2d Cir.2004). The Second Circuit has explained that a market is any grouping of sales whose sellers, if unified by a hypothetical cartel or merger, could profitably raise prices significantly above the competitive level. If the sales of other producers substantially constrain the price-increasing ability of the hypothetical cartel, these others are part of the market.

AD/SAT, a Division of Skylight, Inc., 181 F.3d at 228 (emphasis in original) (quotation omitted).

“ ‘A relevant product market consists of ‘products that have reasonable interchangeability for the purposes for which they are produced—price, use and qualities considered.’ ' ” PepsiCo, Inc. v. Coca–Cola Co., 315 F.3d 101, 105 (2d Cir.2002) ( per curiam ) (quoting United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404, 76 S.Ct. 994, 100 L.Ed. 1264 (1956)). “The relevant market is defined as all products ‘reasonably interchangeable by consumers for the same purposes,’ because the ability of consumers to switch to a substitute restrains a firm's ability to raise prices above the competitive level.” Geneva Pharm. Tech. Corp., 386 F.3d at 496 (quoting E.I. du Pont de Nemours & Co., 351 U.S. at 395, 76 S.Ct. 994); see also Intellective, Inc. v. Massachusetts Mut. Life Ins. Co., 190 F.Supp.2d 600, 610 (S.D.N.Y.2002) (“Every product that can be substituted for the same use or purpose should be included within a single product market.”).

“The alleged product market ‘must bear a rational relation to the methodology courts prescribe to define a market for antitrust purposes—analysis of the interchangeability of use or the cross elasticity of demand....’ ” Arista Records LLC, 532 F.Supp.2d at 575 (quoting Todd v. Exxon Corp., 275 F.3d 191, 200 (2d Cir.2001)); see also Mathias v. Daily News, L.P., 152 F.Supp.2d 465, 480–81 (S.D.N.Y.2001) (“The product market inquiry focuses on the range of products that actually compete in the disputed market, and that inquiry turns on the concepts of reasonable interchangeability and cross-elasticity of demand.”). “ ‘Interchangeability’ looks to the use or function of the given product as compared to other products.” Intellective, Inc., 190 F.Supp.2d at 610. “Products will be considered to be reasonably interchangeable if consumers treat them as ‘acceptable substitutes.’ ” PepsiCo, Inc., 315 F.3d at 105 (citing FTC v. Cardinal Health, Inc., 12 F.Supp.2d 34, 46 (D.D.C.1998) (“[T]he relevant market consists of all of the products that the Defendants' customers view as substitutes to those supplied by the Defendants.”)). “Where the plaintiff ... alleges a proposed...