In re Canadian Import Antitrust Litigation

• Citation: 470 F.3d 785
• Decision Date: 30 November 2006
• Docket Number: No. 05-3873.,05-3873.
• Parties: In re CANADIAN IMPORT ANTITRUST LITIGATION Eileen Iverson; Hugh Hawkins; Juanita Huseby; David Schafer; Gregory Noonan; Bonnie Koch; Jennifer Mills; Minnesota Senior Federation; United Senior Action, of Indiana; LaPorte County Comprehensive Mental Health Council, doing business as Swanson Center, Inc.; Massachusetts Senior Action Council; Painters District Council No. 30 Health and Welfare Fund; Central Laborers Welfare Fund, on behalf of themselves and all others similarly situated, Appellants, National Association of Shareholder and Consumer Attorneys, Amicus on Behalf of Appellant. v. Pfizer, Inc.; GlaxoSmithKline, PLC; Abbott Laboratories, Inc.; Boehringer Ingelheim Pharmaceuticals, Inc., GmbH; Merck & Co., Inc.; Novartis AG; Wyeth Pharmaceuticals, Inc.; Eli Lilly & Company; Astrazeneca, PLC, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

470 F.3d 785

In re CANADIAN IMPORT ANTITRUST LITIGATION

Eileen Iverson; Hugh Hawkins; Juanita Huseby; David Schafer; Gregory Noonan; Bonnie Koch; Jennifer Mills; Minnesota Senior Federation; United Senior Action, of Indiana; LaPorte County Comprehensive Mental Health Council, doing business as Swanson Center, Inc.; Massachusetts Senior

Action Council; Painters District Council No. 30 Health and Welfare Fund; Central Laborers Welfare Fund, on behalf of themselves and all others similarly situated, Appellants, National Association of Shareholder and Consumer Attorneys, Amicus on Behalf of Appellant. v. Pfizer, Inc.; GlaxoSmithKline, PLC; Abbott Laboratories, Inc.; Boehringer Ingelheim Pharmaceuticals, Inc., GmbH; Merck & Co., Inc.; Novartis AG; Wyeth Pharmaceuticals, Inc.; Eli Lilly & Company; Astrazeneca, PLC, Appellees.

No. 05-3873.

United States Court of Appeals, Eighth Circuit.

Submitted: May 18, 2006.

Filed: November 30, 2006.

William R. Kane, argued, Philadelphia, PA (Marvin A. Miller, Jennifer W. Sprengel, Nyran Rose Pearson, Daniel E. Gustafson, and Karla M. Gluek, on the brief), for appellant.

Robert P. Reznick, argued, Washington, DC (Lewis A. Remele, Jr., Christopher R. Morris, John M. Townsend, and Scott H. Christensen, on the brief), for appellee.

Before LOKEN, Chief Judge, JOHN R. GIBSON, and COLLOTON, Circuit Judges.

COLLOTON, Circuit Judge.

Plaintiffs, a group of consumers and organizations from Minnesota who have purchased prescription drugs in the United States from the defendant drug companies in the United States, filed suit pursuant to § 4 of the Clayton Act, 15 U.S.C. § 15, for damages caused by alleged violations of § 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, and pursuant to § 16 of the Clayton Act, 15 U.S.C. § 26, seeking injunctive relief. Plaintiffs also alleged violations of various state statutes concerning restraint of trade. The gravamen of the complaint was that the defendants unlawfully conspired to suppress the importation of Canadian prescription drugs for personal use. The district court¹ dismissed the federal antitrust claim and declined to exercise supplemental jurisdiction over the remaining state law claims. We affirm.

I.

The plaintiffs filed suit on May 19, 2004, alleging that the defendants had "engaged in a concerted course of conduct designed to prevent brand name prescription drugs purchased from Canadian pharmacies from entering the United States." (Complaint, R. Doc. No. 1, at ¶ 18). According to the complaint, the conduct eliminated a legal source of prescription drugs and caused American consumers to pay higher drug prices. The plaintiffs alleged that the defendant drug companies engaged in anti-competitive conduct, including: (1) requiring Canadian pharmacies to certify that they were not selling prescription drugs to persons whom the pharmacies knew or should have known were taking the drugs outside the country, (2) monitoring orders of Canadian pharmacies and limiting their purchases to historical levels, (3) creating "blacklists" of pharmacies that were suspected of selling drugs to American consumers and directing wholesalers not to sell to the blacklisted pharmacies, and (4) cutting off supplies to wholesalers who did not comply with their policies. (Id. at ¶ 36). The plaintiffs alleged that this conduct violated the Sherman Act, and the antitrust and unfair competition statutes of twenty-three states and the District of Columbia. (Id. at ¶¶ 28, 73, 82).

The district court consolidated several similar cases, and the plaintiffs filed an amended complaint on September 30, 2004. The defendants moved to dismiss the complaint for failure to state a claim. See Fed.R.Civ.P. 12(b)(6). Two defendants, AstraZeneca PLC and Novartis AG, also moved to dismiss for lack of personal jurisdiction and improper venue. A magistrate judge recommended granting the motion to dismiss on the Sherman Act claims. The report concluded that because the importation of Canadian prescription drugs was prohibited by the Federal Food, Drug, and Cosmetic Act ("FFDCA"), the plaintiffs could not demonstrate that they have an injury "of the kind the federal antitrust laws were designed to prevent." The magistrate judge also recommended that the state-law claims against AstraZeneca and Novartis be dismissed for lack of personal jurisdiction and improper venue.

On review of the reports and recommendations, the district court concluded that the plaintiffs lacked standing to pursue their federal antitrust claims because the allegedly anticompetitive behavior discouraged only unlawful importation of drugs and not lawful activity that the Sherman Act was designed to protect. In particular, the court found that drugs imported from Canada, even when imported for personal use, were "misbranded" under the laws of the United States because their labels did not bear the required "Rx only" symbol. After dismissing the federal claims, the court declined to exercise supplemental jurisdiction over the remaining state claims and dismissed them without prejudice. The court also denied the motions to dismiss for lack of personal jurisdiction as moot.

II.

We review the district court's grant of a motion to dismiss de novo. Farm Credit Servs. of Am. v. American State Bank, 339 F.3d 764, 767 (8th Cir.2003). A complaint is properly dismissed for failing to state a claim when the plaintiffs can prove no set of facts that would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

The district court's decision to dismiss the federal claims was premised on its conclusion that federal law prohibits the importation of prescription drugs from Canada for personal use. Plaintiffs continue to assert that the common assumption that such importation is unlawful is based purely on "myth," and that no federal statute actually precludes a citizen from carrying prescription drugs purchased in Canada into the United States.

The United States Food and Drug Administration ("FDA") repeatedly has expressed the view that virtually all importation of drugs into the United States by individual consumers violates the FFDCA, because the drugs are not approved in accordance with 21 U.S.C. § 355, are not labeled as required by 21 U.S.C. § 352, or are dispensed without a valid prescription in contravention of 21 U.S.C. § 353(b)(1). The FDA's Office of Compliance has cautioned that "[d]rugs from foreign countries do not have the same assurance of safety as drugs actually regulated by the FDA," due to the risk that counterfeit or unapproved drugs will be sent to consumers, and also because "[w]ithout regulation of repackaging, storage conditions, and many other factors, drugs delivered to the American public from foreign countries may be very different from FDA approved drugs with respect to formulation, potency, quality, and labeling." (Appellees' App. at 8-9). The district court in this case focused on one aspect of the approval process—the labeling requirements—and observed that it is illegal to import drugs whose labels do not comport with the statutory and regulatory requirements.

We agree with the district court's conclusion that the Canadian prescription drugs at issue are not labeled in conformity with federal law, and that importation of the drugs is therefore prohibited. Federal law requires that a drug shall be deemed "misbranded if at any time prior to dispensing the label of the drug fails to bear, at a minimum, the symbol `Rx only,'" 21 U.S.C. § 353(b)(4)(A), and the introduction of misbranded drugs into interstate commerce is prohibited. Id. § 331(a). Drugs that are dispensed by Canadian pharmacies are labeled "Pr," as opposed to "Rx only." Plaintiffs argue that the Canadian symbol is the "functional equivalent" of "Rx only," but federal law does not provide for functional equivalence in labeling. The drugs do not "bear, at a minimum, the symbol `Rx only,'" and they are therefore "misbranded."

The plaintiffs argue that the even if the drugs are misbranded under federal law when they are distributed to Canadian pharmacists, the American labeling requirements do not apply to the drugs after they are dispensed by a pharmacy, because of the so-called "pharmacist's exception" set forth in 21 U.S.C. § 353(b)(2). That provision says that "[a]ny drug dispensed by filling or refilling a written or oral prescription of a practitioner licensed by law to administer such drug shall be exempt from the requirements of section 352 of this title," with some exceptions. Id. The exemption in § 353, however, applies only to the requirements in § 352. The "Rx only" requirement appears in § 353(b)(4), and it is not exempted by § 353(b)(2).

More fundamentally, that the Canadian drugs are mislabeled under federal law illustrates why the Canadian drugs are "unapproved" drugs within the meaning of 21 U.S.C. § 355, and thus prohibited from importation on that basis as well. The FFDCA comprehensively regulates the manufacture, importation, and sale of prescription drugs. Before a new drug may be introduced into interstate commerce, the FDA must approve the manufacturing process, labeling, and packaging. 21 U.S.C. § 355(b)(1). The approval process addresses the chemical composition of the drug, id. § 355(b)(1)(B), (C), the drug's safety and effectiveness, id. § 355(b)(1)(A), and elements of the drug's distribution, such as "the methods used in, and the facilities and controls used for, the manufacture, processing, and packing" of the drug, id. § 355(b)(1)(D), and the "labeling proposed to be used" for the drug. Id. § 355(b)(1)(F). The approval process is specific to each manufacturer and each product. See 21 C.F.R. § 314.50.

Drugs that are manufactured and distributed in Canada are not approved pursuant to this statutory framework. The approval process requires, among other things, that a manufacturer provide "the proposed text of the labeling for the drug." 21 C.F.R. § 314.50(c). Because...