In re Lorazepam & Clorazepate Antitrust Litigation

• Citation: 295 F.Supp.2d 30
• Decision Date: 17 October 2003
• Docket Number: No. MDL 1290(TFH), MISC.NO. 99MS276(TFH), CIV.01-2646(TFH), CIV.02-1299(TFH).,MDL 1290(TFH), MISC.NO. 99MS276(TFH), CIV.01-2646(TFH), CIV.02-1299(TFH).
• Parties: In re LORAZEPAM & CLORAZEPATE ANTITRUST LITIGATION Health Care Service Corporation, et al., Plaintiffs, v. Mylan Laboratories, Inc., et al., Defendants. Blue Cross Blue Shield of Minnesota, Blue Cross Blue Shield of Massachusetts, and Federated Mutual Insurance Company, Plaintiffs, v. Mylan Laboratories, Inc. et al., Defendants.
• Court: U.S. District Court — District of Columbia

Page 30

295 F.Supp.2d 30

In re LORAZEPAM & CLORAZEPATE ANTITRUST LITIGATION

Health Care Service Corporation, et al., Plaintiffs, v. Mylan Laboratories, Inc., et al., Defendants.

Blue Cross Blue Shield of Minnesota, Blue Cross Blue Shield of Massachusetts, and Federated Mutual Insurance Company, Plaintiffs, v. Mylan Laboratories, Inc. et al., Defendants.

No. MDL 1290(TFH), MISC.NO. 99MS276(TFH), CIV.01-2646(TFH), CIV.02-1299(TFH).

United States District Court, District of Columbia.

October 17, 2003.

COPYRIGHT MATERIAL OMITTED

George H. Crompton, DKW Law Group, PC, Pittsburgh, PA, Joseph Anthony Hynds, Rothwell, Figg, Ernst & Manbeck, Washington, DC, Ryan James, DKW Law Group, PC, Pittsburgh, PA, Brian S. Roman, DKW Law Group, PC, Pittsburgh, PA, Peter M. Todaro, King & Spalding, Washington, DC, for Mylan Laboratories, Inc., Mylan Pharmaceuticals, Inc., Defendants.

Lisa R. Fine, Weil, Gotshal & Manges, L.L.P., Washington, for Gyma Laboratories of America, Inc., Defendant.

David T. Fischer, Porter, Wright, Morris & Arthur, Washington, DC, Robert T. Rhoad, Porter Wright Morris & Arthur, Washington, DC, for Health Care Service Corporation, Plaintiff.

Eric Sean Jackson, Robins, Kaplan, Miller & Ciresi, L.L.P., Washington, DC, for Blue Cross Blue Shield of Minnesota, Plaintiff.

Thomas Joseph Poulin, Robins, Kaplan, Miller & Ciresi, L.L.P., Washington, DC, for Blue Cross Blue Shield of Massachusetts, Blue Cross Blue Shield of Minnesota, Federated Mutual Insurance Company, Plaintiffs.

Jonathan R. Tuttle, Debevoise & Plimpton (N.Y.), New York, NY, for Cambrex Corporation, Defendant.

MEMORANDUM OPINION

THOMAS F. HOGAN, Chief Judge.

Pending before the Court is Defendants' Motion to Dismiss Plaintiffs' Second Amended Complaints Pursuant to Federal Rule of Civil Procedure 12(b)(6) [Civ. No. 01-2646 docket # 26] ("Def. Mot."). Upon careful review of Defendants' motion, Plaintiffs' oppositions,¹ Defendants' reply thereto, the various supplemental filings of both parties, and the entire record herein, the Court will deny the motion.

I. BACKGROUND²

The background and procedural history in this case is quite extensive and has been presented in several other opinions. See, e.g., the following In re Lorazepam and Clorazepate Antitrust Litigation opinions: 289 F.3d 98 (D.C.Cir.2002); 202 F.R.D. 12 (D.D.C.2001); TFH Mem. Op. of 08/20/02 (filed 08/21/02).

As pertaining specifically to the motion at hand, the Plaintiffs instituted this action alleging that Defendants entered into exclusive licensing agreements in restraint of trade in order to raise, maintain, and stabilize the prices for the generic drugs lorazepam and clorazepate, and that Defendants monopolized or attempted to monopolize the markets for lorazepam and clorazepate tablets and the active pharmaceutical ingredients ("API") used to manufacture these drugs. See, e.g., Complaint* ¶¶ 4, 8, 20; Complaint ¶¶ 4, 9, 19. Plaintiffs have filed suit under Minnesota, Massachusetts, and Illinois state law on behalf of themselves as third party payors for prescription drugs for their insureds, and on behalf of certain unnamed nonparty customers, including employer-sponsored health plans, seeking to recover "the millions of dollars in overpayments for Lorazepam and Clorazepate" allegedly paid by Plaintiffs and the nonparties. Complaint* ¶ 1; Complaint ¶ 1. Plaintiffs state that they have the authority on behalf of their self-funded customers to pursue claims against the Defendants. Complaint* ¶¶ 13-15; Complaint ¶ 14. Plaintiffs allege that they paid for and absorbed supracompetitive prices allegedly charged by Mylan by making reimbursements for Lorazepam and Clorazepate tablets pursuant to insurance contracts with employee benefit plans that provide prescription drug coverage to their members. Complaint* ¶¶ 7, 39; Complaint ¶¶ 9, 21.

II. LEGAL STANDARD FOR MOTIONS TO DISMISS

A motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) will be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984) ("A court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations."). In reviewing such a motion, the Court must construe the complaint in the light most favorable to plaintiff and must accept as true all allegations and all reasonable factual inferences drawn from well-pleaded factual allegations. See Square D. Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 411, 106 S.Ct. 1922, 90 L.Ed.2d 413 (1986); In re United Mine Workers of America Employee Benefit Plans Litig., 854 F.Supp. 914, 915 (D.D.C.1994). "However, the court need not accept inferences drawn by Plaintiffs if such inferences are unsupported by the facts set out in the complaint. Nor must the court accept legal conclusions cast in the form of factual allegations." Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994) (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)).

III. DISCUSSION

A. Plaintiffs BCBS Minnesota, Federated, and HCSC Do Not Lack Antitrust Standing

1. Overall

BCBS Minnesota and Federated have filed claims against Defendants under Minnesota antitrust laws, and HCSC has filed claims under Illinois antitrust laws. Defendants claim that all three of these Plaintiffs lack antitrust standing to pursue these claims because: (1) they are not participants in any market in which Defendants allegedly restrained and monopolized trade, and (2) Plaintiffs will be unable to establish that Defendants' anticompetitive conduct proximately caused Plaintiffs' claimed harm. Mot. at 4-5.³

2. Pertinent State Law; Such Law To Be Interpreted Via Federal Antitrust Decisions

The Supreme Court held in California v. ARC Am. Corp., 490 U.S. 93, 109 S.Ct. 1661, 104 L.Ed.2d 86 (1989) that states could allow indirect purchasers suing for overcharges to recover under their own antitrust laws. Id. at 102, 109 S.Ct. 1661.

a. Plaintiffs BCBS Minnesota and Federated—Minnesota Law

Third party payor health service organizations have the right to sue under the Minnesota Antitrust Law for antitrust violations. See State by Humphrey v. Philip Morris Inc., 551 N.W.2d 490, 495 (Minn.1996) (discussed further infra). Crucially, Plaintiffs BCBS Minnesota and Federated allege a direct injury aimed at their managed care programs to reduce generic drug prices, that they were forced to absorb the increased costs of Lorazepam and Clorazepate, and that these costs were not passed on to their members. Complaint* ¶¶ 36-48, 95-96.

The Minnesota Antitrust Law confers standing on indirect purchasers like BCBS Minnesota and Federated by its express text:

Any person, any governmental body, or the state of Minnesota or any of its subdivisions or agencies, injured directly or indirectly by a violation of sections 325D.49 to 325D.66, shall recover three times the actual damages sustained, together with costs and disbursements, including reasonable attorneys' fees. In any subsequent action arising from the same conduct, the court may take any steps necessary to avoid duplicative recovery against a Defendant.

Minn.Stat. § 325D.57.

Even absent such statutory authority, the Minnesota Supreme Court noted in Humphrey that BCBS Minnesota would likely have standing on its antitrust claim based upon the reasoning articulated in Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1406 (7th Cir.1995) (cert. denied, 516 U.S. 1184, 116 S.Ct. 1288, 134 L.Ed.2d 233). See Humphrey, 551 N.W.2d at 495-96. In Marshfield Clinic, the Seventh Circuit ruled that Blue Cross had standing to sue defendant Marshfield Clinic that was separate from the standing of its insureds to sue. That court noted that "the money went directly from Blue Cross to the Clinic, and although the two entities were not linked by any overarching contract, each payment and acceptance was a separate and completed contract. We do not think more is required to establish Blue Cross's right to sue to collect these overcharges." Id. at 1414. The Seventh Circuit found that "Blue Cross paid Marshfield Clinic directly in accordance with Blue Cross's contractual obligations to its insureds, and if it paid too much because the Clinic violated antitrust laws then it ought to be allowed to sue to recover these damages." Id. Indeed, "[i]t would be cumbersome, to say the least, for patients of the Marshfield Clinic to organize into a class action to recover money that the patients never paid and that if they received in a judgment or settlement they would have to share with Blue Cross ...." Id. In sum, the Minnesota Supreme Court has concluded that third party payor health services organization possess the general right to sue in antitrust under Section 325D.57 of the Minnesota Antitrust Law. Humphrey, 551 N.W.2d at 495-96.

The issue was raised that Marshfield Clinic does not provide standing to third party payors such as the BCBS Plaintiffs who neither made direct payments to any of the Defendants nor had any direct dealings with the Defendants.⁴ In Int'l Bhd., of Teamsters, Local 734 Health & Welfare Trust Fund v. Philip Morris Inc., 196 F.3d 818, 826 (7th Cir.1999) ("Teamsters") [a tobacco litigation case], the court noted that "Marshfield Clinic does not countenance recovery by insurers whose balance sheets are affected by substances that made their insureds ill." However, in Marshfield Clinic, as in the case at hand, "[m]any of the overpriced services [or drugs] were paid directly by the Blues ...." Id. Further, in Desiano v. Warner-Lambert Co., 326 F.3d 339, 349 (2d Cir. 2003) (discussed more fully infra at pp. 38-39), as is also similar to the case...