Mylan Laboratories, Inc. v. AKZO, NV

• Decision Date: 15 August 1991
• Docket Number: Civ.A. No. R-90-1096.
• Citation: 770 F. Supp. 1053
• Parties: MYLAN LABORATORIES, INC., Plaintiff, v. AKZO, N.V., et al., Defendants.
• Court: U.S. District Court — District of Maryland

770 F. Supp. 1053

MYLAN LABORATORIES, INC., Plaintiff, v. AKZO, N.V., et al., Defendants.

Civ.A. No. R-90-1096.

United States District Court, D. Maryland.

August 15, 1991.

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Donald J. Mulvihill, Cahill, Gordon & Reindel, Washington, D.C., for Akzo N.V. and Pharmaceutical Basics, Inc.

Richard M. Cooper, Richard S. Hoffman, David Kiernan, Williams & Connolly, Washington, D.C., for Par Pharmaceutical, Inc. and Quad Pharmaceuticals, Inc.

Ty Cobb, Janet L. McDavid, Hogan & Hartson, Washington, D.C., for American Therapeutics, Inc.

John Sullivan, Lord Day & Lord, Barrett Smith, New York City, for Vitarine Pharmaceuticals, Inc.

Irv Nathan, David Nicoli, Arnold & Porter, Washington, D.C., for American Home Products Corp. and Quantum Pharmics, Ltd.

Hamilton P. Fox, III, Sutherland, Asbill & Brennan, Washington, D.C., for Raj Matkari and Steven Colton.

Andrew Krulwich, Walter Andrews, Wiley, Rein & Fielding, Washington, D.C., for Ashok Patel.

Steve Salky, Zuckerman, Spaeder, Goldstein, Taylor & Kolker, Washington, D.C., for Dilip Shah.

James E. Rocap, III, Miller, Cassidy, Larroca & Lewin, Washington, D.C., for Raju Vegesna.

Walter Kletch, pro se.

Jan T. Sturm, pro se.

W. Stephen Cannon, Wunder, Ryan, Cannon, & Thelen, Washington, D.C., and Price O. Gielen, Neuberger, Quinn & Gielen, Baltimore, Md., for plaintiff Mylan Labs.

MEMORANDUM AND ORDER

RAMSEY, District Judge.

Pending before the Court in the above-captioned case are twelve motions to dismiss filed by fifteen of the nineteen defendants.¹ The issues have been extensively briefed by the parties, and oral argument was had on April 12, 1991. The motions are now ripe for consideration by the Court.

I. FACTS

The facts of this case, as alleged in Mylan's First Amended Complaint Complaint, are as follows: Plaintiff Mylan Laboratories, Inc., is a corporation organized under the laws of Pennsylvania and is in the business of developing, manufacturing, selling, and distributing prescription drugs. Mylan sells both innovator drugs, new drugs developed and patented by the company, and generic drugs, duplicates of innovator drugs no longer covered by patents.

Defendants Akzo, N.V. Akzo, Pharmaceutical Basics, Inc. PBI, Par Pharmaceuticals, Inc. Par, Quad Pharmaceuticals, Inc. Quad, American Therapeutics, Inc. ATI, Vitarine Pharmaceuticals, Inc. Vitarine, American Home Products Corporation AHP, and Quantum Pharmics, Ltd. Quantum are all corporations also in the business, whether directly or through a subsidiary, of developing, manufacturing, selling, and distributing prescription drugs, specifically generic prescription drugs. Defendants Raj Matkari, Ashok Patel, Dilip Shah, Raju Vegesna, Mohammed Azeem, Steven Colton, and Jun-Shung Chang are or were, at all relevant times, employees or officers of the various corporate defendants. At times throughout this opinion these defendants shall collectively be called the "manufacturer defendants."

Defendants Charles Chang, David Brancato, Walter Kletch, and Jan Sturm are or were, at all relevant times, scientists and employees of the Food and Drug Administration the FDA and worked in the Division of Generic Drugs of the FDA. These defendants shall be referred to as the "FDA defendants."

Mylan describes the generic drug market as one of "intense competition." Complaint para. 44. It is, of course, heavily regulated, and a drug may not be marketed to the public until it has received FDA approval. 21 U.S.C. § 355(a). Two FDA divisions, the Division of Generic Drugs and the Division of Bioequivalence Review, are responsible for the processing of all abbreviated new drug applications ANDAs for generic drugs. This processing is supposed to occur on a first-in, first-out basis: "i.e., the first ANDA submitted to the FDA which satisfactorily passed the labeling, bioequivalency, and chemistry reviews would receive the first approval for a particular generic drug." Complaint para. 55. Mylan states that

"Generally, the most critical element in determining the ability of a firm to compete successfully in the sale of a particular generic drug is the firm's rank in the FDA approval process. The firm which receives the first approval for a particular generic drug is virtually assured of achieving a significant share of sales of that product simply because it has the opportunity to supply all the initial pipeline demand. However, of equal importance, the first firm to sell a generic product generally maintains a relatively large share of the sales even after other generic formulations receive FDA approval. ... The first firm, and to a lesser degree the other firms receiving early approvals, can maintain significant shares if they meet the competitive pricing of subsequent entrants."

Complaint para. 44.

Mylan alleges that from 1984 through 1989 (approximately), the named manufacturer defendants² paid illegal gratuities to the FDA defendants in order to facilitate and/or accelerate FDA approval of the manufacturers' ANDAs. Mylan also alleges that these defendants (manufacturers and FDA) delayed or impeded processing and approval of the ANDAs of Mylan and others, that the manufacturer defendants submitted false information to the FDA, and that the FDA defendants provided secret information (gleaned from the applications of Mylan and others) to the manufacturer defendants.³

Mylan's First Amended Complaint, filed in this Court on July 26, 1990, is 41 counts and 255 pages long. Counts 1 through 3 allege violations of RICO, 18 U.S.C. §§ 1962(c), 1962(a) and 1962(d). Counts 4 through 40 allege violations of § 1 of the Sherman Act: count 4 alleges a conspiracy among all the defendants; counts 5 through 40 allege conspiracies among various combinations of defendants depending on which drugs each manufactured. Count 41 is a state law claim for unfair competition and malicious interference with business relations; this count is asserted against all defendants.

II. THE MOTIONS TO DISMISS

Defendants seek to dismiss counts 1 through 40 of plaintiff's complaint. The arguments range from perceived procedural flaws (Mylan has failed to provide defendants with a short and plain statement of its claim) to fundamental substantive issues (Mylan has failed to allege an antitrust injury or a RICO pattern). The majority of the issues relate to all of the defendants, and the Court will address the arguments collectively; to the extent that there are any distinguishing factors related to any one defendant, the Court will note these distinctions in the appropriate sections of this Memorandum.

III. STANDARDS GOVERNING MOTIONS TO DISMISS

A motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P., is a means for testing the legal sufficiency of a complaint. When deciding the motion, a court must take all well-pleaded material allegations of the complaint as admitted, but conclusions of law or unwarranted deductions of fact are not admitted. A complaint may be dismissed if the law does not support the conclusions argued, or where the facts alleged are not sufficient to support the claim presented. However, a Rule 12(b) motion to dismiss "presumes that general allegations embrace those specific facts that are necessary to support the claim," Lujan v. National Wildlife Federation, ___ U.S. ___, 110 S.Ct. 3177, 3189, 111 L.Ed.2d 695 (1990), and "a complaint should not be dismissed for insufficiency unless it appears to a certainty that plaintiff is entitled to no relief under any state of facts which could be proved in support of the claim." 2A Moore's Federal Practice § 12.08 at 2271-74 (2d Ed.1983) (emphasis in original).

IV. PROCEDURAL PRELIMINARIES

A. Mylan's Argument

Mylan argues that the motions to dismiss of defendants Akzo, PBI, Par, Matkari, Patel, Shah and Vegesna are not properly before this Court as they do not comply with Fed.R.Civ.P. 12(g) and (h)(2). These defendants had responded to Mylan's original complaint with Rule 12 motions raising the defenses of lack of personal jurisdiction, improper venue, insufficiency of process, and insufficiency of service. After the action was transferred to this Court and Mylan filed its amended complaint, these defendants, with the exception of Akzo, withdrew their first motions and then filed the motions now at issue. Akzo refiled its jurisdictional motion and also, with defendant PBI, filed a 12(b)(6) motion. Defendants ATI and Quad had answered the original complaint, asserting the 12(b)(6) defense, but did not answer the amended complaint choosing instead to file a 12(b)(6) motion.

While Mylan may be technically correct in its reading of the rules, this Court will exercise its discretion to entertain the motions filed. "A complaint is always vulnerable to a challenge for legal sufficiency, and it is far more efficient to treat the arguments prior to more extensive discovery." Dart Drug Corp. v. Corning Glass Works, 480 F.Supp. 1091, 1095 n. 3 (D.Md.1979). Rule 12(h)(2) specifically preserves the Rule 12(b)(6) defense against waiver; though 12(h)(2) lists specific points in time when the 12(b)(6) defense can be raised, courts have applied the rule permissively and allowed the 12(b)(6) defense to be raised at other times as well.

"Since the basic purpose of Rule 12(h)(2) probably is to preserve the defenses, rather than delimit the mechanism for their assertion, this approach seems sound and within the spirit, if not the letter, of the provision."

5A Wright and Miller, Federal Practice and Procedure: Civil 2d, § 1392 at 762 (1990). See also Thorn v. New York City Dept. of Social Services, 523 F.Supp. 1193, 1196 n. 1 (S.D.N.Y.1981) (Defendants' 12(b)(6) motion untimely under 12(g) since a motion objecting to venue had previously been made; nonetheless, 12(b)(6) motion considered by the court as "it was not interposed for delay, and its consideration will expedite the disposition of the case on the merits." Also, other defen...