Rxusa Wholesale, Inc. v. Alcon Laboratories, Inc.
| Decision Date | 24 September 2009 |
| Docket Number | No. 06-CV-3447 (DRH)(AKT).,06-CV-3447 (DRH)(AKT). |
| Citation | 661 F.Supp.2d 218 |
| Parties | RxUSA WHOLESALE, INC., Plaintiff, v. ALCON LABORATORIES, INC. et al., Defendants. |
| Court | U.S. District Court — Eastern District of New York |
The Law Firm of Michael Levine, P.C., by: Michael L. Levine, Esq., Scarsdale, NY, for the Plaintiff.
Latham & Watkins LLP, by: Terrence J. Connolly, Esq., Joseph M. Salama, Esq., New York, NY, Latham & Watkins LLP, by: Peter K. Huston, Esq., San Francisco, CA, for Defendants McKesson Corp., Brian Ferreira, and Peter J. Pasquale.
Schiff Hardin LLP, by: Carl W. Oberdier, Esq., New York, NY, for Defendant H.D. Smith Wholesale Drug Company.
Fulbright & Jaworski LLP, by: Mark A. Robertson, Esq., Neil G. Sparber, Esq., Nicholas I. Leitzes, Esq., New York, NY, for Defendant Bellco Drug Corp.
Baker & Hostetler LLP, by: Tracy L. Cole, Esq., New York, NY, for Defendant Cardinal Health, Inc.
Klehr, Harrison, Harvey, Branzburg & Ellers LLP, by: Paul G. Nofer, Esq., Lynn A. Collins, Esq., Philadelphia, PA, for Defendant AmerisourceBergen Corporation.
Olsson Frank Weeda Terman Bode Matz P.C., by: Philip C. Olsson, Esq., Arthur Y. Tsien, Esq., Washington, D.C., Dewey Ballantine LLP, by: Eamon O'Kelly, Esq., New York, NY, for Defendant Healthcare Distribution Management Association.
Gibson, Dunn & Crutcher LLP, by: Daniel G. Swanson, Esq., Los Angeles, CA, Gibson, Dunn & Crutcher LLP, by: Daniel W. Nelson, Esq., Henry C. Whitaker, Esq., Washington, D.C., for the Defendant Pfizer Inc.*
Plaintiff RxUSA Wholesale, Inc. ("Plaintiff"), a secondary wholesaler of pharmaceutical products, brings this antitrust action alleging that defendants—pharmaceutical manufacturers, authorized pharmaceutical wholesalers, and individuals in control of a pharmaceutical enterprise (collectively, "Defendants")—have willfully acquired and sought to maintain a monopoly and exclude competition by secondary wholesalers in the wholesale pharmaceutical industry. Defendants move to dismiss the Complaint for failure to state a claim, pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). In the Complaint, Plaintiff seeks, inter alia, an order enjoining and prohibiting Defendants from engaging in further allegedly unlawful acts that violate the Sherman Act, 15 U.S.C. §§ 1-2; the Donnelly Act, N.Y. Gen. Bus. Law §§ 340-347; the Sarbanes Oxley Act of 200 ("SOX"); and the Racketeer Influence and Corrupt Organization Act ("RICO"), 18 U.S.C. §§ 1962(c) and (d). Plaintiff also seeks damages with regard to the alleged unlawful conduct. For the reasons that follow, Defendants' motions are granted and this case is dismissed.
In crafting the following summary of facts, the Court accepts all of the factual allegations in the Complaint as true.1
Plaintiff is a "secondary wholesaler" of pharmaceutical products that ships U.S. FDA-approved pharmaceuticals to its customers. A secondary wholesaler generally purchases pharmaceuticals from "authorized wholesalers"—wholesalers authorized to purchase directly from drug manufacturers—and then resells them to its own customers, other non-authorized distributors and dispensing facilities.
Several states and the federal government have adopted pedigree rules to regulate the sale of prescription drugs to curtail the sale of counterfeit drugs in the United States. The federal pedigree rules require non-authorized pharmaceutical distributors to show pedigree information on all sales made, i.e., to document the chain of custody of pharmaceuticals from manufacturers to pharmacy or other dispenser, but exempt authorized pharmaceutical distributors from this requirement. Thus, in order to comply with the law, all unauthorized distributors must obtain appropriate pedigree information from the seller. The absence of such information renders illegal any sale of pharmaceutical products in the United States.2
Plaintiff alleges that in the past, it purchased pharmaceuticals from the following five authorized wholesalers which in turn purchased directly from manufacturers: McKesson Corporation ("McKesson"), Cardinal Health Corporation ("Cardinal"), AmerisourceBergen Corp. ("AmerisourceBergen"), H.D. Smith, Inc. ("H.D. Smith"), and Bellco Drug Corp. ("Bellco"). These five companies are referred to in the Complaint, and will be hereinafter collectively referred to as, the Pharmaceutical Wholesaler Defendants or the "PWDs." Plaintiff alleges that the PWDs control more than 95% of the market for wholesale pharmaceutical products in the United States.
Plaintiff had a different relationship with each PWD, as set forth below.
Plaintiff entered into a multi-year agreement with McKesson on October 1, 2003, under which McKesson agreed to supply pharmaceutical products to Plaintiff. As a result of this agreement, McKesson became a primary supplier to Plaintiff. From October 2003 through part of 2006, Plaintiff received approximately $529 million of goods from McKesson, an amount that was allegedly less than the full amount Plaintiff ordered.3 McKesson allegedly fraudulently reported to the manufacturers that Plaintiff was receiving 100% of the product it was ordering from McKesson. In January 2006, McKesson advised Plaintiff that it would not provide Plaintiff with pedigree documentation necessary to permit lawful resale by Plaintiff of the pharmaceutical products purchased by Plaintiff from McKesson. In February 2006, McKesson terminated its supply agreement with Plaintiff.
Plaintiff purchased pharmaceutical products from Cardinal beginning in November 2004 and then periodically thereafter through December 2005. In January 2006, Cardinal notified Plaintiff that it would not supply to Plaintiff and others pedigree information necessary to permit lawful resale. In July 2006, Cardinal notified Plaintiff that it would not supply Plaintiff with any more pharmaceutical products.
Plaintiff purchased pharmaceutical products from AmerisourceBergen from June 1999 through March 2000. In January 2006, AmerisourceBergen announced that it would not supply to Plaintiff and others pedigree documentation necessary to permit lawful resale. In July 2006, AmerisourceBergen notified Plaintiff that it would not supply any more pharmaceutical products to Plaintiff.
Plaintiff purchased pharmaceutical products from H.D. Smith from September 2000 through November 2001. On November 2001, H.D. Smith advised Plaintiff that it would not sell pharmaceutical products to any secondary wholesaler and has not sold any product to Plaintiff since that time.
Plaintiff intermittently purchased pharmaceutical products from Bellco from September 2000 through June 2006. In January 2006, Bellco announced that it would not supply to Plaintiff and others pedigree information necessary to permit lawful resale. In June 2006, Bellco notified Plaintiff that it would not supply Plaintiff with any pharmaceuticals.
Plaintiff alleges that in refusing to sell to Plaintiff, the PWDs' motivation was to consolidate "[each PWD's] monopoly and the monopoly power of the PWDs, prevent Plaintiff from growing its business to become an even larger competitor, eliminate Plaintiff as a competitor in the relevant market, and thereby keep wholesale prices for the products it offered to end users artificially high." (Compl. ¶¶ 192, 203, 214, 227, 237.)
F. Plaintiff's Claims
Plaintiff asserts the following causes of action against the PWDs: (1) counts II-III and V-XII alleging that each PWD violated Section 2 of the Sherman Act by unilaterally refusing to sell to Plaintiff pharmaceutical products which Plaintiff labels as "essential facilities"; (2) counts XIII and XIV, alleging that each PWD violated Section 1 of the Sherman Act by allegedly conspiring with each other to refuse to deal with Plaintiff; and (3) count XX, alleging that such conduct also violated the Donnelly Act. The Complaint also asserts two claims against McKesson only, count I for monopolization of the relevant geographic wholesale pharmaceutical product market in violation of Section 2 of the Sherman Act based on McKesson's termination of its supply agreement with Plaintiff, and count IV for attempted monopolization of the relevant geographic wholesale pharmaceutical product market in violation of Section 2 of the Sherman Act.
At all times relevant to the Complaint, Brian Ferreira ("Ferreira") was a Vice-President, and Peter J. Pasquale ("Pasquale") was a Senior Vice-President of McKesson. As noted above, McKesson was Plaintiff's primary supplier of pharmaceuticals from October 2003 to February 2006 pursuant to a supply agreement between the parties. Plaintiff alleges, inter alia, that Ferreira and Pasquale used the United States mails and wires to transmit fraudulent representations to various manufacturers intended to induce the manufacturers to believe that all of Plaintiff's pharmaceutical purchasing requirements were being met.
Plaintiff asserts the following causes of action against Ferreira and Pasquale: (1) count XXI, alleging that they violated SOX by issuing false reports, and (2) counts XXII and XXIII, alleging that they violated the civil RICO statute via the transmission of these false reports.
Healthcare Distribution Management Association ("HDMA") is a voluntary association of wholesalers of pharmaceutical products which now excludes secondary wholesalers from its ranks. Each of the PWDs is a member of HDMA.
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