Safeway Inc. v. Laboratories
| Decision Date | 14 January 2011 |
| Docket Number | CW.Docket No. 332,No. C 07–06120 CW,CW.Docket No. 287,CW.Docket No. 283,CW.Docket No. 328,CW.Docket No. 209,No. C 07–05470 CW,No. C 07–05985 CW,No. C 07–05702 CW,CW.Docket No. 213,C 07–05470 CW,C 07–05985 CW,C 07–06120 CW,C 07–05702 CW |
| Citation | 761 F.Supp.2d 874 |
| Court | U.S. District Court — Northern District of California |
| Parties | SAFEWAY INC.; Walgreen Co.; The Kroger Co.; New Albertson's, Inc.; American Sales Company, Inc.; and Heb Grocery Company, LP, Plaintiffs,v.ABBOTT LABORATORIES, Defendant.Meijer, Inc. & Meijer Distribution, Inc.; Rochester Drug Co–Operative, Inc.; and Louisiana Wholesale Drug Company, Inc., on behalf of themselves and all others similarly situated, Plaintiffs,v.Abbott Laboratories, Defendant.Rite Aid Corporation; Rite Aid HDQTRS Corp.; JCG (PJC) USA, LLC; Maxi Drug, Inc. d/b/a Brooks Pharmacy; Eckerd Corporation; CVS Pharmacy, Inc.; and Caremark LLC, Plaintiffs,v.Abbott Laboratories, Defendant.Smithkline Beecham Corporation, d/b/a GlaxoSmithKline, Plaintiff,v.Abbott Laboratories, Defendant. |
OPINION TEXT STARTS HERE
William Francis Murphy, Barbara Lynne Harris Chiang, Edward Eldon Hartley, Dillingham & Murphy, LLP, San Francisco, CA, Scott E. Perwin, Kenny Nachwalter PA, Miami, FL, for Plaintiffs.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT ABBOTT LABORATORIES' MOTIONS FOR SUMMARY JUDGMENT ON DIRECT PURCHASERS' CLAIMS (Docket No. 232) AND ON GSK'S CLAIMS (Docket No. 227)
Defendant Abbott Laboratories moves for summary judgment or, alternatively, summary adjudication on the claims of Direct Purchaser Plaintiffs Safeway, Inc., et al.; Meijer, Inc., et al.; and Rite Aid Corporation, et al. (collectively, Direct Purchasers) and for summary judgment on Plaintiff GlaxoSmithKline's (GSK) claims. Direct Purchasers and GSK oppose Abbott's motions. The motions were heard on October 28, 2010. Having considered oral argument and the papers submitted by the parties, the Court GRANTS Abbott's motions in part and DENIES them in part.
Protease inhibitors (PIs) are considered the most potent class of drugs to combat the HIV virus. In 1996, Abbott introduced Norvir as a stand-alone PI with a daily recommended dose of 1,200 milligrams (twelve 100–mg capsules a day), priced at approximately eighteen dollars per day. Norvir is the brand name for a patented compound called ritonavir.
After Norvir's release, it was discovered that, when used in small quantities with another PI, Norvir would “boost” the anti-viral properties of that PI. Not only did a small dose of Norvir—about 100 to 400 milligrams per day—make other PIs more effective and decrease the side effects associated with high doses, but it also slowed the rate at which HIV developed resistance to the effects of those PIs. The use of Norvir as a “booster” has enabled HIV patients to live longer. But the use of Norvir as a booster, and not a stand-alone PI, has also meant that the price for an average daily dose of Norvir has plummeted since Norvir was first introduced, because patients need a much smaller daily dose of Norvir when it is used as a booster compared to when it is used as a stand-alone PI. By 2003, the average price for a daily dose of Norvir was $1.71.
In 2000, Abbott introduced Kaletra, a single “soft gel capsule” containing the PI lopinavir as well as ritonavir, used to boost the effects of lopinavir. Calamari Decl. ¶ 15. A single capsule contained 133 milligrams of lopinavir and 33 milligrams of ritanovir.
In 2003, two new PIs, Bristol–Myers Squibb's Reyataz and GSK's Lexiva, were introduced to the market. Although both drugs could be prescribed as stand-alone PIs, their daily doses were less if they were administered along with Norvir. A daily dose of Reyataz, unboosted by Norvir, was 400 milligrams; if boosted by 100 milligrams of Norvir, Reyataz's daily dose was 300 milligrams. A daily, unboosted dose of Lexiva was 2,800 milligrams; if taken with 100 or 200 milligrams of Norvir, Lexiva's daily dose was 1,400 milligrams. Abbott was aware of studies that showed Norvir-boosted doses of Reyataz and Lexiva had efficacy similar to Kaletra and, in several ways, were superior to Kaletra. See Stockinger Decl., Ex. 98, at NOR00096554–55. Without a boosting dose of Norvir, however, these drugs were inferior to Kaletra.
After the introduction of Reyataz, Kaletra's market share fell. The average daily dose of Norvir also fell. Before Reyataz's release, the most common boosting dose of Norvir ranged from 200 milligrams to 400 milligrams a day. Clinical trials, however, showed that a Norvir dose of only 100 milligrams a day effectively boosted Reyataz.
By September, 2003, Abbott was aware that Reyataz and Lexiva would threaten Kaletra's future market share and cause it to lose revenue. Abbott considered three options to preserve its “HIV leadership in the PI class”: (1) continue to execute licensing agreements with competitors for the co-marketing of their PIs along with Norvir, similar to the one Abbott and GSK agreed to in December, 2002, see generally Calamari Decl., Ex. 23 at NOR0004414; (2) remove Norvir from the market; or (3) increase the price of Norvir. See Stockinger Decl., Ex. 17 at RIT0437434. Abbott concluded that the first would not be sufficient to stem projected revenue losses and that the second would cause “significant issues ... on PR and regulatory fronts both domestically and internationally.” Id. Abbott's staff ultimately decided to recommend an increase in the price of Norvir. See Stockinger Decl., Ex. 95, at NOR00091874. Abbott CEO Miles White approved the increase in late October, 2003.
On December 3, 2003, Abbott raised the price of 100 milligrams of Norvir from $1.71 to $8.57, which amounted to a 400–percent increase. In contrast, Abbott's four previous price increases averaged 3.45 percent, which was in line with the rate of inflation. Stockinger Decl., Ex. 71, at NOR00112052. The change applied only to consumers with private insurance; those purchasing Norvir through public programs, such as Medicare, were not subject to it because of government pricing rules. Abbott maintained the cost of a daily regimen of Kaletra at $18.78. The Norvir price hike commensurately increased the price of boosted Reyataz and Lexiva therapies: a daily dose of Reyataz and Norvir rose from $23.79 to $30.65, and a daily dose of Lexiva and Norvir jumped from $19.42 to $33.14.1 See Calamari Decl., Ex. 2, at NOR00302683; Dellinger Decl., Ex. 103 ¶ 10.
Since December, 2003, Norvir's price has remained at $8.57 per 100 milligrams, whereas the prices for boosted PIs have risen. In December, 2003, the price of a daily dose of Kaletra was $18.78. After slightly reducing Kaletra's price to $18.76 in 2004, through four price hikes between June, 2005 and December, 2007, Abbott increased Kaletra's price to $23.40, a rise of approximately twenty-five percent. Between June, 2005 and December, 2007, the cost of a daily dose of Reyataz, not including Norvir, increased approximately eleven percent, from $23.14 to $25.76. And the cost for a daily dose of Lexiva, not including Norvir, increased approximately twenty-two percent over the same period, from $16.78 to $20.40. See Calamari Decl. ¶¶ 45–46, tbl.1.
At the time of the Norvir price increase, Kaletra commanded a substantial share of the boosted PI market. Since then, its share has declined. In comparison, the market shares of Reyataz and Lexiva have increased, along with that of Prezista, a boosted PI introduced in June, 2006.
Direct Purchasers allege that, in violation of Section 2 of the Sherman Act, Abbott monopolized or attempted to monopolize the “boosted market,” which Plaintiffs define to be the market in which Kaletra competes with Reyataz, Lexiva and other PIs boosted by Norvir. Specifically, Direct Purchasers complain that Abbott set predatory prices for Kaletra, which they argue is a bundled product, and violated its antitrust duty to deal with respect to Norvir. Direct Purchasers also allege that Abbott monopolized the “boosting market,” which Plaintiffs define to be a market in which Norvir is the only product. In the Meijer action, the Court has certified a class of:
All persons or entities in the United States that purchased Norvir and/or Kaletra directly from Abbott or any of its divisions, subsidiaries, predecessors, or affiliates during the period from December 3, 2003 through such time as the effects of Abbott's illegal conduct have ceased, and excluding federal governmental entities, Abbott, and Abbott's divisions, subsidiaries, predecessors, and affiliates.
Order of August 27, 2008 at 21, Meijer v. Abbott Laboratories, Case No. 07–5985 CW, 2008 WL 4065839.
GSK also alleges that Abbott monopolized or attempted to monopolize the boosted market, in violation of Section 2. Specifically, GSK claims that Abbott violated its antitrust duty to deal with respect to Norvir and sabotaged its competitors. In addition, GSK brings claims under New York law for breach of the implied covenant of good faith and fair dealing related to its co-marketing licensing agreement with Abbott. Finally, GSK pleads claims for violations of North Carolina's Unfair and Deceptive Trade Practices Act (UDTPA), N.C. Gen.Stat. §§ 75–1.1, et seq. The UDTPA, among other things, prohibits monopolization and attempted monopolization. Id. § 75–2.1.
The current cases are related to John Doe 1 v. Abbott Laboratories, No. C 04–1511 CW. Although that case also concerned the December, 2003 increase in Norvir's price, the Doe plaintiffs based their Section 2 claim on a theory of monopoly leveraging. See John Doe 1 v. Abbott Laboratories, 571 F.3d 930, 933 (9th Cir.2009). The Ninth Circuit held that the plaintiffs' stand-alone monopoly leveraging claim was foreclosed by Pacific Bell Telephone Co. v. Linkline Communications, Inc., 555 U.S. 438, 129 S.Ct. 1109, 172 L.Ed.2d 836 (2009). The Ninth Circuit noted that the Doe plaintiffs did not allege predatory pricing or a refusal to deal. Doe, 571 F.3d at 935. Allegations of such conduct are plead...
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