United States District Court for the District of New Jersey
February 18, 2005
IN RE REMERON DIRECT PURCHASER ANTITRUST LITIGATION.
The opinion of the court was delivered by: Hochberg, District Judge.
OPINION & ORDER
This matter comes before the Court upon the parties' cross motions for summary judgment. Three issues remain in this antitrust case: (a) whether Defendants had monopoly power in a relevant market, (b) whether Defendants used such monopoly power to monopolize the market by delaying the listing of their drug combination in the FDA's Orange Book, and (c) whether Defendants used such monopoly power to monopolize the market through an overall scheme. Defendants have filed a motion for summary judgment on all three issues. Plaintiffs have filed two motions for partial summary judgment--one on the issue of monopoly power and the other on the issue of monopolization by delayed-listing.
This opinion analyzes both parties' respective summary judgment motions with respect to the "direct evidence" approach for determining Defendants' market power, which is the sole basis of Plaintiffs' motion for summary judgment on monopoly power and is one issue of Defendants' motion.*fn1 The Court reviews the motions on the papers in accordance with Fed.R.Civ.P. 78.
Organon, Inc. and Akzo Nobel N.V. ("Defendants" or "Organon") manufacture the antidepressant drug mirtazapine, commercially marketed as Remeron. Mirtazapine was originally claimed in their now-expired United States Patent No. 4,062,848 (the "'848 patent") and introduced in the United States in 1996. Including patent and regulatory exclusivities, Organon's exclusive right to manufacture and sell mirtazapine expired on June 14, 2001.
Mirtazipine is alone in the selective noradrenergic/serotonergic class of antidepressants ("NSSA"). The oldest commonly used antidepressants are those in the selective serotonin reuptake inhibitor class ("SSRI") which includes, among others, brand-names Prozac, Paxil and Zoloft. Other antidepressants recently marketed in the United States include brand name Effexor (alone in the SNRI class), brand name Desyrel (alone in the SARI class), and brand name Wellbutrin (alone in the NDRI class).
On November 2, 1999, Organon was granted United States Patent No. 5,977,099 (the "'099 patent") for a method of treating depression using a combination of mirtazapine and a SSRI. In January 2001, fourteen months after being granted the '099 patent, Organon submitted the '099 patent to the United States Food and Drug Administration ("FDA") for listing in the APPROVED DRUG PRODUCTS WITH THERAPEUTIC EQUIVALENCE EVALUATIONS ("Orange Book").*fn2
Beginning in February 2001, several generic drug manufacturers ("Generics") filed Abbreviated New Drug Applications ("ANDAs") with the FDA, seeking approval for their generic version of mirtazapine. The Generics each filed a certification, under 21 U.S.C. Sections 355(j)(2)(A)(vii)(IV) ("Paragraph IV Certifications"), which stated that the '099 patent was invalid or would not be infringed by their generic version of mirtazapine.
Organon thereupon sued the Generics for inducement to infringe the '099 patent. Because Organon sued each of the Generics within forty-five days of receipt of the Paragraph IV Certifications, FDA approval of the generic ANDAs was automatically stayed by operation of the Hatch-Waxman Act and would remain stayed until the earlier of thirty months or a judicial determination that the '099 patent was invalid or not infringed. See 21 U.S.C. Sections 355(j)(5)(B)(iii). On December 18, 2002, this Court ruled that the Generics' sale of mirtazapine did not induce infringement of the '099 patent. See Organon Inc. v. Teva Pharms., Inc., 244 F.Supp.2d 370 (D.N.J.2002) ( "Organon I ").
The Generics filed counterclaims against Organon for antitrust violations under the Sherman Act including (1) improperly listing the '099 patent in the Orange Book and (2) baselessly initiating patent infringement actions against the Generics. Organon Inc. v. Mylan Pharms., Inc., 293 F.Supp.2d 453 (D.N.J.2003) ("Organon II "). This Court granted Organon's motion to dismiss both of these claims on December 3, 2003 because (1) the language of 21 U.S.C. Sections 355(b)(1), (c)(2) and 21 C.F.R. Sections 314.53(b) "gave Organon a reasonable basis for listing in the Orange Book" and (2) Organon had an objective basis to believe it could assert a claim of patent infringement.*fn3 Organon II, 293 F.Supp.2d at 459, 461. The Generics and Organon settled the Generics' remaining counterclaims in April 2004.*fn4
Plaintiffs also allege "an overall scheme" to monopolize the relevant market, claiming that, when taken together, the allegations against Organon constitute an antitrust violation even if the individual allegations are not found to violate antitrust laws.*fn5
Necessary to finding for Plaintiffs on either of these issues is an initial determination that Organon had monopoly power in a relevant market.
SUMMARY JUDGMENT STANDARD
Pursuant to Fed.R.Civ.P. 56(c), a motion for summary judgment will be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In other words, "summary judgment may be granted only if there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party." Miller v. Indiana Hosp., 843 F.2d 139, 143 (3d Cir.1988). All facts and inferences must be construed in the light most favorable to the non-moving party. Peters v. Delaware River Port Auth., 16 F.3d 1346, 1349 (3d Cir.1994). The judge's function is not to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial. See Anderson, 477 U.S. at 249, 106 S.Ct. 2505. "Consequently, the court must ask whether, on the summary judgment record, reasonable jurors could find facts that demonstrate, by a preponderance of the evidence, that the nonmoving party is entitled to a verdict." In re Paoli R.R. Yard PCB Litigation, 916 F.2d 829, 860 (3d Cir.1990).
The party seeking summary judgment always bears the initial burden of production. Celotex Corp., 477 U.S. at 323, 106 S.Ct. 2548.
This burden requires the moving party to establish either that there is no genuine issue of material fact and that the moving party must prevail as a matter of law, or to demonstrate that the nonmoving party has not shown the requisite facts relating to an essential element of an issue on which it bears the burden. See id. at 322-23, 106 S.Ct. 2548. Once the party seeking summary judgment has carried this initial burden, the burden shifts to the nonmoving party.
To avoid summary judgment, the nonmoving party must then demonstrate facts supporting each element for which it bears the burden, and it must establish the existence of a "genuine issue of material fact" justifying trial. Miller, 843 F.2d at 143; see also Celotex Corp., 477 U.S. at 324, 106 S.Ct. 2548. The nonmoving party "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.' " Id. at 587, 106 S.Ct. 1348 quoting First National Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). Further, summary judgment may be granted if the nonmoving party's "evidence is merely colorable or is not significantly probative." Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505.
Section 2 of the Sherman Act "sanctions those 'who shall monopolize, or attempt to monopolize ... any part of the trade or commerce among the several states.' " Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430 (3d Cir.1997) quoting 15 U.S.C. s 2. "The offense of monopoly under Sections 2 of the Sherman Act has two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 596 n. 19, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985) quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966); Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d at 437 (same); Ideal Dairy Farms, Inc. v. John Labatt, Ltd., 90 F.3d 737, 749 (3d Cir.1996) (same); Bonjorno v. Kaiser Aluminum & Chemical Corp., 752 F.2d 802, 808 (3d Cir.1984) (same).
Under antitrust law, summary judgment on the issue of monopoly power utilizes the same standard as that applied in other contexts, despite the highly fact-intensive nature of determining monopoly power. A defendant "deserves summary judgment if it can establish that, as a matter of indisputable fact, it lacks sufficient [market] power." Town Sound v. Chrysler, 959 F.2d 468, 479 (3d Cir.1992). The Third Circuit recognizes that "the question of market power is certainly dependant on factual findings, and some older cases did state that summary judgments against plaintiffs are particularly disfavored in complex antitrust cases," however, "many courts, including the Supreme Court, have more recently held defendants entitled to summary judgment in antitrust cases ... the standard of F.R.C.P. 56 remains the same." Id. at 481; see also Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories Inc., 386 F.3d 485, 495 (2d Cir.2004) (holding summary judgment "is an essential tool in the area of antitrust law because it helps avoid wasteful and lengthy litigation that may have a chilling effect on pro-competitive market forces") citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 593-94, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
Plaintiffs do not seek summary judgment on the issue of monopoly power through the traditional market definition approach. Rather, Plaintiffs proffer "direct evidence" to attempt to meet their burden to prove that Defendants had monopoly power in a relevant product market before generic entry and to define that relevant market.*fn6 Although the Supreme Court and Third Circuit have not expressly endorsed such an approach in a section 2 case,*fn7 this Court shall consider Plaintiffs' direct evidence given the existence of some law among other Circuits that permits direct evidence to be used to establish monopolization. See Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories Inc., 386 F.3d 485, 500 (2d Cir.2004) (stating that monopoly power "can be proven directly through evidence of control over prices or the exclusion of competition, or it may be inferred from a firm's large percentage share of the relevant market") citing Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90, 98 (2d Cir.1998); United States v. Microsoft Corp., 253 F.3d 34, 51 (D.C.Cir.2001) ("where evidence indicates that a firm has in fact profitably [raised prices substantially above the competitive level], the existence of monopoly power is clear"); Re/Max Intern. v. Realty One, Inc., 173 F.3d 995, 1018 (6th Cir.1999) ("an antitrust plaintiff is not required to rely on indirect evidence of a defendant's monopoly power, such as high market share within a defined market, when there is direct evidence that the defendant has actually set prices or excluded competition").*fn8
The direct evidence Plaintiffs proffer is the following:*fn9 When generic mirtazipine producers were finally able to enter the market, they did so with prices that were substantially lower than the price of their bioequivalent brand name competitor, Remeron. As more generic producers entered the market, the price of generic mirtazapine continued to decline. Plaintiffs consequently conclude that because Organon's brand name price was much greater than the subsequent generic price for mirtazipine, Organon necessarily had monopoly power prior to generic entry.*fn10
Although the Third Circuit has not considered finding monopoly power based on direct evidence similar to that proffered by Plaintiffs, the Second Circuit did so last year in Geneva Pharmaceuticals v. Barr Laboratories. The Court reviewed evidence similar to that proffered here and affirmed the lower court's decision to grant partial summary judgment for the defendant because the plaintiff could not establish monopoly power. Geneva Pharmaceuticals, 386 F.3d at 500.*fn11 The plaintiff there, a generic producer of prescription blood thinner, alleged that a competing generic producer that had first entered the blood thinner market after decades of blood thinner production solely by the brand name producer, was monopolizing the generic blood thinner market in violation of section 2 of the Sherman Act. Id. at 494. The plaintiff sought to prove monopoly power by direct evidence that the defendant substantially lowered its prices only after the plaintiff entered the market with a much lower price. Id. at 500. Simply based on the defendant's ability to quickly lower its price to match the plaintiff's, the plaintiff argued that the defendant was a monopolist that "had charged a monopoly price that lasted until plaintiffs finally entered the market, ... direct proof that [the defendant] controlled prices during its period of exclusivity." Id.
The Second Circuit rejected the plaintiff's evidence as insufficient as a matter of law. "This direct proof is at best ambiguous," the Court concluded because the plaintiff provided no evidence of the defendant's price-cost margin and no evidence that the defendant restricted output. The Court stated:
[A]bsent from plaintiffs' proffer is any analysis of [the defendant's] costs. Hence, we do not know whether the allegedly elevated prices led to an abnormally high price-cost margin. [citation omitted] Nor do plaintiffs present direct evidence that defendants restricted output, asking us to infer the basis for the higher prices.
While Geneva Pharmaceuticals was a battle between two generic producers, its logic applies equally to direct evidence of a cheaper price by generics as compared with a brand name drug. As in Geneva Pharmaceuticals, Plaintiffs here provide no evidence of excessive price-cost margins or restricted output but merely rely on the fact that later generic manufacturers could enter the market more cheaply than Remeron's price in order to establish monopoly power.*fn12 Geneva Pharmaceuticals's holding is even more persuasive in the present case: the Geneva Pharmaceuticals plaintiffs could at least insinuate that the defendant had some power over price by the fact that the defendant lowered its price in response to generic entry. Here, Plaintiffs provide no evidence that Organon reduced the price of Remeron after generic entry in order to compete with the cheaper generic price.
Furthermore, unlike in Geneva Pharmaceuticals, the Defendant here is a brand name (not generic) manufacturer whose initial fixed costs (including research, development, and the cost of being the first to gain FDA drug approval) are significantly higher than those of generic manufactures because the Hatch-Waxman Act allows generic manufacturers to gain much of the benefit of a brand name manufacturers initial fixed costs by filing an ANDA. See Elizabeth Stanley, An Ounce of Prevention: Analysis of Drug Patent Settlements Under the Hatch-Waxman Act, 10 GEO. MASON. L.REV. 345, 346 (2002) ("Congress sought to balance competing interests by promoting the availability of low-cost generic drugs through simplified regulatory procedures ... an applicant subsequent to the pioneer applicant seeking to manufacture generic versions of the pioneer drug, is not required to file a complete NDA. The generic applicant need only complete an Abbreviated New Drug Application (ANDA) that relies on the safe-and-effective clinical findings of the pioneer drug"); Glaxo Inc. v. Novopharm Ltd., 110 F.3d 1562, 1568 (Fed.Cir.1997) (stating that Hatch-Waxman legislation was "designed to benefit makers of generic drugs, research-based pharmaceutical companies, and not incidentally the public") citing H.R.Rep. No. 98-857(I), at 14-15 (1984) (purpose of Hatch-Waxman is "to make available more low cost generic drugs").*fn13 That Geneva Pharmaceuticals demanded more evidence than simply lower prices where the defendant was a generic manufacturer, a fortiorio, leads to the same conclusion here where Defendants are brand name manufacturers.
Plaintiffs do not cite a case finding market entry of lower priced products to be indicative of a prior monopoly. Plaintiffs only cite cases where the court states that anticompetitive conduct "might" or "may" exist where there is sudden evidence of a change in sales and profits, or where there is a dramatic fall in prices. See In re Shopping Carts Antitrust Litig., 95 F.R.D. 299, 309 (S.D.N.Y.1982); In re Folding Carton Antitrust Litig., 83 F.R.D. 251, 254 (N.D.Ill.1978). The cases cited pertain to section 1 conspiracy claims which have a lower standard for finding market power than cases under section 2 and are inapplicable here. See, e.g., Eastman Kodak Co. v. Image Technical Servs., 504 U.S. 451, 481, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992) (stating "[m]onopoly power under Sections 2 requires, of course, something greater than market power under Sections 1") quoting Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969); Carpet Group International v. Oriental Rug Importers Ass'n., 256 F.Supp.2d 249, 286-87 (D.N.J.2003) (same); Urdinaran v. Aarons, 115 F.Supp.2d 484, 491 (D.N.J.2000) (same); JULIAN O. VON KALINOWSKI, ANTITRUST LAWS AND TRADE REGULATION Sections 25.03 (2004) (same).
If the direct evidence approach can ever supplant the market definition approach in a Sections 2 context, it can only do so where a reasonable juror could find the evidence conclusive as to why Defendants' prices were higher. Geneva Pharmaceuticals, 386 F.3d 485, 500 ("where direct evidence is unavailable or inconclusive, as here, monopoly power may be inferred from" the market definition approach); Blue Cross & Blue Shield v. Marshfield Clinic, 65 F.3d 1406, 1411-12 (7th Cir.1995) ("a reasonable finder of fact cannot infer monopoly power just from higher prices--the difference may reflect a higher quality more costly to provide--and it is always treacherous to try to infer monopoly power from a high rate of return"); Forsyth v. Humana, Inc., 114 F.3d 1467, 1475 (9th Cir.1997) (holding that high prices with no showing of restricted output failed to establish monopoly power). The Plaintiffs' one-track focus on the price of Remeron compared to the price of generic mirtazipine says nothing about the most important factors that would allow a reasonable juror to conclude that Organon had monopoly power.
Indeed, Plaintiffs' approach, if applied beyond this case, would render most brand name pharmaceutical companies as per se monopolists prior to generic entry. Generics normally enter the market with prices significantly lower than that of the first brand name manufacturers. Plaintiffs themselves proffer a statement of Defendants' principal economic expert in the litigation against the Generics, Dr. Ernst Berndt, describing this phenomenon:
Generic manufacturers typically charge substantially lower prices that their bioequivalent counterparts. Since Hatch-Waxman, following patent expiration, there is a high likelihood of rapid entry by multiple generic manufacturers. The subsequent price competition implies a correspondingly rapid loss of the brand's market share to generics, and a generally rapid decline in the price of the generic.
See also supra note 13 and accompanying text.
Clearly, there must be more proof than just a showing that a brand name drug costs more than a generic equivalent. The Supreme Court has held that monopoly power cannot automatically be considered conferred upon a patent holder without more evidence of market power. Walker Process Equipment, Inc. v. Food Machinery and Chemical Corporation, 382 U.S. 172, 178, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965). "There may be effective substitutes for the device which do not infringe the patent," the Court stated, so monopoly power "is a matter of proof." Id. Plaintiffs seek to use nothing beyond the typical reality facing patent holders in the pharmaceutical market (high brand name prices relative to that of generic entrants) as the sole basis for inferring that the brand name patent holder has monopoly power. Plaintiffs' direct evidence is insufficient as a matter of law.*fn14
Accordingly, IT IS on this 18th day of February 2005, ORDERED that Plaintiffs' motion for partial summary judgment on the issue of establishing monopoly power is DENIED; and it is further,
ORDERED that Defendants' motion for summary judgment with respect to the establishing monopoly power via the direct evidence approach is GRANTED.