Sixth Circuit Upholds Finding that Agreement Between Andrx and Hoechst Marion Roussel was a Per Se Illegal Market Division

On June 13, 2003, the United States Court of Appeals for the Sixth Circuit upheld the district court's finding that Hoechst Marion Roussel ("HMR") and Andrx violated the "per se" antitrust rule against market division when HMR effectively paid Andrx to refrain from entering the market with a generic version of HMR's Cardizem CD.

Background

Andrx filed an Abbreviated New Drug Application ("ANDA") with the FDA in 1995, stating that it intended to produce a generic version of Cardizem CD, and certified that its generic product would not infringe any of the patents HMR had listed on the FDA's Orange Book as covering Cardizem. Shortly thereafter, in January 1996, HMR filed a patent infringement suit against Andrx based on its alleged infringement of the '584 patent. Under the Hatch-Waxman Act, the filing of the suit triggered a 30-month stay, during which the FDA could not approve, and Andrx could not market, Andrx's generic product. This stay would end July 1998.

In September 1997, HMR and Andrx entered into an agreement whereby Andrx would not market a generic version of Cardizem until the earliest of: (1) Andrx obtaining a favorable and unappealable decision in the patent infringement case; (2) HMR and Andrx entering into a licensing agreement; or (3) HMR entering into a licensing agreement with a third party. Further, Andrx agreed to dismiss antitrust counterclaims it had filed, and not to relinquish the 180-days of generic exclusivity granted it under the Hatch-Waxman Act as the first ANDA filer for Cardizem. In return, HMR agreed to pay Andrx $40 million per year, beginning the date that Andrx received final FDA approval of its generic drug. Once the 30-month stay expired in July 1998, the FDA granted final approval for Andrx's generic drug, HMR began making payments to Andrx, and Andrx refrained from marketing its approved drug. In June 1999, Andrx and HMR entered into a settlement of the infringement suit where HMR paid Andrx an additional $50.7 million - bringing HMR's total payments to Andrx's to $89.83 million. On June 23, 1999 Andrx began to market its generic drug under the trademark Cartia XT.

Procedural History

Several individual and class plaintiffs filed suit against HMR and Andrx in 1998, following FDA approval of Andrx's generic drug. The graveman of these complaints is that but for the agreement between Andrx and HMR, Andrx would have entered the market with its generic product in July 1998. Further, the complaints allege that Andrx's failure to enter the market postponed the running of the 180-day exclusivity period, and thus additional generic entry. The defendants filed various motions to dismiss, all of which were denied. Plaintiffs then moved for, and were granted, partial summary judgment on the issue of whether the agreement was a per se illegal restraint of trade. Defendants appealed interlocutorily the issues of whether plaintiffs had alleged antitrust injury, and whether defendants' agreement was a per se illegal restraint of trade.

The Sixth Circuit Decision

The Sixth Circuit first upheld the grant of partial summary judgment holding that the agreement between Andrx and HMR was a per se illegal market allocation. The court found that the agreement "guaranteed to HMR that its only potential competitor at that time, Andrx, would, for the price of $10 million per quarter, refrain from marketing its generic version of Cardizem CD even after it had obtained FDA approval." Further, the court noted that "[b]y delaying Andrx's entry into the market, the Agreement also delayed the entry of other generic competitors, who could not enter until the expiration of Andrx's 180-day period of marketing exclusivity." The court concluded that "the Agreement . . . was, at its core, a horizontal agreement to eliminate competition in the market for Cardizem CD throughout the entire United States, a classic example of a per se illegal restraint of trade." The Sixth Circuit rejected defendants' argument that "the Agreement lacked anticompetitive effects and had procompetitive benefits" as irrelevant given the per se treatment of the conduct. It also found unpersuasive defendants' contentions that per se treatment was improper because the agreement was related to enforcing a patent, and because of the "novel" area of law involved.

Turning to the antitrust injury question, the court first held that "here there is no question that the alleged injury - paying higher prices for a product due to a lack of competition in the market - is the type of injury that can, and the plaintiffs have alleged did, flow from the anticompetitive effects of the Agreement." It also rejected the argument that the Sixth Circuit's "necessary predicate test" required plaintiffs to "allege that the only way the defendant could have caused the plaintiff's injury was by engaging in the antitrust violation." Specifically, defendants argued that because Andrx could have "unilaterally, and legally, decided not to bring its generic product to market," the agreement cannot serve as the "necessary predicate" for plaintiffs' injury. The court held that the complaints could be "fairly construed as alleging that the per se illegal Agreement with its $89 million payment, not HMR's disputed 45%-18 patent, constituted the 'necessary predicate' for Andrx's decision to keep its FDA-approved . . . product off the market and HMR free from any generic product competition." It continued that "proof of the allegations on the face of this complaint and reasonable inferences therefrom" could persuade a trier of fact that HMR's patent infringement suit was a "paper tiger," and that the $89 million payment evidenced HMR's lack of confidence in its suit. The court concluded that if these allegations are proven true, "it would almost necessarily follow that the plaintiffs' injury flowed from the Agreement and payment of $40 million per year."