Louisiana Wholesale Drug Co. v. Shire LLC

929 F. Supp. 2d 256, 2013 WL 950833, 2013 U.S. Dist. LEXIS 34251
CourtDistrict Court, S.D. New York
DecidedMarch 6, 2013
DocketNo. 12 Civ. 3711 (VM)
StatusPublished
Cited by3 cases

This text of 929 F. Supp. 2d 256 (Louisiana Wholesale Drug Co. v. Shire LLC) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Louisiana Wholesale Drug Co. v. Shire LLC, 929 F. Supp. 2d 256, 2013 WL 950833, 2013 U.S. Dist. LEXIS 34251 (S.D.N.Y. 2013).

Opinion

DECISION AND ORDER

VICTOR MARRERO, District Judge.

Plaintiff Louisiana Wholesale Drug Company, Inc. (“LWD”), on behalf of itself and all others similarly situated, brought this action against Shire LLC and Shire U.S., Inc. (collectively, “Shire” or “Defendants”), asserting a violation of 15 U.S.C. § 2. Shire filed a motion to dismiss the complaint for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). Upon the Court’s consideration of Shire’s motion, LWD’s opposition, and Shire’s reply, for the reasons discussed below, Shire’s motion is GRANTED.

I. BACKGROUND1

Shire holds patents for and manufactures Adderall XR, a popular drug in the treatment of attention-deficit-hyperactivity-disorder since its introduction to the market in 2001. LWD is a drug wholesaler that purchased Adderall XR and its generic equivalents from Shire and other parties. This dispute sits at the intersection of patent law, pharmaceutical regula[258]*258tion, and antitrust law, with principles of contract law thrown in for good measure.

The Federal Food, Drug, and Cosmetics Act (the “FDCA”) regulates the introduction of drugs into the marketplace. See 21 U.S.C. §§ 301 et seq. Manufacturers of new drugs must file a New Drug Application (“NDA”), which must be approved by the Food and Drug Administration (“FDA”) in order for the drug to be sold. The FDA approved Shire’s NDA for Adderall XR on October 11, 2001, and, over the next decade, Shire enjoyed net sales of more than $6.5 billion.

But Shire’s patents and approved NDA covering Adderall XR did not ensure complete exclusivity over that time. Indeed, federal law attempts to strike a balance between rewarding the innovation of drug manufacturers through the patent system and fostering competition in the marketplace through FDA approvals of generic drugs. Specifically, a 1984 amendment to the FDCA called the Drug Price Competition and Patent Term Restoration Act (the “Hatch-Waxman Act”) implemented a streamlined method for generic drug manufacturers to enter the marketplace: the filing of an Amended New Drug Application (“ANDA”). While an NDA requires scientific findings of safety and efficacy, a generic manufacturer of an already-approved drug can rely on those findings in the original NDA, and need only demonstrate that its new drug is “bioequivalent” to the original. At the same time, the Hatch-Waxman Act provided a measure of protection against the introduction of generic drugs by granting original manufacturers a thirty-month stay of FDA approval of the AND As of their generic competitors.

Shire’s competition wasted little time in attempting to join the marketplace for Adderall. Two competitors are particularly relevant to this case: Teva and Impax. In November 2002, Teva filed an ANDA seeking FDA approval to manufacture and sell generic Adderall XR in the United States. Impax filed a similar ANDA in November 2003. Both manufacturers asserted that Shire’s patents covering Adderall XR did not block the introduction of their generic products. Perhaps predictably, these streamlined applications triggered exactly the response envisioned by the Hatch-Waxman Act: Shire sued both Teva and Impax for patent infringement and received the accompanying automatic thirty-month stay of FDA approval for both AND As.

Ultimately, Shire settled its patent infringement lawsuits with Teva and Impax in 2006. Each settlement had the same structure: the generic manufacturers agreed not to launch any of their own products into the Adderall XR market for roughly three years,2 thereby preserving Shire’s market share. In return, Shire agreed to grant Teva and Impax patent licenses to sell generic Adderall XR once the three year no-competition window closed, and further agreed to supply all of Teva and Impax’s needs for generic Adderall XR under separate requirements contracts with each. All parties to these settlements hedged their risks and received real benefits. Shire gained three years of guaranteed non-competition from two would-be generic distributors, while Teva and Impax received reduced barriers to market entry (in the form of patent licenses and a guaranteed supply of Adderall XR they could sell as generics) in exchange for their delayed entry.

These settlement agreements — specifically, Shire’s alleged performance failures — sow the seeds of LWD’s antitrust claim. According to LWD, while Shire continued to enjoy monopoly power [259]*259through 2009 under the agreements, and it granted patent licenses to both Teva and Impax, it failed to meet the terms of its requirements contracts with the two generic distributors. LWD alleges that Shire, instead of supplying each entity with all the Adderall XR they demanded, intentionally breached the contracts to keep supplies artificially low and prices artificially high.3

In both cases, Shire failed to supply the requested amount of Adderall XR mere months after the requirements contracts kicked in. Although Shire continued to supply some product to both Teva and Impax and never failed to perform completely, LWD alleges that Shire instead kept 40-50% of the Adderall XR product to itself, thereby continuing to dominate sales in the market.4 If it had fully complied with the requirements contracts, LWD contends, Shire’s market share would have dropped to approximately 10%, as customers would have opted for the cheaper, generic (but chemically equivalent) products from Teva and Impax. In fact, Shire raised its prices on branded Adderall XR in late 2010, and subsequently increased the percentage of Adderall XR it kept for itself.

LWD alleges that Shire engaged in these actions with the intent to subvert competition in the Adderall XR market by sacrificing bona fide profits under the requirements contracts in favor of charging monopoly prices on its own sales (and even raising those prices as a result of the bottleneck it created).5 Further, LWD alleges that Shire largely achieved its desired result: instead of watching its market share drop to roughly 10% in 2009, Shire’s decision to limit supply allowed it to maintain 40-50% of sales in the market and watch as its revenues climbed. As a result of these artificial shortages, Teva and Impax could not compete with each other as generic suppliers in the market, meaning that not only were customers forced to pay monopolistic prices for branded Adderall XR, but they were also forced to pay inflated prices for the generic products sold by Teva and Impax.

II. LEGAL STANDARD

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

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929 F. Supp. 2d 256, 2013 WL 950833, 2013 U.S. Dist. LEXIS 34251, Counsel Stack Legal Research, https://law.counselstack.com/opinion/louisiana-wholesale-drug-co-v-shire-llc-nysd-2013.