Antitrust Law Daily Vascular drug marketer’s exclusive deals with suppliers could be unlawful
Monday, February 13, 2017

Vascular drug marketer’s exclusive deals with suppliers could be unlawful

By E. Darius Sturmer, J.D.

The pharmaceutical company that markets and sells the only intravenous vasopressin injection (IVI) drug approved by the Food and Drug Administration (FDA) for use in the United States could have violated federal and New Jersey antitrust law by allegedly entering into exclusive dealing arrangements with suppliers to foreclose generic competition and by fixing the price of its branded drug at supra-competitive levels, the federal district court in Newark, New Jersey, has ruled in a not-for-publication opinion. The generic drug manufacturer asserting the claims—Fresenius Kabi USA, LLC—had standing to sue, as it sufficiently alleged facts demonstrating antitrust injury and causation. Further, Fresenius adequately pleaded unlawful exclusive dealing, group boycott, monopolization, attempted monopolization, and conspiracy to monopolize, the court found. Therefore, a motion by defendants Par Sterile Products and Par Pharmaceutical Companies ("Par") for dismissal was denied (Fresenius Kabi USA, LLC v. Par Sterile Products, LLC, February 10, 2017, Wigenton, S.).

In Fresenius Kabi’s complaint vasopressin solution for intravenous injection is described as a potentially life-saving antidiuretic drug that is used in the acute critical care setting to restore blood pressure. Vasopressin solution had been marketed and sold by numerous manufacturers, including Fresenius, as an unapproved therapeutic drug beginning in 1938. However, after Par received FDA approval to market and sell its branded IVI drug known as Vasostrict in 2014, it contacted the FDA regarding Fresenius’ sale of its generic IVI product. In December 2014, the FDA instructed Fresenius to cease manufacturing and distributing its drug. Once Par became the sole FDA-approved supplier of IVI and ceased to face any competition, the price of the drug drastically increased—allegedly by 2600 percent since April 2016.

The complaint further charged that there are only three suppliers with an active drug master file filed with the FDA for the supply of vasopressin, and Par has entered into exclusive dealing arrangements with each in order to substantially foreclose Fresenius’s ability to purchase vasopressin. There are significant barriers to entry in the relevant market. Fresenius asserted that Par has admitted in its public filings that it deliberately targets high barrier entry drugs that have limited competition.

Antitrust standing. The plaintiff’s allegations sufficed to establish antitrust injury at the pleading stage, the court decided. Its averment that Par engaged in anticompetitive practices to substantially lock up difficult-to-source ingredients in order to prevent competitors from entering the market described an injury of the type the antitrust laws were intended to prevent and were sufficient to demonstrate causation.

Sufficiency of pleadings. Fresenius’s allegations also sufficiently stated Sherman Act violations of unlawful exclusive dealing, group boycott, and monopolization, the court determined. Contentions of market power in the relevant market, coupled with the exploitation of that market power to artificially inflate the price of IVI and the complete foreclosure of the market through Par’s exclusive contracts with suppliers, established substantial foreclosure for purposes of an exclusive dealing claim and the concerted action requisite for a group boycott claim.

Regarding the monopoly claims, the court noted that it was undisputed that Par held a monopoly in the relevant market. Fresenius’s allegation that the affiliated companies maintained the monopoly through "an extensive anticompetitive scheme" that includes blocking access to suppliers to prevent potential competitors from filing abbreviated new drug applications with the FDA was enough to state a claim for monopolization, in the court’s view. Its allegation that Par locked up vasopressin sources by inducing Fresenius’s former supplier to enter into a hyperinflated exclusive contract supported its position that Par leveraged its position as sole FDA-approved manufacturer in a way that reflected a specific intent to monopolize.

Finally, allegations in the complaint regarding that exclusive contract made it clear that the supplier would have understood the intended effect of such an arrangement to be monopolization of the IVI market. Thus, the non-conclusory allegations about the contract were sufficient to infer specific intent for purposes of a conspiracy to monopolize claim as well, the court concluded.

The case is No. 2:16-cv-04544-SDW-LDW.

Attorneys: Philip Andrew Goldstein (McGuire Woods LLP) for Fresenius Kabi USA, LLC. Thomas R. Curtin (Graham Curtin, PA) for Par Sterile Products, LLC and Par Pharmaceutical Companies, Inc.

Companies: Fresenius Kabi USA, LLC; Par Sterile Products, LLC; Par Pharmaceutical Companies, Inc.

MainStory: TopStory Antitrust NewJerseyNews

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