In Generic Drugs Battle, Suit Focuses on Chemical Pipeline to the Market

The 2nd U.S. Circuit Court of Appeals has kept alive an antitrust case between two generic drug makers and a chemical supplier. Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories Inc. involves an alleged anti-competitive agreement in which Barr Laboratories and Brantford Chemicals, a supplier of a key ingredient used to manufacture a blood-thinning drug, entered into an exclusive arrangement.

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The 2nd U.S. Circuit Court of Appeals has kept alive an antitrust case between two generic drug makers and a chemical supplier. The case, Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories Inc., 02-9222, involves an alleged anti-competitive agreement in which Barr Laboratories and Brantford Chemicals, a supplier of a key ingredient used to manufacture a blood-thinning drug, entered into an exclusive arrangement. Southern District Judge Robert W. Sweet had ruled in a summary judgment motion against the main plaintiff, Geneva Pharmaceuticals Technology Corp., who claimed that this exclusive arrangement violated antitrust laws. The appellate panel, made up of 2nd Circuit judges Richard J. Cardamone and Robert D. Sack, and John R. Gibson, who sat by designation from the 8th U.S. Circuit Court of Appeals, ruled Monday in a 61-page opinion that the case raised significant issues that justified a jury trial and should not have been dismissed on summary judgment. EXCLUSIVE AGREEMENT The commercial dispute that ignited the litigation involved the generic version of the blood-thinning drug produced by DuPont, called Coumadin. Geneva and Barr competed as generic drug makers and both produced generic versions of the drug in the 1990s. To begin production, they needed a chemical compound called clathrate, which apparently was in short supply. Barr contacted Brantford and entered into an exclusive agreement whereby Brantford would supply Barr with clathrate. Geneva also contacted Brantford to supply clathrate but after some preliminary talks, ultimately never locked in a regular supply stream. All along, claims Geneva, Brantford declined to disclose its exclusive supply agreement with Barr, preventing Geneva from pursuing other sources. Geneva claimed this arrangement allowed Barr to enter the generic market first and claim a large chunk of that market, causing more than $100 million in damages. DEFINING THE MARKET The first issue for the appellate court involved Geneva’s monopoly claims arising from �2 of the Sherman Antitrust Act. The analysis required the panel to determine whether Barr possessed monopoly power and whether it “willfully acquired or maintained that power in the relevant market.” The key element of this analysis rested on defining the market, a process at the heart of many antitrust suits. The lower court had defined the market to include DuPont’s brand name drug as well as the generics. Under this designation, Barr did not possess a monopoly. But the appellate panel separated the brand name and generic competitors into two distinct markets. The panel noted the significant price difference between DuPont’s drug and the generic substitutes and the nature of price competition among the drug makers. “When other generic competitors entered the market, Barr’s prices dropped substantially, but [DuPont's] remained virtually unchanged and even rose slightly,” held the court. “Barr admitted that Geneva’s presence forced it to offer substantial off-invoice discounts and rebates.” The court added that DuPont’s customers remained loyal to the brand name drug, and did “not perceive generics to be a reasonable substitute.” It also looked at industry dynamics, noting that Brantford acknowledged that generic manufacturers largely compete amongst themselves rather than the brand name maker. By defining the market more narrowly, the panel found that Barr could have abused its monopoly power and overturned the summary judgment decision. The next stage of antitrust analysis led the panel to the issue of monopoly power. It found that because Barr was the sole generic manufacturer for a 15-month period, it created a “strong inference of monopoly power.” Its pricing tactics added to the inference, justifying a jury trial to determine the facts. CONSPIRACY TO MONOPOLIZE Geneva’s second claim accused Barr and Brantford of conspiring to monopolize the clathrate market, the key ingredient needed to produce the blood thinner. This claim rested on whether there were alternative suppliers of clathrate. The lower court found that such suppliers existed. The appellate panel conducted a detailed analysis of 10 other potential suppliers and drew no conclusion, again leading it to direct a jury to ultimately decide the matter. “Several Barr statements,” added the court, “can be interpreted as suggesting an intent to seize the sole supply of clathrate in order to monopolize the generic … market.” The exclusive agreement between Barr and Brantford arose from Barr’s fear that there were no other major suppliers of clathrate, held the court. RESTRAINT OF TRADE The exclusive supply agreement on its face was not an unreasonable restraint of trade, said the panel. But the situation “in the present case is of particular concern because of the alleged bottleneck in the clathrate supply chain,” it explained. The confidentiality agreement between Barr and Brantford led Brantford to hide its dealings with Barr from Geneva, “suggesting that [its] deceptions were in furtherance of the agreement,” the court held. The panel affirmed the district court’s dismissal of Clayton Act claims. Wayne A. Cross of White & Case, Frederick R. Dettmer of the law offices of Frederick R. Dettmer, and David S. Preminger of Rosen Preminger & Bloom represented Geneva. Other plaintiffs involved in the litigation are represented by Louis M. Solomon of Proskauer Rose. Michael J. Gaertner of the Chicago office of Lord, Bissell & Brook represented Brantford and Kurt L. Schultz of Winston & Strawn represented Barr Laboratories.

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