After reviewing motions to dismiss an antitrust lawsuit against pharmaceutical CEO-turned-convicted-felon Martin Shkreli and others, a federal judge in Pennsylvania has ordered additional discovery regarding defense claims that the plaintiff is a “made-for-litigation shell company” formed by a former Winston & Strawn associate.
The lawsuit, brought by Spring Pharmaceuticals, alleges defendants Shkreli, Retrophin, Mission Pharmaceutical Co. and Alamo Pharma Services monopolized the market for a kidney drug by blocking competition from generic drug makers.
Spring alleged the defendants stifled competition by refusing to sell samples of the drug Thiola to distributors, wholesalers or Spring itself, denying it the opportunity to develop a generic version.
The defendants, however, argued in their motions to dismiss that Spring didn’t have the constitutional standing required to bring an antitrust lawsuit because it is not a generic drug manufacturer at all, but instead a company formed by an ex-Winston & Strawn associate and his wife, an accountant, ”as a vehicle to bring this litigation.”
U.S. District Judge Curtis Joyner of the Eastern District of Pennsylvania ruled April 9 that the parties would need to engage in limited discovery to investigate those claims before he could determine whether the case should proceed.
In its Jan. 15 motion to dismiss, Retrophin alleged Spring was “a made-for-litigation shell company posing as a generic pharmaceutical company in an apparent attempt to exploit the treble damages provisions of the antitrust laws.”
“Its ‘CEO’—Jialue Charles Li—is a former associate from Spring’s litigation counsel, Winston & Strawn, LLP,” Retrophin’s motion said. “The only other individual identified as associated with Spring is Mr. Li’s wife, Peimin Flora Hua, who according to publicly available materials is a certified public accountant (CPA) employed by Freddie Mac.”
In response, Spring contended that it was a new company and that it had already taken “substantial steps” toward developing a generic version of Thiola. Additionally, Spring argued that it has worked with consultants to help navigate the regulatory process relating to new drug approval, and that it has secured financing to bring its generic version to market—the only holdup being acquisition of the samples, according to Joyner.
But the question of whether Spring had standing to sue under Article III of the Constitution could not be immediately answered. To have standing, a plaintiff must show “(1) an injury that is (2) ‘fairly traceable to the defendant’s allegedly unlawful conduct’ and that is (3) ‘likely to be redressed by the requested relief.’”
In light of that, Joyner said, “considering that Spring has rebutted defendants’ jurisdictional challenge, we stay defendants’ motions for a period of 90 days to allow for discovery limited to the question of whether plaintiff Spring has standing to sue under Article III.”
Shkreli is represented by William Stassen of Fox Rothschild in Philadelphia; Retrophin is represented by Deei Bansal of Cooley in Washington, D.C.; and Spring is represented by Dan Webb of Winston & Strawn in Chicago.
None of the attorneys responded to requests for comment on the ruling.
Joyner issued his ruling 10 days after Shkreli was reportedly thrown into solitary confinement for using a smuggled cellphone in prison. Shkreli, 36, is serving a seven-year sentence at FCI Fort Dix in New Jersey after being convicted of fraud.
However, Shkreli is perhaps best known for jacking up the price of a lifesaving HIV drug by 5,000 percent, reaping staggering profits for his company, Turing Pharmaceuticals, in the process.