In Re: Warfarin Sodium Antitrust Litigation John Kusnerik Sara Altman Samuel Gordon Tischler Marie A. Steckel Robert Bareiss John Civatte, Jr. Mary Banten
Docket: 99-5034
Court: Court of Appeals for the Third Circuit; May 30, 2000; Federal Appellate Court
Consumers of Coumadin (warfarin sodium) are appealing a dismissal of their complaints for injunctive relief under section 16 of the Clayton Act against its manufacturer, DuPont Pharmaceuticals Company. The Third Circuit Court found that the District Court improperly dismissed the complaints, having considered extraneous matters and failed to apply the correct legal standard for antitrust standing. Coumadin, a blood-thinning drug, has been under DuPont's market dominance since its patent expiration in 1962. The plaintiffs, including Barr Laboratories which introduced a generic version, allege that DuPont engaged in anti-competitive practices to undermine generic competition, including campaigns to disparage generic substitutes and attempts to delay FDA approval of Barr's generic warfarin. They assert that these actions resulted in inflated prices for Coumadin. The court's ruling reversed the District Court's decision and remanded the case for further proceedings.
Barr Laboratories initiated a lawsuit against DuPont, claiming antitrust violations and invoking the Lanham Act, New York state law, and common law. Additionally, four individuals representing a class of 1.8 million Coumadin users filed separate complaints alleging violations of section 2 of the Sherman Act and various state laws, seeking monetary damages and injunctive relief, including treble damages under section 4 of the Clayton Act. DuPont responded with a motion to dismiss both Barr Laboratories' and the class plaintiffs' claims under Fed. R. Civ. P. 12(b)(6) for failure to state a valid claim.
The District Court partially granted and partially denied DuPont's motion regarding Barr Laboratories, while dismissing the class complaints entirely. The key issue on appeal is the District Court's finding that the class plaintiffs lacked standing for injunctive relief under section 16 of the Clayton Act. The court concluded that the plaintiffs failed to adequately allege antitrust injury or a causal link between DuPont's alleged misconduct and the injuries claimed by Coumadin users, thus lacking standing.
The appellate review of the dismissal is based on 28 U.S.C. § 1291, with a plenary standard applied to the District Court's decision. The court noted that dismissal should occur only if, after accepting the allegations as true, no relief could be granted under any consistent facts. However, the District Court improperly considered external facts not included in the complaints, specifically regarding third-party payors and health insurance impacts on pricing, which were not alleged by the plaintiffs. The complaints focused on inflated prices due to DuPont's actions against generic market entry, an assertion the District Court neglected in its analysis. The appellate court criticized the lower court for relying on arguments outside the complaint's scope, which deviated from Rule 12(b)(6) standards.
DuPont argues that the District Court's consideration of facts outside the complaints was justified, claiming that the presence of third-party payors is common knowledge and could be inferred from the pleadings. Alternatively, DuPont suggests that these facts could be subject to judicial notice. However, these arguments are unconvincing. Rule 12(b)(6) mandates that the District Court favor the plaintiffs in drawing inferences, and the facts regarding third-party payors cited by the court do not meet the criteria for judicial notice under Rule 201(b), which requires that facts be generally known or easily verifiable from reliable sources.
As the District Court's findings on this issue were crucial to its standing decision, it is necessary to assess whether the misapplication of Rule 12(b)(6) led to a misunderstanding of the substantive standing issue. Section 16 of the Clayton Act allows any entity to seek injunctive relief against potential harm from antitrust law violations, differing from Section 4, which requires proof of actual loss and provides for treble damages. Section 16 only requires a demonstration of a threat of loss and mandates that the injury aligns with the protections intended by antitrust laws. Although Section 16 has less stringent standing requirements than Section 4, it still necessitates showing a significant threat of injury from a violation of antitrust laws.
In evaluating the Coumadin classes' Section 4 claim, the District Court applied the five Associated General factors to assess standing, which include the causal link between the antitrust violation and the plaintiff's harm, whether the injury is one the antitrust laws aim to address, the directness of the injury, the presence of more direct victims, and the risk of duplicative recovery or complex damage allocation.
Factors one and three required the class to demonstrate that DuPont's monopolization of the anticoagulant market directly caused their injuries. The District Court found that the consumers, positioned third in the distribution chain, and the role of managed care in influencing prescription drug prices, contributed to the conclusion that the plaintiffs' alleged injuries were too remote to establish antitrust standing. The court noted that tracing the overpayment to DuPont's conduct involved several vaguely defined links, indicating a typical indirect purchaser scenario and raising doubts about whether the class experienced any antitrust injury.
Regarding the request for injunctive relief under section 16, the District Court determined, based on its earlier findings, that the class had not adequately alleged the necessary antitrust injury or the causal link to DuPont's conduct. Consequently, the class lacked standing to seek injunctive relief, as they did not demonstrate injuries preventable under the Sherman Act.
While indirect purchaser status does not preclude a request for injunctive relief under section 16 of the Clayton Act, the class must still show entitlement to such relief by demonstrating a threatened loss or injury that can be recognized in equity, which is proximately caused by the alleged antitrust injury. The evaluation centers on whether the class's allegations—that DuPont's actions stifled competition and led to inflated prices for Coumadin—satisfy this requirement.
The court referenced the Supreme Court's guidance, highlighting similarities between the current case and Blue Shield of Virginia v. McCready, where a conspiracy limited competition in a healthcare context, indicating a precedent for assessing the nature of threatened injury.
The Supreme Court's decision in McCready established that a plaintiff may have standing under section 4 of the Clayton Act if their injury is closely related to the antitrust violation and does not present a risk of duplicative recovery. McCready's injury was deemed 'inextricably intertwined' with the conspirators' actions, allowing her to pursue a claim. Similarly, the class in the current case asserts injury from an unlawful restraint on competition concerning Coumadin, reinforcing that indirect purchasers can bring suit without being barred by their status. The class's claims are supported by the absence of duplicative recovery, as they seek only injunctive relief under section 16.
The high prices paid by Coumadin consumers are directly linked to the alleged antitrust violations, making them foreseeable victims of DuPont's exclusionary practices. This mirrors McCready's situation, where the injury was closely associated with the conspiracy's target. The causal relationship is clear; the excess costs paid by Coumadin users are 'inextricably intertwined' with DuPont's conduct, which aimed to inflate prices. The District Court's refusal to acknowledge standing contradicts established jurisprudence, particularly the precedent set in McCarthy v. Recordex, where indirect purchasers were allowed to claim injury despite their status in the distribution chain.
Decisions negating antitrust standing from previous cases are distinguishable. In *City of Pittsburgh v. West Penn Power Co.*, the city sought damages and an injunction against a merger of electric companies, claiming it would eliminate potential lower prices for residents. The court ruled the city's claim failed due to a lack of causal connection and antitrust injury, attributing the injury to an intervening regulatory scheme rather than the merger. However, it noted that without this regulatory barrier, the city would likely have had standing for relief under section 16 of the Clayton Act, as the merger would diminish competition.
In *Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc.*, the court found that the union funds' injuries were too remote to establish a causal connection to the tobacco companies' antitrust actions, indicating that the existence of smokers alone could justify the alleged conspiracy.
In the current case, the purchasers of Coumadin are similar to the smokers in *Steamfitters*, as DuPont's efforts to exclude a generic version were intended to maintain higher prices for the drug. The allegations establish the necessary causal link between DuPont's anticompetitive conduct and the harm to Coumadin purchasers. Therefore, the court concludes that this class has met the standing requirements for injunctive relief under section 16 of the Clayton Act, and unless enjoined, DuPont's unlawful actions will persist, causing ongoing financial harm to the class.
The court will reverse the District Court's dismissal of the class complaints for lack of antitrust standing and remand for further proceedings. The court accepts the facts alleged in the complaint as true.
