Eisai, Inc. v. Sanofi Aventis U.S., LLC , 821 F.3d 394 ( 2016 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 14-2017
____________
EISAI, INC.,
Appellant
v.
SANOFI AVENTIS U.S., LLC;
SANOFI U.S. SERVICES, INC. f/k/a
Sanofi-Aventis U.S. Inc.
On Appeal from the United States District Court
for the District of New Jersey
(D. C. Civil Action No. 3-08-cv-04168)
District Judge: Honorable Mary L. Cooper
Argued on January 13, 2015
Before: AMBRO, FUENTES and ROTH, Circuit Judges
(Opinion filed: May 4, 2016)
Jay N. Fastow, Esquire (Argued)
Justin W. Lamson, Esquire
Denise L. Plunkett, Esquire
Ballard Spahr
425 Park Avenue
New York, NY 10022
Joseph C. Amoroso, Esquire
Timothy I. Duffy, Esquire
Coughlin Duffy
350 Mount Kemble Avenue
P.O. Box 1917
Morristown, NJ 07962
Thomas J. Cullen, Jr., Esquire
James Frederick, Esquire
Kamil Ismail, Esquire
Derek M. Stikeleather, Esquire
Goodell, DeVries, Leech & Dann
One South Street
20th Floor
Baltimore, MD 21202
Counsel for Appellant
George S. Cary, Esquire (Argued)
Leah O. Brannon, Esquire
Cleary, Gottlieb, Steen & Hamilton
2000 Pennsylvania Avenue, N.W.
Suite 9000
Washington, DC 20006
2
Arminda B. Bepko, Esquire
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Marc D. Haefner, Esquire
Tricia B. O’Reilly, Esquire
Liza M. Walsh, Esquire
Connell Foley
85 Livingston Avenue
Roseland, NJ 07068
Counsel for Appellees
OPINION
ROTH, Circuit Judge:
The antitrust laws are concerned with “the protection
of competition, not competitors.”1 Eisai complains that the
conduct of Sanofi Aventis U.S., LLC, and Sanofi U.S.
Services, Inc., (Sanofi) jointly and severally harmed
competition in the market for anticoagulant drugs by
preventing hospitals from replacing Lovenox, one of Sanofi’s
drugs, with competing drugs. The facts, however, do not bear
out Eisai’s characterization of market events. For the reasons
stated below, we conclude that what Eisai calls “payoffs”
1
Brown Shoe Co v. United States, 370 U.S. 294, 320 (1962).
3
were, in reality, discounts offered by Sanofi to its customers;
what Eisai calls “agreements with hospitals to block access”
were, in reality, provisions proscribing customers from
favoring competing drugs over Lovenox; what Eisai calls “a
campaign of ‘fear, uncertainty, and doubt’” was, in reality,
Sanofi’s marketing of Lovenox. Analyzing Eisai’s claims
under the rule of reason, we find no evidence that Sanofi’s
actions caused broad harm to the competitive nature of the
anticoagulant market. To the extent that Sanofi’s conduct
caused damage to its competitors, that is not a harm for which
Congress has prescribed a remedy. We will therefore affirm
the order of the District Court, granting summary judgment in
favor of Sanofi.
I.
A.
Lovenox is an anticoagulant drug used in the treatment
and prevention of deep vein thrombosis (DVT), a condition in
which blood clots develop in a person’s veins. Lovenox
belongs to a category of injectable, anticoagulant drugs
known as low molecular weight heparin (LMWH). Lovenox
was the first LMWH approved by the Food and Drug
Administration and has been sold by Sanofi in the United
States since 1993. Lovenox has at least seven FDA-approved
uses (known as indications), including the treatment of certain
severe forms of heart attack.
Fragmin is a competing injectable LMWH, which
Pfizer, Inc., initially sold only abroad. In September 2005,
Pfizer sold Eisai an exclusive license to market, sell, and
distribute Fragmin in the United States. Fragmin has five
4
FDA-approved indications, some of which overlap Lovenox’s
indications. Fragmin is also indicated to reduce the
reoccurrence of symptomatic venous thromboembolism in
cancer patients, while Lovenox is not. Lovenox, however, is
indicated for treating certain more severe forms of heart
attack, an indication that Fragmin does not have.
The relevant product market also consists of two other
injectable anticoagulant drugs, Innohep and Arixtra. Innohep,
a LMWH, was manufactured and sold by LEO Pharma Inc. in
the United States from 2000 to 2011. Arixtra is an injectable
anticoagulant approved by the FDA in 2001 and sold in the
United States by GlaxoSmithKline from 2005 to 2010. While
not a LMWH, Arixtra is clinically comparable to LMWHs in
its treatment of DVT.
Relevant to Eisai’s claims is the market for Lovenox,
Fragmin, Innohep, and Arixtra in the United States from
September 27, 2005 (when Eisai was able to begin selling
Fragmin) until July 25, 2010 (when Sanofi ended certain
marketing practices after a generic entered the market).
During that time, Lovenox had the most indications of the
four drugs, the largest sales force, and maintained a market
share of 81.5% to 92.3%. Fragmin had the second largest
market share at 4.3% to 8.2%.
5
B.
Eisai’s antitrust claims relate to Sanofi’s marketing of
Lovenox to U.S. hospitals. Most hospitals are members of
group purchasing organizations (GPOs), which negotiate drug
contracts and discounts from pharmaceutical companies on
behalf of their members. From September 2005 until July
2010, Sanofi offered GPOs the “Lovenox Acute Contract
Value Program” (Program), featuring a contractual offer to
sell Lovenox on certain terms and conditions. Eisai’s
allegations of anticompetitive conduct relate to three elements
of this program: (1) market-share and volume discounts, (2) a
restrictive formulary access clause, and (3) aggressive sales
tactics used to market the program.
(1) Under the terms of the Program, hospitals received
price discounts based on the volume of Lovenox they
purchased and their market-share calculation tied to their
purchases of the four anticoagulant drugs.2 The Program
generally treated a GPO’s members as individual customers
when determining the volume and market share. When a
hospital’s purchases of Lovenox were below 75% of its total
purchases of LMWHs, it received a flat 1% discount
regardless of the volume of Lovenox purchased. But when a
hospital increased its market share above that threshold, it
would receive an increasingly higher discount based on a
combination of the volume purchased and the market share.
For example, in 2008, the discount ranged from 9% to 30% of
the wholesale price. Additionally, if certain criteria were met,
2
Specifically, the market share was defined as the rolling four
months of Lovenox units purchased by the hospital divided
by the rolling four months of all units purchased within the
market for Lovenox, Fragmin, Arixtra, and Innohep.
6
a multi-hospital system could have the hospitals’ volumes and
market shares calculated as one entity. For a multi-hospital
system, the discount started at 15% for a market share
meeting the threshold, and increased to 30%.
Although this discount structure motivated GPOs to
purchase more Lovenox, they were not contractually
obligated to do so. The consequence of not obtaining 75%
market share was that a customer would receive only the 1%
discount. If a customer chose to terminate the contract, it was
required to give thirty days’ notice and could still purchase
Lovenox “off contract” at the wholesale price.
(2) The Program also included a formulary access
clause that limited a hospital’s ability to give certain drugs
priority status on its formulary. Generally, a hospital
maintains a formulary, a list of medications approved for use
in the hospital based on factors such as a drug’s cost, safety,
and efficacy. The formulary access clause in the Lovenox
contract required customers to provide Lovenox with
unrestricted formulary access for all FDA-approved Lovenox
indications so that the availability of Lovenox was not more
restricted or limited than the availability of Fragmin, Innohep,
or Arixtra. Hospitals were also forbidden by the contract to
adopt any restrictions or limitations on marketing or
promotional programs for Lovenox. In essence, the contract
did not prohibit members from putting other anticoagulant
drugs on their formularies, but did prohibit them from
favoring those drugs over Lovenox. Noncompliance with the
contract did not limit a customer’s access to Lovenox; it
merely caused a customer’s discount to drop to the 1% base
level.
7
(3) According to Eisai, Sanofi further engaged in a
long-term campaign to discredit Fragmin by spreading “fear,
uncertainty and doubt” about its safety and efficacy. Eisai
asserts that the so-called “FUD” campaign consisted of the
following conduct: Sanofi paid doctors to publish articles
attacking Fragmin on false grounds, without properly
disclosing such payments, and distributed those articles
broadly; Sanofi paid doctors to present educational programs
regarding the medical and legal risks of switching from
Lovenox, casting doubt on Fragmin’s effectiveness and
promoting a belief that Fragmin use would expose hospitals
to malpractice liability; Sanofi’s representatives claimed that
Lovenox was superior to other drugs, in violation of FDA
regulations; and Sanofi promoted Lovenox for non-indicated
cancer-related uses, also in violation of FDA regulations.
C.
Eisai commenced this action on August 18, 2008, in
the U.S. District Court for the District of New Jersey,
asserting (1) willful and unlawful monopolization and
attempted monopolization in violation of Section 2 of the
Sherman Act;3 (2) de facto exclusive dealing in violation of
Section 3 of the Clayton Act;4 (3) an unreasonable restraint of
trade in violation of Section 1 of the Sherman Act;5 and (4)
violations of the New Jersey Antitrust Act.6 Sanofi moved to
dismiss the complaint for failure to state a claim and for being
untimely under the applicable statute of limitations. After a
3
15 U.S.C. § 2.
4
15 U.S.C. § 14.
5
15 U.S.C. § 1.
6
N.J. Stat. Ann. §§ 56:9-3 and 56:9-4.
8
hearing, the District Court denied the motion and referred the
case to a magistrate judge for further proceedings.
The parties then engaged in extensive discovery. On
one particularly contentious discovery issue, Eisai moved to
compel discovery of deposition transcripts from a 2003
antitrust lawsuit brought by Organon Sanofi-Synthelabo
(OSS) against Aventis Pharmaceuticals (Sanofi’s
predecessor) relating to a contractual offer similar to the
terms of the Lovenox Program. On February 27, 2012, the
Magistrate Judge denied Eisai’s motion on the basis that the
2003 transcripts were irrelevant to the current action and
unlikely to lead to the discovery of admissible evidence, and
because the burden or expense of the discovery outweighed
its likely benefit. The District Court affirmed the order.
Both parties subsequently moved for summary
judgment. Eisai relied largely on an expert report by
Professor Einer Elhauge, who determined that customers
occupying a certain spectrum of market share would not save
money by partially switching to a rival drug, even if the rival
drug was cheaper than Lovenox. According to Professor
Elhauge, the Lovenox Program restricted rival sales by
bundling each customer’s contestable demand for Lovenox
(the units that the customer is willing to switch to rival
products) with the customer’s incontestable demand for
Lovenox (the units that the customer is less willing to switch
to rival products). The incontestable demand for Lovenox
was based, at least partially, on its unique cardiology
indication, which no other anticoagulant in the market
possessed and which hospitals needed to treat certain of their
patients. Based on Lovenox’s and Fragmin’s April 2007
prices, Professor Elhauge determined that bundling resulted
9
in an enormous “dead zone” spanning Fragmin’s market
share: For any system choosing to increase its Fragmin
market share from 10% to any amount less than 62%, it
would actually cost hospitals more to switch from Lovenox to
Fragmin despite Fragmin’s lower price. Professor Elhauge
also determined that the Program foreclosed between 68%
and 84% of the relevant market.
On March 28, 2014, the District Court granted
Sanofi’s motion for summary judgment. The District Court
held first that price was the predominant mechanism of
exclusion under Sanofi’s practices, and therefore Eisai’s
antitrust claims could not succeed because Sanofi’s prices
were above cost. Next, the court held that, even when
analyzed under an exclusive dealing framework, Eisai’s
claims still failed because the evidence could not support
Eisai’s contention that Sanofi engaged in unlawful exclusive
dealing. Eisai also could not satisfy the antitrust-injury
requirement because it could not establish that its lower
market share was attributable to anticompetitive conduct by
Sanofi as opposed to other factors.
II.
The District Court had jurisdiction over this case
pursuant to 28 U.S.C. §§ 1331 and 1337. We have appellate
jurisdiction under 28 U.S.C. § 1291.
We employ “a de novo standard of review to grants of
summary judgment, ‘applying the same standard as the
10
District Court.’”7 We “view the underlying facts and all
reasonable inferences therefrom in the light most favorable to
the party opposing the motion.”8 A court “shall grant
summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”9 We review
discovery decisions for abuse of discretion.10
III.
A.
The applicable law is the same for each of Eisai’s four
claims.11 To establish an actionable antitrust violation, Eisai
must show both that Sanofi engaged in anticompetitive
conduct and that Eisai suffered antitrust injury as a result.12
7
Montone v. City of Jersey City, 709 F.3d 181, 189 (3d Cir.
2013) (quoting Pa. Coal Ass’n v. Babbitt, 63 F.3d 231, 236
(3d Cir. 1995)).
8
Id. (internal quotation marks omitted).
9
Fed. R. Civ. P. 56(a).
10
Country Floors, Inc. v. P’ship Composed of Gepner &
Ford, 930 F.2d 1056, 1062 (3d Cir. 1991).
11
See ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 269
n.9, 281 (3d Cir. 2012) (analyzing claims under Sections 1
and 2 of the Sherman Act and Section 3 of the Clayton Act);
State v. N.J. Trade Waste Ass’n, 472 A.2d 1050, 1056 (N.J.
1984) (“[T]he New Jersey Antitrust Act shall be construed in
harmony with ruling judicial interpretations of comparable
federal antitrust statutes.”).
12
See Atl. Richfeld Co. v. USA Petrol. Co., 495 U.S. 328,
339-40 (1990); ZF Meritor, 696 F.3d at 269 n.9.
11
Courts employ either a per se or a rule of reason analysis to
determine whether conduct is anticompetitive.13 The “per se
illegality rule applies when a business practice ‘on its face,
has no purpose except stifling competition.’”14 When
conduct does not trigger a per se analysis, we apply a rule of
reason test, which focuses on the “particular facts disclosed
by the record.”15
One form of potentially anticompetitive conduct is an
exclusive dealing arrangement, which is an express or de
facto “agreement in which a buyer agrees to purchase certain
goods or services only from a particular seller for a certain
period of time.”16 While exclusive dealing arrangements may
deprive competitors of a market for their goods, they can also
offer consumers various economic benefits, such as assuring
them the availability of supply and price stability.17 As such,
an exclusive dealing arrangement does not constitute a per se
13
W. Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d
85, 99 (3d Cir. 2010).
14
Burtch v. Milberg Factors, Inc., 662 F.3d 212, 221 (3d Cir.
2011) (quoting Eichorn v. AT&T Corp., 248 F.3d 131, 143
(3d Cir. 2001)); see, e.g., N. Pac. R.R. Co. v. United States,
356 U.S. 1, 5 (1958) (“Among the practices which the courts
have heretofore deemed to be unlawful in and of themselves
are price fixing, division of markets, group boycotts, and
tying arrangements.” (internal citations omitted)).
15
Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S.
451, 467 (1992).
16
ZF Meritor, 696 F.3d at 270; see LePage’s Inc. v. 3M, 324
F.3d 141, 157 (3d Cir. 2003) (en banc).
17
See ZF Meritor, 696 F.3d at 270-71.
12
violation of the antitrust laws and is instead judged under the
rule of reason.18
Eisai argues that Sanofi’s conduct, as a whole,
operated as a de facto exclusive dealing arrangement that
unlawfully hindered competition. An exclusive dealing
agreement is illegal under the rule of reason “only if the
‘probable effect’ of the arrangement is to substantially lessen
competition, rather than merely disadvantage rivals.”19 While
there is no set formula for making this determination, we
must consider whether a plaintiff has shown substantial
foreclosure of the market for the relevant product.20 We also
analyze the likely or actual anticompetitive effects of the
exclusive dealing arrangement, including whether there was
reduced output, increased price, or reduced quality in goods
or services.21
18
See id. at 271.
19
See id. (quoting Tampa Elec. Co. v. Nashville Coal Co.,
365 U.S. 320, 329 (1961)); United States v. Dentsply Int’l,
Inc., 399 F.3d 181, 191 (3d Cir. 2005).
20
See ZF Meritor, 696 F.3d at 271.
21
See id; W. Penn Allegheny Health Sys., 627 F.3d at 100; see
also Virgin Atl. Airways Ltd. v. British Airways PLC, 257
F.3d 256, 264 (2d Cir. 2001).
13
1.
To demonstrate substantial foreclosure, a plaintiff
“must both define the relevant market and prove the degree of
foreclosure.”22 Although “[t]he test is not total foreclosure,”
the challenged practices must “bar a substantial number of
rivals or severely restrict the market’s ambit.”23 “There is no
fixed percentage at which foreclosure becomes ‘substantial’
and courts have varied widely in the degree of foreclosure
they consider unlawful.”24 In analyzing the amount of
foreclosure, our concern is not about which products a
consumer chooses to purchase, but about which products are
reasonably available to that consumer.25 For example, if
customers are free to switch to a different product in the
marketplace but choose not to do so, competition has not been
thwarted—even if a competitor remains unable to increase its
market share.26 One competitor’s inability to compete does
not automatically mean competition has been foreclosed.
In certain circumstances, however, we have recognized
that a monopolist “may use its power to break the competitive
22
United States v. Microsoft Corp., 253 F.3d 34, 69 (D.C.
Cir. 2001) (en banc) (per curiam).
23
Dentsply, Int’l, Inc., 399 F.3d at 191.
24
ZF Meritor, 696 F.3d at 327 (Greenberg, J., dissenting); see
McWane, Inc. v. FTC, 783 F.3d 814, 837 (11th Cir. 2015).
25
See S.E. Mo. Hosp. v. C.R. Bard, Inc., 642 F.3d 608, 616
(8th Cir. 2011).
26
See, e.g., Allied Orthopedic Appliances Inc. v. Tyco Health
Care Grp. LP, 592 F.3d 991, 997 (9th Cir. 2010); Concord
Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1059 (8th Cir.
2000).
14
mechanism and deprive customers of the ability to make a
meaningful choice.”27 That was the case in LePage’s Inc. v.
3M, where we held that the use of bundled rebates, when
offered by a monopolist, foreclosed portions of the market to
competitors that did not offer an equally diverse line of
products.28 Similarly, in United States v. Dentsply
International, Inc., we held that a dominant manufacturer of
prefabricated teeth hindered competition when it prohibited
dealers from adding competing tooth lines to their product
offerings and retained the ability to terminate the dealer
relationships at will.29 Finally, in ZF Meritor, we found the
defendant’s conduct to be anticompetitive when the defendant
leveraged its position as a dominant supplier of necessary
products to force manufacturers into long term agreements
and there was proof that the manufacturers were concerned
that they would be unable to meet consumer demand without
doing so.30 Although consumers had a choice between
products in LePage’s, Dentsply, and ZF Meritor, in each case
the defendant’s anticompetitive conduct rendered that choice
meaningless.
Eisai argues that Sanofi’s practices substantially
foreclosed the market for anticoagulant drugs because
hospitals had no choice but to purchase Lovenox despite its
increasing price. In support, Eisai points to what it
characterizes as “extensive evidence” of hospitals that wanted
to purchase Fragmin but allegedly were prevented from doing
so due to Sanofi’s conduct. But identification of a few dozen
27
ZF Meritor, 696 F.3d at 285.
28
See 324 F.3d at 154-58.
29
See 399 F.3d at 185.
30
See 696 F.3d at 285.
15
hospitals out of almost 6,000 in the United States is not
enough to demonstrate “substantial foreclosure”31 –
particularly, if the reason a hospital did not change to
Fragmin was due to price, i.e., the loss of the discounts
offered by the Program.
Eisai also relies on the findings of Professor Elhauge,
who described two purported examples of “foreclosure.”
First, Professor Elhauge claims that the discount offered by
Sanofi foreclosed rivals from 68% to 84% of the LMWH
market. Professor Elhauge calculated this percentage by
“treat[ing] as restricted any customer that was receiving loyal
Lovenox prices and thus would have been penalized with
higher Lovenox prices if they purchased a higher percentage
of their LTC drugs from rivals.” In other words, Professor
Elhauge assumed that all Lovenox customers utilizing the
discount program were foreclosed from switching to another
LMWH drug. Second, Professor Elhauge asserts that the
Lovenox discount created a “dead zone” that prevented
customers from increasing their Fragmin purchases to
anywhere between 10% and 62% of their LMWH needs.
Again, Professor Elhauge focuses on consumer preference as
the basis for foreclosure. Specifically, he calculates this
“dead zone” based on the fact that “many customers are
31
See McWane, Inc., 783 F.3d at 837 (“Traditionally, a
foreclosure percentage of at least 40% has been a threshold
for liability in exclusive dealing cases.” (citing Jonathan M.
Jacobson, Exclusive Dealing, “Foreclosure,” and Consumer
Harm, 70 Antitrust L.J. 311, 362 (2002)); but see id.
(“However, some courts have found that a lesser degree of
foreclosure is required when the defendant is a monopolist.”
(citing Microsoft, 253 F.3d at 70)).
16
willing to switch only a portion of their Lovenox purchases to
rival LTC drugs.”
Professor Elhauge’s examples of foreclosure
ultimately derive from a theory of bundling of Lovenox
demand. But a bundling arrangement generally involves
discounted rebates or prices for the purchase of multiple
products.32 For example, in LePage’s, the plaintiffs alleged
that 3M, a dominant seller of transparent tape in the United
States, used its monopoly to gain a competitive advantage in
the private label tape portion of the transparent market by
offering a “multi-tiered ‘bundled rebate’ structure, which
offered higher rebates when customers purchased products in
32
See, e.g., Cascade Health Solutions v. PeaceHealth, 515
F.3d 883, 894 (9th Cir. 2008) (“Bundling is the practice of
offering, for a single price, two or more goods or services that
could be sold separately.”); Virgin Atl. Airways Ltd., 257 F.3d
at 270 (“[A] bundling arrangement offers discounted prices or
rebates for the purchase of multiple products, although the
buyer is under no obligation to purchase more than one
item.”); Concord Boat, 207 F.3d at 1062 (“[B]undling or
tying . . . ‘cannot exist unless two separate product markets
have been linked.’” (quoting Jefferson Parish Hosp. Dist. No.
2 v. Hyde, 466 U.S. 2, 21 (1984)); see also LePage’s, 324
F.3d at 155 (“‘In the anticompetitive case [of package
discounting], . . . the defendant rewards the customer for
buying its product B rather than plaintiff’s B, not because
defendant’s B is better or cheaper. Rather, the customer buys
the defendant’s B in order to receive a greater discount on A,
which the plaintiff does not produce.’” (quoting Phillip E.
Areeda & Herbert Hovenkamp, Antitrust Law ¶ 794, at 83
(Supp. 2002))).
17
a number of 3M’s different product lines.”33 Analogizing this
practice to tying, which is per se illegal, we found such
bundling anticompetitive because it could “foreclose portions
of the market to a potential competitor who does not
manufacture an equally diverse group of products and who
therefore cannot make a comparable offer.”34 In ZF Meritor,
we limited the reasoning in LePage’s “to cases in which a
single-product producer is excluded through a bundled rebate
program offered by a producer of multiple products, which
conditions the rebates on purchases across multiple different
product lines.”35 Significantly, Eisai does not claim that
33
324 F.3d at 145.
34
See id. at 155. “Tying” is “an agreement by a party to sell
one product but only on the condition that the buyer also
purchases a different (or tied) product, or at least agrees that
he will not purchase that product from any other supplier.”
Eastman Kodak, 504 U.S. at 461-62 (internal quotations
omitted); see Warren Gen. Hosp. v. Amgen Inc., 643 F.3d 77,
80 (3d Cir. 2011).
35
696 F.3d at 274 n.11. While LePage’s remains the law of
this Circuit, it has been the subject of much criticism. See,
e.g., Cascade Health Solutions, 515 F.3d at 899-903 (“Given
the endemic nature of bundled discounts in many spheres of
normal economic activity, we decline to endorse the Third
Circuit’s definition of when bundled discounts constitute the
exclusionary conduct proscribed by § 2 of the Sherman
Act.”); LePage’s, 324 F.3d at 179 (Greenberg, J., dissenting)
(arguing that the majority’s opinion “risks curtailing price
competition and a method of pricing beneficial to customers
because the bundled rebates effectively lowered [the seller’s]
costs”); Antitrust Modernization Comm’n, Report and
Recommendations 94, 97 (2007), available at
18
Sanofi conditioned discounts on purchases across various
product lines, but on different types of demand for the same
product. Such conduct does not present the same antitrust
concerns as in LePage’s, and we are aware of no court that
has credited this novel theory.
We are not inclined to extend the rationale of LePage’s
based on the facts presented here. Even if bundling of
different types of demand for the same product could, in the
abstract, foreclose competition, nothing in the record
indicates that an equally efficient competitor was unable to
compete with Sanofi. Professor Elhauge defines
incontestable demand as the “units that the customer is less
willing to switch to rival products” because of “unique
indications, departmental preferences, and doctor habit.” Of
course, obtaining an FDA indication requires investing a
significant amount of time and resources in clinical trials.
But Eisai does not offer evidence demonstrating that fixed
costs were so high that competitors entering the market were
unable to obtain a cardiology indication. In fact, Eisai has its
own unique cancer indication, which it presumably obtained
because of its calculated decision to focus on that area, above
others. Nor does Eisai explain what percentage of
incontestable demand for Lovenox was based on its unique
cardiology indication as opposed to the other factors. While
http://govinfo.library.unt.edu/amc/report_recommendation/a
mc_final_report.pdf (“The lack of clear standards regarding
bundling, as reflected in LePage’s v. 3M, may discourage
conduct that is procompetitive or competitively neutral and
thus may actually harm consumer welfare.”); see also FTC v.
Church & Dwight Co., Inc., 665 F.3d 1312, 1316-17 (D.C.
Cir. 2011) (collecting academic criticisms of LePage’s).
19
Professor Elhauge certainly explains why, in theory, a
customer might hesitate to switch from Lovenox to one of its
lower priced competitors, Eisai fails to tie Professor
Elhauge’s model to concrete examples of anticompetitive
consequences in the record. Accordingly, we cannot credit
Eisai’s bundling claims, at least on the facts before us.36
Eisai’s reliance on our holdings in ZF Meritor and
Dentsply is also misplaced. As a preliminary matter, although
Eisai cites extensively to these cases for the proposition that
Lovenox customers lacked any meaningful ability to switch
products, its supposed evidence of foreclosure is grounded in
Professor Elhauge’s unsupported bundling theory. Moreover,
Sanofi’s conduct is distinguishable from the anticompetitive
practices at issue in ZF Meritor and Dentsply. In ZF Meritor,
the plaintiff “introduced evidence that compliance with the
market penetration targets was mandatory because failing to
meet such targets would jeopardize the [customers’]
relationships with the dominant manufacturer of
transmissions in the market.”37 If customers did not comply
with the targets for one year, they had to repay all contractual
savings.38 We observed that the situation was similar to
Dentsply, where we applied an exclusive dealing analysis
because “the defendant threatened to refuse to continue
dealing with customers if customers purchased rival’s
36
Accord Virgin Atl. Airways Ltd., 257 F.3d at 264
(“Although [the expert’s] affidavit purports to be useful in
interpreting market facts affecting this litigation, expert
testimony rooted in hypothetical assumptions cannot
substitute for actual market data.”).
37
696 F.3d at 278.
38
Id. at 265.
20
products.”39 The threat to cut off supply ultimately provided
customers with no choice but to continue purchasing from the
defendants.
Here, Lovenox customers did not risk penalties or
supply shortages for terminating the Lovenox Program or
violating its terms. The consequence of not obtaining the
75% market share threshold or meeting the formulary
requirements was not contract termination; rather, it was
receiving the base 1% discount. If a customer chose to
terminate the contract entirely, it could still obtain Lovenox at
the wholesale price. In fact, nothing in the record
demonstrates that a hospital’s supply of Lovenox would be
jeopardized in any way or that discounts already paid would
have to be refunded. Attempting to draw a comparison with
ZF Meritor, Eisai argues that the threat of not obtaining a
higher discount (ranging up to 30% off) “handcuffed”
hospitals to the Lovenox Program. Yet, Eisai points to no
evidence of this. Moreover, the threat of a lost discount is a
far cry from the anticompetitive conduct at issue in ZF
Meritor or Dentsply. On the record before us, Eisai has failed
to point to evidence suggesting the kind of clear-cut harm to
competition that was present in these earlier cases.
Accordingly, Eisai fails to demonstrate that hospitals were
foreclosed from purchasing competing drugs as a result of
Sanofi’s conduct.
2.
Eisai also cannot demonstrate that Sanofi’s conduct, as
a whole, caused or was likely to cause anticompetitive effects
in the relevant market. Eisai claims that the District Court
39
Id. at 278 (citing Dentsply, 399 F.3d at 189-96).
21
ignored “proof” of reduction of output, denial of consumer
choice, and increasing price. As to output, Eisai relies on two
pages of Professor Elhauge’s description of the annual growth
rate in the anticoagulant market as more than doubling after
generic entry. Because there was a large reduction in
promotional spending that year, Professor Elhauge concluded
that Sanofi must have previously been reducing output. Such
an assumption cannot serve as a substitute for actual evidence
at the summary judgment stage. Moreover, Eisai fails to
identify any record evidence in support of its argument that
Sanofi’s conduct restricted consumer choice, instead
presumably relying on its theory of foreclosure.
Eisai’s sole example of actual or likely anticompetitive
effect is that Lovenox’s price increased from 2005 until a
generic entered the market in 2010. According to Eisai, the
rising price is particularly significant considering Sanofi’s
long-term monopoly in the market and therefore provides
ample basis for us to find a likelihood of anticompetitive
effect. Specifically, Sanofi had as high as a 92% share of the
market and Lovenox’s price was the highest in the market.
For example, in 2009, the average price per converted unit of
Lovenox was $162.72 compared to $140.28 for Fragmin.
While these figures certainly suggest that Lovenox’s prices
were high, we have no reason to believe that Sanofi’s
allegedly anticompetitive conduct was the cause. In fact,
Sanofi’s list prices increased at a rate similar to Eisai’s prices
and the Pharmaceutical Producer Price Index. As a result, we
find little evidence to suggest that Sanofi’s practices caused
or were likely to cause anticompetitive effects.
Without evidence of substantial foreclosure or
anticompetitive effects, Eisai has failed to demonstrate that
22
the probable effect of Sanofi’s conduct was to substantially
lessen competition in the relevant market, rather than to
merely disadvantage rivals.40 Unlike in LePage’s, Dentsply,
40
See ZF Meritor, 696 F.3d at 281; see also Tampa Elec., 365
U.S. at 328-29. Eisai’s allegations regarding the so-called
“FUD” campaign are more properly analyzed under the law
of deceptive marketing. While false or deceptive statements
may violate the antitrust laws in “rare[]” circumstances, see
W. Penn Allegheny Health Sys., 627 F.3d at 109 n.14; see
also Santana Prods., Inv. v. Bobrick Washroom Equip., Inc.,
401 F.3d 123, 132 (3d Cir. 2005), at minimum, a plaintiff
must show that such statements induced or were likely to
induce reasonable reliance by consumers, see, e.g., Nat’l
Ass’n of Pharm. Mfrs., Inc. v. Ayerst Labs., Div. of/and Am.
Home Prods. Corp., 850 F.2d 904, 916-17 (2d Cir. 1988);
Am. Prof’l Testing Serv., Inc. v. Harcourt Brace Jovanovich
Legal & Prof’l Publ’ns, Inc., 108 F.3d 1147, 1152 (9th Cir.
1997). The District Court held that Eisai failed to put forth
evidence demonstrating reliance and Eisai does not explicitly
challenge this finding. Eisai’s brief, in passing, provides only
a handful of examples of hospitals that decided not to switch
to Fragmin after their representatives attended meetings
presented by Sanofi or its consultants. But, even if these
examples were enough to demonstrate reliance, Eisai has
given us no reason to believe that it could not have corrected
Sanofi’s misstatements by supplying the hospitals with
accurate information. See Santana Prods., Inv., 401 F.3d at
133 (holding that a defendant did not violate Section 1 of the
Sherman Act by criticizing a competitor’s partitions, in part,
when the plaintiff “remain[ed] free to tout its products to the
[customers] and remain[ed] equally free to reassure them that
its partitions are superior to [defendant’s] partitions and to
23
and ZF Meritor, Lovenox customers had the ability to switch
to competing products. They simply chose not to do so. We
will therefore affirm the District Court’s grant of summary
judgment in favor of Sanofi under a rule of reason analysis.
B.
Turning to Safofi’s argument that its discounts
amounted to no more than price-based competition and
Eisai’s suit must be dismissed under the so-called price-cost
test, we disagree. We are not persuaded that Eisai’s claims
fundamentally relate to pricing practices.
Unlawful predatory pricing occurs when a firm
reduces its prices to below-cost levels to drive competitors
out of the market and, once competition is eliminated, reduces
output and raises its prices to supracompetitive levels.41
Reducing prices to only above-cost levels, however, generally
does not have an anticompetitive effect because “the
exclusionary effect of prices above a relevant measure of cost
. . . reflects the lower cost structure of the alleged predator,
and so represents competition on the merits.”42 While there
may be situations where above-cost prices are
anticompetitive, it “is beyond the practical ability of a judicial
prove [defendant] wrong with respect to the flammability of
[its] partitions”).
41
See Weyerhaeuser v. Ross-Simmons Hardwood Lumber
Co., 549 U.S. 312, 318 (2007); Brooke Grp. Ltd. v. Brown &
Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993); see
also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 584-85 (1986).
42
Brooke Grp., 509 U.S. at 223.
24
tribunal” to ascertain this “without courting intolerable risks
of chilling legitimate price-cutting.”43 In light of this
“economic reality,” a plaintiff can succeed on a predatory
pricing claim only if it can show that (1) the rival’s low prices
are below an appropriate measure of its costs and (2) the rival
had a dangerous probability of recouping its investment in
below-cost prices.44 This is known as the price-cost test.
When a competitor complains that a rival’s sales
program violates the antitrust laws, we must consider whether
the conduct constitutes an exclusive dealing arrangement or
simply a pricing practice. Defendants may argue that the
challenged conduct is fundamentally an above-cost pricing
scheme and therefore the price-cost test applies, ultimately
dooming a plaintiff’s claims. But not all contractual practices
involving above-cost prices are per se legal under the antitrust
laws.45 We previously explained in ZF Meritor that the price-
cost test may be utilized as a “specific application of the ‘rule
of reason’” only when “price is the clearly predominant
mechanism of exclusion.”46 There, the defendant urged us to
apply the price-cost test because the plaintiff’s claims were,
“at their core, no more than objections to . . . offering prices .
. . through its rebate program.”47 We declined to adopt this
“unduly narrow characterization of the case as a ‘pricing
practices’ case.”48 We explained that price itself did not
43
Id.
44
Weyerhaeuser, 549 U.S. at 318; see also Brooke Grp., 509
U.S. at 222-24.
45
ZF Meritor, 696 F.3d at 278.
46
Id. at 273, 275.
47
Id. at 273.
48
Id. at 269.
25
function as the exclusionary tool: “Where, as here, a
dominant supplier enters into de facto exclusive dealing
arrangements with every customer in the market, other firms
may be driven out not because they cannot compete on a price
basis, but because they are never given an opportunity to
compete, despite their ability to offer products with
significant customer demand.”49
Under ZF Meritor, when pricing predominates over
other means of exclusivity, the price-cost test applies. This is
usually the case when a firm uses a single-product loyalty
discount or rebate to compete with similar products.50 In that
situation, an equally efficient competitor can match the
loyalty price and the firms can compete on the merits. More
in-depth factual analysis is unnecessary because we know that
“the balance always tips in favor of allowing above-cost
pricing practices to stand.”51 As a result, we apply the price-
cost test as an application of the rule of reason in those
circumstances and conclude that the above-cost pricing at
issue is per se legal. But our conclusion may be different
under different factual circumstances. Here, for example,
49
Id. at 281.
50
See, e.g., NicSand, Inc. v. 3M Co., 507 F.3d 442, 452 (6th
Cir. 2007) (en banc); Concord Boat Corp., 207 F.3d at 1061-
63; Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227,
236 (1st Cir. 1983).
51
ZF Meritor, 696 F.3d at 273; see Brooke Grp., 509 U.S. at
223; see also ZF Meritor, 696 F.3d at 275 (“[W]hen price is
the clearly predominant mechanism of exclusion . . . so long
as the price is above-cost, the procompetitive justifications
for, and the benefits of, lowering prices far outweigh any
potential anticompetitive effects.”).
26
Eisai alleges that its rival, having obtained a unique FDA
indication, offered a discount that bundled incontestable and
contestable demand. On Eisai’s telling, the bundling – not
the price – served as the primary exclusionary tool. Because
we have concluded that Eisai’s claims are not substantiated
and that they fail a rule of reason analysis, we will not opine
on when, if ever, the price-cost test applies to this type of
claim.
IV.
Eisai also argues that the District Court abused its
discretion in holding that discovery of deposition transcripts
from the OSS litigation was irrelevant and unduly
burdensome. Assuming the transcripts were relevant, Eisai
must still show that the order resulted in “actual and
substantial prejudice.”52 Eisai cannot show prejudice when it
appears to have engaged in ample discovery in this case:
Sanofi claims that Eisai took over thirty depositions, received
millions of pages of documents, and subpoenaed
approximately 350 third parties. Eisai was free to elicit
information regarding the OSS litigation during this extensive
discovery process and—in fact—did so by deposing at least
one witness from that litigation. We therefore conclude that
the District Court did not abuse its discretion in denying
Eisai’s request for production of the 2003 OSS deposition
transcripts.
V.
52
See Cyberwold Enter. Tech., Inc. v. Napolitano, 602 F.3d
189, 200 (3d Cir. 2010).
27
For the foregoing reasons, we will affirm the District
Court’s order, granting summary judgment in favor of Sanofi,
and its order denying Eisai’s motion to compel discovery of
transcripts from a prior litigation.
28