Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

GENEVA PHARM. TECH. CORP. v. BARR LABORATORIES

May 10, 2002

GENEVA PHARMACEUTICALS TECHNOLOGY CORP., (AS SUCCESSOR IN INTEREST TO INVAMED, INC.), PLAINTIFF, BARR LABORATORIES, INC., BRANTFORD CHEMICALS INC., BERNARD C. SHERMAN, APOTEX HOLDINGS INC., APOTEX INC. AND SHERIDAN DELAWARE, INC., DEFENDANTS APOTHECON, INC., PLAINTIFF,
V.
BARR LABORATORIES, INC., BRANTFORD CHEMICALS INC., BERNARD C. SHERMAN, APOTEX HOLDINGS INC., APOTEX INC. AND SHERYIAN DELAWARE, INC., DEFENDANTS.



The opinion of the court was delivered by: Robert W. Sweet, U.S. District Judge

        OPINION

Defendants Barr Laboratories, Inc.; Brantford Chemicals, Inc.; Bernard C. Sherman; Apotex Holdings, Inc.; Apotex Inc.; and Sherman Delaware Inc. have moved for summary judgment to dismiss the complaint of plaintiffs Geneva Pharmaceuticals Technology Corp. (as successor in interest to Invamed, Inc.) and Apothecon Inc. alleging violations of the federal antitrust laws, the New York antitrust laws, and numerous related state law claims.

For the foregoing reasons, that motion is granted in part and denied in part.

The Parties

A. The Plaintiffs

Plaintiff Geneva Pharmaceuticals Technology Corp. ("GPTC") is a New Jersey corporation with its principal place of business in New Jersey. GPTC is in the business of developing, manufacturing and marketing generic pharmaceuticals. GPTC is a wholly owned subsidiary of Geneva Pharmaceuticals, Inc. ("Geneva"), which itself is a member of the generics sector of Novartis AG, the Austrian pharmaceutical company. Until its purchase by Geneva in December 1999, GPTC was known as Invamed, Inc. ("Invamed")

Plaintiff Apothecon, Inc. ("Apothecon") is a Delaware corporation with its principal place of business in New Jersey. Apothecon is a wholly-owned subsidiary of the Bristol-Myers Squibb Company ("BMS"), one of the world's leading pharmaceutical companies, and is engaged in the business of developing, manufacturing and marketing generic pharmaceuticals. Apothecon's approximate annual sales are $600 million.

B. The Plaintiffs' Relationships

On June 28, 1996, Invamed and Apothecon entered into an exclusion five-year Development and Supply Agreement in connection with manufacturing and marketing a number of generic pharmaceuticals, including warfarin sodium, a generic version of the drug Coumadin® made by DuPont Pharmaceuticals Company ("DuPont"). Plaintiffs allege that this arrangement constituted a joint venture, in that the parties agreed to share profits and loss and referred to each other as "partners" and to the agreement as a "joint venture."

On December 15, 2000, Geneva's affiliate Biochemie US acquired Apothecon's portfolio of commodity generic pharmacautical products, and Geneva gained the right to sell (under the Geneva or Apothecon label) all of the products, including warfarin sodium, that had been previously supplied to Apothecon by Invamed. On June 7, 2001 BMS agreed to acquire the drug business of DuPont, including Coumadin®, for $7.8 billion in cash.

C. The Defendants

Defendant Barr Laboratories, Inc. ("Barr") is a New York corporation with its principal place of business in New York. Barr is engaged in the business of developing, manufacturing and marketing generic pharmaceuticals.

Defendant Brantford Chemicals, Inc. ("Brantford") is a Canadian corporation with its principal place of business in Brantford, Ontario. Brantford is engaged in the business of manufacturing and marketing active pharmaceutical ingredients ("API"), chemical compounds used in the manufacture of pharmaceuticals. Brantford was known as ACIC (Canada) ("ACIC") until 1996.

Defendant Apotex Inc. ("Apotex") is a Canadian corporation with its principal place of business in Weston, Ontario. Apotex is engaged in the business of researching, manufacturing and marketing both generic and branded pharmaceuticals. Apotex does not currently manufacture or market pharmaceuticals for sale in the United States.

Defendant Apotex Holdings, Inc. ("Apotex Holdings") is a Canadian holding company with its principal place of business in Weston, Ontario.

Defendant Dr. Bernard C. Sherman ("Sherman") is an individual residing in Canada. Sherman founded Apotex in 1974 and is the chairman of its board of directors. Sherman is also a member of the board of directors of Barr*fn1 and the president of Apotex Holdings.

Defendant Sherman Delaware, Inc. ("Sherman Delaware") is a Delaware holding company with its principal place of business in Delaware.

D. The Defendants' Common Ownership

Sherman owns 99% of the voting shares of Sherman Holdings Inc. ("Sherman Holdings"). Sherman and members of his family are also the beneficiaries of the Bernard and Honey Sherman Trust ("Sherman Trust"). Sherman Holdings and the Sherman Trust together own approximately 100% of the voting shares of Shermco Inc.

Shermco Inc. owns 100% of Shermfam Inc., which owns 100% of the outstanding shares of Apotex Holdings. Apotex Holding owns 100% of Apotex Pharmaceutical Holdings Inc., which owns 100% of the outstanding shares of both Apotex and Brantford.

Apotex Pharmaceutical Holdings Inc. and its affiliates have owned 75% of Brantford (then ACIC) since March 1990. The family of Luciano Calenti, ACIC's president, owned the minority interest, along with institutional investors. Apotex Pharmaceutical Holdings Inc. acquired the remaining 25% of ACIC in 1996. In 1990 ACIC was experiencing financial difficulties and Calenti turned to Sherman, a longtime client of ACIC. Sherman pursued the acquisition of ACIC as an opportunity to integrate a supplier with his operations and increase their capacity to develop chemicals. Plaintiffs claim that Sherman did not take an active interest in ACIC until 1996, when he bought out Calenti. Calenti "ran the company" himself until the buy out in July 1996.

Apotex Holdings also owns 100% of Shermfin, Inc., which owns 100% of both Sherman Delaware and Glastex Investments, Inc. From 1993 to 1997, Sherman Delaware and Glastex Investments owned outstanding shares of Barr. In mid-1993, they owned approximately 66%. As of December 31, 1997, Sherman Delaware and Glastex Investments owned approximately 63% of Barr. After a Barr secondary offering in March 1998, Sherman Delaware and Glastex Investments owned approximately 48.6% of Barr.

Prior Proceedings

Invamed filed its complaint on February 6, 1998, alleging violations of the antitrust laws of the United States and various state law claims arising out of defendants' alleged efforts to monopolize and restrain trade in the markets for an oral anti-coagulant medication known as warfarin sodium. The complaint alleged eleven causes of action against the defendants.

On April 9, 1998, Sherman, Apotex Holdings, Apotex, and Sherman Delaware moved under Fed. R. Civ. P. 12(b)(6) to dismiss Invamed's First, Second, Third, Fourth, Eighth, and Ninth Causes of Action, claiming that there are no allegations in the complaint which would establish the basis for those claims. The Court granted this motion to dismiss with leave to replead. Invamed did not replead.

Therefore, Invamed's eleven causes of action are as follows. Count I and II allege monopolization and attempted monopolization against Barr and ACIC/Brantford in both the relevant warfarin sodium market and the market for clathrate, the bulk material used to make the drug. Counts III and IV allege conspiracy to monopolize against Barr and ACIC/Brantford. Count V alleges against all defendants that the acquisition of ACIC/Brantford by Apotex and, through Apotex, by Apotex Holdings, Sherman, Sherman Delaware, and Barr, violates Section 7 of the Clayton Act. Counts VI and VII allege breach of contract and promissory estoppel against ACIC/Brantford. Counts VIII and IX allege tortious interference with contract and with business relations against Barr. Counts X and XI allege negligence and negligent misrepresentation against ACIC/Brantford.

Apothecon filed a separate suit on May 19, 1999, and the cases were consolidated on July 29, 1999. Apothecon included the same causes of action discussed above as well as a few additional ones. Against Barr and ACIC/Brantford, it alleged violation of the Donnelly Act, New York's antitrust law (Count VI) and fraud (Count VIII). Further, it alleged breach of fiduciary obligation (Count XIV) against ACIC/Brantford and unfair competition against Barr (Count XV).

The defendants moved for summary judgment on August 6, 2001. They filed a joint motion on plaintiffs' antitrust claims, and ACIC/Brantford and Barr each submitted a separate motion addressing the state law claims against them. Oral argument was heard on February 13, 2002, and submissions were considered fully complete at that time.

Facts

The following facts are taken from the parties' Rule 56.1 statements and, as required, are construed in the light most favorable to the non-movant, as applicable.*fn2

I. Background

A. Warfarin Sodium

Warfarin sodium is an oral anti-coagulant medication that, in tablet form, is prescribed for the treatment of venous thrombosis and pulmonary embolism, or blood clots, particularly in patients over the age of 60. In its simplest terms, warfarin sodium thins the blood, preventing harmful clots that can cause strokes and heart attacks.

A pharmaceutical product that has a narrow range between its therapeutic dose and its toxic dose is considered a narrow therapeutic index ("NTI") product. Warfarin sodium is an NTI drug. Patients for whom warfarin sodium is indicated are often high-risk patients for whom changes in their medication are viewed with great concern. Warfarin sodium possesses potential side effects that include increased bleeding. Patients taking warfarin sodium are supposed to be monitored in order to ensure that the appropriate amount of the drug is present. The active pharmaceutical ingredient ("API") for warfarin sodium is known as "bulk" warfarin sodium or warfarin sodium clathrate ("clathrate"). Clathrate and its related compounds are also used in one form of rat poison.

The United States Pharmacopoeia ("USP") contains a list of minimum standards for the purity and composition of drugs and pharmaceuticals that are manufactured, prescribed, or sold in the United States. A drug's strength, quality and purity are assessed in accordance with the tests and standards defined in the USP. Raw materials that meet USP standards and meet Good Manufacturing Practices guidelines are suitable for use in manufacturing finished dosage form pharmaceuticals.

Clathrate itself consists of two key chemicals, 4-hydroxyroumarin and benzalacetone (or benzylidene acetone). Both chemicals were readily available in the chemical marketplace throughout the 1990's. It is disputed whether the process of making clathrate is simple or complex. Plaintiffs claim that it can take a supplier several years to develop a procedure for the production of clathrate. Clathrate has a shelf life of 22 months.

Warfarin sodium was first introduced for human use under the brand name of Coumadin® in 1956 by Endo Laboratories, which was purchased by DuPont. DuPont lost patent protection for Coumadin® in 1962. DuPont made Coumadin® using clathrate purchased from Chemoswed A.B. ("Chemoswed"), a Swedish manufacturer. In 1995, DuPont purchased Chemoswed.

Even though DuPont's patent protection for Coumadin® expired in 1962, for the next 35 years DuPont and Coumadin® enjoyed a virtual monopoly in the market for oral anticoagulants. As a result of that position in the market, DuPont's Coumadin® eventually achieved annual sales exceeding $400-500 million.

In the 1980's, several companies received approval to market warfarin-related products, including Purdue Frederick, Abbott Laboratories, Rosemont Pharmaceuticals, and Circa/Watson Pharmaceuticals. The FDA publishes an official directory of generic drugs known as the Orange Book. These products were not successful, and the Orange Book now lists them as discontinued.

In 1990, the New England Journal of Medicine published the results of two new studies indicating that warfarin sodium was effective in preventing strokes in patients suffering from arterial fibrillation (irregular heartbeat), and in reducing strokes and subsequent heart attacks in patients who had survived a heart attack. These and similar articles spurred renewed interest in warfarin sodium by physicians and pharmaceutical companies.

Four companies sell warfarin sodium in the United States today: (1) DuPont, which has marketed Coumadin® since 1956; (2) Barr, which has marketed generic warfarin sodium since July 1997; (3) Geneva (as successor to plaintiffs), which has marketed generic warfarin sodium since October 1998; and (4) Taro Pharmaceutical Industries Ltd. ("Taro"), which has marketed generic warfarin sodium since September 1999. All generic warfarin sodium available in the market today is therapeutically equivalent to Coumadin® and bears the FDA's equivalence rating "AB." The process of achieving this rating is described below.

Invamed/Apothecon and Barr have been and continue to be competitors with respect to warfarin sodium and finished dosage form pharmaceutical products in general.

B. Generic Pharmaceutical Drugs

1. Development

Following evaluation of the initial samples, pharmaceutical companies typically obtain developmental or "R&D" quantities of the API to begin dosage form development and initial formulation analysis. An R&D quantity is smaller in size (e.g., 1-25 kg) than larger "commercial" quantities (e.g., more than 50 kg) that are later used to put the finished-dosage product into commercial production. R&D quantities and commercial quantities frequently differ in price.

Generic drug manufacturers obtain FDA approval for generic forms of innovator or branded drugs by filing an Abbreviated New Drug Application ("ANDA"), which includes information demonstrating that the subject drug is bioequivalent to the branded drug. An ANDA must contain information to show that the generic product has the same active ingredient, conditions of use, route of administration, dosage form, strength, and labeling as the branded drug.

The FDA requires pharmaceutical companies to identify in the ANDA the API supplier or suppliers they intend to use in manufacturing the product. Plaintiffs claim that applicants tend to specify only one supplier of its pharmaceutical ingredients so as to minimize the time taken by the FDA for its review and approval.*fn3 API from a different source can be substituted only upon FDA approval of a supplement or amendment to the ANDA.

The FDA classifies as "therapeutically equivalent" those products that meet the following general criteria: (1) they are approved as safe and effective; (2) they are pharmaceutical equivalents; (3) they are bioequivalent; (4) they are adequately labeled; and (5) they are manufactured in compliance with Current Good Manufacturing Practice regulations. The FDA rates a generic product "AB" equivalent to its branded counterpart if a study is submitted demonstrating bioequivalence to the branded product. Despite this, there may be physical differences between branded and generic drugs, such as the particle size of the active pharmaceutical ingredient, water content, and crystalline structure. A different process is used to manufacture generic products and that process may lead to other differences.*fn4

API suppliers submit Drug Master Files ("DMFs") to the FDA, which summarize the equipment, manufacturing steps, raw materials and laboratory controls used to prepare the particular API. In a DMF "reference letter," the API supplier commits to the FDA that it will manufacture its material as set forth in its DMF. In the letter (which is sent by the supplier to the FDA), the supplier authorizes the FDA to refer to its DMF in connection with an ANDA filed by the drug manufacturer. The FDA reviews a supplier's DMF in conjunction with its review of the pending ANDA. If both are in order, the drug will be approved for marketing.

Because of the need for approval to change suppliers after approval, plaintiffs allege that it is a widespread practice throughout the industry that a supplier providing a reference letter commits itself to providing commercial quantities of the raw material. Plaintiffs also allege that throughout the 1990's it was also practice to rely on informal oral arrangements, rather than written supply contracts. For example, more than 90% of the bulk pharmaceutical ingredients purchased by Barr, and the majority of bulk pharmaceuticals sold by ACIC/Brantford, do not involve written supply agreements.

2. Equivalence of Branded and Generic Warfarin Sodium

Generic warfarin sodium products that are rated AB by the FDA are therapeutically equivalent to the brand product and by approving the products for marketing, the FDA has certified both Barr's and plaintiffs' product as chemically and therapeutically equivalent to the innovator's product, Coumadin®.

Plaintiffs' and Barr's generic warfarin sodium products are, therefore, fully interchangeable with each other and with Coumadin®. In its interrogatory responses, Invamed stated that it is not aware of any reason why any of the three warfarin sodium products "should not be substituted for any of the others." Apothecon, in response to interrogatories asking whether plaintiffs' product, Barr's product, and Coumadin® may be substitited or are interchangeable, stated that it is not "aware of any reason why any of the three . . . warfarin sodium products should cot be substituted for any of the others."

In Invamed's ANDA, Section II, captioned "BASIS FOR ANDA SUBMISSION," Invamed stated that its "WARFARIN SODIUM TABLETS USP . . . are the same as the listed drug COUMADIN TABLETS . . . manufactured by DuPont . . . ."

Both Barr and Apothecon conducted clinical studies demonstrating that their products were clinically interchangeable with Coumadin®. In addition, both Apothecon/Invamed's warfarin sodium product and Barr's warfarin sodium product contain the same labeling and identical prescribing information as that used with Coumadin®. Coumadin® uses different tablet colors to correspond with and signify different dosage sizes. Barr and Apothecon/Invamed use the same colors as Coumadin®.

Generic warfarin sodium and Coumadin® are sold to the same customers: wholesalers, hospitals, retail pharmacy chains, mail order houses, clinics, and managed care organizations.

II. Barr's Generic Warfarin Sodium

A. Barr's Development

Barr's business strategy is to be the first or second manufacturer to enter the market for a particular generic product. To accomplish this goal, Barr chooses products with high barriers to entry so that the company will face limited competition.

In the early 1990's, Barr identified warfarin sodium as a product where there were barriers to entry because of the difficulty of obtaining a supply of the raw material necessary to produce the product. Barr researched potential API suppliers at that title.

In January 1991, Ed Cohen, Barr's president, and Luciano Calenti, ACIC's founder and president, discussed a potential 20 kg order of clathrate. Calenti confirmed that ACIC could produce commercial quantities of clathrate for $2,000 per kilogram, and the initial 20 kg for $2,500 per kilogram. Calenti said a 50% advance payment would be required to ensure that Barr would not rescind the order.

On February 5, 1991, Cohen confirmed Barr's interest to Calenti, sent ACIC its purchase order for 20 kg of clathrate, and offered to lend any analytical support needed in developing purity specifications for the product. The day after Barr's order, ACIC began process development work on warfarin sodium. ACIC developed an acceptable process for synthesizing warfarin sodium by the spring of 1991.

Barr next ordered 7 kg of clathrate from ACIC in June 1993, and another 10 kg in May 1994.

ACIC filed a DMF for clathrate with the FDA on March 15, 1995. On April 3, 1995, ACIC provided a DMF reference letter for clathrate to the FDA in support of Barr's warfarin sodium ANDA. On May 10, 1995, Barr filed its ANDA, listing ACIC as its clathrate supplier and including its DMF reference letter.

In September 1995, Barr entered into an agreement with ACIC for the supply of clathrate. Barr ordered 900 kg of clathrate from ACIC on September 29, 1995. ACIC shipped that quantity to Barr in December 1995. In September 1996, Barr ordered an additional 900 kg of clathrate from ACIC (by that time known as Brantford). This quantity was shipped to Barr in separate lots in February 1997.

On March 26, 1997, the FDA approved Barr's ANDA and authorized the company to begin marketing, which it did beginning July 28, 1997. The FDA's approval of Barr's product was premised on the determination of the FDA's Division of Bioequivalence that Barr's "Warfarin Sodium Tablets" were "bioequivalent and, therefore, therapeutically equivalent to the listed drug" Coumadio®. Consequently, Barr announced in an early advertisement that its warfarin sodium tablets were "[t]herepeutically equivalent to Coumadin®" and that "[t]he only difference is cost."

On August 8, 1997, Barr submitted a purchase order for another 900 kg of clathrate. ACIC/Brantford shipped this quantity to Barr in separate lots in January and April 1998.

In a document dated September 1997, Barr referred to ACIC/Brantford as the "only source [of clathrate] available to the generic industry." Barr also attempted to locate a back-up producer of clathrate. As of March 1998, Barr had been unable to locate an FDA-approved supplier.

B. The Supply and Confidentiality Agreements

In the summer of 1995, Barr and ACIC began discussions regarding a supply agreement for commercial quantities of clathrate. ACIC demanded an arrangement in which a pharmaceutical company would pay for a substantial amount of clathrate prior to receiving FDA approval. Calenti told Barr that if Barr did not strike an agreement with ACIC, Calenti would try to make one with another company.*fn5

1. The Supply Agreement

By letter agreement dated September 19, 1995 (the "Supply Agreement"), Barr and ACIC contracted for ACIC to supply Barr with clathrate. The Agreement obligated Barr to purchase 900 kilograms of clathrate from ACIC for $1.8 million regardless of whether it could use the product or not. The Supply Agreement was negotiated as an arm's length transaction, and at the time it was signed, Barr's President, Bruce Downey, was unaware of any relationship between ACIC/Brantford and Apotex or Sherman.

The Supply Agreement provided that ACIC would exclusively supply Barr with commercial quantities of clathrate in the U.S. until another manufacturer began selling generic warfarin sodium. Barr agreed to purchase 100% of its commercial requirements from ACIC during the exclusivity period.

As to delivery requirements, the Supply Agreement provided that "ACIC will supply the [clathrate] in quantities requested by Barr, provided that Barr provides ACIC with lead times consistent with its normal operations."

Because the Supply Agreement applied only to commercial quantities of clathrate, it did not prohibit ACIC from selling sample or developmental quantities to other generic manufacturers seeking FDA approval of their products. In addition, because the Supply Agreement applied only to clathrate manufactured in ACIC's facilities, it did not prevent ACIC from brokering clathrate manufactured by other suppliers. The Supply Agreement also permitted ACIC to supply commercial quantities to DuPont. Finally, the Supply Agreement permitted Barr, at its option, to purchase sufficient quantities of clathrate from another supplier in order to qualify that supplier as an alternate source.

2. The Confidentiality Agreement

On October 5, 1995, approximately seven days after the Supply agreement was signed, Barr and ACIC executed a Confidentiality Agreement restricting disclosure of "valuable, proprietary, technical, commercial and other confidential information" for five years. This agreement precluded ACIC/Brantford from disclosing to Invamed or any other entity the existence of the exclusive supply contract. It was also ACIC's practice to keep all of its contracts and commercial transactions with its customers confidential.

Soon after these agreements were signed, ACIC removed clathrate from its internal products list, and Calenti advised his sales representatives to stop promoting it to new clients.

Plaintiffs claim that if they had known about the exclusive arrangement, they could have sought another supplier in 1995 and entered the market in a timely fashion.

III. Invamed's Attempts To Secure A Supply of Clathrate

Between 1993 and 1996, Invamed explored the possibility of obtaining clathrate from a number of different sources. Invamed's vice president, Dr. Mahendra Patel ("Patel"), was responsible for the company's research and development efforts for new drugs, including warfarin sodium. Patel co-founded Invamed in 1983 after several years in the pharmaceutical industry, including six years at BMS. It was Patel's responsibility to identify and select potential API suppliers. Plaintiffs claim that Invamed concluded that ACIC/Brantford was the only viable supplier.

A. Chemoswed A.B.

In December 1994, Invamed received a 10-gram sample of clathrate made by Chemoswed, together with technical product information. The supporting technical information indicated that the Chemoswed clathrate was USP grade material and suitable for testing in an Invamed finished product. In early 1994, Invamed performed one product development trial using the Chemoswed clathrate.

At the time, Chemoswed supplied clathrate to DuPont for use in its manufacture of Coumadin®. In 1995 DuPont purchased Chemoswed. Plaintiffs claim that it was widely understood throughout the industry that Chemoswed would not be willing to sell commercial quantities to a generic manufacturer.

During 1995 to 1998, defendants claim that Chemoswed/DuPont received inquiries from at least two pharmaceutical companies, JLM and Rosemont, regarding clathrate. The price quoted to these entities was $30,000 per kilogram. Patel did not request material from Chemoswed/DuPont, stating that "it was not worthwhile" because "[w]e won't get the material."

B. Medea Research Laboratories

Medea Research laboratories, Inc. ("Medea") provided 5 kilograms of clathrate to Invamed on January 11, 1994, and provided Invamed with a DMF reference letter on February 16, 1994. Medea's DMF for clathrate had been filed with FDA in August 1993. Although Invamed found Medea's clathrate suitable for use in its warfarin sodium tablets, Invamed returned the 5 kg order for credit in September 1994. Sometime after Invamed received Medea's material, Medea's plant was destroyed by fire.

C. Hoechst Celanese

On September 30, 1994, the API manufacturer Hoechst Celanese ("Hoechst"), a unit of Hoechst A.G., shipped Invamed a 100-gram sample of clathrate together with technical information. Hoechst manufactured clathrate at its facility in Coventry, Rhode Island. Invamed had previously dealt with Hoechst for ibuprofen API. Invamed's discussions with Hoechst continued in late 1995 and early 1996, as discussed below.

D. ACIC

1. Invamed's Relationship with ACIC

Invamed first became a customer of ACIC in the late 1980's or early 1990's. Sergio Getrajdman, ACIC's U.S. sales representative, ("Getrajdman") was responsible for sales to Invamed and reported to Calenti. Getrajdman, who operated out of an office in New Jersey, where Invamed was located, sold Invamed a variety of products, including atenolol, cimetidine, and nadolol, which ACIC either brokered for others or manufactured itself.

a. Atenolol

ACIC sold Invamed atenolol acting as broker for the manufacturer ICI, which was located in Italy. Dr. Pankaj Dave, Invamed's regulatory manager who joined the company in 1983 ("Dave"), contacted Getrajdman in advance of his purchase orders to discuss price, quantity and delivery dates for the material, and kept ACIC informed of the status of its ANDA approval.

In March 1994, after discussing with ACIC Invamed's requirements for the remainder of the year and negotiating price and payment terms, Dave submitted a purchase order for 10,000 kg of atenolol. ACIC confirmed the purchase order with its supplier and arranged for shipment of the first 500 kg. After receiving several shipments through the next year, Invamed canceled the purchase order in June 1996 with an undelivered balance of more than 7,000 kg.

b. Nadolol

On January 3, 1995, after discussing Invamed's commercial requirements with Getrajdman, Dave submitted a $1.8 million purchase order for 2,500 kg of nadolol, the first 500 kg to be delivered in mid-March 1995. Although multiple shipments were made through the next year, the product was often unavailible. In June 1996, Invamed canceled the purchase order with an undelivered balance of more than 1,500 kg.

c. Cimetidine

ACIC sold Invamed cimetidine acting as broker for the manufacturer, Signa, in Mexico. In June 1993, Dave requested prices, technical information and samples. On October 7, 1993, Dave requested a price for 100 kg, was quoted $65 per kilogram, and followed up with a purchase order the next day. In February 1994, ACIC provided Invamed a DMF reference letter for the product. In May 1994, Invamed advised ACIC it had submitted its cimetidine ANDA and to prepare for an FDA inspection. In February 1995, Dave advised Getrajdman that Invamed would require 5,000 kg for its product launch, tentatively scheduled for July, and the parties discussed pricing on a target quantity of 45,000 kg per year. In April, Dave submitted a purchase order for 4,000 kg of cimetidine and advised Getrajdman that Invamed expected FDA approval within the next two weeks.

On May 13, 1995, Dave wrote Getrajdman requesting a cimetidine delivery schedule for June, and discussed projections for future deliveries. In light of product quality problems at the Signa plant, by September 1995 Invamed had refused delivery of cimetidine and held back payment for nadolol. On September 28, 1993, Getrajdman wrote Dave insisting on payment for nadolol and that Invamed accept and pay for shipments of cimetidine.

In December Invamed submitted a purchase order for 5,000 kg of cimetidine, and in January 1996 sought an agreement from ACIC to supply 75,000 kg for the next two years. By letter dated January 4, Patel sought a fixed price of $100 per kilogram for the first year, and, the same price for the first for the second year for the first 75 tons and afterward a price of $90 per kilogram. Days later, however, after Getrajdman sent a draft agreement to Dave, Invamed issued a purchase order to ACIC for only 20,000 kilogram. Ultimately, Invamed stopped making the product.

2. Clathrate

On September 20, 1994, Dave discussed the availability of clathrate with Getrajdman, who told him there was no exclusive on the material and that ACIC could provide it to Invamed.

The next day, Dave telephoned ACIC for a price on 5-10 kilograms of clathrate and was quoted an approximate price of $2,500 per kilogram. On September 26, 1994, ACIC sent Invamed clathrate samples of 1g and 10g, and technical information, free of charge.*fn6 Invamed also received research and development quantities of clathrate in February 1995 and March 1995, free of charge. ACIC/Brantford provided the samples free of charge in anticipation of selling Invamed substantial quantities of clathrate if Invamed successfully developed warfarin sodium.

On March 7, ACIC shipped the 15 kg clathrate order, and on March 21 it shipped the three additional 50-gram samples with requested information.

On April 3, 1995, ACIC sent the FDA a DMF reference letter as requested in the purchase order and attachment. The same day, ACIC sent a copy of the letter to Invamed. It stated:

Dear Sir,

Re: WARFARIN SODIUM DMF # 11387

Authorization is hereby given to the Food and Drug Administration to refer to our Master File for WARFARIN SODIUM on behalf of:

INVAMED, INC. 2400 Route 130 North Dayton, NJ 088100 — U.S.A.

In support of any new drug application they may file on pharmaceutical preparation containing the drug manufactured by us.
ACIC (CANADA) INC. herewith commits itself to manufacture all of their pharmaceutical products in accordance with the current good manufacturing practices and by the methods described in this specific Drug Master File, and to issue a new DMF reference letter after each amendment on the above Drug Master File.

The letter constitutes a commitment to the FDA to manufacture clathrate in accordance with the requirements outlined in the DMF and the industry requirements if ACIC manufactures the product.

Plaintiffs claim that the sending of this letter also constituted a commitment that ACIC/Brantford would supply commercial quantities of clathrate to Invamed. However, the letter contains no language by which the manufacturer commits to supply the purchaser with the subject materials, although manufacturers can include such language in DMF letters. Further, Invamed did not consider itself obligated to purchase clathrate from all of the companies from which it obtained samples and DMF referral letters such as the one above.

On July 21, 1995, Dave submitted a second standard purchase order and attachment to Getrajdman for 5 kg of clathrate, and requested ACIC's safety and handling procedures for the product. ACIC faxed the requested information to Invamed on July 24, and Invamed received the shipment early in August.

On or about August 23, 1995, Getrajdman allegedly tried to discourage Invamed from pursuing its ANDA submission for warfarin sodium "on the pretext that others were ahead of him and his market share would thus be proportionally smaller."

In January 1996, Dave placed an order for an additional 12 to 14 kilograms of clathrate from ACIC/Brantford to perform tests of a particular machine. Getrajdman advised Invamed that he did not know when availability would allow ACIC to accept an order for clathrate, and that he would have to check with Calenti. In a fax sent the next week, Dave asked Getrajdman to "let him know" so he could submit a confirming purchase order.

The January 1996 order was never fulfilled, and Invamed concluded that the failure to deliver was a result of "poor communication" between the two companies or that ACIC/Brantford was "too busy" to fill a small order. The principals of Invamed did not consider the failure to be serious. In place of ACIC/Brantford's clathrate, Invamed used non-FDA approved material it received from Hoechst.

Before 1996 and in 1996, Patel told Getrajdman that Invamed was working with ACIC/Brantford's material and would be filing its ANDA with it. Plaintiffs claim that Invamed also specifically advised ACIC/Brantford that it would be obligated to supply commercial quantities of clathrate when Invamed's ANDA was approved. Sometime in 1995, Getrajdman told Patel that ACIC/Brantford was one of the suppliers that had clathrate available and that when Invamed placed its order ACIC/Brantford would provide the material. Plaintiffs also claim that ACIC/Brantford "repeatedly assured" Invamed that it would supply commercial quantities of clathrate to it on numerous occasions in 1996. Plaintiffs claim that as part of this implied-in-fact contract, Invamed and ACIC agreed on the price and on a "commercial quantity." Further, Patel testified that as part of the agreement, Invamed had to give commercially reasonable notice of its orders. They did rot agree on delivery dates.

By January 1996, ACIC/Brantford advised Invamed that it was looking to other API suppliers as possible replacement sources of clathrate for Invamed. At that time, Getrajdman told Dave about a possible switching of the manufacturing to Signa in Mexico no obtain clathrate for Invamed. On May 29, 1997, Getrajdman also advised Patel about a possible clathrate source in Italy, but Patel did not want to pursue that option.

On February 14, 1996, Dave sent a fax to Antoniette Walkom, ACIC's manager of regulatory affairs ("Walkom"), requesting that she provide "information with reference to Warfarin Sodium as requested by the FDA." Later the same day, Dave sect another fax to Walkom stating: "I feel that we have not been treated right and it seems to me that you are not dealing in good faith. I have some important questions regarding WARFARIN SODIUM BULK DRUG SUBSTANCE." Walkom forwarded the technical information to Dave on February 16 and 27, noting her displeasure with the tone and content of his fax.

In September 1996, after the sale of Calenti's remaining shares of ACIC to Apotex was complete,*fn8 ACIC/Brantford issued Letters to some companies to which it had provided DMF reference letters, advising them of the change. The letter directed commercial inquiries to Brantford's new sales agent, ACIC Fine Chemicals. Invamed received a letter dated September 27, 1996, with regard to the three ACIC APIs on which it held a reference letter, including clathrate. The letter stated that "[w]e would like to emphasize that the facilities, premises, and procedures as described in the respective files remain unchanged." The letter also asked recipients to inform Brantford of any products that had become inactive in order to update its records.

Invamed responded on October 4, 1996, and advised Brantford that each of these APIs was in active status. Invamed's letter did not inform Brantford that it had filed its ANDA for warfarin sodium or that it had utilized Brantford's DMF reference letter. It did request that the reference letter for clathrate "continue to be maintained."

In the spring of 1997, Dave asked Getrajdman for 100-150 kilograms of clathrate. Getrajdman explained that ACIC/Brantford would be able to deliver such material as soon as the FDA approved two generic manufacturers' ANDAs for warfarin sodium. He provided no explanation of why there had to be two approvals, but stated that. he may be able to provide clathrate before then. In fact, because of the exclusive supply contract with Barr, ACIC/Brantford could not supply a commercial quantity of clathrate until another generic manufacturer besides Barr was selling warfarin sodium. Thus, in effect, the FDA would have approved two generic warfarin sodium manufacturers at the time ACIC/Brantford could supply a commercial quantity of clathrate.

At or about this time, Patel informed Yashvant Patel that Invamed was having clathrate supply problems and that Invamed would have to "play this right" so that it would not be "cut off from the raw material supply." Patel was worried that if Invamed put too much pressure on ACIC for the material, Invamed's DMF access letter could be withdrawn. According to Patel, withdrawal of the access letter would have a "catastrophic effect on the company versus having the DMF and ANDA maintained" because "the ANDA would be ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.