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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,
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
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
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
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
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
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
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.
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
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
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.
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
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
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
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
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
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
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
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
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
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.
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
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
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
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
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
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.
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
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
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.
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.
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.
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.
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
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
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.
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:
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
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.
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 ...