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United States District Court, Eastern District of New York

April 16, 2003


The opinion of the court was delivered by: I. Leo Glasser, United States District Judge


Plaintiffs are a group of nineteen drug store chains and independent pharmacies claiming damages resulting from alleged price discrimination where manufacturers of brand name pharmaceuticals charged retail pharmacies one price while offering discounts to hospitals and HMOs. Defendants Abbot Laboratories, Merck & Co., G.D. Searle & Co., and Zeneca, Inc. (the "Manufacturer Defendants") moved for summary judgment in 1995 before Judge Charles P. Kocoras in the Northern District of Illinois (before whom these cases and numerous others had been consolidated for pre-trial management), but their motions were denied in early 1996. In 2000, a motion to renew those motions was denied. Manufacturer Defendants now move again to renew their summary judgment motions.

Although Manufacturer Defendants claim that subsequent decisions and developments have changed the legal and factual landscape, these changes do not warrant revisiting the original decision. For the reasons stated below, the motion is denied.


These cases were originally filed in the Middle District of Pennsylvania, but later consolidated with the other MDL cases before Judge Kocoras. The plaintiffs generally claimed that the manufacturers and wholesalers conspired to discriminate against retail pharmacies on the price of brand name pharmaceuticals. Plaintiffs in the present actions opted out of the class that Judge Kocoras certified in 1994, and therefore are referred to as the "Rite Aid Plaintiffs" when necessary to distinguish them from the certified class or from other groups who also opted out of the class action.

The Original Motion for Summary Judgment

In 1995, both manufacturers and wholesalers moved for summary judgment. As noted in a later decision, the court was "inundated with enough summary judgment material, in the form of briefs, statements of fact and appendixes, to fill a modest sized room, virtually floor to ceiling." In re Brand Name Prescription Drugs Antitrust Litig., 1999 U.S. Dist. LEXIS 6968, at *12 (N.D. Ill. Apr. 29, 1999). Although the court granted summary judgment to the wholesalers, as to the manufacturers the court denied the motions because there were sufficient facts in dispute regarding the existence of a conspiracy among the Manufacturer Defendants, based on evidence of (i) the parallel conduct of the Manufacturer Defendants toward retail pharmacies as compared to hospitals and managed care organizations, (ii) the ability of retail pharmacies to affect sales of brand name pharmaceuticals,*fn1 (iii) the creation and maintenance of a "chargeback" system*fn2 by which manufacturers police the distribution of their product at different prices, and (iv) the opportunities which Manufacturer Defendants had to conspire. See In re Brand Name Prescription Drugs Antitrust Litig., 1996 WL 167350, at *6-15 (N.D. Ill. Apr. 4, 1996).

Plaintiffs originally pointed to four slightly different categories of evidence from which the existence of the conspiracy could be proved: (i) the Manufacturer Defendants' parallel conduct toward plaintiffs, (ii) the interdependence among the Manufacturer Defendants, (iii) the creation and maintenance of the chargeback system to ensure compliance with the pricing scheme, and (iv) the Manufacturers Defendants' opportunity to conspire. See In re Brand Name Prescription Drugs Antitrust Litig., 1996 WL 167350, at *6. The court first found that sufficient evidence existed to support plaintiffs' contention that the "defendants' seemingly uniform refusal to deal with retail pharmacies was the result of conscious behavior or collusion." Id at *9; see also id. at *6-9 (examining evidence that supported inferences that parallel conduct was caused by collusive behavior). The court then found that plaintiffs offered evidence of manufacturer interdependence, meaning that the parallel conduct "would be in each conspirator's interest only if all conspirators acted alike." Id at *9-10. The court also found it was "unquestionable" that "defendants had the opportunity to conspire." Id at *10. (Judge Kocoras did not examine the chargeback system with regard to the existence of a conspiracy among the manufacturers.)

The court then examined the Manufacturer Defendants' contentions that the evidence surrounding their conduct supported the equally plausible theory that discounts were granted to hospitals and HMOs, but not to retail pharmacies, because the latter "did not possess the ability to deny manufacturers access to certain groups." Id. at *12. Plaintiffs offered evidence showing that, notwithstanding their inability to force doctors to change prescriptions, retail pharmacies "have overall been very successful" when they request that a doctor change prescriptions. Id at *13 (citing as one example a survey indicating that physicians acquiesced to pharmacist requests to substitute one drug for another in 76.9% of cases). Accordingly, the court found that plaintiffs had successfully rebutted the inference that the manufacturers' conduct was as likely as not legal.

As a result, the court held that in light of all the evidence, the factors cited "tend to exclude the possibility that the defendants were pursuing independent, legitimate interests." Id. at *15. Judge Kocoras further noted: "The record is replete with instances of collusive behavior, parallel conduct, uniformity of responses, mutual awareness of each other's policies and practices, and various incriminating quotes on the part of the defendants. While any one of these alone would not be sufficient to send the plaintiffs' case to a jury, any combination of the above is sufficient." Id Accordingly, he denied the motions for summary judgment that no conspiracy among the manufacturers could be established.

Subsequent Proceedings

Between April 1996 and late 1998, numerous settlements were reached, and class plaintiffs proceeded to trial. At the close of class plaintiffs' case, the court granted the defendants' motion for judgment as a matter of law. In re Brand Name Prescription Drugs Antitrust Litig., 1999 WL 33889 (N.D. Ill. Jan. 19, 1999), aff'd, 186 F.3d 781 (7th Cir. 1999).

In 2000, following the affirmance by the Seventh Circuit, the Manufacturer Defendants sought to renew their motion for summary judgment against the Rite Aid Plaintiffs in light of the directed verdict against the class plaintiffs. The court denied that motion. See In re Brand Name Prescription Drugs Antitrust Litig., 2000 WL 204061 (N.D. Ill. Feb. 10, 2000). In so doing, the court determined that it would be unfair to burden the Rite-Aid Plaintiffs with the choices made by the class plaintiffs, especially given that there was a much larger universe of possible evidence that could be used when compared to the evidence actually put forward by the class plaintiffs during the trial. Id at *3-5. However, the court also denied leave on the ground that it would be futile since he would deny summary judgment in any event. Id at *5.

Later in 2000, pursuant to Rule 54, the court entered a partial final judgment to permit appeal of the summary judgment granted previously to the wholesalers. The Manufacturer Defendants then sought certification for interlocutory appeal of the decision denying them summary judgment, but this motion was denied. In re Brand Name Prescription Drugs Antitrust Litig., 2000 U.S. Dist. LEXIS 24999 (N.D. Ill. Mar. 9, 2001). The court specifically rejected the Manufacturer Defendants' claim that the lack of factual evidence to support a claim for conspiracy that included the wholesalers undermined the basis for a genuine dispute as to facts showing the Manufacturer Defendants conspired to fix prices. Id. at *15-46.

The 2002 Seventh Circuit Decision

In 2002, the Seventh Circuit affirmed Judge Kocoras' decision granting summary judgment to the wholesalers. See In re Brand Name Prescription Drugs Antitrust Litig., 288 F.3d 1028 (7th Cir. 2002). In an opinion authored by Judge Posner, the Court of Appeals noted that in order to prevail against the wholesalers, "the plaintiffs would have had to prove two things. The first was that the manufacturers conspired to fix prices. The second was that the wholesalers joined the conspiracy by adopting the chargeback system." Id. at 1032. The Seventh Circuit declined to rule on the first issue, noting that "[w]e need not pursue this issue, because the district court has not yet determined whether the manufacturers conspired among themselves." Id. at 1033. However, the Seventh Circuit did comment in passing on the plaintiffs' arguments about the ability of the retail pharmacies to move the market:

The plaintiffs (who remember are the disfavored purchasers, the drugstores and other retail sellers) did present considerable evidence that some of them, at least, have competitive options just as good as those of some of the favored purchasers. For example, in a number of states pharmacists have the legal right, unless the prescribing physician expressly forbids, to substitute a chemically identical drug for the one prescribed. The refusal of the defendant manufacturers to grant discounts to pharmacies in such states must mean, the plaintiffs argue, that the manufacturers have agreed to hold the line on discounts. This is not an impressive argument, because if pharmacies have the same competitive options as hospitals, why would the manufacturers' cartel charge different prices to pharmacies and to hospitals? Stated differently, if the manufacturers can by agreement avoid giving discounts to pharmacies, why do they give discounts to hospitals that are identically situated so far as competitive options, such as generics are concerned?
288 F.3d at 1032-33. As noted below, Manufacturer Defendants have seized upon these doubts raised by the Seventh Circuit as part of its basis for this motion to renew.

The Seventh Circuit held that Judge Kocoras correctly granted summary judgment to the wholesalers because the inference that the wholesalers knew of any conspiracy simply because of their participation in the chargeback system was "particularly shaky," given that the chargeback system (implemented before the manufacturers allegedly began to collude) existed for a wholly independent reason — namely, to prevent retail customers from directly purchasing drugs from the manufacturers. Id. at 1034. Although plaintiffs argued there was sufficient evidence in the record to demonstrate genuine issues as to the wholesalers' culpability, the Seventh Circuit noted that "[m]ost of it is evidence that the manufacturers were engaged in collusive pricing," and found that such evidence could not "permit an inference that the wholesalers knew the manufacturers were colluding." Id. (emphasis supplied).


I. Standard for Renewing Motions Previously Decided

Without a doubt, this court has the discretion to reconsider a motion for summary judgment. As Justice Holmes explained, "the phrase, `law of the case,' as applied to the effect of previous orders on the later action of the court rendering them in the same case, me rely expresses the practice of courts generally to refuse to reopen what has been decided, not a limit on their power." Messinger v. Anderson, 225 U.S. 436, 444 (1912). The Second Circuit has held with regard to renewing a motion for summary judgment:

In Dictograph Products Company v. Sonotone Corporation, 230 F.2d 131 (2d Cir. 1956), we set forth the standard which governs consideration of such a motion. We held that on a renewed motion for summary judgment before a second judge, the district court must balance the need for finality against the forcefulness of any new evidence and the demands of justice. With respect to a non-appealable denial of summary judgment, the law of the case is not a limit on the court's jurisdiction, but a rule of practice which may be departed from in the sound discretion of the district court. The first judge always has the power to change a ruling; further reflection may allow a better informed ruling in accordance with the conscience of the court. A fortiori, if the first judge can change his mind after denying summary judgment, and change his ruling, a second judge should have and does have the power to do so as well.
Corporacion de Mercadeo Agricola v. Mellon Bank Int'l, 608 F.2d 43, 48 (2d Cir. 1979) (emphasis supplied). In balancing the need for finality and the forcefulness of new evidence, courts frequently analyze whether there is "an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent a manifest injustice." Official Committee of Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, LLP, 322 F.3d 147, 167 (2d Cir. 2003); cf. In re Brand Name Prescription Drugs Antitrust Litig., 2000 WL 204061, at *2 (examining same three factors to determine whether to grant Manufacturer Defendants leave to renew motion for summary judgment). With regard to a change of controlling law, the Second Circuit has cautioned against revisiting prior decisions based merely on doubt about the governing law. "As Judge Magruder said, `mere doubt on our part is not enough to open the point for full reconsideration.' The law of the case will be disregarded only when the court has a `clear conviction of error' with respect to a point of law on which its previous decision was predicated." Fogel v. Chestnutt, 668 F.2d 100, 109 (2d Cir. 1981) (quoting Zdanok v. Glidden, 327 F.2d 944, 953).

The Court is also well aware that this motion does not merely ask it to revisit its old decision, but to reconsider the ruling of a predecessor judge. As Judge Posner noted recently when sitting by designation in the district court,

"When . . . the judges in a case are switched in midstream, as happened here, the successor judge may not reconsider his predecessor's rulings with the same freedom that he may reconsider his own rulings. . . . [T]he law of the case doctrine in these circumstances reflects the rightful expectation of litigants that a change of judges mid-way through a case will not mean going back to square one.
Smithkline Beecham Corp. v. Apotex Corp., ___ F. Supp.2d ___, 2003 U.S. Dist. LEXIS 2902, at *4 (N.D. Ill. March 3, 2003). Nonetheless, the Second Circuit has repeatedly affirmed the power of a second judge to "grant summary judgment despite another judge's previous denial of summary judgment" where there is a change in the law or facts warranting overruling the prior decision Wright v. Cayan, 817 F.2d 999, 1002 n. 3 (2d Cir. 1987). These changes must be sufficiently forceful to warrant undermining the expectations of finality. Corporacion Mercadeo, 817 F.2d at 1002 n. 3.

II. Basis for Renewing the Motion for Summary Judgment

A. Change in the Governing Law

Manufacturer Defendants first note that Judge Kocoras denied summary judgment based on his view that four different evidentiary bases existed to support the inference that the manufacturers had conspired. Manufacturer Defendants then contend that the 2000 Brand Name decision in the Seventh Circuit "flatly rejected three of the four bases for liability and paved the way for summary dismissal of Plaintiffs' Sherman Act claims." (Def. Reply Mem. at 8.)

1. The significance of parallel conduct

The first basis was the evidence of parallel conduct by the Manufacturer Defendants. See Brand Name, 1996 WL 167350, at *9-10. Manufacturer Defendants claim that the Seventh Circuit "flatly rejected" (Def. Mem. at 14) this basis when it stated that "[p]rice discrimination by a firm that is not a monopolist and is not colluding with its competitors is generally not an antitrust violation at all; as we said, it is common in competitive industries." 288 F.3d at 2031. However, whether price discrimination by any individual manufacturer is permissible or even logical was not the basis on which summary judgment was denied. Rather, the parallel conduct by the defendants as a group raised the inference (when combined with the other evidence) that the defendants had conspired. As Judge Kocoras noted after examining numerous pieces of evidence: "While these representative statements alone do not prove the existence of an agreement violative of the Sherman Act, taken together, they buttress the plaintiffs' argument that the defendants' seemingly uniform refusal to deal with retail pharmacies was the result of conscious behavior or collusion." 1996 WL 167350, at *9. The Seventh Circuit's analysis of the parallel conduct question thus does not alter the original decision.

2. Plaintiffs' ability to influence the market

The second basis for summary judgment on which Manufacturer Defendants focus is that, because retail pharmacies are capable of influencing the market, the practice of only providing discounts to hospitals and HMOs was more consistent with collusive behavior and less consistent with discounting that is otherwise legal. See Brand Name, 1996 WL 167350, at *11-14. Manufacturer Defendants focus on the Seventh Circuit's statement that plaintiffs' argument was "unimpressive," 288 F.3d at 1033, and that the focus on providing discounts to hospitals and HMOs was entirely understandable in light of the known ability of those purchasers to affect substitution of prescription drugs. See id. at 1030 ("[Hospitals and HMOs] therefore are unwilling to pay as much for the brandname drugs as the typical drugstore, which simply fills the physician's prescription — and physicians are often indifferent to the price of the drug they are prescribing.").

Plaintiffs admit that the Seventh Circuit's opinion does raise a question about one aspect of their case, but note that Judge Kocoras raised precisely the same question when evaluating the original motion for summary judgment. (Pl. Mem. at 10-12.) Indeed, Judge Kocoras noted that if "as a matter of law, the manufacturers' collective assertions are accurate, then the defendants' no-discounting policies truly reflect a legitimate business concern." 1996 WL 167350, at *12. However, the court extensively analyzed the record before it and found that numerous statements, memos and studies "sufficiently rebut[] the defendants' `legitimate' assertions that retail pharmacies were refused discounts due to their inability to move market share." Id. at *15. The Seventh Circuit's opinion quite rightly confirms Judge Kocoras's initial analysis that f the defendants' assertions "are accurate," id. at *12, then the evidence would likely be as consistent with lawful behavior as not, but the Seventh Circuit's opinion does not otherwise undermine Judge Kocoras's analysis that the evidentiary record made summary judgment inappropriate.

3. The impact of the chargeback system

Manufacturer Defendants finally argue that the Seventh Circuit undermined any reliance upon the existence of the chargeback system to establish that a conspiracy existed among the manufacturers when the Court of Appeals noted that the existence of the chargeback system was as indicative of individual price discrimination as collusive price discrimination. (Def. Mem. at 17-18.) However, Judge Kocoras did not rely upon the existence of the chargeback system (or analyze its impact) with regards to the question of whether sufficient evidence warranted sending the question of a manufacturer conspiracy to the jury. The Seventh Circuit's pronouncements thus have no impact on the law of the case regarding the evidentiary dispute whether a conspiracy existed.*fn3

Manufacturer Defendants have thus fallen short of establishing "a clear conviction of error with respect to a point of law on which [the] previous decision was predicated." Fogel, 668 F.2d at 109. Indeed, the 2002 opinion does not change the law significantly. The Seventh Circuit's 2002 opinion confirmed that which Judge Kocoras already acknowledged — that wholly plausible, legitimate reasons could explain an individual defendant's decision to favor hospitals and HMOs. But Judge Kocoras did not base his decision denying summary judgment on any one piece of evidence or strand of analysis. Instead, the decision relied on the combination of all the evidence before the court: "While any one of these [pieces of evidence] alone would not be sufficient to send the plaintiffs' case to a jury, any combination of the above is sufficient." 1996 WL 167350, at *15 (emphasis supplied). Given this holistic analysis of the evidence, as is proper in an antitrust case, see Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 698 (1962) ("the character and effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts, but only looking at it as a whole"), to revisit this motion for summary judgment based on the Seventh Circuit's latest opinion would ignore the rightful interest in preserving litigants' expectations of finality that the doctrine of law of the case protects.

B. Newly Available Evidence

Manufacturer Defendants next claim that two pieces of newly available evidence severely undermine the existence of any factual dispute: recent statements under oath by one of plaintiffs' experts and judicial admissions made by Rite-Aid in other litigation. Neither warrants revisiting the original summary judgment decision.

1. Deposition of Plaintiffs' Expert

Manufacturer Defendants first point to a deposition of one of plaintiffs' expert witnesses, Roy Weinstein, where he purportedly stated that without the wholesalers participation in the conspiracy, no antitrust violation would have been possible. Specifically, in 2000 he stated under oath that "if these wholesalers did not engage in this anticompetitive conduct to a significant extent, the anticompetitive conduct would not have been able to persist." (Golden Aff., Ex. 4 (Weinstein Dep.) At 23:11-14.) Manufacturer Defendants thus argue that there can be no dispute that conspiracy never existed, since (i) it has already been established by the Seventh Circuit in its 2002 opinion that the wholesalers were not part of any conspiracy, and (ii) plaintiffs' own expert admits that without wholesaler participation, any anticompetitive conduct would have collapsed.

However, the Seventh Circuit's opinion explicitly refused to reach the question of whether a conspiracy existed among the manufacturers. See In re Brand Name Pharmaceutical Antitrust Litig., 288 F.3d at 1033-34. The Seventh Circuit instead held that there was no evidence from which a reasonable trier of the facts could infer the wholesalers knew of any conspiracy if one existed. See id. at 1034 ("This evidence was deemed sufficient by the district court to defeat the manufacturers' motion for summary judgment, but it was hardly strong enough to compel or even permit an inference that the wholesalers knew the manufacturers were colluding.") (emphasis in original). Thus, although the plaintiffs failed to establish that wholesalers were part of any conspiracy, it cannot be said that the plaintiffs have failed to adduce evidence that the wholesalers, by fulfilling their role in the chargeback system, may have unwittingly participated in the scheme by the manufacturers.

Moreover, Weinstein's statement has limited value, since the anticompetitive conduct in question was based on certain assumptions, including the assumption that the wholesalers in question "did not participate in chargeback transactions." (Weinstein Dep. at 23:6-7.) The Seventh Circuit's 2002 opinion thus confirmed an underlying hypothesis of Weinstein's analysis — without the chargeback system any attempt to discriminate on price among customers would fall apart because the wholesalers would arbitrage the system by claiming to buy for hospitals at the cheaper price and then sell to pharmacies at the higher price, pocketing the difference. As long as plaintiffs' evidence can show that wholesalers did participate in chargeback transactions, even if they did so without knowledge of their role in enforcing the purported conspiracy among manufacturers, the deposition statement has no effect on the summary judgment decision.*fn4

2. Admissions by Rite-Aid in other litigation

Manufacturer Defendants also note that Rite-Aid has admitted in other litigation that it too practices price discrimination (or "variable pricing") and favors customers who belong to or qualify for a prescription drug benefit plan: "In the pharmacy industry, variable pricing affects not only cash customers, but customers that purchase drugs under insurance and other third party arrangements. Third party plans have developed in recent years, and most Americans today have a prescription drug plan. These health plans negotiate substantial discounts because of the large groups they cover. They demand and receive volume discounts." (Golden Aff., Ex. 12 (Rite Aid Brief, Langford v. Rite Aid of Ala., No. CV 99-S-2651-NE (N.D. Ala. 1999), at 3.) Based on this admission, Manufacturer Defendants argue that Rite Aid should be estopped from claiming otherwise in this litigation.

There is nothing inconsistent, however, about Rite Aid offering volume discounts to its customers who can make bulk purchases while at the same time complaining that Rite Aid cannot receive discounts that other comparable purchasers receive. Nor did Judge Kocoras deny summary judgment on the understanding that hospitals were volume purchasers but that the retail pharmacies were not. Rather, the court found that Manufacturer Defendants' purported reason for offering discounts only to hospitals and HMOs — namely, that only those favored purchasers could steer patients to discounted drugs — was sufficiently disputed by plaintiffs' evidence to raise a genuine issue of material fact for trial.

Given the lack of significant value to this "new evidence," the Court will not depart from Judge Kocoras' prior decision or undermine the finality of his decision.


For the reasons state above, the motion to renew Manufacturer Defendants' motion for summary judgment is denied.

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