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IN RE CIPROFLOXACIN HYDROCHLORIDE ANTITRUST LIT.

May 20, 2003

IN RE CIPROFLOXACIN HYDROCHLORIDE ANTITRUST LITIGATION.


The opinion of the court was delivered by: David Trager, District Judge.

MEMORANDUM & ORDER

This suit challenges the validity of agreements between the brand-name manufacturer of the widely used antibiotic ciprofloxacin hydrochloride ("Cipro") and potential generic manufacturers of Cipro. Direct Purchaser and Indirect Purchaser Class Plaintiffs and Individual Non-Class Plaintiffs (collectively, "plaintiffs") have brought suit against Bayer AG, a German company, and its American subsidiary, Bayer Corporation (collectively, "Bayer") and Barr Laboratories, Inc. ("Barr"); The Rugby Group, Inc. ("Rugby"); Hoechst Marion Roussel, Inc. ("HMR"); and Watson Pharmaceuticals, Inc. ("Watson") (collectively, "Generic Defendants")*fn1 alleging that Bayer and Generic Defendants (collectively, "defendants") entered into agreements that prevent competition in the market for Cipro in violation of federal and state antitrust laws. Plaintiffs now move this court pursuant to Federal Rule of Civil Procedure 56 for partial summary judgment finding that these agreements are per se unlawful under Section 1 of the Sherman Act, 15 U.S.C. § 1, and various state antitrust and consumer protection laws. Defendants have filed a cross-motion seeking to dismiss plaintiffs' respective complaints pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to plead facts sufficient to sustain a Sherman Act violation.*fn2 These motions present difficult questions of antitrust law and its interaction with patent rights.

Statutory and Regulatory Background

The manufacture and distribution of pharmaceutical drugs in the United States is regulated by the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301 et seq. (the "Act"). Recognizing that the Act's "cumbersome drug approval process delayed entry of relatively inexpensive generic drugs into the marketplace," Mylan Pharms., Inc. v. Shalala, 81 F. Supp.2d 30, 32 (D.D.C. 2000), Congress passed the "Hatch-Waxman Amendments" to the Act in 1984. See Drug Price Competition & Patent Term Restoration Act of 1984, Pub.L. No. 98-417 (codified as amended at 21 U.S.C. § 355). The impetus behind the Hatch-Waxman Amendments was "to make available more low cost generic drugs[.]" H.R.Rep. No. 98-857, pt. 1, at 14 (1984), reprinted in 1984 U.S.C.C.A.N 2647, 2647. In fact, the Hatch-Waxman Amendments embody Congress' attempt to "balance two conflicting policy objectives: to induce name-brand pharmaceutical firms to make the investments necessary to research and develop new drug products, while simultaneously enabling competitors to bring cheaper, generic copies of those drugs to market." Mylan, 81 F. Supp.2d at 32 (citations omitted).

To this end, the Hatch-Waxman Amendments established new guidelines that simplify the approval process for generic drugs. Previously, any company wanting to market a new drug had to secure approval from the U.S. Food & Drug Administration ("FDA") by filing a New Drug Application ("NDA"), a process often "time consuming and costly" because a NDA requires companies to submit specific data concerning the drug's safety and effectiveness. Andrx Pharms., Inc. v. Biovail Corp. Int'l, 256 F.3d 799, 801 (D.C. Cir. 2001) (citations omitted), cert. denied 535 U.S. 931, 122 S.Ct. 1305, 152 L.Ed.2d 216 (2002). Under the new guidelines, a generic drug manufacturer can file an Abbreviated New Drug Application ("ANDA") that incorporates by reference the safety and efficacy data developed and previously submitted by the company that manufactured the original, "pioneer" brand-name drug. To obtain FDA approval, the ANDA filer must demonstrate that its product is "bioequivalent" to the pioneer drug. 21 U.S.C. § 355(j)(2)(A)(iv).

To protect the patent rights of the pioneer drug manufacturer, the ANDA filer must make one of four certifications in its ANDA concerning patents listed with the FDA for the pioneer drug,*fn3 namely that (1) no patent for the pioneer drug is listed in the Orange Book; (2) the patent listed in the Orange Book has expired; (3) the listed patent will expire on a particular date, and the ANDA filer does not seek FDA approval before that date (a "Paragraph III Certification"); and (4) the listed patent "is invalid or . . . will not be infringed by the manufacture, use, or sale of the [generic] drug" (a "Paragraph IV Certification"). Id. § 355(j)(2)(A)(vii); see also 21 C.F.R. § 314.94(a)(12)(A)(4).

An ANDA containing a Paragraph IV Certification (an "ANDA IV") has "important legal ramifications. It automatically creates a cause of action for patent infringement." Mylan, 81 F. Supp.2d at 32. Indeed, an ANDA applicant making such a certification must notify the owner of the listed patent of the filing of its ANDA and certification. See 21 U.S.C. § 355(j)(2)(B). Thereafter, the patent holder has 45 days to initiate a patent infringement suit against the ANDA applicant. See id. § 355(j)(5)(B)(iii). If the patent holder does not commence an action within 45 days, the FDA may approve the ANDA at any time. See id. If a timely infringement suit is initiated, the FDA cannot approve the ANDA for 30 months. See id. Moreover, the court hearing the patent case may, in its discretion, extend the 30-month stay if either party fails to "reasonably cooperate in expediting the action." Id. § 355(j)(5)(B)(iii).*fn4 However, if the court presiding over the infringement action determines before the 30-month period expires that the patent at issue is "invalid or not infringed," approval is effective "on the date of the court decision[.]" Id. § 355(j)(5)(B)(iii)(I).

The Hatch-Waxman Amendments provide an incentive to encourage generic drug manufacturers to challenge listed patents for brand-name drugs. As an incentive to incur "potentially substantial litigation costs," Mylan, 81 F. Supp.2d at 33, the first company to submit an ANDA IV is awarded a 180-day period of exclusive rights to market a generic formula of the pioneer drug. See 21 U.S.C. § 355(j)(5)(B)(iv). Prior to the expiration of the exclusivity period, the FDA cannot finally approve any other ANDA for the same generic drug. See id. The exclusivity period is triggered by either the commercial marketing of the generic drug by the first ANDA filer or the decision of a court finding the pioneer drug's patent to be either invalid, unenforceable, or not infringed. See id.; see also 21 C.F.R. § 314.107.

Factual Background*fn5

(1)

Bayer manufactures and distributes Cipro, a broad spectrum antibiotic that is prescribed for various infections and is dispensed in tablet, liquid and intravenous forms. Bayer AG claims the active ingredient in Cipro — ciprofloxacin hydrochloride — in Patent No. 4,670,444 (the "444 Patent"), which was issued by the Patent and Trademark Office ("PTO") on June 2, 1987. See App. to Bayer's Mem. in Opp'n to Pls.' Mot. for Partial Summ. J. ("Bayer App."), Ex. 1. The 444 Patent expires on December 9, 2003. in October 1987, Miles, Inc. (the predecessor to Bayer Corporation and the licensee of the 444 Patent) obtained FDA approval to market Cipro in the United States. Cipro has been the best selling antibiotic in the United States for many consecutive years and is described as "the most prescribed antibiotic in the world." D.P. Compl. ¶ 1. Since 1987, Bayer has been the only producer of Cipro in the United States, and, since 1997, Bayer has derived over $1 billion in U.S. net sales of all Cipro products. See Bayer App., Ex. 12 ¶ 3.

By letter dated October 22, 1991, Barr filed ANDA 74-124 for a generic, bioequivalent version of Cipro.*fn6 See App. to Decl. of Edwin John U in Supp. of Generic Defs.' Mem. in Opp'n to Pls.' Mot. for "Partial Summ. J." ("G.Defs.' Summ. J. Mem.") ("G.Defs.' App."), Tab 1. Barr's ANDA included a Paragraph IV Certification seeking the FDA's permission to market its generic drug before the 444 Patent expires on the grounds that the patent is invalid and unenforceable. See J.A. in Supp. of all Pls.' Mot. for Summ. J. ("Pls.' J.A."), Ex. T. As set forth in the HatchWaxman Amendments, on December 6, 1991, Barr notified Bayer of its ANDA IV filing and its assertions contained therein regarding Bayer's 444 Patent. See id. On January 16, 1992, Bayer commenced a timely patent infringement suit against Barr in the Southern District of New York, thereby triggering the 30-month statutory waiting period for FDA approval. See generally id., Ex. G; see also Bayer App., Ex. 3. This litigation was styled Bayer AG and Miles, Inc. v. Barr Labs., Inc., 798 F. Supp. 196 (S.D.N.Y. 1992) (Knapp, J.). In its pleadings, Barr denied any violation of the patent laws and asserted counterclaims seeking a declaratory judgment that the 444 Patent is invalid and unenforceable.*fn7 See generally Pls.' J.A., Exs. H, I.

Subsequently, in November 1992, Bayer and Barr executed a stipulation whereby the parties agreed to extend the 30-month waiting period until final judgment was entered in the patent infringement action. See id., Ex. J. This stipulation was "so ordered" by Judge Knapp on December 8, 1992. See id. Absent this agreement, the stay would otherwise have expired on April 22, 1995.*fn8 See id. In a letter dated January 4, 1995, while the patent litigation was pending, the FDA granted tentative approval of Barr's ANDA for generic Cipro. See id., Ex. U. Plaintiffs contend that this approval was tentative, rather than final, due to the parties' stipulation to extend the 30-month stay. See D.P. Summ. J. Mem. at 15. In fact, in its letter to Barr, the FDA stated that "[i]n certain cases approval can be granted after the expiration of the 30-month period. . . . In this case, the 30-month option is not relevant. The [FDA] was advised that on December 8, 1992, the court ordered that the 30-month period be extended[.]" Pls.' J.A., Ex. U. A year later, in January 1996, Bayer and Barr filed cross-motions for partial summary judgment. See Bayer App., Ex. 16. Judge Knapp denied the parties' respective motions in an order and opinion dated June 5, 1996. See Pls.' J.A., Ex. K. Upon a motion by Bayer to reconsider that ruling, the court re-affirmed its decision in a separate order and opinion dated September 5, 1996. See id., Ex. L. After some postponements, trial of the patent litigation was finally scheduled to begin on January 27, 1997.

Meanwhile, HMR and Rugby entered the fray. On March 29, 1996, Barr and Rugby entered into an agreement pursuant to which Barr agreed to share equally with Rugby (then a subsidiary of HMR) any rights and profits from the eventual marketing and/or distribution of Cipro, and, in return, Rugby agreed to finance a portion of the costs and expenses of the patent litigation (the "Litigation Funding Agreement"). See generally id., Ex. P. By subsequent amendment, HMR succeeded to Rugby's rights under this agreement. See id., Ex. Q § 1.1. Rugby was later acquired by Watson and is now a wholly owned subsidiary of Watson.

(2)

As the trial date approached, Bayer and Barr reached a settlement that concluded the patent litigation in the Southern District. In connection with the settlement, on January 8, 1997, Bayer entered into three separate but interrelated settlement agreements with Barr, HMR and Rugby, and Bernard Sherman ("Sherman") and Apotex, Inc. ("Apotex")*fn9 (collectively, the "Settlement Agreements") and a supply agreement with Barr and HMR (the "Supply Agreement"). The terms of these agreements form the bases of plaintiffs' allegations of a Sherman Act violation. Under the Settlement Agreements, Barr, HMR, Rugby, Sherman, and Apotex acknowledged the validity of the 444 Patent and additional U.S. Patents held by Bayer.*fn10 See id., Ex. B § 4; id., Ex. C § 3; id., Ex. D § 1. In the Barr Settlement Agreement, Barr also agreed to amend its ANDA to change its Paragraph IV Certification to a Paragraph III Certification, thereby permitting Barr to obtain FDA approval to market generic Cipro only upon expiration of the 444 Patent. See id., Ex. B § 5(a); see also 21 U.S.C. § 355(j)(2)(A)(vii)(III). The agreement also provides for an immediate $49.1 million payment from Bayer to the "Barr Escrow Account."*fn11 See Pls.' J.A., Ex. B § 1.

In the Supply Agreement, Barr and HMR agreed not to manufacture (or to have manufactured) Cipro in the United States. See id., Ex. E § 3.01. In addition, the agreement provides that Bayer either will (1) supply Bayer-manufactured Cipro to Barr, HMR and Rugby for distribution in the United States, subject to certain price controls, see id. § 3.06(a)(i); or (2) make quarterly payments — varying from $15 million to approximately $17 million — to the Barr Escrow Account from January 1998 through December 2003 (when the 444 Patent expires). See id. §§ 3.06(a)(i), 4.01(a), 4.02 & Sch. 4.01. If Bayer does not license Cipro immediately, it has agreed to do so at a set price if another generic company successfully challenges the validity of the 444 Patent. See id. §§ 1.01, 3.06(d). In addition, defendants claim that Bayer agreed to supply Cipro to Barr for marketing under a generic label beginning six months prior to the expiration of the 444 Patent.*fn12 See id. § 3.06(a)(ii). To date, Bayer has chosen to make payments to the Barr Escrow Account, which through December 2003 will total approximately $398 million. See id., Sch. 4.01.

(3)

Pursuant to the terms of the Barr Settlement Agreement, Bayer and Barr submitted to Judge Knapp a two-page consent judgment (the "Consent Judgment") that the parties had negotiated and that extinguished all claims raised in the patent litigation. See id., Ex. N. On January 16, 1997, Judge Knapp signed the Consent Judgment in the form submitted by the parties. See id. The Consent Judgment entered judgment for Bayer, providing that the 444 Patent is valid and enforceable as to, and was infringed by, Barr. See id. ¶¶ 2-4. There was no mention in the Consent Judgment of the payments Bayer agreed to make to the Barr Escrow Account or the agreement by Barr, HMR and Rugby not to manufacture and market a generic form of Cipro. The Settlement Agreements and the Supply Agreement were not filed with or otherwise provided to the patent court, but the court was apprised of the material terms of the settlement on January 30, 1997 when Bayer's counsel forwarded Bayer's news release to the court. See G.Defs.' App., Tab 10.

On January 17, 1997, Bayer and Barr each issued a news release announcing the settlement and discussing the payment scheme set forth in the Supply Agreement.*fn13 See Pls.' J.A., Ex. B § 8 (permitting press releases); G.Defs.' App., Tabs 10, 11. In fact, the press releases note that the settlement is comprised of two components: (1) an initial cash payment and (2) a Supply Agreement, which sets forth Bayer's option to make payments to the Barr Escrow Account or to provide Barr with Cipro that Barr would market pursuant to a license from Bayer. See generally G.Defs.' App., Tabs 10, 11. Also, on January 22, 1997, pursuant to the Barr Settlement Agreement, Barr filed an amendment to its ANDA 74-124, see Pls.' J.A., Ex. V, and in a letter to the FDA dated January 23, 1997, Barr amended its Paragraph IV Certification to a Paragraph III Certification. See id., Ex. W.

In July 1997, Bayer voluntarily submitted its 444 Patent to the PTO for reexamination, and, upon reexamination, the PTO reaffirmed the patent's validity. See Bayer App., Exs. 17, 18. Since the execution of the Settlement Agreements, four generic companies have filed ANDA IVs for Cipro and have mounted challenges to the 444 Patent similar to the challenge raised by Barr; one challenge was dismissed, see Bayer AG v. Ranbaxy Pharms., Inc., No. 3:98 Civ. 4464 (D.N.J. Oct. 29, 1999) (dismissing case per stipulation), Bayer App., Ex. 21, and three challenges were unsuccessful, see Bayer AG v. Schein Pharm., Inc., 301 F.3d 1306 (Fed. Cir. 2002) [hereinafter "Schein & Mylan"], unpublished version enclosed with Letter from Counsel for Bayer to Judge Trager of 8/19/02; Bayer AG v. Carlsbad Tech., Inc., No. 01 Civ. 867-B (S.D.Cal. Oct. 24, 2001) (denying Carlsbad's motion for summary judgment), Bayer App., Ex. 31. At present, Bayer sells the only ciprofloxacin hydrochloride drug available in the United States.

Discussion

Motion to Dismiss — Federal Claims

Defendants have before this court numerous motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn14 Bayer and Generic Defendants move to dismiss each of plaintiffs' respective complaints for failure to state a claim upon which relief can be granted.*fn15 Watson moves to dismiss the claims in the Aston Complaint and Indirect Purchaser Plaintiffs' Complaint as failing to state a cognizable claim as to Watson.*fn16 In addition, Generic Defendants seek to dismiss the claims of the "Organizational Plaintiffs" contained in the Aston Complaint as timebarred. Lastly, Generic Defendants seek to dismiss Indirect Purchaser Plaintiffs' claims on various additional grounds related to those plaintiffs' allegations under state antitrust and consumer protection laws.*fn17

When considering defendants' motions to dismiss under Rule 12(b)(6), the court must deny the motions unless "it appears beyond reasonable doubt that the plaintiff[s] can prove no set of facts in support of [their] claim[s] which entitle [them] to relief." Conley v. Gibson, 355 U.S. 41, 4546, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). Moreover, the court is obligated to accept the complaints' allegations as true and to read them in the light most favorable to plaintiffs. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002); Cruz v. Coach Stores, Inc., 202 F.3d 560, 565 (2d Cir. 2000). When determining the suffi ciency of a plaintiffs claim, "consideration is limited to the factual allegations in [the] complaint, which are accepted as true, to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiffs' possession or of which plaintiffs had knowledge and relied on in bring suit." Brass v. Am. Film Techs., 987 F.2d 142, 150 (2d Cir. 1993) (citing Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 4748 (2d Cir. 1991)).

Two sections of the Clayton Act authorize private parties to bring suit under the federal antitrust laws. Section 4 of the Clayton Act provides treble damages to "`[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws. . . .'"*fn18 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 485, 97 S.Ct. 690, 696, 50 L.Ed.2d 701 (1977) (quoting 15 U.S.C. § 15(a)). Moreover, Section 16 of the Clayton Act provides injunctive relief to persons "threatened [with] loss or damage by a violation of the antitrust laws."*fn19 15 U.S.C. § 26. The Clayton Act includes the Sherman Act, 15 U.S.C. § 1 et seq., as one of the "antitrust laws." Id. § 12. To plead a claim under Section 1 of the Sherman Act, plaintiffs must allege that defendants' conduct imposed an actual restraint on competition. As an initial matter, plaintiffs have sufficiently alleged that defendants' conduct constitutes a restraint on competition in violation of Section 1. The facts supporting plaintiffs' argument, and a discussion concerning the merits of their argument, will be set forth in some detail in the discussion below regarding summary judgment. Suffice it to say that the complaints adequately allege that the Supply Agreement and Settlement Agreements operate to pay Bayer's generic competitors, Barr, HMR and Rugby, hundreds of millions of dollars to suppress generic competition in the domestic market for Cipro and that those competitors did abandon their efforts to come to market with less expensive, generic forms of Cipro.

However, the Supreme Court has cautioned that although a defendant's conduct can constitute a violation of Section 1, such liability does not indicate whether a private plaintiff has suffered the appropriate injury to seek relief under the Clayton Act. See Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 342, 110 S.Ct. 1884, 1893, 109 L.Ed.2d 333 (1990). Therefore, to recover damages under Section 4 (or to qualify for injunctive relief under Section 16) of the Clayton Act, plaintiffs must also allege that the challenged restraint, even if it violates Section 1, is causally linked to their alleged injury (i.e., injury-in-fact), see Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 535, 103 S.Ct. 897, 907, 74 L.Ed.2d 723 (1983); Argus, Inc. v. Eastman Kodak Co., 801 F.2d 38, 41 (2d Cir. 1986), and that such injury is an "antitrust injury." Brunswick, 429 U.S. at 489, 97 S.Ct. at 697. Antitrust injury is "injury of the type that the antitrust laws were designed to prevent and that flows from that which makes defendants' acts unlawful." Id.; see also Atl. Richfield, 495 U.S. at 344-45, 110 S.Ct. at 1894-95; Balaklaw v. Lovell, 14 F.3d 793, 797 (2d Cir. 1994) (quoting Brunswick, 429 U.S. at 489, 97 S.Ct. at 697); Volvo N. Am. Corp. v. Men's Int'l Prof'l Tennis Council, 857 F.2d 55, 66 (2d Cir. 1988) (quoting Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 107 S.Ct. 484, 93 L.Ed.2d 427 (1986) (quoting Brunswick, 429 U.S. at 489, 97 S.Ct. at 697)). Bayer and Generic Defendants' claims regarding the common deficiencies of the four consolidated complaints will be addressed first. Then Watson's motion and Generic Defendants' additional claims will be discussed seriatim.

(1)

Injury-in-Fact

Plaintiffs maintain that the challenged agreements suppressed entry of a generic version of Cipro into the U.S. market. As a result, plaintiffs claim that they are paying more than they would have paid for Cipro absent defendants' alleged restraint. See Aston Compl. ¶ 97; CVS Compl. ¶ 65; D.P. Compl. ¶ 73; I.P. Compl. ¶ 135. Defendants assert that plaintiffs have no claim under the antitrust laws because all of their theories of liability depend on generic entry into the domestic market for Cipro, which defendants claim is completely blocked by the 444 Patent. Therefore, defendants maintain that plaintiffs' alleged injuries flow from the existence of the 444 Patent and not from any claimed restraint on trade. in response to this position, plaintiffs offer three theories in support of their claim.

a. Successful Litigation

Plaintiffs allege that but for the challenged agreements, Barr would have prevailed in the patent litigation and then Barr, HMR and Rugby (and possibly other generic firms) would have come to market with generic versions of Cipro. See CVS Compl. ¶ 49; D.P. Compl. ¶ 61.*fn20 Plaintiffs support this theory of causation with assertions that Barr submitted to the FDA a Paragraph IV Certification, stating that the 444 Patent is invalid or unenforceable, see CVS Compl. ¶ 22; D.P. Compl. ¶ 32, and that "for six years — until it was paid hundreds of millions to concede otherwise — Barr vigorously asserted that the '444 patent is invalid and unenforceable." Direct Purchaser Pls.' Mem. in Opp'n to all Defs.' Mot. to Dismiss the Compls. ("D.P. Mot. Dismiss Mem.") at 7. Moreover, Barr repeated its assertion that the patent is invalid during the patent litigation, withstanding Bayer's motions for summary judgment and reconsideration, both of which were denied. See CVS Compl. ¶¶ 25, 29-31; D.P. Compl. ¶¶ 35, 38-39. Lastly, plaintiffs emphasize that Bayer paid enormous sums of money to avoid a judicial determination of the patent infringement case. See CVS Compl. ¶¶ 34-35; D.P. Compl. ¶¶ 41-42.

The Supreme Court has held — albeit in a different factual context — that a legal theory dependent on predicting the outcome of a specific lawsuit is unduly speculative. See Whitmore v. Arkansas, 495 U.S. 149, 159-60, 110 S.Ct. 1717, 109 L.Ed.2d 135 (1990). In Whitmore, a death row inmate wanted to challenge the validity of a death sentence imposed on another capital defendant who waived his right to appeal to the Arkansas Supreme Court. See id. at 151, 110 S.Ct. at 1719. The plaintiffs alleged injury was that if the court did not review the capital defendant's sentence, that defendant's crimes would not be included in a database of crimes of convicted capital defendants, which was compiled by the state for comparative purposes to ensure fair application of the death penalty. See id. at 156, 110 S.Ct. at 1723. To support his claim, the plaintiff asserted that he may eventually seek federal habeas corpus relief that would entitle him to a new trial and that, if he received this new trial and was again sentenced to death, his crime would then be compared to the crimes in the state database. The Supreme Court remarked that to prevail with his claim, the plaintiff would have to prove not only that he may eventually secure federal habeas corpus relief but that, if he did, he would be retried, convicted and again sentenced to death. See id. at 157, 110 S.Ct. at 1724. The Court found the plaintiffs alleged injury "too speculative" to constitute an injury in fact and denied him standing to bring his claim. Id.; see also id. at 159-60, 110 S.Ct. at 1725 ("It is just not possible for a litigant to prove in advance that the judicial system will lead to any particular result in his case.").

Although no other decision of the Court addresses this question in an antitrust or other economic context, the Second Circuit has foreclosed speculation about the outcome of litigation in the corporate context. See Boehm v. Comm'r, 146 F.2d 553 (2d Cir.), aff'd, 326 U.S. 287, 66 S.Ct. 120, 90 L.Ed. 78 (1945). In Boehm, a stockholder postponed reporting losses on worthless stock for tax purposes until resolution of a pending stockholder derivative action, which ultimately settled. See id. at 55355. The plaintiff argued that she postponed her losses because she believed that her stock could in fact have had some value if the litigation were successful, thereby restoring money to the corporate treasury. See id. at 555. The Second Circuit rejected this argument. In doing so, it found that the tax court properly inferred that the derivative suit had unproven value and, therefore, that the probability of a particular result in that litigation was "too speculative." Id.; see also United States v. Carboni, 204 F.3d 39, 4647 (2d Cir. 2000) (holding that the district court properly refused to consider the outcome of a potential lawsuit in determining for sentencing purposes the amount of loss caused by the criminal defendant's fraudulent acts because "the cost of litigation and the uncertainty of success made any recovery . . . speculative").

In this case, without a showing of patent invalidity, all that the complaints contain is conjecture as to (1) whether Barr would prevail in the trial court; (2) whether the Federal Circuit would reverse any ruling for Barr; (3) whether the Supreme Court would have heard this case; and (4) when this case ultimately would be resolved. Plaintiffs' allegations, far from proving causation, merely allege that prior to its settlement with Bayer, Barr initiated and then litigated this case in good faith and to the best of its abilities. Therefore, this allegation, like those in Whitmore and Boehm, is too speculative and is insufficient to state a claim under the antitrust laws.*fn21

The speculative nature of plaintiffs' allegations is highlighted by the post-settlement affirmations of the 444 Patent's validity. For instance, in 1997, Bayer voluntarily submitted the 444 Patent to the PTO for reexamination pursuant to 35 U.S.C. § 305, and the PTO upheld the patent's validity. More significantly, other generic manufacturers have brought challenges to the 444 Patent — all unsuccessfully.*fn22 Indeed, the Court of Appeals for the Federal Circuit has upheld summary judgment for Bayer on the issue of the 444 Patent's validity. See Schein & Mylan, 301 F.3d 1306. These judicially noticed facts provide more compelling evidence than the proffers made by plaintiffs, who really can do little more than speculate about what might or might not have happened if the patent litigation had continued.*fn23 These facts do not, however, shield the 444 Patent from all future challenges. Rather, the significance of the reexamination and the litigation that Bayer has won is that plaintiffs' allegations that Barr "would have won" the patent challenge are little more than dubious expectations or desires. Therefore, plaintiffs can not avoid dismissal based on a claim of injury-in-fact that relies on the hope that Barr would have prevailed in its suit against Bayer.

b. Final FDA Approval

Some of the plaintiffs also allege that but for the challenged agreements, Barr would have received final marketing approval from the FDA (i.e., it would not have changed its Paragraph IV Certification to a Paragraph III Certification) and it would have marketed generic Cipro before resolution of the patent litigation. See CVS Compl. ¶ 49; I.P. Compl. ¶¶ 63, 65, 136. If Barr had entered the market, other generic companies, like HMR and Rugby, could have entered the market with their own generic versions of Cipro after Barr's 180-day exclusivity period. Plaintiffs emphasize that the availability of this theory clearly establishes that, despite defendants' contentions, it is not necessary to plead patent invalidity to state a cognizable claim of an antitrust violation.

It is not contested that before a company may market a new drug, it must receive FDA approval. See 21 U.S.C. § 355(a) ("No person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of an application . . . is effective with respect to such drug."). As described above, the Hatch-Waxman Amendments simplified the approval process for companies wanting to market generic drugs by permitting such companies to file an ANDA. The amendments also addressed the interests of patent holders by requiring an ANDA filer to include one of four certifications regarding the patents held by the pioneer drug manufacturer. The certification relevant to this case — the Paragraph IV Certification — seeks FDA permission to market a generic drug before the expiration of the pioneer manufacturer's patent by asserting either that the patent is invalid and unenforceable or that the generic drug product does not infringe the patent. See 21 U.S.C. § 355(j)(2)(A)(vii)(IV); see also 21 C.F.R. § 314.94(a)(12)(A)(4). By contrast, the Paragraph III Certification seeks FDA permission to market a generic drug upon the expiration of the pioneer drug manufacturer's patent. See 21 U.S.C. § 355(j)(2)(A)(vii)(III). The pioneer drug manufacturer can bring a patent infringement case against an ANDA IV filer, which will delay FDA approval of the ANDA for 30 months or until successful resolution of the litigation, whichever occurs first. See id. § 355(j)(5)(B)(iii). A court is permitted to lengthen or shorten this 30-month stay if it determines that ether party to the litigation has failed to "reasonably cooperate in expediting the action." Id.

Therefore, if the patent holder wants to prevent generic competition after the 30month stay expires but before resolution of the patent infringement case, it must obtain a preliminary injunction restraining generic sales that allegedly infringe upon its patent. See Ciprofloxacin I, 166 F. Supp.2d at 740; Zeneca, 16 F. Supp.2d at 116 (citing 21 U.S.C. § 355(j)(5)(B)(iii)(III)). Occasionally, courts have denied preliminary injunctions in patent cases on the ground that, until there is a judicial finding of validity and infringement, the alleged infringer has a "right to compete." Ill. Tool Works, Inc. v. Grip-Pak, Inc., 906 F.2d 679, 684 (Fed. Cir. 1990) (noting that the district court properly balanced the public interest in the protection of patent rights against the alleged infringer's continuing right to compete during motion stage of litigation); see also Easter Unlimited v. Rubie's Costume Co., No. 00 Civ. 6241, 2000 WL 1341400, at *10 (S.D.N.Y. Sept. 15, 2000) ("While there is a public interest in the protection of patent rights, this interest is counterbalanced by [alleged infringer's] continuing right to compete before a trial on the merits can be concluded."); accord Cargo Protectors, Inc. v. Am. Lock Co., 92 F. Supp.2d 926, 935 (D.Minn. 2000).

The complaints in this case contain numerous facts in support of plaintiffs' allegation that but for the challenged agreements, Barr would have received final FDA approval to market its generic product and would thereby have had the capacity to enter the Cipro market before resolution of the patent suit. In October 1991, Barr filed an ANDA IV seeking the FDA's permission to market a generic version of Cipro before the expiration of the 444 Patent. See, e.g., CVS Compl. ¶ 22. Shortly thereafter, Barr notified Bayer of its ANDA and certification. See, e.g., id. ¶ 23. On January 16, 1992, Bayer commenced a timely patent infringement case against Barr, thereby triggering the statutory waiting period for FDA approval of Barr's ANDA. See, e.g., id. ¶ 24. The parties subsequently stipulated to extend the statutory waiting period until final resolution of the patent infringement case.*fn24 See, e.g., id. ¶ 26. In January 1995, while the case was still pending, the FDA granted tentative approval of Barr's ANDA for generic Cipro. See Aston Compl. ¶ 66. In the FDA's letter to Barr granting this approval, it stated that the FDA had "completed the review of [Barr's] abbreviated application and has concluded that, based upon the information [Barr has] presented to date, the drugs are safe and efficient for uses as recommended in the submitted labeling — therefore, the application is tentatively approved." Id. According to plaintiffs, once Barr received tentative approval, final approval was imminent upon expiration of the 30-month stay. However, under the Barr Settlement Agreement, Barr agreed to (and did in fact) amend its ANDA to contain a Paragraph III Certification instead of a Paragraph IV Certification, thereby relinquishing its efforts to come to market before the 444 Patent expires. See id. ¶¶ 74, 84. These allegations adequately show that but for the stipulation and Barr Settlement Agreement, the statutory stay would have expired in April 1995, at which time Barr would have likely received final FDA approval to market its generic Cipro.*fn25 Accordingly, plaintiffs maintain that once Barr received FDA approval, it would have had a "right to compete" with Bayer and that it should have been permitted to decide on its own, without colluding with Bayer, whether it would enter the market or withhold its product pending resolution of the patent litigation.

Bayer, however, has labeled this theory as "plaintiffs' theory of infringing entry," which it likens to a market in stolen, infringing goods. Bayer Mot. Dismiss Mem. at 25; see also id. at 31, 33. Bayer maintains that the 444 Patent, not the challenged agreements, blocked generic entry. This analogy is unpersuasive. Bayer in effect is substituting its self-fulfilling prophecy for plaintiffs' allegations, since unlicensed market entry is "infringing" only if the patent holder ultimately prevails. Therefore, Bayer's argument assumes that the district court would have found the 444 Patent valid and that Barr's generic product would infringe the patent. But the district court made no such finding. Indeed, the crux of plaintiffs' claim of a per se violation is that the challenged agreements allowed Barr to accept cash in exchange for an agreement to halt the process by which a court would make such a determination — a process encouraged by the Hatch-Waxman Amendments and beneficial to consumers. Therefore, defendants' claim that generic entry upon FDA approval is precluded is rejected.

Nonetheless, courts have recognized that if a generic company that received FDA approval markets its drug before the resolution of the patent infringement suit, the generic company assumes the risk that it may subsequently be found liable for infringement. See Ciprofloxacin I, 166 F. Supp.2d at 744; Zeneca, 16 F. Supp.2d at 115-16 ("Of course, in the event that the FDA approves a generic because of the expiration of [the statutory stay] without a court decision, and it is later determined that the patent is valid, the patent owner may still recover damages from the generic.") (citing H.R.Rep. No. 98-857, pt. 2 at 9 (1984) reprinted at 1984 U.S.C.C.A.N. 2647, 2694) (citation and footnote omitted). Therefore, a prudent company may well determine that its interests require waiting until a court has decided the patent infringement case before marketing its generic drug. For instance, in Elan, the generic manufacturer, Elan, chose to delay marketing its product until the resolution of its lawsuit with Bayer, even though the parties agreed that, since the statutory stay had expired, Elan could come to market. See 212 F.3d at 1248 n. 5. In this case, the complaints do not allege that Barr had the desire or intent to enter the market before resolution of the patent litigation. Moreover, it seems highly unlikely that Barr would risk market entry without a judicial decision of patent invalidity considering that the Bayer/Barr patent suit involved a patent validity challenge on a compound patent, which the generic drug necessarily infringes. In fact, the complaints seem to undermine plaintiffs' assertion. For example, according to Indirect Purchaser Plaintiffs' Complaint, on January 11, 1995, the Newark Star-Ledger reported that a spokesman for Barr said that the company will launch its product immediately "if Barr prevails in court." I.P. Compl. ¶ 64 (emphasis added); accord Aston Compl. ¶ 67. Consequently, without allegations that Barr intended to enter the market upon FDA approval, before a court decision on the validity of the 444 Patent, plaintiffs' claim of injury-in-fact based on this theory cannot withstand a motion to dismiss.*fn26

In a separate argument, HMR and Rugby maintain that plaintiffs' attempt to stretch this theory to encompass them is flawed. HMR and Rugby argue that plaintiffs have failed to allege an actionable antitrust injury flowing from HMR and Rugby's conduct because neither HMR nor Rugby exercised control over Barr's entry into the Cipro market prior to a resolution in the patent litigation and neither HMR nor Rugby had the legal capacity to produce Cipro.

Although neither HMR nor Rugby were parties to the patent litigation, the complaints clearly establish their participation in the challenged agreements. Indeed, HMR and Rugby are both signatories to one of the Settlement Agreements, and HMR is a signatory to the Supply Agreement. See I.P. Compl. ¶¶ 22, 23. In addition, in March 1996, Barr and Rugby (then a subsidiary of HMR) entered into the Litigation Funding Agreement pursuant to which Rugby agreed to help Barr fund its patent litigation against Bayer. See CVS Compl. ¶ 31; I.P. Compl. ¶ 71. In return, Barr agreed that if it acquired the right to manufacture and/or distribute a generic Cipro tablet — either by Barr prevailing in the patent litigation or by settlement of such litigation — Barr would share the right to market that product exclusively with Rugby. See CVS Compl. ¶¶ 9, 31; I.P. Compl. ¶ 71. The agreement also provided that Barr could not settle the Bayer/Barr patent litigation without Rugby's express written approval, that any settlement of that case must provide equal benefits to Barr and Rugby and that Rugby would obtain FDA approval to manufacture Cipro. See I.P. Compl. ¶ 71. Moreover, Barr and Rugby were to share equally in the profits derived from those sales. In December 1996, the Litigation Funding Agreement was amended to transfer certain of Rugby's rights and obligations to HMR. However, the amendment provided that Rugby still retained the exclusive right to distribute any Cipro that HMR obtained the right to market or jointly market with Barr. See I.P. Compl. ¶ 72. The parties also agreed that all monies received from Bayer in connection with the settlement of the patent litigation would be split equally between Barr and HMR. See CVS Compl. ¶ 32; I.P. Compl. ¶ 75.

However, a fair reading of plaintiffs' complaints fails to establish any facts from which a jury could infer that either HMR or Rugby could have influenced or controlled Barr's decision to enter the domestic Cipro market prior to a resolution of the patent litigation. Moreover, the Litigation Funding Agreement — which requires Barr to share with Rugby and HMR its rights to market and/or distribute Cipro upon successful litigation or settlement — does not contemplate such entry.

In addition, to the extent plaintiffs allege that HMR and Rugby could have entered the market with their own generic Cipro product following Barr's statutory exclusivity period, this claim also fails. Although a jury could infer from the facts surrounding the Litigation Funding Agreement that Rugby and HMR intended to enter the Cipro market, the fact remains that neither HMR nor Rugby had the legal capacity to market Cipro. The complaints do not allege otherwise. Although plaintiffs assert that Rugby agreed in the Litigation Funding Agreement to seek FDA approval to manufacture Cipro, none of the complaints allege that either HMR or Rugby filed an ANDA seeking to manufacture Cipro or received FDA approval to do so. Without an ANDA and FDA approval, neither HMR nor Rugby had a right to manufacture generic Cipro. Moreover, any inference that HMR or Rugby would seek FDA approval in this situation is mere conjecture and unsupported by any facts in the complaints.

As an alternative theory, plaintiffs direct this court to cases from various circuits imposing under the antitrust laws joint and several liability on members of a conspiracy. These cases are unpersuasive because none of them involves a situation where the alleged conspirators were prohibited by government regulation from entering the market and, therefore, could not have caused the plaintiffs antitrust injury. For instance, plaintiffs rely on Paper Systems, Inc. v. Nippon Paper Industries Co., where the Seventh Circuit addressed the effect of joint and several liability on the application of the Illinois Brick doctrine. 281 F.3d 629 (7th Cir. 2002). In that case, the defendant, Nippon, was one of five manufacturers accused of conspiring to reduce output and raise prices in the thermal facsimile paper business. See id. at 631. Each manufacturer in the alleged conspiracy sold paper through different distribution systems; consequently, the Paper Systems plaintiffs were indirect purchasers of Nippon but direct purchasers of the other alleged conspirators. See id. at 632. The court found that although the direct customers of Nippon held the exclusive right to recover damages in an antitrust suit based on the overcharges caused by Nippon (and accordingly carved their recovery out of the case), Nippon was still liable to the plaintiffs for the entire overcharge caused by the conspiracy. In other words, although Nippon did not sell directly to the plaintiffs, that fact did not preclude Nippon's liability for the aggregate overcharge.

In addition, as to HMR and Rugby, the Andrx case is instructive. In that case Biovail (the second ANDA IV filer) maintained that it could not reach the generic drug market as quickly as it could in the absence of an agreement between HMR (the brand-name drug manufacturer) and Andrx (the first ANDA IV filer). See 256 F.3d at 806. To support its claim, Biovail alleged that it filed an ANDA IV seeking permission to market Cardizem CD, but did not specifically allege that it was prepared to market a generic version of that drug or that it anticipated FDA approval. See id. at 807. The district court denied Biovail standing and dismissed the case with prejudice. The district court reasoned that Biovail failed to plead an injury because its exclusion from the generic drug market was caused by lack of FDA approval, not the agreement. See id. (citing district court opinion, 83 F. Supp.2d 179, 186 (D.D.C. 2000)). The D.C. Circuit, although it agreed that Biovail failed to plead an injury, disagreed as to whether Biovail could ever do so. See id. at 808. In fact, the circuit court found that Biovail could allege its intent and preparedness to enter the market by claiming that FDA approval was probable. See id. In this case, the Aston Complaint does not allege that HMR or Rugby filed an ANDA or that FDA approval was probable. Consequently, any injury based on market entry by HMR or Rugby pending outcome of the Bayer/Barr patent infringement case fails because that injury is precluded by operation of the regulatory scheme and not by any conduct on the part of HMR and/or Rugby.

c. License under 444 Patent

As this court has previously observed with regard to the state law claims in Indirect Purchaser Plaintiffs' Complaint, "plaintiffs have asserted at least one theory by which they may establish state antitrust violations without resorting to a determination of patent law." Ciprofloxacin I, 166 F. Supp.2d at 748. The theory to which this court referred was that "if in fact Bayer would have licensed or authorized Barr to distribute ciprofloxacin rather than risk the loss of its patents, plaintiffs would have benefitted from the resulting competition, and there would never have been a judicial determination of the validity of Bayer's patents." Id. at 749. Accordingly, plaintiffs also assert that but for the challenged agreements, Bayer would have settled the Bayer/Barr patent litigation by granting Barr, HMR and/or Rugby a license to bring a generic version of Cipro on the market. See CVS Compl. ¶ 49; see also D.P. Compl. ¶ 58; I.P. Compl. ¶ 113. Like the previously discussed theory, this theory does not require plaintiffs to allege that the 444 Patent is invalid.

In support of this theory, Direct Purchaser Plaintiffs contend that Bayer at different times had entered serious discussions with both Schein Pharmaceuticals, Inc. ("Schein") and Barr concerning the issuance of a license to market generic Cipro. See D.P. Compl. ¶ 58. For instance, they assert that in or about August 1996, Bayer met with Barr and/or HMR to discuss, inter alia, the possibility of Bayer issuing an exclusive license to Barr to market a generic form of all present and future forms of Cipro. See id. Moreover, the complaints allege that at the time of the challenged agreements, there was a serious dispute as to the validity of the 444 Patent. In fact, Judge Knapp denied both Barr and Bayer's respective motions for summary judgment.

Moreover, defendants recognize the leverage that Barr had in this case, particularly under the new Hatch-Waxman scheme, which allows a generic manufacturer to seek entry into a market without incurring damages for infringement. See, e.g., Bayer's Mem. in Opp'n to Pls.' Mot. for Partial Summ. J. ("Bayer's Summ. J. Mem.") at 31 ("The patent owner has much more at stake, because it may lose its patent altogether. Its losses represent a larger share of the market, with much higher lost profits (due to higher prices) on each sale. Thus, the generic challenger's potential upside can be a fraction of the patent owner's potential downside.").

Indeed, defendants concede that patent litigation is inherently uncertain and that, consequently, many patent infringement cases settle. See, e.g., id. ("[N]o matter how valid a patent is — no matter how often it has been upheld in other litigation . . . or successfully reexamined . . . — it is still a gamble to place a technology case in the hands of a lay judge or jury. . . . Even the confident patent owner knows that the chances of prevailing in [patent] litigation rarely exceed seventy percent. . . . Thus, there are risks involved even in that rare case with great prospects.") (internal quotation marks and citations omitted); id. at 32 ("The range of potential settlements is now substantial. Because the generic challenger's valuation of victory is smaller than the patent owner's valuation of loss, settlement is highly likely.") (citation omitted); G.Defs.' Summ. J. Mem. at 16-17 ("The inherent uncertainty of a trial and appeal meant that Bayer faced some risk of losing even a valid patent, along with the attendant profits which the patent laws are designed to provide to patent holders."); id. at 16 ("It is beyond dispute that some 95% of all litigation settles.") (citation omitted).

In addition, plaintiffs argue that their contention is supported by the provisions of the Supply Agreement. In fact, the Supply Agreement contains a licensing provision pursuant to which Bayer would supply Barr and HMR with generic Cipro to bring onto the market beginning as early as January 1, 1998. The agreement also contains provisions giving Bayer the unilateral right not to issue a license and instead to pay Barr and HMR hundreds of millions of dollars in exchange for their agreement not to manufacture competing, generic versions of Cipro. Accordingly, plaintiffs maintain that in the absence of the challenged agreements (i.e., without the payment option) Bayer would in fact have entered into a license arrangement. Plaintiffs also argue that the evidentiary value of the licensing provisions is bolstered by the agreement's severability clause, which provides for the provisions to be enforced "if any term or provision of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect." CVS Compl. ¶ 51; D.P. Compl. ¶ 60.

Defendants argue that Bayer has a right, acting unilaterally, not to license its patent and that plaintiffs' claim "turn[s] this principle on its head" by stripping Bayer of this right and by creating a legal duty to license: "Even though plaintiffs purport to concede that a patentee cannot be held liable under the antitrust laws for failing to grant a license, plaintiffs argue that the same failure to grant Barr a license . . . gives rise to cognizable injury under the antitrust laws." Bayer Mot. Dismiss Mem. at 36-37. Bayer then cites numerous cases to support its proposition that Bayer cannot be liable under the antitrust laws for refusing to license its 444 Patent. See id. Bayer is correct in its recitation of the law. See, e.g., SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1204 (2d Cir. 1981) (finding refusal to license immune from antitrust scrutiny). Moreover, plaintiffs recognize that Bayer has a unilateral right not to license under the challenged agreements and at law. In addition, they concede that the challenged agreements contain a license. However, defendants seriously misconstrue plaintiffs' allegations, which are not in conflict with this principle of patent law.

Plaintiffs do not contend that Bayer violated the antitrust laws because it unilaterally refused to issue Barr and/or HMR and Rugby a license. Rather, plaintiffs allege that if Bayer had not entered into the challenged agreements, under which it paid Barr, HMR and Rugby in lieu of supplying Cipro, those Generic Defendants would in fact have entered the market with generic Cipro. According to plaintiffs, but for the agreements, Barr would have used the leverage of the pending patent litigation to obtain a license under the 444 Patent for itself and/or HMR and Rugby. Thus, plaintiffs allege that Bayer, notwithstanding its legal right not to issue a license, would in fact have granted Barr and/or HMR and Rugby a license. Accordingly, this case is distinguishable from cases like SCM cited by defendants, all of which address whether a defendant's refusal to grant a license violates the Sherman Act. This case addresses a different issue, namely whether plaintiffs who have already alleged a violation of the Sherman Act can demonstrate causation by showing that Bayer would in fact have granted a license but for its allegedly illicit conduct.

Thus, plaintiffs' complaints have provided sufficient allegations that Bayer would have issued to Barr, HMR and/or Rugby a license for distribution of generic Cipro if it had not instead agreed to pay Barr and HMR hundreds of millions of dollars — an arrangement that plaintiffs claim is illegal — indeed, per se illegal. Moreover, it is fair to assume from the allegations in the complaint that if Barr intended to enter the market upon successful resolution of the patent litigation, it also would enter the market upon receiving a license, which would likewise shield Barr from any liability for patent infringement. Therefore, unlike plaintiffs' successful litigation theory discussed above, this theory is not so speculative to justify denying plaintiffs the opportunity to show that the challenged agreements foreclosed the leverage provided by the patent litigation that would have led Bayer to grant a license.

As to HMR and Rugby, under this theory, plaintiffs have alleged injury-in-fact linked to those defendants. Plaintiffs assert that Bayer would have issued Barr (and perhaps HMR and/or Rugby) a license in the absence of the allegedly illegal agreements. In this regard, the presence of HMR and Rugby made it more likely than not that Bayer would have issued a license for generic Cipro. The fact that Rugby (and later HMR) was providing financial assistance to Barr during the patent litigation added to Barr's leverage in that case, as it demonstrates that Barr had the resources to continue with the litigation, including a trial. In addition, the fact that a license would ward off not only Barr, but also HMR and Rugby, as two other potential patent challengers, makes it more likely than not that Bayer would have licensed Cipro if it had not entered into the challenged agreements.

Moreover, if Bayer granted Barr a license to manufacture generic Cipro, presumably in connection with a settlement of the Bayer/Barr patent litigation, that license would trigger the provisions of the Litigation Funding Agreement. Under that scenario, there is another plausible argument for linking lack of generic entry to HMR and Rugby. If Barr received from Bayer a license to manufacture Cipro, Rugby would begin distributing Barrmanufactured Cipro as contemplated by the Litigation Funding Agreement, as amended. Accordingly, but for HMR and Rugby agreeing not to enter the market with Cipro, Bayer would have granted a license to Barr to manufacture Cipro, and Rugby would have distributed generic Cipro.

(2)

Antitrust Injury

Since plaintiffs have alleged one theory of injury-in-fact causally linked to defendants' alleged illegal conduct, it is necessary to determine whether that injury is "antitrust injury," i.e., injury of the type contemplated by the antitrust laws. See Brunswick, 429 U.S. at 489, 97 S.Ct. at 697. Antitrust injury "should reflect the anticompetitive effect either of the violation or of the anticompetitive acts made possible by the violation. It should, in short, be the type of loss that the claimed violations . . . would be likely to cause." Id., 97 S.Ct. at 697-98 (internal quotation marks and citation omitted). It is well established that the antitrust laws "[were] enacted to assure customers the benefits of price competition." Assoc. Gen. Contractors, 459 U.S. at 538, 103 S.Ct. at 908. As purchasers of Cipro, plaintiffs, therefore, present classic allegations of antitrust injury.

In fact, plaintiffs' complaints demonstrate how the introduction of generic competition into the Cipro market would have greatly benefitted plaintiffs. According to plaintiffs, generic drugs are invariably priced below the brand-name drugs to which they are bioequivalent. See, e.g., I.P. Compl. ¶ 47. A 1998 study conducted by the Congressional Budget Office ("CBO") concluded that the purchase of generic drugs saved consumers and third party payors between $8-10 billion in a single year. See, e.g., id. Similarly, a report prepared by the Government Accounting Office in August 2000 observed that "[b]ecause generic drugs are not patented and can be copied by different manufacturers, they often face intense competition, which usually results in much lower prices than brand-name drugs." Id. Indeed, according to plaintiffs' complaints, Barr has recognized the importance of generic drugs, as it spelled out on its web page:

Generic pharmaceuticals can cost 30-80% less than the equivalent, branded product. Yet, the consumer is getting the same product, manufactured to the same high standards, as the brand name product.
[I]ntroduction of generic products — which offer consumers a choice — results in competition that can also help lower prices. The generic manufacturer makes a real contribution to lowering health care costs, by offering the very same quality pharmaceutical products at significantly lower prices.

Id.; accord CVS Compl. ¶ 16; D.P. Compl. ¶¶ 26, 27. According to plaintiffs, Barr stated that it planned to enter the market for Cipro by initially pricing its generic product 30% less than Bayer's Cipro. See I.P. Compl. ¶ 47. This price, plaintiffs maintain, would inevitably have been lowered, as additional generic companies entered the market and competed for market share. See id.; D.P. ¶ 26.

Moreover, the complaints recognize the detrimental consequences to Bayer of generic competition in the Cipro market. According to plaintiffs, a brand-name company loses a significant portion of its market share to generic competitors less than a year after the introduction of generic competition, even if the brand-name manufacturer lowers prices to meet such competition. See I.P. Compl. ¶ 48. The 1998 CBO Study estimates that generic drugs capture at least 44% of the brand-name drug's market share in just the first year of sale. See id. Moreover, in testimony before Congress, a representative from the Pharmaceutical Research and Manufacturers of America (a brand-name pharmaceutical manufacturer's trade association), confirmed that "in most cases, sale of pioneer medicines drop as much as 75%) within weeks after a generic copy enters the market." Id. In addition, the complaints establish that Bayer well understood the dramatic, adverse consequence that generic competition would have on Bayer's sales of brand-name Cipro; indeed, it noted that "being hit by generics is traumatic for an organization." D.P. Compl. ¶ 26; accord CVS Compl. ¶ 15. These facts demonstrate that, but for the challenged agreements, Bayer stood to lose billions of dollars in the face of generic competition. To prevent this result, plaintiffs maintain that Bayer suppressed generic entry in the Cipro market, at the expense of Cipro purchasers, including plaintiffs.

In In re Warfarin Sodium Antitrust Litigation, the Third Circuit sanctioned a claim of antitrust injury similar to the claim raised by plaintiffs in this case. See 214 F.3d 395 (3d Cir. 2000). The plaintiffs in Warfarin, indirect purchasers of the drug Coumadin, sought injunctive relief for the anticompetitive conduct of the drug's manufacturer, DuPont Pharmaceuticals Company ("DuPont"). See id. at 396-97. They alleged that DuPont's conduct prevented competition in the Coumadin market, which caused Coumadin users to pay supra-competitive prices for the drug. See id. at 396, 400. The court granted the plaintiffs standing for injunctive relief, remarking that "the excess amount paid by Coumadin users not only is `inextricably intertwined' with the injury DuPont aimed to inflict, the overcharge was the aim of DuPont's preclusive conduct. It is difficult to imagine a more formidable demonstration of antitrust injury." Id. at 401 (emphasis added).*fn27

Instead, plaintiffs claim that, since entering into the agreements, Bayer has instituted price increases for Cipro that are among the highest percentage increases for any prescription drug in the United States. See Aston Compl. ¶ 95; I.P. Compl. ¶ 120. As a result, plaintiffs maintain that they have been denied the opportunity to obtain low-cost generic Cipro and are forced to pay supra-competitive prices. See Aston Compl. ¶ 99; I.P. Compl. 135. Just as in Warfarin, in this case, Bayer's "efforts to keep the generic drug off the market emanate from the fact that the introduction of the generic product would force down the price paid [for Cipro]. The higher prices paid were the raison d'etre of [Bayer's alleged] antitrust conduct." 214 F.3d at 402. Accordingly, plaintiffs have advanced prototypical allegations of antitrust injury directly linked to defendants' allegedly illegal conduct. Moreover, the injury occurred not only by reason of defendants' allegedly illegal conduct — entering into the agreements — but also "from that which makes defendants' acts unlawful" — illegally restraining ...


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