The opinion of the court was delivered by: Denis R. Hurley, United States District Judge
HURLEY, Senior District Judge
Plaintiff RxUSA Wholesale, Inc. ("Plaintiff"), a secondary wholesaler of pharmaceutical products, brings this antitrust action alleging that defendants -- pharmaceutical manufacturers, authorized pharmaceutical wholesalers, and individuals in control of a pharmaceutical enterprise (collectively, "Defendants") -- have willfully acquired and sought to maintain a monopoly and exclude competition by secondary wholesalers in the wholesale pharmaceutical industry. Defendants move to dismiss the Complaint for failure to state a claim, pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). In the Complaint, Plaintiff seeks, inter alia, an order enjoining and prohibiting Defendants from engaging in further allegedly unlawful acts that violate the Sherman Act, 15 U.S.C. §§ 1-2; the Donnelly Act, N.Y. Gen. Bus. Law §§ 340-347; the Sarbanes Oxley Act of 200 ("SOX"); and the Racketeer Influence and Corrupt Organization Act ("RICO"), 18 U.S.C. §§ 1962(c) and (d). Plaintiff also seeks damages with regard to the alleged unlawful conduct. For the reasons that follow, Defendants' motions are granted and this case is dismissed.
In crafting the following summary of facts, the Court accepts all of the factual allegations in the Complaint as true.*fn2
Plaintiff is a "secondary wholesaler" of pharmaceutical products that ships U.S. FDA-approved pharmaceuticals to its customers. A secondary wholesaler generally purchases pharmaceuticals from "authorized wholesalers" -- wholesalers authorized to purchase directly from drug manufacturers -- and then resells them to its own customers, other non-authorized distributors and dispensing facilities.
Several states and the federal government have adopted pedigree rules to regulate the sale of prescription drugs to curtail the sale of counterfeit drugs in the United States. The federal pedigree rules require non-authorized pharmaceutical distributors to show pedigree information on all sales made, i.e., to document the chain of custody of pharmaceuticals from manufacturers to pharmacy or other dispenser, but exempt authorized pharmaceutical distributors from this requirement. Thus, in order to comply with the law, all unauthorized distributors must obtain appropriate pedigree information from the seller. The absence of such information renders illegal any sale of pharmaceutical products in the United States.*fn3
I. Plaintiff's Allegations Against the Authorized Wholesalers
Plaintiff alleges that in the past, it purchased pharmaceuticals from the following five authorized wholesalers which in turn purchased directly from manufacturers: McKesson Corporation ("McKesson"), Cardinal Health Corporation ("Cardinal"), AmerisourceBergen Corp. ("AmerisourceBergen"), H.D. Smith, Inc. ("H.D. Smith"), and Bellco Drug Corp. ("Bellco"). These five companies are referred to in the Complaint, and will be hereinafter collectively referred to as, the Pharmaceutical Wholesaler Defendants or the "PWDs." Plaintiff alleges that the PWDs control more than 95% of the market for wholesale pharmaceutical products in the United States.
Plaintiff had a different relationship with each PWD, as set forth below.
A. Plaintiff's Alleged Dealings With McKesson
Plaintiff entered into a multi-year agreement with McKesson on October 1, 2003, under which McKesson agreed to supply pharmaceutical products to Plaintiff. As a result of this agreement, McKesson became a primary supplier to Plaintiff. From October 2003 through part of 2006, Plaintiff received approximately $529 million of goods from McKesson, an amount that was allegedly less than the full amount Plaintiff ordered.*fn4 McKesson allegedly fraudulently reported to the manufacturers that Plaintiff was receiving 100% of the product it was ordering from McKesson. In January 2006, McKesson advised Plaintiff that it would not provide Plaintiff with pedigree documentation necessary to permit lawful resale by Plaintiff of the pharmaceutical products purchased by Plaintiff from McKesson. In February 2006, McKesson terminated its supply agreement with Plaintiff.
B. Plaintiff's Alleged Dealings With Cardinal
Plaintiff purchased pharmaceutical products from Cardinal beginning in November 2004 and then periodically thereafter through December 2005. In January 2006, Cardinal notified Plaintiff that it would not supply to Plaintiff and others pedigree information necessary to permit lawful resale. In July 2006, Cardinal notified Plaintiff that it would not supply Plaintiff with any more pharmaceutical products.
C. Plaintiff's Alleged Dealings With AmerisourceBergen
Plaintiff purchased pharmaceutical products from AmerisourceBergen from June 1999 through March 2000. In January 2006, AmerisourceBergen announced that it would not supply to Plaintiff and others pedigree documentation necessary to permit lawful resale. In July 2006, AmerisourceBergen notified Plaintiff that it would not supply any more pharmaceutical products to Plaintiff.
D. Plaintiff's Alleged Dealings With H.D. Smith
Plaintiff purchased pharmaceutical products from H.D. Smith from September 2000 through November 2001. On November 2001, H.D. Smith advised Plaintiff that it would not sell pharmaceutical products to any secondary wholesaler and has not sold any product to Plaintiff since that time.
E. Plaintiff's Alleged Dealings With Bellco
Plaintiff intermittently purchased pharmaceutical products from Bellco from September 2000 through June 2006. In January 2006, Bellco announced that it would not supply to Plaintiff and others pedigree information necessary to permit lawful resale. In June 2006, Bellco notified Plaintiff that it would not supply Plaintiff with any pharmaceuticals.
Plaintiff alleges that in refusing to sell to Plaintiff, the PWDs' motivation was to consolidate "[each PWD's] monopoly and the monopoly power of the PWDs, prevent Plaintiff from growing its business to become an even larger competitor, eliminate Plaintiff as a competitor in the relevant market, and thereby keep wholesale prices for the products it offered to end users artificially high." (Compl. ¶¶ 192, 203, 214, 227, 237.)
Plaintiff asserts the following causes of action against the PWDs: (1) counts II-III and V-XII alleging that each PWD violated Section 2 of the Sherman Act by unilaterally refusing to sell to Plaintiff pharmaceutical products which Plaintiff labels as "essential facilities"; (2) counts XIII and XIV, alleging that each PWD violated Section 1 of the Sherman Act by allegedly conspiring with each other to refuse to deal with Plaintiff; and (3) count XX, alleging that such conduct also violated the Donnelly Act. The Complaint also asserts two claims against McKesson only, count I for monopolization of the relevant geographic wholesale pharmaceutical product market in violation of Section 2 of the Sherman Act based on McKesson's termination of its supply agreement with Plaintiff, and count IV for attempted monopolization of the relevant geographic wholesale pharmaceutical product market in violation of Section 2 of the Sherman Act.
II. Plaintiff's Allegations Against Brian Ferreira and Peter J. Pasquale
At all times relevant to the Complaint, Brian Ferreira ("Ferreira") was a Vice-President, and Peter J. Pasquale ("Pasquale") was a Senior Vice-President of McKesson. As noted above, McKesson was Plaintiff's primary supplier of pharmaceuticals from October 2003 to February 2006 pursuant to a supply agreement between the parties. Plaintiff alleges, inter alia, that Ferreira and Pasquale used the United States mails and wires to transmit fraudulent representations to various manufacturers intended to induce the manufacturers to believe that all of Plaintiff's pharmaceutical purchasing requirements were being met.
Plaintiff asserts the following causes of action against Ferreira and Pasquale: (1) count XXI, alleging that they violated SOX by issuing false reports, and (2) counts XXII and XXIII, alleging that they violated the civil RICO statute via the transmission of these false reports.
III. Plaintiff's Allegations Against Healthcare Distribution Management Association
Healthcare Distribution Management Association ("HDMA") is a voluntary association of wholesalers of pharmaceutical products which now excludes secondary wholesalers from its ranks. Each of the PWDs is a member of HDMA.
Plaintiff became a member of HDMA in or about 2005. On July 29, 2005, Plaintiff advised HDMA that it was having problems opening up accounts with most major pharmaceutical manufacturers and requested that HDMA look into this issue. In December 2005, Plaintiff was notified by HDMA that Plaintiff was no longer eligible for HDMA membership. Plaintiff alleges that the exclusion of Plaintiff from HDMA membership was "directed by, or acquiesced in by, the PWDs, whose intention was to exclude Plaintiff from participation in an essential industry organization and permit some of the Manufacturer Defendants to use the exclusion of Plaintiff from the HDMA as a purported 'basis' for refusal to deal with Plaintiff." (Compl. ¶ 251.) As a result, Plaintiff claims it is unable to compete with HDMA members in the wholesale pharmaceutical market.
Plaintiff asserts one cause of action against HDMA, count XIX, alleging that HDMA violated Section 2 of the Sherman Act by unilaterally refusing to provide Plaintiff with membership in HDMA, which membership Plaintiff alleges is an "essential facility."
IV. Plaintiff's Allegations Against the Manufacturers
The pharmaceutical manufacturer defendants (collectively, the "Manufacturing Defendants")*fn5 are the sole original source for certain branded and/or trademarked pharmaceutical products. Plaintiff alleges that the Manufacturing Defendants have wrongfully and illegally refused to deal with Plaintiff and other selected secondary wholesalers directly.
From the time it commenced operations through 2006, Plaintiff purchased large quantities of pharmaceuticals from one or more of the PWDs. Beginning in December 2003 and through March 2006, Plaintiff requested in writing that the Manufacturing Defendants sell pharmaceuticals directly to Plaintiff. According to the Complaint, all refused. Several of the Manufacturing Defendants advised Plaintiff that they would not sell products directly to Plaintiff because they were satisfied with their current distribution network. (See, e.g., Compl. ¶¶ 54, 61, 75, 82, 97, 137, 156. 163, 170.) Others noted that they only sold to distributors who were members of HDMA (see, e.g., id. ¶ 82 ), or that they did not deal directly with secondary wholesalers. (Id. ¶ 121.) Still others did not respond to Plaintiff's request. (See, e.g., id. ¶¶ 68, 90, 104, 130.)
Plaintiff asserts the following causes of action against the Manufacturing Defendants: (1) counts XV and XVI, alleging that the Manufacturing Defendants violated Section 1 of the Sherman Act by allegedly conspiring with each other to refuse to deal with Plaintiff; (2) counts XVII-XVIII, alleging that each Manufacturing Defendant violated Section 2 of the Sherman Act, by unilaterally refusing to sell to Plaintiff pharmaceutical products which are claimed to be "essential facilities"; and (3) count XX, alleging that such conduct also violated the Donnelly Act.
V. The Alleged Anti-Competitive Effects
Plaintiff describes the alleged anti-competitive effects of the foregoing as follows:
[ ] Collectively, the Defendants have sought to prevent, and have succeeded in preventing, Plaintiff from acquiring widely-used pharmaceutical products on competitive terms for resale, failed to permit Plaintiff to acquire products in sufficient quantity, failed to provide pedigree information lawfully necessary for Plaintiff to resell pharmaceutical goods, and ultimately refused to provide any product to Plaintiff at all, all of which made it impossible for Plaintiff to adequately compete or exist in the relevant market.
[ ] The Defendants' unlawful acts have been directed primarily at Plaintiff and selected other "secondary wholesalers," which represent a significant competitive source of supply for pharmaceutical products on a nationwide basis. Having obtained their monopoly position, the Defendants have aggressively misused their monopoly power to gain further competitive advantages and totally suppress competition in the relevant market by, among other things, such means as refusing to deal, entering into exclusive contracts, exercising preferential and restrictive arrangements among themselves, filing false statements with Manufacturers, failing to make full and complete disclosures to the SEC and their public shareholders in compliance with section 10(B)(5) of the federal securities laws, and refusing to provide necessary pedigree information so as to render goods lawfully resalable in all States of the United States. (Compl. ¶¶ 13-14.)
VI. The Motions Before the Court
Presently before the Court are four separate motions to dismiss pursuant to Rule 12(b)(6) made by the following defendants: (1) the Manufacturing Defendants; (2) the PWDs; (3) McKesson, Pasquale, and Ferreira (the "McKesson Defendants"); and (4) HDMA. For the reasons explained below, all four motions are granted in their entirety and the Complaint is dismissed.
I. Motion to Dismiss: Legal Standards
Rule 8(a) provides that a pleading shall contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court has recently clarified the pleading standard applicable in evaluating a motion to dismiss under Rule 12(b)(6).
First, in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), the Court disavowed the well-known statement in Conley v. Gibson, 355 U.S. 41, 45-46 (1957) that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." 550 U.S. at 562. Instead, to survive a motion to dismiss under Twombly, a plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face." Id. at 570.
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).
Id. at 555 (citations and internal quotation marks omitted).
More recently, in Ashcroft v. Iqbal, -- U.S. --, 129 S.Ct. 1937 (2009), the Supreme Court provided further guidance, setting forth a two-pronged approach for courts deciding a motion to dismiss. First, a court should "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." 129 S.Ct. at 1950. "While legal conclusions can provide the framework of a complaint, they must be supported by factual assumptions." Id. Thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 1949 (citing Twombly, 550 U.S. at 555)).
Second, "[w]hen there are well-pleaded factual allegations a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. at 1950. The Court defined plausibility as follows:
A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.'"
Id. at 1949 (quoting Twombly, 550 U.S. at 556-57) (internal citations omitted).
In deciding a motion to dismiss pursuant to Rule 12(b)(6), a court must look to the allegations on the face of the complaint, but may also consider "[d]ocuments that are attached to the complaint or incorporated in it by reference." Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007). See also Gillingham v. GEICO Direct, 2008 WL 189671, at *2 (E.D.N.Y. Jan. 18, 2008) (noting that a court considering a motion to dismiss "must limit itself to the facts stated in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint") (citation and internal quotation marks omitted).
II. Plaintiff's Claims Against the Manufacturing Defendants are Dismissed
A. Plaintiff's Claims Under Section 2 of the Sherman Act are Dismissed
Counts XVII and XVIII assert violations of Section 2 of the Sherman Act against the Manufacturing Defendants. Count XVII is entitled "Monopolization of the Relevant Geographic Wholesale Pharmaceutical Product Market (Refusal to Deal)" and alleges that the Manufacturing Defendants refused to supply product to Plaintiff in an effort to eliminate competition from Plaintiff and other wholesalers in violation of Section 2. (Compl. at 119.) Count XVIII is entitled "Monopolization of the Relevant Geographic Wholesale Pharmaceutical Product Market (Denial of an Essential Facility to Compete)" and alleges that the pharmaceutical products sold by the Manufacturing Defendants are "essential facilities" that Plaintiff cannot obtain through any other source and that the Manufacturing Defendants' refusal to provide Plaintiff with these essential facilities violates Section 2. (Id. at 121.)
There are two elements to a Section 2 claim for monopolization: (1) "the possession of monopoly power in the relevant market" and (2) "'the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.'" Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004) (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)). Here, the Complaint founders on both elements.
1. The Complaint Fails to Allege that the Manufacturing Defendants Possess Monopoly Power ...