479 F.Supp.3d 31
S.D.N.Y.2020Background
- In August 2015 Vyera (a Phoenixus subsidiary) bought U.S. rights to Daraprim and immediately raised the price from $17.50 to $750 per tablet despite no patent protection.
- The FTC and seven states allege Vyera, Phoenixus, and individuals Martin Shkreli and Kevin Mulleady implemented a scheme to block generic competition by limiting access to finished Daraprim and its API (pyrimethamine).
- The Amended Complaint identifies three core practices: a restricted distribution system (contracts limiting who may buy Daraprim and quantity limits), exclusive supply agreements with API manufacturers, and data‑blocking agreements with distributors.
- Plaintiffs allege these practices prevented generic manufacturers from obtaining enough branded product for bioequivalence testing and from securing FDA‑approved API, delaying or deterring ANDA approvals and preserving the inflated price.
- FTC and states sued (federal Sherman Act §§1 & 2, FTC Act §13(b), multiple state statutes); defendants moved to dismiss; the court denied dismissal of all claims except the Pennsylvania UTPCPL claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FTC authority under §13(b) to sue in federal court | FTC alleged defendants were "is violating, or is about to violate" antitrust laws because the contractual scheme remained in effect and continued to harm competition | Defendants relied on Shire to argue §13(b) requires ongoing or impending conduct and here wrongdoing was past | Court: §13(b) applies — scheme and many contracts remained in effect at filing, giving FTC reason to believe violations were ongoing |
| New York Executive Law §63(12) equitable relief | NY AG seeks equitable relief for repeated or persistent illegality under §63(12) | Defendants argued no continuing violations were alleged | Court: Claim plausibly pleaded — repeated/persistent conduct alleged; denial of dismissal |
| Sherman Act §1 (concerted action; rule of reason) | Plaintiffs allege agreements among Vyera, distributors, and suppliers, plus "plus factors" (payments tied to price, communications, public admissions) to block entry | Defendants argue distributors/suppliers lacked motive/knowledge, and dealer refusal to deal is lawful absent agreement | Court: Complaint plausibly alleges concerted action and adverse competitive effect in relevant market; §1 claims survive pleading challenge |
| Sherman Act §2 (monopolization/maintenance) | Plaintiffs allege monopoly power in FDA‑approved pyrimethamine market and willful maintenance via exclusionary contracts and above‑market repurchases | Defendants claim no duty to deal and that conduct reflects lawful business choices | Court: Allegations plausibly plead willful maintenance of monopoly via anticompetitive means; §2 claims survive |
| Liability of Individual Defendants (Shkreli, Mulleady) under Sherman Acts | Plaintiffs allege individuals designed/implemented and continued to direct the scheme and benefited from it | Individuals argue corporate acts cannot be imputed absent separate individual agreement or proof they individually monopolized | Court: Individuals may be liable for participating/implementing corporate antitrust violations; pleadings sufficient to allege participation and intent |
| Pennsylvania UTPCPL (catchall fraud provision) | Plaintiffs invoke catchall (§201‑2(4)(xxi)) arguing conduct is deceptive/fraudulent | Defendants point to precedent narrowing UTPCPL so ordinary antitrust conduct is not per se actionable | Court: Dismissed UTPCPL claim — Amended Complaint fails to plead conduct that fits the UTPCPL residual definition of "fraudulent" or deceptive conduct |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- FTC v. Shire ViroPharma, Inc., 917 F.3d 147 (3d Cir. 2019) (§13(b) does not authorize suit for long‑past, completed misconduct)
- FTC v. Ind. Fed’n of Dentists, 476 U.S. 447 (1986) (FTC Act covers unfair methods of competition including Sherman Act violations)
- United States v. Apple, Inc., 791 F.3d 290 (2d Cir. 2015) (need to distinguish parallel conduct from concerted action; plus factors inquiry)
- New York ex rel. Schneiderman v. Actavis PLC (Namenda II), 787 F.3d 638 (2d Cir. 2015) (antitrust test for foreclosure and effect on competition)
- United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (rule of reason foreclosure analysis)
- Geneva Pharms. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485 (2d Cir. 2004) (exclusive supply agreements can freeze out generic competition)
- Monsanto Co. v. Stray‑Rite Service Corp., 465 U.S. 752 (1984) (limits on refusal‑to‑deal when conduct is concerted)
- United States v. Colgate & Co., 250 U.S. 300 (1919) (distinction between unilateral refusal to deal and concerted restrictions)
- Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) (monopoly power not unlawful absent anticompetitive conduct; duty‑to‑deal limitations)
- Liu v. Securities and Exchange Comm’n, 140 S. Ct. 1936 (2020) (equitable monetary remedies—disgorgement/restitution—may be awarded for wrongdoing)