Antitrust Update Blog

Turing, Daraprim, and Refusals to Deal with Generic Manufacturers

Drug company Turing Pharmaceuticals made headlines recently when it reportedly raised the price of Daraprim, used commonly by AIDS patients to fight life-threatening infections, from $13.50 to $750 per tablet. Amidst vociferous protest, the company agreed to reduce the price. But the attention garnered by media reports has led to some allegations that Turing may have run afoul of antitrust laws through a less-publicized aspect of its marketing of Daraprim: the elimination of certain distribution channels, including wholesalers and retailers.

The New York Attorney General is reported to be looking into whether that restriction in distribution was designed to frustrate potential generic manufacturers’ access to samples of Daraprim. The theory advanced by some is that thwarting access to samples, which is necessary for the development of a generic version of a brand name drug, could potentially delay entry of a competing generic. The FTC also has been asked to investigate.

As we have discussed before, the FTC has been hostile to alleged efforts by drug manufacturers to delay generic competition through “reverse payment” settlements in patent litigation. The FTC has also offered its input as amicus in litigation concerning a brand name manufacturer’s alleged efforts to frustrate a generic manufacturer getting access to drug samples. This issue was raised in a recent case brought by Mylan against Celgene in the District of New Jersey.

According to the parties, resolution of the issue turns on the proper interpretation of Supreme Court precedent concerning a monopolist’s refusal to deal with potential competitors. According to Celgene, a longstanding feature of that doctrine is that there is no “affirmative duty to deal,” a principle it said is enshrined most recently in Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, 540 U.S. 398 (2004). The only possible exception, Celgene argued in a motion to dismiss, arises in a case in which a monopolist terminates a longstanding course of dealing with the competitor and sacrifices short-term profits in order to achieve the goal of eliminating a rival, as in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985). In its amicus brief, the FTC countered that while demonstrating that an alleged monopolist is sacrificing profits may be essential to a viable “refusal to deal” claim, showing a prior course of dealing is not (but may serve as evidence of the former).

The District Court sided with Mylan, allowing the “refusal to deal” claim to go forward, but also permitted Celgene to seek an interlocutory appeal. The court certified the question of whether an allegation of a prior course of dealing is required to state such a claim. In doing so, it recognized “conflicting precedent and the absence of controlling law in the Third Circuit on this issue.” Nevertheless, the Third Circuit declined to hear the appeal.

Meanwhile, the facts surrounding Turing’s curtailment of its distribution channels are still being investigated. Although it appears that there was a prior course of dealing with retailers and wholesalers, the profit structure of the previous distribution method has yet to be detailed.