Warren General Hospital v. Amgen Inc.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 10-2778

_____________

WARREN GENERAL HOSPITAL,

Appellant

v.

AMGEN INC.

_____________

On Appeal from the United States District Court

for New Jersey

District Court No. 09-cv-04935

District Judge: The Honorable Stanley R. Chesler

Argued January 25, 2011

1

Before: FUENTES and CHAGARES, Circuit Judges, and

POLLAK, Senior District Judge

(Filed: June 14, 2011 )

Jeffrey L. Kodroff, Esq.

Jeffrey J. Corrigan, Esq. (Argued)

Spector, Roseman, Kodroff & Willis, P.C.

1818 Market Street, Suite 2500

Philadelphia, PA 19103

Counsel for Appellant

Michael R. Griffinger, Esq.

Michael F. Quinn, Esq.

Guy V. Amoresano, Esq.

Christopher Walsh, Esq.

Gibbons P.C.

One Gateway Center

Newark, NJ 07102

Bobby R. Burchfield, Esq. (Argued)

Raymond A. Jacobsen, Jr., Esq.

Jon B. Dubrow, Esq.

William Diaz, Esq.

McDermott, Will & Emry LLP

600 Thirteenth Street, N.W.

Washington, D.C. 20005



Hon. Louis H. Pollak, Senior Judge, United States

District Court for the Eastern District of Pennsylvania, sitting

by designation.

2

Counsel for Appellee

_______________

OPINION OF THE COURT

_______________

FUENTES, Circuit Judge.

This appeal raises the question of whether a hospital

that purchases certain pharmaceutical products from a

wholesaler middleman has standing under Illinois Brick Co.

v. Illinois, 431 U.S. 720 (1977), to bring an illegal tying claim

under federal law against the manufacturer of the

pharmaceutical drugs, Amgen. In Illinois Brick, the Supreme

Court held that only direct purchasers have standing under

Section 4 of the Clayton Act. In this case, plaintiff-appellant

Warren General Hospital argues that it falls squarely within

the direct purchaser rule, despite the fact that it purchases

Amgen‟s products through a middleman, because (1) it has a

direct relationship with Amgen and (2) it is the first

“overcharged” purchaser in the chain of distribution. The

District Court granted the defendant‟s motion to dismiss after

finding that the hospital was an indirect purchaser of

Amgen‟s products and thus lacked antitrust standing under

Illinois Brick. For the reasons that follow, we will affirm.1

1

The District Court also granted Amgen‟s motion to

dismiss on the alternative grounds that the Complaint failed to

allege a per se tying claim. Because we affirm the District

Court‟s dismissal of the complaint for lack of standing, we

will not reach this claim.

3

I.

The following narrative is adapted from facts set forth

in the Complaint. Because the District Court decided this

case on a motion to dismiss, we accept as true the factual

allegations in the Complaint and draw all reasonable

inferences in plaintiff‟s favor.

Plaintiff Warren General Hospital (“Warren General”)

is a Pennsylvania not-for-profit corporation that seeks to

represent members of a proposed class, composed of other

hospitals, clinics, and care centers, that purchase drugs

manufactured by defendant Amgen. Amgen is a corporation

with its principal place of business in California that

manufactures and sells pharmaceutical drugs. On September

25, 2009, Warren General filed an antitrust class action in the

District of New Jersey alleging that Amgen violated antitrust

law by “tying” the purchase of two of its drugs, Neupogen

and Neulasta, to the sale of another Amgen drug, Aranesp.

(Compl. ¶ 1).

The heart of plaintiff‟s claim is that Amgen used its

knowledge of medical insurance reimbursement rates to

leverage its market power in one market—the market for

White Blood Cell Growth Factor (“WBCGF”) drugs—to

impair competition in the market for Red Blood Cell Growth

Factor (“RBCGF”) drugs. Warren General alleges that

Amgen violated antitrust law by creating an unlawful scheme

that “tied” the purchase of Amgen‟s WBCGF drugs to the

purchase of its RBCGF drugs. Because of the low

4

reimbursement rates from medical payors the hospital

receives for WBCGF drugs, it is not economically feasible for

the hospital to purchase WBCGF drugs at the “market price.”

Amgen offered Warren General discounts on purchases of its

WBCGF drugs that were predicated on the hospital‟s

purchase of Amgen‟s more expensive RBCGF drug.

Although Amgen did not expressly require the hospital to

purchase its drugs, Amgen‟s monopoly of the WBCGF

market, combined with its rebate program, implicitly

“forc[ed] Plaintiff and class members to make substantial

purchases of Amgen‟s more-expensive RBCGF drug, rather

than the cheaper competing [drug] . . . in order to avoid losing

money on . . . purchases of Amgen‟s . . . WBCGF drugs.”

(Compl. ¶ 1). Absent this tying scheme, the hospital would

have preferred to buy cheaper RBCGF drugs offered by

Amgen‟s competitors.

Plaintiff‟s claims were brought under Section 1 of the

Sherman Act, 15 U.S.C. § 1 and Sections 3 and 4 of the

Clayton Act, 15 U.S.C. §§ 14, 15. “Tying is selling one good

(the tying product) on the condition that the buyer also

purchase another, separate good (the tied product).” Gordon

v. Lewistown Hosp., 423 F.3d 184, 213 (3d Cir. 2005).2

Substantively, plaintiff‟s claims are grounded in Section 1 of

the Sherman Act and Section 3 of the Clayton Act, which

proscribe tying schemes. See Town Sound and Custom Tops,

Inc. v. Chrysler Motors Corp., 959 F.2d 468, 473-74 (3d Cir.

2

A per se tying claim has three elements: “(1) a

defendant seller ties two distinct products; (2) the seller

possesses market power in the tying product market; and (3) a

substantial amount of interstate commerce is affected.” Town

Sound, 959 F.2d at 477.

5

1992) (en banc). Section 1 of the Sherman Act declares

“[e]very contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or commerce

among the several States, or with foreign nations . . . to be

illegal.” 15 U.S.C. § 1. Section 3 of the Clayton Act makes it

“unlawful for any person engaged in commerce . . . to . . .

make a sale or contract for sale of goods . . . or fix a price

charged therefor, or discount from, or rebate upon, such price,

on the condition, agreement, or understanding that the . . .

purchaser thereof shall not use or deal in the goods . . . of a

competitor or competitors of the lessor or seller, where the

effect . . . may be to substantially lessen competition or tend

to create a monopoly.” 15 U.S.C. § 14. Warren General

brings this action pursuant to Section 4 of the Clayton Act,

which provides a private right of action for “any person who

shall be injured in his business or property by reason of

anything forbidden in the antitrust laws.” 15 U.S.C. § 15(a).

Amgen manufactures two WBCGF drugs, known as

Neulasta and Neupogen. (Compl. ¶ 3). Neulasta and

Neupogen treat neutropenia, “a potentially life-threatening

white blood cell deficiency” . . . “which can compromise a

patient‟s immune system.” (Compl. ¶¶ 21-22). It is often a

side effect of chemotherapy, although it also occurs in other

contexts. (Compl. ¶ 21). Neulasta is the newer and more

powerful drug, and “is roughly equal to 7 injections of

Neupogen.” (Compl. ¶ 22). Warren General submits that

Amgen holds an effective monopoly in the WBCGF market.

(Compl. ¶ 24). Sales of Neupogen and Neulasta make up 98

percent of the market for WBCGF drugs; Neulasta alone

6

controls 86 percent of the WBCGF market share. 3 (Compl. ¶

24).

Amgen also manufactures a RBCGF drug called

Aranesp. (Compl. ¶ 2). Aranesp is used to treat severe

anemia of the type experienced by patients undergoing

dialysis or chemotherapy or receiving certain treatment for

human immunodeficiency virus (HIV). (Compl. ¶ 15).

Unlike the WBCGF market, Amgen faces real competition in

the RBCGF market, where Ortho Biotech Labs (“Ortho”)

sells a drug called Procrit. (Compl. ¶ 2). Procrit controls

approximately 70 percent of the RBCGF drug market.

(Compl. ¶ 2). Yearly sales of Aranesp, Procrit, Neulasta and

Neupogen are estimated to be several billion dollars. (Compl.

¶¶ 4, 20, 64).

Sometime in early 2003, Amgen crafted a rebate

program that offered the hospital and other members of the

putative class rebates on the price of WBCGF drugs that

correlated to purchases of Aranesp. Without the rebates,

Warren General “would lose money on every administration

of [Neupogen and Neulasta]” because “the cost of buying

[those drugs] . . . exceeded the amount of reimbursement such

purchasers received from Medicare and other health care

3

Another WBCGF drug, Leukine, is sold by Berlex

Laboratories. (Compl. ¶ 24). Leukine holds only a “very

small” share of the WBCGF market, a situation Warren

General attributes to the fact that Leukine is “administered

intravenously,” a “longer and more costly process.” (Compl.

¶ 24). In comparison, Amgen‟s WBCGF drugs are

administered by subcutaneous injection. (Compl. ¶ 24).

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payors.” (Compl. ¶ 6). Therefore, it became “commercially

unreasonable” for plaintiff to purchase Neulasta and

Neupogen without the rebates. (Compl. ¶ 6). The terms of

the rebate program ensured that the greater the quantity of

Aranesp that Warren General Hospital purchased, the greater

the value of the rebates it would receive on purchases of

Neulasta and Neupogen.

The hospital claimed two types of injuries: First, it

was “forced to pay more for Aranesp than they would have

paid for Procrit,” and second, the hospital “paid more for the

bundle of Aranesp and the WBCGF drugs than they would

have paid for the bundle of RBCGF and WBCGF drugs.”

(Compl. ¶ 7). Amgen changed its rebate program over time

so that Warren General had “to continue to purchase larger

amounts of Aranesp just to receive the same level of rebates

they had been receiving.” (Compl. ¶ 5). Meanwhile, sales of

Aranesp increased significantly: by 2005, sales of Aranesp

had increased by 38 percent and were valued at $840 million.

(Compl. ¶ 59).

The Complaint did not set forth the mechanics of the

hospital‟s WBCGF and RBCGF purchases. However, at the

motion to dismiss stage, it became clear that Warren General

Hospital in practice purchases Amgen‟s drugs through an

independent middleman wholesaler known as

AmerisourceBergen.

The totality of the Complaint‟s discussion of the

hospital‟s status as a direct purchaser is contained in

Paragraph 13:

8

During the class period, Plaintiff purchased

Aranesp, Neulasta and Neupogen directly from

Amgen, pursuant to a contract between Amgen

and Plaintiff. The contract was negotiated at

Warren Hospital between Plaintiff and an

Amgen representative, who continued to service

the account. The contract also required Amgen

to pay the rebated dollars directly to Plaintiff,

which it did.

(Compl. ¶ 13). The Complaint identified the relevant

contracts and agreements between the two parties: the

Amgen Portfolio Contract, the Momentum Rebate,

Momentum II, and the Enhanced Momentum II contracts.

(Compl. ¶ 27). Otherwise, the Complaint merely repeatedly

characterized Warren General Hospital and other members of

the putative class as “direct purchasers” of Amgen‟s drugs.

See (Compl. ¶ 14) (“Amgen . . . manufactures and sells

Aranesp [and] . . . Neupogen and Neulasta . . . to direct

purchasers such as hospitals, doctors and oncology clinics.”);

(Compl. ¶ 24) (“Amgen has a 98% share of the sales to direct

purchasers such as hospitals, doctors and oncology clinics . . .

.”); (Compl. ¶ 47) (“[T]here were no such caps on Aranesp

purchases, which further coerced direct purchasers such as

hospitals, doctors and oncology clinics.”); (Compl. ¶ 53)

(“Amgen economically coerced direct purchasers such as

hospitals, doctors and oncology clinics into purchasing their

RBCGF product.”); (Compl. ¶ 60) (“Amgen‟s efforts to use

its monopoly power in the WBCGF drug market to coerce

direct purchasers such as hospitals, doctors and oncology

clinics into buying substantial amounts of Aranesp caused

those purchasers to substantially overpay . . . . ”); (Compl. ¶

70) (“Plaintiff brings this action . . . as [a] representative of a

9

[c]lass of all direct purchasers . . . .”).

Amgen filed a motion to dismiss on the ground that

Warren General lacked antitrust standing under Illinois Brick,

which permits only direct purchasers to advance antitrust

claims under Section 4 of the Clayton Act. The District Court

granted Amgen‟s motion and dismissed the Complaint in its

entirety on the ground that Warren General Hospital was not

a “direct purchaser” within the meaning of Illinois Brick.

The District Court noted that the Complaint did not

identify the role played by the wholesaler and found that it

was appropriate to rely on extrinsic evidence, namely the four

contracts and agreements upon which the Complaint relied.4

“[T]he parties agree[d] that, as documents explicitly referred

to and relied on by the Complaint, the contracts may be

considered by the Court on this motion to dismiss, even

though the documents are extraneous to the Complaint.”

Warren Gen. Hosp. v. Amgen Inc., 2010 WL 2326254, *1 n.2

(D.N.J. June 7, 2010). After examining the contracts

identified in the Complaint, the District Court found that

Warren General purchased Amgen products through a

wholesaler known as AmerisourceBergen. Id. at *1. The

court described the relationship between the plaintiff, the

defendant, and the wholesaler as follows:

4

As a general rule, “a district court ruling on a motion

to dismiss may not consider matters extraneous to the

pleadings.” West Penn Allegheny Health Sys., Inc. v.

UPMC, 627 F.3d 85, 97 (3d Cir. 2010) (internal quotation

marks and citations omitted). However, “a limited exception

exists for documents that are integral to or explicitly relied

upon in the complaint.” Id. (same).

10

Warren General and other end users of the

drugs transacted their purchases from Amgen

pursuant to contracts identified in the

Complaint as the Amgen Portfolio Contract

(“APC”), Momentum Rebate, Momentum II

and Enhanced Momentum II. (Compl., ¶ 27.)

The contracts are negotiated by a Group

Purchasing Organization (“GPO”) on behalf of

member hospitals. The Enhanced Momentum II

contract, pursuant to which Warren General

made purchases, structures the transaction so

that Amgen sells Aranesp, Neupogen and

Neulasta to wholesalers, which in turn sell to

hospitals. Plaintiff acknowledges in its brief that

it purchased through wholesaler

[AmerisourceBergen].

Id. (footnotes omitted). In the medical field, GPOs “negotiate

standardized contracts with manufacturers and suppliers of

medical devices on behalf of their members.” Id. at *1 n.3

(citation and quotation marks omitted). The District Court

concluded that the Complaint‟s characterization of Warren

General as a “direct purchaser” was “squarely contradicted by

the purchase contracts on which the Complaint relies” which

“demonstrate that Warren General pays a wholesaler, not

Amgen for the products based on prices which have been set

by the wholesaler.” Id. at *3. Under these circumstances,

“the written instrument controls.” Id. (citing ALA, Inc. v.

CCAir, Inc., 29 F.3d 855, 859 n.8 (3d Cir. 1994)).

After reviewing the Illinois Brick case law, including a

Ninth Circuit case with similar facts, Delaware Valley

Surgical Supply, Inc. v. Johnson & Johnson, 523 F.3d 1116,

11

1123-24 (9th Cir. 2008), the District Court held that the

hospital purchased Amgen‟s drugs through

AmerisourceBergen and thus was an indirect purchaser barred

from asserting this illegal tying claim. The court found that

the Complaint‟s characterization of the plaintiff as a “‟direct

purchaser‟ merely parrots the Illinois Brick requirement,

without providing any factual basis.” Id. at *3. Dismissal of

the Complaint in its entirety followed.5 Id. at *7.

Warren General filed this timely appeal on June 14,

6

2010.

II.

Our review of a district court‟s dismissal of a

complaint for failure to state a claim is plenary. 7 Lum v.

5

The District Court also rejected the possibility that

Warren General fell under the cost-plus exception to Illinois

Brick. Plaintiff does not appeal that conclusion.

6

We have jurisdiction over an appeal from a final

decision of the district court pursuant to 28 U.S.C. § 1291.

7

The District Court described Amgen‟s motion to

dismiss as a motion for failure to state a claim and ultimately

dismissed the complaint for lack of statutory standing. For

purposes of our review, this distinction is irrelevant. Under

most circumstances, “[a] dismissal for lack of statutory

standing is effectively the same as a dismissal for failure to

state a claim.” Baldwin v. Univ. of Pittsburgh Med. Ctr., 636

F.3d 69, 73 (3d Cir. 2011); see also Maio v. Aetna, Inc., 221

12

Bank of America, 361 F.3d 217, 223 (3d Cir. 2004). “The

issue of antitrust standing is a legal issue, over which we

exercise plenary review.” McCarthy v. Recordex Serv., Inc.,

80 F.3d 842, 847 (3d Cir. 1996) (citing In re Lower Lake Erie

Iron Ore Antitrust Litig., 998 F.2d 1144, 1164 (3d Cir.

1993)).

In reviewing a dismissal under Federal Rule of Civil

Procedure 12(b)(6), “we accept all factual allegations as true,

construe the complaint in the light most favorable to the

plaintiff.” Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374

n.7 (3d Cir. 2002). Under Rule 12(b)(6), a motion to dismiss

may be granted only if, accepting all well-pleaded allegations

in the complaint as true and viewing them in the light most

favorable to the plaintiff, a court finds that plaintiff's claims

lack facial plausibility. Bell Atlantic Corp. v. Twombly, 550

U.S. 544, 555-56 (2007). This requires a plaintiff to plead

“sufficient factual matter to show that the claim is facially

plausible,” thus enabling “the court to draw the reasonable

inference that the defendant is liable for misconduct alleged.”

Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.

2009) (internal quotation marks and citation omitted). After

Twombly and Ashcroft v. Iqbal, --- U.S. ---, 129 S. Ct. 1937

(2009), “conclusory or bare-bones allegations will no longer

survive a motion to dismiss: threadbare recitals of the

elements of a cause of action, supported by mere conclusory

statements, do not suffice.” Fowler, 578 F.3d at 210 (internal

quotation marks and citation omitted). While the complaint

“does not need detailed factual allegations . . . a formulaic

F.3d 472, 482 n.7 (3d Cir. 2000). Our standard of review is

the same in either case. Baldwin, 636 F.3d at 73.

13

recitation of the elements of a cause of action will not do.”

Twombly, 550 U.S. at 555.

On appeal, Warren General Hospital argues that the

District Court erred in finding that it lacked standing under

Illinois Brick to pursue an illegal tying claim. Warren

General urges us to find that it is a “direct purchaser” within

the meaning of Illinois Brick. Warren General does not frame

this argument as one of creating an “exception” to Illinois

Brick; on the contrary, it expressly disavows that approach.

Warren General advances two other arguments. First, it

maintains that the mechanics of the purchasing relationship

between itself, the wholesaler, and Amgen reveal that, in fact,

it is the direct purchaser of Amgen‟s pharmaceutical

products. Alternatively, Warren General contends that it has

direct purchaser standing under Illinois Brick because it is

“the first and only party in the distribution chain to be injured

by Amgen‟s tying scheme.” (Appellant Br. 35).

We find it useful to begin by reviewing the origins of

the direct purchaser doctrine. Section 4 of the Clayton Act

provides that “any person who shall be injured in his business

or property by reason of anything forbidden in the antitrust

laws may sue . . . in any district court of the United States in

the district in which the defendant resides or is found or has

an agent, without respect to the amount in controversy, and

shall recover threefold the damages by him sustained, and the

cost of suit, including a reasonable attorney‟s fee.” 15 U.S.C.

§ 15. The Supreme Court has developed two limitations on

Section 4. See Merican, Inc. v. Caterpillar Tractor Co., 713

F.2d 958, 962-63 (3d Cir. 1983). The first restriction, the

“direct purchaser rule,” limits antitrust actions to suits

brought by parties that are the direct purchasers of the

14

product. See generally Illinois Brick v. Illinois, 431 U.S. 720

(1977). The second limitation asks whether the “injuries [are]

too remote [from an antitrust violation] to give them standing

to sue for damages under § 4.” Blue Shield of Va. v.

McCready, 457 U.S. 465, 476 (1982) (bracketing in

original).8 In this appeal, only the first limitation is at issue.

The direct purchaser rule was first considered by the

Supreme Court in Hanover Shoe, Inc. v. United Shoe Mach.

Corp., 392 U.S. 481 (1968). There, the namesake shoe

manufacturer brought suit against a manufacturer and

distributor of shoe machinery, alleging that the manufacturer

had illegally monopolized the shoe industry, in violation of

Section 2 of the Sherman Act. Id. at 483-84. The defendant

argued that the plaintiff lacked standing to sue under Section

4 of the Clayton Act because the plaintiff had effectively

“passed on” any injury to its customers.9 Id. at 488 n.6. The

8

This is in addition to, and distinct from, the

constitutional requirement of injury in fact. See Associated

Gen. Contractors v. Cal. State Council of Carpenters, 459

U.S. 519, 535 n.31 (1983).

9

In general, “[p]assing on describes the action of an

overcharged buyer who passes the extra expense on to those

who buy from him.” In re Sugar Industry Antitrust Litig.,

579 F.2d 13, 16 n.4 (3d Cir. 1978) (internal quotation marks

omitted). The “passing-on” theory has been invoked in one

of two ways: “Defensive passing on refers to efforts by

antitrust defendants to show that a particular plaintiff was not

injured because he had foisted the inflated price onto his own

customers. Offensive passing on is used to characterize

plaintiffs' strategy proving that an overcharge was imposed

15

Supreme Court rejected that defense, finding that only the

direct purchaser of an illegally overcharged good, and not

others in the chain of manufacturing or distribution, is the

party “injured” within the meaning of Section 4. Id. at 489-

91. The Court based its decision on two conclusions: (1) if

indirect purchasers were permitted to bring antitrust suits, the

offer of proof alleging injury and the extent of that injury

would become extremely complicated, id. at 491-93, and (2)

because indirect purchasers would have “only a tiny stake in a

lawsuit” and have fewer incentives to sue, a doctrine that

allowed only indirect purchasers to bring suit would enable

antitrust violators to “retain the fruits of their illegality,” id. at

493-94.

Illinois Brick tackled the next logical question: may

an indirect purchaser bring suit against an antitrust violator

on the ground that the overcharge cost was passed on to him

by the direct purchaser? 431 U.S. at 726. In that case, the

defendant was a brick manufacturer and distributor who sold

bricks to masonry contractors, who then in turn submitted

bids (relying on those bricks) to general contractors. Id.

These general contractors then created and submitted bids to

final consumers, like the State of Illinois, who became the

indirect purchaser of the bricks. Id. The State of Illinois,

representing a number of customers, sued the original

manufacturer of the bricks under Section 4 of the Clayton Act

alleging that the brick manufacturer had engaged in an illegal

price-fixing conspiracy. Id. at 726-27. The Supreme Court

held that Illinois, which purchased the bricks following “two

upon them by buyers closer to the defendant in the chain of

distribution.” Id. (internal quotations omitted).

16

separate levels in the chain of distribution,” id. at 726, was an

indirect purchaser without standing, id. at 735.

Illinois Brick rests on three policy considerations. The

first policy rationale that the Court drew on was the “serious

risk of multiple liability for defendants.” Id. at 730. The

Court found that permitting the offensive use of the pass-on

theory without the defensive use (prohibited in Hanover

Shoe) would “create a serious risk of multiple liability for

defendants,” since defendants could be sued by indirect

purchasers and direct purchasers. Id. This would

“substantially increase[] the possibility of inconsistent

adjudications and therefore of unwarranted multiple liability.”

Id.

Next, the Court drew attention to the “evidentiary

complexities and uncertainties” involved in ascertaining how

much of the overcharge was “passed on” to the indirect

purchasers. Id. at 732. This problem, which constituted

“[t]he principal basis for the decision in Hanover Shoe,” was

also present in the Illinois Brick factual scenario. Id. at 731-

32. The calculations necessary to determine how much of the

overcharge had been “passed on” would be “long and

complicated” and would have to be “repeated at each point at

which the price-fixed goods changed hands before they

reached the plaintiff.” Id. at 732-33 (internal quotation marks

omitted). Therefore, “the difficulty of reconstructing the

pricing decisions of intermediate purchasers at each step in

the chain beyond the direct purchaser generally will outweigh

any gain in simplicity from not having to litigate the effects of

the passed-on overcharge on the direct purchaser‟s volume.”

Id. at 733 n.13. This is because of the “uncertainties and

difficulties in analyzing price and out-put decisions in the real

17

economic world rather than an economist‟s hypothetical

model.” Id. at 731-32 (internal quotation marks omitted).

Finally, the Court also examined the third policy

rationale: the need for effective enforcement of antitrust law.

Id. at 733-34. Relying on Hanover Shoe, the Court explained

that “the antitrust laws will be more effectively enforced by

concentrating the full recovery for the overcharge in the direct

purchasers rather than by allowing every plaintiff potentially

affected by the overcharge to sue only for the amount it could

show was absorbed by it.” Id. at 735. Therefore, this

rationale also weighed against conferring direct purchaser

status.

Although the direct purchaser rule was grounded in

these policy rationales, the Supreme Court explicitly stated

that its rule was the result of statutory construction. Id. at

736-37 (explaining that “considerations of stare decisis weigh

heavily in the area of statutory construction” and a

“presumption of adherence to our prior decisions construing

legislative enactments would support our reaffirmance of the

Hanover Shoe construction of [Section 4]”). In making this

point, the Court manifested its unwillingness to recognize any

exceptions to the direct purchaser rule, id. at 743-45, warning

that “the process of classifying various market situations

according to the amount of pass-on likely to be involved and

its susceptibility of proof in a judicial forum would entail the

very problems that the Hanover Shoe rule was meant to

avoid,” id. at 744-45.

The final case in this trilogy is Kansas v. UtiliCorp

United, Inc., 497 U.S. 199 (1990). In UtiliCorp, several

public utilities brought suit against a pipeline company and

18

natural gas producers under Section 4 of the Clayton Act,

alleging that the defendants conspired to inflate the price of

the natural gas supplied to public utilities. Id. at 204-05. The

states of Kansas and Missouri, acting as parens patriae,

asserted the same claims on behalf of all persons residing in

the states who purchased the gas. Id. at 204. The defendants

argued that the utility companies—the direct purchasers of

the gas—lacked standing to bring suit because state and

municipal regulations ensured that the utility companies had

“passed on” 100 percent of the alleged overcharge to their

customers. Id. at 205. The states argued that the residential

customers should have standing to bring suit because none of

the policies underlying Hanover Shoe or Illinois Brick were

implicated and because the customers bore the full cost of the

price-fixing conspiracy. Id. at 208.

The Supreme Court acknowledged that “the rationales

of Hanover Shoe and Illinois Brick may not apply with equal

force in all instances” but held that it was “inconsistent with

precedent and imprudent in any event to create an exception

for regulated public utilities.” Id. With regard to the states‟

argument that there would be no litigation over the

apportionment of the overcharge because they “prove the

exact injury to the residential customers,” id., the Court found

that this argument “oversimplified the apportionment

problem,” id. at 209. First, the nature of market forces meant

it was possible that the overcharge still injured the utility,

“even if the utility raise[d] its rates to offset its increased

costs.” Id. Second, “[e]ven if, at some point, a utility can

pass on 100 percent of its costs to its customers, various

factors may delay the passing-on process,” and thus the utility

is also injured by the defendant‟s actions. Id. at 210. The

states also argued Illinois Brick‟s second policy rationale, the

19

risk of multiple recoveries, was inapplicable because the

plaintiffs sought different damages, that is, the residents

“would recover the amount of the overcharge and the utilities

would recover damages for their lost sales.” Id. at 212-13.

The Court roundly rejected this argument, noting that the

“case already ha[d] become quite complicated” and

“involve[d] numerous utilities and other companies . . . under

federal, state, and municipal regulation” and had the potential

to expand to other direct purchasers and unrepresented

consumers. Id. at 213. Any “expansion of the case would

risk the confusion, costs, and possibility of error inherent in

complex litigation.” Id. Finally, the Court concluded by

dismissing the argument that suits by indirect purchasers are

more effective at “promot[ing] the vigorous enforcement of

the antitrust laws.” Id. at 214.

III.

A.

We now turn to Warren General Hospital‟s first

argument: that, in practice and based on the facts in the

Complaint and its cited agreements, the hospital is the direct

purchaser of Amgen‟s products under Illinois Brick. The

hospital argues that the District Court “improperly exalted

form over substance in failing to look beyond the existence of

a wholesaler and ignoring many other facts that are evidence

of [Warren General‟s] purchaser status,” and urges us to hold

that the District Court erred when it found that the hospital

was an indirect purchaser. (Appellant Br. 26).

In support, the hospital directs our attention to the

following features of its relationship with Amgen: (1)

20

“Amgen required [Warren General] to negotiate the purchase

requirements, rebates and thus net prices for Aranesp,

Neulasta, and Neupogen directly with Amgen”, id. at 26-27;

(2) Amgen required Warren General to “only communicate

directly with Amgen on the net costs and on any other issue

regarding these drugs”, id.; (3) the contracts between Warren

General and Amgen were negotiated at the hospital; (4) the

contracts were serviced by an Amgen representative; (5) the

costs and rebate amounts were set by Amgen; (6) the rebate

opportunities for Warren General were not contingent on

AmerisourceBergen‟s purchases; and (7) Amgen paid the

rebates directly to Warren General.

After considering the Complaint, the contracts and

documents referred to therein, and the parties‟ arguments on

appeal, we conclude that the District Court correctly

determined that plaintiff was an indirect purchaser of

Amgen‟s products and, therefore, the Complaint failed to

allege a cause of action under Rule 12(b)(6). The mechanics

of the transactions between Warren General, Amgen, and

AmerisourceBergen reveal Warren General to be an indirect

purchaser of Amgen‟s WBCGF and RBCGF drugs. First,

when Warren General wants to purchase Amgen‟s WBCGF

and RBCGF drugs it places its order through

AmerisourceBergen. Accordingly, AmerisourceBergen

charges Warren General for its order. Second,

AmerisourceBergen maintains the right to set the price of the

drugs it sells, and thus AmerisourceBergen‟s price is not

necessarily the price it paid Amgen. Third, Warren General

physically takes delivery of the shipment from

AmerisourceBergen. Fourth, Warren General pays

AmerisourceBergen directly; it transmits no funds to Amgen.

21

We agree that the hospital is “the immediate buyer”

from AmerisourceBergen, and does not purchase directly

from the “alleged antitrust violators.” UtiliCorp, 497 U.S. at

207. The purchases go through at least one other stage in the

chain of distribution before reaching Warren General, and

therefore the situation before us is akin to the facts in

UtiliCorp and Illinois Brick. There are no allegations that

AmerisourceBergen is controlled or owned by Amgen and

thus part of the conspiracy; AmerisourceBergen is a publicly

traded company. (Appellee Br. 12). In light of this record,

there is no way of getting around the conclusion that Warren

General is the second purchaser in the chain of distribution.

The facts that Warren General marshals in its support

do not persuade us otherwise. We assume the truth of the

Complaint‟s allegations that Amgen and Warren General

negotiated the value of the rebates directly, that those

negotiations took place on the hospital‟s property, that

Warren General communicated exclusively with Amgen

about any cost and issues relating to the drugs, that Warren

General was “serviced” by an Amgen representative, and that

Warren General‟s “rebate opportunities” were not contingent

on AmerisourceBergen‟s purchases. Nevertheless, these facts

do not transform Warren General into a direct purchaser. At

best, they reveal that there were some direct interactions

between Amgen and the hospital relating to the rebate

program and the volume of Amgen drugs the hospital

required.

The only direct financial transaction between Amgen

and Warren General was Amgen‟s payment of the rebates

directly to Warren General. Even this financial transaction

does not confer direct purchaser standing on the hospital. The

22

value of the rebates was transmitted after the purchases had

concluded. The key question in an illegal tying claim is

whether the plaintiff purchased the tied product from the

antitrust defendant. In this case, the hospital simply did not.

The situation is similar to one that arises when a

customer buys, for example, a bottle of shampoo from a

supermarket. The shampoo manufacturer may offer a rebate

to the customer that the customer must submit directly to the

manufacturer. Yet it cannot be said that the customer

purchased the shampoo from the manufacturer just because it

subsequently received a rebate from the manufacturer. The

customer paid the price of the shampoo directly to the

supermarket and received the shampoo from the supermarket.

The customer is an indirect purchaser of the shampoo even if

the manufacturer set the price of the rebate or communicated

with the customer regarding his purchase.

In analyzing the mechanics of the purchasing

relationship between Amgen, Warren General, and

AmerisourceBergen, our decision in Howard Hess Dental

Laboratories Inc. v. Dentsply International, Inc., 424 F.3d 363

(3d Cir. 2005), is instructive. In that case, the plaintiffs were

dental laboratories that manufactured dentures using artificial

teeth made by Dentsply. Id. at 366. The plaintiffs brought a

class action on behalf of themselves and other laboratories

that manufactured dentures, asserting that Dentsply and its

dealers conspired to monopolize and fix prices in violation of

Section 2 of the Sherman Act and Sections 3 and 4 of the

Clayton Act. Id. The complaint alleged that the laboratories

“purchased [the teeth] through Dentsply Dealers”. Id. at 372.

We held that the dental laboratories were indirect purchasers

of Dentsply‟s products and thus lacked standing under Illinois

Brick. Id. at 371. Plaintiffs also sought direct purchaser

23

standing “for teeth drop shipped directly from Dentsply to the

labs.”10 Id. at 372. With regard to that allegation, we held

that plaintiffs could not “avoid Illinois Brick by claiming they

were direct purchasers of drop shipments when their

complaint specifically alleges that they did not directly

purchase from Dentsply.” Id. at 372-73.

Moreover, even assuming that “some of the teeth are

drop shipped directly from Dentsply,” that did not change

“the economic substance of the transaction.” Id. at 373. The

facts still made out that the laboratories were indirect

purchasers because:

[T]he dealers still make the sale to Plaintiffs

and Dentsply makes the sale to the dealers.

Plaintiffs pay the dealers their usual price, the

dealers take their profit, and then the dealers

pay Dentsply. While it is true that the dealers

do not take physical possession of the teeth,

this is nothing but a formal difference from the

typical transaction. Thus, even as to teeth drop

shipped directly from Dentsply to the labs,

Plaintiffs are indirect purchasers potentially

subject to Illinois Brick.

10

Drop shipping occurs when “a dealer does not have

certain teeth in stock or could not fulfill a [customer]‟s order

for some other reason and asks Dentsply to ship the teeth

directly to a [customer]. When teeth are drop shipped, the

dealer never has physical custody of them, but it does bill the

[customer] for the teeth, collect payments from the

[customer], and pay Dentsply.” Howard Hess, 424 F.3d at

367.

24

Id. at 373 (internal citation omitted). The transactions

between Warren General, AmerisourceBergen, and Amgen

share similar features. AmerisourceBergen “make[s] the sale

to Plaintiff[]” while the antitrust defendant “makes the sale to

the dealer[].” Warren General pays the middleman its price,

who “take[s] [its] profits,” and finally AmerisourceBergen

“pay[s]” Amgen. Id. Moreover, Warren General takes

“physical possession” of the drugs from AmerisourceBergen,

and unlike the situation in Howard Hess, there are no direct

shipments between Amgen and the hospital.

Warren General maintains that the Enhanced

Momentum II Contract, which is cited in the Complaint,

reveals the existence of a contract “between Amgen and

[Warren General] for the purchase of Amgen‟s drugs.”

(Appellant Br. 29) (emphasis added). The Enhanced

Momentum II Contract, dated March 31, 2005, sets forth the

WBCGF “Rebate Opportunit[ies]” available to Warren

General based on its net purchases of RBCGF. (JA 220).

Again, there is no doubt that Amgen and Warren General had

some direct interactions. However, in our view the Enhanced

Momentum II Contract does not confer direct purchaser

standing on Warren General. The Enhanced Momentum II

Contract sets forth the parameters of the rebate program. It is

not a contract for purchases. Moreover, Warren General‟s

status as an indirect purchaser is borne out by another

document cited in the Complaint, the Amgen Portfolio

Contract. This sample letter agreement sets forth the

standards for “physician practice[s]” to participate in

Amgen‟s rebate program. (JA 43). The agreement reveals

the role of the middleman wholesaler as an intermediary

between Amgen and Warren General. The agreement notes

25

that qualifying physician practices are represented by “a

group purchasing organization” which “acts on behalf of its

member[s].” (JA 43). It notes that the physician practices

and the GPO have a separate agreement and states the

physician practice “has engaged Purchasing Group as an

exclusive agent to provide purchasing opportunities for its

eligible members.” (JA 43) (emphasis added).

On appeal, Warren General Hospital also asks us to

consider several documents that the District Court

“overlooked.” (Appellant Br. 30). This argument is

unavailing. As a threshold matter, we note that, because

standing was decided at the motion to dismiss stage, the

District Court properly limited itself to the pleadings

contained in the Complaint and the agreements cited therein.

See West Penn, 627 F.3d at 97. Moreover, assuming that the

District Court had considered these documents, they would

not have resulted in a different outcome.11

11

This evidence consists of: (1) a sample 2004

“Physician Clinic Agreement,” referring to the “purchase” of

the drugs by “Physician Practice[s];” (2) a 2008 “Physician

Clinic Agreement” stating that any conflict between the

clinics relating to “any purchaser order or invoice” was

controlled by the clinic‟s Agreement with Amgen; (3) a 2007

letter from Amgen to the Centers for Medicare and Medicaid

Services discussing a proposed rule that included an

attachment where Amgen referred to patients as “customers”;

(4) a 2007 letter sent by Amgen to class members that address

doctors, clinics, and hospitals as “valued customer[s],” and

(5) a template contract between Amgen and a sample clinic

that refers to “purchasing opportunities” for eligible members

and “purchases” by physicians. (Appellant Br. 31-33)

26

Finally, Warren General Hospital directs us to two

cases that, in its view, reveal that a more flexible approach in

determining direct purchaser status is appropriate. See

Gulfstream III Assocs., Inc. v. Gulfstream Aerospace Corp.,

(emphases omitted) (internal quotation marks omitted).

Warren General also draws our attention to statements

Amgen made in Ortho Biotech Products, LP., v. Amgen Inc.,

Case No. 05-cv-4850 (D.N.J.), an antitrust suit Aranesp

manufacturer Ortho brought against Amgen.

These various documents do not give rise to direct

purchaser standing. First, there is no allegation that Warren

General was a party to these agreements or contracts.

Moreover, although the contracts show that Amgen permitted

physician clinics to purchase products either directly from

Amgen or from “Authorized Wholesalers,” Warren General

concedes that all of its purchases were through a wholesaler.

Therefore, even if we considered those agreements, they

would not support the hospital‟s position. Second, we

question the relevance of Amgen‟s characterization of its

relationship with class members in promotional materials or

correspondence to an agency in a different context. Even if

Amgen considered hospitals and clinics to be “customers,”

that would not negate the fact that Amgen sold its products to

hospitals and clinics through an intervening customer—the

middleman agency. We find for the same reason that

Amgen‟s use of the word “customer” or “purchaser” in

describing hospitals and clinics, or its failure to mention

AmerisourceBergen in responding to Ortho‟s complaint in a

separate lawsuit, does not contradict our conclusion that

Warren General is an indirect purchaser.

27

995 F.2d 425 (3d Cir. 1993); In re Mercedes-Benz Anti-Trust

Litig., 364 F. Supp. 2d 468 (D.N.J. 2005). These cases are

distinguishable. In Gulfstream III, the plaintiff signed an

agreement to purchase an aircraft, but assigned its purchase

agreement to another party before the plane was ready for

delivery. 995 F.2d at 430. We held that the plaintiff was a

direct purchaser under Illinois Brick because, despite

subsequently assigning that right to another party, he had

signed the original purchase agreement and thus “remained

contractually bound to pay the [aircraft‟s] total purchase price

up to and including the date of delivery.” Id. Thus, he began

his relationship as a direct purchaser; the issue was whether

he retained that status.

Whether Mercedes-Benz was properly decided or not,

it is also distinguishable. There, plaintiffs were lessees of

Mercedes-Benz automobiles who sued Mercedes-Benz and its

dealers for price-fixing the costs of repair parts. 364 F. Supp.

2d at 476-78. The district court held that the lessees were

direct purchasers because of “[t]he mechanics of how a

leasing transaction is initiated,” id. at 480, namely the car

lessees negotiated the monthly lease payments directly with

the dealership, made its first payments to the dealership, and

received the car from the dealership. Id. at 472. In the matter

before us, Warren General did not begin its relationship with

Amgen as a direct purchaser. Although Warren General and

Amgen negotiated the terms of the rebate contracts, plaintiff

never placed product orders with Amgen, never paid Amgen

directly, and never received any drugs directly from Amgen.

For these reasons, we hold that Warren General

Hospital is an indirect purchaser of Amgen‟s WBCGF and

RBCGF drugs and therefore the District Court did not err in

28

dismissing plaintiff‟s complaint for lack of standing. This

result is in line with numerous other cases from this Court

recognizing that standing lies with the direct purchaser and

not any subsequent downstream purchaser. See Recordex, 80

F.3d at 852 (plaintiff clients whose attorneys had purchased

copies of clients‟ records from photocopying services were

indirect purchasers of the photocopies, and thus did not have

standing under “the absolute bar of the „direct purchaser‟

rule”); Link v. Mercedes-Benz of N. Am., Inc., 788 F.2d 918,

929-33 (3d Cir. 1986) (customers of dealerships who alleged

that Mercedes-Benz had forced its dealers to purchase parts

for repairing vehicle at fixed prices were indirect purchasers

of Mercedes-Benz parts); Mid-West Paper Prods. Co. v.

Cont‟l Grp., Inc., 596 F.2d 573 (3d Cir. 1979) (plaintiffs that

purchased “consumer bags” from wholesaler middleman

lacked standing to bring an antitrust action against

manufacturer of bags).

B.

We now turn to Warren General Hospital‟s argument

that it has antitrust standing because it is the first injured party

in the chain of distribution. The hospital submits that Illinois

Brick—and the policies underlying the direct purchaser

rule—confer standing on the first harmed direct purchaser,

not just the direct purchaser. Applying that theory here, the

hospital advances the following facts: (1) Warren General

bore the full cost of the overcharge caused by Amgen‟s rebate

scheme; (2) the wholesaler was not affected by the

overcharge and was never subject to or targeted by the illegal

tying scheme; and (3) the wholesaler was not injured by

Amgen‟s actions. Warren General further submits that,

29

because AmerisourceBergen was not injured by Amgen‟s

actions, it would not have standing to sue Amgen.

It is a basic tenet of antitrust law that a cause of action

will not lie if the plaintiff has not been harmed. See

Gulfstream III, 995 F.2d at 429. However, the hospital‟s

argument conflates the different components of antitrust

standing: the statutory requirement contained in Section 4 that

the plaintiff be the direct purchaser as set forth in Illinois

Brick and the requirement that the plaintiff have suffered a

recognizable injury. See McCready, 457 U.S. at 476

(“Analytically distinct from the restrictions on the § 4 remedy

recognized in . . . Illinois Brick, there is the conceptually

more difficult question of which persons have sustained

injuries too remote [from an antitrust violation] to give them

standing to sue for damages under § 4.”) (bracketing in

original) (internal citation and quotation marks omitted); see

also Gulfstream III, 995 F.2d at 429 (“[T]he focus of the

doctrine of „antitrust standing‟ is somewhat different from

that of standing as a constitutional doctrine. Harm to the

antitrust plaintiff is sufficient to satisfy the constitutional

standing requirement of injury in fact, but the court must

make a further determination whether the plaintiff is a proper

party to bring a private antitrust action.”) (quoting Associated

Gen. Contractors v. Cal. State Council of Carpenters, 459

U.S. 519, 535 n.31 (1983)).

The question in this case is whether Warren General is

a direct purchaser under Illinois Brick, and we hold that it is

not. Hanover Shoe and its progeny did not resolve what party

was a direct purchaser by calculating exactly where the harm

lay. In fact, the Court‟s discussion in those cases of the

policy rationales underpinning the rule manifests the Court‟s

30

intent to avoid linking direct purchaser status to injury

calculations and determinations. In UtiliCorp, the consumer

plaintiffs also argued that the public utility (the direct

purchaser) had not been harmed by the antitrust defendant‟s

actions, and that consumers had borne the full brunt of the

injuries, thus justifying an exception to the Illinois Brick rule.

The Court highlighted the need to apply the rule consistently:

[T]he process of classifying various market

situations according to the amount of pass-on

likely to be involved and its susceptibility of

proof in a judicial forum would entail the very

problems that the Hanover Shoe rule was meant

to avoid. The litigation over where the line

should be drawn in a particular class of cases

would inject the same „massive evidence and

complicated theories into treble-damages

proceedings, albeit at a somewhat higher level

of generality.

In sum, even assuming that any economic

assumptions underlying the Illinois Brick rule

might be disproved in a specific case, we think

it an unwarranted and counterproductive

exercise to litigate a series of exceptions.

Having stated the rule in Hanover Shoe, and

adhered to it in Illinois Brick, we stand by our

interpretation of § 4.

497 U.S. at 216-17 (citations omitted).

In support of its more expansive reading of Illinois

Brick, Warren General directs us to Sports Racing Services,

31

Inc. v. Sports Car Club of America, Inc., 131 F.3d 874 (10th

Cir. 1997). Warren General submits that in Sports Racing,

“the plaintiff was not barred under Illinois Brick because he

was „the first person with a cause of action‟ under the illegal

tying scheme, and there was „no other person who could

assert a claim for illegal tying as a purchaser.‟” (Appellant

Br. 38). We are not persuaded by this reading of Sports

Racing, which in any case does not bind this Court. In the

section plaintiff relies on, the Tenth Circuit is describing the

direct purchaser cases as “recogniz[ing] standing . . . in the . .

. direct victim of the anticompetitive activity and the first

person with a cause of action.” Id. at 889. In describing the

Illinois Brick rule, the court was simply equating the “direct

victim” as the “first person with a cause of action.” Id. The

court‟s later discussion makes this clear: “The Illinois Brick

rule selects the better plaintiff between two possible types of

plaintiffs—direct purchasers and indirect purchasers. The

Court chose the direct purchaser primarily to simplify

damages determinations and limit the possibility of multiple

recovery against the defendant.” Id.

Moreover, the holding of Sports Racing does not

contradict our holding in this case. There, the plaintiff John

Freeman asserted both an illegal tying claim, based on the

defendant‟s tying of “a racer‟s purchase of [the defendant‟s]

racing services . . . to the purchase of cars and parts sold by

[the defendant‟s exclusive dealerships],” and a monopoly

claim alleging that the defendant created a monopoly in car

parts. Id. at 879. The Tenth Circuit agreed that Freeman was

“not a direct purchaser from defendants of the tied product

(the cars and parts)” but was a direct purchaser of the tying

product, the car racing services. Id. at 887. However, the fact

that Freeman bought the tied product from a third party was

32

not fatal to his tying claim, because the defendants required

Freeman to purchase the tied product “indirectly through a

[sub-dealership] supplied by [the defendant] rather than

through an independent source.” Id. Thus, this did not

present “a typical tying situation.” Id. In this case, of course,

Warren General buys neither the tying product nor the tied

product from Amgen; the facts show that the hospital buys

them directly from an “independent source.”

Finally, we find that the three policy rationales

sustaining the direct purchaser rule are present in this case.

Warren General argues that there is no risk of duplicative

recovery in this case, because AmerisourceBergen was not

injured by the illegal tying scheme and has no standing to sue.

However, we are not persuaded by plaintiff‟s assurances that

AmerisourceBergen was not injured by Amgen‟s rebate

program. The second policy rationale underlying the rule

relates to the “evidentiary complexities and uncertainties

involved in ascertaining the portion of the overcharge that the

direct purchasers had passed on to the various levels of

indirect purchasers.” Howard Hess, 424 F.3d at 369-70.

Warren General contends that we can easily determine how

much of the overcharge created by the illegal tying scheme

was “passed on” to the hospital: the entire cost of the

overcharge was passed on because AmerisourceBergen‟s role

was to set a market price for WBCGF and RBCGF drugs and

then process Warren General‟s orders. Therefore, so Warren

General contends, Amgen‟s rebate program only affected the

ultimate price that Warren General paid for the drugs.

This argument oversimplifies the injury calculation. In

its direct purchaser cases, the Supreme Court has consistently

emphasized the difficulty in calculating how market forces

33

work on the different purchasers and sellers in an economic

system. “The principal basis for the decision in Hanover

Shoe was the Court‟s perception of the uncertainties and

difficulties in analyzing price and out-put decisions in the real

economic world rather than an economist‟s hypothetical

model, and of the costs to the judicial system and the efficient

enforcement of the antitrust laws of attempting to reconstruct

those decisions in the courtroom.” Illinois Brick, 431 U.S. at

731-32 (internal citations and quotation marks omitted). In

UtiliCorp, the plaintiffs also argued that apportioning

damages would be simple; because the utility company

“passed on” 100 percent of the overcharge, its customers

were injured by the whole amount of the overcharge.

Although the Court seemed to agree that the apportionment

question was easier in that case, it nonetheless noted that the

apportionment calculation presented serious difficulties:

[W]e do not know whether the [plaintiff

UtiliCorp United, a public utility corporation]

could have raised its prices prior to the

overcharge. Its customers [the indirect

purchasers] may have been willing to pay a

greater price . . . . To the extent that [UtiliCorp

United] could have sought and gained

permission to raise its rates in the absence of an

overcharge, at least some portion of the

overcharge is being borne by it; whether by

overcharge or by increased rates, consumers

would have been paying more for natural gas

than they had been paying in the past. Because

of this potential injury, [UtiliCorp United] must

remain in the suit. If we were to add indirect

purchasers to the action, we would have to

34

devise an apportionment formula. This is the

very complexity that Hanover Shoe and Illinois

Brick sought to avoid.

497 U.S. at 210.

Because of the complicated interplay between market

forces, the possibility that the wholesaler was harmed by

defendant‟s actions exists even if the majority of the injury is

borne by the indirect purchaser. The prices charged by the

wholesaler are typically set by demand for the products it

sells. Mid-West Paper Prods., 596 F.2d at 584 (“As noted in

Hanover Shoe, “(a) wide range of factors influence a

company‟s pricing policies. . . . [P]ricing decisions are [also]

based on various other considerations, such as marketing

strategy and elasticity of demand.”). Therefore, when a

producer sets certain prices that change demand for its goods,

then the wholesaler‟s sales, prices, and profits may also be

affected. This is also true even though Warren General

received the earnings from the rebates after it paid for the

products, because Amgen would need to determine how high

a price the market would tolerate, and what to set the rebates

at in order to maximize purchases of its RBCGF and WBCGF

drug. All of these factors would make it difficult to

determine the extent of Warren General and

AmerisourceBergen‟s injuries, and, as the UtiliCorp Court

explained, consistent application of the direct purchaser rule

is necessary to avoid being mired in these difficult

calculations. 497 U.S. at 211.

We find the Ninth Circuit‟s decision in Delaware

Valley Surgical Supply Inc. v. Johnson & Johnson, 523 F.3d

35

1116 (9th Cir. 2008) to be instructive.12 In that case, a

hospital that purchased Johnson & Johnson medical products

through a medical supply company brought price-fixing and

monopoly claims under Section 4 of the Clayton Act. Id. at

1118, 1122-23. The hospital was a member of a GPO; the

GPO negotiated an agreement with Johnson & Johnson

setting the prices for certain medical products on the

hospital‟s behalf. Id. at 1119. Using those prices, the

hospital negotiated its own contract with Johnson & Johnson,

but ultimately purchased the products through a separate

contract with a wholesaler. Id.

The Ninth Circuit rejected the hospital‟s argument that

this independent contractual relationship with Johnson &

Johnson gave it antitrust standing. Because the hospital

purchased the products through a GPO, the court was bound

by the “sensible and straightforward” “bright line rule” set

forth in Illinois Brick. Id. at 1122. For two other reasons, the

court also rejected the hospital‟s request for “a new rule . . .

12

Warren General has attempted to distinguish cases

arising from price-fixing antitrust claims from tying claims,

on the ground that the direct purchaser rule has less traction in

the latter. The direct purchaser rule has its origins in statutory

construction of Section 4 of the Clayton Act, Illinois Brick,

431 U.S. at 736-37. Therefore, as the hospital conceded at

oral argument, it applies here. See also Merican, 713 F.2d at

967 (refusing to limit Illinois Brick to cases of horizontal

price-fixing). To the extent that Warren General argues that

the harm caused by an illegal tying claim is distinct from the

harm caused by a price-fixing conspiracy, we find that

argument unpersuasive, given the possible injuries in this

case.

36

better attuned to . . . health care providers and

manufacturers.” Id. at 1123. First, it explained UtiliCorp

foreclosed the possibility of any “leeway to make a policy

determination on a case-by-case basis . . . when there are

special business arrangements.” Id. at 1124. Second,

conferring standing on the hospital would offend the policy

rationales underlying the rule. Contrary to the hospital‟s

assertions, the “distributor is not a completely irrelevant

economic actor” in the economic transaction, and therefore

the risk of multiple liability and complicated economic injury

calculations was present. Id. The price increases created by

the defendant‟s anticompetitive practices might affect the

demand for the products the wholesaler sells, even if the price

increase is borne by the indirect purchaser. Id. Apportioning

the effect of the overcharge would continue to “force courts

to engage in complex factual inquiries” that the direct

purchaser rule was created to avoid. Id.

Therefore, because of the possibility that

AmerisourceBergen was injured by Amgen‟s actions, we find

that the risk of multiple liability is also present. Moreover,

even if we agreed that the middleman purchaser was unable

or unwilling to bring a suit, that conclusion does not

necessarily weigh in favor of giving the indirect purchaser

standing. The Supreme Court confronted a similar possibility

in Illinois Brick, when it recognized the possibility that direct

purchasers would “refrain from bringing a treble-damages

suit,” in that case “for fear of disrupting relations with their

suppliers.” 431 U.S. at 746. Nonetheless, the Court found

that application of the direct purchaser rule was warranted,

because “on balance . . . the legislative purpose in creating a

group of private attorneys general to enforce the antitrust laws

. . . is better served by holding direct purchasers to be injured

37

to the full extent of the overcharge paid by them than by

attempting to apportion the overcharge among all that may

have absorbed a part of it.” Id. (internal quotation marks

omitted). In Merican, we were confronted with a situation

where the direct purchaser had executed an affidavit stating

that it had not suffered any injuries from the allegedly illegal

antitrust action. 713 F.2d at 968-99. Even there, we refused

to extend standing to the indirect purchaser in part because

Illinois Brick had “recognized . . . that it was possible that

direct purchasers might not sue their suppliers in all cases,”

yet still held that only direct purchasers had standing under

Section 4. Id. at 969.

Third, given the complexities of apportionment and

the possibility of multiple recovery, the third Illinois Brick

rationale, which prioritizes efficient enforcement of the

antitrust laws, also weighs in favor of applying the direct

purchaser rule.13

Ultimately, whether all of the policy rationales

underpinning Illinois Brick are exactly replicated in the case

before us is not dispositive. The UtiliCorp Court expressly

recognized that “[t]he rationales underlying Hanover Shoe

13

We take note of Warren General‟s argument that

AmerisourceBergen would not have standing to bring an

antitrust action under Section 4, because it was not injured by

Amgen‟s actions. However, that issue is not before us and

the existence or non-existence of AmerisourceBergen‟s

injuries was not considered by the District Court, thus there is

no record for us to review. Therefore, we do not find that

only a suit brought by Warren General would enforce the

antitrust laws.

38

and Illinois Brick will not apply with equal force in all cases.”

497 U.S. at 216. Yet even then, the rule applies. Id.

While we are sympathetic to Warren General‟s

complaints regarding Amgen‟s rebate program, our

examination of the principles animating Hanover Shoe,

Illinois Brick, and UtiliCorp confirm that application of the

Court‟s bright line rule is appropriate in this case.

IV.

For all of the foregoing reasons, the judgment of the

District Court is affirmed.

39