In Re Cardizem CD Antitrust Litigation

ORDER NO. 12

MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS

EDMUNDS, District Judge.

Defendant Hoechst Marion Roussel, Inc. (“HMRI”), a wholly owned subsidiary of Defendant Hoechst Aktiengesellschaft (“Hoechst AG”), is the manufacturer of the brand name prescription heart drug Car-dizem CD which consists of a once-daily dosage of the chemical compound diltiazem hydrochloride. Cardizem CD is widely prescribed for the treatment of chronic chest pains (angina), high blood pressure (hypertension), and for the prevention of heart attacks and strokes. Until June 23, 1999, when Defendant Andrx Pharmaceuti

*623

cals, Inc. (“Andrx”) began to sell Cartia XT, the first generic bioequivalent to Car-dizem CD, Defendant HMRI had a monopoly in the $700-million-plus annual United States market for Cardizem CD and its generic bioequivalents.

These cases involve claims that the Defendants violated section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 , and various state antitrust and unfair competition statutes. Plaintiffs allege the following contract, combination or conspiracy in restraint of trade: Defendant Andrx developed a generic drug which is the bioequivalent to the Hoechst Defendants’ prescription drug Cardizem CD. Andrx’s generic drug was approved by the FDA for sale and could have entered the U.S. market on or about July 9, 1998. Andrx, however, did not enter the market at that time because it had agreed with its horizontal competitor, HMRI, that it would delay the entry of its generic version of Cardizem CD in exchange for,

inter alio,

non-refundable payments of $40 million per year from HMRI. Plaintiffs allege that this agreement is embodied in a September 24, 1997 document executed by Defendants HMRI and Andrx (the “HMRI/Andrx Agreement”).

The HMRI/Andrx Agreement was executed eight days

after

the FDA preliminarily approved Defendant Andrx’s generic drug as the first AB-rated generic bioequi-valent for Cardizem CD. It is alleged that, under the terms of the Agreement, Defendant Andrx agreed not to market its generic drug when it received FDA approval and not to transfer, assign, or relinquish its right to a 180-day exclusivity period that Andrx would enjoy once it finally did begin to market its generic version of Car-dizem CD, and Defendant HMRI paid Andrx $89.88 million, beginning on the date the Andrx product received FDA approval. Thus, it is alleged that the HMRI/ Andrx Agreement not only protected HMRI from competition from Andrx, but it also protected HMRI from competition from other generic competitors because Andrx agreed not to give up its FDA first-filer status, thus blocking and delaying other drug manufacturers from introducing generic versions of Cardizem CD in the United States market; i.e., Andrx’s delayed entry would postpone the start of its 180-day exclusivity period, and Andrx’s agreement not to give up or transfer its right to that 180-day period of exclusivity would preclude other generic competitors from entering the market until that 180-day exclusivity period expired.

After these actions were first filed in August 1998, Defendants’ HMRI/Andrx Agreement was widely publicized in the media, was condemned by public officials and health care payors injured by Defendants’ acts, and was investigated by the FTC.

1

As a result, Plaintiffs’ allege that, in June 1999, HMRI and Andrx terminated their Agreement, settled their patent infringement action, and Andrx began to market Cartia XT, its generic version of Cardizem CD.

In addition to the above, it is also alleged that Defendants have engaged in a continuing pattern of unlawful anticompeti-tive conduct to delay the introduction of generic bioequivalent versions of Cardizem CD in the United States. The targets have included, at varying times, co-Defendant Andrx, and Hoechst AG’s former joint venture partner, Biovail International Corporation (“Biovail”). The alleged pattern includes the Hoechst Defendants’ filing and continued prosecution of a baseless patént infringement action, breached agreements with Biovail, false misrepresentations made to the United States Food & Drug Administration (“FDA”), and manipulation of a Consent Decree with the United States Federal Trade Commission (“FTC”) which was designed to prevent the anticompetitive trade practices which are the subject of Plaintiffs’ suits.

*624

This matter is now before the Court on numerous motions brought by Defendants requesting dismissal of Plaintiffs’ complaints in this multidistrict antitrust litigation pursuant to Rules 12(b)(2) and (12)(b)(6) of the Federal Rules of Civil Procedure. At issue are: (1) State Law Plaintiffs’ Coordinated First Amended Class Action Complaints alleging that Defendants HMRI, Hoechst AG, and Andrx committed a per se violation of various state antitrust laws and were unjustly enriched in violation of various states’ common laws; (2) Sherman Act Class Plaintiffs’ Consolidated Amended Class Action Complaint alleging a section 1, Sherman Act violation against Defendants HMRI and Andrx under either a per se or rule of reason analysis of the reasonableness of the Defendants’ alleged restraint of competition; (3) Individual Sherman Act Plaintiffs’ Amended Complaint brought by the Kroger Co., Albertson’s, Inc., the Stop & Shop Supermarket Co., Eckerd Corporation, Walgreen Co. and Hy-Vee, Inc. against Defendants HMRI and Andrx alleging a per se violation of section 1 of the Sherman Act; and (4) Individual Sherman Act Plaintiffs’ Complaint brought by Plaintiffs CVS Meridian, Inc. and Rite Aid Corporation against Defendants HMRI and Andrx alleging a violation of section 1 of the Sherman Act under either a per se or rule of reason analysis.

For the reasons stated below, this Court DENIES: (1) Defendant Hoechst AG’s motion to dismiss the Minnesota action (Aetna U.S. Healthcare, No. 99-73329) for lack of personal jurisdiction and failure to state a claim; (2) Defendant Hoechst AG’s motion to dismiss the Tennessee action (Larry S. Sizemore, No. 99-73345) for lack of personal jurisdiction and failure to state a claim; (3) Defendant HMRI’s motion to dismiss the Sherman Act Class Plaintiffs’ Amended Complaint (Louisiana Wholesale, No. 99-73259, and Duane Reade, No. 99-73870); (4) Defendant HMRI’s motion to dismiss Sherman Act Individual Plaintiffs’ Amended Complaint (Kroger, et al., No. 99-73735); (5) Defendant HMRI’s motion to dismiss Sherman Act Individual Plaintiffs’ Complaint (CVS Meridian and Rite Aid Corp., No. 99-75036); (6) Defendant HMRI’s motion to dismiss State Law Plaintiffs’ Coordinated First Amended Complaints (Nos. 99-75070, 99-73422, 99-73412, 99-73871, 99-74262, 99-73667, 98-74043, 99-73239, 99-73845, 99-73713, 99-74377, 99-73190, 99-73345, 99-73981, and 99-73666); (7) Defendant Andrx’s motion to dismiss the Coordinated “Indirect Purchaser” Complaints (Nos. 98-74043, 99-75070, 99-73422, 99-73412, 99-73871, 99-74262, 99-73239, 99-73667, 99-73845, 99-73713, 99-74377, 99-73190, 99-73345, 99-73981, and 99-73666); and (8) Defendant Andrx’s motion to dismiss the Consolidated “Direct Purchaser” Complaint and the two additional “Direct Purchaser” Complaints (Nos. 99-73870, 99-73259, 99-73735, and 99-75036).

I. Facts

A. The Parties

1. Defendants

a. Hoechst Defendants

On or about June 25, 1995, Defendant Hoechst AG bought Marion Merrell Dow, Inc. (“Dow”), a major pharmaceutical company. Dow’s best-selling prescription drug product was Cardizem CD. After the acquisition, Dow’s name was changed to HMRI.

2

HMRI is responsible for developing, distributing, advertising and selling Cardizem CD throughout the United States.

HMRI is an indirectly wholly owned subsidiary of Hoechst AG, a German company, whose stock is publicly traded on the Frankfurt Stock Exchange and until November 26, 1999 was traded on the New York Stock Exchange. Hoechst AG is a 96% owned, direct subsidiary of Aventis, a French corporation, which prior to Decem

*625

ber 15, 1999, was named Rhone-Poulenc, S.A. Aventis stock is publicly traded on the Frankfurt Stock Exchange, the Paris Bourse, and the New York Stock Exchange. State Law Plaintiffs sue both Hoechst Defendants. All other Plaintiffs sue only HMRI.

b. Andrx

Andrx develops, manufactures and markets controlled-release drugs. It has developed a generic bioequivalent to Cardizem CD, recently marketed under the trade name of Cartia XT. Andrx’s generic version of Cardizem CD was preliminarily approved by the FDA for sale in the U.S. in 1997, was given final FDA approval in July 1998, and was licensed for sale in Canada during the alleged class periods.

Plaintiffs allege that, pursuant to the illegal HMRRAndrx Agreement, the Hoechst Defendants paid Andrx $89.83 million not to sell its generic version of Cardizem CD in the U.S. before June 1999 and to use its FDA first filer status to block other manufacturers from introducing generic Cardizem CD in the U.S.

2. Plaintiffs

a. State Law Plaintiffs

Plaintiffs are indirect purchasers of Car-dizem CD or Cartia XT in Alabama, California, D.C., Illinois, Michigan, Minnesota, New York, North Carolina, Tennessee, and Wisconsin. Plaintiffs claim violations of the antitrust and consumer protection statutes in eight of the states (California, D.C., Michigan, Minnesota, New York, North Carolina, Tennessee and Wisconsin)

3

and seek recovery based on common law claims of unjust enrichment in all ten states. Plaintiffs bring their respective actions on behalf of state-wide indirect-purchaser classes defined as (1) all persons and entities who Or which have paid and/or co-paid pharmacies in the Indirect Purchaser States for Cardizem CD and Cartia XT dispensed pursuant to doctors’ prescriptions; and (2) in Alabama, California and New York, separate classes of retail pharmacies located in such Indirect Purchaser States which have purchased Car-dizem CD or Cartia XT for resale to individual users of Cardizem CD and Cartia XT during the Conspiracy Class Period or Monopolization Class Period.

b. Sherman Act Class Plaintiffs

Plaintiffs Louisiana Wholesale Drug Co., Inc., Duane Reade, Inc., and Kinray, Inc., bring this action alleging a violation of section 1 of the Sherman Act on behalf of themselves and as representatives of a class defined as “all persons, or assignees

*626

of such persons, who have directly purchased Cardizem CD from Hoechst at any time during the period July 9, 1998 through and after the date hereof until the effects of Defendants’ illegal contract, combination or conspiracy cease” (Complaint, ¶ ll).

4

Plaintiff Louisiana Wholesale is a Louisiana corporation that has purchased the prescription drug Cardizem CD directly from Hoechst during the class period. Plaintiff Duane Reade is a publicly held corporation organized under Delaware laws and has its principal place of business in New York, New York. During the class period, Duane Reade purchased annually between $500,000 and $800,000 of Cardiz-em CD from Defendant HMRI through its wholesaler Kinray, Inc. Duane Reade is the assignee of Kinray, Inc.’s antitrust claims with respect to these Cardizem CD purchases from Defendant HMRI. Plaintiff Kinray, Inc. is a New York Corporation with its principal place of business in Whitestone, New York. It purchased Car-dizem CD directly from Defendant HMRI and sold it to Duane Reade during the class period. Kinray has assigned its antitrust claims with respect to these purchases to Duane Reade.

c. Individual Sherman Act Plaintiffs

There are two Individual Sherman Act actions and two different sets of Individual Sherman Act Plaintiffs.

The first action, No. 99-78735,. is brought by the following Plaintiffs who own and operate retail stores in several states where prescription drugs are dispensed to the public and who purchased Cardizem CD directly from Defendant HMRI during the relevant time period: (1) The Kroger Co., an Ohio corporation with its principal place of business in Ohio; (2) Albertson’s Inc., a Delaware corporation with its principal place of business in Idaho; (3) The Stop & Shop Supermarket Co., a Delaware corporation with its principal place of business in Massachusetts; (4) Eckerd Corporation, a Delaware corporation with its principal place of business in Florida; (5) Walgreen Co., an Illinois cor

*627

poration with its principal place of business in Illinois; and (6) Hy-Vee, Inc., an Iowa corporation with its principal place of business in Iowa. Plaintiffs Eckerd, Walgreen, and Hy-Vee also bring this action as an assignee of their pharmaceutical wholesalers with respect to those companies’ purchases of Cardizem CD directly from Defendant HMRI that were subsequently resold to them during the relevant time period.

5

The second Individual Sherman Act case, No. 99-75036, is brought by two Plaintiffs: (1) CVS Meridian, Inc., a New York corporation with its principal place of business in Rhode Island; and (2) Rite Aid Corp., a Delaware corporation with its principal place of business in Pennsylvania. Each Plaintiff purchases substantial quantities of pharmaceutical products and other goods for resale to the public, and, during the relevant time period, purchased Car-dizem CD from Defendant HMRI through wholesalers who have assigned their antitrust claims with respect to these purchases to Plaintiffs.

6

B. Relevant Statutory and Regulatory Framework

The manufacture and distribution of pharmaceutical drugs are regulated by the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301 , et seq. (1994). Congress passed the “Hatch-Waxman Amendments” to the Act in 1984 after concluding that the Act’s “cumbersome drug approval process

*628

delayed the entry of relatively inexpensive generic drugs into the market place.”

Mylan Pharmaceuticals, Inc. v. Shalala,

81 F.Supp.2d 30, 32 (D.D.C.2000). The Hatch-Waxman Amendments, 21 U.S.C § 355 (1994), embody Congress’ intent “to make available more low cost generic drugs” and its 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.”

Id.

(internal quotes and citations omitted).

“[T]he Hatch-Waxman Amendments established new guidelines for the approval of generic drugs. Generic drug makers were permitted to file an Abbreviated New Drug Application (‘ANDA’) which incorporated data that the ‘pioneer’ manufacturer had already submitted to the FDA regarding the pioneer drug’s safety and efficacy. In order to obtain FDA approval, the ANDA must demonstrate, among other things, that the generic drug is ‘bioequiva-lent’ to the pioneer drug. 21 U.S.C. § 355 (j)(2)(A)(iv). As protection for pioneer drug makers, the applicant is also required to certify in one of four ways that the generic drug will not infringe on any patent which claims the pioneer drug.

See id.

at § 355(j)(2)(A)(vii).”

Mylan Pharmaceuticals,

81 F.Supp.2d at 32 .

Applicable here is the fourth type of certification. Paragraph IV certification “permits the applicant to allege that the patent for the pioneer drug is either invalid or will not be infringed by the marketing of the generic drug.

See id.

at § 355(j)(2)(A)(vii)(IV).”

Mylan Pharmaceuticals,

81 F.Supp.2d at 32 . As the District Court for the District of Columbia recently observed, “[a] generic drug manufacturer’s filing of a so-called ‘Paragraph IV’ certification has important legal ramifications. It automatically creates a cause of action for patent infringement. Upon receiving notice of a Paragraph IV certification’s filing, the patent holder or pioneer manufacturer has 45 days within which to file suit against the generic manufacturer.

See id.

at § 355(j)(5)(B)(iii). If such an action is brought, the FDA cannot approve the generic manufacturer’s ANDA for 30 months.

See id.

However, if the court hearing the infringement action rules before the expiration of the 30-month period that the patent at issue is ‘invalid or not infringed,’ then ‘the approval shall be made effective on the date of the court decision[.]’ Id. at § 355(j)(5)(B)(iii)(I).”

Mylan Pharmaceuticals,

81 F.Supp.2d at 32-33 .

To encourage competitors to bring cheaper generic drugs to market, and acknowledging that they will likely incur “potentially substantial litigation costs associated with challenging pioneer drug makers’ patents, the Hatch-Waxman Amendments provide an added incentive for generic drug producers to file Paragraph IV certifications. The first generic manufacturer to file an ANDA containing a Paragraph IV certification with respect to a specific patent is awarded a 180-day period of exclusive marketing rights for a generic version of the drug claimed by that patent. In other words, no other ANDA for the same generic drug product will be approved during those 180 days.”

Id.

at 33 .

Section 355(j)(5)(B)(iv) provides that:

*629

Id.

(quoting 21 U.S.C. § 355 (j)(5)(B)(iv)). Accordingly, the 180-day period of exclusivity “can be triggered in one of two ways — either (1) when the generic producer begins commercial marketing of its drug (the ‘commercial marketing trigger’), or (2) when there is a court decision finding the pioneer drug maker’s patent invalid or not infringed (the ‘court-decision trigger’).”

Mylan Pharmaceuticals,

81 F.Supp.2d at 33 (footnote omitted).

*628

If the [ANDA] contains a certification described in [Paragraph IV] and is for a drug for which a previous application has been submitted under this subsection [containing a Paragraph IV] certification, the application shall be made effective not earlier than one hundred and eighty days after—

(I) the date the Secretary receives notice from the applicant under the previous [ANDA] of the first commercial marketing of the drug under the previous [ANDA], or

(II) the date of a decision of a court in an action described in clause (iii) holding the patent which is the subject of the certification to be invalid or not infringed, whichever is earlier.

*629

C. Background

1. Cardizem CD

In 1982, Marion Merrell Dow (“Dow”), HMRI’s predecessor, introduced the pioneer drug in the United States containing diltiazem hydrochloride as an active ingredient for treating hypertension and angina. This drug used an immediate release delivery method and was patented and sold under the brand name “Cardizem.” The problem with immediate release drugs is that they do not provide for a continuing and slow release of a drug into the patient’s bloodstream, so Cardizem patients had to take three or four doses a day. Some patients would forget a dose and this in turn would cause undesirable fluctuations in diltiazem concentrations in the blood. To remedy this problem, Dow introduced an improved, twice-a-day product called “Cardizem SR” in 1989. In 1992, Dow introduced its once-a-day diltiazem hydrochloride formulation under the name Cardizem CD. Cardizem CD’s single administration of diltiazem hydrochloride is based on a sustained-release delivery method patented by Elan Corp., P.L.C. (“Elan”), an Irish company. Dow and Carderm Capital L.P., a limited partnership, were the licensees of Elan’s U.S. patents for sustained release delivery and absorption of Cardizem CD. Cardizem CD quickly replaced Cardizem SR as the most popular hydrochloride product in the U.S.

The U.S. patent on the compound dil-tiazem hydrochloride, the active ingredient in Cardizem CD, originally expired in February 1988 but was extended by legislation until November 1992. Thus, it is alleged that after November 1992, Dow for the first time began to face the threat of competition from generic pharmaceutical manufacturers. (State Law Plfs. Complt. ¶ 58).

2. Development of Generic Bioequi-valent — Biovail

As the Eighth Circuit recently observed, “[djiltiazem was a pioneer new drug, which means that the Cardizem products enjoyed a ten-year period of market exclusivity under the Hatch-Waxman amendments to the Food, Drug, and Cosmetics Act.”

Rhone-Poulenc Rover Pharm., Inc. v. Marion Merrell Dow, Inc.,

93 F.3d 511, 513 (8th Cir.1996). “Cardizem products were immensely successful, generating sales of $1.1 billion in 1992 alone. By the early 1990’s, competing drug manufacturers were anxious to penetrate the diltiaz-em market with less costly alternatives.”

Id.

In 1993, Biovail, a Canadian corporation, was in the process of developing a bioequi-valent formulation of once-daily diltiazem hydrochloride (“QD Diltiazem”) to compete with Cardizem CD. In June 1993, Hoechst AG, through its subsidiary Hoechst-Rous-sel Pharmaceuticals, Inc. (“HRP”), entered into an Agreement with Biovail for the joint development and exploitation of QD Diltiazem drugs which HRP and Biovail intended to sell under the trademark “Tia-zac.” Tiazac, like Cardizem CD, is administered once a day and provides the patient with diltiazem hydrochloride in the bloodstream throughout the day. (¶¶ 59-62).

HRP filed a New Drug Application (NDA) for Tiazac with the FDA certifying its safety and effectiveness. On September 30, 1993, HRP gave notice to Dow and Carderm of HRP’s NDA and certified that HRP’s submission of its NDA to the FDA did not constitute an act of infringement of the Elan-licensed patents. Dow and Car-derm responded on November 11, 1993 with a patent infringement lawsuit in the District of New Jersey which HRP characterized as frivolous. The filing of this suit served to stay HRP’s NDA for 30 months.

*630

In late 1994, Hoechst (parent of HRP) agreed to acquire Dow and HRP terminated its joint venture with Biovail. After the acquisition, Dow became HMRI. (¶¶ 63-69).

In April 1995, Biovail sued Hoechst and others for breach of contract and antitrust violations, and Hoechst, Dow and Biovail then entered into a Settlement Agreement and Release resolving the pending Dow/ HRP patent infringement action and the Biovail litigation against Hoechst and others. As part of the Settlement Agreement, Dow (HMRI’s predecessor) agreed not to “initiate any regulatory proceedings or legal actions challenging or contesting in any manner whatsoever the Product, infringement relating to the Product or regulatory approvals of the Product now or in the future.” “Product” was defined to include Tiazac and “any improvements thereto or any formulation thereof alone or in combination with at least one other active ingredient.” Biovail was also assigned the rights to the NDA for Tiazac previously filed by HRP. (¶¶ 70-73).

Subsequently, the FTC investigated the proposed acquisition of Dow by Hoechst, and that investigation was settled when the parties agreed to enter into a Consent Order that was proposed on September 26, 1995 and became final on April 17, 1996. That Consent Order contained an express provision requiring that the Hoechst Defendants give Biovail a letter of reference to the toxicology data filed with the FDA in support of Dow’s NDA covering Cardiz-em CD. Specifically, the FTC Consent Order compelled the Hoechst Defendants to “make the necessary filings with the FDA authorizing the FDA to refer to the appropriate section(s) of Dow’s [now HMRI’s] NDA No. 18-602 for such data (including, but not limited to, pharmacology and toxicology data) in support of Biovail NDA No. 20-401 for Biovail Diltiazem Products, including any supplemental NDAs or related NDAs.” (¶¶ 74-78). “Biovail Diltiazem Products” were defined in the FTC Consent Order as “the sustained release and/or extended release diltiazem products that Hoechst was developing with Biovail pursuant to the Rights Agreement that Hoechst and Biovail entered into on June 30,1993.” (¶ 79).

On December 18, 1995, HMRI wrote to the FDA authorizing Biovail to reference the data discussed in the Consent Order “in support of Biovail’s NDA No. 20401 for onee-a-day dosage form of diltiazem hydrochloride, including any supplemental NDAs or NDAs related to that product.” (¶ 80). Also by letter dated April 8, 1996, the FDA confirmed to Biovail that the “right of reference” was broad enough to cover “any diltiazem hydrochloride new drug application or supplement that Bio-vail submits.” (¶ 82). Plaintiffs allege that the purpose and intended effect of the Biovail/Hoechst Settlement Agreement, the FTC Consent Order, and the Letter of Reference was to ensure that the Hoechst Defendants would not attempt to prevent Biovail from obtaining FDA approvals for its diltiazem products, including any supplemental or related NDAs.

In the summer of 1996, the Hoechst Defendants learned that Biovail was: (1) resolving its patent dispute with Elan, which in light of the December 18, 1995 letter of reference, would have been the only remaining impediment to the FDA’s approval of Biovail’s generic version of Cardizem CD; (2) preparing to file an ANDA seeking approval of its generic drug; and (3) preparing to submit an NDA for its generic version of Cardizem CD which required, as a precondition to filing, the December 18, 1995 letter of reference. (¶ 86). Since drugs covered by NDA’s are not subject to Para. IV Certification or the 180-day exclusivity period imposed on all ANDA filers except the first ANDA filer, Biovail’s NDA filing would have been unaffected by Andrx’s 1995 first-filed ANDA for its generic version of Cardizem CD. Biovail’s generic version would have been promptly approved for marketing under the NDA route and allegedly would have been available in the U.S. no later than April 1998, before Andrx’s ANDA was approved.

(Id.,

¶ 88).

*631

Accordingly, it is alleged that the Hoechst Defendants wrote to the FDA on July 11, 1996 to attempt to limit the scope of the right of reference to Tiazac only. The Hoechst Defendants wrote to the FDA, renouncing the wording of its December 18,1995 “right of reference” letter, and telling the FDA that the right of reference did not apply to any QD diltiaz-em formulations other than the one originally submitted for Tiazac, and telling the FDA that the right of reference could not be used for any new NDAs submitted by Biovail for diltiazem-based drug products. (¶¶ 86-91). In October 1996, the Hoechst Defendants delivered a second letter to the FDA renouncing the wording of their earlier December 18, 1995 right of reference letter and stating that it did not apply to any QD diltiazem formulation other than the one originally submitted for Tiazac and further stating that it could not be used for any new NDA submitted by Biovail for diltiazem-based drug products.

{Id.,

¶ 91).

On November 8, 1996, the FDA advised Biovail that Defendant HMRI had expressly limited the right of reference and thus “the broader interpretation by the agency of the possible scope of the right of reference, which was conveyed to [Biovail] by letter of April 18, 1996” was inapplicable. (¶ 92). Plaintiffs allege that the Hoechst Defendants’ limitation of the right of reference: (1) “plainly contradicted” the “clear wording” of the December 18, 1995 letter of reference itself; (2) constituted a breach of the Settlement Agreement and the FTC Consent Order; (8) compelled the FDA to reject Biovail’s NDA filing; (4) precluded Biovail from filing an expedited NDA for generic Cardizem CD; (5) prolonged Defendants’ monopoly over the Cardizem CD market; and (6) was done despite the absence of any reasonable belief in its merits and for the sole purpose of prolonging the Cardizem CD monopoly. (¶¶ 93-95).

The Hoechst Defendants also allegedly sent an Hoeehst/HMRI representative to meet with Biovail’s executives at Biovail’s Canadian headquarters on a Sunday in August 1997, where the Hoechst/HMRI representative offered Biovail a payment of at least $20 million cash not to market its generic version of Cardizem CD before January 2000 and threatened a patent infringement suit, notwithstanding its covenant not to sue, if Biovail filed an NDA. Biovail refused the offer and indicated its intent to file an NDA using the right of reference to expedite the process. (¶¶ 89-90).

Biovail has filed suit against Hoechst, HMRI and Carderm in the United States District Court for the District of New Jersey for, inter alia, violations of antitrust laws in connection with this conduct. On June 1, 1999, that court denied each of defendants’ motions to dismiss Biovail’s complaint. 39 F.Supp.2d 750 (D.N.J.1999).

{Id.,

¶¶ 94-96).

3. Development of Generic Bioequi-valent — Andrx

Prior to August 1995, Defendant Andrx had been developing its own generic version of Cardizem CD, and provided samples of its proposed generic substitute for Cardizem CD to the Hoechst Defendants so they could perform their own tests to confirm that there was no infringement of the patents claiming Cardizem CD and thus avoid litigation.

On September 22, 1995, Andrx filed an ANDA for a generic version of Cardizem CD and made a Paragraph IV Certification with regard to all unexpired patents listed in the FDA’s Orange Book

7

allegedly claiming Cardizem CD.

On November 28, 1995, two months after Andrx’s ANDA, the U.S. Patent and Trademark Office issued the “584 Patent” to Carderm which then licensed it to HMRI.

(Id.,

¶ 101).

In January 1996, HMRI and Carderm filed a patent infringement suit against Andrx in the District Court for the Southern District of Florida (“HMRI/Andrx patent case”). The filing of the suit triggered

*632

the 30-month Hatch-Waxman waiting period, which expired on July 3, 1998.

{Id.

¶ 102).

On April 4, 1996, Andrx amended its ANDA to specify a dissolution profile that was even more clearly distinct from that claimed by the ’584 patent.

{Id.,

¶ 103). Despite notice of this, HMRI continued to prosecute the HMRI/Andrx patent case. Andrx also filed antitrust counterclaims against HMRI in the patent ease.

On September 17, 1997, the FDA gave preliminary approval to Andrx’s amended ANDA for its generic version of Cardizem CD. Thus, upon expiration of the 30 month waiting period in early July 1998, Andrx would be able to introduce its generic version of Cardizem CD into the U.S. market. Plaintiffs allege (¶ 108) that unless the Hoechst Defendants could come up with a way to keep their competitor’s generic version off the market, they would lose their monopoly over the market for Cardizem CD and its generic bioequivalents by no later than July 9, 1998. On that date, the 30-month Hatch-Waxman waiting period would expire, and the FDA’s approval of ■Andrx’s ANDA would allow Andrx to begin marketing its generic drug notwithstanding the continued pendency of the HMRI/Andrx patent case.

On or before September 24, 1997, HMRI and Andrx entered into the HMRI/Andrx Agreement. Plaintiffs allege (¶ 111) that this collusive and anticompetitive agreement had the effect and purpose of allowing the Hoechst Defendants to continue to maintain their monopoly market share while continuing to set artificially high prices for Cardizem CD throughout the U.S. Under the Agreement, HMRI was obligated to start, as of July 9, 1998 (the date the 30-month freeze ended), making quarterly payments to Andrx of ten million dollars. The payments were to end when the HMRI/Andrx patent case,

including all appeals,

was finally over.

It is alleged that but for the HMRI/ Andrx Agreement, Andrx would have begun marketing is generic version of Car-dizem CD on or shortly after July 9, 1998, and the FDA could have approved other generic versions of Cardizem CD after the 180-day period of exclusivity granted to Andrx under Hatch-Waxman expired.

On August 20, 1998, the first of these state law class actions was filed in California, and on June 9,1999, HMRI and Andrx announced that they had agreed to settle the HMRI/Andrx patent suit. They claim here that the settlement was possible because Andrx amended its ANDA and reformulated its generic version of Cardizem CD. At the time of settlement, HMRI paid Andrx an additional $50,700,000, bringing its total payments to Andrx to $89,830,000.

Since June of 1999, Cartia XT, Andrx’s generic version of Cardizem CD, has been sold at a substantial discount to the price of Cardizem CD, and it has captured nearly half of the U.S. market for Cardizem CD and its generic bioequivalents.

D. Defendants’ Motions to Dismiss

Presently pending before the Court are Defendants’ motions to dismiss raising issues concerning:

1. Defendants’ immunity from antitrust liability under the

Noerr-Pennington

Doctrine;

2. State Law and Sherman Act Plaintiffs’ failure to allege antitrust injury— an essential element of Plaintiffs’ antitrust claims;

3. State Law and Sherman Act Plaintiffs’ failure to allege any legally cognizable anticompetitive effects;

4. Preemption/Exemption of Plaintiffs’ claims;

5. Plaintiffs’ lack of standing to enforce the FTC Consent Order regarding Bio-vail;

6. State Law Plaintiffs’ failure to state claims under the antitrust statutes of Tennessee and Wisconsin (interstate vs. intrastate commerce issue);

7. State Law Plaintiffs’ failure to state claims based on principles of unjust enrichment;

8. Whether the Tennessee or Minnesota Plaintiffs have personal jurisdiction over Defendant Hoechst AG; and

*633

9. Plaintiffs’ failure to state an antitrust claim that allows the reasonableness of the alleged restraint of trade to be analyzed under either a

per se

or rule of reason analysis.

II. Standard of Review — Motion to Dismiss

To survive a motion to dismiss under Rule 12(b)(6), a “complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.”

Scheid v. Fanny Farmer Candy Shops, Inc.,

859 F.2d 434, 436 (6th Cir.1988) (internal quotation marks and citations omitted). The Court “must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief.”

In re DeLorean Motor Co.,

991 F.2d 1236, 1240 (6th Cir.1993). “[W]hen an allegation is capable of more than one inference, it must be construed in the plaintiffs favor.”

Sinay v. Lamson & Sessions Co.,

948 F.2d 1037, 1039-40 (6th Cir.1991). “[A] complaint should be dismissed for failure to state a claim only where ‘it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.’”

Monette v. Electronic Data Sys. Corp.,

90 F.3d 1173, 1189 (6th Cir.1996) (quoting

Conley v. Gibson,

355 U.S. 41, 45-46 , 78 S.Ct. 99 , 2 L.Ed.2d 80 (1957)).

“Although this standard for Rule 12(b)(6) dismissals is quite liberal, more than bare assertions of legal conclusions is ordinarily required to satisfy federal notice pleading requirements.”

Scheid,

859 F.2d at 436 (citing 5 Charles A. Wright & Arthur R. Miller,

Federal Practice & Procedure

§ 1357, at 596 (1969)). “The essential elements of a private antitrust claim must be alleged in more than vague and conclusory terms to prevent dismissal of the complaint on a defendant’s 12(b)(6) motion.”

Crane & Shovel Sales Corp. v. Bucyrus-Erie Co.,

854 F.2d 802, 805 (6th Cir.1988).

III. Analysis

A. Immunity under the

Noerr-Pen-nington

Doctrine

Issues: (1) Whether the HMRI/Andrx Agreement is “incidental to” a valid effort to influence governmental action and thus immune from antitrust liability under the

Noerr-Pennington

Doctrine; (2) Whether Plaintiffs have failed to allege facts showing that the HMRI/Andrx Patent Infringement Litigation was a Sham; and (3) Whether Hoechst’s communications with the FDA regarding the scope of the Right of Reference Granted to Biovail are protected under the Noerr-Pennington doctrine?

1.

Noerr-Pennington

Immunity for Conduct “Incidental To” Non-Sham Governmental Petitioning

Defendant HMRI argues that, because the HMRI/Andrx Agreement is an “incidental effect” of non-sham patent infringement litigation; i.e., it is conduct reasonably attendant to litigation (a protected activity), it is immune from antitrust liability under the

Noerr-Pennington

doctrine. HMRI’s argument has two premises; the first presents a legal argument, and the second presents a factual one: (1) private agreements, like the HMRI/Andrx Agreement, can be considered “incidental effects” of litigation and thus fall within the protection of the

Noerr-Pennington

immunity doctrine; and (2) HMRI’s initiation and continued prosecution of the HMRI/ Andrx patent infringement litigation was a valid effort to influence government action; i.e., it was not sham litigation. If the Court disagrees with HMRI’s initial legal argument and finds that the HMRI/Andrx Agreement is separate and distinct activity that cannot be considered an incidental effect of the HMRI/Andrx patent litigation, there is no need to address the factual premise of Defendant’s argument; i.e., that Plaintiffs have failed to alleged facts

*634

showing that HMRI’s filing and continued prosecution of the HMRI/Andrx patent case was a sham. Accordingly, this Court addresses the legal argument first.

a.

Noerr-Pennington

Doctrine

The

Noerr-Pennington

doctrine immunizes defendants from antitrust liability for anticompetitive harm that results from government-petitioning activity, including litigation. “Concerted efforts to restrain or monopolize trade by petitioning government officials are protected from antitrust liability”.

Allied, Tube & Conduit Corp. v. Indian Head, Inc.,

486 U.S. 492, 499 , 108 S.Ct. 1931 , 100 L.Ed.2d 497 (1988). “The doctrine stands for the proposition that the exercise of First Amendment rights in seeking governmental action—including litigation—cannot form the basis of antitrust liability, even if the action injures a competitor.”

TRW Financial Systems, Inc. v. Unisys Corp.,

835 F.Supp. 994, 1011, n. 25 (E.D.Mich.1993).

The doctrine has developed from a trio of Supreme Court decisions.

See Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc.,

365 U.S. 127 , 81 S.Ct. 523 , 5 L.Ed.2d 464 (1961);

United Mine Workers of Am. v. Pennington,

381 U.S. 657 , 85 S.Ct. 1585 , 14 L.Ed.2d 626 (1965); and

California Motor Transport Co. v. Trucking Unlimited,

404 U.S. 508 , 92 S.Ct. 609 , 30 L.Ed.2d 642 (1972). “In

Noerr

and

Pennington ,

the Court held that ‘the Sherman Act does not prohibit ... persons from associating together in an attempt to persuade the legislature or the executive to take particular action with respect to a law that would produce a restraint or monopoly.’ ”

Noerr,

365 U.S. at 136 , 81 S.Ct. at 529 ;

Pennington,

381 U.S. at 669 , 85 S.Ct. at 1592 . “In

California Motor Transport,

the Court extended

Noerr

to protect from antitrust liability citizens engaging in adjudicatory actions before administrative agencies and the courts. 404 U.S. at 510 , 92 S.Ct. at 611 .”

TRW Financial Systems,

835 F.Supp. at 1011 n. 25. The Supreme Court has observed, however, that “[t]he scope of this protection depends ... on the source, context, and nature of the anticompetitive restraint at issue.”

Allied Tube,

486 U.S. at 499 , 108 S.Ct. 1931 .

As Professors Areeda and Hovenkamp observe:

[mjonopolists or collaborators are privileged to pursue their private and selfish objectives through legislation, adjudication, or executive and administrative machinery. This right is founded in our Constitution but is also said to be independently derived from statutory interpretation of the antitrust laws. But even setting aside the Constitution and the substantive meaning of the statute,

when the anticompetitive harm results from the government

action—as when a private petitioner requests and receives anticompetitive

legislation—then the government itself becomes the “cause” of the restraint, and the private petitioner is relieved from liability.

1 P. Areeda & H. Hovenkamp,

Antitrust Law

¶ 201a at 148 (Rev. ed.1997) (emphasis added). Elaborating further, Professors Areeda and Hovenkamp explain that “[t]o be sure, private parties may have influenced or persuaded the government to act, but the government’s decision to act reflects an independent governmental choice, constituting the supervening ‘cause’ that breaks the link between a private party’s request and the plaintiffs injury.”

Id.

¶ 202c at 160.

In the context of successful litigation, these commentators observe that “[i]n that case the premise must be that judge and jury are politically ‘neutral’ decision makers and that established law entitled the petitioner to the requested relief.”

Id.

at 161. “[Cjourts distinguish between harm caused directly by the private parties from that caused by the government itself.”

Id.

at 163. When the anticompetitive harm is the result of a court decision, although requested by a private party, there “is no private restraint of trade.”

Id.

at 163-64.

b. Analysis

Defendant HMRI’s Rule 12(b)(6) motion to dismiss is premised on its legal

*635

argument that purely private agreements, like the HMRI/Andrx Agreement, that are entered into during the course of pending litigation but are not filed with, presented to, or approved by the court presiding over that litigation, fall within the protection of the

Noerr-Pennington

immunity doctrine because they are “incidental to” that pending litigation.

See Allied Tube,

486 U.S. at 499 , 108 S.Ct. 1931 (citing

Noerr,

366 U.S. at 143, 81 S.Ct. 523 ). Specifically, HMRI argues that the HMRI/Andrx Agreement is “incidental to” the HMRI/Andrx patent infringement action because,' contrary to Plaintiffs’ allegations in their complaints, it merely maintained the status quo and managed the risks the parties faced while the HMRI/Andrx patent suit was being litigated. Defendant calls the Agreement an “interim stipulation” and a “stipulated preliminary injunction” despite the fact that the Agreement was never filed in that case and was never presented to or approved by the court presiding over the HMR/Andrx patent infringement action. Defendant also describes the Agreement as “akin to a settlement agreement of portions of the infringement action” despite the fact that the Agreement settled none of the infringement claims pending in the HMRI/Andrx patent infringement action. Rather, as Plaintiffs allege, in addition to refraining from going to market with its generic version of Cardizem CD in exchange for $10 million per quarter, Andrx agreed to dismiss, without prejudice, its antitrust and unfair competition counterclaims against HMRI which asserted that HMRI’s patent infringement claims were a sham.

Plaintiffs argue that the anticompetitive harm caused by the purely private HMRI/ Andrx Agreement is separate and distinct from any anticompetitive effects that would have resulted from Defendant HMRI’s successful prosecution of its patent infringement action against Andrx and thus cannot be considered an “incidental effect” of that patent infringement litigation. This, they argue, is not a situation where the anticompetitive harm is the result of a court’s decision although requested by a private party. Rather, it is the result of purely private conduct and thus constitutes a private restraint of trade subject to liability under the antitrust laws.

Plaintiffs further argue that, despite HMRI’s current characterizations of the HMRI/Andrx Agreement, there was no preliminary injunction hearing or injunction issued in the patent case, no stipulation filed in that case, and no partial settlement agreement presented to, filed in, or approved by the court presiding over that matter. Thus, any anticompetitive harms that flow from the HMRI/Andrx Agreement are the result of purely private action, not judicial action. This Court agrees with Plaintiffs. Construing the allegations in Plaintiffs’ Complaints in the light most favorable to them, this Court is persuaded that

Noerr-Pennington

jurisprudence does not justify application of this doctrine to immunize the anticompetitive harms caused by the HMRI/Andrx Agreement.

8

*636

The decisions Defendant relies upon do not support a contrary conclusion.

i. The Decision in

Noerr

Does Not Support HMRFs Argument

Defendant’s “incidental effects” argument finds its roots in

Noerr .

In that case, a group of railroads waged a publicity campaign against truckers and trucking companies in an effort to influence anti-trucking legislation. A group of trucking companies subsequently brought an antitrust suit against the railroads alleging a railroad conspiracy to monopolize the long-distance freight business and alleging that the government’s veto of a Fair Truck Bill in response to the railroad’s publicity campaign caused the trucking companies damage in the form of lost business. The Court held that the railroad group was immune from antitrust liability for the anticompetitive harms that resulted from its legitimate government petitioning activity despite the fact that the railroad’s publicity campaign may have also inflicted some direct injury on the trucking companies. In

Noerr ,

the Court observed that:

[i]t is inevitable, whenever an attempt is made to influence legislation by a campaign of publicity, that an incidental effect of that campaign may be the infliction of some direct injury upon the interest of the party against whom the campaign is directed.... To hold that the knowing infliction of such injury renders the campaign itself illegal would thus be tantamount to outlawing all such campaigns.

Noerr,

365 U.S. at 14 &-44, 81 S.Ct. 523 .

Accordingly,

Noerr

teaches that, in some circumstances, immunity is still warranted despite the presence of incidental effects of lobbying that might result in direct injury of an opponent.

See

1 P. Areeda & H. Hovenkamp,

supra,

¶2(^ at 164. “In

Noerr ,

..., the plaintiffs alleged that one consequence of the railroads’ campaign against truckers was the dissemination of information suggesting that the truckers were dangerous on the highway, that they did not pay their fair share of highway taxes, and similar charges. Whether true or not, these claims injured the truckers without regard to any action that the government might take in response to the railroads’ petitions.”

Id.

at 165 , 81 S.Ct. 523 (footnote omitted). Nonetheless, “the Supreme Court held that there could be no recovery for any injury that was ‘an incidental effect’ of the legislative campaign. Every campaign for regulating someone else, the Court noted, would include factual statements casting the other in a bad light. It then concluded that making petitioners liable for incidental injuries caused by their petitions would be tantamount to condemning the petitions themselves.”

Id.

(footnotes omitted).

The argument Defendant advances here is not supported by the Court’s “incidental effects” analysis in

Noerr .

The source, context and nature of the anticompetitive restraint at issue here are readily distinguished from those present in

Noerr .

There is no claim of anticompetitive harm here resulting from the incidental effects of a publicity campaign waged by HMRI in connection with its litigation against Andrx. Rather, the source of the alleged anticompetitive harm is a private market allocation agreement between horizontal competitors who were adversaries in the pending HMRI/Andrx patent infringement action. Defendant does not explain how

Noerr

advances its claim that the purely private HMRI/Andrx Agreement is an “incidental effect” of pending litigation and thus entitled to immunity from antitrust liability. Applying

Noerr

in the litigation context, a more analogous “incidental effect” of non-sham litigation deserving of immunity would be the direct and indirect costs associated with defending the litigation.

See

1 P. Areeda & H. Hovenkamp,

supra,

¶ 202d at 164.

*637

This Court agrees with Plaintiffs’ argument that, rather than being analogous to

Noerr ,

this case is more analogous to a situation where the Pharmaceutical Manufacturers Association petitions Congress for a law requiring drug makers to raise their prices by a specified amount per year (an immunized governmental petitioning activity) and then, because Congress isn’t as quick as the Association would prefer, its members enter into a private, “interim” agreement where they accomplish the same thing while Congress deliberates (not immunized governmental petitioning activity).

See, e.g., In re Brand Name Prescription Drugs Antitrust Litig.,

186 F.3d 781, 789 (7th Cir.1999) (observing that the

Noerr-Pennington

“doctrine does not authorize anticompetitive

action

in advance of government’s adopting the industry’s anticompetitive proposal. The doctrine applies when such action is the consequence of legislation or other governmental action-”).

ii. Decisions Extending Immunity to Pre-litigation Conduct Do Not Advance HMRI’s Arguments

Noerr-Pennington

immunity has been extended to non-sham, pre-litigation threats of suit, demand letters, and communications about pending suits.

See McGuire Oil Co. v. Mapco, Inc.,

958 F.2d 1552, 1558-60 (11th Cir.1992)(pre-litigation threats of suit);

Coastal States Marketing, Inc. v. Hunt,

694 F.2d 1358, 1366-67 (5th Cir.1983) (same); and

Barq’s, Inc. v. Barq’s Beverages, Inc.,

677 F.Supp. 449, 453 (E.D.La.1987) (observing that “threatened litigation and attending ^publicity” was considered “part and parcel" of'the petitioning immunity of

Noerr-Pennington

if the litigation itself was in good faith” and thus holding that the plaintiffs pre-litigation demand letters were “also protected under the

Noerr-Pennington

petitioning immunity”).

See also Aircapital Cablevision, Inc. v. Starlink Communications Group, Inc.,

634 F.Supp. 316, 324-26 (D.Kan.1986) (observing that publicity about non-sham litigation and its indirect threats of litigation against Starlink’s customers were incidental to non-sham litigation and thus protected under the

Noerr-Pennington

immunity doctrine).

Cf. Cardtoons v. Major League Baseball Players Ass’n,

182 F.3d 1132 ,

reh’g en banc,

208 F.3d 885 ,- (10th Cir.2000) (observing that

Noerr-Pennington

immunity is available to immunize prelitigation threats from liability only when antitrust claims are at issue). “Most lawsuits are prefaced by various communications, such as demand letters that expressly or impliedly threaten suit unless the addressee alters its conduct or provides other relief. Such prelitigation communications provide useful notice and facilitate the resolution of controversies. It would be foolish to adopt antitrust rules encouraging suit before communication by penalizing the communication but not the suit.” 1 P. Areeda & H. Hovenkamp,

supra,

¶ 205e at 237.

Defendant’s argument that the HMRI/ Andrx Agreement is “reasonably and normally attendant upon effective litigation” and thus entitled to immunity is not advanced by decisions holding that pre-litigation conduct like threats of suit are entitled to the same immunity as the litigation itself. While it is true that the courts have extended

Noerr-Pennington

immunity to non-sham, pre-litigation threats of suit, demand letters, and communications about pending suits, the HMRI/Andrx Agreement does not fall within this category of immunized pre-litigation conduct. Accordingly, that line of authority does nothing to advance Defendant’s position here.

Defendant HMRI’s reliance on

McGuire Oil Co. v. Mapco, Inc.,

958 F.2d 1552 , 1560 n. 11 (11th Cir.1992), is similarly misplaced. The Court in

McGuire Oil

did not, as Defendant HMRI argu^sTRoId that “an interim stipulation entered into bv opposing parties in ongoing litigation was protected by

Noerr-Pennington

immunity.” HRMI Br. at 25. Rather, the

McGuire Oil

Court held that pre-litigation threats of suit enjoy the same immunity under the

Noerr-Pennington

doctrine as the litigation itself.

*638

In

McGuire Oil,

the plaintiffs, petroleum wholesalers “engaged in the wholesale and retail sale of branded gasoline” first threatened suit and then sued defendant corporation, which was “engaged in the retail sale of unbranded petroleum products in Alabama,” alleging that defendant had violated the Alabama Motor Fuel Marketing Act by selling or offering to sell gas at prices below cost.

McGuire Oil,

958 F.2d at 1554 . The defendant filed a counterclaim alleging that “the plaintiffs engaged in a concerted effort to establish minimum prices for gasoline in the Mobile [Alabama] area, and that this effort manifested itself in threats and coercion of those independent retailers, like [defendant], who sought to preserve their market share by pricing gas one or two cents below major brand gas prices.”

Id.

at 1557 . Defendant’s counterclaim alleged, in essence, “that plaintiffs violated the Sherman Act by engaging in concerted efforts to threaten and initiate litigation against [defendant] under the [Alabama Motor Fuel Marketing Act].”

Id.

at 1558 . Affirming the district court’s summary dismissal of defendant’s antitrust claims, the Eleventh Circuit observed that, “[o]n its face, [defendant]^ Sherman Act counterclaim appears barred by the Noerr-Pen-nington doctrine: the raison d’etre of plaintiffs’ alleged conspiracy was to threaten and ultimately initiate litigation against [defendant] under the [Alabama Act] in an attempt to get [defendant] to cease its below-cost sales of gas.”

Id.

at 1559 . After rejecting defendant’s argument that the sham exception to the

Noerr-Penning-ton

immunity doctrine “applies in this case to strip the plaintiffs of immunity from Sherman Act liability under that doctrine”, the

McGuire Oil

court held that “plaintiffs’ concerted and repeated threats of litigation”, as well as plaintiffs’ “actual initiation of litigation,” are immunized from antitrust liability.

Id.

at 1562, 1560 .

Rather than being derived from the holding in

McGuire Oil,

Defendant’s argument is gleaned from dicta in a footnote. There the court observed that the defendant in

McGuire

could not use the fact that it' had suffered losses as a result of a stipulation it voluntarily entered into during the course of the plaintiffs litigation against it to bootstrap an argument, in support of its antitrust counterclaim, that the plaintiff had sued it purely for anti-competitive purposes and without a legitimate expectation of winning or a desire for judicial relief.

See McGuire Oil,

958 F.2d at 1560 n. 11.

9

When the court stated that the defendant “cannot treat as abuse of the judicial process the entry of a stipulation to which the parties voluntarily agreed, regardless of the injurious effect it had on [defendant’s business”, it was merely observing that the defendant could not argue that the lawsuit filed against it was a sham because, during the course of that litigation, it agreed with its opposing party that it would raise its gas prices and subsequently lost sales as a result of that voluntary agreement.

The facts presented here are readily distinguished from the facts presented in

McGuire Oil.

They are likewise distinguishable from the facts of other decisions Defendant relies upon in support of its argument that the HMRI/Andrx Agreement is conduct “reasonably and normally attendant upon litigation” and thus immunized from antitrust liability.

iii. Decisions Immunizing the Rejection of a Settlement Offer Do Not Advance HMRI’s Arguments

Noerr-Pennington

immunity has been extended to an antitrust defendant’s refusal to accept the antitrust plaintiffs offer to settle pending, non-sham litigation between these parties.

See Columbia Pictures Industries, Inc. v. Professional Real

*639

Estate Investors, Inc.,

944 F.2d 1525, 1528-29 (9th Cir.1991) (holding that the plaintiffs’ refusal to accept the defendant’s offer to settle a pending, nomsham copyright infringement case was conduct incidental to the prosecution of that non-sham case and thus was likewise immunized from antitrust liability),

aff'd sub nom, Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc.,

508 U.S. 49 , 113 S.Ct. 1920 , 123 L.Ed.2d 611 (1993);

PrimeTime 21 Joint Venture v. Nat’l Broadcasting Co., Inc.,

21 F.Supp.2d 350, 358-59 (S.D.N.Y.1998) (similarly construing the antitrust defendants’ concerted refusals, both to negotiate with the antitrust plaintiff and to erant-fhe plaintiff the licenses it sought in an attempt to~avoid liability for infringing "fhe"'dsfendants’ copyrights, as a rejection of a settlement offer and thus conduct incidental to the antitrust defendants’ pending copyright infringement litigation against the antitrust plaintiff);

Modesto Irrigation Dist. v. Pacific Gas & Elec. Co.,

61 F.Supp.2d 1058 (N.D.Cal.1999) (construing the antitrust defendant’s unilateral refusal to accept the antitrust plaintiffs request to provide transmission service' 'to_a'~eertam~p5wer substation as analogous"!» a refusantd accept a settlement offer and thus finding the refusal “incidental to” the defendant’s filing of a petition before a governmental agency, where it sought a declaration that it was not obligated to provide power to that substation, and entitled to immunity because, if the offer had been accepted, the agency action would have been moot). In

Columbia Pictures, PrimeTime 21,

and

Modesto,

the court reasoned that the antitrust defendant’s conduct was “incidental to” the underlying litigation because the rejection allowed for continued prosecution whereas an acceptance of the antitrust plaintiffs offer would have rendered the underlying dispute moot.

Contrary to Defendant’s argument here, the courts in

Columbia Pictures, Prime-Time 24,

and

Modesto

did not apply

Noerr-Pennington

immunity to a purely private agreement similar t'o the-HMRI/ Andrx Agreement. Rather,- these court held that an antitrust defendants’ refusal to accept the antitrust plaintiffs’ offer to settle a pending, non-sham case was conduct “incidental to” the continued prosecution of that non-sham case and thus was entitled to the same immunity as that enjoyed by the underlying litigation. Thus, the principle to be gleaned from these decisions is’ tHaFIf tire underlytng'Tffigation is~not’a shañTahdImmuneTrom antitrust liaMlify,"!heif 'in’ a" subsequent~'antrtfust ácHbñ7fhe'añS5;ust“deféManl’s" refusaTto settle the undérIpñg~süit~is~Ekewise iin-mune_from antitrust liability-under~the

Nóerr-Penniñgfm

doctrine.

CoBImlñd

NicMreFhlüstrat'esTEIFpoiñE

In

Columbia Pictures,

the plaintiffs sued the defendant hotel operators alleging that the defendants had violated the plaintiffs’ “copyrights to certain motion pictures by renting videodiscs of those pictures” to its guests “for viewing on videodisc players placed in hotel rooms.”

Id.

at 1527. Defendant Professional Real Estate Investors, Inc. (“PRE”) filed a counterclaim against the plaintiffs alleging violations of the Sherman Act, state antitrust laws and state unfair competition laws. “PRE charged that the copyright infringement suit was a sham”, and that the plaintiffs’ “concerted refusal to grant licenses to PRE to rent the videos, as well as other unspecified activities, constituted a pattern of anticompetitive conduct.”

Id.

Granting the plaintiffs’ motion for summary judgment, the district court held that the plaintiffs’ “copyright infringement action was not a ‘sham’, and that, as a result, the Movie Studios’ bringing of that action was immune from antitrust liability under the Noerr-Pennington doctrine.”

Id.

at 1527-28. This decision was affirmed by the Ninth Circuit. Additional rulings in that appeal are germane to Defendant HMRI’s argument here.

On appeal, PRE argued that summary judgment was improper because the district court failed to consider its additional allegation of anticompetitive conduct, including an allegation that the plaintiffs in

*640

the copyright infringement action had “eoncertedly refused to grant licenses to PRE to rent videodiscs to its guests”.

Id.

at 1528. Despite the district court’s failure to address PRE’s additional allegations, the Ninth Circuit affirmed its decision granting summary judgment because reversal was not required.

Id.

at 1528. The court reasoned that reversal was not required because: (1) PRE’s concerted-refusal-to-deal allegation related to “PRE’s attempts, after Columbia Pictures instituted the copyright infringement action, to obtain licenses from the Movie Studios to use and install in-room videodisc systems in the guest rooms”,

id.;

(2) “[o]n the facts of this case, PRE’s request for licensing amounted to an offer to settle the lawsuit”,

id.;

(3) “[a]

decision

to accept or reject an offer of settlement is conduct incidental to the prosecution of the suit and not a separate and distinct activity which might form the basis of antitrust liability”,

id.

(emphasis added); (4) “PRE’s ability to establish that the Movie Studios’ refusal to deal violated the Sherman Act depends on its success or failure in showing that the copyright infringement action is actionable under the federal antitrust laws”; i.e., that it is not immune under the

Noerr-Penning-ton

doctrine,

id.

at 1529; (5) PRE had not shown that the copyright infringement lawsuit was a sham, and thus its filing was immune from the antitrust laws under the

Noerr-Pennington

doctrine,

id.

at 1529-32; and (6) consequently, the Movie Studios’ decision to reject PRE’s offer of settlement was likewise immune from antitrust liability,

id.

at 1529.

The circumstances presented in

Columbia Pictures,

as well as the circumstances presented in

PrimeTime

34 and

Modesto,

are distinguishable from those presented here. Unlike those cases, here there is no refusal by one of the Defendants to accept an offer to settle the underlying patent infringement suit, and there is no antitrust claim based on any such refusal. Rather, it is alleged here that the HMRI/Andrx Agreement is a private agreement between two horizontal competitors to allocate the U.S. market for Cardizem CD, not an agreement accepting or rejecting an offer to settle the pending infringement claims against Andrx.

Based on these allegations, the Court is not persuaded by Defendant’s argument that the HMRI/Andrx Agreement is “incidental to” the HMRI/Andrx patent infringement action. Rather, Plaintiffs’ allegations support its argument that the HMRI/Andrx Agreement is separate and distinct from prosecution of the HMRI/ Andrx patent infringement litigation. Acceptance of the alleged terms of the HMRI/Andrx Agreement did not render HMRI’s continued prosecution of its patent infringement action moot. Moreover, the alleged restraint of trade that results from the terms of that Agreement constitutes harm that is independent of the harm that would result from HMRI’s successful prosecution of its pending patent litigation. Accordingly, this Court is not convinced that Defendants HMRI and Andrx may cloak their unlawful conduct in

Noerr-Pen-nington

immunity simply because the HMRI/Andrx Agreement was entered into while a patent infringement action was pending between the two parties to that Agreement. The Agreement did not take place within the context of that suit; i.e., it was never filed with or approved by the court presiding' over that matter, and the court was not even aware of its existence. Moreover, the alleged nature of the Agreement is far different from the refusals to accept settlement offers that were at issue in

Columbia Pictures, PrimeTime 21,

and

Modesto.

Defendant’s argument that the HMRI/ Andrx Agreement is, in essence, a stipulated “preliminary injunction” and thus should be immunized from antitrust liability as conduct “incident to” the pending HMRI/Andrx patent litigation also lacks merit. Acceptance of Defendant’s argument would improperly require the court to construe the allegations in Plaintiffs’ complaint about the HMRI/Andrx Agreement in a light most favorable to Defendant, not Plaintiffs. The argument also

*641

ignores the fact that, although the anti-competitive effects flowing from any in-junctive relief HMRI might have obtained from the court would have been immunized from antitrust liability under the

Noerr-Pennington

doctrine, HMRI did not obtain any such relief from the court. Accordingly, HMRI cannot argue that the anticom-petitive effects resulting from its private agreement with Andrx warrant the same protections as would injunctive relief granted by the court presiding over the HMRI/Andrx patent infringement action.

iv. The

Hise

Decision Does Not Advance HMRI’s Immunity Argument

Contrary to Defendant’s contention here, the courts have not broadly applied

Noerr-Pennington

immunity to purely private settlement agreements. Rather, as Plaintiffs’ point out, the courts have not hesitated to impose antitrust liability in cases arising out of anticompetitive settlement agreements.

See, e.g., In re New Mexico Natural Gas Antitrust Litig.,

MDL No. 403, 1982 WL 1827 (D.N.M. Jan. 26,1982).

In

New Mexico Natural Gas,

the plaintiffs alleged that the settlement of a prior lawsuit among the defendants (“the Producer Litigation”) constituted an antitrust violation. The defendants moved for summary judgment, arguing that the initiation, prosecution, and settlement of the Producer Litigation was immune from antitrust liability under the

Noerr-Pennington

doctrine. Rejecting the defendants’ argument, the court observed that:

[tjhere may be some probative eviden-tiary value in the facts as to the initiation and prosecution of the

Producer Litigation.

However, the Court concludes that plaintiffs are correct in asserting that a

private settlement agreement accomplished unthout Court participation should not he afforded Noerr-Pennington protection. When parties

petition a Court for judicial action that protection attaches, but when they

voluntarily withdraw their disputes from the comt and resolve it by agreement among themselves there would he no purpose served by affording Noerr-Pennington protection. The parties by so doing must abide with any antitrust consequences that result from their settlement.

Id.

at *6 (emphasis added).

The decision in

New Mexico Natural Gas

is not unique. The courts have consistently observed that private agreements settling litigation may result in antitrust liability “when they are attended by anti-competitive results.”

Duplan Corp. v. Deering Milliken, Inc.,

444 F.Supp. 648, 683 (D.S.C.1977),

rev’d in part on other grounds,

694 F.2d 979 (4th Cir.1979).

See also United States v. Singer Mfg. Co.,

374 U.S. 174 , 83 S.Ct. 1773 , 10 L.Ed.2d 823 (1963) (holding that settlement agreements between the Singer Company and its Italian and Swiss competitors violated the Sherman Act);

Blackburn v. Sweeney,

63 F.3d 826, 828 (7th Cir.1995) (holding that a dissolution agreement between former law partners settling a state court lawsuit was a horizontal agreement to allocate markets among competitors and thus a per se violation of the Sherman Act);

Duplan Corp. v. Deering Milliken, Inc.,

594 F,2d 979, 981 (4th Cir.1979) (affirming the district court’s finding that a 1964 settlement agreement “was the core of a scheme to stabilize and maintain production royalties ... and to monopolize the United States market”);

Southex Exhibitions, Inc. v. Turner Exposition Corp,

6 Fla. L. Week. Supp. 551, 552 (Fla. 13th Cir. June 15, 1999) (“The Settlement Agreement clearly constitutes a horizontal restraint of trade between two competitors for allocation of markets and customers ... [and] is a per se violation of the Sherman Antitrust Act .... This Court cannot find a single pro-competitive justification for the horizontal restraints of trade created by the Settlement Agreement”).

The decision Defendant relies upon in support of its contrary position,

Hise v. Philip Morris, Inc.,

46 F.Supp.2d 1201 (N.D.Okla.1999),

aff'd,

208 F.3d 226 (10th Cir.2000), is easily distinguished from the facts of this case. In

Hise ,

the underlying suit involved an action brought by over

*642

forty states against numerous tobacco companies and manufacturers “for the purposes of furthering their policies regarding public health and reducing underage consumption of tobacco products” and sought “monetary, equitable and injunctive relief.”

Id.

at 1204 . “[T]o avoid the enormous expense and delay inherent in such litigation, the states and tobacco companies agreed to enter into negotiations with the aim of settling their various disputes.”

Id.

“Ultimately, the negotiations succeeded,” and the parties “entered into a Master Settlement Agreement.”

Id.

After entering into the Master Settlement Agreement, the defendant tobacco companies “raised the price of their tobacco products, presumably to cover the costs of the settlement.”

Id.

The plaintiffs in

Hise

then filed an action against some of the tobacco companies that had signed that Master Settlement Agreement “purportedly on behalf of themselves and a class consisting of an estimated 40 million consumers of [the] defendants’ tobacco products”.

Id.

at' 1203. The plaintiffs alleged,

inter alia,

that, as a result of the settlement agreement, the defendants had violated federal antitrust laws when they unlawfully “agreed to raise tobacco prices in order to pay the costs of the settlement.”

Id.

The court dismissed the plaintiffs’ section 1 Sherman Act claim, finding that “the

Noerr-Pennington

doctrine and the

Illinois Brick

indirect purchaser rule preclude recovery”.

Id.

at 1205 . As to the

Noerr-Pennington

doctrine, the court found “that the actions of [the] defendants in negotiating and executing” the Master Settlement Agreement fell “within the recognition that

Noerr

shields from the Sherman Act a concerted effort to influence public officials regardless of intent or purpose”.

Id.

at 1206-07 (internal quotes and citations omitted). The

Hise

court then concluded that “the concerted effort by [the] defendants to influence public officials, i.e., the states’ Attorneys General, to accept a settlement in exchange for dismissing the numerous lawsuits pending against defendants is among the activities protected by the

Noerr-Pennington

doctrine.”

Id.

at 1207 .

Unlike

Hise ,

in this case the HMRI/ Andrx Agreement is not a result of negotiations with a state attorney general or any government official, and therefore, unlike the Master Settlement Agreement in

Hise ,

it cannot be considered as conduct incidental to litigation with a governmental entity.

v. Conclusion

Defendant HMRI has not presented the court with a persuasive argument as to why the private settlement agreements in the above-referenced cases were not immunized from antitrust liability notwithstanding the fact that each “related to” or was an “incidental effect” of non-sham litigation. The Court is convinced that interim agreements, like the HMRI/Andrx Agreement here, that restrain trade through private rather than governmental conduct are subject to antitrust liability and are not entitled to immunity under the

Noerr-Pennington

doctrine. A final, private settlement that would resolve the HMRI/Andrx patent infringement litigation by entering into a market allocation agreement like the one alleged here would not enjoy

Noerr-Pennington

immunity and neither should the Defendants “interim” Agreement that accomplishes the same anticompetitive results.

2. Adequacy of Plaintiffs’ Pleading that the HMRI/Andrx Patent Infringement Action is a Sham

In light of the above analysis, the Court may consider whether the HMRI/Andrx Agreement is subject to antitrust liability independent of any decision that the HMRI/Andrx patent infringement litigation was a sham.

10

State Law Plaintiffs, however, have asserted an additional reason for opposing Defendants’ arguments

*643

that they have failed to sufficiently allege facts showing that HMRI’s initiation and continued prosecution of the HMRI/Andrx patent litigation was both objectively baseless and brought for anticompetitive purposes; i.e., a sham. These Plaintiffs argue that, but for HMRI’s initiation of the sham patent infringement action, the 30 month Hateh-Waxman period would not have gone into effect and generic versions of Cardizem CD would have entered the market much sooner than the July, 1998 date when that 30-month period expired. Accordingly, the following is a discussion of the sham exception to the

Noerr-Penning-ton

doctrine, the facts alleged in each of the Plaintiffs’ complaints, and an analysis of whether the complaints sufficiently allege facts showing that the HMRI/Andrx patent litigation is a sham. .

a. Sham Exception to Antitrust Immunity

Not all government-petitioning activity is immunized. “As a general matter petitions to the government are not immune when the petitioning action is a ‘mere sham.’ ”

Id.

at 148-49.

See Noerr,

365 U.S. at 144 , 81 S.Ct. 523 and

California Motor Transport,

404 U.S. at 510 , 92 S.Ct. 609 (where the Court observed that application of the Sherman Act would be justified “where the litigation or the political activity is a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor”). The Supreme Court has set forth a two-prong test for determining whether litigation is a “sham” and thus not entitled to antitrust immunity under the

Noerr-Pennington

doctrine. First, it must be shown that the litigation is “objectively baseless in the sense-that no reasonable litigant could realistically expect success on the merits.”

Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc. (“PRE”),

508 U.S. 49, 60 , 113 S.Ct. 1920 , 123 L.Ed.2d 611 (1993). If the antitrust plaintiff satisfies the “objectively baseless” prong, the court then examines the plaintiffs allegations regarding the antitrust defendant’s subjective motivation and determines “whether the baseless suit conceals ‘an attempt to interfere directly with, the business relationships of a competitor.’ ”

PRE,

508 U.S. at 60 , 113 S.Ct. 1920 (quoting

Noerr,

365 U.S. at 144 , 81 S.Ct. 523 ).

b. Analysis

The question presented here is whether, construing the Plaintiffs’ allegations in the light most favorable to them, Plaintiffs have adequately alleged facts showing that HMRI’s initiation and continued prosecution of the HMRI/Andrx patent infringement action was a sham.. This Court finds that the State Law Plaintiffs have sufficiently alleged facts that satisfy the objective and subjective prongs of

PRE’s

sham litigation test.

11

Defendant HMRI argues facts that contradict those

*644

alleged by State Law Plaintiffs. On a Rule 12(b)(6) motion, this Court is required to construe the allegations in Plaintiffs’ complaint as true and in the light most favorable to Plaintiffs.

The Sherman Act Class Plaintiffs, on the other hand, have not alleged facts that would satisfy both the objective and subjective prongs of PRE’s sham litigation test. There is only a conclusory allegation that the patent infringement suit was a sham and an allegation that, in the HMRI/ Andrx patent infringement action, Andrx had similarly alleged that HMRI was pursuing its patent infringement suit solely to harm Andrx and without any reasonable belief of success on the merits.

See

Complt. at ¶ 53. These Plaintiffs attempt to allege facts showing that the HMRP Andrx patent litigation was a sham but fail to meet their burden. Rather than dismiss their antitrust claims, however, the proper remedy is for the Court to allow Plaintiffs the opportunity to amend their complaints so as to adequately plead facts showing that the HMRI/Andrx patent infringement litigation was a sham.

3.

Noerr-Pennington

Immunity for Hoechst’s Communications with the FDA Regarding the Scope of the Right of Reference Granted to Biovail

State Law Plaintiffs allege violations of various state law statutes similar to § 2 of the Sherman Act, 15 U.S.C. § 2 ,

12

making it an offense for any person or persons to monopolize, attempt to monopolize, or to conspire to monopolize. In support of their monopoly claims, State Law Plaintiffs allege that the HMRI/Andrx Agreement is evidence of the parties’ conspiracy to maintain the Hoechst Defendants’ monopoly over the market for Car-dizem CD. Plaintiffs further allege that additional conduct is evidence of the Hoechst Defendants’ attempt to maintain its monopoly over the Cardizem CD market: (1) the Hoechst Defendants’ “baseless renunciation of the FTC-mandated right of reference” previously granted to Biovail in connection with Biovail’s NDA for a generic version of Cardizem CD; and (2) HMRI’s initiation and continued prosecution of the HMRI/Andrx patent infringe-' ment action.

See

State Law Plfs. Complt., Second and Third Claims for Relief under California, District of Columbia, Michigan, Minnesota, North Carolina, and Wisconsin state statutes, pp. 50-51, 57-58, 63-64, 69-70, 78-79, and 90-91.

Defendant HMRI challenges Plaintiffs’ allegations regarding the Hoechst Defendants’ communications to the FDA as to the right of reference it granted to Biovail in December, 1995. Specifically, HMRI argues that Plaintiffs have not adequately pled facts showing that this petitioning conduct falls within the sham exception to the

Noerr-Pennington

immunity doctrine.

*645

Asserting facts that dispute those alleged by Plaintiffs, HMRI claims that its post-December 1995 communications with the FDA did not renounce but merely: (1) clarified that the right of reference granted to Biovail was limited to a specific product — Tiazac—and was limited to supplemental or additional NDAs for Tiazac; and (2) petitioned the FDA to adopt its interpretation of its obligations under the FTC Consent Order rather than the interpretation Biovail was lobbying for and are thus immunized under the

Noerr-Pen-nington

doctrine. Defendant’s arguments are factually and legally deficient.

First, construing the allegations in Plaintiffs’ complaint in the light most favorable to them, this Court finds that Plaintiffs have adequately alleged facts showing that the Hoechst Defendants’ post-December 1995 communications were objectively baseless as well as showing the Hoechst Defendant’s subjective anticom-petitive motivation. The essence of Plaintiffs’ allegations is that the Hoechst Defendants intentionally narrowed the scope of the right of reference, despite their knowledge of what was directed by the FTC, so as to keep Biovail’s generic products from being approved and thus competing in the U.S. market for Cardizem CD.

See

State Law Fife’ Complaint ¶¶ 59-95.

Second, as the Seventh Circuit Court of Appeals recently observed, it is error for the court to treat the

Noerr-Pennington

doctrine “as a rule of evidence that forbids the introduction of evidence ... relating to efforts to obtain governmental protection” to show an antitrust violation.

In Re Brand Name Prescription Drugs Antitrust Litig.,

186 F.3d at 789 . State Law Plaintiffs confirmed at the hearing on this matter that they are not asserting a separate cause of action based' on these FDA communications. Rather, Plaintiffs’ allegations regarding the Hoechst Defendants’ FDA communications are merely evidence in support of the Plaintiffs’ state law claims.

See

4/18/00 Hrg. Transcript at 81.

B. Antitrust Injury

Issue: Have Plaintiffs Sufficiently Pled the Fact of Antitrust Injury (Anticom-petitive Effects)

Individual and Class Sherman Act Plaintiffs allege that Defendants violated section 1 of the Sherman Act, 15 U.S.C. § 1 , with their horizontal market allocation and price-fixing agreement and further allege that they were injured by Defendants’ antitrust violations, and seek treble damages pursuant to section 4 of the Clayton Act, 15 U.S.C. § 15 . State Law Plaintiffs allege they were injured by Defendants’ -violation of state antitrust laws similar to section 1 of the Sherman Act and likewise seek treble damages under state law provisions similar to section 4 of the Clayton Act. Defendants’ Rule 12(b)(6) motions to dismiss argue that Plaintiffs have not and cannot allege an antitrust injury cognizable under section 1 of the Sherman Act or under the respective state antitrust statutes.

1. Legal Principles

Section 1 of the Sherman Act prohibits any “ ‘contract, combination ..., or conspiracy’ between two or more persons that unreasonably restrains trade in interstate commerce.”

Re/Max Int’l, Inc. v. Realty One, Inc.,

173 F.3d 995 ,1009 (6th Cir.1999) (quoting 15 U.S.C. § 1 ),

petition for cert. filed,

68 U.S.L.W. 3138 (U.S. August 17, 1999) (No. 99-294). Section 4 of the Clayton Act broadly defines the class of persons entitled to seek treble damages for an antitrust violation; 15 U.S.C. § 15 . The relevant language provides, “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States... and shall recover threefold the damages by him sustained, and the costs of the suit, including a reasonable attorney’s fee.” 15 U.S.C. § 15 .

Although the language of the statute is sweeping on its face, the United States

*646

Supreme Court has limited its scope by setting forth several factors which must be considered before a private person is allowed to prosecute an antitrust claim.

See Associated Gen. Contractors of California, Inc. v. California State Council of Carpenters,

459 U.S. 519 , 103 S.Ct. 897 , 74 L.Ed.2d 723 (1983). The application of section 4 “has of necessity been judicially confined to limit the remedy available thereunder to particular classes of persons and for redress of particular forms of injury.”

Southaven Land Co., Inc. v. Malone & Hyde, Inc.,

715 F.2d 1079 (6th Cir.1983);

see also Valley Products Co., Inc. v. Landmark, A Division of Hospitality Franchise Sys., Inc.,

128 F.3d 398, 402-03 (6th Cir.1997). “The antitrust injury doctrine is one such constraint and an increasingly important one.”

Valley Products,

128 F.3d at 403 .

A plaintiff must allege facts showing that it suffered an “antitrust injury,” that is, “injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendant’s acts unlawful.”

Brunswick Corp., v. Pueblo Bowl-O-Mat, Inc.,

429 U.S. 477, 489 , 97 S.Ct. 690 , 50 L.Ed.2d 701 (1977).

13

See also

William C. Holmes,

Antitrust Law Handbook

§ 8.03[l][a] at 791 (1999). This definition of “antitrust injury” involves “two separate analytical issues. First, the claimed injury must be of a type that the antitrust laws were meant to discourage. And second, the plaintiffs injury must be causally related to the defendant’s anti-competitive acts.”

Id.

“Issues of causation are, thus, brought into the analysis as a second step even after the determination has been made that the nature of the alleged harm is of potential antitrust concern.”

Id.

at 798-800.

Explained more fully, the

Brunswick

“test forces antitrust courts to connect the alleged injury to the purposes of the antitrust laws. Compensation for that injury must be consistent with the purposes of antitrust law generally and with the rationale for condemning the particular defendant. ... At its most fundamental level) the antitrust injury requirement precludes any recovery for losses resulting from competition, even though such competition was actually caused by conduct violating the antitrust laws.” 2 P. Areeda

&

H. Hovenkamp,

supra,

¶ 362a at 210. As the

Brunswick

Court stated, “[t]he injury should reflect the anticompetitive effect either of the violation or of 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.’”

Brunswick,

429 U.S. at 489 , 97 S.Ct. 690 (footnote omitted) (quoting

Zenith Radio Corp. v. Hazeltine Research,

395 U.S. 100, 125 , 89 S.Ct. 1562 , 23 L.Ed.2d 129 (1969)). The antitrust injury requirement “ensures that the harm claimed by the plaintiff corresponds to the rationale for finding a violation in the first place.”

Atlantic Richfield Co. v. USA Petroleum Co.,

495 U.S. 328, 342 , 110 S.Ct. 1884 , 109 L.Ed.2d 333 (1990). Although antitrust violations may have three, often interwoven, effects, “[t]he antitrust injury requirement ensures that a plaintiff can recover only if the loss stems from a eom-

petition-reducing

aspect or effect of the defendant’s behavior”, not from a competition-increasing or competition-neutral aspect of the defendant’s behavior.

Id.

at 343 , 110 S.Ct. 1884 .

See also Eastman Kodak Co. v. Goodyear Tire & Rubber Co.,

114 F.3d 1547, 1557 (Fed.Cir.1997).

*647

2. Analysis

a. Plaintiffs’ Allegations of Antitrust Injury

Here, Plaintiffs are consumers not competitors of Defendants HMRI or Andrx. They have alleged that “but for” Defendants’ anticompetitive conduct, they would not have suffered their alleged antitrust injury. Specifically, it is alleged that Defendants’ September 1997 Agreement eliminated generic competition and deprived all U.S. purchasers of the ability to buy Cardizem CD at a competitive price and thus violated section 1 of the Sherman Act and various state antitrust statutes. It is further alleged that: (1) “but for” the illegal HMRI/Andrx Agreement and the payment of tens of millions of dollars, Andrx would have begun marketing its generic version of Cardizem CD on or shortly after July 9, 1998; (2) Andrx represented to the court presiding over the HMRI/Andrx patent case that it intended to market and sell its generic version of Cardizem CD as soon as it received FDA approval;

14

and (3) as a result of the illegal HMRI/Andrx Agreement, Plaintiffs have paid more than they would have paid for Cardizem CD absent Defendants’ illegal conduct.

b. Defendants’ Rule 12(b)(6) Arguments

Defendants’ motions to dismiss, in essence, argue that Plaintiffs’ antitrust claims must be dismissed because their complaints do not, and cannot, sufficiently plead the fact of antitrust injury.

15

Defendant Andrx frames the argument differently; i.e., because the facts do not and cannot show that the HMRI/Andrx Agreement necessarily delayed Andrx’s decision to market its generic version of Cardizem CD, Plaintiffs’ complaints fail to allege any legally cognizable anticompetitive effects caused by that Agreement and thus must be dismissed. Defendants’ arguments focus on the second, causation prong of the

Brunswick

antitrust injury test. They then argue that, under prevailing Sixth Circuit law, Plaintiffs must plead facts showing that their alleged antitrust injury would not have occurred in the absence of the HMRI/Andrx Agreement.

Defendant HMRI argues that the Sixth Circuit’s “necessary predicate” test requires this Court to determine whether plaintiffs

could have

suffered the same injury from

other conduct

(under a hypothetical set of facts that contradict those alleged in the Plaintiffs’ complaints) that does not violate the antitrust laws; and if it so finds, then the violation is not a necessary predicate of the Plaintiffs’ injury, and there can be no antitrust injury. Defendant HMRI further argues that, because Plaintiffs cannot show that their alleged injuries

necessarily

flow from the HMRI/Andrx Agreement and the alleged anticompetitive conduct, the Court must conclude Plaintiffs suffered no antitrust injury. Defendant Andrx similarly argues that Plaintiffs must plead a coherent factu

*648

al basis to conclude the injury they allege

would not

have occurred in the absence of the HMRI/Andrx Agreement.

Defendants argue that Plaintiffs cannot meet this Sixth Circuit “necessary predicate” test because there are three plausible explanations why Andrx may have delayed going to market even though it could have done so as early as July 1998:(1) the HMRI/Andrx Agreement — which is what Plaintiffs allege (antitrust violation); (2) the possibility that HMRI

might have been able to obtain

a preliminary injunction in the patent ease preventing Andrx from selling its generic drug after July 1998 (no antitrust violation); and (3) the fact that Andrx

could have unilaterally

refrained from going to market prior to resolution of the pending HMRI/Andrx patent infringement case so as to avoid the risk of possible damages (no antitrust violation). Defendants further argue that, because Plaintiffs would have suffered the

same

injury (delayed entry of the generic drug on the market and thus higher prices for a longer period of time), even without an antitrust violation (albeit under a set of facts that contradict those Plaintiffs allege here), there is no antitrust injury as a matter of law.

Defendants’ arguments are flawed. First, they ignore the standard this Court must apply to Rule 12(b)(6) motions. Second, they ignore the causation standard the Court applies when examining whether the plaintiff has shown a causal connection between an alleged antitrust violation and the injury it claims it suffered. Defendants’ alternative, possible causation theories likewise ignore a basic antitrust principle that, in antitrust cases such as this, the only difference between legal and illegal conduct is the existence of an agreement to do the same thing the parties could have done unilaterally and thus legally.

16

Finally, Defendants misapply the antitrust injury test enunciated in

Brunswick

and its progeny and likewise misapply the Sixth Circuit precedent they rely upon to support their dismissal arguments.

c. Application of Rule 12(b)(6) Standard to Plaintiffs’ Allegations

Defendants’ arguments merely present a different set of facts that support

an alternative possible cause

for Andrx’s decision to delay going to market with its product beyond July 9, 1998 despite Plaintiffs’ allegations that Andrx: (1) had the ability to do so; (2) had made representations to a court that that was what it intended to do; and (3) would have done so but for its September 1997 Agreement with Defendant HMRI to delay in exchange for tens of millions of dollars. Defendants’ factual arguments do not make it any less possible that Andrx was doing as Plaintiffs allege here — -not marketing its generic product and stalling the patent suit, which in turn stalled the exclusivity period under Hatch-Waxman, because HMRI was paying it $40 million a year to do just that.

See Biovail Corp. Int’l,

49 F.Supp.2d at 767-68. In

*649

essence, Defendants argue that the Court must conclude that Andrx would not have marketed its generic drug prior to finally resolving the HMRI/Andrx patent litigation regardless of allegations to the contrary in Plaintiffs’ complaints. The Court, however, cannot ignore that, on a Rule 12(b)(6) motion to dismiss, it must take all the Plaintiffs’ well-pleaded allegations as true, and determine whether Plaintiffs have pled an antitrust injury as defined in

Brunswick .

The Court cannot consider facts that contradict those pled in Plaintiffs’ complaints and, based on those un-pled facts, conclude that Plaintiffs would have suffered the same injury with or without an antitrust violation and thus cannot plead an antitrust injury.

Despite Defendants’ claims that there

could have

been an injunction precluding Andrx from going to market and that Andrx

could have

unilaterally refrained from going to market, that is not what Plaintiffs allege here. Instead, it is alleged that Andrx told the court presiding over the HMRI/Andrx patent infringement case that it expected to begin selling its generic version of Cardizem CD as soon as it obtained FDA approval, and, “but for” the illegal HMRI/Andrx Agreement, Andrx would have done just that. This Court is required to accept those allegations as true. Dismissal under Rule 12(b)(6) is not permitted simply because Defendants can come up with a different set of facts that support an alternative possible cause for Plaintiffs’ injury that does not offend antitrust law. At best, Defendants’ arguments highlight disputed issues of material fact that are not to be decided at this stage of the litigation.

d. Application of Proper Causation Standard to Plaintiffs’ Allegations

As to the required causal connection between Plaintiffs’ alleged antitrust violation and injury suffered, the Supreme Court has observed that an antitrust plaintiff must demonstrate

“some

damage flowing from the unlawful conspiracy; inquiry beyond this minimum point goes only to the amount and not the fact of damage”; and therefore “[i]t is enough that the illegality is shown to be a material cause of the injury;

a plaintiff need not exhaust all possible alternative sources of injury in fulfilling his burden of proving compensa-ble injury under § f [of the Clayton Act].” Zenith Radio Corp.,

395 U.S. at 114 n. 9, 89 S.Ct. 1562 (emphasis added).

Accord, Allied Accessories & Auto Parts Co., Inc. v. General Motors Corp.,

901 F.2d 1322, 1325 (6th Cir.1990).

Professors Areeda and Hovenkamp have likewise observed that, “[wjhile all courts demand a showing of injury-in-fact ‘caused’ by an antitrust violation, to require proof that the illegal conduct was the

exclusive

cause of the plaintiffs injury would effectively deny private remedies, for multiple causes always affect everyone. Accordingly, the Supreme Court has declared that the plaintiff need show only that the violation is a ‘material cause’ of the claimed injury.” 2 P. Areeda & H. Hovenkamp,

supra,

¶ 363a at 219 (rev. ed.1995). “It is therefore enough that the antitrust violation contributes significantly to the plaintiffs injury even if other factors amounted in the aggregate to a more substantial cause.”

Id.

at 219-220. “Thus, a plaintiff initially obtains standing by showing that the alleged violation contributed significantly to his injury. Ultimately, of course, he must provide the jury with a reasonable basis for separating the impact of the violation from the other forces affecting him.”

Id.

at 221.

“If there is sufficient evidence in the record to support an inference of causation between the antitrust violation and the injury suffered, the ultimate conclusion as to what that evidence proves is for the jury.”

Law v. Nat’l Collegiate Athletic Ass’n,

5 F.Supp.2d 921, 927 (D.Kan.1998) (citing

Perkins v. Standard Oil Co.,

395 U.S. 642, 648 , 89 S.Ct. 1871 , 23 L.Ed.2d 599 (1969)).

See also Rossi v. Standard Roofing, Inc.,

156 F.3d 452, 483-84 (3rd Cir.1998) (observing that, as to the causation element of antitrust injury, the plain

*650

tiff need only establish that “the defendants’ illegal conduct was a material cause of [his] injury”)(internal quotes and citations omitted). As the Seventh Circuit recently observed, to satisfy the second, or causation component of

Brunswick ,

a § 4 plaintiff must show that its injury “flows from that which makes defendants’ acts unlawful,”

Brunswick,

429 U.S. at 489 , 97 S.Ct. 690 — that “but for” the alleged violation, the injuries would not have occurred. [Citations omitted]. An antitrust violation need not be the sole cause of the alleged injuries, but the plaintiff must establish, with a fair degree of certainty, that the violation was a material element of, and substantial factor in producing, the injury.

Greater Rockford Energy and Technology Corp. v. Shell Oil Co.,

998 F.2d 891, 401 (7th Cir.1993).

Thus, the question presented here is whether, construing Plaintiffs’ allegations in the light most favorable to them, the HMRI/Andrx Agreement, with its $40 million per year payments to Andrx, was a material cause of Andrx’s decision to withhold its product from the market beyond the time it could have gone forward and beyond the time it had represented to another court that it intended to go forward. This Court concludes that Plaintiffs have sufficiently alleged the required causal connection between the Defendants’ anticompetitive conduct and their alleged injuries.

To establish antitrust injury, Plaintiffs are not required to eliminate the hypothetical possibility that Defendant Andrx might have unilaterally delayed entry into the market even absent the HMRI/Andrx Agreement. As the Seventh Circuit recently observed in

In re Brand Name Prescription Drugs Antitrust Litig.,

186 F.3d 781 (7th Cir.1999),

[plaintiffs] did not, ..., as the defendant manufacturers rather absurdly argue, have to exclude all possibility that the manufacturers’ price discrimination was unilateral rather than collusive. That would imply that the plaintiff in an antitrust case must prove a violation of the antitrust laws not by a preponderance of the evidence, not even by proof beyond a reasonable doubt (as indeed is required in criminal antitrust cases), but to a 100 percent certainty, since any lesser degree of certitude would leave a possibility that the defendant was innocent.

Id.

at 787 . Prevailing Supreme Court precedent and Sixth Circuit precedent do not support Defendants’ arguments to the contrary.

e. Application of

Brunswick

and Its Progeny to Plaintiffs’ Allegations

The Sixth Circuit, following

Brunswick ,

applies a two-pronged test in this context, requiring the plaintiff to show “(1) that the alleged violation tends to reduce competition in some market and (2) that the plaintiffs injury would result from a decrease in that competition rather than from some other consequence of the defendant’s actions.”

Tennessean Truckstop, Inc. v. NTS, Inc., 875

F.2d 86, 88 (6th Cir.1989) (quoting P. Areeda

&

H. Hovenkamp,

supra,

¶ 334.1b at 299 (1988 Supp.)). Plaintiffs specifically allege that, as a result of the Defendants’ illegal market allocation Agreement and Defendants’ anticompeti-tive conduct, Plaintiffs and the class paid more than they would have paid for Car-dizem CD absent Defendants’ illegal conduct. They allege that the HMRI/Andrx Agreement eliminated generic competition and thus deprived all U.S. purchasers of the ability to buy Cardizem CD at a competitive price. This Court concludes that Plaintiffs have pled the type of injury the antitrust laws were intended to prevent and have pled an injury that flows from the conduct that makes Defendants’ actions illegal.

As to the first prong of the antitrust injury test, the Supreme Court has observed that “[t]he Sherman Act was enacted to assure customers the benefits of price competition, and our prior cases have emphasized the central interest in protecting the economic freedom of participants

*651

in the relevant market.”

Associated General,

459 U.S. at 538 , 103 S.Ct. 897 . Plaintiffs are customers, not competitors of Defendants, and the injury claimed consists of higher prices paid for drugs as a result of the contractually mandated absence of competition between HMRI and Andrx. As to the second, or causal connection prong of the antitrust injury test, Plaintiffs have alleged that the HMRI/Andrx Agreement decreased generic competition, and that the decreased competition bargained for in the HMRI/Andrx Agreement caused their injuries. Thus, Plaintiffs’ injuries coincide precisely with the rationale for finding a violation of the antitrust laws in the first place. Since the very purpose of antitrust law is to ensure that the benefits of competition flow to purchasers of goods affected by the violation, “buyers have usually been preferred plaintiffs in private antitrust litigation,” and a purchaser’s standing “to recover for an overcharge paid directly to an illegal cartel or monopoly is seldom doubted.” 2 P. Areeda

&

H. Hovenkamp,

supra,

¶ 370 at 253. Plaintiffs have sufficiently pled facts that show they satisfy the “antitrust injury” test set forth in

Brunswick .

No more is required. The Sixth Circuit precedent Defendants’ rely upon is fully consistent with this conclusion.

f. Application of Sixth Circuit Precedent Defendants’ Rely Upon

Defendants argue that under Sixth Circuit precedent, the Court must dismiss their complaints, if Plaintiffs

could have

suffered the same injury from conduct other than that alleged in their complaints, that plausibly explains the Defendants’ conduct but does not violate the antitrust laws. Defendants offer new and contradictory facts supporting alternative possible causes for Andrx’s delayed entry into the market and, using those facts, argue that Plaintiffs cannot show that they would have been worse off with the alleged restraint on trade than they would have been without it and thus cannot plead antitrust injury. Defendants misconstrue and misapply the Sixth Circuit precedent they rely upon to support their dismissal arguments.

See Axis, S.p.A. v. Micafil, Inc.,

870 F.2d 1105 (6th Cir.1989);

Hodges v. WSM, Inc.,

26 F.3d 36 (6th Cir.1994);

Valley Products Co. v. Landmark,

128 F.3d 398 (6th Cir.1997).

The Sixth Circuit determines whether “antitrust injury” has been properly pled by applying the test enunciated in

Brunswick. See, e.g., Tennessean Truckstop.

Contrary to Defendants’ assertions here, the Sixth Circuit does not apply a more stringent “necessary predicate” test each time antitrust injury is challenged on a Rule 12(b)(6) motion.

See, e.g., Re/Max Int’l, Inc.,

173 F.3d at 1023. Rather, the Sixth Circuit has dismissed antitrust complaints on Rule 12(b)(6) motions when the alleged facts show that the plaintiffs antitrust injury inevitably flows, not from the alleged antitrust violation, but from an independent cause that fully accounts for the plaintiffs injury. In those circumstances, the independent cause breaks the causal connection between the alleged antitrust violation and antitrust injury thus demonstrating that the plaintiff would have necessarily suffered the same alleged injury with or without the alleged anticompetitive conduct.

See Axis, Hodges,

and

Valley Products.

Stated in

Brunswick

terms, the injury flows from this independent cause, not from the alleged antitrust violation.

The Sixth Circuit has not, as Defendants urge hfere, dismissed an antitrust complaint simply because the defendant can conjure up a set of facts, contradicting those alleged in the plaintiffs complaint, but supporting an alternative possible cause for Plaintiffs’ injuries that would not offend the antitrust laws. Defendants have not presented the Court with any decision where an antitrust complaint was dismissed based on a speculative argument that there can be no antitrust injury because the defendant could have acted other than the plaintiff alleges without offending the antitrust laws and the plaintiff would have suffered the same claimed injury. As Professors Areeda and Hovenkamp cau

*652

tion, “[d]enying injury when the plaintiff is no worse off than he would have been in the absence of any violation does not mean ... that the defendant should prevail merely by asserting what he

would otherwise have done.”

2 P. Areeda & H. Hovenkamp,

supra,

¶ 363c at 225 (emphasis added) (citing

Irvin Indus., Inc. v. Goodyear Aerospace Corp.,

974 F.2d 241 (2nd Cir.1992) and observing that the Second Circuit Court of Appeals “correctly reversed” the district court’s decision that there was no antitrust injury to the plaintiff and correctly refused “to base a denial of injury on

speculation about what the defendant would have done had it not been acting predatorily

”) (emphasis added).

As discussed more fully

infra,

in

Axis, Hodges,

and

Valley Products,

the Sixth Circuit did not arrive at its decision that dismissal was proper by assuming the plaintiffs allegations were false and by considering contradictory facts presented by the defendants. Rather, in those decisions, the Sixth Circuit applied

Brunswick

and concluded that the plaintiff had not and could not allege an antitrust injury because the injury it alleged flowed not from the alleged antitrust violation but from another independent cause that fully accounted for the plaintiffs claimed injury.

Defendants do not ground their arguments on the court’s reasoning and conclusion in

Axis, Hodges,

and

Valley Products.

Instead, they focus on language that gives rise to what Defendants call the Sixth Circuit’s “necessary predicate” test for establishing antitrust injury. After stating its analysis and decision, the

Hodges

Court, in the last paragraph of its decision, further remarked that, “because plaintiffs did not allege, nor could they, that the illegal antitrust conduct was a necessary predicate to their injury or that defendants could exclude plaintiffs only by engaging in the antitrust violation, it was appropriate to dismiss the case pursuant to Federal Rule of Civil Procedure 12(b)(6).”

Id.

at 39 . While the Sixth Circuit language found in the last paragraph of

Hodges

and repeated in

Valley Products

appears to broadly apply to the facts presented here, careful examination of these decisions reveals otherwise. The quoted language goes well beyond the antitrust injury test announced in

Brunswick ,

goes well beyond what the Sixth Circuit actually did in each of these cases, goes further than the underlying facts allow, and is mutually inconsistent with the “material cause” standard that is to be applied in antitrust cases. Factually and legally, the decisions in

Axis, Hodges,

and

Valley Products

do not support dismissal of Plaintiffs’ antitrust claims on a Rule 12(b)(6) motion.

As Professors Areeda and Hovenkamp have observed, “[o]n occasion, a force other than the antitrust violation fully accounts for the plaintiffs injury.” 2 P. Areeda & H. Hovenkamp,

supra,

¶ 363b at 222.

17

For example, “a plaintiff cannot be injured in fact by private conduct excluding him from the market when a statute prevents him from entering that market in any event.”

Id.

at 222. As an example of this principle, Professors Areeda and Ho-venkamp cite the Sixth Circuit case,

Axis v. Micafil,

and observe that there is “no standing for [the] plaintiff who was unable to obtain a government-required license to enter the market from which the defendant allegedly excluded him.”

Id.

at 222 n. 15.

See also City of Pittsburgh v. West Penn. Power Co.,

147 F.3d 256, 268-69 (3rd Cir.1998)(where the Court observed, “it is the structure of the regulated industry, not the defendant’s conduct, which creates the lack of competition — and under these facts — the lack of antitrust injury”). Simply put, when an independent cause fully accounts for the plaintiffs alleged

*653

antitrust injury, it breaks the causal connection between the alleged antitrust violation and the plaintiffs injury.

Professors Areeda and Hovenkamp caution that “the defendant’s reliance on supervening governmental action or other independent cause must be examined closely” to make sure that it is the supervening, independent cause, rather than the alleged illegal agreement, that gives rise to the plaintiffs antitrust injury. 2 P. Areeda & H. Hovenkamp,

supra,

¶ 363b at 222 (citing

Kaiser Cement Corp. v. Fischbach and Moore,

793 F.2d 1100 (9th Cir.1986)). That is what the Sixth Circuit did in

Axis, Hodges,

and

Valley Products.

Defendants’ arguments confuse the factual circumstances presented here with those presented in

Axis, Hodges,

and

Valley Products,

where the alleged facts show that an independent cause fully accounts for the plaintiffs alleged injury and thus breaks the causal link between the alleged antitrust violation and that injury. The mere fact that Defendants can come up with additional plausible and legally permissible explanations as to why Andrx prolonged its entry into the market (albeit based on facts that contradict those alleged in the Plaintiffs’ complaints) is to no avail. Dismissal under Rule 12(b)(6) is not appropriate here. As discussed

infra,

the decisions in

Axis, Hodges,

and

Valley Products

do not support a contrary conclusion.

i.

Axis, S.pA. v. Micafil, Inc.,

870 F.2d 1105 (6th Cir.1989).

In

Axis,

the court affirmed the district court’s dismissal of the plaintiffs antitrust claim pursuant tó a Rule 12(b)(6) motion to dismiss. Plaintiff, an Italian armature winding machine manufacturer brought antitrust claims against a Swiss manufacturer which had recently purchased two American companies that manufacture armature winding machines. Plaintiff alleged that the defendant’s purchase violated the antitrust laws “because the acquisition brought about a substantial reduction of competition in the market” and caused the plaintiff to suffer “lost sales and lost profits from winding machines that it would have sold in the United States” had the defendant not made this purchase.

Id.

at 1106-07 . The district court granted the defendant’s Rule 12(b)(6) motion, finding that the plaintiffs complaint “failed to state a claim because it did not allege an ‘antitrust injury’ ” because the plaintiff “would have suffered the same injury — exclusion from the U.S. markefr — if [the defendant] had not” made the challenged purchase.

Id.

at 1107 . There was another causal factor that fully explained the plaintiffs exclusion from the U.S. market; i.e., the plaintiff did not have access to the patents it needed to enter the U.S. market. “Thus, the anticompetitive act of purchasing [the American manufacturer] did not cause the plaintiffs alleged injury. The patents were an impenetrable barrier to the plaintiffs entry

before

[defendant] purchased [the American manufacturer], and they remained as great a barrier af-terwards .... [A]ny injury that [the plaintiff] may have suffered did not flow directly from [the defendant’s presumably unlawful act.”

Id.

(Emphasis added).

Applying

Brunswick ,

the

Axis

Court concluded that the plaintiffs injury did not “flow from” that which made the defendant’s acts unlawful under the antitrust laws. It reasoned that the plaintiffs “exclusion from the United States armature winding machine market did not result from [the defendant’s acquisition of the [American manufacturer] — the anticompet-itive act. Before [the defendant] ever acquired [the American manufacturer], [the plaintiff] was shut out of the desired market by the patents” controlled by others “and by the refusal of those companies to license to [the plaintiff].”

Id.

at 1110.

The

Axis

Court observed that “[t]he single determinant of antitrust injury is whether the plaintiff has suffered an ‘injury of the type the antitrust laws were intended to prevent and that flows from that which makes [a defendant’s] act [ ] unlawful.”

Id.

at 1111 (quoting

Bruns

*654

wick,

429 U.S. at 489 , 97 S.Ct. 690 ). The Court affirmed the district court, finding that, even viewed in the light most favorable to the plaintiff, its complaint failed to allege an antitrust injury.

Id.

It observed that the plaintiff: (1) admitted in the complaint that patents controlled by others precluded its entry into the market, (2) failed to allege that the defendant violated the antitrust laws by misusing its patents or licenses, and (3) alleged only that the defendant’s acquisition of the American manufacturing companies “raised the barriers to its entry into the U.S. market” but failed to allege that the defendant “dominated the U.S. market for armature winding machines” and failed to allege “conditions under which the acquisition of patents may violate the antitrust laws and create antitrust injury for which damages may be awarded.”

Id.

at 1111.

As Professors Areeda and Hovenkamp observe,

Axis

is an example of a case where “a force other than the antitrust violation fully accounts for the plaintiffs injury.” 2 P. Areeda & H. Hovenkamp,

supra,

¶ 363b at 222. In

Axis,

it was the plaintiffs inability to obtain certain patents, or a license to use those patents, that caused its alleged injury — exclusion from the relevant market. In the language of

Brunswick ,

plaintiffs injury flowed from its inability to obtain the patents it needed to enter the relevant market; it did not flow from the defendant’s alleged anticom-petitive conduct. Because it did not have the necessary patents, the plaintiff would have suffered the same injury- — exclusion from the relevant market — with or without the alleged antitrust violation.

In contrast, here Plaintiffs allege that “but for” the HMRI/Andrx Agreement and the millions of dollars that HMRI paid to Andrx, Andrx would have done precisely what it represented to the court presiding over the HMRUAndrx patent infringement action that it intended to do — go to market with its generic product in July 1998 when the Hatch-Waxman 30-month waiting period expired. Unlike the facts presented in

Axis,

there are allegations here that Andrx’s generic product did not infringe the ’584 patent, thus giving rise to the inference that the patent did not present an impenetrable barrier to Andrx’s July 1998 entry into the United States market for Cardizem CD and its bioequivalents.

ii.

Hodges v. WSM, Inc.,

26 F.3d 36 (6th Cir.1994).

In

Hodges ,

the plaintiffs, who operated an airport shuttle and tour service in Nashville, sued companies that owned and operated the Grand Ole Opry music radio program; the amusement park and hotel and convention center known as Opryland; and a sightseeing and tour company called Grand Ole Opry Tours, Inc. The plaintiffs alleged that these defendants violated § 1 of the Sherman Act when they unlawfully conspired with competitors in the Nashville airport shuttle and tour market. The alleged unlawful agreement was that the competitors would “refrain from transporting passengers between the airport and the Opryland complex, in exchange for defendants hiring vans and buses from these former competitors for Opryland’s sightseeing tour business.”

Id.

at 37. The plaintiffs further alleged that the defendants “policed the-agreement by refusing entry onto Opryland property” to the plaintiffs and to all non-conspiring shuttle service companies.

Id.

Finally, the plaintiffs alleged that this illegal conspiracy caused them to lose sales of shuttle services between the Nashville airport and Opryland and thus injured the plaintiffs’ “opportunity to compete in the airport shuttle transportation market.”

Id.

The Sixth Circuit affirmed the district court’s dismissal of the plaintiffs’ antitrust claims in response to the defendants’ Rule 12(b)(6) motion to dismiss. The district court applied the two prong test of

Brunswick

and concluded that the plaintiffs’ complaint failed to state a claim because it did not allege an antitrust injury. The court examined the nature of the alleged conspiracy and the plaintiffs’ injury and reasoned that: (1) the plaintiffs’ injury did not flow from “a decrease in competition

*655

among the allegedly conspiring shuttle operators,” (2) “if the conspiracy existed, it would have benefitted [the p]laintiff by reducing its competition to shuttle passengers from the airport to Opryland”, and (3) “[i]t was Opryland’s refusal to allow [the plaintiffs vans on its property which caused [the pjlaintiff s injury.”

Id.

at 38. Agreeing with the district court’s analysis, the Sixth Circuit likewise concluded that, because the alleged antitrust violation would have benefitted the plaintiffs, not injured them, the “plaintiffs were not harmed by the kind of evil contemplated by § 1 of the Sherman Act.”

Id.

at 39. Accordingly, the plaintiffs did not, and could not, allege facts that satisfied the first prong of the

Brunswick

“antitrust injury” test.

As to the second prong of

Brunswick ,

the Sixth Circuit explained, the “defendants were accused of orchestrating with former competitors a combination designed to free [the] defendants of competition.”

Id.

at 39. The defendants allegedly agreed with these other conspiring shuttle services that the defendants would handle all shuttles from the airport to Opryland and, in exchange, the defendants would farm out tour business from Opryland to these co-conspirators. Opryland’s refusal to allow the plaintiffs access to its property was not part of the alleged conspiracy. Rather, it was alleged that the defendants used the refusal as a means to police the alleged illegal agreement.

Id.

at 37. Accordingly, the court reasoned, the alleged “violation .of the antitrust laws, a market division conspiracy to restrain competitors, was not the cause of plaintiffs’ exclusion from the shuttle service market between the airport and Opryland.”

Id.

at 39. The alleged illegal agreement did not prevent the plaintiffs from shuttling customers between the airport and Opryland. Rather, “plaintiffs’ injury resulted from defendants’ lawful refusal to grant plaintiffs access to their private property.”

Id.

The alleged antitrust violation was a conspiracy to decrease competition among competitors, and the plaintiffs’ alleged “injury was not an ‘antitrust injury’ because it did not result from any decrease in competition among shuttle operators.”

Id.

at 39. Simply put, violation of the antitrust laws, “was not the cause of plaintiffs’ exclusion from the shuttle service market between the airport and Opryland.”

Id.

at 39. Rather, the alleged harm was caused by the defendants’ denial of access to Opry-land. This independent cause fully accounts for the plaintiffs’ claimed injury and does not flow from the alleged antitrust violation.

The

Hodges

Court, as mandated under

Brunswick ,

examined the nature of the alleged antitrust violation and the alleged antitrust injury and concluded that there could be no antitrust injury where: (1) the plaintiffs were not harmed from the kind of evil contemplated by section 1 of the Sherman Act; and (2) there was no causal connection between the harm allegedly suffered and the alleged Sherman Act violation.

In contrast, here it is alleged that Defendants conspired and agreed to keep Andrx’s generic'version of Cardizem CD off the market, to prolong HMRI’s monopoly and to keep prices at an artificially high rate. It is further alleged that but for the Defendants’ illegal conspiracy and agreement, Defendant Andrx would have done as it told the HMRI/Andrx patent court it was prepared to do; i.e., begin marketing its generic version of Cardizem CD as soon as it obtained FDA approval and the 30 month Hatch-Waxman stay period had expired — on or before July 9, 1998. Plaintiffs also allege that but for Defendants’ alleged anticompetitive conduct, Plaintiffs would not have paid an artificially high price for Cardizem CD. Thus, unlike the plaintiffs in

Hodges ,

Plaintiffs here allege facts showing that: (1) they were harmed by the kind of evil contemplated by section 1 of the Sherman Act; and (2) their antitrust injuries “flow from” and are a direct result of the alleged antitrust violation.

*656

iii.

Valley Products Co. v. Landmark,

128 F.3d 398 (6th Cir.1997).

In

Valley Products,

the plaintiff, a manufacturer of logo-bearing hotel soaps and other hotel amenities, brought an antitrust action against a hotel franchisor and two of the plaintiffs competitors, .Guest Supply, Inc. and Marietta Corp., claiming the plaintiff was the victim of an illegal tying arrangement between the defendant hotel franchisor and its franchisees. The plaintiff had been one of six approved vendors that the defendant franchisor authorized to sell logo-bearing soap and ■ other guest amenities to its franchisees. The plaintiff and the other approved vendors had a “vendor agreement” with the defendant franchisor that allowed either party to terminate on 60 days’ notice. The defendant franchisor decided to cut its number of preferred vendors down to two (Guest Supply and Marietta Corp.). and notified the plaintiff that it was terminating its vendor agreement.

After its vendor agreement was terminated, the plaintiff filed suit alleging that the defendants: (1) violated section 1 of the Sherman Act “by attempting to subject [the defendant franchisor’s] franchisees to tying arrangements under which franchise rights were conditioned on purchases of logoed amenities manufactured by Guest Supply and/or Marietta”; and (2) violated section 2 of the Sherman Act “by attempting improperly to leverage the market power of the defendant manufacturers and the monopoly power that [the defendant franchisor] possessed over its franchisees’ use of the [defendant franchisor’s] trademarks”.

Id.

at 401 . The district court granted a Rule 12(b)(6) motion to dismiss, finding that the plaintiff had failed to state an antitrust claim on the ground that its complaint failed to allege an antitrust injury. The Sixth Circuit affirmed.

Citing

Brunswick ,

the Sixth Circuit observed that the plaintiff must prove antitrust injury.

Id.

at. 402. It further observed that the Sixth Circuit bars recovery “where the asserted injury, ..., flows directly from conduct that is not itself an antitrust violation.”

Id.

at 403 (citing and discussing

Axis

and Hodges). The

Valley Products

Court then concluded that the plaintiff could not satisfy the Sixth Circuit requirement that the alleged antitrust violation (defendant franchisor’s alleged tying arrangement with its franchisees) be a necessary predicate to the plaintiffs alleged antitrust injury (loss of logoed amenity sales).

Id.

at 404. The Court reasoned that the plaintiffs alleged injury — the loss of logoed amenity sales it claimed it suffered after its vendor agreement was canceled — “flowed directly from the cancellation.”

Id.

It further observed that “the sales losses would have been suffered as a result of the cancellation whether or not [the defendant franchisor] had entered into the alleged tying arrangements with the franchisees .”

Id.

In

Valley Products,

there was no antitrust injury because the plaintiffs alleged injury flowed from the fact that the defendant franchisor terminated its vendor agreement, not from the alleged anticom-petitive activity.

Id.

This termination was an independent cause that

fully accounted

for the plaintiffs claimed injury, and the termination was not itself an antitrust violation. In contrast, Plaintiffs allege that their injuries flow directly from Defendants’ anticompetitive conduct. This Court cannot conclude, on a Rule 12(b)(6) motion, that an independent cause fully accounts for Plaintiffs’ asserted injuries and that Plaintiffs’ alleged injuries flow directly from an independent cause that is not itself an antitrust violation.

The mere fact that Defendant Andrx can come up with other' plausible and legally permissible explanations as to why it prolonged its entry into the market is to no avail. In

Virginia Vermiculite,

156 F.3d at 539-40 , the Fourth Circuit Court of Appeals rejected an argument similar to the one Defendants raise here. Reversing the district court’s Rule 12(b)(6) dismissal of the plaintiffs’ section 1 Sherman Act claims “on the ground that [the plaintiffs] failed to demonstrate a sufficient causal

*657

relationship between their alleged injury and the [defendants]’ alleged violation of the antitrust laws”,

id.

at 539 , the Fourth Circuit found the district court’s reasoning faulty because: (1) it failed to appreciate the Supreme Court’s observations that “in antitrust cases, where the proof is largely in the hands of the alleged conspirators, dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly”,

id.

(internal quotes and citations omitted), and (2) the district court misconstrued the nature of the plaintiffs’ Sherman Act allegations and failed to appreciate that the defendant was “foreclosed from challenging causation simply on the basis that it could have achieved the same result through lawful means.”

Id.

at 540 .

Accord, In re Brand Name Prescription Drugs Antitrust Litig.,

186 F.3d at 787 ;

Biovail v. Hoechst Aktiengesellschaft,

49 F.Supp.2d at 767-78 (where the court rejected the same argument Defendants raise here, refused to dismiss plaintiffs antitrust claims under Rule 12(b)(6), and reasoned that, “while it is possible that Andrx is not marketing its generic product because it does not want to risk potential patent infringement damages, it is also

certainly

possible that Andrx is not marketing its generic product ... because defendants are paying it forty million dollars .a year not to do so. This court simply cannot make this call on the pleadings”).

g. The Other Cases Defendants Rely Upon do not Require a Different Result.

Defendants’ reliance on

City of Pittsburgh v. West Penn Power Co.,

147 F.3d 256 (3rd Cir.1998) is likewise misplaced. In that case, the plaintiff City asserted antitrust claims against the defendant power companies “alleging that the two companies entered into a premerger agreement in restraint of trade and that their proposed merger would substantially lessen competition or tend to create a monopoly” and limit the City’s ability to choose to buy power from one company over the other.

Id.

at 258 . The Court affirmed the district court’s dismissal of the plaintiffs complaint, pursuant to Rule 12(b)(6), reasoning that the plaintiff failed to state an antitrust claim because “any injury suffered by the City did not flow from the defendants’ conduct, but, rather, from the realities of the regulated environment in which all three [parties] were actors.”

Id.

at 265 . Central to the Court’s decision were the alleged facts that the defendant power companies were never competitors, “the regulatory scheme mandated that they not compete;” and that any attempts to compete “were no more than attempts, with no assurance that competition would be permitted.”

Id.

Thus, the Court concluded, the City’s alleged injury, “ ‘[t]he purported lessening of competition’, ‘was not caused by the premerger agreement and proposed merger’ of defendant power companies.”

Id.

at 266 . Rather, “the City’s inability to choose to buy from either [defendant power company] ... is an injury visited upon it by the regulated nature of the utility services, not caused by an agreement between [defendant power companies] to withdraw [one of the company]^ application to be able to compete.”

Id.

The defendant power company needed regulatory approval before it could compete, it did not have that approval, it never competed and thus “any injury to the City did not result from a lessening of competition.”

Id.

The Third Circuit, agreeing with the district court, observed that “it is the structure of the regulated industry, not the' defendants’ conduct, which creates the lack of competition — and under these facts — the lack of standing.”

Id.

at 269 . The Court went on to observe that “[t]he very essence of our ruling is that the advent of deregulation will likely remove the break in the causal chain so that future utility arrangements in the free market atmosphere may well pass muster for purposes of standing under the antitrust laws.”

Id.

at 269 . With the current statutory and regulatory scheme in place, however, the Court concluded that “the City cannot establish the necessary antitrust injury and causal connection between the

*658

alleged antitrust violation and its injury.”

Id.

The District Court for the District of Columbia recently reached a similar conclusion in a case pending between Andrx and Biovail Corporation International, a Canadian corporation and competitor of Defendants Andrx and HMRI. In

Andrx Pharm., Inc. v. Friedman,

83 F.Supp.2d 179 (D.D.C.2000), the court concluded that Biovail’s alleged antitrust injury — delayed sales and profits for its generic version of Cardizem CD — did not flow from the HMRI/Andrx Agreement but from two other independent causes: (1) the FDA had not yet approved Biovail’s ANDA for its generic version of Cardizem CD; and (2) the “troublesome” statutory scheme (the Hatch-Waxman Amendments) that prohibits Biovail from “marketing a drug until the first ANDA recipient goes to market, and which places no restrictions on when, or even whether, that applicant must go to market.”

Id.

at 185 .

Unlike the City in

City of Pittsburgh

and Biovail in

Andrx Pharmaceuticals v. Friedman,

Plaintiffs here allege an antitrust injury — having to pay an artificially high price — that flows directly from the alleged antitrust violation, the September 1997 HMRI/Andrx Agreement. The Hatch-Waxman Amendments did not prohibit Andrx from going to market with its generic product on July 9, 1998. Defendant Andrx not only had the unfettered right to do so, Plaintiffs allege that it represented to the court presiding over the HMRI/Andrx patent infringement action that that was what it intended to do. It is further alleged that but for HMRI’s promise to pay it tens of millions of dollars to delay, Andrx would have gone to market on July 9, 1998. Even though the Hatch-Waxman Amendments may authorize very specific unilateral conduct and a specific, limited restraint of trade, they do not authorize

agreements

to restrain trade.

h. Conclusion

Unlike the plaintiffs in

Axis, Hodges, Valley Products,

and

City of Pittsburgh ,

Plaintiffs here have alleged an injury that flows directly from the Defendants’ anti-competitive acts. These allegations must be taken as true. That Defendants can come up with contrary facts to support their 'alternative hypothesis about what Defendant Andrx could have done so as to not offend the antitrust laws is irrelevant. As the Seventh Circuit recently observed in

In re Brand Name Prescription Drugs Antitrust Litig.,

186 F.3d at 787 , to require Plaintiffs to “exclude all possibility that the manufacturers’ price discrimination was unilateral rather than collusive” would impermissibly require an antitrust plaintiff to “prove a violation of the antitrust laws ... to a 100 percent certainty, since any lesser degree of certitude would leave a possibility that the defendant was innocent.” Defendants’ arguments here that Plaintiffs “must plead a coherent factual basis to conclude the injury they allege would not have .occurred in the absence of the HMRI/Andrx Agreement” likewise requires Plaintiffs to. “exclude all possibility” that Defendant Andrx’s conduct was unilateral rather than collusive, and likewise impermissibly requires an antitrust plaintiff to not only prove but to plead facts that would allow the Court, on a Rule 12(b)(6) motion, to determine to a 100 percent certainty that there was no antitrust injury. Accordingly, Defendants’ motions to dismiss based on Plaintiffs’ inability to plead the fact of antitrust injury are DENIED.

C. Preemption/Exemption of Plaintiffs’ Claims

Issues: Whether the Hatch-Waxman Amendments (1) Preempt Plaintiffs’ State Law Claims; and (2) Provide an Implied Exemption from the Sherman Act Plaintiffs’ Antitrust Claims?

1. Preemption of State Law Plaintiffs’ claims

In

Gustafson v. City of Lake Angelus,

76 F.3d 778 (6th Cir.1996), the Sixth Circuit observed that:

*659

Preemption is predicated on congressional intent.... A statute may be construed as preemptive under three circumstances. First, Congress, in enacting a federal statute, may express a clear intent to preempt state law. Second, absent express preemption, federal law may have an implied preemptive effect if Congress revealed this intent by “occupying the field” of regulation. There is implied preemption when there is a scheme of federal regulation ... so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it or because the Act of Congress may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject. There is a third type of preemption when state law actually conflicts with federal law. Such conflict occurs where compliance with both federal and state regulations is a physical impossibility, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.

Id.

at 782-83 (internal quotes and citations omitted). Defendants argue here that there is preemption under the second and third set of circumstances. This Court disagrees.

Defendants first argue that Plaintiffs’ state law claims are preempted because Congress has so pervasively regulated this particular intersection of patent law, pharmaceutical regulation, and antitrust law that a clear intent to occupy the field can be inferred. Focusing as it must on congressional intent, this Court examines Defendants’ evidence of pervasiveness and its argument that the Hatch-Waxman Amendments preclude enforcement of Plaintiffs’ state law claims.

Defendants assert that the Hatch-Wax-man Amendments were intended to expedite the availability of lower-priced generic drugs by encouraging drug manufacturers to develop generic forms of brand-name drugs (180 day exclusivity period for the first to file an application) while preserving the brand-name drug manufacturer’s protections under the patent laws (30 month suspension of FDA approval of the first filer’s application for approval of its generic version of the patented drug if the patent holder timely files a patent infringement action against the generic drug manufacturer). Without evidence of congressional intent or analysis of the state laws at issue here, Defendants conclude without support that Congress intended to so occupy the field of prescription drug development so as to preclude enforcement of Plaintiffs’ state law claims. The fact that the Hatch-Waxman Amendments set out a statutory scheme designed to encourage drug manufacturers to develop generic forms of brand-name drugs that do not infringe the brand-name drug manufacturer’s patents, and the fact that the FDA has adopted regulations to enforce the Hatch-Waxman statutory scheme, does not convince the Court that Congress left no room for Plaintiffs’ state law claims or that Plaintiffs’ state law claims address the same subject matter addressed in the Hatch-Waxman Amendments or the FDA regulations relating to enforcement of those Amendments; Defendants have not convinced the Court that the state laws at issue impinge in any way on the federal government’s “established scheme” in this area of federal law. The cases Defendants rely upon do nothing to advance their position that permitting Plaintiffs to bring their state law claims against Defendants would frustrate Congress’ intent to bring the subject areas of law under a uniform set of federal regulations.

Defendants next argue that Plaintiffs’ state law claims are preempted because compliance with both the state laws and the Hatch-Waxman Amendments is impossible. Specifically, Defendants argue that Plaintiffs’ state law claims are preempted because the state laws would render illegal the very conduct Congress approved in the Hatch-Waxman Amendments. Defendants’ arguments are without merit.

*660

As Plaintiffs correctly point out, there is nothing in the language of the Hatch-Waxman Amendments or their legislative history that prohibited Defendant Andrx from bringing its generic product to market in July 1998. If it had done so, there would be no violation of the state laws at issue here. Moreover, if Defendant Andrx had unilaterally decided not to market its generic product until resolution of the HMRI/Andrx patent infringement action, there would be no state law violations. However, there is nothing in the language of the Act or its legislative history that impliedly authorizes a patent-holder, like Defendant HMRI, to contract with and pay a generic drug competitor, like Defendant Andrx, to delay its entry into the market beyond the time the statute permits it to go to market so as to artificially inflate the price at which the patented brand-name drug is sold. That is what Plaintiffs are alleging here.

See Mova Pharmaceutical Corp. v. Shalala,

140 F.3d 1060, 1072 (D.C.Cir.1998) (observing that the statutory scheme creates an unfortunate opportunity for illegal anticompetitive conduct, “the first applicant could even collude with the original patent-holder to prolong their litigation, and thereby keep the second applicant’s drug off the market indefinitely”);

18

Mylan Pharmaceuticals, Inc. v. Henney,

94 F.Supp.2d 36, 53 (D.D.C.2000) (same)

19

;

Biovail Corp. Int’l,

*661

49 F.Supp.2d at 768 (observing that Biovail was alleging “that defendants are taking advantage of the exclusivity period in an anticompetitive manner”; that “it could be said that the Andrx Agreement falls squarely within what the court in

Mova

speculated would be an abuse of the statute”; and further observing that in

Woods Exploration & Producing Co. v. Aluminum Co. of Am.,

438 F.2d 1286, 1303 (5th Cir.1971), the court had held “that actions taken to ‘subvert’ a regulatory scheme ‘for anticompetitive purposes’ are subject to the antitrust laws”).

See also

A. Engel-berg, “Special Patent Provisions for Pharmaceuticals: Have They Outlived Their Usefulness?”, 39

IDEA: J.L. & Tech.

389 (1999) where the author criticizes the ease with which the Hatch-Waxman statutory scheme and its original goals can be and have been subverted, citing the facts of this multidistrict litigation and the HMRI/ Andrx Agreement as an example. As the author observes:

[t]he likelihood that a patent challenge will result in an actual judgment that triggers the 180-day exclusive period is, in fact, very small. Of the approximately two dozen or more patent challenges filed since 1984, only a handful have resulted in an actual judgment after a full trial.... The vast majority of patent challenges have resulted in a settlement involving either a cash payment to the challenger in exchange for an agreement to forego the challenge or the grant of a deferred license; i.e., a license which would allow the generic challenger to begin competition on an agreed-upon date before the actual expiration of the patent, typically six months or more.

In a pending case involving a sustained release version of diltiazem, the patent oumer (Hoechst-Roussel) is paying the challenger (Andrx) the sum of $10 million per quarter to refrain from entering the market unless and until a final judgment is entered in pending litigation even though more than thirty months have lapsed and Andrx is free to enter the market under its approved ANDA

Id.

at 416-17 (emphasis added).

Plaintiffs have alleged here that Defendants, a patent holder and the first generic applicant, agreed that the patent holder (HMRI) would pay the first generic applicant (Andrx) a portion of its monopoly profits (tens of millions of dollars) to delay marketing its FDA-approved generic drug beyond July 9, 1998 and beyond the time it represented to another court that it intended to begin marketing its generic drug. Such collusive conduct falls outside the parameters of the Hatch-Waxman Amendments yet falls squarely within the parameters of the state and federal laws that give rise to Plaintiffs’ claims. The Court is satisfied that Plaintiffs may well be able to show that although Defendants fully complied with the Hatch-Waxman Amendments, they have unfairly restricted competition and thus are. liable under the state and federal claims asserted in Plaintiffs’ complaints.

The FDA has recently observed that agreements and arrangements between a patent holding drug company and a first-to-apply generic drug company, “may contribute to delayed generic competition by forestalling the beginning, or triggering, of the 180-day exclusivity period.” 180-Day Generic Drug Exclusivity for Abbreviated New Drug Applications, 21 C.F.R. Part 314, § 314.1 et seq., Proposed Rules, Dept, of Health & Human Serv., F.D.A., 64 Fed. Reg. 42873 at 42874-75 (August 6, 1999). Accordingly, such agreements, can subvert “Congress’s central goal” underlying its passage of the Hatch-Waxman Amendments; i.e., “to bring generic drugs on the market as rapidly as possible.”

Mova,

140

*662

F.3d at 1068. To cure this problem, the FDA has recently announced proposed rule changes to the regulations that place a time limit on when the first-filed ANDA applicant must trigger its rights to obtain the 180-day marketing exclusivity period provided under the Hatch-Waxman Amendments; a “use it or lose it” triggering period is proposed. The FDA explains the problem and proposed remedial regulations as follows.

The Hatch-Waxman Amendments benefit consumers by bringing lower priced generic versions of previously approved drugs to market, while simultaneously promoting new drug innovation through the restoration of patent life lost during regulatory proceedings. The award of a 180-day period of market exclusivity for certain ANDA applicants with paragraph IV certifications was designed to maintain this balance by rewarding generic firms for their willingness to challenge unenforceable and invalid innovator patents, or design noninfringing drug products.

Recently, however, this balance has been upset and generic competition impeded, in part through the establishment of certain licensing agreements or other commercial arrangements between generic and innovator companies.

Under current regulatory provisions,

the first generic applicant

to file a substantially complete ANDA with a paragraph IV certification

can delay generic competition by entering into certain commercial arrangements with an innovator company. The result may be, notwithstanding the intent of the Hatch-Waxman Amendments, rewards are directed to generic companies for hindering rather than speeding generic competition.

A necessary condition for such arrangements is that the economic gains to the innovator from delaying generic competition exceed the potential economic gains to the generic applicant from the 180 days of market exclusivity.

Such instances are becoming more frequent because a successful strategy to extend market exclusivity can mean tens of millions of dollars in increased revenue for an innovator firm.

Under such circumstances, it can be mutually beneficial for the innovator and the generic company that is awarded 180 days of generic exclusivity to enter into agreements that block generic competition for extended periods. This delayed competition harms consumers' by slowing the introduction of lower priced products into the market and thwarts the intent of ’ the Hatch-Waxman Amendments.

FDA’s proposal to establish a 180-day triggering penod addresses this problem in several ways.

In most cases, the first generic applicant with a paragraph IV certification would lose its claim to 180-day exclusivity if it withheld its drug product from the market, or failed to obtain a favorable court decision, for more than 180 days after the tentative approval of a subsequent generic applicant for the same drug product. Also, a subsequent generic applicant could not be blocked from marketing its drug product for longer than, at most, 1 year from when it received tentative approval (the 180-day triggering period plus the 180-day exclusivity period). As

a result, the potential economic losses to consumers from the increased unavailability of lower priced generic products would be reduced significantly.

Moreover,

decreasing the length of time that these commercial arrangements could block generic competition lessens the market incentive for entering into such agreements.

Limiting the period during which an agreement between an innovator and the first generic ANDA applicant with a paragraph IV certification could block generic competition provides less incentive, and therefore makes it less likely, that an innovator and a generic company would enter into such an agreement. Consequently,

consumers would benefit because commercial arrangements to block generic

*663

competition would be not only less damaging, but would be less likely to occur.

64 FecLReg. at 42882-83 (emphasis added). The Bureau of Competition and of Policy Planning of the Federal Trade Commission (“FTC”) published comments supporting the proposed rule and suggesting that “the FDA consider a requirement that both patent litigation settlement agreements (either full or partial settlements) between branded companies and ANDA applicants and agreements related to the filing of an ANDA by a potential applicant be filed confidentially with the agency in a timely manner and be accessible to federal antitrust authorities on a non-public basis so that the antitrust agencies can be made aware of any anti-competitive issues involved with such settlements.”

In the Matter of 180-Day Generic Drug Exclusivity for Abbreviated New Drug Applications: “Comment of the Staff of the Bureau of Competition and of Policy Planning of the Federal Trade Commission”,

Docket No. 85N-0214 at 1, 5-6 (November 4, 1999).

2. The Hatch-Waxman Amendments Do Not Provide an Implied Exemption from Plaintiffs’ Antitrust Claims

“[T]he courts often say that [antitrust] immunity is not lightly to be implied, unless ‘necessary to make the [regulatory] Act work.’ ” 1A P. Areeda

&

H. Hovenkamp,

supra,

¶ 243al at 36 (quoting

Silver v. New York Stock Exchange,

373 U.S. 341, 357 , 83 S.Ct. 1246 , 10 L.Ed.2d 389 (1963)).

See also United States v. Nat'l Ass’n of Securities Dealers, Inc.,

422 U.S. 694, 719-720 , 95 S.Ct. 2427 , 45 L.Ed.2d 486 (1975) (observing that “implied antitrust immunity is not favored, and can be justified only by a convincing showing of clear repugnancy between the antitrust laws and the regulatory system” at issue). Defendants have not demonstrated such a “clear repugnancy” between the antitrust laws and the Hatch-Waxman Amendments and have not supplied this Court with any decision so holding. Because the Hatch-Wax-man Amendments neither require nor approve of agreements between competitors to keep a product off the market, Defendants arguments for antitrust immunity are to no avail.

The fact that the Hatch-Waxman Amendments permit Defendant Andrx to unilaterally do what it cannot do collusively does not serve to immunize Defendants’ conduct from the antitrust laws. As Professors Areeda and Hovenkamp observe, “[w]here a statute conveys no express immunity and leaves acts open to private discretion, antitrust law will be applied to define the limits of private behavior.” 1A P. Areeda & H. Hovenkamp,

supra,

¶243a2 at 37. These commentators caution that, “courts should not conclude too quickly that antitrust jurisdiction is ousted merely by virtue of the existence of a federal regulatory scheme.”

Id.

¶ 244a at 66. “Antitrust is presumptively relevant whenever the conduct being challenged was engaged in by a private party and not mandated or adequately reviewed by the federal agency.”

Id.

Here, the challenged conduct was engaged in by private parties, was not mandated by the Hatch-Waxman Act, and was not adequately reviewed by any federal agency.

As the Sherman Act Plaintiffs point out, no court has held that the sixteen year old Hatch-Waxman Amendments provide immunity from the antitrust laws or have repealed the Sherman Act, and Defendants have not persuaded this Court that it should be the first to do so. Moreover, this Court agrees with Plaintiffs’ argument that both the FDA and the FTC’s actions and comments discussed above clarify that neither agency considers that the regulatory scheme of the Hatch-Waxman Amendments conflicts with, or is inconsistent with, existing antitrust laws. Contrary to Defendants’ arguments, the Hatch-Wax-man Amendments are not clearly repugnant to the antitrust laws and thus do not provide an implied exemption from antitrust law.

*664

D. FTC Consent Decree

Issue: Do Plaintiffs’ Claims Require This Court to Enforce a FTC Consent Decree

The Hoechst Defendants argue Plaintiffs’ state law claims cannot be based on their allegations that the Hoechst Defendants violated an FTC Consent Decree because Plaintiffs lack standing to collaterally enforce the Decree or to even have this Court construe its terms. The FTC Consent Decree required Defendant Hoechst AG to provide Biovail with a limited right to rely on certain toxicology data that had been filed in support of Cardizem CD in order to assist Biovail in gaining approval for its Tiazac product — a generic version of Cardizem CD. Defendants assert that Plaintiffs’ state law claims require the Court to construe the provisions of the Consent Decree and to conclude that Defendants violated that Decree. They further assert that, because Plaintiffs are neither parties to nor intended beneficiaries of the Consent Decree, they have no express enforcement rights under the Decree and thus lack standing to ask this Court to construe and enforce its provisions. Defendants cite

Blue Chip Stamps v. Manor Drug Stores,

421 U.S. 723 , 95 S.Ct. 1917 , 44 L.Ed.2d 539 (1975) and its progeny.in support of their arguments.

State Law Plaintiffs respond that: (1) this Court, in its October 14, 1999 Mem. Op. and Order, has already observed that State Law Plaintiffs’ claims do not seek to have the Consent Decree enforced and do not require the Court to construe or apply the Federal Consent Decree and thus Defendants should not be allowed to relitigate this matter; and (2) even if this Court were to allow the issue to be relitigated, it should adopt the reasoning in

Biovail Corp., Int’l v. Hoechst Aktiengesellschaft,

49 F.Supp.2d 750, 762-66 (D.N.J.1999) and similarly reject Defendants arguments. The Court agrees with Plaintiffs on both points.

This Court has observed that the State Law Plaintiffs’ substantive claims arise under state law, not federal law, and that Plaintiffs’ allegations regarding the FTC Consent Decree are merely evidence of the Plaintiffs’ state law claims. This Court further observed that Plaintiffs’ claims do not require it to interpret the FTC Consent Decree, and the cases Defendants relied upon failed to support their position to the contrary. Unlike the circumstances in the cited cases, State Law Plaintiffs do not seek to overturn the FTC Consent Decree, nor do they challenge its appropriateness. Rather, they use the Hoechst Defendants’ conduct in connection with that FTC Consent Decree as evidence in support of their state law claims.

See In re Cardizem CD Antitrust Litig.,

99-md-1278, Mem. Op. and Order at 36-37 (E.D.Mich. October 14,1999).

In their amended consolidated complaint, State Law Plaintiffs likewise do not seek enforcement of the FTC Consent Decree and in no way threaten the FTC’s enforcement of that Decree, either by inconsistent interpretations or otherwise.

20

The cases Defendants rely upon in their motions to dismiss fail to support their position to the contrary.

21

*665

State Law Plaintiffs’ claims here do not depend upon a finding that the Biovail FTC Consent Decree was breached and do not seek enforcement of that Decree. As recently observed by the District Court for the District of New Jersey in

Biovail,

although Biovail lacked standing to enforce the FTC Consent Decree, “this does not mean that defendants’ behavior with respect to the FTC Decree cannot be considered, along with all the other allegations, as support of Biovail’s antitrust claims. Biovail’s standing to enforce the consent decree is distinct from its standing to maintain an antitrust claim.”

Biovail,

49 F.Supp.2d at 764-65 . The same analysis applies here. Plaintiffs do not seek to enforce the FTC Decree, and thus the Court may consider allegations in their complaint about activity in connection with that FTC Decree.

E. Challenges to State Law Plaintiffs’ Claims

1. Wisconsin and Tennessee— Intrastate versus Interstate Commerce Issue

Issue: Whether Plaintiffs are required to allege conduct affecting intrastate as opposed to interstate commerce to state claims under the relevant Wisconsin and Tennessee statutes?

Defendants argue that the Wisconsin Plaintiffs (Albert Eirich and United Wisconsin Services, Inc.) and the Tennessee Plaintiffs (Eugenia Wynne Sams and Larry S. Sizemore) have failed to state a claim for relief because the Wisconsin antitrust statute and the Tennessee antitrust and consumer fraud statutes apply to intrastate, as opposed to interstate, commerce. Plaintiffs respond that Defendants make too much of the interstate/intrastate dichotomy. Citing a recent Seventh Circuit decision, Plaintiffs assert that Defendants’ narrow interpretation of the Wisconsin and Tennessee statutes would render them a virtual nullity.

See In re Brand Name Prescription Drugs Antitrust Litig.,

123 F.3d 599, 612-13 (7th Cir.1997) (observing that to narrowly limit the reach of Alabama’s antitrust statute to wholly intrastate commerce would render it “a dead letter because there are virtually no sales, in Alabama or anywhere else in the United States, that are intrastate in

that

sense”).

a. Claims under Wisconsin Law

Defendants HMRI and Andrx argue that the Wisconsin Supreme Court has long held that the state’s antitrust statute applies to anticompetitive conduct that affects intrastate as opposed to interstate commerce.

See

Andrx Br. at 44 (Wisconsin antitrust statute applies “solely to transactions involving wholly intrastate commerce”). Plaintiffs respond that Defendants’ arguments focus on legislative intent in 1893 and ignore the effect of more recent 1980 amendments, including one that permits indirect purchasers, like Plaintiffs here, standing to bring private antitrust actions. Plaintiffs urge this Court to adopt the reasoning in

Emergency One, Inc. v. Waterous Co., Inc.,

23 F.Supp.2d 959, 969 (E.D.Wis.1998) (where the court considered the Wisconsin antitrust statute at issue here, found that the Wisconsin’s courts have recognized that the antitrust statute had some applicability to interstate transactions, and concluded that an adverse effects standard; i.e., one that recognizes claims against persons doing business in interstate commerce where the alleged unlawful anticompetitive activity significantly and adversely affects the trade and economic competition within the state, was “consistent with both Wisconsin precedent and judicial interpretation of the scope of federal antitrust law.”)

*666

In

Emergency One,

the court conducted a thorough review of the Wisconsin courts’ interpretation of that state’s antitrust statute and observed that, with the possible exception of the initial 1914 decision in

Pulp Wood Co. v. Green Bay Paper & Fiber Co.,

157 Wis. 604 , 147 N.W. 1058 (1914), the remainder of the decisions in the “oft-cited string of precedent” supporting the intrastate versus interstate commerce dichotomy do not “for the most part” “examine the scope of state antitrust law with respect to specific allegations of interstate commerce, and thus none sheds much light on where or how the line should be drawn in a case like the one before [it].”

Emergency One,

23 F.Supp.2d at 962 . Based on its review of relevant Wisconsin decisions, the court concluded that “[r]ote reliance on the ‘intrastate as distinguished from interstate,’

Pulp Wood

to

Grams

line of precedent to dismiss state antitrust claims with any interstate aspect is ... misplaced and inconsistent with Wisconsin precedent.”

Id.

at 966 .

Ultimately, the court concluded that an adverse effects standard was “consistent with both Wisconsin precedent and judicial interpretations of the scope of federal antitrust law” and that it “comports with the legislative intent” of Wisconsin’s antitrust law.

Id.

at 969 .

22

Accord K-S Pharmacies, Inc. v. Abbott Laboratories,

No. 94-CV-2384, Mem. Decision and Order (Cir. Ct. Dane County, Wisconsin, Sept. 5, 1995), Slip Op. at 17-18. In

K-S Pharmacies,

the plaintiffs, independent pharmacies, brought a Wisconsin antitrust action against 27 drug manufacturers and wholesalers alleging that they had engaged in a conspiracy to restrain trade. Rejecting the same arguments Defendants raise here, the court observed that “[t]he Wisconsin antitrust statute applies to illegal conspiracies that are alleged to have restrained trade in Wisconsin.” Slip Op. at 18. (citing

State v. Allied Chemical & Dye Corp.,

9 Wis.2d 290 , 101 N.W.2d 133 (1960)). The court further observed that, although the “state antitrust statute applies to intrastate commerce”, this “does not necessarily mean that all acts violative of the statute must occur in-state. Cases limiting the scope of the statute to intrastate

commerce

do not limit it to intrastate

conspiracy.” Id.

This Court agrees with the reasoning in

Emergency One

and likewise concludes that the Wisconsin antitrust statute applies to illegal conspiracies that are alleged to have restrained trade in Wisconsin. Construing the allegations in Plaintiffs’ complaint in the light most favorable to them, this Court further concludes that the Wisconsin Plaintiffs have alleged conduct that significantly and adversely affected trade and commerce in that state and thus state a claim for relief under Wis. Stats. § 133.03.

b. Claims under Tennessee Law

Tennessee Plaintiffs allege violations of the Tennessee Trade Practices Act, Tenn.Code § 47-25-101

et seq.,

and the Tennessee Consumer Protection Act, Tenn.Code § 47-18-104. Defendant Andrx argues that both these statutes apply only to transactions that are intrastate in character. Defendant HMRI similarly argues that the Tennessee laws apply only to transactions that are wholly or predominantly intrastate in character.

See Blake v. Abbott Laboratories, Inc.,

1996-1 Trade Cases (CCH) ¶ 71,369, 1996 WL 134947 at *4-5, *7 (Tenn.App. March 27, 1996).

See also Dzik & Dzik, P.C. v. Vision Serv. Plan,

1989 WL 3082 (Tenn.App. Jan.20, 1989);

Lynch Display Corp. v. Nat’l Souvenir Ctr., Inc.,

640 S.W.2d 837 (Tenn.App.1982);

Valley Products Co., Inc. v.

*667

Landmark,

877 F.Supp. 1087 (W.D.Tenn.1994), aff

'd,

128 F.3d 398 (6th Cir.1997);

FTC v. Mylan Laboratories, Inc.,

62 F.Supp.2d 25 (D.D.C.1999). In essence, Defendants argue that, because Plaintiffs’ consolidated complaint alleges anticompet-itive activity and restraints of trade occurring in several jurisdictions, the Tennessee Plaintiffs cannot possibly claim that the alleged restraints of trade in Tennessee predominantly affect Tennessee’s intrastate commerce, as opposed to their “predominantly” affecting interstate commerce, and thus the Tennessee Plaintiffs cannot possibly state a claim for relief under Tennessee’s antitrust and consumer protection statutes.

Plaintiffs respond that Defendants read the Tennessee statutes too narrowly as evidenced by the plain language of Tennessee’s antitrust statute and the Tennessee Supreme Court’s decisions construing this statute. Plaintiffs assert that the Tennessee antitrust and consumer protection statutes are not limited to transactions that are wholly or predominantly intrastate in character. Rather, they allow Tennessee to regulate anticompetitive conduct occurring outside the state but having more than an incidental effect on Tennessee’s intrastate commerce; i.e., situations like that alleged here where anticompetitive conduct may have occurred outside the state but results in a prescription drug product intentionally coming to rest within Tennessee and causing injury to Tennessee citizens who have purchased the product in Tennessee at artificially inflated prices as a result of Defendants’ anticom-petitive conduct. The Court agrees with Plaintiffs.

In

Standard Oil Co. v. State,

117 Tenn. 618 , 100 S.W. 705 (1907), the Tennessee Supreme Court observed that articles of commerce “which had been imported from other states and countries, [and] commingled with the common mass of property in this state” were “intended to be included with the provisions” of Tennessee’s antitrust statute.

Id.,

100 S.W. at 711 . Otherwise, the Court observed, “commerce, in the vast amount of valuable property of foreign production and manufacture that was then and is now in this state, would be wholly unprotected from - the abuses legislated against.”

Id.Accord Jo Ann Forman, Inc. v. Nat’l Council on Compensation Ins., Inc.,

13 S.W.3d 365, 373 (Tenn.App.1999) (observing that “it is clear that Tennessee Code Annotated section 47-25-101, in express terms, applies to articles of foreign and domestic origin”).

The

Standard Oil

Court further observed that “[a] combination affecting interstate commerce is none the less a violation of the federal anti-trust statute and punishable under it because the agreement made incidentally affects interstate commerce; and the same rule will apply to combinations made in violations of the statute of the state upon the same subject where interstate commerce is incidentally affected. If it were otherwise, neither the federal nor the state laws could be enforced in any case.”

Standard Oil,

100 S.W. at 712 . Accordingly, as the courts have subsequently observed, to state a claim under Tennessee’s antitrust statute, “the dispute need not be exclusively intrastate” but “it must more than.incidentally affect intrastate commerce.”

Valley Products,

877 F.Supp. at 1095 (citing

Lynch,

640 S.W.2d at 840 ). Contrary to Defendants’ arguments, the Tennessee statutes at issue here are not limited to anticom-petitive conspiracies that are hatched and implemen

This text is long and has been trimmed here. Open the source document for the complete record.