Petition for Writ of Certiorari — Sanofi-Aventis U.S., LLC, Petitioner v. Mylan, Inc., et al.
Supreme Court briefNov 28, 2022
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APPENDIX
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APPENDIX A — OPINION OF THE UNITED
STATES COURT OF APPEALS FOR THE
TENTH CIRCUIT, FILED JULY 29,2022
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
No. 21-3005
IN RE: EPIPEN (EPINEPHRINE INJECTION,
USP) MARKETING, SALES PRACTICES AND
ANTITRUST LITIGATION.
SANOFI-AVENTIS U.S., LLC,
Plaintiff Counterclaim Defendant - Appellant,
v.
MYLAN, INC.,
Defendant - Appellee,
and
MYLAN SPECIALTY, LP,
Defendant Counterclaimant - Appellee.
2a
Appendix A
OPEN MARKETS INSTITUTE; AMERICAN
ANTITRUST INSTITUTE; ALLERGY & ASTHMA
NETWORK; THE COMMITTEE TO SUPPORT THE
ANTITRUST LAWS; PHARMACEUTICAL CARE
MANAGEMENT ASSOCIATION; INTERNATIONAL
CENTER FOR LAW & ECONOMICS AND
SCHOLARS OF LAW AND ECONOMICS; THE
CHAMBER OF COMMERCE OF THE UNITED
STATES OF AMERICA; J. GREGORY SIDAK,
Amici Curiae.
July 29, 2022, Filed
Appeal from the United States District Court
for the District of Kansas.
(D.C. No. 2:17-MD-02785-DDC-TJJ)
(507 F. Supp. 3d 1289 ).
Before MORITZ, BALDOCK, and EID, Circuit Judges.
BALDOCK, Circuit Judge.
“Competition is a tough weed, not a delicate flower.” —
George Stigler
Despite the extraordinary length of this opinion,
this appeal presents a simple question. Can a plaintiff
present a triable issue of monopolization without offering
any evidence of actual or threatened consumer harm? We
conclude such a plaintiff cannot.
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Appendix A
I.
Plaintiff Sanofi-Aventis U.S., LLC (“Sanofi”) sued
Defendants Mylan, Inc. and Mylan Specialty, LP
(collectively “Mylan”) under Section 2 of the Sherman
Antitrust Act. 15 U.S.C. § 2. Sanofi, one of the world’s
largest pharmaceutical companies, alleges Mylan, the
distributor of EpiPen, monopolized the epinephrine
auto-injector market effectively and illegally foreclosing
Auvi-Q—Sanofi’s innovative epinephrine auto-injector—
from the market. The parties cross-moved for summary
judgment. The district court, holding no triable issue
of exclusionary conduct, granted Mylan’s motion for
summary judgment. Exercising jurisdiction under 28
U.S.C. § 1291, we affirm.1
A.
The following facts are either uncontroverted, or,
where genuinely controverted, are viewed in the light
most favorable to Sanofi, the party opposing the grant of
summary judgment to Mylan.2 Scott v. Harris, 550 U.S.
1. The Judicial Panel on Multidistrict Litigation transferred
this case from the District of New Jersey to the District of Kansas
for coordinated or consolidated pretrial proceedings. We have
jurisdiction to hear Sanofi’s appeal because the right to appeal
ripened when the district court granted summary judgment on
Sanofi’s sole claim, “not upon eventual completion of multidistrict
proceedings in all of the consolidated cases.” Gelboim v. Bank of
Am. Corp., 574 U.S. 405,408,135 S. Ct. 897,190 L. Ed. 2d 789 (2015).
2. In outlining the facts, we borrow language without indication
from the district court’s excellent Memorandum and Order. In re
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Appendix A
372,378-80,127 S. Ct. 1769,167 L. Ed. 2d 686 (2007). We
are mindful, however, that when “opposing parties tell two
different stories, one of which is blatantly contradicted
by the record, so that no reasonable jury could believe
it, a court should not adopt that version of the facts for
purposes of ruling on a motion for summary judgment.”
Id. at 380. Sanofi’s allegations of monopolization center
around industry-specific practices in the prescription drug
market. We must, therefore, begin with an indispensable,
albeit technical, overview of the prescription drug market.
“Before a patient can go to the pharmacy (or mailbox)
to pick up their prescription, the medicine must make
its way from the pharmaceutical manufacturer to the
pharmacy.” Pharm. Research & Mfrs. of Am., Follow
the Dollar 3 (2017) [hereinafter Follow the Dollar],
http://phrma-docs.phrma.org/files/dmfile/Follow-theDollar-Report.pdf. The distribution chain starts with the
manufacturer who sells to a wholesaler for the wholesale
acquisition cost (“list price”). Wholesalers then sell to the
pharmacy, who dispense the product to the patient with
a doctor’s prescription.
While prescription drug distribution is conventional,
the payments are not. “Drug pricing is a complex and often
confusing issue, shaped by a pharmaceutical distribution
and payment system that involves multiple transactions
EpiPen (Epinephrine Injection, USP) Mktg., Sales Practices &
Antitrust Litig., 507 F. Supp. 3d 1289 (D. Kan. 2020). Record and
source quotations are cleaned up without indication. We see no
need to redact statements sealed on appeal which were published
unredacted by the district court.
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Appendix A
among numerous stakeholders.” Id. at 1. The cost of
prescription drugs is shared between the patient and a
patient’s health plan, so the amount a patient pays depends
on the existence and extent of the patient’s insurance. An
uninsured patient pays the price set by the pharmacy.
An insured patient pays—depending on the insurance
policy’s terms—a co-payment (a fixed dollar amount), a
co-insurance payment (a percentage of the drug’s price),
or the full price. If the insured is paying a co-payment or
co-insurance, the health plan covers the balance.
At this point, the drug has been purchased, but the
amount paid to the pharmacy does not typically represent
the drug’s actual price. Health plans can effectively
reduce the price of a drug by negotiating rebates with
drug manufacturers. Charles Roehrig, Altarum, The
Impact of Prescription Drug Rebates on Health Plans and
Consumers 7 (2018), https://altarum.org/sites/default/files/
Altarum-Prescription-Drug-Rebate-Report_April-2018.
pdf. A rebate is a partial refund on the purchase price of an
item. Even though the health plan must circle back post
purchase to collect the rebate, we can say the rebate is,
in effect, a price discount. The cost savings from rebates
are substantial. One report found “health plans received
manufacturer rebates of $23 billion [in 2016], which is
12% of point-of-purchase spending.” Id. These rebate
agreements are at the heart of the present dispute.
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Appendix A
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Figure 1. Visual representation of the flow of
prescription drugs (Rx) and payments ($). Id. at 3.
To understand why drug manufacturers offer rebates,
we must explain the role of health plans. The managed
care health plan is the most common form of commercial
health insurance in the United States. “Managed care”
means the health plan controls patients’ access to benefits
to reduce costs. By controlling patients’ access to benefits,
a managed care health plan adjusts coverages and
premiums to meet patient demands. Managed care health
plans control patients’ access to things like providers,
medical procedures, and, relevant to this appeal,
prescription drugs. By purchasing managed care health
plans, the patient relinquishes some treatment-choice
autonomy for lower premiums.
Health plans control patients’ access to prescription
drugs by utilizing formularies. A formulary is a list of
drugs covered by the health plan and is usually structured
as “open” or “closed.” An “open” formulary generally
covers many, or sometimes all, drugs, whether they are
7a
Appendix A
listed on the formulary or not. A “closed” formulary only
covers drugs listed on the formulary. Health plans are
not required to cover all available prescription drugs.
Some formularies cover a wide range of drugs to treat
the same condition, while others are more restrictive.
Choice comes at a cost. At his deposition, Sanofi’s former
CEO testified that health plans “can control the price
[of a pharmaceutical product] by controlling access to
the formulary; so the tighter the access to any given
formulary, the more you have control over price.” When
a formulary covers more drugs, it increases the health
plan’s costs which, in turn, raises the patient’s premiums.
Some health plans develop and manage their own
formularies, but most retain Pharmacy Benefit Managers
(“PBMs”) to do so on their behalf. PBMs are effectively
purchasing cooperatives. Instead of hundreds or thousands
of health plans individually negotiating formulary access
and rebates, the PBM acts in their collective interest,
wielding the health plans’ aggregate purchasing power
to gain greater discounts than the health plans could
obtain individually. After negotiating rebates with drug
manufacturers, PBMs develop national formularies
that health plans can adopt or customize in response
to a particular plan’s needs. Even if a PBM excludes or
disadvantages a particular drug on its national formulary,
the health plan may, nevertheless, choose to cover it.
The PBM industry is “highly consolidated,” with
three PBMs processing about 70% of all prescription drug
claims. Follow the Dollar, supra, at 7. The number of
patients enrolled in a particular health insurance plan is
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Appendix A
often referred to as the number of “covered lives.” Sanofi’s
expert economist, Fiona M. Scott Morton, Ph.D., estimates
that, as of January 2015, the seven largest PBMs managed
prescription drug benefits for 86% of covered commercial
lives.3 The PBMs are: Express Scripts (“ESI”) (38%),
CVS Caremark (“CVS”) (20%), OptumRx (10%), Prime
Therapeutics (“Prime”) (7%), Medlmpact (6%), Cigna
(4%), and Aetna (1%).
To reduce health plan costs, PBMs control access
to the formularies using what are called utilization
management (“UM”) techniques. By utilizing UM
techniques, PBMs can nudge patients towards costeffective products and negotiate better pricing from drug
manufacturers. A PBM may only employ UM techniques
after its pharmacy and therapeutics committee—a group
of medical experts evaluating prescription drugs’ efficacy,
safety, and availability—determines two or more products
are therapeutically equivalent (that is they have the same
clinical effect and safety profile). A drug class that is
subject to UM techniques is called a “managed class.”
Four commonly used UM techniques are relevant to
this appeal: (1) formulary tiering, (2) step edits, (3) prior
authorizations, and (4) formulary exclusion.
Formulary Tiering. Formularies often use at least
three tiers corresponding to different co-payments. The
lower the tier, the lower the patient’s co-payment. Generics
are usually placed on the lowest tier (Tier 1), while branded
3. The district court and parties call these seven entities
“payors.” For clarity, we refer to these seven entities as PBMs even
though some of them are health insurers.
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Appendix A
drugs occupy the higher tiers (Tier 2 and Tier 3). When
a PBM wants to cover multiple branded drugs, the PBM
might place its preferred products on the lower tier (Tier
2), and less preferred products on the higher tier (Tier 3).
Step Edits. With a step edit, the PBM requires the
patient to try a cheaper drug first and treatment failure
before covering a more expensive drug.
Prior Authorizations. A PBM can require, before
it will cover a specific drug, a formal request from the
patient’s physician asserting the patient meets certain
criteria developed by the PBM.
Formulary Exclusion. Finally, PBMs may exclude
drugs from the formulary. When a PBM excludes a drug
from coverage, the patient can seek a medical necessity
exemption or pay out of pocket for the product.
By using UM techniques, PBMs create some degree
of price competition among sellers of therapeutically
equivalent products. Drug manufacturers offer rebates
and price protection for better formulary placement and to
disadvantage rival products. Rebates are partial refunds
that are calculated as some percentage of the list price.
Price protection is an agreement to refund some, if not
all, of the drug’s increased price above some specified
level. Implementing UM techniques for therapeutically
equivalent drugs is how PBMs lower prescription drug
costs. Sanofi’s expert recognized as much, testifying
before Congress:
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Appendix A
The way you get low prices in the pharmaceutical
industry is by the ability to exclude drugs.
What do I mean by that? You identify a few
therapeutic substitutes and you essentially hold
an auction. I am happy to buy any one of these
drugs. Whoever gives me the best price is the
one I am going to buy from, and everybody else
gets none of my business.
When you can do that, you force price
competition.
Prescription Drug Pricing and Negotiation: Overview
and Economic Perspectivesfor the Medicare Prescription
Drug Benefit: Hearing Before the S. Comm, on Fin., 110th
Cong. 13 (2007) [hereinafter Hearings] (statement of Fiona
M. Scott Morton, Ph.D., Professor of Economics, Yale
School of Management). Patients are, in turn, enriched in
the form of reduced premiums and reduced cost-sharing.
Br. of Amicus Curiae Pharm. Care Mgmt. Ass’n (PCMA)
in Supp. of Appellees 22; Roehrig, supra, at 7.
PBMs commonly solicit multiple rebate offers from
manufacturers, including different rebate offers for
different levels of formulary placement. For convenience,
these bids are usually submitted in the form of “bid grids.”
A bid grid is a table with several cells, each of which
represents a different level of formulary control and rebate
percentage. Drug manufacturers offer higher rebates
conditioned on the drug’s exclusive or preferred (lower
tier) status on the formulary. The manufacturer might
also offer a higher rebate if the PBM agrees to subject
competing products to additional restrictions like a step
edit or prior authorization. See generally supra p. 9.
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Appendix A
After a PBM and manufacturer agree on price
concessions, the PBM enters an agreement with the
manufacturer which typically includes the entire bid grid.
The rebate agreement does not require the PBM or health
plan to make specific formulary decisions. Instead, only if
and when a coverage option is selected by a PBM’s client
(the health plan) is the manufacturer obligated to provide
the agreed-upon level of price concessions. This preserves
flexibility for a PBM’s client to, for example, receive the
rebate for covering a drug that is otherwise excluded on
the PBM’s national formulary. PBMs may sign rebate
agreements with multiple manufacturers for drugs in the
same therapeutic class. Sanofi alleges, through the use of
these rebate agreements, Mylan illegally monopolized the
market for epinephrine auto-injectors.
B.
Millions of Americans suffer from anaphylaxis, a
life-threatening allergic reaction caused by exposure
to allergens such as foods, insect stings, pets, latex,
or medications. The reaction occurs within seconds or
minutes of exposure. Anaphylaxis causes a person’s blood
pressure to drop and restricts their airways, blocking
breathing. If anaphylaxis is not treated immediately, it
can be fatal. Epinephrine is the first-line treatment for
anaphylaxis. An epinephrine auto-injector is a medical
device used to inject a fixed dose of epinephrine through a
spring-activated needle. Physicians prescribe epinephrine
auto-injectors to patients at risk for anaphylaxis. Patients
who suffer from anaphylaxis should always carry
an epinephrine auto-injector, but failing to do so is a
documented problem.
12a
Appendix A
In 2007, defendant Mylan obtained the exclusive
right to market, distribute, and sell EpiPen and EpiPen
Jr. Auto-Injectors (collectively “EpiPen”) in the United
States. Introduced in the 1980s, EpiPen was the first
epinephrine auto-injector available on the market. Shaped
like a pen, a patient administers EpiPen by removing a cap
and swinging it against the thigh, causing the needle to
protract and inject epinephrine. The patient then removes
the device and a plastic shield covers the needle. After
acquiring the rights to distribute EpiPen, Mylan invested
substantially in marketing the product. Between 2007 and
2012, EpiPen accounted for at least 90% of epinephrine
auto-injector prescriptions in the United States. Other
than a few fringe competitors, EpiPen was the epinephrine
auto-injector market.
Figure 2. Visual comparison ofAuvi-Q (left)
and EpiPen (right).
That all changed in 2013 when plaintiff Sanofi launched
a new epinephrine auto-injector called Auvi-Q. Twin
brothers Eric and Evan Edwards invented Auvi-Q after
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Appendix A
becoming frustrated with EpiPen’s design. The brothers
suffered from anaphylaxis and knew from experience
that EpiPen’s size and shape made it inconvenient to
carry. Auvi-Q treats anaphylaxis with the same active
ingredient (epinephrine) and same delivery mechanism
(auto-injector) as EpiPen. Auvi-Q differs from EpiPen in
that it is smaller (the thickness of a smart phone and size
of a credit card), has a rectangular shape, has a needle
that retracts (as opposed to one covered before and after
injection), and plays audio instructions. To administer
Auvi-Q, the patient removes its cover and follows the audio
instructions. When the patient presses the device against
a patient’s leg, the needle fires to inject epinephrine and
retracts automatically. Unlike EpiPen, Auvi-Q does not
require a swing-and-jab motion. No clinical studies show
Auvi-Q is safer or more effective treating anaphylaxis, but
market research suggested Auvi-Q would, nevertheless,
be heavily favored among patients. Sanofi marketed
Auvi-Q until October 28, 2015, when it initiated an FDA
Class I recall following reports that Auvi-Q was failing to
inject epinephrine. An FDA Class I recall is appropriate
when a reasonable probability exists that the use of a
product will cause serious adverse health consequences
or death. Sanofi never relaunched Auvi-Q, electing instead
to return Auvi-Q’s distribution rights. Auvi-Q is currently
sold by the inventors’ company, operating under the name
kaleo, Inc.
From the outset, Mylan knew Auvi-Q was a potentially
disruptive product. Auvi-Q offered patients a solution to
one of EpiPen’s most significant problems: its size and
shape. This would make Auvi-Q a particularly attractive
-
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Appendix A
option for certain patient populations who do not carry
bags or purses. Mylan recognized that “physician research
evaluating Auvi-Q and EpiPen perception/messaging
had indicated strong interest in the new device.” Mylan
understood the research to show that “many physicians
believed more patients would be willing to carry an Auvi-Q
auto-injector,” and some had “expressed strong interest
and intent to prescribe Auvi-Q for a percentage of new
and repeat patients.” In 2012, Mylan’s then-President
acknowledged that Auvi-Q “is a real competitor with
some potential/perceived advantages.” Concerned about
Auvi-Q’s arrival, Mylan even researched the possibility
of redesigning EpiPen, but abandoned the plans because
it would take too much time and money.
When it came time to launch, Sanofi decided to
market Auvi-Q as a premium alternative to EpiPen.
Sanofi’s strategy was to seek a mix of Tier 2 and Tier
3 access for Auvi-Q—but “not Tier 2 at all cost.” In his
deposition, Auvi-Q’s then-”brand lead” testified that
Sanofi was “not planning for a lot of tier two access” and
was “perfectly fine with tier two or tier three.” See In
re EpiPen (Epinephrine Injection, USP) Mktg., Sales
Practices & Antitrust Litig., 507 F. Supp. 3d 1289, 1309
(D. Kan. 2020) (collecting further evidence). At the time,
this marketing strategy may have made sense. Before
2012, no formulary excluded a non-EpiPen epinephrine
auto-injector. But around the time of Auvi-Q’s launch,
patients and health plans became increasingly cost
conscious. Where previously patients wanted choice,
they were now accepting tighter formularies for lower
premiums. PBMs adapted by increasingly using UM
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Appendix A
techniques to lower drug prices and decrease health plan
costs. Sanofi observed that PBMs, “with the assistance
of their health plan and PBM partners, are increasingly
influencing physician prescribing decisions and patient
use” by “erecting administrative hurdles (e.g., Step-Edits
and prior authorizations)” and “co-pays.” Several PBMs—
including CVS, ESI, and UnitedHealthcare—began
adding more drugs to their exclusion lists. Sanofi also
observed an increasing use of exclusion-type formularies
and a demonstrated ability to dramatically impact market
share with formulary exclusions. PBMs also increasingly
asked for price protection—not just in the epinephrine
auto-injector market, but across all product markets.
Meanwhile, Mylan was also preparing a strategy for
Auvi-Q’s launch. In December 2011, Mylan’s Director of
National Accounts suggested implementing a “proactive”
strategy where Mylan “should begin to identify
opportunities to restructure our contracts for exclusivity
language.” He recognized that if Mylan did not “begin
its ‘war game’ scenarios now and begin to restructure
contracts now it may be too late to do it after Auvi-Q gets
momentum.” Mylan developed a strategy for responding
to Auvi-Q’s launch that included strengthening EpiPen’s
formulary positions by adding, for example, “exclusivity
language in 2012 contract renewals,” causing “PBMs
to be heavily impacted if they work against Mylan,” or
encouraging PBMs “to require prior authorization” for
Auvi-Q. See id. at 1309-10 (collecting instances of Mylan
encouraging a strategy to exclude or disadvantage
Auvi-Q). Before Auvi-Q’s launch, Mylan was offering
single digit rebates (roughly 3%-10%) conditioned on
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Appendix A
equivalent access to the formulary as other epinephrine
auto-injectors. After Auvi-Q’s introduction, Mylan’s
rebate offers increased significantly: EpiPen’s average
rebate grew from 17% in 2014 to 36% in 2015. Mylan
was also no longer satisfied with coequal access; Mylan
demanded exclusive or preferred formulary placement.
And Mylan’s higher rebates now required some PBMs to
place restrictions on competing products (like step edits
or prior authorizations).
Sanofi’s initial marketing strategy was unsuccessful.
At launch, Sanofi adopted contracting guidelines for
Auvi-Q that authorized “pretty small” rebates, in the
range of 3%-10% for Tier 2 with no price protection and
no rebate strategy for Tier 3 coverage. PBMs rejected
these offers as “inadequate,” “not competitive,” and even
“laughable,” telling Sanofi these rebates “couldn’t match
the Mylan offer.” Sanofi learned that Mylan was making
offers conditioned on exclusivity that PBMs “couldn’t
refuse.” Shortly after Auvi-Q’s launch, Sanofi began
questioning whether its offers were “being aggressive
enough,” but Sanofi recognized it was “in a bit of a bind
and may already be as aggressive as” it can be given its
high production costs and royalty rates. Auvi-Q’s “royalty
rate was 20 percent and it had a higher [cost-of-goodssold] profile than other pharmaceutical products.” Sanofi
believed its initial strategy “made sense based on its
understanding of the market environment” but it “couldn’t
have foreseen the unprecedented rebates that were given
competitively by Mylan which forced Sanofi then into
an aggressive rebating strategy to be able to negotiate
access.” So, “what made sense at launch made less sense
17a
Appendix A
after the competitive response to exclude Auvi-Q from
the marketplace, and what it required for Sanofi to claw
back appropriate patient access made it challenging from
a [profit-and-loss] perspective.”
Sanofi also miscalculated how much PBMs would
value Auvi-Q’s unique attributes. Several PBMs
believed Auvi-Q delivered a treatment that was similar
to or interchangeable with EpiPen. Departing from
their previous practice of not excluding epinephrine
auto-injectors, some PBMs decided to cover just one
epinephrine auto-injector product. Id. at 1311 (collecting
evidence). Auvi-Q’s introduction was seen by many PBMs
as an opportunity to manage the epinephrine auto-injector
class and push for more competitive pricing. Id. at 131112 (collecting evidence). Indeed, several PBMs told both
Mylan and Sanofi that they intended to cover only one
epinephrine auto-injector product and encouraged them
to compete on price. Id. at 1312 (collecting evidence).
Even though the clear answer to Sanofi’s problem was
offering better prices, Sanofi was concerned that offering
aggressive rebates during its first year of launch would
“set off a whole cascade of price discounts” which would
be “nearly impossible to withdraw.” Sanofi believed,
according to an internal presentation, that “newly
launched, differentiated products with a high [cost of good]
s cannot and should not engage in a discounting war,” and
“there are no winners in a price war.” While being deposed,
Sanofi’s former CEO testified that, by September 2013,
the company was not yet ready to authorize discounting
to match Mylan’s offers. He explained why:
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Appendix A
The first objective is really to establish the
value proposition of a product with your
customer, and pricing moves are very difficult
to reverse in the future.
It’s a typical corporate approach where we’d
say, you know, well, we know what a price
decrease is going to cost us. Are you sure that
you have done everything on all of the other
levers of marketing really to explain that value
proposition and—and avoid that.
So it’s a judgment call as to when you do that,
but six months after launch would be potentially
waving the white flag a little bit too early on the
ability of the marketing and the sales team to
explain that value proposition.
In the months leading up to Auvi-Q’s launch, Mylan
implemented various price increases for EpiPen. In 2012—
the year before Sanofi’s launch—Mylan raised EpiPen’s
price three times. And during the period of Sanofi’s
distribution of Auvi-Q (2013 through 2015), EpiPen’s
net price, on average, increased.4 According to Dr. Scott
Morton, “Mylan’s average net price to PBMs was $111
per device when Auvi-Q first entered the market,” which
increased steadily through the end of 2014, decreased
sharply at the beginning of 2015 (when Sanofi competed
on price, see infra Section I.C 2015 Formulary Coverage),
4. Net price here means average list price per pen net any
rebates, administrative fees, and price protection.
19a
Appendix A
and increased again to about $150 per device by the time
Sanofi exited the market. Mylan’s costs, during the same
period, increased between 4.3% to 6.5% annually.
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Figure 3. EpiPen andAuvi-Q price
per pen over time.
In 2016, Mylan submitted a “U.S. EpiPen Profitability
Analysis” to Congress as a supplement to its congressional
testimony. The analysis shows that EpiPen’s sales
increased from 4.5 million pens and $200 million in gross
sales in 2009 to 8.3 million pens and $912 million in gross
sales in 2015. Mylan’s analysis also shows that its gross
profit margin increased from 56% per pen in 2010 to
72% per pen in 2015. Using the data from Mylan’s U.S.
EpiPen Profitability Analysis, Sanofi’s expert concluded
that “profits per pen throughout 2013-2015 were far above
what Mylan earned in 2012.” And she found “from 2013
to 2015, while Auvi-Q was in the market, Mylan earned
$219 million, $313 million, and $312 million respectively,
20a
Appendix A
or $30, $40, and $38 on a per-pen basis” and “across these
three years, annual profits increased by 80% relative to
2012, or 67% on a per-pen basis.”
C.
Most of Sanofi’s specific allegations of monopolization
center around Mylan’s rebate agreements and EpiPen’s
formulary coverage from 2013 to 2015. Every year or
two, PBMs solicit bids from drug manufacturers for
formulary coverage. As described in more detail below,
four PBMs—ESI, Aetna, OptumRx/UnitedHealthcare,
and Medlmpact—excluded or restricted Auvi-Q from
coverage in 2014. But in 2015, two of the four—ESI and
Aetna—removed those restrictions. Three PBMs—CVS,
Prime, and Cigna—never restricted or excluded Auvi-Q,
covering it on Tier 2 or Tier 3 without restriction. The
following section describes the formulary coverage Mylan
and Sanofi negotiated for their respective products from
2013 to 2015.
2013 Formulary Coverage
In 2013, the year of Auvi-Q’s launch, many PBMs—
including ESI, CVS, Prime, Aetna, and Cigna—covered
Auvi-Q on Tier 3 pending formal review by their
pharmacy and therapeutics committees. OptumRx/
UnitedHealthcare did not cover Auvi-Q at launch because
it had a policy of “not covering new products to market
with the same active ingredients as other covered
products” until its pharmacy and therapeutics committee
reviewed the product.
21a
Appendix A
2014. Formulary Coverage
The following section describes the coverages Mylan
and Sanofi negotiated for their respective products on the
seven largest PBMs’ formularies in 2014.
PBM #1: Express Scripts (“ESI”). When Sanofi
launched Auvi-Q, it initially planned to offer ESI rebates
in the 5% range. But in early 2013, ESI advised Sanofi
to offer higher rebates if it wanted to compete with
Mylan’s offer. Sanofi’s revised final rebate offer was
30% for exclusive Tier 2 coverage, 20% for co-preferred
Tier 2 coverage, and 10% for Tier 3 access. Sanofi did
not offer any price protection. See generally supra p.
9. Mylan, on the other hand, offered a range of rebates,
including a 23% rebate with price protection for plans
who chose to make EpiPen the exclusive epinephrine
auto-injector. Sanofi’s expert placed the overall value of
Mylan’s discounts (rebate plus price protection of 10%)
at “approximately 30%.” ESI announced EpiPen was the
exclusive epinephrine auto-injector on ESI’s 2014 National
Preferred and High Performance Formularies. But this
only affected about “35% of ESI commercial lives.” In
other words, Auvi-Q remained covered for roughly “2 out
of 3 ESI commercial patients.” ESI’s corporate designee
testified that it exclusively covered EpiPen because it
resulted in a “lower net cost for our plans.” EpiPen’s list
price was lower, and Mylan offered price protection.
PBM #2: CVS Caremark (“CVS”). In late 2012,
CVS asked Mylan and Sanofi to complete the CVS “bid
document” to submit bids that would become effective
22a
Appendix A
July 1, 2013. The bid request explained: “Incremental
Rebates for Additional Controls (exclusion opportunities)
may be used for custom clients in 2013/14, as well as future
template exclusions effective January 1,2014.” Both Mylan
and Sanofi offered CVS a variety of rebates, and CVS
memorialized the bids in agreements effective July 1,
2013. Mylan offered a 7% rebate for Tier 2 co-preferred
coverage, a 9% rebate for 1-of-l Tier 2 coverage on
managed plans, and a 14% rebate for 1-of-l Tier 2 coverage
on closed plans. Sanofi offered a 10% rebate for 1-of-l or
l-of-2 coverage on any tier. On its national formulary, CVS
covered both products from July 1, 2013 to July 1, 2014,
placing EpiPen on Tier 2 and Auvi-Q on Tier 3.
PBM #3: OptumRx/UnitedHealthcare. In February
2013, OptumRx asked Mylan to offer a 30% rebate
for EpiPen in exchange for OptumRx making it the
exclusive branded epinephrine auto-injector product
on UnitedHealthcare’s formulary for the remainder of
2013 and for 2014. Initially, Mylan did not make that
offer. But in April 2013, Mylan offered a 17% rebate
conditioned on EpiPen being the exclusive branded
epinephrine auto-injector on UnitedHealthcare’s
formulary. OptumRx rejected the bid stating, “if Mylan
did not offer a better rebate for EpiPen, the product would
be placed into a benefit exclusion.” Mylan understood that
UnitedHealthcare would decide at its July formulary
meeting “whether Auvi-Q or EpiPen will be the future sole
epinephrine auto-injector covered under its benefits” and
that, “if Auvi-Q is selected, EpiPen will become excluded.”
OptumRx told Mylan to submit a revised offer “by June
14th to meet deadline of July” formulary meeting. Mylan
23a
Appendix A
knew that OptumRx disadvantaged EpiPen in the late
2000s after Twinject—another epinephrine auto-injector
device—made a higher rebate offer.
In Sanofi’s negotiations with OptumRx, Sanofi offered
rebates ranging from 2% to 7% for co-preferred status
with EpiPen, but Sanofi did not offer price protection
or any rebate for unrestricted placement on the non
preferred formulary brand tier (Tier 3). After OptumRx
rejected Sanofi’s earlier offers, it set a deadline of June
28, 2013 for Sanofi to submit a revised proposal.
Mylan submitted a revised bid to OptumRx on June
13, 2013. It presented UnitedHealthcare with seven
different rebate options conditioned on various formulary
placements, ranging from 2% for co-preferred positioning
to 22% for exclusive formulary positioning. Mylan’s offer
also included 8% price protection and made all proposed
rebates effective July 1, 2013. Sanofi submitted its
revised bid on June 28, 2013. Sanofi’s rebate offer was
based on progressive effective dates. Sanofi offered a 7%
rebate for coverage on any tier, effective August 1, 2013
through December 31,2013. Then, beginning January 1,
2014 through December 31, 2015, Sanofi offered a 22%
rebate plus 9% resetting price protection in exchange for
exclusive epinephrine auto-injector formulary positions.
See generally In re EpiPen, 507 F. Supp. 3d at 1315
(explaining resetting price protection, which resets each
year, is less valuable than cumulative price protection).
OptumRx and UnitedHealthcare rejected Sanofi’s June
28 offer. OptumRx’s corporate designee testified: “The
24a
Appendix A
Mylan offer was better for two reasons.” First, Mylan’s
double-digit rebates started earlier. Second, Mylan’s price
protection was more valuable because it was based on an
earlier list price and did not reset each year. OptumRx
told Sanofi that its offer “is not close to what is needed.”
On July 12,2013, Sanofi submitted another revised offer to
OptumRx. The revised offer was not as price competitive
as Mylan’s offer, so OptumRx rejected it. OptumRx and
UnitedHealthcare memorialized Mylan’s offers in a
rebate agreement effective July 1, 2013. OptumRx and
UnitedHealthcare did not enter an agreement with Sanofi
for Auvi-Q rebates. UnitedHealthcare excluded Auvi-Q
from its formularies for about 60% of its commercial lives
for the second half of 2013 through the first half of 2015.
And OptumRx restricted Auvi-Q with a step edit or prior
authorization on its 2014 standard national formularies
for external health plan clients. See generally supra p. 9.
PBM #Jf.: Prime Therapeutics (‘Prime”). When
Auvi-Q launched, Mylan offered Prime two rebate options
memorialized in a rebate agreement effective April 1,2013
through December 31, 2015: 8% for Tier 2 co-preferred
coverage, and 12% for placement as the exclusive branded
product on Tier 2. In early 2014, Prime renegotiated its
EpiPen rebate agreement with Mylan. Prime had been
“pushing Mylan very hard for price protection.” So, Mylan
offered Prime the same 8% rebate for Tier 2 co-preferred
coverage and the same 12% rebate for Tier 2 exclusive
coverage described above, but Mylan also offered a 17%
rebate plus price protection if EpiPen was the exclusive
epinephrine auto-injector device on Tier 2 with “all other
auto-injectors listed tier 3 or higher with step therapy
25a
Appendix A
restriction.” Mylan “encouraged” Prime to disadvantage
Auvi-Q with a step edit, but Prime refused. Instead,
Prime asked Mylan to increase its rebate for exclusive
Tier 2 placement. Mylan responded by increasing its offer
for exclusive Tier 2 coverage from 12% to 14%. The 8%,
14%, and 17% rebate options were memorialized in an
amendment to Prime’s EpiPen rebate agreement, effective
April 1,2014 through December 31, 2015.
In early 2013, Prime asked Sanofi to submit rebate
proposals for Auvi-Q, and repeatedly told Sanofi that
certain Prime clients would consider placing a new
product on Tier 2 only if a rebate proposal contained price
protection. Sanofi’s account executive told Prime that his
internal request for price protection was “denied nationally
due to the reduction of price for Auvi-Q, prior to launch, to
be equal with EpiPen.” Sanofi eventually offered Prime a
17% rebate plus price protection for Tier 2 equal access.
Sanofi memorialized its offers to Prime in an agreement
effective April 1,2014 through December 31,2015. Sanofi
did not offer rebates for exclusive Tier 2 coverage. Prime
continued to list EpiPen as the exclusive epinephrine auto
injector device on Tier 2 of its national formulary in 2014
with Auvi-Q on Tier 3 without restrictions. But, during
that time, Prime’s clients continued to make independent
determinations for their formularies—for example, from
2013 to 2015, Horizon Blue Cross Blue Shield of New
Jersey covered both Auvi-Q and EpiPen on Tier 2.
PBM #5: Medlmpact. With Auvi-Q’s launch,
Medlmpact used the entry of a new epinephrine auto
injector as a “negotiation technique.” Medlmpact intended
26a
Appendix A
to “create a perception” with both Mylan and Sanofi that
“there is a very good possibility that the other product
would be a formidable challenger to their product on our
formularies” to induce them “to offer as large a rebate
as possible.” Before Auvi-Q’s launch, Mylan was paying
Medlmpact a 5% rebate for Tier 2 formulary coverage.
In early 2013, Mylan offered Medlmpact a 10% rebate if
EpiPen was the only branded epinephrine auto-injector on
Tier 2. Medlmpact responded by asking Mylan to submit
a better offer, and specifically asked for a rebate offer
conditioned on Medlmpact placing a step edit on Auvi-Q.
Medlmpact also solicited a “1 of 1 offer” from Sanofi.
Medlmpact told Sanofi that it “wishes to have only one
product in the category” and that “all other products”
would be “Not Covered or [Tier 3 Prior Authorization]/
Step Edit” on Medlmpact’s controlled and closed plans.
Sanofi responded by offering Medlmpact several rebate
options, including 4% for exclusive preferred coverage
on the closed formulary. Medlmpact rejected Sanofi’s
offer as “not competitive” and invited Sanofi to submit a
revised offer. Both Mylan and Sanofi submitted revised
bids in March 2013. The bids included a slew of rebates.
Among other bids, Sanofi offered Medlmpact a 15% rebate
for 1-of-l coverage on a closed formulary. Mylan offered
Medlmpact a 13% rebate for EpiPen’s exclusive formulary
position on Tier 2 and placement of all other epinephrine
auto-injectors on the highest copay tier with a step edit.
In late April 2013, Medlmpact informed Mylan that it
was going to “go with Auvi-Q.” Mylan responded with
a final offer that included: a 5% rebate for unrestricted
placement on Tier 2; a 10% rebate for exclusive preferred
27a
Appendix A
brand placement; a 20% rebate for exclusive preferred
brand placement, with all other branded epinephrine auto
injector products “placed on the highest copay tier” and
subject to step edit; and a 22% rebate to be the exclusive
product in the lowest preferred branded tier, with all other
epinephrine auto-injector products (branded or generic)
“placed on the highest copay tier” and subject to step edit.
Ultimately, Medlmpact made EpiPen the preferred
epinephrine auto-injector with Auvi-Q “in a NonFormulary position with a step edit.” Medlmpact concluded
that EpiPen had “a better price, net of rebate”—with
EpiPen costing $113/device compared to Auvi-Q’s $145/
device—and its “decision to stick with EpiPen” was also
based upon “the potential for disruption, and observation
of market adoption rates.” Sanofi asked if it could submit
another offer. Medlmpact initially declined, but in the fall
of 2013, Sanofi renegotiated with Medlmpact to provide
higher rebates, ranging from 5% to 20%, for Medlmpact’s
custom clients. Even though Auvi-Q was step edited on
Medlmpact’s three standard commercial formularies,
custom clients remained eligible for Sanofi’s rebates if they
covered Auvi-Q. For example, one Medlmpact client—the
University of Michigan—covered Auvi-Q on Tier 2. Also,
on open plans (15% of Medlmpact’s clients) Auvi-Q shared
equal preferred positioning with EpiPen.
PBM #6: Aetna. In May 2013, Aetna recognized a
“revenue opportunity by placing a prior authorization or
step edit on Auvi-Q,” but doing so could “risk” “member
and provider dissatisfaction.” Later that month, Mylan
offered Aetna a 15% rebate plus price protection
28a
Appendix A
conditioned on Tier 2 formulary placement for EpiPen
and Tier 3 formulary placement for Auvi-Q with a step
edit on Aetna’s national formulary. Mylan and Aetna
memorialized Mylan’s rebate offers in an amendment to
Mylan’s rebate agreement with Aetna, effective January
1, 2014 through December 31, 2015.
Aetna also negotiated with Sanofi, but Aetna only
agreed to Sanofi’s offer for a 25% rebate for exclusive Tier
2 coverage on Aetna’s Qualified Health Plans in 2014. In
August 2013, Aetna announced that it would place a step
edit on Auvi-Q on its national formulary in 2014. In March
2014, Aetna offered to remove the restriction on Auvi-Q
beginning June 1,2014, in exchange for Sanofi offering a
30% to 40% rebate for unrestricted Tier 3 access. Sanofi’s
corporate representative explained that Sanofi was “not
willing to” offer Aetna’s proposed rebates, so Auvi-Q’s
step edit stayed in place for the rest of 2014.
PBM #7: Cigna. Before Auvi-Q’s launch, Cigna asked
Mylan to provide a rebate offer for “exclusive epinephrine
positioning.” Mylan responded with a 10% rebate offer
conditioned on EpiPen being the sole preferred brand.
Cigna responded by asking whether there was any
“further opportunity (above 10%) for any lines of business
where we are able to implement NDC blocks and/or
Step therapy on competing products?” In June 2013,
Mylan offered Cigna a 13% rebate for placement as the
sole preferred epinephrine auto-injector with all other
epinephrine auto-injectors “branded or generic placed on
the highest copay tier of such Plan (i.e. Tier 3 or higher)
and subject to a step therapy edit.” Cigna did not accept
29a
Appendix A
Mylan’s offer for sole preferred placement. Instead, Cigna
signed a contract with Mylan for a 7% rebate for EpiPen,
conditioned only on co-preferred coverage.
At the same time, Sanofi offered Cigna a 12% rebate
for placement as a co-preferred epinephrine auto-injector
through December 2013, and a 15% rebate for placement
as a co-preferred epinephrine auto-injector from January
2014 through December 2015. Cigna did not accept the
proposal, and Auvi-Q remained on the formulary as non
preferred without a rebate agreement. Sanofi then offered
Cigna a 35% rebate for co-preferred formulary placement
or a 20% rebate for Tier 3 access. Cigna again declined
the offer, and Auvi-Q remained on Tier 3 with no rebate
agreement through 2014. In 2015, though, Sanofi and
Cigna entered a Rebate Agreement that included a 20%
rebate for Auvi-Q as a non-preferred brand.
Other PBMs and Health Plans. Like the PBMs
described above, other PBMs made formulary decisions
for Auvi-Q and EpiPen in 2014.5 In negotiations with
these other PBMs, Mylan asked some of them to exclude
Auvi-Q. In the end, some PBMs covered: (a) both Auvi-Q
5. Sanofi details Mylan’s rebate negotiations and agreements
with Humana but we do not see how they are relevant. Mylan
successfully blocked Auvi-Q on Humana’s Medicare formularies
by doubling the rebate offer from 5% to 10% in 2013, and then
increasing it to 14% in 2014. But Humana never excluded Auvi-Q on
its commercial formularies. No one explicitly defines the relevant
market in this case, but it appears to be, based on the arguments
presented, the commercial U.S. market for epinephrine auto
injectors. Humana’s exclusion of Auvi-Q on its Medicare formularies
is, therefore, wholly irrelevant.
30a
Appendix A
and EpiPen on the preferred brand tier; (b) EpiPen on the
preferred tier and Auvi-Q on the non-preferred tier; (c)
EpiPen on the preferred tier and placed a restriction on
Auvi-Q; and (d) Auvi-Q on the preferred tier and EpiPen
on the non-preferred tier. Some PBMs chose to cover only
one device and selected EpiPen, but at least one PBM
restricted EpiPen in favor of Auvi-Q.
2015 Formulary Coverage
After discovering PBMs were more interested in
Mylan’s exclusive rebate offers than paying a premium
for Auvi-Q, Sanofi “changed its contracting strategy”
and “made deeper offers” to PBMs to gain formulary
access. Sanofi’s former CEO, Chris Viehbacher, testified
at his deposition that, after seeing the “very aggressive
approach on pricing to try to exclude Auvi-Q,” “it became
clear to Sanofi that there was no choice but to try to gain
an access to the marketplace by significantly discounting.”
Thus, in early 2014 Viehbacher proposed “making an offer
that kicks Mylan off a formulary. If Mylan knows we can
be aggressive it may help.” Sanofi’s change in “contracting
strategy” had an “impact on its profitability” but it helped
Sanofi to “resecure the ESI business starting in 2015”
and secured a “tier two parity agreement for 2015” with
Aetna. “So those deeper offers started to pull Sanofi’s
access back.”
Express Scripts (ESI). First, Sanofi was able to
reverse its exclusion from ESI’s national formulary. Sanofi
made a “portfolio contract” offer for Auvi-Q that provided
an additional 2% rebate on Lantus if Auvi-Q was removed
31a
Appendix A
from the exclusion list. Lantus is Sanofi’s market-leading
insulin drug which in 2013-2014 had “somewhere around
$4 billion in sales”—a “formidable” volume unmatched by
any Mylan product. Additionally, Sanofi offered ESI price
protection. Initially, ESI decided to “reverse exclusion
and exclude EpiPen and prefer Auvi-Q.” But after more
analysis, ESI concluded that it could “decrease the cost
per [prescription] significantly” for both EpiPen and
Auvi-Q “without excluding.” So, ESI decided to cover both
products on its national formularies but exclude EpiPen
in favor of Auvi-Q on its High Performance Formulary.
ESI’s corporate designee testified that ESI “did our job
there” and “lowered the overall net cost for its plans, and
in many cases, for members, depending on what their
specific benefit design would have been.”
Aetna. Next, Sanofi offered Aetna a 65% rebate, with
price protection, conditioned on Aetna listing Auvi-Q as
the exclusive epinephrine auto-injector on its formulary
for 2015. In response, Aetna developed a 2015 formulary
design that would (1) make Auvi-Q the exclusive preferred
product on its value formularies, and (2) make Auvi-Q and
EpiPen co-preferred on its premier formularies. Aetna
then used Sanofi’s offer as leverage to threaten Mylan
with EpiPen’s exclusion. By doing so, Aetna was able
to induce a 45% rebate plus 10% price protection from
Mylan for EpiPen to be co-preferred on Tier 2. Sanofi
ultimately agreed to pay Aetna a 30% rebate plus 12%
price protection for Auvi-Q to be co-preferred on Tier
2 (i.e., a lower rebate than Mylan for the same access).
Effective January 1,2015, Aetna made EpiPen and Auvi-Q
co-preferred on its value and premier formularies.
32a
Appendix A
CVS. Sanofi also improved its coverage at CVS by
offering rebates of 40% for unrestricted coverage, 50%
for exclusive preferred coverage, and 65% for exclusive
formulary coverage with EpiPen excluded, plus 10% price
protection. Sanofi and CVS memorialized these offers in a
rebate agreement effective July 1,2014 through December
31,2015. With this offer, Sanofi secured co-preferred Tier
2 formulary coverage for Auvi-Q on CVS’s Preferred
Drug List, and Auvi-Q became the sole preferred drug
(with EpiPen excluded) on CVS’s Value Based Formulary
beginning July 1, 2014, and CVS’s Advanced Control
Formulary beginning October 1,2014. CVS used Sanofi’s
offer to pressure Mylan to increase its rebates to avoid
EpiPen’s exclusion on the Preferred Drug List. Mylan
agreed to a 34% rebate for 1-of-l status on closed plans
as well as an additional 5% incremental base rebate “on
all Plan types,” if Auvi-Q is excluded. Even though Mylan
tried to reverse EpiPen’s exclusion from CVS’s Value and
Advanced Control formularies, CVS continued to exclude
EpiPen until early November 2015—after Auvi-Q was
recalled from the market.
Other PBMs. Finally, in 2015, Sanofi successfully
maintained its previous formulary coverage at many
PBMs including Prime and Cigna. But Sanofi’s success
was not unlimited; it was unable to secure coverage
with all PBMs in 2015. For example, UnitedHealthcare
sought to renegotiate with Sanofi, expressly requesting
an offer for exclusive formulary coverage and telling
Sanofi its target rebate was 60% plus 6% cumulative price
protection with a base date of December 1, 2014. Sanofi
declined to make an exclusive offer, offering instead a
33a
Appendix A
lower rebate—35% rebate plus 8% price protection with
a list price base date of January 1, 2015—for coverage
on any tier. In contrast, Mylan offered a higher rebate
(37% plus 8% price protection) for exclusive coverage
and, as a result, maintained its position as the exclusive
epinephrine auto-injector on the formulary. And in March
2014, Sanofi asked Medlmpact what rebate it should offer
to secure removal of the step edit on Auvi-Q. In response,
Medlmpact told Sanofi that it “would need to offer a
discount in the upper 30s to low 40s with Price Protection
to even open the conversation.” Medlmpact recognized “it
would be very difficult for Sanofi to neutralize the savings
advantage from Mylan’s exclusive rebate offer given the
current share” of Auvi-Q. After internal discussion, Sanofi
declined to offer Medlmpact such a discount.
Sanofi’s increased price competition also impacted
Mylan. PBMs approached Mylan with requests for deeper
discounts using Sanofi’s competition in the epinephrine
auto-injector market as leverage. For example, after
Sanofi increased its rebate offer to Prime in late 2014,
Prime told Mylan months later that “Sanofi is aggressively
selling in the market,” “that we are starting to see some
share shift in certain areas,” and that “there has been
some discussions around a possible move to an equal
status due to this shift and the possible upcoming generic
entry.” Prime reminded Mylan that it was seeking
“overall enhancements on terms and on price protection.”
Prime asked that Mylan “take the items discussed into
consideration and please provide your most competitive
offer to Prime.” In response, Mylan offered better price
protection.
34a
Appendix A
In April 2015, after seeing Auvi-Q had regained “80%
commercial market” coverage, Sanofi’s newly-appointed
CEO, Dr. Olivier Brandicourt, asked for an “upside
proposal for Auvi-Q, to drive profitable growth,” and
“increased its investment in the brand.” Sanofi began
seeing Auvi-Q’s market share increase in 2015.
D.
Despite Auvi-Q’s frequent exclusion, several PBMs
testified that they could have excluded EpiPen in favor of
Auvi-Q because they could shift product use from EpiPen
to Auvi-Q. In re EpiPen, 507 F. Supp. 3d at 1324 (collecting
evidence). This testimony is confirmed by the record. On
at least two occasions, patients shifted to Auvi-Q after
EpiPen was excluded. First, CVS excluded EpiPen from
its Advanced Control Formulary in 2014 and told Mylan
in 2015 that its market share on that formulary was “all
but gone.” CVS used its Advanced Control Formulary as a
“trial balloon of sorts” and determined it would not be “a big
deal excluding EpiPen” because there had “been no noise
or complaints.” Mylan confirmed that EpiPen utilization
on plans that adopted the CVS Value Formulary, including
plans of large corporations like Comcast and Home Depot,
“completely disappeared in Q4 2014.” CVS projected that
if it excluded EpiPen in favor of Auvi-Q on its national
formulary, EpiPen’s share would drop from 66% to 7%,
with Auvi-Q’s share increasing from 10% to 75%. Second,
when ESI excluded EpiPen from its High Performance
Formulary, EpiPen’s share for plans that adopted the
exclusion list “dropped from an average of 94% in the end
of 2014, to about 12% by June 2015.” When Sanofi crafted
its 2015 ESI bid, it also assumed this shift in market share
35a
Appendix A
would occur. Sanofi predicted that excluding EpiPen in
favor of Auvi-Q would achieve 89% market share for Auvi-Q
on plans adopting the exclusion list.
Broader industry practice also supports the PBMs’
testimony that they could have excluded EpiPen in favor of
Auvi-Q. PBMs are, as one of Sanofi’s consultants observed,
“able to transition market share from the product that has
been excluded to the new product” and are “willing to remove
market leaders in certain circumstances.” ESI, for example,
excluded many popular products with high market shares,
including GlaxoSmithKline’s leading asthma medication
Advair and Gilead’s leading hepatitis C treatment Sovaldi.
As part of its marketing efforts, Sanofi employed
pharmaceutical sales calls. Between April 2013 and July
2013, the percentage of targeted physicians writing
Auvi-Q prescriptions increased from 10.3% to 22.6%. The
percentage also increased for targeted allergists (39.2% to
61.6%) and targeted pediatricians (4.3% to 15.2%). Sanofi
reported that “more than three in four allergists” and
“one in four pediatricians” who were called on by Sanofi’s
sales force “converted” to prescribe Auvi-Q. In 2014,
when Sanofi’s overall share of epinephrine auto-injector
prescriptions declined, Sanofi concluded that “prescribes
who have been detailed show a smaller drop in Auvi-Q
share compared to those not called on.” Sanofi’s study
of 24 months of data—from August 2013 to July 2015—
concluded that Sanofi’s “sales force generated 15% of all”
Auvi-Q prescriptions.6
6. Some evidence relied upon by the district court in granting
summary judgment is absent from the record on appeal. Because
the parties did not object to the use of that evidence, we perfect the
36a
Appendix A
II.
In 2017, Sanofi sued Mylan under Section 2 of the
Sherman Act alleging monopolization. 15 U.S.C. §§ 2, 15.
Sanofi originally filed the action in the District of New Jersey,
but the Judicial Panel on Multidistrict Litigation transferred
the case to the District of Kansas for coordinated discovery
with a related consumer class action. After discovery, the
parties cross-moved for summary judgment on the two
elements of Sanofi’s claim: “(1) the possession of monopoly
power in the relevant market and (2) the willful acquisition or
maintenance of that power as distinguished from growth or
development as a consequence of a superior product, business
acumen, or historic accident.” United States v. Grinnell
Corp., 384 U.S. 563, 570-71, 86 S. Ct. 1698, 16 L. Ed. 2d
778 (1966). Sanofi moved on the first element, Mylan on the
second. In a learned order, the district court granted Mylan’s
motion and denied Sanofi’s motion as moot. In re EpiPen,
507 F. Supp. 3d at 1382. The district court held Sanofi could
not survive summary judgment because, based on the
undisputed summary judgment facts, no reasonable jury
could conclude Mylan engaged in exclusionary conduct—the
second element of monopolization. Id. at 1363. Sanofi appeals.
III.
We review a district court’s grant of summary
judgment on a monopolization claim de novo. Lenox
MacLaren Surgical Corp. v. Medtronic, Inc., 762
record by taking judicial notice of the missing facts. See St. Louis
Baptist Temple, Inc. v. FDIC, 605 F.2d 1169,1172 (10th Cir. 1979).
37a
Appendix A
F.3d 1114, 1118 (10th Cir. 2014). Summary judgment is
appropriate “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. R 56(a). We
view the facts and draw reasonable inferences in the light
most favorable to the nonmoving party—which in this
case is Sanofi. Scott, 550 U.S. at 378. A factual dispute is
“genuine” if “the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Anderson
v. Liberty Lobby, Inc., All U.S. 242,248,106 S. Ct. 2505,
91 L. Ed. 2d 202 (1986). An issue of fact is “material” if it
“might affect the outcome of the suit under the governing
law.” Id.
“Summary judgment procedure is properly regarded
not as a disfavored procedural shortcut, but rather as
an integral part of the Federal Rules as a whole, which
are designed to secure the just, speedy and inexpensive
determination of every action.” Celotex Corp. v. Catrett,
All U.S. 317, 327,106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986)
(quotation omitted). “Summary judgment is of particular
importance in the area of antitrust law, because it helps
to avoid wasteful trials and prevent lengthy litigation
that may have a chilling effect on pro-competitive market
forces.” MLB Props., Inc. v. Salvino, Inc., 542 F.3d 290,
309 (2d Cir. 2008) (cleaned up); see also Race Tires Am.,
Inc. v. HoosierRacing Tire Corp., 614 F.3d 57,73 (3d Cir.
2010).
Because the Judicial Panel on Multidistrict Litigation
transferred this case from the Third Circuit, we must
initially decide an issue of first impression for our
38a
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Circuit: whose substantive law applies? Our sister circuits
unanimously agree that “when one district court transfers
a case to another, the norm is that the transferee court
applies its own Circuit’s cases on the meaning of federal
law.” AER Advisors, Inc. v. Fid. Brokerage Servs., LLC,
921 F.3d 282, 288 & n.5 (1st Cir. 2019) (collecting cases
' from the Second, Fourth, Fifth, Eighth, Ninth, Eleventh,
and D.C. Circuits). We see no reason to depart from the
consensus view. Our caselaw, therefore, has “stare decisis
effect,” and the Third Circuit’s caselaw “merits close
consideration.” In re Korean Air Lines Disaster of Sept.
1, 1983, 829 F.2d 1171,1176, 265 U.S. App. D.C. 39 (D.C.
Cir. 1987) (R. Ginsburg, J.).
IV.
Section 2 of the Sherman Act makes it illegal to
“monopolize” any part of the trade or commerce among the
several states. 15 U.S.C. § 2. The offense of monopolization
“has two elements: (1) the possession of monopoly power
in the relevant market and (2) the willful acquisition or
maintenance of that power as distinguished from growth
or development as a consequence of a superior product,
business acumen, or historic accident.” Grinnell, 384
U.S. at 570-71. The second element is often called the
“exclusionary conduct” element. To survive summary
judgment, the plaintiff must present a triable issue of both
(1) monopoly power and (2) exclusionary conduct. See 3
Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law
f 618, at 67 (4th ed. 2015).
39a
Appendix A
The issue of monopoly power—the power to “raise
prices substantially above a competitive level without
losing so much business that the gambit becomes
unprofitable”—is not in play here. Novell, Inc. v. Microsoft
Corp., 731 F.3d 1064, 1070 (10th Cir. 2013) (Gorsuch, J.);
see, e.g., United States v. Microsoft Corp., 253 F.3d 34,
51, 346 U.S. App. D.C. 330 (D.C. Cir. 2001) (en banc)
(per curiam); William M. Landes & Richard A. Posner,
Market Power in Antitrust Cases, 94 Harv. L. Rev.
937 (1981). The district court held there was no triable
issue of exclusionary conduct, meaning, for purposes
of summary judgment, it was unnecessary to reach the
issue of monopoly power. Thus, the sole issue on appeal
is whether the district court properly granted summary
judgment on the exclusionary conduct element.
A.
“A firm violates § 2 only when it acquires or maintains,
or attempts to acquire or maintain, a monopoly by
engaging in exclusionary conduct.” Microsoft, 253 F.3d
at 58. Writing for the Supreme Court, Justice Scalia
observed:
The mere possession of monopoly power, and
the concomitant charging of monopoly prices, is
not only not unlawful; it is an important element
of the free-market system. The opportunity to
charge monopoly prices—at least for a short
period—is what attracts “business acumen”
in the first place; it induces risk taking that
produces innovation and economic growth.
40a
Appendix A
To safeguard the incentive to innovate, the
possession of monopoly power will not be found
unlawful unless it is accompanied by an element
of anticompetitive conduct.
Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko,
LLP, 540 U.S. 398,407,124 S. Ct. 872,157 L. Ed. 2d 823
(2004). See generally Robert L. Heilbroner, The Worldly
Philosophers 293-97 (7th ed., rev. 1999) (discussing
Joseph Schumpeter’s views on entrepreneurship and
innovation underlying Justice Scalia’s observations); Paul
A. Samuelson & William D. Nordhaus, Economics 540-42
(12th ed. 1985) (explaining Schumpeter’s hypothesis that
imperfect competition is the “wellspring of innovation and
technological change”).
“Whether any particular act of a monopolist is
exclusionary, rather than merely a form of vigorous
competition, can be difficult to discern.” Microsoft, 253
F.3d at 58; see also, e.g., Frank H. Easterbrook, The
Limits of Antitrust, 63 Tex. L. Rev. 1, 26 (1984) (“Low
prices and large plants may be competitive and beneficial,
or they may be exclusionary and harmful.”). Competitive
and exclusionary conduct look alike and “the means of
illicit exclusion, like the means of legitimate competition,
are myriad.” Microsoft, 253 F.3d at 58; see also, e.g.,
Novell, 731 F.3d at 1072. “The challenge for an antitrust
court lies in... distinguishing between exclusionary acts,
which reduce social welfare, and competitive acts, which
increase it.” Microsoft, 253 F.3d at 58; Novell, 731 F.3d
at 1072. The courts, with time and a gathering body of
experience, have been able to “adapt this general inquiry
41a
Appendix A
to particular circumstances, developing considerably more
specific rules for common forms of alleged misconduct”—
like tying, predatory pricing, or exclusive dealing. Novell,
731 F.3d at 1072.
Real-world monopolists may engage in allegedly
exclusionary conduct which does not fit within a single
paradigm, instead exhibiting characteristics of several
common forms of alleged misconduct. In these situations,
the courts disaggregate the exclusionary conduct into its
component parts before applying the relevant law. The
Supreme Court, for example, separated a price-squeeze
claim into a duty-to-deal and predatory-pricing claim.
Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc., 555 U.S.
438,449-52,457,129 S. Ct. 1109,172 L. Ed. 2d 836 (2009).
Holding the plaintiff could not state a duty-to-deal or
predatory-pricing claim, the Supreme Court “decline[d]
the invitation to recognize” a “new form of antitrust
liability,” stating “[t]wo wrong claims do not make one that
is right.” Id. at 457. In granting summary judgment to
Mylan on Sanofi’s monopolization claim, the district court
disaggregated Mylan’s allegedly exclusionary conduct into
several common forms of alleged misconduct and, after
applying the relevant law, concluded that—considered
separately or together—the facts presented no triable
issue of exclusionary conduct. See In re EpiPen, 507 F.
Supp. 3d at 1363.
The district court’s methodology was flawed, so
says Sanofi, because it took “a balkanized view of the
evidence that badly missed the forest for the trees.”
Appellant’s Opening Br. 3. After all, “Sanofi should have
42a
Appendix A
received ‘the full benefit of all its proof without tightly
compartmentalizing the various factual components.’”
Appellant’s Opening Br. 72 (cleaned up) (quoting Cont’l
Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690,
699,82 S. Ct. 1404,8 L. Ed. 2d 777 (1962)). We reject this
argument. See Ne. Tel. Co. v. AT&T Co., 651 F.2d 76, 95
n.28 (2d Cir. 1981); Cal. Comput. Prods., Inc. v. IBM Corp.,
613 F.2d 727,746 (9th Cir. 1979). For the sake of accuracy,
precision, and analytical clarity, we must evaluate
Mylan’s allegedly exclusionary conduct separately. See
N.M. Oncology & Hematology Consultants, Ltd. v.
Presbyterian Healthcare Servs., 994 F.3d 1166, 1173-74
(10th Cir. 2021). Only then can we evaluate the evidence
in totality to see if any “synergistic effect” saves Sanofi’s
case. Ne. Tel. Co., 651 F.2d at 95 n.28; Cal. Comput. Prods.,
613 F.2d at 746; cf. linkLine, 555 U.S. at 457.
Mylan’s allegedly exclusionary conduct can be split up
into three categories: (1) Mylan’s use of exclusive rebate
agreements; (2) the leveraging of EpiPen’s entrenched
demand to deny Sanofi a meaningful opportunity to
compete for the non-entrenched demand; and (3) other
conduct working in concert to lock Sanofi out of the
market, including Mylan’s EpiPen4Schools program
and the misclassification of EpiPen as a generic drug for
Medicaid purposes. We take each in turn and conclude
that, considered separately or together, the district court
properly held the summary judgment facts present no
triable issue of exclusionary conduct.
43a
Appendix A
B.
Sanofi alleges Mylan’s rebate agreements were
anticompetitive exclusive dealing contracts. “An exclusive
dealing arrangement is an agreement in which a buyer
agrees to purchase certain goods or services only from a
particular seller for a certain period of time.” ZF Meritor,
LLC v. Eaton Corp., 696 F.3d 254, 270 (3d Cir. 2012).
“The primary antitrust concern with exclusive dealing
arrangements is that they may be used by a monopolist
to strengthen its position, which may ultimately harm
competition.” Id. (citing United States v. Dentsply InFl,
Inc., 399 F.3d 181,191 (3d Cir. 2005)); see also Perington
Wholesale, Inc. v. Burger King Corp., 631 F.2d 1369,1374
(10th Cir. 1979); McWane, Inc. v. FTC, 783 F.3d 814, 832
(11th Cir. 2015). “The best example of a possible threat
to competition exists where a market is already heavily
concentrated and long-term exclusive dealing contracts...
foreclose so large a percentage of the available... outlets
that entry into the concentrated market is unreasonably
constricted.” E. Food Servs., Inc. v. Pontifical Catholic
Univ. Servs. Ass’n, 357 F.3d 1,8 (1st Cir. 2004); 11 Areeda
& Hovenkamp, supra, 111802, at 72.
“Despite some initial confusion, today exclusive
dealing contracts are not disfavored by the antitrust laws.”
E. Food Servs., 357 F.3d at 8. Courts repeatedly explain
that exclusive dealing agreements are often entered into
for entirely procompetitive reasons and pose very little
threat to competition even when utilized by a monopolist.
See, e.g., Tampa Elec. Co. v. Nashville Coal Co., 365 U.S.
320, 333, 81 S. Ct. 623, 5 L. Ed. 2d 580 (1961); Jefferson
Par. Hosp. Dish No. 2 v. Hyde, 466 U.S. 2, 45,104 S. Ct.
44a
Appendix A
1551, 80 L. Ed. 2d 2 (1984) (O’Connor, J., concurring in
the judgment); ZF Meritor, 696 F.3d at 270; 11 Areeda
& Hovenkamp, supra, 111810, at 161 (“Exclusive-dealing
arrangements can produce beneficial results greatly
exceeding their potential for harm.” (cleaned up)). For
example, exclusive deals might ensure a buyer with a
predictable source of inputs from an otherwise volatile
supply market, United States v. Am. Can Co., 230 F.
859, 883 (D. Md. 1916); enable buyers to group repeat
purchases into a single contract to reduce the cost of using
the market, 11 Areeda & Hovenkamp, supra, U 1811c; or
prevent distributors from free riding on a manufacturer’s
promotional investments, Howard P. Marvel, Exclusive
Dealing, 25 J.L. & Econ. 1, 7 (1982). See also Robert
H. Bork, The Antitrust Paradox 303 (1978); Richard A.
Posner, Antitrust Law 230 (2d ed. 2001). Thus, exclusive
dealing contracts are “frequently upheld when challenged
on antitrust grounds.” Race Tires Am., 614 F.3d at 76
(citing E. Food Servs., 357 F.3d at 8; Barr Labs., Inc.
v. Abbott Labs., 978 F.2d 98, 111 (3d Cir. 1992)). In fact,
some courts and commentators suggest exclusive dealing
contracts should be treated as “presumptively lawful in
all but a few carefully defined circumstances.” 11 Areeda
& Hovenkamp, supra, U 1810, at 161; see E. Food Servs.,
357 F.3d at 8; Bork, supra, at 303.
1.
To analyze the legality of exclusive dealing contracts,
we apply the rule of reason.7 Jefferson Par., 466 U.S. at
7. There is some law in the Third Circuit suggesting “in the
context of exclusive dealing, the price-cost test may be utilized as a
45a
Appendix A
44-45 (O’Connor, J., concurring in the judgment) (citing
Tampa Elec., 365 U.S. at 333-35); Perington Wholesale,
631 F.2d at 1374; ZFMeritor, 696 F.3d at 271. See generally
McWane, 783 F.3d at 835 (providing background on how
Tampa Electric is now read to permit a full rule of reason
approach to exclusive dealing cases).
specific application of the ‘rule of reason’ when the plaintiff alleges
that price is the vehicle of exclusion.” ZF Meritor, 696 F.3d at 273
(citing Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039,106063 (8th Cir. 2000)); id. at 320-24, 344 (Greenberg, J., dissenting);
Eisai, Inc. v. Sanofi Aventis U.S., LLC, 821 F.3d 394, 408-09 (3d
Cir. 2016). The Supreme Court developed the price-cost test to
analyze predatory-pricing claims. See Brooke Grp. Ltd. v. Brown
& Williamson Tobacco Corp., 509 U.S. 209, 222-27,113 S. Ct. 2578,
125 L. Ed. 2d 168 (1993). A predatory-pricing plaintiff must prove: (1)
the rival’s low prices “are below an appropriate measure of its rival’s
costs,” and (2) the rival had a “dangerous probability[] of recouping
its investment in below-cost prices.” Id. Sanofi does not dispute that
it cannot pass the price-cost test.
Mylan urges us to affirm on this basis, but its briefing is too
cursory for us to do so. See Br. of Appellees 66. Even within the ZF
Meritor panel there was substantial disagreement about when the
price-cost test is the appropriate rule of reason analysis for exclusive
dealing contracts. Mylan’s two paragraphs of briefing are insufficient
for us to determine whether the Third Circuit’s approach is correct
and how it should apply in this case. We leave for another day whether,
in the Tenth Circuit, the pricecost test is the appropriate rule of
reason analysis where “a firm uses a single-product loyalty discount
or rebate to compete with similar products.” Eisai, 821 F.3d at 409.
We, therefore, choose to apply the full rule of reason analysis to
Mylan’s exclusive rebate agreements. This approach is consistent
with Third Circuit precedent—which merits close consideration
in this case—because ZF Meritor clearly states the pricecost test
“may be utilized as a specific application of the ‘rule of reason.’” 696
F.3d at 273.
46a
Appendix A.
“The rule of reason requires courts to conduct a
fact-specific assessment of ‘market power and market
structure to assess the challenged restraint’s actual
effect’ on competition.” Ohio v. Am. Express Co., 138 S. Ct.
2274,2284,201 L. Ed. 2d 678 (2018) (cleaned up) (quoting
Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752,
768, 104 S. Ct. 2731, 81 L. Ed. 2d 628 (1984)). Whether
an exclusive dealing arrangement is an “unreasonable
restraint on competition,” Cont’l T. V, Inc. v. GTE
Sylvania Inc., 433 U.S. 36, 49, 97 S. Ct. 2549, 53 L. Ed.
2d 568 (1977), depends on whether “performance of the
contract will foreclose competition in a substantial share
of the line of commerce affected.” Tampa Elec., 365 U.S.
at 327; see also ZFMeritor, 696 F.Sd at 271. This analysis
requires us to consider not only the percentage of the
market foreclosed by the contested contract, but also
“the probable effect of the contract on the relevant area
of effective competition” and “the probable immediate
and future effects which pre-emption of that share of
the market might have on effective competition therein.”
Tampa Elec., 365 U.S. at 329.
Standing alone, these standards are not particularly
illuminating. After all, every completed contract could be
said to “foreclose competition” for the subject matter of
that contract. Barry Wright Corp. v. ITT Grinnell Corp.,
724 F.2d 227,236 (1st Cir. 1983) (Breyer, J.); Bork, supra,
at 137. And the term “substantially foreclose competition”
is not a self-contained, or clearly-defined yardstick.
To delineate between permissive and prohibited
exclusionary contracts, we need some guiding principle—
47a
Appendix A
some standard that allows us to quickly and easily resolve
whether exclusive contracts harm competition. In our
Circuit, this is the consumer welfare standard. Novell, Inc.
v. Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013) (Gorsuch,
J.). “Congress designed the Sherman Act as a ‘consumer
welfare prescription.”’ Reiter v. Sonotone Corp., 442 U.S.
330, 343, 99 S. Ct. 2326, 60 L. Ed. 2d 931 (1979) (quoting
Bork, supra, at 66); see 7 Areeda & Hovenkamp, supra,
If 1503a, at 401-04. In earlier days, antitrust was built
upon the assumption that protection of rivalry was the
best means of promoting competition. The promotion of
atomistic competition at all costs, however, led to puzzling
outcomes: “If a monopolist so much as expanded its
facilities to meet anticipated demand, or failed to keep
its prices high enough to permit less efficient rivals to
stay afloat, it could find itself held liable under section 2.”
Novell, 731 F.3d at 1072.
The emphasis of antitrust policy has wisely shifted
from “protection of competition as a process of rivalry
to the protection of competition as a means of promoting
economic efficiency.” Olympia Equip. Leasing Co. v. W.
Union Tel. Co., 797 F.2d 370, 375 (7th Cir. 1986) (Posner,
J.); see also Novell, 731 F.3d at 1072. The lawful monopolist,
after all, must be “free to compete like everyone else;
otherwise the antitrust laws would be holding an umbrella
over inefficient competitors.” Olympia Equip., 797 F.2d at
375; see also Posner, supra, at 196. Under the consumer
welfare standard, we still seek to “protect[] the process of
competition,” but we do it “with the interests of consumers,
not competitors, in mind.” Novell, 731 F.3d at 1072. As
the Supreme Court explains, the goal is to “distinguish[]
48a
Appendix A
between restraints with anticompetitive effect that are
harmful to the consumer and restraints stimulating
competition that are in the consumer’s best interest.”
Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551
U.S. 877, 886, 127 S. Ct. 2705,168 L. Ed. 2d 623 (2007);
accord Am. Express, 138 S. Ct. at 2284. Consequentially,
with the adoption of the consumer welfare standard,
antitrust became indifferent to the preservation of
inefficient competitors. “[A] consumer has no interest in
the preservation of a fixed number of competitors greater
than the number required to assure his being able to
buy at the competitive price.” Marrese v. Am. Acad, of
Orthopaedic Surgeons, 706 F.2d 1488,1497 (7th Cir. 1983)
(Posner, J.).
Some amici curiae urge us to either supplant or
supplement our consumer welfare standard with a
consumer choice framework. Because of the industry
at issue, we must necessarily reject this invitation.8 In
urging us to reverse the district court, these amici argue
the district court erred by failing to consider the patients’
deprivation of choice arising from Mylan’s exclusive rebate
agreements. At the outset, it is hard to say patients were
ever deprived of choice. Even when a patient’s health
plan excluded Auvi-Q, the patient could seek a medical
necessity exemption or otherwise pay out of pocket for
the device. But even if the inability to choose between
multiple covered products was considered a deprivation
8. Introducing a consumer choice framework, even as a
supplement to the consumer welfare standard, may inappropriately
re-entangle the courts in what Judge Bork called the “antitrust
paradox.” See Bork, supra, at 79-89.
49a
Appendix A
of choice, it would subvert the health insurance industry
to adopt a consumer choice framework.
“Antitrust analysis must always be attuned to the
particular structure and circumstances of the industry
at issue,” Trinko, 540 U.S. at 411, and when a patient
purchases health insurance, the patient necessarily
relinquishes some treatment-choice autonomy in exchange
for lower premiums. Adopting a consumer choice
framework would frustrate, for example, the patient
who sought out a health plan with a tighter formulary
and lower premiums, because the health plan would be
obligated to cover both EpiPen and Auvi-Q when covering
EpiPen alone would be cheaper. The proper balance
between health plan premiums and formulary coverage is
better struck through the workings of the private market
than the judiciary. Thus, our only concern in this case
is whether Mylan’s exclusive rebate agreements hurt or
threaten to hurt consumers through reduced output or
increased prices. See 11 Areeda & Hovenkamp, supra,
111802b, at 75.
2.
In the exclusive dealing context, we can broadly state
that an exclusive dealing contract is anticompetitive under
the consumer welfare standard if it harms consumers
by excluding rivals. See Roland Mach. Co. v. Dresser
Indus., Inc., 749 F.2d 380,394 (7th Cir. 1984) (Posner, J.);
Microsoft, 253 F.3d at 58; 3 Areeda & Hovenkamp, supra,
11651bl, at 103. In a case like this where buyers instigated
exclusivity to obtain lower prices, the rival plaintiff must
50a
Appendix A
prove two things to show the exclusive dealing agreements
are anticompetitive. First, the rival plaintiff must show
that the agreements are likely to foreclose it from doing
business in the relevant market. See Tampa Elec., 365
U.S. at 334; Roland Mach., 749 F.2d at 394 (“If there is
no exclusion of a significant competitor, the agreement
cannot possibly harm competition.”); E. Food Servs., 357
F.3d at 8-9; 11 Areeda & Hovenkamp, supra, H 1802b,
at 75 (“A ‘foreclosure’ injury to a private firm occurs
when that firm is denied access to a market that would
presumably be open absent the challenged restraint.”). To
determine whether the challenged exclusive agreements
are likely to foreclose a competitor from the market, courts
generally look at (among other things) the duration, ease
of terminability, and percentage of the market foreclosed
by the contracts. See, e.g., E. Food Servs., 357 F.3d at 8; 11
Areeda & Hovenkamp, supra, 111802g2, at 101-02.
Second, the rival plaintiff must show that, once
foreclosed, the defendant could reduce output or increase
prices and those consumer harms would outweigh any
consumer benefit received from the period of lower prices.
See Roland Mach., 71+9 F.2d at 39p, Microsoft, 253 F.3d
at 59; Novell, 731 F.3d at 1075; Barry Wright, 724 F.2d at
237-38; 11 Areeda & Hovenkamp, supra, II1802, at 72; cf,
e.g., Brooke Grp. Ltd. v. Brown & Williamson Tobacco
Corp., 509 U.S. 209, 222-27, 113 S. Ct. 2578, 125 L. Ed.
2d 168 (1993). The monopolist’s successful elimination of
a rival alone is an insufficient condition to prove harm to
competition. See Prods. Liab. Ins. Agency, Inc. v. Crum
& Forster Ins. Cos., 682 F.2d 660, 663 (1982) (Posner,
J.) (“Now there is a sense in which eliminating even a
51a
Appendix A
single competitor reduces competition. But it is not the
sense that is relevant in deciding whether the antitrust
laws have been violated.”); Univ. Life Ins. Co. of Am. v.
Unimarc Ltd., 699 F.2d 846, 853 (7th Cir. 1983) (Posner,
J.) (“That ‘there’s a special providence in the fall of a
sparrow,’ William Shakespeare, Hamlet act 5, sc. 2, lines
233-34, is not the contemporary philosophy of antitrust.”
(cleaned up)); Br. of Amicus Curiae J. Gregory Sidak in
Supp. of Appellees 20-23. It does not automatically follow
that a monopolist can freely engage in the requisite
anticompetitive conduct—reducing output or increasing
prices—once it forecloses its competitor from the market
using exclusive deals. If the monopolist pushes prices
above the competitive level, the foreclosed competitor
might develop alternative channels of distribution, see
Omega Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157,1163
(9th Cir. 1997), or might reenter the market and compete
for the challenged contracts, see John Bates Clark, The
Control of Trusts 26-27 (1st ed. 1901), effectively pushing
prices back down to the competitive level. Thus, to present
a triable issue of monopolization where the exclusive deals
were entered into for a corresponding procompetitive
benefit—here, lower prices—the plaintiff must “prove that
the ... effect of the exclusion will be to raise prices above
(and therefore reduce output below) the competitive level,
or otherwise injure competition; [plaintiff] must show in
other words that the anticompetitive effects (if any) of the
exclusion outweigh any benefits to competition from it.”
Roland Mach., 749 F.2d at 394; see, e.g., Microsoft, 253
F.3d at 59; Race Tires Am., 614 F.3d at 75; Dentsply, 399
F.3d at 196-97; Easterbrook, supra, at 26-28.
52a
Appendix A
We recognize our test seems onerous, but the Supreme
Court consistently reminds us that “mistaken inferences”
in a case driven by “price-cutting activities” can be
“especially costly, because they chill the very conduct the
antitrust laws are designed to protect”: slashing prices.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 594, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986);
accord Brooke Grp., 509 U.S. at 223; Weyerhaeuser Co.
v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312,
319, 127 S. Ct. 1069, 166 L. Ed. 2d 911 (2007); see Atl.
Richfield Co. v. USA Petroleum Co., 495 U.S. 328,340,110
S. Ct. 1884,109 L. Ed. 2d 333 (1990). “[Ajntitrust rules are
court-administered rules” which “must be designed with
the knowledge that firms ultimately act, not in precise
conformity with the literal language of complex rules,
but in reaction to what they see as the likely outcome
of court proceedings.” Town of Concord v. Bos. Edison
Co., 915 F.2d 17, 22 (1st Cir. 1990) (Breyer, C.J.). No one
can seriously dispute that exclusive rebate agreements
stimulate price competition in the prescription drug
market. Sanofi’s own expert witness, Dr. Scott Morton,
recognized as much, testifying before Congress that
“[t]he way you get low prices in the pharmaceutical
industry is by the ability to exclude drugs.” Hearings,
supra, at 13. Price cutting in concentrated industries
seems “sufficiently difficult to stimulate that we hesitate
before embracing a rule that could”—through the
unintentional prohibition of the monopolist’s legitimate use
of exclusive rebate agreements—’’stabilize ‘tacit cartels’
and further encourage interdependent pricing behavior.”
Barry Wright, 724 F.2d at 235. Our rule, therefore,
adequately protects the legitimate use of exclusive rebate
agreements in the prescription drug market.
53a
Appendix A
3.
Because Mylan’s exclusive rebate agreements brought
about lower prices for epinephrine auto-injectors than if
Mylan and Sanofi used preferred or co-preferred rebate
agreements, see supra Section I.C, Sanofi must prove
that (1) Mylan’s exclusive rebate agreements were likely
to foreclose Auvi-Q from the epinephrine auto-injector
market, and (2) after Auvi-Q’s foreclosure, Mylan could
reduce output or increase prices above the competitive
level, and the reduced output or increased prices
would produce anticompetitive effects outweighing the
procompetitive benefits from the period of lower prices.
Sanofi fails to present a triable issue that Mylan’s rebate
agreements were likely to foreclose it from doing business
in the epinephrine autoinjector market. We, therefore,
affirm the district court’s judgment on that element alone.
The district court, applying ZF Meritor’s seven-factor
test,9 concluded Sanofi “failed to present a triable issue
9. We think the district court’s use of the ZF Meritor sevenfactor test was appropriate given our case-specific deference to
the Third Circuit. Although our analysis today does not directly
reference ZF Meritor’s, factors, it follows the same general principles.
These principles are:
There is no set formula for evaluating the legality of an
exclusive dealing agreement, but modern antitrust law
generally requires a showing of (1) significant market
power by the defendant, (2) substantial foreclosure, (3)
contracts of sufficient duration to prevent meaningful
competition by rivals, and (4) an analysis of likely or
actual anticompetitive effects considered in light of
54a
Appendix A
that Mylan’s rebate contracts foreclosed Sanofi” from
competing in the epinephrine auto-injector market. In re
EpiPen, 507 F. Supp. 3d at 1355. We are in full agreement.
At the height of its allegedly anticompetitive behavior,
Mylan only foreclosed Auvi-Q from 31% of the U.S.
population. See id. at 1S53 (collecting evidence that Auvi-Q
was not covered or step edited for 31% of the population).
That means Auvi-Q was still covered and available for
nearly 70% of the U.S. population. And remember, patients
whose health plans excluded or restricted Auvi-Q could
still pay out of pocket for the device if they so desired.
But percentage of market foreclosure is only half the
inquiry. While we recognize that a “monopolist’s use of
exclusive contracts, in certain circumstances, may give
rise to a § 2 violation even though the contracts foreclose
less than the roughly 40% or 50% share usually required
in order to establish a § 1 violation,” Microsoft, 253 F.3d
at 70, this is not one of those cases.10 Mylan’s exclusive
any procompetitive effects. Courts will also consider
(5) whether there is evidence that the dominant firm
engaged in coercive behavior, and (6) the ability of
customers to terminate the agreements. (7) The use
of exclusive dealing by competitors of the defendant
is also sometimes considered.
ZF Meritor, 696 F.3d at 271-72 (cleaned up).
10. Section 1 of the Sherman Act makes “[ejvery contract,
combination in the form of trust or otherwise, or conspiracy, in
restraint of trade or commerce among the several States” illegal. 15
U.S.C. § 1. Exclusive dealing can be challenged under both § 1 and
§ 2. See, e.g., ZF Meritor, 696 F.3d at 267 (challenging defendant’s
exclusive deals under both § 1 and § 2). For background on how the
55a
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rebate agreements did not impair Sanofi’s opportunity to
compete for several reasons.
First, Mylan’s exclusive rebate agreements were
short and easily terminable. It is axiomatic that short,
easily terminable exclusive agreements are of little
antitrust concern; a competitor can simply wait for the
contracts to expire or make alluring offers to initiate
termination. See, e.g., Omega Envtl., 127 F.3d at 116364 (“The short duration and easy terminability of these
agreements negate substantially their potential to
foreclose competition.” (cleaned up)); Methodist Health
Servs. Corp. v. OSF Healthcare Sys., 859 F.3d 408,
410 (7th Cir. 2017) (Posner, J.) (“Most of the contracts
expire every year or two, giving other competitors, such
as plaintiff, a shot at obtaining the next contract by
outbidding defendant.” (cleaned up)); U.S. Healthcare,
Inc. v. Healthsource, Inc., 986 F.2d 589,596 (1st Cir. 1993)
(holding termination on 30 days’ notice is normally a de
minimis constraint); Balaklaw v. Lovell, 14 F.3d 793,
799 (2d Cir. 1994) (holding “opportunities for competition
remain” where the contract’s term was three years but it
“may be cancelled without cause upon six-months’ notice”);
see also, e.g., Roland Mach., 749 F.2d at 395; Paddock
Publ’ns, Inc. v. Chi. Tribune Co., 103 F.3d 42,47 (7th Cir.
1996) (Easterbrook, J.); Barry Wright, 724 F.2d at 237; 11
Areeda & Hovenkamp, supra, H 1802g2, at 101 (“Even an
exclusive-dealing contract covering a dominant share of
a relevant market need have no adverse consequences if
exclusive dealing analysis sometimes differs under § 1 and § 2, see
1 Antitrust Section, ABA, Antitrust Law Developments § 2C-2-b
(9th ed. 2022).
56a
Appendix A
the contract is let out for frequent rebidding.”); Marvel,
supra, at 6. The undisputed summary judgment facts
show that most of the contracts imposed terms of two and
a half years or less and included termination provisions
allowing either party to terminate the agreements without
cause on 90-days’ written notice or less. In re EpiPen, 507
F. Supp. 3d at 1344 (collecting evidence). Furthermore,
the summary judgment record establishes that PBMs
invoked these termination provisions and renegotiated
rebate agreements annually and, sometimes, even more
frequently. Id. at 1344-45 (collecting evidence). Mylan’s
exclusive rebate agreements made the epinephrine auto
injector market hard to enter midyear but did not “stifle
competition over the longer run.” Paddock Publ’ns, 103
F.3d at 45.
Second, exclusive rebate agreements were a normal
competitive tool in the epinephrine auto-injector market
to stimulate price competition. The undisputed summary
judgment facts show that PBMs often instigated
exclusivity to stimulate price competition, with Sanofi
bidding for and entering into exclusive rebate agreements
for Auvi-Q. See In re EpiPen, 507 F. Supp. 3d at 1307OS, 1311-12 (collecting evidence). The widespread use
of exclusive rebate agreements in the epinephrine
auto-injector market—and the pharmaceutical drug
market more broadly—does not suggest Mylan acted
anticompetitively. Rather, this demonstrates the market
was functioning properly. See Paddock Publ’ns, 103
F.3d at 45 (“Competition-for-the-contract is a form of
competition that antitrust laws protect rather than
proscribe.”); Race Tires Am., 614 F.3d at 83 (“It is well
57a
Appendix A
established that competition among businesses to serve
as an exclusive supplier should actually be encouraged”)-,
NicSand, Inc. v. 3M Co., 507 F.3d 442, 453-54 (6th Cir.
2007) (en banc) (Sutton, J.); Benjamin Klein & Kevin M.
Murphy, Exclusive Dealing Intensifies Competition for
Distribution, 75 Antitrust L. J. 433,437,450 (2008). After
all, Sanofi’s own expert testified before Congress that u[t]
he way you get low prices in the pharmaceutical industry
is by the ability to exclude drugs.” Hearings, supra, at 13
(statement of Dr. Scott Morton) (emphasis added).
Third, in the absence of any coercion, see infra Section
IV.B.4.C, we are left with the firm and singular conclusion
that Sanofi “need only offer a better product or a better
deal” to reverse, and possibly wield, exclusivity. Omega
Envtl., 127 F.3d at 1164; see, e.g., NicSand, 507 F.3d at
447; Paddock Publ’ns, 103 F.3d at 45. When Sanofi entered
the epinephrine auto-injector market, it prepared to take
its place as the market’s premium product: Sanofi priced
Auvi-Q at a premium and refused to seek out exclusivity or
deeply discount its “better mousetrap.” In re EpiPen, 507
F. Supp. 3d at 1307-09 (collecting evidence). This turned
out to be a mistake; PBMs rejected Sanofi’s initial offers
as “inadequate,” “not competitive,” and even “laughable.”
Id. at 1310. Sanofi’s initial strategy failed to accommodate
PBMs’ increasing reliance on UM techniques to push down
drug prices. Id. at 1307-08. But after being excluded or
restricted on four of the seven largest PBMs’ formularies
in 2014, Sanofi changed its contracting strategy and made
deeper offers to reverse exclusivity. Id. at 1321. The shift
in strategy was a resounding success. In 2015, Sanofi not
only maintained its formulary coverage from 2014, but also
58a
Appendix A
reversed exclusivity at ESI and Aetna. Moreover, Sanofi
successfully excluded EpiPen on ESI’s High Performance
formulary and CVS’s Value Based and Advanced Control
formularies.11 By April 2015, Auvi-Q regained 80% access
to the commercial market and Sanofi was investigating
long-term marketing strategies. Id. at 1323-24. The
captain of a sinking ship, we note, rarely continues to
chart his course.
Sanofi challenges our de novo conclusion that it only
had to offer a better price to reverse or wield exclusivity,
but its arguments suffer from a serious evidentiary
deficiency. According to Sanofi, PBMs excluded Auvi-Q
even when Sanofi offered better per-unit prices than
Mylan. But Sanofi’s incomplete and cherry-picked bids do
not support the story it tells. Throughout Sanofi’s briefing
is a mischaracterization or misunderstanding of pricing.
Price, in this case, depends not only on list price, but the
11. Sanofi tries to downplay the significance of its clear success
by suggesting PBMs “might experiment at the margins, excluding
EpiPen from their smallest and most highly managed formularies,”
but “none would dare block EpiPen from a major formulary.”
Appellant’s Opening Br. 39-40. But the summary judgment record
undercuts Sanofi’s assertion. For example, in 2015, ESI initially
decided to reverse exclusion and exclude EpiPen in favor of Auvi-Q
on its national formulary. In re EpiPen, 507 F. Supp. 3d at 1321.
ESI only reversed course after further analysis uncovered it could
decrease the cost per prescription for both EpiPen and Auvi-Q
without excluding EpiPen. Id. And CVS used its exclusion of EpiPen
on its Advanced Control Formulary as “a trial balloon of sorts.” Id. at
1324. After hearing “no noise or complaints” arising from EpiPen’s
exclusion, CVS projected that it could exclude EpiPen in favor of
Auvi-Q on its national formulary. Id.
59a
Appendix A
rebates, price protection, and effective dates of rebates.
Sanofi alleges ESI excluded Auvi-Q in 2014 even after it
offered better prices than Mylan. While we agree with
Sanofi that it offered higher rebates (30% for exclusivity
versus Mylan’s 23%), the record belies Sanofi’s claim that
it offered better prices. ESI concluded Mylan’s offer was
better because it included price protection—something
Sanofi did not offer—and resulted in cheaper per-unit
costs because EpiPen’s list price was lower.
Sanofi makes the same deficient argument about
OptumRx/UnitedHealthcare and Medlmpact. In 2014,
Sanofi offered OptumRx/UnitedHealthcare a 27% rebate
with 9% price protection for exclusive epinephrine autoinjector coverage, while Mylan only offered a 22% rebate
with 8% price protection. It may appear that Sanofi was
rejected despite offering better prices, but this conclusion
is misleading for two reasons. First, Sanofi’s 27% offer
was weeks too late. Second, Mylan’s offer started earlier
(July 1, 2013 versus January 1, 2014) and Mylan’s price
protection was based on an earlier list price. OptumRx/
UnitedHealthcare excluded Auvi-Q because Mylan’s
rebate offer was timely and superior. Medlmpact also
excluded Auvi-Q in 2014 because Mylan offered better
rebates. After discounts, Medlmpact would pay $ 113 per
EpiPen versus $ 145 per Auvi-Q.
The record supports only one conclusion: when
Sanofi beat Mylan’s prices it succeeded. For instance,
Sanofi reversed Auvi-Q’s exclusion on ESI’s national
formulary and successfully excluded EpiPen on ESI’s
High Performance formulary; Sanofi secured exclusive
60a
Appendix A
formulary positioning for Auvi-Q on Aetna’s value
formularies and co-preferred positioning on Aetna’s
premier formularies; and Sanofi obtained Auvi-Q’s co
preferred formulary placement on CVS’s Preferred Drug
List and exclusive formulary positioning on CVS’s Value
Based Formulary and Advanced Control Formulary. Id.
at 1321-22. PBMs were not afraid of excluding popular,
high57 market share products if another product offered
better exclusive pricing. See id. at 1324 (discussing ESI’s
exclusion of the market-leading drugs Advair and Sovaldi).
“[PBMs] testified that they could have excluded EpiPen in
favor of Auvi-Q because they could shift product use from
EpiPen to Auvi-Q.” Id. at 1324. Sanofi fails to bring forth
a triable issue of exclusionary conduct because exclusive
rebate agreements were a normal competitive tool in
the epinephrine auto-injector market, Mylan’s exclusive
rebate agreements were short and easily terminable, and
Mylan did not coerce any PBMs.
Sanofi tries to save its plainly deficient case by
arguing: “Mylan’s clear plan confirms Sanofi’s substantial
foreclosure.” Appellant’s Opening Br. 59. We recognize
that some caselaw suggests intent evidence is relevant
in antitrust analysis. But in these cases, intent is only
relevant to whether the challenged conduct is fairly
characterized as “exclusionary.” E.g., Aspen Skiing Co.
v. Aspen Highlands Skiing Corp., 472 U.S. 585, 602,105
S. Ct. 2847,86 L. Ed. 2d 467 (1985). When the challenged
conduct is so wholly devoid of any inference of exclusionary
effect, intent cannot save the plaintiff’s case. Nor should
it. See 7 Areeda & Hovenkamp, supra, 111506, at 438-39.
Intent evidence is too easily misleading. The miscreant’s
61a
Appendix A
declarations are also “legitimately used by business people
in the heat of competition.” Morgan v. Ponder, 892 F.2d
1355, 1359 (8th Cir. 1989); A.A. Poultry Farms, Inc. v.
Rose Acre Farms, Inc., 881 F.2d 1396, 1401-02 (7th Cir.
1989) (Easterbrook, J.); Barry Wright, 724 F.2d at 232; see
also Herbert Hovenkamp, The Monopolization Offense,
61 Ohio St. L.J. 1035, 1039 (2000) (“[A]ny competitively
energetic firm ‘intends’ to prevail over its actual or
potential rivals.”). So it is with Sanofi’s intent evidence;
phrases like it is important to “hammer Sanofi at launch”
or Mylan’s need to “pre-empt Auvi-Q” are statements
representative of normal business competition. See 7
Areeda & Hovenkamp, supra, 11 1506, at 441. “Were
intent to harm a competitor alone the marker of antitrust
liability, the law would risk retarding consumer welfare by
deterring vigorous competition—and wind up punishing
only the guileless who haven’t figured out not to write
such things down.” Novell, 731 F.3d at 1078. Intent does
not save Sanofi’s case.
4.
Sanofi makes several objections to our de novo
conclusion that no triable issue of exclusionary conduct
exists in this case. First, Sanofi alleges Mylan foreclosed
it from more than half the market because of spillover
foreclosure. Second, Sanofi argues we should not weigh its
use of exclusive contracts against it. Third, Sanofi contends
Mylan’s offers were coercive. Finally, Sanofi maintains its
desperate attempts to regain epinephrine auto-injector
market access by granting incremental rebates on a
different drug (Lantus) exemplifies foreclosure. None of
these arguments undermine our conclusion.
62a
Appendix A
a.
Sanofi begins by challenging our de novo conclusion
that, at most, Auvi-Q was foreclosed from 31% of
the market. According to Sanofi, EpiPen’s “spillover
foreclosure” blocked Auvi-Q from more than half the
market. Spillover foreclosure is the idea that doctors act
on imperfect information and fail to prescribe Auvi-Q
even when it is better for the patient and covered by the
patient’s insurance. Basically, doctors want to prescribe
covered drugs to their patients, but patients are covered
by many different health plans and each health plan covers
different products, so doctors—instead of researching
each patient’s coverage before prescribing a product—
tend to default to the product that they know is most
widely covered in the region. The aggregate effect of
this behavior is, “if one or more large plans in a region
has excluded Auvi-Q, the prescribers tend to prescribe
EpiPen to patients in the region, even if the health plans
for those patients provide equal or even preferred access.
to Auvi-Q or other [epinephrine auto-injector] devices.”
In re EpiPen, 507 F. Supp. 3d at 1320. We reject Sanofi’s
spillover foreclosure theory for both factual and legal
reasons.
Spillover foreclosure is predicated on a breakdown of
rational behavior. Rational choice theory, a foundational
principle of modern economics, presumes a decisionmaker
“maximize[s] their utility from a stable set of preferences
and accumulate [s] an optimal amount of information and
other inputs in a variety of markets.” Gary S. Becker,
The Economic Approach to Human Behavior 14 (1976).
63a
Appendix A
In a perfect world, we would expect doctors to assemble
an optimal amount of information about every drug that
could treat the patient’s condition before deciding what
drug to prescribe. This information would include the
upsides and downsides of each product, and the costs of
each product—including whether any is covered by the
patient’s insurance. In our perfect world, we would expect
the doctor to prescribe the drug that produces the highest
utility (a function of the expected benefits and risks of the
drug) per patient dollar (a function of formulary coverage).
For example, if the ideal Auvi-Q patient (someone who
needs a pocketable epinephrine auto-injector) walked
into the doctor’s office, we would expect the doctor (after
assembling optimal information) to prescribe Auvi-Q if
the co-payment or out-of-pocket cost to the patient was
the same or substantially similar as EpiPen. After all,
the doctor knows this patient will receive a higher utility
per dollar from Auvi-Q than EpiPen. In economic terms,
we would call this doctor “rational.” With the rational
doctor, the highest foreclosure percentage Sanofi could
claim is 31%—the percentage of the U.S. population for
which Auvi-Q was either not covered or restricted. In re
EpiPen, 507 F. Supp. 3d at 1353.
According to Sanofi, this is not what happens in the
real world. Doctors cannot possibly retain an encyclopedic
knowledge of prescription drug coverages for thousands
of health plans, see Christine Jolls, Cass R. Sunstein &
Richard Thaler, A Behavioral Approach to Law and
Economics, 50 Stan. L. Rev. 1471,1477 (1998), and doctors’
busy schedules may prevent them from investigating every
patient’s individual drug coverage before prescribing a
64a
Appendix A
product, see Staffan Burenstam Linder, The Harried
Leisure Class 60-76 (1970). So doctors default to the drug
they know is most widely covered by health plans. This,
of course, is a stark departure from the rational doctor.
This imperfect doctor could be said to exhibit “irrational”
behavior.12 Due to the doctor’s irrationality, we can expect
prescriptions to be written for the inferior, widely-covered
drug even when the patient’s insurance covers a superior,
less-widely covered drug. This irrational behavior is what
Sanofi calls “spillover foreclosure.” Combining spillover
foreclosure and contractual foreclosure, Sanofi estimates
Mylan foreclosed Auvi-Q from over half the market.
We refuse to recognize Sanofi’s theory of spillover
foreclosure for three reasons. First, Sanofi’s theory
of spillover foreclosure depends on crediting market
participants’ irrationality as a means of measuring market
foreclosure. This squarely contradicts the Supreme
Court’s guidance in Tampa Electric where foreclosure
was measured only by contractual foreclosure—that is,
the percentage of the market covered by the contested
contracts. See 365 U.S. at 330-33. We are unaware of, and
Sanofi fails to cite, any case where market foreclosure
was measured, not by contractual foreclosure, but by the
irrational behavior of market participants.
Second, any spillover foreclosure is subject to
neutralization by vigorous competition. The clear problem
12. The term “rational” and “irrational” are economic terms.
Doctors that act “irrationally” may nevertheless act, in the eyes of
society, appropriately or reasonably. See, e.g., Richard A. Posner,
Economic Analysis of Law § 1.1 (9th ed. 2014).
65a
Appendix A
with Sanofi’s theory is spillover foreclosure is not actual
foreclosure—it does not prevent customers from accessing
Auvi-Q. Spillover foreclosure is a nebulous byproduct
of irrational doctors. If a patient knew their insurance
covered both EpiPen and Auvi-Q, the patient could
simply ask the doctor to prescribe Auvi-Q. This leads us
into another question raised by Sanofi’s briefing: should
we consider spillover foreclosure because Mylan ran an
advertising campaign to amplify spillover foreclosure?
No. Quite simply, any harm from Mylan’s advertising
campaign or spillover foreclosure was “readily susceptible
to neutralization or other offset by rivals.” Lenox, 762 F.3d
at 1127 (citing Am. Profl Testing Serv., Inc. v. Harcourt
Brace Jovanovich Legal & Prof l Publ’ns, Inc., 108 F.3d
1147,1152 (9th Cir. 1997)). Mylan’s advertising campaign
intended to push the narrative EpiPen was the “preferred
brand” for epinephrine auto-injectors for “95 million
patients” because “Auvi-Q will be a difficult product
for patients to obtain.”13 Sanofi could easily neutralize
the effects from these advertisements and otherwise
reduce or eliminate spillover foreclosure by advertising
to physicians or patients. The record confirms this.
Sanofi directly advertised to doctors and the message
recall surveys indicated positive results. One survey, for
example, concluded that 28% of health care providers
“recalled messaging that Auvi-Q was preferred over
EpiPen.” In re EpiPen, 507 F. Supp. 3d at 1330 (emphasis
13. The district court reviewed this evidence under the
deceptive speech doctrine. In re EpiPen, 507 F. Supp. 3d at 1360-61.
That analysis is clearly correct. Our present analysis is only meant to
address Sanofi’s use of the advertisements to argue for recognition
of spillover foreclosure.
66a
Appendix A
added); see also id. at 1328-30 (collecting evidence). So long
as Anvi-Q is front of mind for patients or preservers, any
spillover foreclosure will be minimal.
Finally, any recognition of spillover foreclosure
intolerably raises the risk of false condemnation under the
antitrust laws and disincentivizes procompetitive behavior.
“[M]ost every rule proves over- or under-inclusive in some
way. We often accept a degree of over- and under-inclusion
as the price that must be paid for the benefits associated
with a clear rule of law.” Novell, 731 F.3d at 1073. Our
rule, prohibiting the use of spillover foreclosure to bolster
market foreclosure, is under-inclusive in the sense it might
err “by permitting a deleterious practice,” rather than err
by “condemning a beneficial practice.” Easterbrook, supra,
at 2. But our rule is correct because limiting the risk of
false condemnation is a central tenet of modern antitrust
jurisprudence. See, e.g., Am. Express, 138 S. Ct. at 2287
(quoting Brooke Grp., 509 U.S. at 226); Matsushita, 475
U.S. at 594; Leegin, 551 U.S. at 895; Easterbrook, supra,
at 15-17. “Rules that seek to embody every economic
complexity and qualification may well, through the
vagaries of administration, prove counter-productive,
undercutting the very economic ends they seek to serve.”
Barry Wright, 724 F.2d at 234. Any alternative rule, we
note, might discourage the use of exclusive agreements
by a dominant firm in a market where competition-for-the
contract is a legitimate competitive tool to bring about low
prices for the consumers. See Paddock Publ’ns, 103 F.3d at
45. “[W]e must be concerned lest a rule or precedent that
authorizes a search for a particular type of undesirable
pricing behavior end up by discouraging legitimate price
competition.” Barry Wright, 724 F.2d at 234.
67a
Appendix A
We also agree with the district court and reject
Sanofi’s spillover foreclosure for factual reasons. To
begin with, Sanofi fails to adequately quantify spillover
foreclosure into any foreclosure percentage. See In re
EpiPen, 507 F. Supp. 3d at 1354. Sanofi simply says,
when combined with contractual foreclosure, spillover
foreclosed Auvi-Q from “more than half the market.”
Appellant’s Opening Br. 57. But Sanofi’s “more than half
the market” claim lacks any factual support. Sanofi’s claim
comes from Dr. Scott Morton’s deposition where she was
hazarding a guess at the percentage of formularies she
thought Auvi-Q was foreclosed from. Later, Dr. Scott
Morton seemingly disavowed the “more than half the
market claim” by reiterating that there was “no need
to devise a new foreclosure metric given that Mylan’s
ordinary course documents have already done this” and
citing documents showing the highest foreclosure was
31%. Br. of Appellees 64 n.24. Importantly, Dr. Scott
Morton’s theory of spillover foreclosure is different
than Sanofi’s theory. Sanofi uses spillover foreclosure to
supplement any contractual foreclosure, while Dr. Scott
Morton uses spillover foreclosure to bolster her claims
about entrenched share. In re EpiPen, 507 F. Supp. 3d
at 1354-55 (“With her opinion, Dr. Scott Morton simply
asserts that spillover effects increased Mylan’s entrenched
market share—but not that any market foreclosure
occurred.”). See generally infra Section IV.C (discussing
entrenched share). Because these are different concepts
and Dr. Scott Morton does not appear to endorse any
market foreclosure greater than 31%, Sanofi fails to
marshal sufficient evidence supporting a “genuine” issue
of foreclosure higher than 31%. Anderson, All U.S. at 248;
In re EpiPen, 507 F. Supp. 3d at 1354.
68a
Appendix A
b.
Sanofi contends we should not weigh its use of
exclusive rebate offers against it when deciding whether
Mylan engaged in any exclusionary conduct. According
to Sanofi, the fact that it capitulated to offering exclusive
rebates after Mylan’s scheme shifted the PBMs’ focus
from equal access to exclusive coverage for epinephrine
auto-injectors “cut[s] decisively in favor of liability.”
Appellant’s Opening Br. 72. We agree with Sanofi that the
fact it had itself signed an exclusive agreement would not
preclude it from suing on the antitrust violation, Perington
Wholesale, 631 F.2d at 1375, but we completely disagree
with Sanofi’s understanding of the relevance of its use of
exclusive dealing contracts in our analysis.
The use of exclusive contracts by a defendant’s rivals
is relevant for two reasons. First, such use illuminates
the “particular structure and circumstance of the
industry at issue,” Trinko, 540 U.S. at 411, and reveals
whether competition was effectively waged for the
contract. See NicSand, 507 F.3d at 454 (“If [PBMs] have
made exclusivity a barrier to entry, one cannot bring an
antitrust claim against a [manufacturer] for acquiescing
to that requirement.”); Paddock Publ’ns, 103 F.3d at 45;
Race Tires Am., 614 F.3d at 78-79. There are industries
where competition-for-the-contract is the dominant form of
competition between rivals—and one that must, therefore,
be protected. Paddock Publ’ns, 103 F.3d at 45 (“Every
year or two, General Motors, Ford, and Chrysler invite
tire manufacturers to bid for exclusive rights to have their
tires used in the manufacturers’ cars.”); Menasha Corp. v.
69a
Appendix A
News Am. Mktg. In-Store, Inc., 354 F.3d 661,663 (7th Cir.
2004) (Easterbrook, J.); Race Tires Am., 614 F.3d at 76;
see NicSand, 507 F.3d at 447-48 (examining an industry
where competition/or the shelf, as opposed to on the shelf,
was the dominant form of competition). The epinephrine
auto-injector industry is—at least for some PBMs—one
such industry. Sanofi’s use of exclusive rebate agreements
confirms what is otherwise abundantly clear in the record:
PBMs used exclusivity to encourage price competition.
See, e.g., Paddock Publ’ns, 103 F.3d at 45 (observing
competition-for-the-contract can drive down the price
of a product “to the ultimate benefit of consumers”);
Hearings, supra, at 13; Klein & Murphy, supra, at 450. So,
Mylan’s use of exclusive rebate agreements in an industry
where competition-for-the-contract is a legitimate form
of competition does not raise an inference of exclusionary
conduct. See Concord Boat Corp. v. Brunswick Corp., 207
F.3d 1039,1062 (8th Cir. 2000).
Second, and somewhat related, the competitors’ use
of exclusive contracts might suggest that customers are
instigating exclusivity—a circumstance that sometimes
eases any anticompetitive concern arising from a
monopolist’s use of exclusive dealing contracts.14 We call
this phenomenon customer-instigated exclusive dealing.
Richard M. Steuer, Customer-Instigated Exclusive
Dealing, 68 Antitrust L. J. 239 (2000). Customer-instigated
exclusive dealing occurs when a customer announces to
14. This does not mean that exclusive dealing arrangements
instigated by the monopolist cannot be procompetitive or that
exclusive dealing arrangements instigated by the customer cannot
be anticompetitive.
70a
Appendix A
“would-be suppliers that it will commit to buy from only
one of them and that if they hope to be selected they
had better offer their products on the most attractive
terms—lower prices, assured supply, guaranteed pricing,
or other special treatment.” Id. at 239; see NicSand, 507
F.3d at 447-48.
When the party instigating exclusive dealing is the
end user, we are not particularly concerned about the
anticompetitive effects of the arrangement.15 Steuer,
supra, at 250. End users are typically the consumers of
the goods, but an end user is any buyer who cannot directly
pass along the increased cost of a good to a downstream
market participant. Health plans (through PBMs) are
end users because they must ultimately pay the balance
for any covered drug. End users are “less likely to be
motivated by a desire to weaken interbrand competition by
diminishing the strength of alternate suppliers and their
brands.” Id. Because end users must eventually reenter
the market once the exclusive deal expires, they have
every incentive to ensure alternative suppliers remain in
the market. The last thing an end user wants “is to reduce
the number of competing suppliers available in the future.”
Id. Buyers are unlikely to “shoot themselves in the feet”
by signing exclusive contracts that entrench the seller “as
a monopolist that then can apply the squeeze.” Menasha,
354 F.3d at 663; see also Bork, supra, at 304-05; Posner,
supra, at 230.
15. We have no occasion to decide whether this logic applies
equally to customer-instigated exclusive dealing by non-end users
(like distributors).
71a
Appendix A
These observations partially underlie the reasoning of
Barry Wright, 724 F.2d at 237-38. In Barry Wright, the
defendant—a producer of mechanical snubbers—agreed
to provide Grinnell—a major snubber user—with nearly
all its requirements at a low price. One of the defendant’s
competitors sued alleging exclusionary practices in
violation of Sherman Act § 2. In deciding the requirements
contract was not exclusionary, then-Judge Breyer noted
that—even though there was foreclosure of 50% of the
relevant market—the likely anticompetitive effects of the
contract were overstated. Id. at 237. Judge Breyer wrote:
Grinnell is not a small firm that defendant
could likely bully into accepting a contract
that might foreclose new competition. To
the contrary, it was Grinnell, not defendant,
that sought the extensions for 1978 and 1979.
Moreover, Grinnell had every interest in
promoting new competition. Grinnell could
have obtained snubbers without placing such
large orders had it given up the “special” extra
5 to 10 percent price discount, a matter of a
few hundred thousand dollars per year. Had
Grinnell believed that the long-term nature of
the contracts significantly interfered with new
entry, or inhibited the development of a new
source of supply, it is difficult to understand
why it would have sought the agreements.
Id. at 237-38 (cleaned up). In other words, because Grinnell
was an end user, it was highly unlikely the requirements
contract was anticompetitive. Grinnell would not be
72a
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enticed by present exclusivity discounts if the discounts
expose it to exploitation by a dominant supplier in the
future.
The epinephrine auto-injector market exemplifies an
industry fueled by customer-instigated exclusive dealing.
Even though PBMs did not historically manage the
epinephrine auto-injector class, the introduction of Auvi-Q
was seen by many PBMs as an opportunity to instigate
price competition through exclusive rebate agreements.
In re EpiPen, 507 F. Supp. 3d at 1308,1311-12 (collecting
evidence); see, e.g., id. at 1316 (explaining Medlmpact
explicitly solicited “1 of 1 offers” from Sanofi and told
Sanofi that it wished to cover only one epinephrine auto
injector product). Contrary to Sanofi’s assertion, PBMs—
not Mylan—instigated the use of exclusive deals to drive
down prices, and Sanofi’s refusal to press for exclusivity
until 2014 does not suggest Mylan acted anticompetitively.
Rather, it suggests Sanofi acted imprudently. Thus, the
district court correctly concluded that exclusive contracts
are a normal competitive tool within the epinephrine auto
injector industry and weighed that in favor of granting
summary judgment. Id. at 1352 (citing Concord Boat, 207
F.3d at 1062).
c.
Sanofi also attacks our de novo conclusion that Mylan’s
exclusive rebate agreements were not exclusionary by
arguing Mylan coerced PBMs into exclusivity. Coercion—
although unnecessary to establish a successful exclusive
dealing case—will often be present in successful exclusive
73a
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dealing cases because the presence of coercion in such
cases casts doubt on the assumption that the exclusive
deals are naturally procompetitive. See Race Tires Am,.,
614 F.3d at 77. Exclusive deals tend to create efficiencies
far more often than they inflict consumer harm, see, e.g.,
E. Food Servs., 357 F.3d at 8; Barry Wright, 724 F.2d at
237; Bork, supra, at 304-05; Posner, supra, at 230, because
a buyer will generally only agree to exclusivity if the seller
offers something to the buyer that is worth more than
the cost of giving up alternative sources of supply. See
Bork, supra, at 304-05 (“[Efficiencies are the reality, and
the fear of foreclosure is chimerical”). We can therefore
generally presume exclusive deals are procompetitive. But
this assumption is thrown out the window when record
evidence suggests coercion by the monopolist. Dentsply
is a good example.
In Dentsply, the United States brought an antitrust
suit against Dentsply—the dominant artificial tooth
manufacturer—for implementing a clause in its distribution
contracts which prohibited distributors from adding
further tooth lines to their product offerings. 399 F.3d
at 184-85. The United States presented testimony that
distributors were dissatisfied with the exclusive-dealing
clause, but “none of them have given up the popular
Dentsply teeth to take on a competitive line.” Id. at 185.
The distributor’s testimony suggested Dentsply was
willfully maintaining its monopoly power by imposing an
“all-or-nothing” choice on distributors. Partly because
of this testimony, the Third Circuit reversed the district
court’s judgment in favor of Dentsply and ordered the
district court to grant the Government’s injunctive relief.
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The presence of coercion also explains the Third
Circuit’s decision in ZF Meritor, 696 F.3d 254, and the
Eleventh Circuit’s decision in McWane, 783 F.3d 814.
In ZF Meritor, the Third Circuit affirmed the jury’s
verdict holding the monopolist’s use of exclusive dealing
agreements posed a threat to competition where buyer
testimony suggested the terms of the exclusive agreements
were unfavorable, but they agreed to such terms because
they would otherwise be unable to satisfy consumer
demand. 696 F.3d at 285. And in McWane, the Eleventh
Circuit affirmed the Federal Trade Commission’s ruling
that a monopolist’s exclusive dealing agreements were
anticompetitive where they were unilaterally imposed
by fiat upon distributors with no corresponding benefit.
783 F.3d at 834.
Sanofi fails to marshal sufficient evidence suggesting
that Mylan engaged in any coercion. Sanofi, instead
of presenting evidence like Dentsply, ZF Meritor, or
McWane, develops its own novel theory of “coercion in the
relevant sense.” Appellant’s Opening Br. 68-71. According
to Sanofi, PBMs who refused Mylan’s exclusive rebate
agreements “would face the penalty of EpiPen’s everrising list price multiplied by Mylan’s dominant share,
without the safeguard of price protection, and barely offset
by a small EpiPen access rebate.” Appellant’s Opening Br.
68. But if that was the “practical reality” of the market,
why is there no PBM testimony to that effect? We cannot
infer coercion from abstract theories.16 Unlike Dentsply,
16. Sanofi cites some stray documents where PBMs, for
example, “reported being held ‘hostage’ by Mylan’s exclusionary
offers.” Appellant’s Opening Br. 69. But these isolated, informal,
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ZF Meritor, or McWane, no PBM testified that they felt
compelled to enter into exclusive agreements with Mylan
despite unfavorable terms. Instead, the clear evidence
presented by the record discloses PBMs entered exclusive
deals with both Mylan and Sanofi whenever they offered
the most advantageous terms. See, e.g., In re EpiPen,
507 F. Supp. 3d at 1313 (Mylan-ESI 2014 exclusive deal);
id. at 1314-15 (Mylan- OptumRx/UnitedHealthcare
2014 exclusive deal); id. at 1317 (Mylan-Medlmpact 2014
exclusive deal); id. at 1318 (Mylan-Aetna 2014 exclusive
deal); id. at 1321-22 (Sanofi- ESI 2015 exclusive deal); id.
at 1322 (Sanofi-CVS 2015 exclusive deal).
We are not alone in our conclusion. In Eisai, Inc.
v. Sanofi Aventis U.S., LLC, the plaintiff brought a
similar, if not identical, claim against Sanofi (yes, the
same Sanofi)—the marketer of Lovenox—for allegedly
monopolizing the anticoagulant drug market. 821 F.3d
394 (3d Cir. 2016); see infra Section IV.C (analyzing
Sanofi’s theory of anticompetitive leveraging of entrenched
share). Sanofi created a loyalty-discount program which
provided hospitals with larger discounts as their volume of
Lovenox purchases increased—not dissimilar to Mylan’s
exclusive rebate offers. The plaintiff argued Sanofi’s
loyalty-discount program foreclosed it from competing
because the “threat of not obtaining a higher discount
(ranging up to 30% off) ‘handcuffed hospitals’”—who
had to buy at least some Lovenox due to its “unique
out-of-court remarks in a record of 13,680 pages are insufficient for a
jury to find Mylan coerced PBMs. “The mere existence of a scintilla
of evidence in support of the plaintiffs position” will not preclude
summary judgment. Anderson, 477 U.S. at 252.
76a
Appendix A
cardiology indication”—to Sanofi’s loyalty-discount
program. Eisai, 821 F.3d at 401, 407. The Third Circuit
rejected the plaintiff’s theory of coercion. Hospitals who
failed to purchase greater quantities of Lovenox did not
“risk penalties or supply shortages,” but only the loss of a
larger discount. Id. at 406. “[T]he threat of a lost discount
is a far cry from the anticompetitive conduct at issue in ZF
Meritor or Dentsply.” Id. at 407. Applying that same logic
here, Sanofi fails to demonstrate coercion because the loss
of an additional discount was the only consequence PBMs
faced for rejecting Mylan’s exclusive rebate agreements.
Since the parties argued this case, the Fifth Circuit
released Pulse Network, L.L.C. v. Visa, Inc., 30 F.4th 480
(5th Cir. 2022). According to Sanofi, Pulse confirms that
there is a triable issue Mylan deployed coercive pricing
to monopolize the epinephrine auto-injector market. To
explain why we disagree, we must provide a detailed
background of the Pulse decision. Pulse sued Visa for
allegedly monopolizing or attempting to monopolize
the debit network market—which facilitates financial
transactions between merchants and customers using
debit cards. See id. at 484-86; cf. Am. Express, 138 S.
Ct. at 2280 (overviewing the analogous credit network
market). In 2010, Congress passed a law which (1) required
debit card issuers to enable at least two unaffiliated debit
networks on all cards and (2) bestowed upon merchants
total autonomy to choose which debit network to route
transactions over. Pulse, 30 F.4th at 486. Because
merchants must pay a per-transaction fee to utilize a debit
network, merchants generally route transactions over the
network with the lowest fees per-transaction. Putting this
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Appendix A
together, if a customer uses a Visa-branded debit card, the
merchant can route the transaction over Visa’s network
or another unaffiliated but activated debit network—like
Pulse’s network.
Visa allegedly monopolized the debit network market
by implementing a new two-charge policy. Instead of
charging merchants only a per-transaction fee, Visa began
charging merchants a fixed monthly fee to use its ubiquitous
debit network. Simultaneously, Visa substantially reduced
its per-transaction fee. According to Pulse, Visa used its
“market dominance to foist on merchants a high fixed fee
they wouldn’t ordinarily accept,” and used the “revenues
from that unavoidable upfront fee to artificially lower is
per-transaction fees,” effectively foreclosing rivals. Id.
at 491. The narrow issue before the Fifth Circuit was
whether Visa’s two-charge policy inflicted an antitrust
injury upon Pulse. See generally Brunswick Corp. v.
Pueblo Bowl-O-Mat, Inc., 429 U.S. 477,489,97 S. Ct. 690,
50 L. Ed. 2d 701 (1977) (“Plaintiffs must prove antitrust
injury, which is to say injury of the type the antitrust laws
were intended to prevent and that flows from that which
makes defendants’ acts unlawful.”). The Fifth Circuit
held Pulse satisfied the antitrust injury requirement
because Visa’s two-charge policy foreclosed rivals and
forced merchants to pay a higher total cost (fixed plus
per-transaction fees) than before. Pulse, 30 F.4th at 491.
Sanofi’s efforts to bolster its case by relying on Pulse
are unconvincing. To begin with, our dispositive analysis is
concerned with the merits of Sanofi’s claim. Pulse, on the
other hand, is an antitrust standing case where the court
78a
Appendix A
assumed an antitrust violation. See id. To the extent we
can glean anything about the merits of Pulse’s claim from
the Fifth Circuit’s antitrust standing analysis, it provides
limited utility in this case. Visa’s allegedly anticompetitive
scheme relied upon a two- charge structure absent from
the epinephrine auto-injector market. Mylan did not
impose on PBMs an unavoidable upfront fee to subsidize
lower per-unit prices on the backend. Sanofi’s complaints
about Mylan’s exclusive rebate offers are equivalent to
Pulse “complaining only that Visa had slashed its pertransaction prices,” which is a complaint about increased,
not decreased, competition. Id.
Sanofi has another theory of coercion but fails to
substantiate it with any evidence. Sanofi alleges exclusivity
was partially triggered by Mylan’s price escalation.
Appellant’s Opening Br. 70. According to Sanofi, PBMs
aggressively manage a therapeutic class where there
is high list price escalation. Mylan supposedly took
advantage of this by raising EpiPen’s list price to trigger
tighter formulary controls and then bid for exclusivity. By
doing so, according to Sanofi, Mylan was able to coerce
PBMs, who would have otherwise preferred co-equal
access, into exclusive rebate agreements.17 But this theory
17. We have reasons to be skeptical of the viability of this
strategy as a method of coercion. Raising a drug’s list price can
expose the manufacturer to congressional scrutiny and serious
legal repercussions. See Toni Clarke, U.S. Lawmakers Blast Mylan
CEO Over ‘Sickening’EpiPen Price Hikes, Reuters (Sept. 21,2016),
https://www.reuters.com/article/us-mylan-nl-epipen-congressidUSKCNHR20G.
For example, Martin Shkreli was recently banned for life from
the pharmaceutical drug industry because of his role in hiking the
79a
Appendix A
is doomed because Sanofi fails to marshal any evidence
to support it. Contrary to Sanofi’s assertions, exclusivity
was not forced upon PBMs; exclusivity was wielded by
PBMs to push for more competitive pricing. See, e.g., In
re EpiPen, 507 F. Supp. 3d at 1311-12. We hold the district
court properly considered the absence of coercion as a
factor in the exclusive dealing analysis and we join the
district court in concluding there is no evidence in the
record from which to infer coercion.
d.
Sanofi also challenges our de novo conclusion that
because Sanofi reversed exclusivity and regained 80%
market access it was not substantially foreclosed.
According to Sanofi, just because it “was ‘able to enter and
grow despite’ Mylan’s scheme does not end the analysis.”
Appellant’s Opening Br. 76 (quoting McWane, 783 F.3d
at 840). We should, according to Sanofi, infer substantial
foreclosure because Sanofi was only able to overcome
exclusion by paying a $36 million access tax on Lantus.
Lantus is Sanofi’s market-leading insulin drug, which in
2013-2014 had somewhere around $4 billion in sales in the
United States—a formidable volume unmatched by any
Mylan product.
price of the drug Daraprim. Dan Mangan, Pharma Bro Martin
Shkreli Banned for Life from Drug Industry in Monopoly Case,
Ordered to Pay $64,.6 Million, CNBC (Jan. 14, 2022), https://www.
cnbc.com/2022/01/14/pharma-bro-martin-shkreli-banned-for-lifefrom-drug-industry-ordered-to-pay-64point6-million.html. And if
Mylan increased EpiPen’s price to trigger tighter formulary controls,
PBMs could punish Mylan by eating higher prices for a competitor
or they could retaliate against Mylan in other therapeutic classes.
80a
Appendix A
We assume Sanofi’s proposition is correct that a
monopolist can be liable under § 2 even when its rival was
“able to enter and grow” McWane, 783 F.3d at 840. But
we cannot infer substantial foreclosure simply because
Sanofi had to offer lower prices through a portfolio bid to
compete with Mylan. In substance, Sanofi’s offer to provide
a 2% incremental Lantus rebate for the reversal of AuviQ’s exclusion is just an indirect price cut on Auvi-Q. And
we cannot and should not infer any exclusionary conduct
on the part of Mylan simply because Sanofi had to slash
its prices to compete with Mylan. Under our consumer
welfare standard, this argument is a clear non-starter.
The Lantus payments may prove “harm to one or more
competitors,” but they do nothing to satisfy Sanofi’s
burden to prove “harm to the competitive process and
thereby harm [to] consumers.” Microsoft, 253 F.3d at 58;
see also, e.g., Brooke Grp., 509 U.S. at 224.
The only acceptable inference to draw in this case is the
Lantus payments exemplified vigorous price competition—
something we strenuously protect. See, e.gMatsushita, 475
U.S. at 594 (“But cutting prices in order to increase business
often is the very essence of competition. Thus, mistaken
inferences in cases such as this one are especially costly,
because they chill the very conduct the antitrust laws are
designed to protect.”); Atl. Richfield, 495 U.S. at 340 (“Low
prices benefit consumers regardless of how those prices are
set, and so long as they are above predatory levels, they do.
not threaten competition.”); Brooke Grp., 509 U.S. at 222-27.
We agree with the district court that “Sanofi’s increased
rebate offers for Lantus certainly didn’t harm competition.
Just the opposite, they promoted it.” In re EpiPen, 507 F.
Supp. 3d at 1351 n.22.
81a
Appendix A
C.
Sanofi’s next argument is Mylan leveraged its
entrenched share to monopolize the epinephrine auto
injector market. Entrenched share (a.k.a. non-contestable
demand) is “the portion of the market that—even in the
face of entry of an alternative— will not switch away from
the incumbent’s product, at least in the shorter term.” Id.
at 1355-56 (quoting Dr. Scott Morton’s expert report).
Non-entrenched share (a.k.a. contestable demand) is, by
reason of deduction, that portion of the market that will
switch away from an incumbent’s product in the short
term. According to Dr. Scott Morton, EpiPen, as the
incumbent epinephrine auto-injector, had a “committed
customer base that would not easily switch away from the
EpiPen.” She explains, “even when faced with competition
from an innovative product, and even were there not
significant barriers to entry, Mylan would still be able to
keep a significant portion of the market, at least in the
shorter term.”18 Sanofi suggests EpiPen’s entrenched
demand may have been as high as 50-70% of the market.
18. EpiPen’s entrenched share arises either because (a)
consumers preferred EpiPen to Auvi-Q, or (b) consumers exhibited
something called status quo bias—that is, even though they might
have preferred Auvi-Q in the abstract, they viewed any switch
from a familiar-but-inferior product to an unfamiliar-but-superior
product as an unacceptable loss. See William Samuelson & Richard
Zeckhauser, Status Quo Bias in Decision Making, 1 J. Risk &
Uncertainty 7 (1988); see also Daniel Kahneman, Jack L. Knetsch
& Richard H. Thaler, Anomalies: The Endowment Effect, Loss
Aversion, and Status Quo Bias, 5 J. Econ. Persp. 193, 197-99
(1991) (“[Ijndividuals have a strong tendency to remain at the
status quo, because the disadvantages of leaving it loom larger
82a
Appendix A
To quickly summarize its argument, Sanofi contends
that a monopolist—with an entrenched share—commits
monopolization when it offers loyalty discounts to compete
for the market’s non-entrenched share.19 Loyalty discounts
(a.k.a. all-unit or cliff discounts) “are a particular form
of non-linear pricing in which the unit price of a good
declines when the buyer’s purchases meet a buyer-specific
minimum threshold requirement.” Bruce H. Kobayashi,
The Economics of Loyalty Discounts and Antitrust
Law in the United States, 1 Competition Pol’y Int’l 115,
116 (2005). Loyalty discounts are extremely common
and take on a variety of forms: an airline’s frequent
flyer program and a deli’s buy-ten-sandwiches-get-onefree punch card are but two common examples. Mylan’s
rebates are properly characterized as a specific type of
loyalty discount called a volume-based loyalty discount,
which grants the buyer a discount on all units if the buyer
reaches a certain purchase threshold—e.g., an offer for
25% off if you buy three or more items. Mylan, of course,
never conditioned EpiPen’s rebates on a specific quantity
of EpiPens sold. But by conditioning EpiPen’s rebates on
certain formulary positioning, Mylan in effect conditioned
than advantages.”). See generally Daniel Kahneman & Amos
Tversky, Prospect Theory: An Analysis of Decision Under Risk,
47 Econometrica 263 (1979). This latter explanation is a specific
theory of behavioral economics. We neither reject nor endorse the
application of behavioral economics to antitrust analysis.
19. Although Sanofi focuses on Mylan’s exclusive rebate offers,
its theory cannot be limited to this situation. Following Sanofi’s logic,
its theory would apply any time an entrenched monopolist offers
loyalty discounts conditioned on sales exceeding the entrenched
portion of the market.
83a
Appendix A
the rebates on the rough volume of sales associated with
the given formulary placement.
Litigants and scholars have only recently begun
to raise antitrust concerns about volume-based loyalty
discounts. See, e.g., Concord Boat, 207 F.3d 1039; Eisai,
821 F.3d 394; Kobayashi, supra, at 118. Sanofi alleges
the entrenched monopolist’s use of loyalty discounts—
conditioned on sales exceeding entrenched demand—is
anticompetitive because the loyalty discounts effectively
foreclose competition for the non-entrenched demand. See,
e.g., Appellant’s Opening Br. 61 (“So, as a matter of basic
‘math,’ a price concession by Sanofi would not go nearly
as far as the same concession by Mylan.”). To reach a
jury on this issue, Sanofi must show that Mylan’s alleged
leveraging of entrenched demand raises a factual issue
that is “material.”20 Fed. R. Civ. R 56(a); Anderson, All
U.S. at 247-48.
We look to the substantive law to decide whether an
issue of fact is material for purposes of summary judgment.
Id. at 248. “Only disputes over facts that might affect the
outcome of the suit under the governing law will preclude
20. We can affirm the grant of summary judgment “on any
ground supported by the record, so long as the appellant has had a
fair opportunity to address that ground.” Lincoln v. BNSF Ry. Co.,
900 F.3d 1166,1180 (10th Cir. 2018) (quoting Alpine Bank v. Hubbell,
555 F.3d 1097,1108 (10th Cir. 2009)). At oral argument, Sanofi was
asked to clarify what substantive legal standard ought to apply to
Mylan’s alleged leveraging of entrenched share. Because Sanofi failed
to do so, we can affirm the grant of summary judgment on the basis
of “materiality.” See Fed. R. Civ. P. 56(a).
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Appendix A
the entry of summary judgment.” Id. Sanofi describes a
phenomenon where an entrenched firm might be able to
offer hard-to-match discounts to the non-entrenched share
by offering loyalty discounts conditioned on sales exceeding
the entrenched demand.21 But Sanofi does not provide us
21. We need not determine whether Sanofi’s theory actually
persists in practice. For the purposes of this case, it is sufficient to
examine Sanofi’s theory in the abstract. To generalize Sanofi’s theory,
assume a distributor needs to buy 10 widgets. Two manufacturers,
Firm A and Firm B, sell slightly differentiated widgets at the same
price. For 70% of the distributor’s customers, they require Firm
A’s widgets (entrenched demand). The other 30% of customers are
indifferent between Firm A’s or Firm B’s widgets (non-entrenched
demand). If Firm A offered the distributor a 10% rebate conditioned
on the distributor buying all ten units from it, Firm B would need
to offer a 33.3% rebate on each widget to make the distributor
indifferent between (a) buying exclusively Firm A’s widgets or (b)
buying seven widgets from Firm A, and three from Firm B.
The entrenched monopolist’s use of loyalty discounts might
make it harder for a rival to compete for the non-entrenched
portion of the market, but we cannot immediately discern any
reduction in consumer welfare from this situation because the
loyalty discounts lower aggregate prices. See, e.g., Klein &
Murphy, supra, at 450 (explaining that ex ante competition for
exclusive or preferred formulary placement “will substantially
lower the pharmaceutical manufacturers’ prices”); Hearings,
supra, at 13 (“The way you get low prices in the pharmaceutical
industry is by the ability to exclude drugs.” (statement of Dr. Scott
Morton)); Bork, supra, at 137 (“All business activity excludes....
Antitrust, therefore, must be able to distinguish [proper and
beneficial] efficiency exclusion from improper exclusion.”). “By
adopting exclusivity, a [PBM] can be thought of as acting as the
bargaining agent for all its loyal consumers, so they are made
better off as a group. If, alternatively, the [PBM covered] both
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Appendix A
any legal standard by which to evaluate Mylan’s alleged
leveraging of entrenched share, making it impossible for
us to determine whether there is a material issue of fact.
See id. We could overlook this oversight if Sanofi’s theory
inherently lends itself to only one legal standard—but
it does not. At least four legal standards exist by which
to evaluate Mylan’s alleged leveraging of entrenched
demand. First, the entrenched monopolist’s use of loyalty
rebates could be a per se violation of § 2 because it may
foreclose the non-entrenched portion “of the market to a
potential competitor.” LePage’s Inc. v. 3M, 324 F.3d 141,
155 (3d Cir. 2003) (en banc). At oral argument, Sanofi
wisely disclaimed the per se test.22 Second, the entrenched
brands and left it up to ex post competition between manufacturers
to determine prices, consumers would have indulged their
individual brand preferences and driven up prices for everyone.”
Klein & Murphy, supra, at 452. Sanofi’s briefing fails to answer
the material question—whether Mylan’s use of loyalty rebates
hurt or threatened to hurt consumers—and instead answers an
immaterial one—whether Mylan’s use of loyalty rebates hurt
or threatened to hurt a competitor. Brunswick, 429 U.S. at 488
(“The antitrust laws, however, were enacted for ‘the protection of
competition not competitors.’” (quoting Brown Shoe Co. v. United
States, 370 U.S. 294, 320, 82 S. Ct. 1502, 8 L. Ed. 2d 510 (1962)));
see, e.g., Novell, 731 F.3d at 1072; Crum & Forster, 682 F.2d at
663-64; Bork, supra, at 61.
22. The entrenched monopolist’s use of loyalty discounts may
be procompetitive or competitively neutral, Kobayashi, supra, at
117,121-22, which necessarily means a per se rule is inappropriate.
E.g., Leegin, 551 U.S. at 886-87. We should not, after all, deter the
entrenched monopolist’s use of loyalty discounts if it would lead to
lower consumer prices and higher welfare. See FTC v. Church &
Dwight Co., Inc., 665 F.3d 1312, 1316-17, 398 U.S. App. D.C. 449
86a
Appendix A
monopolist’s use of loyalty rebates may be anticompetitive
when, after applying the full amount of the loyalty rebates
to the non-entrenched portion of the market, the resulting
price is below the monopolist’s cost. Cascade Health Sols,
v. PeaceHealth, 515 F.3d 883, 906 (9th Cir. 2008). This is
the discount-attribution test.23 Third, applying Dr. Scott
(D.C. Cir. 2011) (D. Ginsburg, J.) (collecting criticism of the LePage’s
decision because it condemns behavior which does not obviously
reduce, and may even promote, consumer welfare); cf. Timothy J.
Muris & Vernon L. Smith, Antitrust and Bundled Discounts: An
Experimental Analysis, 75 Antitrust L. J. 399,403 (2008) (discussing
experiments in the analogous context of bundling which showed that
“even when competitors are excluded, such exclusion does not reduce
long-run average consumer or total surplus”).
23. We worry about the administrability of this test. To
determine prospectively whether its loyalty rebates would offend
the discount-attribution test, the entrenched firm must calculate
the entrenched share before applying the aggregate discounts to the
non-entrenched share. But entrenched share based upon consumer
preference is impossible to calculate with any objective precision.
On a cold and complete record, Dr. Scott Morton (former Deputy
Assistant Attorney General for Economic Analysis) can only guess
that EpiPen’s entrenched share was somewhere between 50%-70%.
This is too imprecise. Without an administrable test of liability, the
entrenched monopolist would never risk offering loyalty rebates
even if it would bring about increased consumer welfare. See Bos.
Edison Co., 915 F.2d at 22. We are uncomfortable with such a result
because, as then-Judge Breyer observed, “we must be concerned lest
a rule or precedent that authorizes a search for a particular type
of undesirable pricing behavior end up by discouraging legitimate
price competition.” Barry Wright, 724 F.2d at 234; see also, e.g.,
Easterbrook, supra, at 2 (“If the court errs by condemning a
beneficial practice, the benefits may be lost for good. Any other firm
that uses the condemned practice faces sanctions in the name of stare
decisis, no matter the benefits”).
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Appendix A
Morton’s Effective Entrant Burden (“EEB”) test,24 the
entrenched monopolist’s use of loyalty discounts would
be anticompetitive when the extent of entrenched share
and the magnitude of discounts makes it too hard for a
rival to compete for the non-entrenched share.26 See Fiona
M. Scott Morton & Zachary Abrahamson, A Unifying
Analytical Framework for Loyalty Rebates, 81 Antitrust
L.J. 777 (2017) (introducing Dr. Scott Morton’s EEB
test). Fourth, the entrenched monopolist’s use of loyalty
24. For some background, Dr. Scott Morton quantified EEB as:
EEB = (exclusionary rebate %) x (share with exclusion)
(contestable share)
The basic theory is when EEB is high, the defendant’s loyalty
rebate scheme is anticompetitive. EEB is higher when the loyalty
rebate is high (i.e., Mylan is offering lower prices) and when nonentrenched demand is low (i.e., when customers prefer EpiPen).
Thus, Dr. Scott Morton’s test is an inadequate proxy for consumer
welfare because EEB will generally punish a firm for offering
better prices or having the preferred product.
We are unsure whether we can consider the EEB test as
a potential legal standard since the district court excluded Dr.
Scott Morton’s EEB test in a contemporaneously-filed Daubert
opinion—a disposition Sanofi does not challenge on appeal. This
is a thorny question which we are not going to entangle ourselves
in. Assuming we could adopt the EEB test as a legal standard, it
does not change our analysis. Sanofi never proposed a substantive
legal standard on appeal, preventing us from determining whether
Mylan’s alleged leveraging of entrenched demand presents a
“material” question of fact.
25. The EEB test suffers the same administrability problems as
the discount-attribution test—it relies upon the extent of entrenched
share which is difficult to objectively derive. See supra note 23.
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rebates is lawful “as long as the prices being charged are
not predatory”—that is price is not below cost. linkLine,
555 U.S. at 455; see, e.g.Brooke Grp., 509 U.S. at 222-23.
One group of amici curiae—which includes Nobel laureate
Vernon L. Smith and several serious legal and economic
scholars— persuasively argues that this fourth legal
standard, often called the price-cost test, should apply to
Sanofi’s theory. Br. of Amici Curiae Int’l Ctr. for Law &
Econ. & Scholars of Law & Econ. in Support of Appellees
and Affirmance 4-15; see, e.g.Brooke Grp., 509 U.S. at
223 (“[T]he exclusionary effect of prices above a relevant
measure of cost . . . is beyond the practical ability of a
judicial tribunal to control without courting intolerable
risks of chilling legitimate price-cutting.”); Matsushita,
475 U.S. at 594; Atl. Richfield, 495 U.S. at 340.26
26. The downside to the price-cost test is that it may not, when
compared to another standard, catch as many anticompetitive uses
of loyalty discounts by an entrenched monopolist. But the price-cost
test has some benefits. First, the price-cost test limits the risk of
false condemnation for welfare-enhancing price competition and
does not discourage “legitimate price competition.” Barry Wright,
724 F.2d at 234; Bos. Edison Co., 915 F.2d at 22 (“[Antitrust rules]
must be designed with the knowledge that firms ultimately act, not
in precise conformity with the literal language of complex rules,
but in a reaction to what they see as the likely outcome of court
proceedings.”); see, e.g., Brooke Grp., 509 U.S. at 223; Klein &
Murphy, supra, at 444-48; Easterbrook, supra, at 15-17; cf. Muris &
Smith, supra, at 403. Second, the price-cost test is objectively (and
prospectively) administrable—unlike any test dependent on the
extent of entrenched consumer preference. See Richard M. Steuer,
Musthavedness, 81 Antitrust L.J. 447, 460-61 (2017); supra notes
23, 25. Third, because the price-cost test is easier to administer, it
results in reduced costs of administration. See, e.g., Easterbrook,
supra, at 12-13,16 (“Litigation costs are the product of vague rules
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Sanofi does not explicitly mention any of these
legal standards in its briefing, and the one legal theory
Sanofi seemed to implicitly rely upon—LePage’s per se
illegality—was explicitly disavowed by Sanofi at oral
argument. Oral Argument at 7:31. Without any briefing by
the parties regarding what substantive law ought to apply
to Sanofi’s claim that Mylan anticompetitively leveraged its
entrenched demand, we refrain from deciding this issue
independently. And in the absence of an appropriate legal
standard, we cannot decide whether this issue is material.
See Anderson, 477 U. S. at 248. After all, for at least one of
these legal standards (the price- cost test), the existence
and leveraging of entrenched share is wholly immaterial
to the issue of liability. We decline Sanofi’s invitation to
send this “issue of fact” to the jury without the opportunity
to first adjudge whether the existence and leveraging
of entrenched share is material. Summary judgment is,
therefore, inescapable. See Fed. R. Civ. R 56(a).
D.
Sanofi’s final argument is Mylan’s other conduct worked
in synergy to lock Sanofi out of the market, including
combined with high stakes, and nowhere is that combination more
deadly than in antitrust litigation.”). Fourth, the price-cost test,
because it is unlikely to disincentivize the use of loyalty rebates by
an entrenched firm, will not inadvertently encourage collusion in
the market. See Trinko, 540 U.S. at 408; Barry Wright, 724 F.2d
at 235 (“Price cutting in concentrated industries seems sufficiently
difficult to stimulate that we hesitate before embracing a rule that
could, in practice, stabilize ‘tacit cartels’ and further encourage
interdependent pricing behavior.”); Novell, 731 F.3d at 1073.
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Appendix A
Mylan’s deceptive marketing, the EpiPen4Schools
program, and the misclassification of EpiPen as a generic
drug for Medicaid purposes. We already disposed of
Sanofi’s deceptive marketing argument while discussing
spillover foreclosure. To recap, we rejected Sanofi’s
argument that “Mylan developed a deceptive marketing
program to augment the spillover effects of its contracts,”
Appellant’s Opening Br. 55, because that marketing was
“readily susceptible to neutralization.” Lenox, 762 F.3d
at 1127. But we have not discussed Sanofi’s arguments
pertaining to the EpiPen4Schools program or the
misclassification of EpiPen as a generic drug for Medicaid
purposes. We take each in turn.
Through the EpiPen4Schools program, Mylan
donated over one million free EpiPens to schools. The
program offered schools four free EpiPens and unlimited
additional EpiPens at a substantial discount. There
was an additional discount offered if a school agreed to
refrain from buying rival epinephrine auto-injectors for
twelve months. According to Sanofi, “Mylan fortified its
entrenched network by extracting pledges from schools
to train on EpiPen and not to buy Auvi-Q.” Appellant’s
Opening Br. 55. We take this argument to be analogous to
the deceptive marketing claim: Mylan was able to enhance
foreclosure by donating EpiPens to schools.27
27. In discussing Mylan’s EpiPen4Schools program, Sanofi
might be trying to make an additional argument by using the vogue
antitrust buzzword: “network effects.” E.g., Appellant’s Opening Br.
56. “In markets characterized by network effects, one product or
standard tends towards dominance, because ‘the utility that a user
derives from consumption of the good increases with the number
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Appendix A
We agree with the district court that “[n]o reasonable
factfinder could infer from these undisputed facts that
of other agents consuming the good.”’ Microsoft, 253 F.3d at 49
(quoting Michael L. Katz & Carl Shapiro, Network Externalities,
Competition, and Compatibility, 75 Am. Econ. Rev. 424,424 (1985)).
But see id. (“In technologically dynamic markets, however, such
entrenchment may be temporary, because innovation may alter
the field altogether.” (citing Joseph A. Schumpeter, Capitalism,
Socialism and Democracy 81-90 (Harper Perennial 1976) (1942))).
Sanofi argues the difference in administration of EpiPen and Auvi-Q
created network effects in the epinephrine auto-injector industry.
Patients receive additional utility from carrying the device that a
greater proportion of the population carries because there is an
increased chance that a bystander would properly administer the
patient’s device in an emergency. See, e.g., Appellant’s Opening Br.
20 (“And with 30 years of market dominance, EpiPen had cultivated
a ‘network’ of teachers, neighbors, and school nurses trained
exclusively to swing and jab.”).
The problem is “there is no consensus among commentators on
the question of whether, and to what extent, current monopolization
doctrine should be amended to account for” network effects.
Microsoft, 253 F.3d at 50; see, e.g., Michael L. Katz & Carl Shapiro,
Systems Competition and Network Effects, 8 J. Econ. Persp. 93,
113 (1994) (“[W]e are far from having a general theory of when
government intervention is preferable to the unregulated market
outcome.”). We cannot reach any argument pertaining to network
effects because Sanofi’s offhand use of the term does not satisfy its
obligation to provide us with its “contentions and reasons for them.”
Fed. R. App. P. 28(a)(8)(A); Exum v. U.S. Olympic Comm., 389
F.3d 1130, 1133 n.4 (10th Cir. 2004) (“Scattered statements in the
appellant’s brief are not enough to preserve an issue for appeal.”).
With such substantial disagreement about the proper role of network
effects in antitrust analysis, Sanofi’s obligation was to brief us on
the proper role of network effects in our analysis. Sanofi’s failure to
do so constitutes waiver of that argument.
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Appendix A
Mylan engaged in anticompetitive activity by offering
free EpiPens to schools.” In re EpiPen, 507 F. Supp.
3d at 1362. First, the EpiPen4Schools program did not
prohibit schools from buying Auvi-Q. A school could accept
Mylan’s four free EpiPens, buy additional discounted
EpiPens, and still buy Auvi-Q. The only penalty schools
faced for purchasing other epinephrine auto-injectors was
losing access to deeper EpiPen discounts. Id. Second, any
disadvantage Sanofi faced because of this program could
have been neutralized by implementing its own charitable
program. Cf Lenox, 762 F.3d at 1127. Sanofi never
implemented a similar program to provide free Auvi-Q
devices to schools and there is no evidence suggesting
Sanofi was unable to do so. If Sanofi implemented such a
program, any extraordinary demand built from Mylan’s
EpiPen4Schools program would have been neutralized.
We refuse to subject Mylan to antitrust liability for
building demand through a free giveaway program of a
life-saving device like EpiPen without any evidence of a
decrease in consumer welfare.
Sanofi also alleges Mylan fortified its exclusionary
conduct by misclassifying EpiPen as a generic drug for
Medicaid purposes.28 An appellant’s opening brief must
identify “appellant’s contentions and the reasons for them,
with citations to the authorities and parts of the record
on which the appellant relies.” Fed. R. App. P. 28(a)(8)
(A). “Consistent with this requirement, we routinely have
declined to consider arguments that are not raised, or
28. We note that something feels suspect about permitting a
private plaintiff to bring a monopolization claim when the alleged
misconduct derives from the defendant defrauding the government.
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Appendix A
are inadequately presented, in an appellant’s opening
brief.” Bronson v. Swensen, 500 F.3d 1099, 1104 (10th
Cir. 2007) (emphasis added). Sanofi’s briefing fails to
adequately explain the relevance of any alleged Medicaid
misclassification on Mylan’s ability to monopolize the
private market or clearly describe where the district
court erred. Thus, we cannot say Sanofi has adequately
presented its argument. Moreover, Sanofi does not cite any
legal authority to support its argument. For these reasons,
we hold Sanofi’s Medicaid misclassification argument is too
perfunctorily raised to consider. It is, therefore, waived.
See, e.g., United States v. Walker, 918 F.3d 1134,1151 (10th
Cir. 2019) (quoting United States v. Wooten, 377 F.3d 1134,
1145 (10th Cir. 2004)).
y.
When antitrust and the health insurance industry
meet, a nearly impenetrable fog descends upon what
might otherwise be a manageable case. What occurred
in this case is no different than the competition which
occurs at thousands of retail stores across the country—
ranging from supermarket behemoths to family-owned
mercantiles. These stores bring about lower prices for
their customers by engaging in the exact same practices
Sanofi complains of—and, astoundingly, the stores often
discover and utilize these practices without exploiting any
special economic expertise. For example, a mercantile
might enter discussions with several bakeries to decide
whose bread will occupy its shelves. During these
negotiations, the mercantile can solicit lower wholesale
prices by promising a bakery preferred positioning at
the front of the aisle where sales are higher. And every so
often, when a bakery offers low enough wholesale prices,
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Appendix A
the mercantile might exclusively stock that bakery’s
bread. Despite being unable to choose between multiple
brands of bread, the mercantile’s customers are unlikely to
complain. They are, after all, compensated in the form of
lower retail prices. By deciding to stock only one bakery’s
bread, the mercantile does not eliminate competition in the
bread market—instead competition takes on a different,
more powerful form, but one that is harder to intuitively
understand.
The same thing happened in the epinephrine auto
injector market: instead of competing on the formulary,
Mylan and Sanofi competed for the formulary. Mylan’s
legitimate competition for the formulary must not now
expose it to liability. “The successful competitor, having
been urged to compete, must not be turned upon when he
wins.” United States v. Aluminum Co. of Am., 148 F.2d
416,430 (2d Cir. 1945) (L. Hand, J.). Without any evidence
of harm to competition—as opposed to harm from
competition—Sanofi cannot present this case to a jury.
Considered separately or together, Sanofi’s arguments do
not raise a triable issue of exclusionary conduct. For the
reasons stated herein, we AFFIRM the district court’s
judgment.29
29. Sanofi also appeals the district court’s alternative and
independently sufficient basis for summary judgment that “no
reasonable jury could find that Mylan’s conduct produced an antitrust
injury.” In re EpiPen, 507 F. Supp. 3d at 1366. Given our previous
analysis, we need not decide the issue of antitrust injury. “When a
court concludes that no [antitrust] violation has occurred, it has no
occasion to consider [antitrust injury].” Levine v. Cent. Fla. Med.
Affiliates, Inc., 72 F.3d 1538, 1545 (11th Cir. 1996) (quoting 2A
Areeda & Hovenkamp, supra, 11335f, at 101); accord Doctor’s Hosp. of
Jefferson, Inc. v. Se. Med. All., Inc., 123 F.3d 301,306 (5th Cir. 1997);
Hairston v. Pac. 10 Conference, 101 F.3d 1315,1318 (9th Cir. 1996).
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