May 6, 2016

Third Circuit Shows No Love For Lovenox® Bundling Theory

By Ankur Kapoor

Citing the well-known maxim that the antitrust laws are concerned with “the protection of competition, not competitors,” the U.S. Court of Appeals for the Third Circuit on Wednesday affirmed summary judgment for Defendant Sanofi Aventis on Plaintiff Eisai, Inc.’s claim that Sanofi foreclosed competition in the market for anticoagulant drugs administered in hospitals.

Eisai alleged that Sanofi dominated that market with its Lovenox® product.  In addition to being FDA-approved for the treatment and prevention of deep-vein thrombosis (DVT), a potentially life-threatening condition in which a blood clot (thrombus) could break loose and into the bloodstream, Lovenox® is FDA-approved for six other indications, including the treatment of severe forms of heart attack.  Eisai’s Fragmin® competes with Lovenox® for treatment of DVT and is approved for four other indications, but not for treatment of severe forms of heart attack.  According to the court, there are two other injectable anticoagulants in the relevant product market: LEO Pharma’s Innohep® and GlaxoSmithKline’s Arixtra®.

Eisai’s primary allegation of anticompetitive conduct was Sanofi’s granting market-share discounts on hospitals’ Lovenox® purchases, from 9 to 30 percent, if 75 percent or more of the hospital’s injectable-anticoagulant purchases were Lovenox®.  To show that those market-share discounts foreclosed competition from Eisai’s Fragmin®, Eisai largely relied on an expert report by Professor Einer Elhauge of Harvard Law School.

Premised on the fact that Lovenox®’s unique cardiac indication made it a must-have product for hospitals, Professor Elhauge determined that a hospital’s sacrificing those discounts would cost the hospital more to switch from Lovenox® to the lower-priced Fragmin®—even if the hospital were to increase its Fragmin® share beyond a mere 10 percent.  Professor Elhauge concluded that the market-share discounts foreclosed between 69 and 84 percent of the relevant market.

Notwithstanding such seemingly powerful evidence of market foreclosure, the Third Circuit panel held that Eisai’s claims failed as a matter of law.

The court characterized Eisai’s theory of foreclosure as one of bundled discounting, which involves discounts on an alleged must-have monopoly product on the condition that the buyer purchase another product which faces competition.  The Lovenox® discounts were not conditioned on the purchase of another product, but the theory was that the separate, “incontestable” demand for Lovenox®’s cardiac indication made it a separate, must-have, monopoly product from Lovenox® for DVT.

The panel declined to extend the Third Circuit’s anticompetitive-bundling theory from LePage’s Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003) (en banc), to the situation where one product has two different demand curves.  Interestingly, the LePage’s decision, which upheld a bundling claim, involved discounts on 3M’s dominant Scotch® brand tape which were conditioned on buyers’ purchases of 3M’s unbranded private-label tape and other products.  Arguably, branded tape and unbranded tape are also “one product” but with differing demand.

The Third Circuit hedged its decision by noting:  “Even if bundling of different types of demand for the same product could, in the abstract, foreclose competition, nothing in the record indicates that an equally efficient competitor was unable to compete with Sanofi. . . .  Eisai does not offer evidence demonstrating that fixed costs were so high that competitors entering the market were unable to obtain a cardiology indication.”

It will be interesting to see whether, and to what extent, the Third Circuit and other Courts of Appeals continue to limit anticompetitive-bundling theory in future cases.

Edited by Gary J. Malone

Categories: Antitrust and Intellectual Property Law, Antitrust Law and Monopolies, Antitrust Litigation

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