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In re Flonase Antitrust Litigation

April 15, 2009


The opinion of the court was delivered by: Anita B. Brody, J.

THIS DOCUMENT RELATES TO: Indirect Purchasers Actions


I. Introduction

On September 3, 2008, Plaintiffs A.F. of L.- A.G.C. Building Trades Welfare Plan ("AFL"), International Association of Bridge, Structural, Ornamental and Reinforcing Ironworkers Local No. 79 Health Fund ("IABORI"), IBEW-NECA Local 505 Health and Welfare Plan ("IBEW"), MC-UA Local 119 Health and Welfare Plan ("UA"), Painters District Council No. 30 Health & Welfare Fund ("Painters"), and Sheet Metal Workers Local 441 Health and Welfare Plan ("Sheet Metal"), collectively "Plaintiffs," filed an amended class action complaint against Defendant SmithKline Beecham Corporation, doing business as GlaxoSmithKline, Inc. ("GSK"). Plaintiffs are all indirect purchasers of the prescription drug Flonase (i.e. they did not purchase the drug for resale) who allege that GSK filed sham citizens petitions with the Food and Drug Administration ("FDA") in order to delay the entry of generic Flonase into the market. Plaintiffs bring three counts against GSK under numerous states' laws:

1) Monopolization, 2) Unfair and Deceptive Practices, and 3) Unjust Enrichment. On October 17, 2008, GSK filed a Motion to Dismiss the amended complaint. That motion will be granted without prejudice because none of the named Plaintiffs have stated a claim under the laws of the states in which they reside or do business.

II. Background*fn1

Under the Federal Food, Drug and Cosmetic Act ("FDCA"), drug manufacturers must receive FDA approval before selling a new drug. A prospective manufacturer of a generic drug must demonstrate to the FDA that the generic version is the "bioequivalent" of the brand name drug before the generic version is approved for sale. In other words, the generic version must contain the same active ingredient(s), dosage form, route of administration, and strength. Once a generic drug enters the market, the price of the name-brand drug and the sales volume typically drop. While the approval of a generic version is pending, "citizens petitions" may be filed with the FDA to express legitimate concerns regarding a product and request that the FDA take, or refrain from taking, administrative action. Because citizens petitions could delay a generic drug's approval,*fn2 they were often abused by pharmaceutical companies attempting to prolong their monopoly in the market. Plaintiffs contend that in 2004, as the end of GSK's exclusivity period for the drug Flonase approached, GSK filed four successive sham citizens petitions solely to delay generic approval of the drug and with no reasonable basis for objecting to the approval.

Because of this unlawful behavior, Plaintiffs' ability to purchase lower-priced generic versions of Flonase was delayed and they were denied the benefits of unrestrained competition.

III. Standard of Review and Jurisdiction

Under Federal Rule of Civil Procedure 12(b)(1), a court must grant a motion to dismiss if it lacks subject matter jurisdiction to hear a claim. "A motion to dismiss for want of standing is also properly brought pursuant to Rule 12(b)(1), because standing is a jurisdictional matter." Ballentine v. U.S., 486 F.3d 806, 810 (3d Cir. 2007). Under Federal Rule of Civil Procedure 12(b)(6), a court must grant a motion to dismiss if the plaintiff fails "to state a claim upon which relief can be granted." In deciding a motion to dismiss pursuant to Rule 12(b)(6), the court must accept as true the well-pleaded allegations of the complaint and draw all reasonable inferences in the plaintiff's favor. Brown v. Card Serv. Ctr., 464 F.3d 450, 452 (3d Cir. 2006). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007) (internal quotations omitted). Jurisdiction over this action is proper under the Class Action Fairness Act of 2005, which grants district courts original jurisdiction over "any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interests and costs, and is a class action in which ... any member of a class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(2)); Kaufman v. Allstate N.J. Ins. Co., Nos. 08-4911, 08-4912, 08-4913, 2009 WL 779759 at *1 (3d Cir. March 26, 2009).

IV. Discussion

In the amended complaint, Plaintiffs assert that GSK's actions denied them (1) the benefits of free and unrestrained competition, and (2) the opportunity to purchase lower-priced generic versions of Flonase. GSK contends that because Plaintiffs do not assert in which state(s) they suffered injury they do not have standing to bring any state law claims, and even if the Court infers that named Plaintiffs have standing to assert claims under the laws of the states in which they reside or have a principal place of business, the entire complaint must be dismissed because the named Plaintiffs have failed to state claims under those laws. Unless at least one named Plaintiff can state a claim for relief under each count Plaintiffs do not have standing to bring claims as part of a putative class action. GSK further contends that even if the named Plaintiffs themselves have standing under the laws of states where they were injured, they do not have standing to assert claims on behalf of putative class members under the laws of states where no named Plaintiff was injured. Plaintiffs respond that the named Plaintiffs have stated claims under the laws of Tennessee, Illinois and Florida, states in which named Plaintiffs suffered injury. Furthermore, Plaintiffs assert that it would be "premature to rule on defendant's argument that named Plaintiffs cannot state antitrust claims in jurisdictions where they do not reside or do business" because class certification should be decided prior to analyzing standing. (Plaintiffs' Opposition to Motion to Dismiss, p. 10). Plaintiffs request that should the Court decide GSK's Motion is timely, that the Plaintiffs be allowed to amend their complaint or, alternatively, that the Court dismiss any claims for lack of standing without prejudice so that named Plaintiffs from additional states could join the case.

Article III of the Constitution limits the power of federal courts to resolving cases or controversies. The case or controversy requirement is met when"there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Id.(citations omitted). The doctrine of standing helps identify which disputes are justiciable under the case or controversy requirement. At a minimum, there are three elements needed to establish constitutional standing under Article III:

1) injury-in-fact, 2) causation (or traceability), and 3) redressability. Lujan v. Defenders of ...

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