Drug Maker’s “Market Switching” Did Not Constitute Monopolization

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Pharmacies and drug wholesalers failed to state monopolization claims based on a drug maker’s purported “market switching,” the federal district court in Washington, D.C. has ruled.

The drug maker would not have engaged in exclusionary conduct prohibited by Section 2 of the Sherman Act by “switching the market” from one of its heartburn drugs that faced generic competition to a virtually identical drug, which did not have generic competition. The drug maker’s motion to dismiss was granted.

The drug maker’s conduct did not eliminate any consumer choices, the court ruled. Rather, it added choices. The drug maker aggressively marketed a newer drug to compete with already-established drugs—both its own and others’—and with generic substitutes for at least one of the established drugs.

Fraud in Sales of New Drug

Moreover, the drug maker did not engage in fraud. The pharmacies and drug wholesalers alleged that the drug maker used distortion in its efforts to persuade doctors and other medical professionals that the new drug offered advantages over the older one. They further alleged distortions in advertising directed to lay persons. However, they did not identify any antitrust law that prohibited market switching through sales persuasion short of false representations or fraud.

Antitrust Injury

The pharmacies and drug wholesalers failed to identify an antitrust injury as a result of the drug maker’s alleged monopolistic efforts, according to the court. They claimed that the drug maker’s conduct cost them sales of their generic substitutes. However, the fact that a new product siphoned off some of the sales from the old product—and, in turn, depressed sales of the generic substitutes for the old product—did not create an antitrust cause of action, the court reasoned.

The complaint reflected little reason for the plaintiff’s circumscribed ability to realize sales other than the drug marker’s introduction of a new competitive product and successful competition in marketing the new product. This was not an antitrust injury, according to the court.

The February 25 decision is Walgreen Co. v. Astrazeneca Pharmaceuticals L.P., , 2008-1 Trade Cases ¶76,060.