Tuesday, January 31, 2012

FTC Will Not Seek Review in Lundbeck Case

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

The FTC will not petition the U.S. Supreme Court for review of a decision of the U.S. Court of Appeals in St. Louis (2011-2 Trade Cases ¶77,570), rejecting a challenge to a 2006 acquisition involving global pharmaceutical company Lundbeck, Inc.

The appellate court affirmed judgment in favor of the drug company (2010-2 Trade Cases ¶77,160), based on the government’s failure to identify a valid relevant product market.

Decision “Profoundly Wrong”

The decision was made not to pursue review, despite a determination that the result in the case “was profoundly wrong, reflecting a serious misunderstanding by the District Court of the dynamics of this market and of the competitive consequences of an acquisition that allowed one company to control the only two pharmaceutical treatments for a life-threatening medical condition and raise prices by nearly 1300 percent,” according to a statement expressing the views of Chairman Jon Leibowitz, Commissioner Edith Ramirez, and Commissioner Julie Brill.

The three commissioners decided that it would be better to “turn our energies to other enforcement priorities.”

Commissioner Rosch’s Views

In a separate statement, Commissioner J. Thomas Rosch outlined the “many reasons for seeking Supreme Court review of the Eighth Circuit’s panel and en banc decisions in the Lundbeck case, which blessed the district court’s decision.”

According to Rosch, the courts erred in determining the product market. The first error of law was that, in holding that the two drugs at issue in the case—Indocin and NeoProfen—did not compete with each other in the same relevant product market, the district and appellate courts interpreted “cross-elasticity of demand” to mean exclusively cross-price elasticity of demand. Second, by erroneously focusing only on cross-price elasticity of demand, the district court allowed an economic expert’s opinion to trump the record facts regarding how the products were being marketed, purchased, and used in the real world.

Rosch also questioned the district court’s failure to consider the parties’ own business documents, as well as a hypothetical market.

The statement on the closing of the investigation of Lundbeck, Inc., Dkt Nos. 10-3458, 10-3459, FTC No. 0810156, appears at CCH Trade Regulation Reporter ¶16,711.

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