9th Circ. Rejects Rehearing On Norvir Antitrust Deal

By Christopher Norton

Law360, New York (August 21, 2009) -- A federal appeals court has rejected a bid for an en banc rehearing of its decision to limit a settlement to $10 million in a class action alleging that Abbott Laboratories illegally jacked up the prices of its market-dominating HIV drug Norvir, sticking to its finding that the plaintiffs failed to state a claim in light of recent case law.

The U.S. Court of Appeals for the Ninth Circuit on Wednesday unanimously denied the plaintiffs' petition for rehearing. The petition for rehearing en banc was circulated to the judges of the Ninth Circuit, and no judge requested a vote for en banc consideration, the opinion said.

Judge Claudia Wilken of the U.S. District Court for the Northern District of California signed an order Aug. 6 granting final approval to the settlement, which would have resolved protracted litigation accusing Abbott of engaging in anti-competitive behavior by improperly raising the price for Norvir.

Under the settlement, first announced in 2008, Abbott could have paid between $10 million and $27.5 million, depending on the outcome of an interlocutory appeal to the Ninth Circuit, which the plaintiffs had hoped to convince the panel to rehear.

In early July, the Ninth Circuit ruled in favor of the pharmaceutical company, finding that the lead plaintiffs failed to state a claim in light of recent case law.

According to the appeals court, mere possession of monopoly power and the practice of charging monopoly prices do not run afoul of Section 2 of the Sherman Act.

“Allegations of monopoly leveraging through pricing conduct in two markets do not amount to a claim under Section 2 in the absence of an antitrust refusal to deal in the monopoly market or below-cost pricing in the second market,” the opinion said.

The ruling reversed a decision by the Northern District of California that the plaintiffs’ claims for monopolization and attempted monopolization of the market for boosted protease inhibitors could go forward on a theory of monopoly leveraging.

In light of the Ninth Circuit's ruling, Abbott will not be required to contribute an additional $17.5 million to the fund, as stipulated in the settlement.

“We were disappointed but we understand that very few en banc petitions are granted in the Ninth Circuit, so we are not totally surprised,” attorney for the consumer class Joseph Tabacco said.

At issue in the litigation was whether Abbott engaged in anti-competitive conduct when it raised the price of Norvir but did not commensurately raise the price of Kaletra, another HIV drug.

Norvir is a protease inhibitor usually used to boost the therapeutic effects of other protease inhibitors; it is the only product available in the “boosting” market. In the “boosted” market — for drugs combined with Norvir — Abbott's Kaletra competes with other protease inhibitors.

The plaintiffs claimed that Abbott, as a player in both markets, used its monopoly position in the boosting market to hurt its competitors by raising Norvir's price by more than 400 percent in December 2003, when rivals GlaxoSmithKline PLC and Bristol-Myers Squibb Co. introduced drugs meant to be boosted by Norvir.

Rite Aid Corp., CVS Pharmacy Inc. and several other pharmacy chains filed a second amended complaint in their own similar pending antitrust action against Abbott on Aug. 14, in light of the appeals court's ruling in favor of Abbott.

Representatives for Abbott declined to comment Friday.

Abbott is represented by Winston & Strawn LLP and Munger Tolles & Olson LLP.

The plaintiffs are represented by Labaton Sucharow LLP, Berman DeValerio and the Law Office of Richard R. Wiebe.

The interlocutory appeal is John Doe 1 et al. v. Abbott Laboratories, case number 08-17699, in the U.S. Court of Appeals for the Ninth Circuit.

The district court case is Doe 1 et al. v. Abbott Laboratories, case number 4:04-cv-01511, in the U.S. District Court for the Northern District of California.

--Additional reporting by Julie Zeveloff and Erin Daly