Same Product in Different Packaging May Constitute Separate Market for Antitrust Purposes | McDermott Will & Emery
Addressing an issue of first impression, the US Court of Appeals for the Second Circuit concluded that two medications that contain the same ingredients but are packaged in different forms constitute separate markets for purposes of assessing antitrust violations. Regeneron Pharm., Inc. v. Novartis Pharma AG, Case No. 22-0427 (2d Cir. Mar. 18, 2024) (Parker, Lee, Merriam, JJ.)
Regeneron sued Novartis in the US District Court for the Southern District of New York alleging antitrust violations under the Sherman Act and New York state law claims. The specific products at issue were prescription medications used to treat the overproduction of vascular endothelial growth factor (VEGF). VEGF is a naturally occurring protein but, if overproduced, can lead to eye disorders, including permanent blindness. Both Regeneron and Novartis produce medication to combat overproduction of VEGF. The first form of anti-VEGF medications developed was packaged into vials and administered in a two-step process where a physician draws the product into a syringe then injects the product into the patient’s eye. However, a newer version of anti-VEGF drugs come in a prefilled syringe (PFS) designed to be administered in one step. The PFS packaging carries a significantly lower risk of complications and infections. PFSs have become the “preferred way [to] administer [] anti-VEGF medications.” Novartis moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(6). After the district court granted the motion, Regeneron appealed.
The district court reasoned that original and newer products competed in the same market because they were the exact same medication, just sold in different forms. The Second Circuit disagreed. PFSs reduce the likelihood of complications and have become the preferred form of administration for treatment of VEGF overproduction over vials. The Second Circuit concluded that the district court improperly focused its analysis on whether the two products were “functional substitutes” and not on whether they were “economic substitutes.” The Second Circuit concluded that the district court had applied the improper standard for the relevant market and should instead consider whether the two drugs are economic substitutes. That is to say, the district court should look to whether the different packaging for the VEGF treatments are reasonably interchangeable by consumers. Regeneron alleged they are not due to PFSs’ preferred status among physicians (although PFSs are more costly than vials).
As to the state law claims, the district court dismissed Regeneron’s tortious interference claims as untimely. On appeal, Regeneron argued that Novartis should be equitably estopped from invoking the statute of limitation because the defendants “took steps to prevent Regeneron from learning of Novartis’s tortious interference until after the statute of limitation period had expired.” The Second Circuit found that Novartis concealed a co-inventor’s role in the procurement of a patent, which Regeneron only found out about during subsequent patent litigation, and that such concealment was in violation of a contract. Thus, the Court “conclude[d] that [Regeneron’s] allegations were sufficient to permit Regeneron to invoke equitable estoppel.” Additionally, the complaint “plausibly alleged a claim for tortious interference with contract.”
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