FTC v. Lundbeck, Inc.

650 F.3d 1236 (2011)

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Nature of the Case

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Facts

Patent ductus arteriosus (PDA) is a life-threatening heart condition that primarily affects low-birth-weight, usually premature, babies. The suggested course of treatment is drugs first and surgery second. Approximately 30,000 cases of PDA are treated with drugs in the U.S. yearly. There were two FDA-approved drugs: Indocin IV and NeoProfen. Because their active ingredients differ, Indocin IV and NeoProfen are not bioequivalents and have different side effects. D purchased the rights to Indocin IV and the rights to NeoProfen. Until generics appeared in 2010, D owned all the drugs for PDA. D immediately raised the price of Indocin IV. Two days after acquiring the rights to NeoProfen, D raised the price thirteen-fold. By 2008, the price of Indocin IV settled at $1614.44 (from around $80). When D introduced NeoProfen in 2006, it charged $1450 per NeoProfen treatment, and its price eventually settled at $1522.50. Most hospitals assemble a formulary-a list of recommended drugs-to streamline purchasing. The formulary-listed drugs are chosen by pharmacy and therapeutics committees who often seek input from specialist physicians. Some hospitals use closed formularies (special approval is required to prescribe non-listed drugs). Others apply open formularies (physicians can prescribe non-listed drugs at their discretion). Hospitals use inclusion in the formulary to extract better prices from sellers of clinically-substitutable drugs. Ps brought suit against D for violation of the Sherman Act. The district court determined that the FTC did not meet its burden to prove that Indocin IV and NeoProfen were in the same product market and thus failed to identify a relevant market. Ps appealed.