A Third Circuit panel recently ruled that a foreign drug manufacturer lacks antitrust standing when it could only sell its product in the United States through a distributor.
In Ethypharm S.A. France v. Abbott Laboratories, Ethypharm, a French company, manufactured the drug fenofibrate and sold it under the brand name Antara. Because of the substantial time and resources required to obtain FDA approval, however, Ethypharm did not directly sell Antara in the United States. Rather, Ethypharm licensed Antara to a distributor that secured FDA approval for Antara, and the distributor marketed and distributed Antara in the United States.
As part of getting Antara to market, Ethypharm’s distributor filed a declaratory judgment action claiming Antara did not violate four of Abbott’s patents; Abbott brought a counterclaim for infringement of those patents. When Ethypharm’s distributor eventually went bankrupt, Ethypharm sued Abbott, alleging it violated Sections 1 and 2 of the Sherman Act by engaging in sham litigation to enforce those four patents.
On appeal, the Third Circuit found that the district court should have dismissed Ethypharm’s claim for lack of antitrust standing. The Third Circuit found Ethypharm did not compete in the relevant market – Ethypharm alleged a relevant market as the sale of fenofibrate products in the United States – because it never sold Antara in the United States. Even though Ethypharm manufactured a product that was eventually sold in the United States, it had no legal right to sell Antara directly in that market. Thus, there was no cross-elasticity of demand between Ethypharm’s product and Abbott’s product because Ethypharm’s product could not legally be substituted for Abbott’s.
The court seemed to take pains to limit its holding to the highly-regulated drug market, “it is not the general arrangement of manufacturer and distributor that is problematic; it is the fact that Ethypharm cannot sell Antara in the United States because of legal barriers particular to the pharmaceutical market.” Nevertheless, counsel considering an antitrust suit on behalf of a foreign entity, particularly in any regulated market, should carefully consider whether the United States distributor must also be a plaintiff, or even be the only plaintiff.