CISG CASE PRESENTATION

[…] [page 241]

[Counsel]

Solomon, Zauderer, Ellenhorn, Frischer & Sharp, New York, NY, Harry Frischer, Colin Underwood, Jennifer Scullion, of counsel, for Plaintiff Apothecon, Inc.

Frederick R. Dettmer, New York, NY, for Plaintiff Geneva Pharmaceuticals.

Winston & Strawn, Chicago, IL, Kurt L. Schultz, Brant C. Weidner, Jay L. Levine, John J. Tully, Jr., Gregory C. Vamos, Richard A. Duda, Monika Blacha, of counsel, for Defendant Barr Laboratories.

Lord, Bissell & Brook, Chicago, IL, Michael J. Gaertner, David G. Greene, Douglas M. Chalmers, John F. Kloecker, Stacey Y. Dixon, of counsel, for Defendants Brantford Chemicals, Inc., Bernard C. Sherman, Apotex Holdings Inc., Apotex Inc. and Sherman Delaware Inc.

OPINION

Sweet, District Judge

Defendants Barr Laboratories, Inc.; Brantford Chemicals, Inc.; Bernard C. Sherman; Apotex Holdings, Inc.; Apotex Inc.; and Sherman Delaware Inc. have moved for summary judgment to dismiss the complaint of plaintiffs Geneva Pharmaceuticals Technology Corp. (as successor in interest to Invamed, Inc.) and Apothecon Inc. alleging violations of the federal antitrust laws, the New York antitrust laws, and numerous related state law claims.

For the foregoing reasons, that motion is granted in part and denied in part.

The Parties

A. The Plaintiffs

Plaintiff Geneva Pharmaceuticals Technology Corp. ("GPTC") is a New Jersey corporation with its principal place of business in New Jersey. GPTC is in the business of developing, manufacturing and marketing generic pharmaceuticals. GPTC is a wholly owned subsidiary of Geneva Pharmaceuticals, Inc. ("Geneva"), which itself is a member of the generics sector of Novartis AG, the Austrian pharmaceutical company. Until its purchase by Geneva in December 1999, GPTC was known as Invamed, Inc. ("Invamed").

Plaintiff Apothecon, Inc. ("Apothecon") is a Delaware corporation with its principal place of business in New Jersey. Apothecon is a wholly-owned subsidiary of the Bristol-Myers Squibb Company ("BMS"), one of the world's leading pharmaceutical companies, and is engaged in the business of developing, manufacturing and marketing [page 242] generic pharmaceuticals. Apothecon's approximate annual sales are $600 million.

B. The Plaintiffs' Relationships

On June 28, 1996, Invamed and Apothecon entered into an exclusive five-year Development and Supply Agreement in connection with manufacturing and marketing a number of generic pharmaceuticals, including warfarin sodium, a generic version of the drug Coumadin® made by DuPont Pharmaceuticals Company ("DuPont"). Plaintiffs allege that this arrangement constituted a joint venture, in that the parties agreed to share profits and loss and referred to each other as "partners" and to the agreement as a "joint venture."

On December 15, 2000, Geneva's affiliate Biochemie U.S. acquired Apothecon's portfolio of commodity generic pharmaceutical products, and Geneva gained the right to sell (under the Geneva or Apothecon label) all of the products, including warfarin sodium, that had been previously supplied to Apothecon by Invamed. On June 7, 2001 BMS agreed to acquire the drug business of DuPont, including Coumadin®, for $7.8 billion in cash.

C. The Defendants

Defendant Barr Laboratories, Inc. ("Barr") is a New York corporation with its principal place of business in New York. Barr is engaged in the business of developing, manufacturing and marketing generic pharmaceuticals.

Defendant Brantford Chemicals, Inc. ("Brantford") is a Canadian corporation with its principal place of business in Brantford, Ontario. Brantford is engaged in the business of manufacturing and marketing active pharmaceutical ingredients ("API"), chemical compounds used in the manufacture of pharmaceuticals. Brantford was known as ACIC (Canada) ("ACIC") until 1996.

Defendant Apotex Inc. ("Apotex") is a Canadian corporation with its principal place of business in Weston, Ontario. Apotex is engaged in the business of researching, manufacturing and marketing both generic and branded pharmaceuticals. Apotex does not currently manufacture or market pharmaceuticals for sale in the United States.

Defendant Apotex Holdings, Inc. ("Apotex Holdings") is a Canadian holding company with its principal place of business in Weston, Ontario.

Defendant Dr. Bernard C. Sherman ("Sherman") is an individual residing in Canada. Sherman founded Apotex in 1974 and is the chairman of its board of directors. Sherman is also a member of the board of directors of Barr [1] and the president of Apotex Holdings.

Defendant Sherman Delaware, Inc. ("Sherman Delaware") is a Delaware holding company with its principal place of business in Delaware.

D. The Defendants' Common Ownership

Sherman owns 99% of the voting shares of Sherman Holdings Inc. ("Sherman Holdings"). Sherman and members of his family are also the beneficiaries of the Bernard and Honey Sherman Trust ("Sherman Trust"). Sherman Holdings [page 243] and the Sherman Trust together own approximately 100% of the voting shares of Shermco Inc.

Shermco Inc. owns 100% of Shermfam Inc., which owns 100% of the outstanding shares of Apotex Holdings. Apotex Holdings owns 100% of Apotex Pharmaceutical Holdings Inc., which owns 100% of the outstanding shares of both Apotex and Brantford.

Apotex Pharmaceutical Holdings Inc. and its affiliates have owned 75% of Brantford (then ACIC) since March 1990. The family of Luciano Calenti, ACIC's president, owned the minority interest, along with institutional investors. Apotex Pharmaceutical Holdings Inc. acquired the remaining 25% of ACIC in 1996. In 1990 ACIC was experiencing financial difficulties and Calenti turned to Sherman, a longtime client of ACIC. Sherman pursued the acquisition of ACIC as an opportunity to integrate a supplier with his operations and increase their capacity to develop chemicals. Plaintiffs claim that Sherman did not take an active interest in ACIC until 1996, when he bought out Calenti. Calenti "ran the company" himself until the buy out in July 1996.

Apotex Holdings also owns 100% of Shermfin, Inc., which owns 100% of both Sherman Delaware and Glastex Investments, Inc. From 1993 to 1997, Sherman Delaware and Glastex Investments owned outstanding shares of Barr. In mid-1993, they owned approximately 66%. As of December 31, 1997, Sherman Delaware and Glastex Investments owned approximately 63% of Barr. After a Barr secondary offering in March 1998, Sherman Delaware and Glastex Investments owned approximately 48.6% of Barr.

Prior Proceedings

Invamed filed its complaint on February 6, 1998, alleging violations of the antitrust laws of the United States and various state law claims arising out of defendants' alleged efforts to monopolize and restrain trade in the markets for an oral anti-coagulant medication known as warfarin sodium. The complaint alleged eleven causes of action against the defendants.

On April 9, 1998, Sherman, Apotex Holdings, Apotex, and Sherman Delaware moved under Fed.R.Civ.P. 12(b)(6) to dismiss Invamed's First, Second, Third, Fourth, Eighth, and Ninth Causes of Action, claiming that there are no allegations in the complaint which would establish the basis for those claims. The Court granted this motion to dismiss with leave to replead. Invamed did not replead.

Therefore, Invamed's eleven causes of action are as follows. Count I and II allege monopolization and attempted monopolization against Barr and ACIC/Brantford in both the relevant warfarin sodium market and the market for clathrate, the bulk material used to make the drug. Counts III and IV allege conspiracy to monopolize against Barr and ACIC/Brantford. Count V alleges against all defendants that the acquisition of ACIC/Brantford by Apotex and, through Apotex, by Apotex Holdings, Sherman, Sherman Delaware, and Barr, violates Section 7 of the Clayton Act. Counts VI and VII allege breach of contract and promissory estoppel against ACIC/Brantford. Counts VIII and IX allege tortious interference with contract and with business relations against Barr. Counts X and XI allege negligence and negligent misrepresentation against ACIC/Brantford.

Apothecon filed a separate suit on May 19, 1999, and the cases were consolidated on July 29, 1999. Apothecon included the same causes of action discussed above as well as a few additional ones. Against Barr and ACIC/Brantford, it alleged violation of the Donnelly Act, New York's antitrust [page 244] law (Count VI) and fraud (Count VIII). Further, it alleged breach of fiduciary obligation (Count XIV) against ACIC/Brantford and unfair competition against Barr (Count XV).

The defendants moved for summary judgment on August 6, 2001. They filed a joint motion on plaintiffs' antitrust claims, and ACIC/Brantford and Barr each submitted a separate motion addressing the state law claims against them. Oral argument was heard on February 13, 2002, and submissions were considered fully complete at that time.

Facts

The following facts are taken from the parties' Rule 56.1 statements and, as required, are construed in the light most favorable to the non-movant, as applicable.[2]

Because of this, the Court will accept the facts submitted by the defendants to which plaintiffs responded by referring generally to its later affirmative statement. This does not mean that the Court ignored the affirmative statement, and facts from the affirmative statement are included in the statement of facts below. It does mean that the Court will not sift through an affirmative statement to make a party's arguments for it -- particularly in a complex case such as this one where both parties are ably represented and have demonstrated the ability to brief, in hundreds of pages, the issues. In any case, plaintiffs fail to present a genuine issue to be tried as to whether Coumadin competes in the same market as generic warfarin sodium.

I. Background

A. Warfarin Sodium

Warfarin sodium is an oral anti-coagulant medication that, in tablet form, is prescribed for the treatment of venous thrombosis and pulmonary embolism, or blood clots, particularly in patients over the age of 60. In its simplest terms, warfarin sodium thins the blood, preventing harmful clots that can cause strokes and heart attacks.

A pharmaceutical product that has a narrow range between its therapeutic dose and its toxic dose is considered a narrow therapeutic index ("NTI") product. Warfarin sodium is an NTI drug. Patients for whom warfarin sodium is indicated are often high-risk patients for whom changes in their medication are viewed with great concern. Warfarin sodium possesses potential side effects that include increased bleeding. Patients taking warfarin sodium are supposed to be monitored in order to ensure that the appropriate amount of the drug is present. The active pharmaceutical ingredient ("API") for warfarin sodium is known as "bulk" warfarin sodium or warfarin sodium clathrate ("clathrate"). Clathrate and its related compounds are also used in one form of rat poison. [page 245]

The United States Pharmacopoeia ("USP") contains a list of minimum standards for the purity and composition of drugs and pharmaceuticals that are manufactured, prescribed, or sold in the United States. A drug's strength, quality and purity are assessed in accordance with the tests and standards defined in the USP. Raw materials that meet USP standards and meet Good Manufacturing Practices guidelines are suitable for use in manufacturing finished dosage form pharmaceuticals.

Clathrate itself consists of two key chemicals, 4-hydroxycoumarin and benzalacetone (or benzylidene acetone). Both chemicals were readily available in the chemical marketplace throughout the 1990's. It is disputed whether the process of making clathrate is simple or complex. Plaintiffs claim that it can take a supplier several years to develop a procedure for the production of clathrate. Clathrate has a shelf life of 22 months.

Warfarin sodium was first introduced for human use under the brand name of Coumadin® in 1956 by Endo Laboratories, which was purchased by DuPont. DuPont lost patent protection for Coumadin® in 1962. DuPont made Coumadin® using clathrate purchased from Chemoswed A.B. ("Chemoswed"), a Swedish manufacturer. In 1995, DuPont purchased Chemoswed.

Even though DuPont's patent protection for Coumadin® expired in 1962, for the next 35 years DuPont and Coumadin® enjoyed a virtual monopoly in the market for oral anticoagulants. As a result of that position in the market, DuPont's Coumadin® eventually achieved annual sales exceeding $400-500 million.

In the 1980's, several companies received approval to market warfarin-related products, including Purdue Frederick, Abbott Laboratories, Rosemont Pharmaceuticals, and Circa/Watson Pharmaceuticals. The FDA publishes an official directory of generic drugs known as the Orange Book. These products were not successful, and the Orange Book now lists them as discontinued.

In 1990, the New England Journal of Medicine published the results of two new studies indicating that warfarin sodium was effective in preventing strokes in patients suffering from arterial fibrillation (irregular heartbeat), and in reducing strokes and subsequent heart attacks in patients who had survived a heart attack. These and similar articles spurred renewed interest in warfarin sodium by physicians and pharmaceutical companies.

Four companies sell warfarin sodium in the United States today: (1) DuPont, which has marketed Coumadin® since 1956; (2) Barr, which has marketed generic warfarin sodium since July 1997; (3) Geneva (as successor to plaintiffs), which has marketed generic warfarin sodium since October 1998; and (4) Taro Pharmaceutical Industries Ltd. ("Taro"), which has marketed generic warfarin sodium since September 1999. All generic warfarin sodium available in the market today is therapeutically equivalent to Coumadin® and bears the FDA's equivalence rating "AB." The process of achieving this rating is described below.

Invamed/Apothecon and Barr have been and continue to be competitors with respect to warfarin sodium and finished dosage form pharmaceutical products in general.

B. Generic Pharmaceutical Drugs

1. Development

To develop any generic drug, a pharmaceutical company must first procure the raw materials necessary to make the drug, including its API. Numerous companies manufacture APIs for sale to the pharmaceutical [page 246] industry. In the developmental stage, pharmaceutical companies typically obtain small quantities of API (generally less than 1 kg) and technical product information from API suppliers for initial analysis and testing. A sample is typically a small quantity measured in grams and is usually provided free of charge.

Following evaluation of the initial samples, pharmaceutical companies typically obtain developmental or "R & D" quantities of the API to begin dosage form development and initial formulation analysis. An R & D quantity is smaller in size (e.g., 1-25 kg) than larger "commercial" quantities (e.g., more than 50 kg) that are later used to put the finished-dosage product into commercial production. R & D quantities and commercial quantities frequently differ in price.

Generic drug manufacturers obtain FDA approval for generic forms of innovator or branded drugs by filing an Abbreviated New Drug Application ("ANDA"), which includes information demonstrating that the subject drug is bioequivalent to the branded drug. An ANDA must contain information to show that the generic product has the same active ingredient, conditions of use, route of administration, dosage form, strength, and labeling as the branded drug.

The FDA requires pharmaceutical companies to identify in the ANDA the API supplier or suppliers they intend to use in manufacturing the product. Plaintiffs claim that applicants tend to specify only one supplier of its pharmaceutical ingredients so as to minimize the time taken by the FDA for its review and approval.[3] API from a different source can be substituted only upon FDA approval of a supplement or amendment to the ANDA.

The FDA classifies as "therapeutically equivalent" those products that meet the following general criteria: (1) they are approved as safe and effective; (2) they are pharmaceutical equivalents; (3) they are bioequivalent; (4) they are adequately labeled; and (5) they are manufactured in compliance with Current Good Manufacturing Practice regulations. The FDA rates a generic product "AB" equivalent to its branded counterpart if a study is submitted demonstrating bioequivalence to the branded product. Despite this, there may be physical differences between branded and generic drugs, such as the particle size of the active pharmaceutical ingredient, water content, and crystalline structure. A different process is used to manufacture generic products and that process may lead to other differences.[4]

API suppliers submit Drug Master Files ("DMFs") to the FDA, which summarize the equipment, manufacturing steps, raw materials and laboratory controls used to prepare the particular API. In a DMF "reference letter," the API supplier commits to the FDA that it will manufacture its material as set forth in its DMF. In the letter (which is sent by the supplier to the FDA), the supplier authorizes the FDA to refer to its DMF in connection with an ANDA filed by the drug manufacturer. The FDA reviews a supplier's DMF in conjunction with its review of the pending [page 247] ANDA. If both are in order, the drug will be approved for marketing.

Because of the need for approval to change suppliers after approval, plaintiffs allege that it is a widespread practice throughout the industry that a supplier providing a reference letter commits itself to providing commercial quantities of the raw material. Plaintiffs also allege that throughout the 1990's it was also practice to rely on informal oral arrangements, rather than written supply contracts. For example, more than 90% of the bulk pharmaceutical ingredients purchased by Barr, and the majority of bulk pharmaceuticals sold by ACIC/Brantford, do not involve written supply agreements.

2. Equivalence of Branded and Generic Warfarin Sodium

Generic warfarin sodium products that are rated AB by the FDA are therapeutically equivalent to the brand product and by approving the products for marketing, the FDA has certified both Barr's and plaintiffs' product as chemically and therapeutically equivalent to the innovator's product, Coumadin®.

Plaintiffs' and Barr's generic warfarin sodium products are, therefore, fully interchangeable with each other and with Coumadin®. In its interrogatory responses, Invamed stated that it is not aware of any reason why any of the three warfarin sodium products "should not be substituted for any of the others." Apothecon, in response to interrogatories asking whether plaintiffs' product, Barr's product, and Coumadin® may be substituted or are interchangeable, stated that it is not "aware of any reason why any of the three ... warfarin sodium products should not be substituted for any of the others."

In Invamed's ANDA, Section II, captioned "BASIS FOR ANDA SUBMISSION," Invamed stated that its "WARFARIN SODIUM TABLETS USP ... are the same as the listed drug COUMADIN TABLETS ... manufactured by DuPont. ..."

Both Barr and Apothecon conducted clinical studies demonstrating that their products were clinically interchangeable with Coumadin®. In addition, both Apothecon/Invamed's warfarin sodium product and Barr's warfarin sodium product contain the same labeling and identical prescribing information as that used with Coumadin®. Coumadin® uses different tablet colors to correspond with and signify different dosage sizes. Barr and Apothecon/Invamed use the same colors as Coumadin®.

Generic warfarin sodium and Coumadin® are sold to the same customers: wholesalers, hospitals, retail pharmacy chains, mail order houses, clinics, and managed care organizations.

II. Barr's Generic Warfarin Sodium

A. Barr's Development

Barr's business strategy is to be the first or second manufacturer to enter the market for a particular generic product. To accomplish this goal, Barr chooses products with high barriers to entry so that the company will face limited competition.

In the early 1990's, Barr identified warfarin sodium as a product where there were barriers to entry because of the difficulty of obtaining a supply of the raw material necessary to produce the product. Barr researched potential API suppliers at that time.

In January 1991, Ed Cohen, Barr's president, and Luciano Calenti, ACIC's founder and president, discussed a potential 20 kg order of clathrate. Calenti confirmed that ACIC could produce commercial [page 248] quantities of clathrate for $2,000 per kilogram, and the initial 20 kg for $2,500 per kilogram. Calenti said a 50% advance payment would be required to ensure that Barr would not rescind the order.

On February 5, 1991, Cohen confirmed Barr's interest to Calenti, sent ACIC its purchase order for 20 kg of clathrate, and offered to lend any analytical support needed in developing purity specifications for the product. The day after Barr's order, ACIC began process development work on warfarin sodium. ACIC developed an acceptable process for synthesizing warfarin sodium by the spring of 1991.

Barr next ordered 7 kg of clathrate from ACIC in June 1993, and another 10 kg in May 1994.

ACIC filed a DMF for clathrate with the FDA on March 15, 1995. On April 3, 1995, ACIC provided a DMF reference letter for clathrate to the FDA in support of Barr's warfarin sodium ANDA. On May 10, 1995, Barr filed its ANDA, listing ACIC as its clathrate supplier and including its DMF reference letter.

In September 1995, Barr entered into an agreement with ACIC for the supply of clathrate. Barr ordered 900 kg of clathrate from ACIC on September 29, 1995. ACIC shipped that quantity to Barr in December 1995. In September 1996, Barr ordered an additional 900 kg of clathrate from ACIC (by that time known as Brantford). This quantity was shipped to Barr in separate lots in February 1997.

On March 26, 1997, the FDA approved Barr's ANDA and authorized the company to begin marketing, which it did beginning July 28, 1997. The FDA's approval of Barr's product was premised on the determination of the FDA's Division of Bioequivalence that Barr's "Warfarin Sodium Tablets" were "bioequivalent and, therefore, therapeutically equivalent to the listed drug" Coumadin®. Consequently, Barr announced in an early advertisement that its warfarin sodium tablets were "[t]herapeutically equivalent to Coumadin®" and that "[t]he only difference is cost."

On August 8, 1997, Barr submitted a purchase order for another 900 kg of clathrate. ACIC/Brantford shipped this quantity to Barr in separate lots in January and April 1998.

In a document dated September 1997, Barr referred to ACIC/Brantford as the "only source [of clathrate] available to the generic industry." Barr also attempted to locate a back-up producer of clathrate. As of March 1998, Barr had been unable to locate an FDA-approved supplier.

B. The Supply and Confidentiality Agreements

In the summer of 1995, Barr and ACIC began discussions regarding a supply agreement for commercial quantities of clathrate. ACIC demanded an arrangement in which a pharmaceutical company would pay for a substantial amount of clathrate prior to receiving FDA approval. Calenti told Barr that if Barr did not strike an agreement with ACIC, Calenti would try to make one with another company.[5]

1. The Supply Agreement

By letter agreement dated September 19, 1995 (the "Supply Agreement"), Barr and ACIC contracted for ACIC to supply Barr with clathrate. The Agreement obligated Barr to purchase 900 kilograms of clathrate from ACIC for $1.8 million regardless of whether it could use the product or not. The Supply Agreement was [page 249] negotiated as an arm's length transaction, and at the time it was signed, Barr's President, Bruce Downey, was unaware of any relationship between ACIC/Brantford and Apotex or Sherman.

The Supply Agreement provided that ACIC would exclusively supply Barr with commercial quantities of clathrate in the U.S. until another manufacturer began selling generic warfarin sodium. Barr agreed to purchase 100% of its commercial requirements from ACIC during the exclusivity period.

As to delivery requirements, the Supply Agreement provided that "ACIC will supply the [clathrate] in quantities requested by Barr, provided that Barr provides ACIC with lead times consistent with its normal operations."

Because the Supply Agreement applied only to commercial quantities of clathrate, it did not prohibit ACIC from selling sample or developmental quantities to other generic manufacturers seeking FDA approval of their products. In addition, because the Supply Agreement applied only to clathrate manufactured in ACIC's facilities, it did not prevent ACIC from brokering clathrate manufactured by other suppliers. The Supply Agreement also permitted ACIC to supply commercial quantities to DuPont. Finally, the Supply Agreement permitted Barr, at its option, to purchase sufficient quantities of clathrate from another supplier in order to qualify that supplier as an alternate source.

2. The Confidentiality Agreement

On October 5, 1995, approximately seven days after the Supply Agreement was signed, Barr and ACIC executed a Confidentiality Agreement restricting disclosure of "valuable, proprietary, technical, commercial and other confidential information" for five years. This agreement precluded ACIC/Brantford from disclosing to Invamed or any other entity the existence of the exclusive supply contract. It was also ACIC's practice to keep all of its contracts and commercial transactions with its customers confidential.

Soon after these agreements were signed, ACIC removed clathrate from its internal products list, and Calenti advised his sales representatives to stop promoting it to new clients.

Plaintiffs claim that if they had known about the exclusive arrangement, they could have sought another supplier in 1995 and entered the market in a timely fashion.

III. Invamed's Attempts to Secure a Supply of Clathrate

Between 1993 and 1996, Invamed explored the possibility of obtaining clathrate from a number of different sources. Invamed's vice president, Dr. Mahendra Patel ("Patel"), was responsible for the company's research and development efforts for new drugs, including warfarin sodium. Patel co-founded Invamed in 1983 after several years in the pharmaceutical industry, including six years at BMS. It was Patel's responsibility to identify and select potential API suppliers. Plaintiffs claim that Invamed concluded that ACIC/Brantford was the only viable supplier.

A. Chemoswed A.B.

In December 1994, Invamed received a 10-gram sample of clathrate made by Chemoswed, together with technical product information. The supporting technical information indicated that the Chemoswed clathrate was USP grade material and suitable for testing in an Invamed finished product. In early 1994, Invamed performed one product development trial using the Chemoswed clathrate. [page 250]

At the time, Chemoswed supplied clathrate to DuPont for use in its manufacture of Coumadin®. In 1995 DuPont purchased Chemoswed. Plaintiffs claim that it was widely understood throughout the industry that Chemoswed would not be willing to sell commercial quantities to a generic manufacturer.

During 1995 to 1998, defendants claim that Chemoswed/DuPont received inquiries from at least two pharmaceutical companies, JLM and Rosemont, regarding clathrate. The price quoted to these entities was $30,000 per kilogram. Patel did not request material from Chemoswed/DuPont, stating that "it was not worthwhile" because "[w]e won't get the material."

B. Medea Research Laboratories

Medea Research Laboratories, Inc. ("Medea") provided 5 kilograms of clathrate to Invamed on January 11, 1994, and provided Invamed with a DMF reference letter on February 16, 1994. Medea's DMF for clathrate had been filed with FDA in August 1993. Although Invamed found Medea's clathrate suitable for use in its warfarin sodium tablets, Invamed returned the 5 kg order for credit in September 1994. Sometime after Invamed received Medea's material, Medea's plant was destroyed by fire.

C. Hoechst Celanese

On September 30, 1994, the API manufacturer Hoechst Celanese ("Hoechst"), a unit of Hoechst A.G., shipped Invamed a 100-gram sample of clathrate together with technical information. Hoechst manufactured clathrate at its facility in Coventry, Rhode Island. Invamed had previously dealt with Hoechst for ibuprofen API. Invamed's discussions with Hoechst continued in late 1995 and early 1996, as discussed below.

D. ACIC

1. Invamed's Relationship with ACIC

Invamed first became a customer of ACIC in the late 1980's or early 1990's. Sergio Getrajdman, ACIC's U.S. sales representative, ("Getrajdman") was responsible for sales to Invamed and reported to Calenti. Getrajdman, who operated out of an office in New Jersey, where Invamed was located, sold Invamed a variety of products, including atenolol, cimetidine, and nadolol, which ACIC either brokered for others or manufactured itself.

a. Atenolol

ACIC sold Invamed atenolol acting as broker for the manufacturer ICI, which was located in Italy. Dr. Pankaj Dave, Invamed's regulatory manager who joined the company in 1983 ("Dave"), contacted Getrajdman in advance of his purchase orders to discuss price, quantity and delivery dates for the material, and kept ACIC informed of the status of its ANDA approval.

In March 1994, after discussing with ACIC Invamed's requirements for the remainder of the year and negotiating price and payment terms, Dave submitted a purchase order for 10,000 kg of atenolol. ACIC confirmed the purchase order with its supplier and arranged for shipment of the first 500 kg. After receiving several shipments through the next year, Invamed canceled the purchase order in June 1996 with an undelivered balance of more than 7,000 kg.

b. Nadolol

On January 3, 1995, after discussing Invamed's commercial requirements with Getrajdman, Dave submitted a $1.8 million purchase order for 2,500 kg of nadolol, the first 500 kg to be delivered in mid-March [page 251] 1995. Although multiple shipments were made through the next year, the product was often unavailable. In June 1996, Invamed canceled the purchase order with an undelivered balance of more than 1,500 kg.

c. Cimetidine

ACIC sold Invamed cimetidine acting as broker for the manufacturer, Signa, in Mexico. In June 1993, Dave requested prices, technical information and samples. On October 7, 1993, Dave requested a price for 100 kg, was quoted $65 per kilogram, and followed up with a purchase order the next day. In February 1994, ACIC provided Invamed a DMF reference letter for the product. In May 1994, Invamed advised ACIC it had submitted its cimetidine ANDA and to prepare for an FDA inspection. In February 1995, Dave advised Getrajdman that Invamed would require 5,000 kg for its product launch, tentatively scheduled for July, and the parties discussed pricing on a target quantity of 45,000 kg per year. In April, Dave submitted a purchase order for 4,000 kg of cimetidine and advised Getrajdman that Invamed expected FDA approval within the next two weeks.

On May 13, 1995, Dave wrote Getrajdman requesting a cimetidine delivery schedule for June, and discussed projections for future deliveries. In light of product quality problems at the Signa plant, by September 1995 Invamed had refused delivery of cimetidine and held back payment for nadolol. On September 28, 1995, Getrajdman wrote Dave insisting on payment for nadolol and that Invamed accept and pay for shipments of cimetidine.

In December Invamed submitted a purchase order for 5,000 kg of cimetidine, and in January 1996 sought an agreement from ACIC to supply 75,000 kg for the next two years. By letter dated January 4, Patel sought a fixed price of $100 per kilogram for the first year, and, the same price for the second year for the first 75 tons and afterward a price of $90 per kilogram. Days later, however, after Getrajdman sent a draft agreement to Dave, Invamed issued a purchase order to ACIC for only 20,000 kilogram. Ultimately, Invamed stopped making the product.

2. Clathrate

On September 20, 1994, Dave discussed the availability of clathrate with Getrajdman, who told him there was no exclusive on the material and that ACIC could provide it to Invamed.

The next day, Dave telephoned ACIC for a price on 5-10 kilograms of clathrate and was quoted an approximate price of $2,500 per kilogram. On September 26, 1994, ACIC sent Invamed clathrate samples of 1g and 10g, and technical information, free of charge.[6] Invamed also received research and development quantities of clathrate in February 1995 and March 1995, free of charge. ACIC/Brantford provided the samples free of charge in anticipation of selling Invamed substantial quantities of clathrate if Invamed successfully developed warfarin sodium.

Invamed also purchased 15 kilograms of clathrate from ACIC/Brantford in February [page 252] 1995 and an additional 5 kilograms in July 1995, at a price of $2500 per kilogram. The February 1995 purchase order contained an attachment requesting a variety of other information and materials in addition to the requested quantity of clathrate.[7]

On March 7, ACIC shipped the 15 kg clathrate order, and on March 21 it shipped the three additional 50-gram samples with requested information.

On April 3, 1995, ACIC sent the FDA a DMF reference letter as requested in the purchase order and attachment. The same day, ACIC sent a copy of the letter to Invamed. It stated:

The letter constitutes a commitment to the FDA to manufacture clathrate in accordance with the requirements outlined in the DMF and the industry requirements if ACIC manufactures the product.

Plaintiffs claim that the sending of this letter also constituted a commitment that ACIC/Brantford would supply commercial quantities of clathrate to Invamed. However, the letter contains no language by which the manufacturer commits to supply the purchaser with the subject materials, although manufacturers can include such language in DMF letters. Further, Invamed did not consider itself obligated to purchase clathrate from all of the companies from which it obtained samples and DMF referral letters such as the one above.

On July 21, 1995, Dave submitted a second standard purchase order and attachment to Getrajdman for 5 kg of clathrate, and requested ACIC's safety and handling procedures for the product. ACIC faxed the requested information to Invamed on July 24, and Invamed received the shipment early in August.

On or about August 23, 1995, Getrajdman allegedly tried to discourage Invamed from pursuing its ANDA submission for warfarin sodium "on the pretext that others were ahead of him and his market share would thus be proportionally smaller."

In January 1996, Dave placed an order for an additional 12 to 14 kilograms of clathrate from ACIC/Brantford to perform tests on a particular machine. Getrajdman advised Invamed that he did not know when availability would allow ACIC to accept [page 253] an order for clathrate, and that he would have to check with Calenti. In a fax sent the next week, Dave asked Getrajdman to "let him know" so he could submit a confirming purchase order.

The January 1996 order was never fulfilled, and Invamed concluded that the failure to deliver was a result of "poor communication" between the two companies or that ACIC/Brantford was "too busy" to fill a small order. The principals of Invamed did not consider the failure to be serious. In place of ACIC/Brantford's clathrate, Invamed used non-FDA approved material it received from Hoechst.

Before 1996 and in 1996, Patel told Getrajdman that Invamed was working with ACIC/Brantford's material and would be filing its ANDA with it. Plaintiffs claim that Invamed also specifically advised ACIC/Brantford that it would be obligated to supply commercial quantities of clathrate when Invamed's ANDA was approved. Sometime in 1995, Getrajdman told Patel that ACIC/Brantford was one of the suppliers that had clathrate available and that when Invamed placed its order ACIC/Brantford would provide the material. Plaintiffs also claim that ACIC/Brantford "repeatedly assured" Invamed that it would supply commercial quantities of clathrate to it on numerous occasions in 1996. Plaintiffs claim that as part of this implied-in-fact contract, Invamed and ACIC agreed on the price and on a "commercial quantity." Further, Patel testified that as part of the agreement, Invamed had to give commercially reasonable notice of its orders. They did not agree on delivery dates.

By January 1996, ACIC/Brantford advised Invamed that it was looking to other API suppliers as possible replacement sources of clathrate for Invamed. At that time, Getrajdman told Dave about a possible switching of the manufacturing to Signa in Mexico to obtain clathrate for Invamed. On May 29, 1997, Getrajdman also advised Patel about a possible clathrate source in Italy, but Patel did not want to pursue that option.

On February 14, 1996, Dave sent a fax to Antoniette Walkom, ACIC's manager of regulatory affairs ("Walkom"), requesting that she provide "information with reference to Warfarin Sodium as requested by the FDA." Later the same day, Dave sent another fax to Walkom stating: "I feel that we have not been treated right and it seems to me that you are not dealing in good faith. I have some important questions regarding WARFARIN SODIUM BULK DRUG SUBSTANCE." Walkom forwarded the technical information to Dave on February 16 and 27, noting her displeasure with the tone and content of his fax.

In September 1996, after the sale of Calenti's remaining shares of ACIC to Apotex was complete,[8] ACIC/Brantford issued letters to some companies to which it had provided DMF reference letters, advising them of the change. The letter directed commercial inquiries to Brantford's new sales agent, ACIC Fine Chemicals. Invamed received a letter dated September 27, 1996, with regard to the three ACIC APIs on which it held a reference letter, including clathrate. The letter stated [page 254] that "[w]e would like to emphasize that the facilities, premises, and procedures as described in the respective files remain unchanged." The letter also asked recipients to inform Brantford of any products that had become inactive in order to update its records.

Invamed responded on October 4, 1996, and advised Brantford that each of these APIs was in active status. Invamed's letter did not inform Brantford that it had filed its ANDA for warfarin sodium or that it had utilized Brantford's DMF reference letter. It did request that the reference letter for clathrate "continue to be maintained."

In the spring of 1997, Dave asked Getrajdman for 100-150 kilograms of clathrate. Getrajdman explained that ACIC/Brantford would be able to deliver such material as soon as the FDA approved two generic manufacturers' ANDAs for warfarin sodium. He provided no explanation of why there had to be two approvals, but stated that he may be able to provide clathrate before then. In fact, because of the exclusive supply contract with Barr, ACIC/Brantford could not supply a commercial quantity of clathrate until another generic manufacturerbesides Barr was selling warfarin sodium. Thus, in effect, the FDA would have approved two generic warfarin sodium manufacturers at the time ACIC/Brantford could supply a commercial quantity of clathrate.

At or about this time, Patel informed Yashvant Patel that Invamed was having clathrate supply problems and that Invamed would have to "play this right" so that it would not be "cut off from the raw material supply." Patel was worried that if Invamed put too much pressure on ACIC for the material, Invamed's DMF access letter could be withdrawn. According to Patel, withdrawal of the access letter would have a "catastrophic effect on the company versus having the DMF and ANDA maintained" because "the ANDA would be kicked out and we'd be starting from ground zero." Patel elected to wait until after the FDA approved Invamed's ANDA to pressure ACIC.

E. Banyan Chemicals

By May 1995, Invamed had decided to develop a process to produce clathrate internally and to transfer that knowledge to Banyan Chemicals (Private) Ltd. ("Banyan"), an Indian API manufacturer located in Baroda, India and formed in the early 1990's.[9]

1. The 1992 MOU

On February 4, 1992, Invamed and Banyan executed a Memorandum of Understanding ("Memorandum") regarding the development and supply of APIs by Banyan for Invamed. The Memorandum included provisions regarding product development, transfer of technology, training of personnel and the manufacturing and marketing of several bulk active drug substances. Under the Memorandum, which was to run seven years, Banyan agreed to manufacture three APIs for Invamed, supply Invamed's requirements of these APIs on an exclusive basis in the U.S., and develop such other drug substances that Invamed requested. The Memorandum further provided that all information transferred between Invamed and Banyan pursuant to the agreement would not be disclosed to third parties and would be kept "secret." [page 255]

2. The May 1995 Addendum

On May 16, 1995, Invamed and Banyan executed an Addendum to the Memorandum of Understanding ("Addendum") that expanded the list of products covered by the original 1992 agreement to include clathrate. Invamed included warfarin sodium as one of the products covered by the Addendum because it had begun the product development process for warfarin sodium, wanted to pursue the product for eventual commercialization, and because it was "good business practice" to have a second source for clathrate. Invamed had a policy of having two raw material suppliers for every approved drug if possible.

To compensate Banyan for expenses incurred in modifying its plant to facilitate the manufacture of clathrate, Invamed agreed to "purchase [clathrate] from Banyan ... at a premium to the prevailing world market prices ... until such time as the additional costs are recouped by Banyan. ..."

The Addendum also provided that Invamed "shall be required to purchase 80% of its annual requirements for [clathrate] from Banyan after receiving formal approval from the U.S. Food and Drug Administration," and gave Invamed "the option to purchase 100% of the annual requirements for [clathrate] from Banyan." It also provided that "Banyan shall not sell any quantity of the Products directly to the U.S. market, nor shall they enter into any agreements to supply the Products to any third party for sale into the U.S. market for the duration of [the] Agreement." The advantage to Invamed of entering into an exclusive relationship with Banyan was that Invamed would have a guaranteed supply of raw material, and would be guaranteed the quantity of raw material it required without having to share Banyan's production capacity with other customers and risk the non-availability of raw materials.

At the time, Invamed did not tell ACIC of the Banyan contract, as was consistent with Invamed's business practice. In addition, Invamed's rights and obligations relating to clathrate would come into existence only if and when Banyan produced clathrate and supplemental ANDA approval. In 1995, Banyan had not produced clathrate and did not know how to do so. Invamed did not consider Banyan to be a viable supplier because it was not capable of producing warfarin sodium so as to permit Invamed to obtain FDA approval and enter the market in a timely fashion. Banyan's factory was completed in the first quarter of 1997, and Banyan filed a DMF for clathrate in mid-1998.

F. Other Potential Suppliers

Defendants claim that other suppliers were able to supply clathrate or could have gained the competence to supply clathrate besides the ones mentioned above.

1. Taro Pharmaceuticals

Since 1996, Taro Pharmaceuticals Industries Ltd. has manufactured clathrate that conforms to USP standards. During each year from 1996-1998, Taro manufactured between 25-50 kilograms of clathrate for sampling purposes and for research and development. On November 18, 1997, Taro submitted a DMF to the FDA for clathrate.

Taro has had no dealings with Invamed with respect to clathrate. Invamed was aware of Taro at least by 1997, when Taro attempted to contact Invamed. Patel did not return Taro's telephone calls because he did not want to divulge any information on warfarin to Taro.

Taro launched its own finished-dosage generic warfarin sodium tablets in the United States in September 1999, using its [page 256] own internally developed source of clathrate. Plaintiffs dispute whether Taro had the capacity to manufacture 400 kilograms of clathrate for other customers and whether Taro has offered to sell clathrate to other pharmaceutical companies.

2. API Manufacturers Willing to Produce Clathrate

a. Diosynth/Rosemont

Since 1996, Diosynth has been capable of manufacturing commercial quantities of clathrate if provided with a non-infringing process, synthesis or formulation by a pharmaceutical company. Since 1997, through its own internally developed process, Diosynth has been capable of supplying pharmaceutical manufacturers with sufficient quantities of clathrate so that they could engage in the commercial development and manufacture of warfarin sodium tablets. In September 1999, Diosynth filed a DMF for clathrate.

Diosynth has had no dealings with Invamed or Apothecon with respect to clathrate. Invamed did not pursue Diosynth as a source for clathrate because of "the ownership between Rosemont and Akzo [-Nobel]." Patel also testified that before February 1998 he did not know that Diosynth was a potential supplier.

b. Chemagis

Chemagis offered to manufacture clathrate for Invamed. Plaintiffs dispute whether it was capable of timely doing so.

c. Lachema

In December 1997, Invamed received samples of clathrate from Lachema, which filed in December 1996 for a DMF for clathrate. Invamed tested the samples and determined them to be suitable for use. On February 26, 1998, Invamed placed an order with Lachema's agent Chemapol for 15 kilograms of clathrate for research and development.

Invamed revised the terms and conditions attached to a purchase order for Lachema. The revised attachment included several new provisions:

At the advice of counsel, Invamed included this language because it wanted to ensure continuity of supply.

Lachema issued a DMF reference letter to Invamed in March 1998. At least one internal Lachema document states that, as of March 1998, Invamed was "prepared to enter into a 3 to 5 year Contract for supplies of Warfarin Sodium Clathrate." The document further states that Lachema agreed to "maintain a continuous supply of [clathrate]" (200-300 kg per month) "to satisfy the future requirements of Invamed." [page 257]

Invamed never received the 15-20 kilograms of clathrate it ordered from Lachema. When the material was not delivered for 6-9 months, Invamed learned from Lachema that the "Eastern Europe block bureaucracy" had accounted for the delay. Invamed then rejected the offer to take the material.

d. Arenol

During the 1995-97 time-frame, Arenol manufactured APIs including amphetamines and methamphetamines. Based upon one eight hour shift per day, five days per week, Arenol's plant was capable of producing 5,000 kilograms of any API in a given year. Arenol could have increased this capacity by adding shifts, if it so desired. However, Arenol never filed a DMF for clathrate and plaintiffs dispute that Arenol had the ability to produce clathrate in 1995.

Arenol engaged a consulting chemist to develop the process for producing clathrate in 1997. The chemist developed a procedure for the commercial manufacture of clathrate in mid-1998. Using the chemist's process, Arenol manufactured three 15 kg pilot batches of clathrate. The batches that were manufactured were USP compliant.

In 1997, Apothecon's Doug Hamilton learned that Medea had transferred its warfarin sodium technology to Arenol and that Arenol had manufactured USP-grade batches of clathrate and had 10 to 12 DMFs on file for other products. Arenol informed Hamilton that Arenol could produce USP-grade clathrate batches by the first quarter of 1998. In August 1998, a fire destroyed Arenol.

e. Vinchem

In December 1997, Vinchem, a broker of raw materials, offered Invamed an exclusive clathrate supply contract in November 1997, and offered to supply 15 kg of clathrate in three shipments of 5 kg each, beginning in March 1998. Invamed ultimately decided not to pursue Vinchem because Patel believed Vinchem would not be a viable supplier of clathrate. Invamed did not investigate to determine whether Vinchem had access to a viable source of clathrate. Prior to this time, Invamed had purchased other APIs from Vinchem.

IV. Invamed Turns to Hoechst for Additional Clathrate to Complete Its Product Development

Beginning in December 1995, Invamed began discussions with Hoechst, which had by then developed an acceptable process for manufacturing clathrate. In early 1996, Hoechst completed product development work at its Coventry, Rhode Island facility. Hoechst then determined it would be able to manufacture approximately 1,000 kilograms of clathrate per year.

At the time, Hoechst was willing and able to enter into a long-term supply contract with Invamed for clathrate. Hoechst, however, wanted an exclusive supply agreement, to which Invamed would not agree. The parties also could not agree on a firm price. As a result, Hoechst would only sell Invamed clathrate on a "spot" basis, from purchase order to purchase order.

On January 12, 1996, Invamed submitted a purchase order to Hoechst for 14 kg of clathrate Invamed needed for its warfarin sodium development work. Unlike its standard purchase order, however, and despite the lack of any prior agreement, Invamed included a handwritten notation on the face of the purchase order that read: "It shall be obligatory on the part of Hoechst Celanese Corporation to supply the material as of now and for a period of three years after the approval of the ANDA and in case Hoechst Celanese decides [page 258] to discontinue product a period until an alternate source is qualified and approved by the FDA." The attachment also required Hoechst to supply a DMF referral letter.

On January 17, 1996, Hoechst's sales representative, Gary Moss ("Moss"), advised Dave and Patel that the additional "obligation" language in the purchase order was unacceptable. Moss further advised that Invamed's order would be put on hold until some "significant items" were resolved, including the state of Hoechst's production, the progress on its DMF and technical materials (which were months away), and the price of the product. Ultimately, Hoechst returned the revised purchase order to Invamed with the language regarding the supply obligation stricken, and shipped the product.

On March 29, 1996, Invamed submitted a purchase order to Hoechst for 8 additional kilograms of clathrate. The purchase order contained no commitment language. Invamed submitted the purchase order to Hoechst because ACIC/Brantford had not responded to its earlier request and because Patel believed ACIC would not supply that amount to Invamed.

Invamed used this Hoechst material for its warfarin sodium development, and in April began manufacturing warfarin sodium tablets using Hoechst's clathrate to complete its product development work and its ANDA. Patel stated that "Hoechst was a suitable alternative to ACIC." [10]

V. Invamed Files Its Warfarin Sodium ANDA

On June 14, 1996, Invamed submitted its ANDA for warfarin sodium to the FDA. Invamed listed ACIC as its source for raw material and included the DMF reference letter ACIC had sent in April 1995. Plaintiffs relied on the alleged repeated representations by ACIC/Brantford that it would supply commercial quantities of clathrate to Invamed and the purported industry practice that it would do so.

On June 28, 1996, Invamed and Apothecon entered into an exclusive five-year Development and Supply Agreement in connection with the manufacture and marketing of a number of generic pharmaceuticals, including warfarin sodium. In that agreement, Invamed contracted to manufacture warfarin sodium for Apothecon, which Apothecon would then market to its customers. Invamed received $2.1 million up front and was to be paid a transfer price for the tablets it made for Apothecon plus a percentage of the profits.[11] The timetable attached to the agreement targeted June 1997 as the date for FDA approval of Invamed's ANDA for warfarin sodium, and listed August 1995 as the date the "drug substance vendor" had been "contracted." As of August 1995, Invamed had executed a written contract with only Banyan, which did not have the capability of producing clathrate at the time.

On July 29, 1997, Getrajdman e-mailed a press release to Dave regarding Barr's launch of warfarin sodium. In his e-mail, Getrajdman indicated that he would "commence [his] pressuring of the manufacturer again, as they promised to review the possibilities after launch."

Also on July 29, 1997, after Invamed and Apothecon held a warfarin marketing [page 259] meeting, raw material sourcing remained as an item requiring action from Invamed. A subsequent Apothecon warfarin launch proposal similarly noted "Raw Materials Still Not Secured" and further listed "Secure Raw Materials!" as the first of many items on a list entitled "What We Need To Do."

In late September, Dave and Patel informed Doug Hamilton, Apothecon's Director of Sourcing ("Hamilton"), that they expected ANDA approval any day, but that Invamed had no contract in writing with ACIC/Brantford. Hamilton was also informed that pricing on clathrate was "[approximately] $3500/kg ... Invamed even fuzzy here." Invamed also identified its plan to obtain clathrate: "get approval then place order with ACIC. Take things from there."

By this time, Apothecon had forecasted 1997-1999 warfarin sodium sales of between $87 million and $112 million.

VI. Invamed Arranges for Other Clathrate Suppliers after the Submission of Its ANDA

A. Invamed Requests Additional Clathrate from Hoechst

In July 1996, Invamed provided information about its ANDA filing and relayed its clathrate needs and timing to Gary Moss of Hoechst. As Moss reported in a memorandum to his supervisor, Invamed's original plan "was to submit their ANDA based on" other clathrate and substitute Hoechst's material "at the appropriate time to the FDA without losing time on the ANDA/SNDA approval." Moss wrote that Invamed never communicated the exact need of volume and time when asked on two separate occasions until July. He also stated that Patel threatened to go to ACIC if Hoechst could not supply clathrate by November. Hoechst submitted its DMF for clathrate in August 1996.

B. Invamed Develops a Manufacturing Process for Clathrate

In July 1996, Patel asked Dr. Chandra Kasireddy, one of Invamed's senior research scientists ("Kasireddy"), to develop a process for manufacturing clathrate. Patel intended to provide this process to another supplier that would manufacture the product for Invamed. By November 1996, Dr. Kasireddy had performed several tests and found it a "simple process" to prepare clathrate in conformance with Invamed's specifications. Kasireddy prepared a document that summarized his process.

C. Invamed Hires a Broker to Locate Manufacturers

Invamed hired Ceres Chemical, a chemicals broker, to find potential clathrate manufacturers.

1. Invamed's Negotiations with Pharmeco

In the summer of 1996, Ceres put Invamed in touch with Pharmeco, a Boston area chemical manufacturer, about manufacturing clathrate for Invamed using Kasireddy's process. In September 1996, Invamed entered into a Non-Disclosure Agreement with Ceres and Pharmeco concerning their warfarin sodium discussions. Pharmeco, however, ultimately declined to enter into an agreement to manufacture clathrate for Invamed based on environmental and safety issues relating to the product.

2. Invamed's Negotiations with Chemagis

Ceres also brought Chemagis, an Israel-based manufacturer of raw materials, to Invamed's attention. In the fall of 1996, Patel and Yashvant Patel met with Chemagis [page 260] to discuss the possibility of Chemagis's manufacturing clathrate for Invamed and entered into a Non-Disclosure Agreement with Ceres and Chemagis regarding their warfarin sodium discussions. Patel provided Chemagis with a flowchart of the process involved.

In or around November 1996, Chemagis offered to enter into an agreement with Invamed for the supply of clathrate. Chemagis offered to manufacture clathrate for Invamed if Invamed would pay for certain costs associated with setting up a separate manufacturing facility, which Chemagis estimated would take approximately eight months, and bear some of the expenses involved in obtaining a DMF approval. Invamed rejected this proposal because it did not want to pay for the up-front costs and because it was concerned that Chemagis's time-frame to set up the manufacturing process was too long. Invamed had no further communication with Chemagis regarding warfarin sodium.

D. Banyan Begins Manufacturing Clathrate

In March 1997, Kasireddy went to India to train Banyan personnel in the process he had developed for synthesizing clathrate. By the end of May 1997, Kasireddy had produced acceptable pilot-plant scale batches in the Banyan facility.

On September 24, 1997, when Invamed knew its ANDA approval was imminent, Invamed ordered 29.5 kilograms of clathrate from Banyan at $4,000 per kg. Invamed planned to supplement its ANDA with Banyan's clathrate. The next day, the idea to present a "hardship case" to the FDA for expedited approval was raised in a meeting with Apothecon.

The FDA inspected Banyan's plant in connection with the manufacture of clathrate in September 1998.

E. Invamed Enters a Supply Agreement with Shanghai Shenxing

In July or August 1996, Invamed had requested that ChemWerth, a pharmaceutical manufacturers' representative and consultant, develop an FDA-approved source of clathrate for Invamed. ChemWerth advised Invamed that a Chinese manufacturer known as Shanghai Shenxing (also known as Shanghai # 16) ("Shanghai") was capable of producing clathrate that complied with USP, and offered Invamed an exclusive supply arrangement. On December 5, 1996, ChemWerth received its first sample of USP clathrate from Shanghai.

On April 8, 1997, Invamed received from ChemWerth samples of Shanghai clathrate, that were tested and found to be of very good quality. ChemWerth also sent a written proposal to Invamed for a three-year supply of clathrate from Shanghai. ChemWerth sent a letter to Invamed confirming Invamed's verbal commitment to use Shanghai as a source for clathrate on May 1, 1997. However, later in 1997, Patel told ChemWerth to put its development of the Shanghai source "on hold" when Banyan began producing clathrate.

VII. Invamed's ANDA Is Approved and It Submits a Purchase Order to Brantford for 750 kg of Clathrate

A. Invamed Submits a Purchase Order to Brantford

On September 30, 1997, Invamed received approval from the FDA for its warfarin sodium ANDA. The next day, October 1, 1997, Invamed submitted a $1,875,000 purchase order to ACIC Fine Chemicals for 750 kilograms of clathrate in three shipments of 250 kilograms each, at [page 261] a price of $2,500 per kilogram.[12] The purchase order requested that the first shipment be delivered "as soon as possible (rush order)" and that the second and third shipments be delivered on January 1, 1998 and April 1, 1998, respectively.

Invamed's purchase order was accompanied by a cover letter to Getrajdman in which Invamed informed Getrajdman that it had received FDA approval to manufacture and distribute warfarin sodium tablets. The letter requested that ACIC Fine Chemicals, Inc. supply Invamed with clathrate pursuant to the purchase order enclosed and made reference to an "agreement" for the supply of clathrate.

No one at Invamed advised Getrajdman in advance of the purchase order. Prior to submission of the purchase order, Invamed made no inquiries regarding Brantford's availability or capacity to manufacture clathrate, its campaign schedule,[13] or its price. Invamed also did not keep ACIC informed of Invamed's anticipated launch date, commercial requirements or delivery forecasts. Before it submitted its purchase order, Invamed did not provide ACIC with a projection of its commercial or launch quantities, and did not discuss with Brantford the price, quantity, annual requirements, payment terms, delivery schedule, packaging or labeling requirements, or in any other way determine whether the terms were acceptable to Brantford.

There were no discussions at any time between Invamed and ACIC regarding a guarantee by Invamed to purchase clathrate from ACIC or Brantford. Patel never asked Getrajdman or Calenti about the possibility of entering a written supply contract, and Invamed never sought or discussed an exclusive with ACIC or Brantford.

B. Brantford Rejects Invamed's Purchase Order

In early October 1997, James Berhalter, Brantford's new director of finance and administration ("Berhalter") received the order. Plaintiffs claim that upon receipt of the letter ACIC/Brantford immediately advised Barr that Invamed was seeking to purchase clathrate.

On October 16, 1997, Patel sent letters to Calenti and Berhalter threatening legal action against ACIC Fine Chemicals, Inc. and Brantford if Invamed did not receive clathrate from ACIC by October 20, 1997. Berhalter was wary of dealing with Invamed because of Brantford's earlier problems with Invamed. After conferring with the company's president, Dr. Murthy, Berhalter decided to reject Invamed's purchase order and sent a letter to Invamed to that effect on October 20, 1997. ACIC/Brantford thereafter refused to accept Invamed's orders, and plaintiffs learned for the first time that ACIC/Brantford would not supply clathrate [page 262] to Invamed as a result of its agreement with Barr.

Plaintiffs claim that ACIC/Brantford had the capacity to manufacture clathrate for plaintiffs and would have filled plaintiffs' order if not for its agreement with Barr. ACIC/Brantford had planned the production of 1100 kilograms of clathrate in the fall of 1997, even though Barr had only requested 900 kilograms. In fact, it was unable to produce 1100 kilograms because it did not obtain timely delivery of raw material.

VIII. Invamed Obtains Expedited FDA Approval to Include Banyan and Apothecon Launches Its Product

Upon learning that they would not obtain clathrate from ACIC/Brantford, plaintiffs determined that the fastest way to get to market was to assist Banyan in developing a processfor manufacturing clathrate.

A. Invamed Supplements Its ANDA with Banyan's Clathrate

On May 2, 1998, Banyan submitted its DMF, compiled with Invamed's assistance, to the FDA. On May 13, 1998, Banyan sent the FDA a DMF reference letter for Invamed.

Three days later, on May 16, 1998, Invamed submitted a supplement to its ANDA seeking approval to manufacture warfarin sodium tablets using Banyan clathrate. Invamed sought expedited approval of this supplement. Invamed's supplement to its ANDA to add Banyan as a supplier was approved on October 8, 1998, and Apothecon began marketing warfarin sodium tablets on October 21, 1998. Plaintiffs claim that its entry caused the price of generic warfarin sodium to decline substantially.

At the time, Barr had been selling its product for sixteen months. Plaintiffs claim that, as a result, Barr had the "first mover's" advantage, and that customers were unwilling to switch to plaintiffs' product even though its price was lower than Barr's.

B. Invamed Supplements with Shanghai's Clathrate

On October 8, 1997 Invamed submitted a purchase order to ChemWerth for thirty kilograms of Shanghai's clathrate. Prior to submission of the purchase order, Patel and Dave discussed price, quantity and delivery date particulars with ChemWerth representatives. Invamed used the clathrate obtained from Shanghai to make several trial batches of dosage form warfarin sodium. This material met Invamed's specifications.

Invamed ordered an additional fourteen kilograms of Shanghai's clathrate from ChemWerth on March 13, 1998 and an additional sixteen kilograms on April 13, 1998. ChemWerth submitted a DMF reference letter for Invamed to the FDA on May 29, 1998. On July 14, 1999, Invamed filed a supplement to its ANDA to add Shanghai's clathrate.

IX. The Warfarin Sodium Market

A. Plaintiffs Recognize that Generic Warfarin Sodium Competes with Coumadin®

Apothecon's marketing, training, and business documents state that (1) "This product ... will compete with the innovator product, DuPont's Coumadin®"; (2) the "competition" is "Coumadin®" and "Barr's warfarin"; (3) the "introduction of Barr's warfarin and [Apothecon's] warfarin sodium has placed Coumadin® in a defensive position for the first time"; (4) Apothecon's two "competitors" are DuPont and Barr; (5) the "competition" for Apothecon's generic warfarin sodium is [page 263] "Barr's warfarin and Coumadin®"; (6) Apothecon's generic warfarin sodium product is "NO DIFFERENT THAN [THE] INNOVATOR PRODUCT!!!"

Sales representative training materials issued by Apothecon contain competitive analyses of Coumadin® and also specifically addressed strategies and selling points regarding the substitution of Apothecon's warfarin sodium product for Coumadin®.

For the following facts, plaintiffs state that "[i]n light of the material facts discussed in Plaintiffs' affirmative statement, there exists a genuine issue to be tried as to whether Coumadin® competes in the same market as generic warfarin sodium." As discussed above, this Court will accept the facts below despite this response because the plaintiffs failed to point to specific material facts in its affirmative statement to support the existence of a triable issue of material fact.

Apothecon presented its generic product as "a reliable, predictable, lower-cost bioequivalent alternative to Coumadin®," and highlighted its AB-rated therapeutic equivalence to the brand and its adoption of DuPont's content-uniformity standards.

Apothecon and Invamed personnel admit that their warfarin sodium competes against Coumadin® and Barr's warfarin sodium. Patel agreed that with respect to warfarin sodium, "the other competitors in the marketplace are Barr and DuPont."

In setting prices for its warfarin sodium, Apothecon considered and compared its own prices with that of Coumadin®. For example, in a memorandum from March 1999, Joseph Grotzinger stated: "Apothecon recently learned that both of our competitors (brand and generic) have raised their wholesale list prices. This action has resulted in a competitive disadvantage to Apothecon. ... It is recommended that the attached list prices be established for Apothecon's Warfarin Sodium Tablets."

Apothecon actively attempted to switch customers using Coumadin® to the Apothecon product. Apothecon had market share programs providing financial incentives to customers in order to increase the amount of plaintiffs' product dispensed as a percentage of "all warfarin sodium tablets dispensed."

In analyzing their potential and actual market share, Apothecon routinely included plaintiffs' warfarin sodium, Barr's warfarin sodium, and Coumadin® in one market. Upon the launch of plaintiffs' product, for example, Apothecon analyzed total warfarin sodium sales and market share, defining the total market to include both Coumadin® and Barr. In February 1999, Apothecon measured its share of new patient starts against both Barr and Coumadin®. In October 1999, Apothecon examined its share of new and total prescriptions for warfarin sodium -- including Coumadin® and Barr in both categories of the market.

Apothecon's sales of generic warfarin sodium, as well as its market share, come at the expense of Coumadin®, the branded version of warfarin sodium. Generic warfarin sodium takes market share from Coumadin® as a result of the generic's lower price and conversion incentives offered to encourage switching.

This is the end of one section that plaintiffs dispute because they claim that there exists a genuine issue to be tried as to whether Coumadin® competes in the same market as generic warfarin sodium. As discussed, supra, plaintiffs have failed to prove that such issue of material fact exists.

B. Relative Growth Of Brand And Generic Warfarin Sodium Sales

Total warfarin sodium sales grew from 3.41 billion milligrams in 1998 to 3.53 billion [page 264] milligrams in 2000, an increase of 0.13 billion milligrams. From 1998-2000, annual sales of generic warfarin sodium increased by approximately 0.57 billion milligrams, while sales of Coumadin® decreased by approximately 0.45 billion milligrams. The growth in generic warfarin sodium sales thus exceeded the growth in total warfarin sodium sales. Consequently, at least 77 percent of the increase in generic warfarin sodium sales realized between 1998 and 2000 came directly from former Coumadin® sales.

C. DuPont Recognizes that Coumadin® Competes with Generic Warfarin Sodium

Prior to the launch of either the Barr or Apothecon generic warfarin sodium products, DuPont conducted research and concluded that the "Availability of a Generic Sodium Warfarin Will Impact Coumadin® Sales." In addition, DuPont set forth strategies and selling points to be implemented immediately after generic availability. DuPont responded to Barr's entry by implementing incentive and rebate programs to encourage numerous wholesalers and retailers to purchase Coumadin® instead of Barr's generic warfarin sodium. DuPont considered launching, and could have launched at the same time as a generic competitor, its own generic warfarin sodium product. DuPont priced Coumadin® as a generic for certain customers.

On March 22, 1996, DuPont requested that the USP tighten its content uniformity specifications for warfarin sodium tablets so that generic manufacturers would have to utilize the stricter content uniformity manufacturing standards for warfarin sodium utilized by DuPont. In March and July 1997, the USP denied DuPont's request. DuPont also petitioned state legislatures and formulary boards to place restrictions on the substitutability of NTI drugs such as warfarin sodium.

On September 18, 1996, DuPont filed a Petition For Stay of Action with the FDA asking that approval of any pending applications for generic warfarin sodium be stayed until such time as the FDA adopted new, more restrictive bioequivalence approval standards for generic warfarin sodium. In its Petition, DuPont also noted that its content uniformity specifications for warfarin sodium were stricter than those set forth by the USP and proposed that the FDA adopt DuPont's stricter standards. Concluding that the standards DuPont proposed "were neither necessary nor appropriate," on March 25, 1997, the FDA rejected DuPont's request.

On July 28, 1997, the date on which Barr came to market with its generic warfarin sodium product, DuPont issued a press release warning that "if warfarin sodium products are interchanged, patients should receive additional blood tests to ensure the amount of drug in their blood stream is appropriate for their condition." The press release also stated that Barr "focuse[d] on producing a 'cheaper' " product while DuPont "focuses on patient safety and education and the future health of ... patients." DuPont repeated its claims in nationwide communications to physicians and pharmacists, to the FDA and to industry regulators.

In an August 26, 1997 letter to DuPont, the FDA called DuPont's Coumadin® promotional activities "false and misleading." Specifically, the FDA criticized DuPont's suggestion that generic warfarin sodium was not therapeutically equivalent to Coumadin®. The FDA stressed that "[a]ll FDA approved dosage forms of generic drugs classified as therapeutically equivalent and coded AB can be substituted for the reference product with the full expectation that the substituted product will [page 265] produce the same clinical effect and safety profile."

D. Barr Competes against DuPont

Barr sponsored two clinical studies that separately established the interchangeability of Barr's product for DuPont's Coumadin® and disseminated the studies' findings to physicians, pharmacists and other health care providers.[14] Barr also disseminated the positive results of a third clinical study on product interchange (between Barr's product and Coumadin®) that had been conducted by an independent organization.

Barr extended numerous discounts and incentives to customers in order to encourage pharmacies to switch Coumadin® sales to generic sales of warfarin sodium tablets.

In determining its own price for warfarin sodium, Barr considered and analyzed the price of Coumadin®. Barr even adjusted the price of its generic warfarin sodium prior to launch in response to a Coumadin® price increase so that Barr's price could be sustained at 70% of the price of Coumadin®.

X. Market Share Data

As of March 2001, Barr accounted for close to 80 percent of the generic warfarin sodium sales.

Its representation in the total sales of generic and branded warfarin sodium is consistently lower. At the end of 1997, Barr's share was 8%. It grew to 15% at the end of 1998 and 18% at the end of 1999. At the end of 2000, Barr's share was 24%, dropping to 20% in March 2000. By contrast, at the end of 2000, Apothecon's share of the total sales of generic and branded warfarin sodium was 5% and Taro's share was 3%.

DISCUSSION

Jurisdiction

This Court has jurisdiction pursuant to 28 U.S.C. § 1337 in that it involves a federal question under the antitrust laws of the United States, particularly the Sherman Antitrust Act, 15 U.S.C. § 1 et seq. and sections 4, 7 and 16 of the Clayton Act, 15 U.S.C. § § 15, 18, & 26 and pursuant to this Court's supplemental jurisdiction under 28 U.S.C. § 1367(a) and Rule 18(a) of the Federal Rules of Civil Procedure.

Standards for Summary Judgment

Rule 56(e) of the Federal Rules of Civil Procedure provides that a court shall grant a motion for summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits ... show that there is no genuine issue as to material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Silver v. City Univ., 947 F.2d 1021, 1022 (2d Cir.1991). "The party seeking summary judgment bears the burden of establishing that no genuine issue of material fact exists and that the undisputed facts establish her right to judgment as a matter of law." Rodriguez v. City of New York, 72 F.3d 1051, 1060-61 (2d Cir.1995). In determining whether a genuine issue of material fact exists, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. [page 266] Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Gibbs-Alfano v. Burton, 281 F.3d 12, 18 (2d Cir.2002).

[1] Plaintiffs contend that summary judgment is inappropriate in complex antitrust litigation, relying on Poller v. Columbia Broad. Sys., Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962) (holding that summary judgment was often inappropriate in antitrust cases because of the emphasis on motive, intent, hostile witnesses, and the fact that the proof is largely in the hands of the alleged conspirators). Following Matsushita, 475 U.S. at 578, 106 S.Ct. 1348, Anderson v. Liberty Lobby, 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), and Celotex, 477 U.S. at 323-24, 106 S.Ct. 2548, however, the federal courts have confirmed that summary judgment is a useful tool to "isolate and dispose of factuallyunsupported claims" in antitrust cases. Virgin Atlantic Airways, Ltd. v. British Airways PLC, 257 F.3d 256, 262 (2d Cir.2001) (recognizing the difficulty of granting summary relief in antitrust cases but upholding district court's grant of summary judgment); see also H.L. Hayden Co. v. Siemens Med. Sys., Inc., 879 F.2d 1005, 1011-12 (2d Cir.1989) ("Both the Supreme Court and [the Second Circuit] have encouraged the use of summary judgment in complex cases to avoid unnecessary trials."). As discussed below, the antitrust claims in this case may be resolved without regard to issues of intent or motive and without reliance on facts in the hands of defendants or hostile witnesses.

I. Monopolization and Attempted Monopolization

Plaintiffs' monopolization claims relate both to the warfarin sodium product and to the clathrate used to make such products. Counts 1 and 2 (monopolization and attempted monopolization) accuse Barr and ACIC/Brantford of violating § 2 of the Sherman Act by using their "monopoly power" in the clathrate market to foreclose competition in the "market(s) for generic warfarin sodium and/or branded and generic warfarin sodium. ..."

[2] [3] [4] The offense of monopolization under § 2 of the Sherman Act has two elements: "(1) possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished rom growth or development as a consequence of a superior product, business acumen or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966). The offense of attempted monopolization requires plaintiffs to prove "(1) that the defendant has engaged in predatory or anti-competitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power." Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993). In order to determine whether there is a dangerous probability of monopolization, courts consider the relevant market and the defendant's ability to lessen or destroy competition in the market. Id.

A. Warfarin Sodium

1. The Relevant Market

The first step in assessing whether a defendant possesses monopoly power is to define correctly the relevant market in which that power is allegedly being exercised. Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965) ("[W]ithout a definition of that market, there is no way to measure [a defendant's] ability to lessen or destroy competition."); [page 267] Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 268 (2d Cir.1979) ("[T]he first step in a court's analysis must be a definition of the relevant market.") (citing United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391-93, 76 S.Ct. 994, 100 L.Ed. 1264 (1956)).

Plaintiffs' § 2 claims turn on whether the relevant market is comprised solely of generic warfarin sodium or whether it includes the branded warfarin sodium (Coumadin®).

[5] The relevant market for purposes of antitrust litigation is the "area of effective competition" within which the defendant operates. Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327-28, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961). As the Court explained in E.I. du Pont de Nemours:

"The market which one must study to determine when a producer has monopoly power will vary with the part of commerce under consideration. The tests are constant. The market is composed of products that have reasonable interchangeability for the purposes for which they are produced -- price, use and qualities considered." 351 U.S. at 404, 76 S.Ct. 994.

[6] Products need not be identical to be part of the same market. Id. at 394, 76 S.Ct. 994 ("[W]here there are market alternatives that buyers may readily use for their purposes, illegal monopoly does not exist merely because the product said to be monopolized differs from others."). Two products or services are reasonably interchangeable where there is sufficient cross- elasticity of demand. Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962) ("The outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it.").

"Cross-elasticity of demand exists if consumers would respond to a slight increase in the price of one product by switching to another product." AD/SAT, Div. of Skylight, Inc. v. Associated Press, 181 F.3d 216, 227 (2d Cir.1999); Ally Gargano/MCA Adver., Inc. v. Cooke Props., Inc., No. 87 Civ. 7311 (RWS), 1989 WL 126066, at *21 (S.D.N.Y. Oct.13, 1989).

[7] Within the relevant markets, there may also exist "well-defined submarkets [15] ... which, in themselves, constitute product markets for antitrust purposes." Brown Shoe, 370 U.S. at 325, 82 S.Ct. 1502. A submarket may be determined by examining such practical indicia as (1) industry or public recognition of the submarket as a separate economic entity, (2) the product's peculiar characteristics and uses, (3) the unique production facilities, (4) distinct customers, (5) distinct prices, (6) sensitivity to price changes, and (7) specialized vendors. Id.

[8] Plaintiffs argue that generic warfarin sodium products are a well- defined submarket within the larger warfarin sodium market. The issue of generic and branded pharmaceuticals has been discussed by other courts in antitrust cases.

For instance, the District Court for the Eastern District of Michigan addressed the issue of competition between branded drugs and their generic equivalents.

See also Barr Labs. Inc. v. Abbott Labs., 978 F.2d 98, 102 (3d Cir.1992) (stating that jury determined that the relevant market included generic and branded erythoromycin); In re Terazosin Hydrochloride Antitrust Litig., 203 F.R.D. 551, 558 n. 9 (S.D.Fla.2001) (looking to price difference of branded and generic pharmaceutical in measuring overcharge because no material difference between branded and generic pharmaceutical product); In re Warner Lambert Co., 87 F.T.C. 812, 877 (1976) (branded and unbranded thyroid products constituted a single product market despite the existence of price differences between the two products).

There is no dispute that the parties' generic warfarin sodium products are fully interchangeable with each other and with Coumadin®. In order to obtain FDA approval, Barr, Taro, and plaintiffs were required to demonstrate that their generic warfarin sodium products were bioequivalent to Coumadin® and have the same active ingredient, conditions of use, route of administration, dosage form, strength, and labeling. By law, generic sodium warfarin is sold with the same package insert as the brand and is subject to the same prescribing indications and warnings. Barr and the plaintiffs use the same tablet colors as Coumadin® to signify different dosage sizes. Finally, Barr and Apothecon also conducted hospital-based studies demonstrating that their products had the same clinical effects as Coumadin®.

The generic can be freely prescribed by doctors or substituted at the pharmacy in lieu of the brand. The Orange Book gives an AB rating to all generic warfarin sodium product available today. Consequently, generic warfarin sodium is eligible for unrestricted substitution for Coumadin® under most state pharmacy regulations. Inwood Labs., Inc. v. Ives Labs. Inc., 456 U.S. 844, 847 n. 4, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982) ("Since the early 1970's, most States have enacted laws allowing pharmacists to substitute generic drugs for brand name drugs under certain conditions."); E.g. Ariz.Rev.Stat. Ann. § 32-1963.01 (West 2001); Cal. Bus. & Prof.Code § 4073 (West 2001); N.Y. Educ. Law § 6810(6)(a) (West 2001).

Generic warfarin sodium and Coumadin® are sold to the same customers, i.e., wholesalers, hospitals, retail pharmacy chains, mail order houses, clinics and managed care organizations. There is no evidence [page 269] that these consumers view the generic and branded drugs to be in two economically distinct markets.

Moreover, plaintiffs have admitted that their product competes with Coumadin® and Barr's generic warfarin sodium. Barr and Apothecon price their products at a discount to Coumadin® and in competition with each other. Apothecon produced extensive marketing, training and business documents that address in detail Apothecon's strategies for competing with Barr and DuPont. Apothecon has actively attempted to switch customers using Coumadin® to its product by offering various incentive programs to promote Apothecon's product in competition with Barr and DuPont. Apothecon routinely included all generic products and Coumadin® in one market when analyzing potential and actual market share.

In addition, DuPont recognized that generic and branded warfarin sodium compete with each other for sales. DuPont designed and implemented its own marketing plans and incentive programs to meet the threat posed by generic warfarin sodium. Indeed, DuPont considered launching and could have launched its own generic warfarin sodium product.

Barr, Apothecon and Taro have gained market share at the expense of DuPont. At least 77% of the increase in generic warfarin sodium sales realized between 1998 and 2000 came directly from former Coumadin® sales. From July 1997 to November 2001, Coumadin®'s share fell from 92% to 61% of the market.

In order to establish the existence of a submarket consisting solely of the generic sodium warfarin, plaintiffs primarily rely on a supposed price increase on the part of Coumadin® and price decrease on the part of Barr's generic product after the plaintiff's entry into the market.[16] Yet, Brown Shoe itself rejected a market defined by price. There the merging parties contended that because they competed in different markets-medium-priced shoes and low-priced shoes -- their merger would not reduce competition. The Court rejected this argument, holding that a division of the product lines based on "price/quality" was "unrealistic." Brown Shoe, 370 U.S. at 326, 82 S.Ct. 1502; see also Nifty Foods Corp. v. Great Atlantic & Pac. Tea Co., 614 F.2d 832, 839 & n. 13 (2d Cir.1980) ("It is even less realistic to make such division in this case where the two types of waffles are sold side by side in the same frozen food case and distinguished only by label and price, and not quality."); Twin City Sportservice, Inc. v. Charles O. Finley & Co., Inc., 512 F.2d 1264, 1274 (9th Cir.1975) ("The scope of the relevant market is not governed by the presence of a price differential between competing products").

Similarly, in Warner Lambert the FTC rejected the notion that branded and unbranded thyroid drugs were in separate product markets. The Administrative Law Judge ("ALJ") had determined that "there are substantial differences in the way the two companies' products are manufactured, the customers and methods used in selling their products, the way they are priced, and, since they are sold only on prescription of a physician, the way they are dispensed to the ultimate user." The FTC reversed the ALJ, reasoning:

Significantly, the thyroid drugs in Warner Lambert were not AB rated and were, therefore, more susceptible to market distinctions than the products at issue here, which the FDA certifies as equivalent and interchangeable.

The cases plaintiffs offer merely stand for the proposition that price and quality distinctions can be indicative of separate markets because the products are not interchangeable. E.g., Beatrice Foods Co. v. FTC, 540 F.2d 303, 309-10 (7th Cir.1976) (noting absence of "clearly separate price grouping based on quality distinctions"); United States v. Aluminum Co. of Am., 377 U.S. 271, 275, 84 S.Ct. 1283, 12 L.Ed.2d 314 (1964) ("Insulated aluminum conductor is so intrinsically inferior to insulated copper conductor that in most applications it has little consumer acceptance."). Here, the products at issue exhibit no quality differences and are fully interchangeable.

In addition, plaintiffs' analysis of the separate market based on price ignores a number of factors. First, it does not explain why, often, branded drugs will raise their prices at the entrance of a generic drug into the market. Clearly there is some interrelationship. In addition, the analysis did not determine the effect on Barr's average price as a result of Apothecon's entry, did not calculate the impact of Apothecon's entry separately on the price of Coumadin®, did not try to separate the effect of Apothecon's entry from other factors that may have contributed to Barr's changing prices, and failed to conduct a formal test regarding the degree of purported differential impact that Apothecon's entry had on the price of Barr's warfarin sodium and Coumadin®.

In a letter submitted after oral argument, plaintiffs offered a recent opinion holding that a triable issue of fact existed as to whether brand name and generic tires for vintage automobiles constituted separate submarkets. Lucas Automotive Eng'g Inc. v. Bridgestone/Firestone Inc., 275 F.3d 762 (9th Cir.2001). The case is distinguishable, however, in the lack of the evidence plaintiffs have offered in this case concerning the Brown Shoe analysis. In Lucas, the plaintiff presented evidence of physical differences between the products; the "brand name" tires are authentic reproductions of the tires originally sold on vintage cars while the "generic" private label brand tires are not. Id. at 765. Because enthusiasts value authenticity, this physical difference is significant. Id. at 767. The plaintiff also presented a declaration from defendant as well as defendant's own advertising material that revealed that the defendant marketed the brand name tires to distinct customers. Id. at 767-68. Finally, the plaintiff also presented deposition testimony from independent dealers and declarations from other tire manufacturers supporting plaintiff's proposed market definition. Id.

Here, there are no significant physical differences between the generic and [page 271] branded pharmaceuticals. They are marketed to the same customers, and the market participants themselves define the competition to be between the generics and Coumadin®. Therefore, plaintiffs' reliance on Lucas is misplaced. The relevant product market is the combined group of generic and the branded warfarin sodium.

2. Monopoly Power in the Relevant Market

[9] In order to demonstrate monopoly power, a plaintiff must show defendant had a significant share of the market and that the market share could be sustained over time. CDC Techs. Inc. v. IDEXX Labs. Inc., 7 F.Supp.2d 119, 130 (D.Conn.1998), aff'd 186 F.3d 74 (2d Cir.1999) (citing Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1434-43 (9th Cir.1995)); see also United States v. Syufy Enter., 903 F.2d 659, 665-66 (9th Cir.1990) ("In evaluating monopoly power, it is not market share that counts, but the ability to maintain market share.") (emphasis in original); Colorado Interstate Gas Co. v. Nat'l Gas Pipeline Co. of Am., 885 F.2d 683, 696 n. 22 (10th Cir.1989) ("[M]arket power must be persistent to make a firm a monopolist for purposes of the antitrust laws.").

[10] During the time that plaintiffs claim their launch was delayed, from October 1997 to October 1998, Barr's share of the relevant market including branded and generic warfarin sodium grew from 11% to 14%. As of December 2000, Barr's share was about 24%. These percentages cannot support a claim for monopolization or attempted monopolization. E.g., AD/SAT, 181 F.3d at 229 (finding 20% market share insufficient for attempted monopolization); United Air Lines, Inc. v. Austin Travel Corp., 867 F.2d 737, 742 (2d Cir.1989) (holding 31% market share insufficient to constitute monopoly power); Nifty Foods, 614 F.2d at 841 (upholding summary judgment on monopolization and attempted monopolization claims where defendant had 33% market share); Caldwell v. The American Basketball Ass'n, 825 F.Supp. 558, 575 (S.D.N.Y.1993)(finding 36% market share insufficient for monopolization claim to survive summary judgment).

Plaintiffs have relied on Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90 (2d Cir.1998). There, the Second Circuit reversed the entry of summary judgment on a claim of attempt to monopolize, notwithstanding its ruling that defendants lacked monopoly power. The Court reasoned that the defendant's large market share percentage at the time when defendant took other anticompetitive actions was sufficient to create a triable issue of fact as to whether there was a dangerous probability that the defendant would achieve monopoly power. Id. at 100-01. Here, however, Barr had only a market share of up to 8% at the times plaintiffs allege other anticompetitive actions. That percentage is insufficient as a matter of law to create a dangerous probability that Barr would achieve monopoly power in the applicable market as defined here.

For these reasons, claims I and II are dismissed as they relate to warfarin sodium.

B. Clathrate Used in Making Warfarin Sodium

Plaintiffs allege that Barr and ACIC/Brantford had monopoly power over the market for clathrate and used that power to foreclose competition in the warfarin sodium market.

1. Claims Against Barr

[11] The allegation against Barr is based on the plaintiffs' claim that Barr controlled ACIC/Brantford. There is no [page 272] evidence that Barr ever controlled or owned any interest in ACIC/Brantford. Barr is a public corporation, which manufactures finished tablets. It buys raw materials from others, including ACIC/Brantford. The fact that Barr and ACIC/Brantford have a stockholder in common does not mean that one controls the other for § 2 purposes. Invamed, Inc. v. Barr Labs. Inc., 22 F.Supp.2d 210, 219 (S.D.N.Y.1998).[17] Barr has never competed in the clathrate market and could not possibly have exercised any control over that market.

Therefore this claim is dismissed as against Barr.

2. ACIC/Brantford

a. Power in the Relevant Market

[12] The relevant market is clathrate used to produce warfarin sodium (both generic and Coumadin®). Plaintiffs claim that no other suppliers besides ACIC/Brantford were willing and able to sell clathrate during the relevant times for this lawsuit. This contention is not supported by the undisputed facts, however.

[13] It is undisputed that Chemoswed produced commercial quantities of clathrate during all the relevant time periods for this lawsuit. While most or all of its clathrate was dedicated to DuPont, internal or captive sources of a product still are included in the relevant market. California v. Sutter Health Sys., 84 F.Supp.2d 1057, 1068 (N.D.Cal.), aff'd 217 F.3d 846, 2000 WL 531847 (9th Cir.2000); 2A Phillip E. Areeda & Herbert Hovenkamp, An Analysis of Antitrust Principles and Their Application, ¶ 570g (1995)("Internal or captive transfers of a product should be included in the market. It is part of the supply, and control over supply determines the existence of market power. ...").

In addition, there is no dispute that Hoechst had the capability and desire of producing commercial quantities of clathrate by early 1996. Hoechst estimated it would be able to manufacture commercial quantities of clathrate in the range of 1,000 kilograms a year. Moreover, Hoechst was willing and able to enter into a long-term supply contract with Invamed for clathrate.[18] In April 1996, Invamed began manufacturing warfarin sodium using Hoechst's clathrate. In August 1996, Hoechst submitted its DMF for clathrate.

A number of other manufacturers were also in the process of developing or sought Invamed's partnership in developing clathrate. Shanghai, for instance, sought a supply contract with Invamed in 1997. Banyan was producing clathrate and filed a DMF in 1997. Arenol, Chemagis, Diosynth, Lacheme, Taro and Vinchem all also were manufacturing clathrate or sought Invamed's partnership in doing so in 1996 to 1997. Invamed challenges whether these companies actually could or would have supplied to them, but in many instances it is undisputed that Invamed did not even investigate the possibility or refused it for various reasons. Discon, Inc. v. NYNEX Corp., 86 F.Supp.2d 154, 161 (W.D.N.Y.2000)("All of [the] choices -- whether a particular buyer decides to consider them or instead ignore all options but one -- must be included in the relevant [page 273] market."). Thus, ACIC/Brantford was not the only supplier in the market.

In addition, plaintiffs were not "locked in" to using the ACIC/Brantford clathrate. The Supreme Court has acknowledged the possibility of a single relevant market when there was no interchangeability with other products. Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 482, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). In Kodak, independent service organizations (ISOs) sued Kodak for unlawfully tying the sale of service of its copying machines to the sale of repair parts and for monopolizing the market for Kodak parts. Id. at 459, 112 S.Ct. 2072. The ISOs brought their claims after Kodak stopped selling parts to the ISOs thereby forcing customers to deal only with Kodak. The Court ruled that the relevant market consisted of Kodak repair parts and services because Kodak copiers could only use Kodak parts. Thus, there were no reasonably available market alternatives. 504 U.S. at 481-82, 112 S.Ct. 2072.

The facts in this case are much different. Nothing in this record suggests that the ACIC/Brantford clathrate was not interchangeable with the clathrate from other sources, such as Chemoswed and Hoechst. In fact, Invamed used the Hoechst material in its product development and further preparation of its ANDA, even if it did not include Hoechst as its supplier on that application.

Plaintiffs' theory is that Invamed was "required" to purchase clathrate from ACIC/Brantford because it "chose to develop its product and submit its ANDA" with ACIC/Brantford clathrate. Invamed's decision to rely on one of any number of suppliers does not lead to the type of lock-in described in Kodak. A plaintiff's business decision to vest economic power in another party cannot sustain an antitrust claim. Hack v. President and Fellows of Yale College, 237 F.3d 81, 85-86 (2d Cir.2000) (finding no "lock-in costs" where Yale students could have chosen to attend other universities but chose to attend Yale); Queen City Pizza, Inc. v. Domino's Pizza Inc., 124 F.3d 430, 441 (3rd Cir.1997) (rejecting plaintiff's antitrust claims as plaintiff's acceptance of franchise from defendants limited plaintiff's remedies to breach of contract); see also Re-Alco Indus., Inc. v. National Ctr. For Health Educ., 812 F.Supp. 387, 392 (S.D.N.Y.1993) ("fact that plaintiff chose to operate in a single market ... does not make it a relevant market for antitrust purposes")(quoting Theatre Party Assocs., Inc. v. Shubert Org., Inc., 695 F.Supp. 150, 155 (S.D.N.Y.1988)).

Invamed came to market within one year of switching to another source, Banyan. Invamed could have used other clathrate sources (such as Hoechst) and come to market sooner. Because "the existence of ... switching costs alone" does not render "an otherwise invalid relevant market valid," plaintiffs' Kodak lock-in claim is rejected. Queen City Pizza, Inc., 124 F.3d at 439; see also Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 514 (3d Cir.1998) ("Product market definition turns on the existence of close substitutes for a particular product, not on the ability of any particular consumer to switch effortlessly to such substitutes.").

b. Exclusionary Behavior

[14] In any case, plaintiffs fail to establish "exclusionary" behavior on the part of ACIC/Brantford. Exclusionary behavior (1) tends to impair the opportunities of rivals and (2) either does not further competition on the merits or does so in an unnecessarily restrictive manner. [page 274] Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985); United States Football League v. Nat'l Football League, 842 F.2d 1335, 1359 (2d Cir.1988).

First, the "exclusive" agreement permitted ACIC/Brantford to supply commercial quantities of clathrate to Barr and lesser quantities to anyone. Further, the agreement did not prevent ACIC/Brantford from brokering clathrate produced by other manufacturers to its clients.

[15] Further, legitimate business justifications for challenged conduct prevent a rational trier of fact from inferring § 2 liability. Trans Sport Inc. v. Starter Sportswear Inc., 964 F.2d 186, 189-90 (2d Cir.1992); United States Football League, 842 F.2d at 1360. Exclusive supply contracts have been recognized as having procompetitive benefits and thereby serving legitimate business objectives. In Standard Oil Co. v. United States, 337 U.S. 293, 306-07, 69 S.Ct. 1051, 93 L.Ed. 1371 (1949), the Supreme Court reasoned that exclusive supply contracts can assure supply, afford protection against price increases, enable long-term planning on the basis of known costs, and obviate expense and risk of storage in the quantity necessary for having a fluctuating demand. Accord CDC Techs., 186 F.3d at 80 ("exclusive distributorship arrangements are presumptively legal"). But see U.S. Healthcare Inc. v. Healthsource Inc., 986 F.2d 589, 595 (1st Cir.1993)("There is one common danger for competition: an exclusive agreement may 'foreclose' so much of the available supply or outlet capacity that existing competitors or new entrants may be limited or excluded and, under certain circumstances, this may reinforce market power and raise prices for consumers.").

Plaintiffs allege that Barr arranged for the exclusive supply contract in order to thwart the development of other generic warfarin sodium. Moreover, they allege that Barr demanded the confidentiality provision as a means of further delaying Invamed's entry into the generic warfarin sodium market. Plaintiffs fail to produce evidence, however, that ACIC/Brantford entered into the agreement for the purpose of foreclosing the available supply of clathrate so that Barr's competitors would be limited or excluded from competing in the relevant warfarin sodium market.

This claim also fails.

II. Conspiracy under §§ 1 and 2

Plaintiffs allege as Counts III and IV that "Brantford and Barr conspired and agreed that Brantford would not supply clathrate to plaintiffs despite Brantford's prior representation to plaintiffs that it would do so." Apothecon Compl. ¶ 41. Further, the purported objective of defendants' conspiracy was to preserve Barr's monopoly as the sole manufacturer of warfarin sodium and to delay the plaintiffs' entry into the market for as long as possible. Id.

A. Barr and ACIC/Brantford Are Legally Capable of Conspiring under Copperweld

[16] In Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984), the Supreme Court held that "the coordinated activity of a parent and its wholly-owned subsidiary must be viewed as that of a single enterprise for purposes of § 1 of the Sherman Act." Id. at 771, 104 S.Ct. 2731. The Court's rationale was that "two or more entities that previously pursued their own interests separately are combining to act as one for their common benefit." Id. at 769, 104 S.Ct. 2731. Coordinated action between a parent and subsidiary, in contrast, does not pose the same risk because "there is no sudden joining of economic resources that had previously served different interests." [page 275] Id. at 771, 104 S.Ct. 2731. The lower courts have extended Copperweld to hold that sister corporations are incapable of conspiring, Gucci v. Gucci Shops, Inc., 651 F.Supp. 194, 197 (S.D.N.Y.1986), as are affiliated corporations that are less than wholly owned. Bell Atlantic Business Sys. Servs. v. Hitachi Data Sys. Corp., 849 F.Supp. 702, 706-07 (N.D.Cal.1994) (80% subsidiary); Novatel Comms. v. Cellular Tel. Supply, 1986 WL 15507 at *5 (N.D.Ga.1986)(51% subsidiary).

Courts have applied Copperweld to conspiracies to monopolize under § 2 in addition to "contracts, combinations or conspiracies" challenged under § 1. Lambtek Yogurt Machines v. Dreyer's Grand Ice Cream, Inc., 1997 WL 108718, at *3 (N.D.Cal. Mar.3, 1997); H.R.M., Inc., v. Tele- Communications Inc., 653 F.Supp. 645, 647 (D.Colo.1987); Rosemount Cogeneration Joint Venture v. Northern States Power Co., 1991 WL 13729 at *3 (D.Minn. Jan.18, 1991).

In September 1995, when Barr and ACIC signed their exclusive and confidential contract, Sherman effectively owned 62% of Barr and 75% of ACIC. In October 1997, when Invamed's purchase order was rejected, Sherman owned 100% of Brantford and 63% of Barr. Defendants claim that Barr and ACIC were "sister corporations" with Sherman as the common parent and therefore incapable of conspiring.

Copperweld does not apply here because Barr and ACIC/Brantford were admittedly independent entities with an overlap only in the ownership of the entities. It is akin to the situation presented in Fishman v. Estate of Wirtz, 807 F.2d 520 (7th Cir.1986). The court acknowledged that "there was some overlap between the investors in CSC and CPSC since Arthur Wirtz owned and controlled CSC (along with his son, William Wirtz) and also invested in CPSC; however CSC and CPSC were not under common control in the same sense as is a corporation and its wholly-owned subsidiary or as are two corporations owned in identical proportions by the same set of investors." Id. at 541 n. 19 (citing Century Oil Tool Inc. v. Production Specialties, Inc., 737 F.2d 1316 (5th Cir.1984) (two corporations were commonly owned by three persons, two of whom each owned 30% of each corporation and one of whom owned 40% of each)); see also American Vision Centers, Inc. v. Cohen, 711 F.Supp. 721 (E.D.N.Y.1989)(denying motion to dismiss where defendants owned 54% of stock of one publicly-traded company and100% of stock of another; common ownership and majority interest were not enough to invoke Copperweld ).

In addition, there was no "unity of purpose or a common design" between ACIC/Brantford and Barr. Copperweld, 467 U.S. at 771, 104 S.Ct. 2731. Sherman never exercised any control over Barr and took pains to conceal his passive ownership of ACIC/Brantford prior to 1996. Even after he acquired the remaining shares of ACIC's parent corporation, he continued to use ACIC Fine Chemicals as its independent sales arm. In addition, Barr was unaware of Sherman's or Apotex's ownership in ACIC/Brantford at the time the exclusive supply contract was signed, and Barr and ACIC/Brantford conducted their business at arms' length.

Copperweld does not bar this claim.

B. Agreement and Intent to Monopolize Is Lacking

[17] Plaintiffs must present evidence that Barr and ACIC/Brantford "had a conscious commitment to a common scheme designed to achieve an unlawful objective." Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764, 104 S.Ct. 1464,