Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 1 of 32
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`In re
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`GLUMETZA ANTITRUST
`LITIGATION.
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`This Document Relates to:
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`ALL ACTIONS.
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`No. C 19-05822 WHA
`No. C 19-06138 WHA
`No. C 19-06839 WHA
`No. C 19-07843 WHA
`No. C 19-08155 WHA
`No. C 20-01198 WHA
`No. C 20-05251 WHA
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`(Consolidated)
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`ORDER RE SUMMARY
`JUDGMENT
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`INTRODUCTION
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`In a secret pharmaceutical-patent infringement settlement agreement, concealed from the
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`district judge, brand and generic manufacturers of the type 2 diabetes drug Glumetza allegedly
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`pledged not to compete with each other by agreeing to not introduce a generic version of the
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`drug for several years. So, while generic competition should have driven drug prices down, the
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`brand manufacturer instead hiked prices up. The generic manufacturer belatedly entered the
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`market at premium pricing, and, as a result, the conspiring manufacturers allegedly extracted
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`huge sums of money from consumers. In this resulting antitrust action, a certified class of
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`direct purchasers move for partial summary judgment that our defendant brand and generic
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`manufacturers wielded market power. For their part, defendants move for summary judgment,
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`attacking the underlying antitrust violation and causal injury. All motions are DENIED.
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`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 2 of 32
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`STATEMENT
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`An estimated thirty million Americans suffer from type 2 diabetes. The condition,
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`“caused by the combination of insulin resistance . . . and deficient insulin secretion,” causes an
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`alarming array of complications. Those with diabetes face nearly twice the average risk of
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`stroke and heart disease. They may suffer foot ulcers that take months or years to heal, or may
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`require amputation. Around forty percent suffer some degree of kidney disease, with one
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`percent suffering kidney failure. In fact, “[p]ersons with diabetes make up the fastest growing
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`group of kidney dialysis and transplant recipients in the United States.” “Diabetes is the
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`leading cause of new cases of blindness among adults aged 18–64 years.” And, in 2017,
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`diabetes was estimated to be the seventh leading cause of death in the United States. CTRS.
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`DISEASE CTRL. & PREV., NAT’L DIABETES STATS. RPT. 12 (2020), https://www.cdc.gov/
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`diabetes/pdfs/data/statistics/national-diabetes-statistics-report.pdf; NAT’L INST. OF DIABETES &
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`DIGESTIVE & KIDNEY DISEASES, DIABETES IN AMERICA, ch. 1, pp. 2–3, ch. 22, p. 1, fact sheet
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`(3d ed. 2018), https://www.niddk.nih.gov/about-niddk/strategic-plans-reports/diabetes-in-
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`america-3rd-edition.
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`Fortunately, modern medicine offers a battery of remedial medications. One such drug,
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`metformin hydrochloride, helps control blood-sugar levels. Following approval by the Food
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`and Drug Administration in June 2005, defendant Depomed, Inc. launched a new extended-
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`release version of metformin in late 2006. Glumetza, introduced first in 500 mg and later in
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`1000 mg tablets, extended the release of metformin over a prolonged period by disbursing the
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`active drug into a polymeric matrix. In the stomach, the metformin would more slowly diffuse
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`out of the matrix and ensure its smooth delivery into the bloodstream over time, without the
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`usual initial spike and later lull in drug level, to offer consistent blood-sugar control.
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`Depomed obtained several patents covering the developments embodied in Glumetza,
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`United States Patent Nos. 6,340,475 and 6,635,280, which expired in September 2016, No.
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`6,488,962, which expired in June 2020, and No. 6,723,340, which will expire in October 2021.
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`Depomed listed these patents as covering Glumetza in the FDA’s “Orange Book.” U.S. DEP’T
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`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 3 of 32
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`HEATH & HUM. SERVS., FDA, APPROVED DRUG PRODUCTS WITH THERAPEUTIC EQUIVALENCE
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`EVALUATIONS (41st ed. 2021), https://www.fda.gov/media/71474/download.
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`In 2009, defendants Lupin Pharmaceuticals, Inc. and Lupin Limited filed an Abbreviated
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`New Drug Application with the FDA, seeking to manufacture and market generic versions of
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`both 500 mg and 1000 mg Glumetza. Lupin certified to the FDA that Depomed’s patents were
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`either invalid or not infringed, yet Depomed sued anyway in November 2009, asserting several
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`claims from the ’475, ’280, and ’962 patents (it also asserted but later dropped the ’340 patent).
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`The case came before the Honorable Phyllis J. Hamilton of our district. Following a year of
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`litigation, Judge Hamilton held a Markman hearing in January 2011 and issued a claim
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`construction order in May. The parties fought for the rest of that year, but, before filing
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`dispositive motions, settled in February 2012. As far as the parties told the judge, they would
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`simply go their separate ways and Lupin would launch its generic on February 1, 2016.
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`Depomed, Inc. v. Lupin Pharms., Inc., No. C 09-05587 PJH, Dkt. No. 152 (N.D. Cal. Mar. 27,
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`2012). This, our plaintiffs now allege, concealed an underlying unlawful conspiracy.
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`*
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`*
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`Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984,
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`more commonly known as the Hatch-Waxman Act, to lower pharmaceutical drug prices by
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`speeding generics to market. In general, a pharmaceutical drug must undergo a grueling —
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`and costly — testing regimen to obtain FDA approval to market. To ease generic entry,
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`however, the Act permits a generic drug manufacturer to file an Abbreviated New Drug
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`Application (ANDA) to piggyback on the approval efforts of the underlying brand-name drug
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`that uses the same active ingredient and to which the proposed generic is biologically
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`equivalent. The Act then implements a network of interlocking incentives to encourage faster
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`introduction of these low-cost generics into the pharmaceutical market, yet still drive new drug
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`development. See FTC v. Actavis, 570 U.S. 136, 142 (2013); 21 U.S.C. §§ 355(j)(2)(A)(ii),
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`(iv).
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`The ANDA relieves generic drug manufacturers of a significant burden by, in practical
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`effect, placing it on brand manufacturers. So, to ensure generics cannot immediately hop
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`aboard and profit from a brand manufacturers’ costly investment, the ANDA scheme relies on,
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`among others, patents to temporarily exclude generic manufacturers from use of the novel drug
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`ingredient itself or its new formulation, delivery mechanism, or form of treatment. H.
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`Hovenkamp, Anticompetitive Patent Settlements & the Supreme Court’s Actavis Decision, 15
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`MINN. J.L. SCI. & TECH. 3, 10–11 (2014). Recognizing that the long FDA approval process
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`would otherwise eat into a substantial portion of a patent’s twenty-year term, the Act provides
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`for up to a five-year extension of a drug patent’s term. New York ex rel. Schneiderman v.
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`Actavis PLC, 787 F.3d 638, 644 (2d Cir. 2015). The Act adds a further layer to drug-patent
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`protection, requiring an ANDA application to certify that the relevant patents have either
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`expired or will expire before the generic reaches the market, or that the patents are either
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`invalid or not infringed. Actavis, 570 U.S. at 143; 21 U.S.C. § 355(j)(2)(A)(vii)(I)–(IV).
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`Balancing this patent protection with its overall goal of expediting generic entry, the Act
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`encourages generic manufacturers to challenge weak validity or infringement cases. See King
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`Drug Co. v. SmithKline Beecham Corp., 791 F.3d 388, 394 (3d Cir. 2015). The first generic to
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`file an ANDA including a certification of invalidity or noninfringement (the “Paragraph IV”
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`approach) wins 180 days of generic exclusivity, meaning that once it gains FDA approval and
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`enters the market, the FDA can’t approve any other generics during that time. This, however,
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`doesn’t stop the brand from launching its own “authorized generic” to win some market share
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`back from the first filer, and the first filer can lose the exclusivity if fails to market promptly
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`after a later generic filer gains FDA approval. But the exclusivity period can be “worth several
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`hundred million dollars” to the first-filer generic and outweigh the risk of infringement suit.
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`Actavis, 570 U.S. at 143–44; In re Wellbutrin XL Antitrust Litig., 868 F.3d 132, 144 fn. 7 (3d
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`Cir. 2017); See Teva Pharm. v. Crawford, 410 F.3d 51, 55 (D.C. Cir. 2005); 21 U.S.C.
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`§ 355(j)(5)(B)(iv), (D).
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`To ease timely judicial resolution of ANDA patent challenges, a Paragraph IV
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`certification operates as a technical act of patent infringement. And, to encourage prompt
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`commencement, the Hatch-Waxman Act imposes a thirty-month stay against FDA approval of
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`the ANDA if the patent owner sues within forty five days’ notice of the certification. If a court
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`resolves the infringement suit during that time, the FDA follows that result. If not, the FDA
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`will then be free to approve the ANDA at the expiration of the statutory stay. Actavis, 570
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`U.S. at 143; 21 U.S.C. § 355(j)(5)(B)(iii); 35 U.S.C. § 271(e)(2)(A).
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`With FDA approval, a generic drug may enter the market. Though, if the infringement
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`suit remains ongoing, the launch is commonly referred to as “at risk,” given the brand
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`manufacturer might still win a judgment of infringement, damages (perhaps enhanced for
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`willfulness), and, where appropriate, an injunction. Wellbutrin, 868 F.3d at 168 fn. 59; 35
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`U.S.C. §§ 283–84. But once a generic drug makes it to market, the FDA’s Orange Book
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`broadcasts its availability to the public as an alternative to the underlying brand drug. All fifty
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`states and the District of Columbia have some form of mandatory or permissive drug
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`substitution law to help shift consumers from expensive brand drugs to their cheaper generics,
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`without another visit to the doctor. See Schneiderman, 787 F.3d at 644–45.
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`This scheme is supposed to expedite our access to cheaper generics. But the
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`pharmaceutical industry found a way around it. In some infringement cases, the brand
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`manufacturer (the patent owner) pays the generic (the accused infringer) to settle. This may
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`seem topsy-turvy but the patent owner actually comes out ahead. In exchange, the first-filer
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`generic manufacturer agrees to stay off the market for a few years. So, instead of expedited
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`generic entry, the brand maintains its monopoly and cuts the supposed-generic a share of the
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`profits.
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`In 2013, the United States Supreme Court found that these “pay for delay” schemes can
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`violate federal antitrust law. True, a patent gives a brand drug the power to exclude
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`competition within the bounds of the claims for its twenty-year term. But by paying the
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`accused infringer to stay out of the market, the brand in essence concedes the weakness of the
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`patent’s validity or infringement case against the ANDA. Thus, the settlement suppresses
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`generic competition and does so outside the bounds of the brand manufacturer’s patent
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`protection. See Actavis, 570 U.S. at 147–49, 153–58.
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`Our plaintiffs allege just a scheme here. The stipulated dismissal in 2012, which the
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`parties submitted to Judge Hamilton, and which they characterized as permitting Lupin’s early
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`generic market entry, in fact concealed from the judge an extensive side agreement which
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`preserved the brand monopoly and kept Lupin’s generic Glumetza off the shelves for years.
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`Per the secret quid pro quo, dated February 22, 2012, Lupin agreed to walk away, leave
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`the patents alone, and delay market entry of its generic Glumetza for four years, until February
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`1, 2016. Instead of a simple cash payment to stay away, Depomed gave Lupin something else
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`of value — a guarantee that Depomed would not launch an authorized-generic to compete with
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`Lupin for one year, atop the FDA-granted 180 days of market exclusivity from other generic
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`competition. The settlement also included two clauses to protect Lupin from other generic
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`competition, providing, first, that if any other manufacturer succeeded in marketing a generic
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`Glumetza before February 2016, Lupin could market immediately, and, second, that Depomed
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`would not license any other generic Glumetza manufacturers until at least 180 days following
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`Lupin’s market entry. These provisions undercut the incentive for any other generic
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`manufacturer to enter the market before Lupin. But, as noted above, only the first of these
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`terms, Lupin’s February 2016 market entry, made it into the parties’ stipulated dismissal.
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`Crucially, as alleged, defendants did not disclose the no-authorized generic (no-AG) provision
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`until a February 5, 2016, quarterly earnings call with Lupin executives.
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`This artificially-prolonged monopoly and synthesized duopoly proved a windfall to our
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`defendants. Depomed had already sold its marketing rights in Glumetza to defendant Santarus,
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`Inc., but then sold its royalty rights, estimated between $140 million and $180 million, to PDL
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`Biopharma in October 2013 (Dkt. No. 464-1). The juiced Glumetza portfolio aided Santarus’
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`sale to defendant Salix Pharmaceuticals for $2.6 billion in November 2013, and Salix’s sale to
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`defendant Valeant Pharmaceuticals for $14.5 billion in April 2015.
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`Then, in the summer of 2015, Valeant hiked the price of Glumetza on the order of 800%.
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`The wholesale acquisition cost of a 500 mg pill spiked from $5.72 in May to $51.48 by the end
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`of July. In the same time, the cost of a 1000 mg pill spiked from $12.37 to $113.36. Glumetza
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`accounted for a three hundred fifty million dollar swell in Valeant’s profits in the second half
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`of 2015. When Lupin joined the market in February, the supposed affordable generic did so at
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`around $45 for each 500 mg tablet. All in all, Lupin reaped to the tune of six hundred million
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`dollars from Glumetza over the next few years.
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`Only adding to their spoils, defendants’ scheme apparently dissuaded other generic
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`manufacturers from marketing their own generic versions of Glumetza until after Lupin did.
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`Sun Pharmaceuticals filed its ANDA in March 2011. But Depomed and marketing-partner
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`Santarus promptly sued, and a January 2013 settlement kept Sun’s generic off the market until
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`August 2016. Watson Pharmaceuticals then filed its ANDA in March 2012. Another prompt
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`lawsuit resulted in a November 2013 settlement keeping Watson’s generic also off the market
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`until August 2016. In the end, Watson (by then Teva Pharmaceutical Industries Ltd.) did not
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`market its generic Glumetza until May 2017, and Sun not until July 2018.
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`Glumetza prices have to some extent slowly recovered, but not to pre-hike estimates.
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`The most immediate fallout for our defendants? Bad press. So, in 2018, Depomed changed its
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`name to Assertio Therapeutics, Inc., and Valeant changed its name to Bausch Health
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`Companies Inc.
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`Plaintiffs started suing in August 2019. Ultimately, twelve cases by both direct and
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`indirect purchasers arrived before the undersigned. An order dated March 5, 2020, largely
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`denied defendants’ motions to dismiss the direct purchasers but granted the motions in part
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`against the indirect purchasers, who all subsequently dismissed. In re Glumetza Antitrust
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`Litig., No. C 19-05822 WHA, 2020 WL 1066934 (N.D. Cal. Mar. 5, 2020). The remaining
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`direct purchasers, several who sued as assignees of absent direct purchasers, have proceeded in
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`two groups: (1) the direct-purchaser class, and (2) the retailer plaintiffs. An August 15 order
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`certified the Rule 23(b)(3) direct-purchaser class comprising:
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`All persons or entities in the United States and its territories who
`directly purchased Glumetza or generic Glumetza from a defendant
`from May 6, 2012 until the date of [the] order.
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`In re Glumetza Antitrust Litig., 336 F.R.D. 468 (N.D. Cal. 2020). Days prior, plaintiff Humana
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`Inc. attempted to resurrect the slew of indirect-purchaser claims. Orders dated December 5 and
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`February 2, 2021, rejected that ploy.
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`Over the past three months, our parties have filed ten Daubert motions and four motions
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`for summary judgment. This order resolves the motions for summary judgment, reserves the
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`Daubert motions for later, and follows full briefing and oral argument held via
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`videoconference due to COVID-19.
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`ANALYSIS
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` Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of
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`trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States.”
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`Put plainly, it bars (1) concerted conduct which (2) unreasonably restrains trade. F.T.C. v.
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`Qualcomm Inc., 969 F.3d 974, 989 (9th Cir. 2020). An unreasonable restraint comes either as
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`a per se violation (“when surrounding circumstances make the likelihood of anticompetitive
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`conduct so great as to render unjustified further examination”) or a violation of the rule of
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`reason, meaning the “restraint’s harm to competition outweighs its procompetitive effects” in
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`light of the peculiarities of the business, the nature and history of the restraint, and its reason
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`for being. NCAA v. Bd. of Regents of Univ. Okla., 468 U.S. 85, 103–04 (1984); Tanaka v.
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`Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001); United States v. Topco Assocs., 405 U.S.
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`596, 607 (1972). In pharmaceutical reverse-payment cases, such as ours, we apply the rule of
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`reason. Actavis, 570 U.S. at 158–59.
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`Section 2 condemns “[e]very person who shall monopolize, or attempt to
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`monopolize . . . any part of the trade or commerce among the several States.” Unlike Section
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`1’s prohibition of concerted restraints, Section 2 prohibits unilateral (as well a multilateral)
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`conduct, but only that which threatens to or actually monopolizes. Alaska Airlines v. United
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`Airlines, 948 F.2d 536, 541 (9th Cir. 1991). Such violation involves the (1) possession of
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`power in the relevant market following (2) its willful acquisition or maintenance and (3) an
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`injury resulting from abuse or leverage of that market power. This causal-harm element
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`emphasizes the distinction between, on the one hand, the unlawful acquisition of market power
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`and, on the other, its “development as a consequence of a superior product, business acumen,
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`or historic accident.” Qualcomm, 969 F.3d at 990 (quoting United States v. Grinnell Corp.,
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`384 U.S. 563, 570–71 (1966)).
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`Our threshold inquiry asks whether defendants wielded power over the relevant market,
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`“the area of effective competition.” Section 2 carries this demand on its face; a monopolist
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`unifies the market for a given good and wields the resulting anticompetitive power. Though
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`less obvious a requirement of Section 1, “courts usually cannot properly apply the rule of
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`reason without an accurate definition of the relevant market,” as the analysis requires our
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`location of defendants within the market structure to gauge the results of their anticompetitive
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`conduct. Ohio v. Am. Express Co., 585 U.S. ___, 138 S. Ct. 2274, 2285 (2018); Qualcomm,
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`974 F.3d at 989–92; Rebel Oil Co. v. ARCO, 51 F.3d 1421, 1434 (9th Cir. 1995).
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`Plaintiffs establish the antitrust violation itself via a tripart burden shift, beginning with a
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`prima facie concerted restraint under Section 1 or willful or attempted monopoly under Section
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`2. The defendant must then offer a nonpretextual procompetitive rationale for the restraint or
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`the monopolization, which plaintiffs must either rebut or show, under Section 1, that a less
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`anticompetitive means would achieve the same ends, or under Section 2, that the
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`anticompetitive harm outweighs the procompetitive benefit. See Qualcomm, 974 F.3d at 991;
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`Image Tech. Serv. v. Eastman Kodak Co., 903 F.2d 612, 618–19 (9th Cir. 1990), aff’d, 504
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`U.S. 451 (1992).
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`If plaintiffs establish the antitrust violation, they must then prove their causal antitrust
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`injury, i.e., an injury both of the kind the antitrust laws seek to prevent and which flows from
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`the unlawfulness of defendants’ conduct, and offer a fair estimate of their damages. Brunswick
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`Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477, 489 (1977); Bigelow v. RKO Radio Pictures, 327
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`Northern District of California
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`United States District Court
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`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 10 of 32
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`U.S. 251, 264–65 (1946); Qualcomm, 974 F.3d at 989–92; In re New Motor Vehicles Canadian
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`Export Antitrust Litig., 522 F.3d 6, 19 fn. 18 (1st Cir. 2008).
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`This order denies plaintiffs’ motion for partial summary judgment. True, a reasonable
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`trier of fact could find that defendants wielded market power during the relevant time period.
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`Compelling evidence illuminates classic indicators of power in the market for brand and
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`generic Glumetza. In 2015, Bausch profitably hiked prices and reduced consumption. Lupin
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`profitably maintained those supracompetitive prices for several years before competition with
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`the authorized generic, Teva, and Sun finally brought prices back down. But a reasonable trier
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`could reject these considerations in light of defendants’ evidence of the cross-elasticity of
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`demand between Glumetza and the many, and more prevalent, variants of metformin
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`hydrochloride available to consumers.
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`This order also denies defendants’ motions for summary judgment. A reasonable trier of
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`fact could conclude that defendants violated the rule of reason. The challenged settlement
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`included cross-covenants not to compete, one from Lupin to pause its generic Glumetza entry
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`for four years, and the other from Assertio and Santarus to forego an authorized generic for one
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`year. These horizontal restraints on competition mirrored classic per se antitrust violations.
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`Defendants, however, contend these restraints fell within the scope of their patent rights. But
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`given evidence calling into question the strength of defendants’ infringement case, a
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`reasonable trier of fact could find defendants’ covenants exceeded those bounds.
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`A reasonable trier of fact could further conclude that defendants’ restraint of the market
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`delayed generic entry, stifled competition, and caused plaintiffs to pay more for brand and
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`generic Glumetza than they would have otherwise. In the absence of the unlawful scheme,
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`Lupin might have marketed its generic earlier via either an at-risk launch, by prevailing in the
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`underlying suit, or by negotiating an earlier market entry date in the absence of the no-AG
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`agreement, and other generics might have followed quickly thereafter. This earlier generic
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`competition would have prevented or mitigated defendants’ price gouging. A reasonable trier
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`of fact could also find plaintiffs’ suit timely and reject both Assertio and Lupin’s solo defenses.
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`Material questions abound. Anderson v. Liberty Lobby, 477 U.S. 242, 248–49, 255 (1986).
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`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 11 of 32
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`1.
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`DEFENDANTS’ MARKET POWER.
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`A reasonable trier of fact could find that defendants’ wielded power in the market for
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`brand and generic Glumetza. It could also find otherwise. Up front, no one doubts that the
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`market for brand Glumetza included both its authorized generic and those by Lupin, Sun, and
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`Teva. Drug substitution laws nationwide permit or even require pharmacies to swap these
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`cheaper generics in place of a brand drug. Schneiderman, 787 F.3d at 644–45, 657; ORANGE
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`BOOK at vii–xvi, 3-284. If our relevant market stopped there, then defendants’ market power
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`would likely follow. Until the authorized generic joined in February 2017, our defendants
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`retained 100% market share, the FDA approval regime posed a significant barrier to market
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`entry, and others like Sun and Teva proved unable to ramp up production until mid-2017 and
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`2018. Rebel Oil Co. v. ARCO, 51 F.3d 1421, 1434 (9th Cir. 1995).
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`Our parties, however, dispute whether the relevant market also encompassed other
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`variants of metformin hydrochloride, such as Glucophage, Glucophage XR, and Fortamet
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`(including their generics). This question of fact involves a broad inquiry into “the particular
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`structure and circumstances” of the pharmaceutical context and into the cross-elasticity of
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`demand between Glumetza and its proposed substitutes, including empirical study, to
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`determine which, if any, would have been adequate and available enough to constrain prices.
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`Rebel, 51 F.3d at 1434–35; Verizon Comm’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540
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`U.S. 398, 411 (2004); Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962); Times-
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`Picayune Publ. Co. v. United States, 345 U.S. 594, 612 fn. 31 (1953).
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`In the dysfunctional pharmaceutical market, the doctor who chooses the drug does not
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`pay for it, and the consumer who pays does not choose. Insurance obfuscates the price the
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`consumer sees. The prescription requirement, by corollary, limits alternatives. And, consumer
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`“demand” for pharmaceutical drugs often manifests as degrees of desperation, because we
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`consume these drugs to prevent illness, ease suffering, and even forestall death. See
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`Schneiderman, 787 F.3d at 645–47; Mylan Pharms. v. Warner Chilcot Pub. Ltd. Co., 838 F.3d
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`421, 429–30 (3d Cir. 2016); F.M. Scherer, The Pharmaceutical Industry, in I HANDBOOK OF
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`HEALTH ECONOMICS 1300–01 (2000).
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`Northern District of California
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`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 12 of 32
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`This all shifts bargaining power to the drug companies, but it only tells part of the story.
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`Defendants’ expert testimony indicates that physicians both account for price in prescribing
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`and view Glumetza as therapeutically interchangeable with the numerous, and more prevalent,
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`metformin variants (Glumetza has only ever accounted for about a two and a half percent
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`share). Drug manufacturers then compete behind the scenes for preferred placement on health
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`plan formularies which govern drug insurance coverage.
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`Both sides’ experts also attack cross-elasticity empirically. Plaintiffs’ expert submits
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`studies indicating little to no cross-elasticity between Glumetza and other metformin variants.
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`Defendants’ expert presents the contrary. Plaintiffs’ Daubert motion may narrow this battle of
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`the experts, but the breadth of this inquiry ensures that sufficient, though perhaps lopsided,
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`disputes will remain. Ultimately, the balancing of this evidence must be left to our trier of fact.
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`See Primiano v. Cook, 598 F.3d 558, 564–65 (9th Cir. 2010); Provenz v. Miller, 102 F.3d
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`1478, 1490 (9th Cir. 1996).
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`Seeking to bypass this maze, plaintiffs offer direct evidence of defendants’ market power.
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`True enough, market power asks “whether an arrangement has the potential for genuine
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`adverse effects on competition.” Under either Section 1 or 2, “proof of actual detrimental
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`effects . . . can obviate the need for an inquiry into market power.” F.T.C. v. Ind. Fed’n
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`Dentists, 476 U.S. 447, 460–61 (1986); United States v. Microsoft, 253 F.3d 34, 51 (D.C. Cir.
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`2001) (en banc).
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`Plaintiffs point to the “hallmarks of market power” — defendants’ profitable
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`maintenance of supracompetitive pricing and reduced output for several years. Bausch’s 2015
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`price hike, which plaintiffs characterize as an 800% increase, though defendants would place
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`the number around 275%, drove thousands of consumers from Glumetza to (we infer in
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`defendants’ favor) Glucophage and Fortamet, whose producers ably supplied the new demand.
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`Meanwhile, Bausch reaped three hundred fifty million dollars more in profit over the latter half
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`of 2015. Lupin joined the market at a similar premium in February 2016, quickly captured the
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`brand consumer base, and maintained that profitable supracompetitive pricing for several years
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`(Dkt. Nos. 493-79, 493-100). Oltz v. St. Peter’s Comm’ty Hosp., 861 F.2d 1440, 1448 (9th Cir.
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`Northern District of California
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`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 13 of 32
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`1988); NCAA, 468 U.S. at 85–86; William M. Landes & Richard A. Posner, Market Power in
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`Antitrust Cases, 94 HARV. L. REV. 937 (1981).
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`Prices & WAC of Extended-Release and
`Immediate-Release Metformin 2010–2019
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`Though the Supreme Court approved of direct proof of market power in Indiana
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`Federation, there remains a broad gap between affirmance of a direct factual finding of market
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`power versus plaintiffs’ request here to take that question from the jury. Plaintiffs cite, and this
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`order is aware of, no appellate decision stemming from Indiana Federation affirming the leap
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`plaintiffs’ seek. Additionally, Indiana Federation did, in fact, roughly define the market,
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`emphasizing the locality of dentistry services and defendants’ majority share in two specific
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`cities. Defendants’ evidence of the cross-elasticity of demand between Glumetza and other
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`metformin variants, particularly given Glumetza’s small role in the broader metformin array,
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`precludes our reliance on even a rough market definition here. 476 U.S. at 460–61; Oltz, 861
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`F.2d at 1448.
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`A reasonable trier of fact could exclude other versions of metformin and include only
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`Glumetza and its generics in our market. The reasonable trier could also find that defendants’
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`have already wielded anticompetitive market power. But as our court of appeals has observed:
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`Northern District of California
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`United States District Court
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`Case 3:19-cv-05822-WHA Document 537 Filed 05/06/21 Page 14 of 32
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`The ultimate issue in a rule of reason case is whether a challenged
`practice will produce adverse effects on price or output. The only
`direct way to answer that question is to introduce evidence of
`actual price increases or