United States District Court For The District Of Kansas Declines To Adopt The Co-Conspirator Exception To The Illinois Brick Direct Purchaser Rule In EpiPen Antitrust Litigation
08/16/2022On August 8, 2022, Judge Daniel Crabtree of the United States District Court for the District of Kansas declined to apply the co-conspirator exception to the Illinois Brick direct purchaser rule in a case alleging a conspiracy to delay the entry of generic competition to a patented epinephrine auto injector (“EpiPen”), dismissing antitrust claims against defendant EpiPen manufacturers while allowing the claims against the defendant distributors from whom plaintiffs directly purchased EpiPens to proceed. KPH Healthcare Services, et al. v. Mylan N.V., et al., No. 20-2065-DDC-TJJ (D. Ka. July 8, 2022).
Plaintiff purchasers of EpiPens brought a putative antitrust class action against two groups of defendants, manufacturers of EpiPens and distributors of EpiPens, alleging that defendants entered into a series of anticompetitive agreements with a generic device/drug manufacturer that had the purpose and effect of delaying the entry of a generic substitute for EpiPens, and that plaintiffs were allegedly injured by paying a higher price for EpiPens than they would have in the absence of the alleged anticompetitive agreement. The manufacturer defendants moved to dismiss the complaint on the grounds that plaintiffs lacked standing as to the manufacturers because they had not purchased directly from defendants as required under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), which held that only direct purchasers (and not subsequent indirect purchasers) have antitrust standing to seek damages under the Sherman Act. Plaintiffs responded by invoking the “co-conspirator exception” to Illinois Brick, arguing that they should qualify as direct purchasers for the purposes of antitrust standing because they plausibly alleged that all defendants conspired together to violate the antitrust laws.
The district court rejected this argument. First, it noted that facts alleged did not fit within the two specific exceptions that the Supreme Court has recognized to the direct purchaser rule: “(1) when a direct purchaser has a preexisting fixed quantity, cost-plus contract with the indirect purchaser, or (2) where the direct purchaser is owned or controlled by its customer.” Second, the court noted that while the Fourth and Eleventh Circuits have recognized the co-conspirator exception in the context of price-fixing cases, courts have generally rejected attempts to apply the exception to allegations of vertical conspiracy, and no court has ever applied it to an antitrust claim involving an alleged conspiracy to delay entry of a generic competitor. The court also distinguished Third and Ninth Circuit precedent, applying the exception on the grounds that those cases involved conspiracies to restrict output that were functionally indistinguishable from price-fixing conspiracies. Finally, the district court emphasized that both the Supreme Court and the Tenth Circuit had warned against creating additional exceptions beyond the narrow exceptions already recognized by the Supreme Court. Thus, the court declined to adopt a co-conspirator exception in this case and dismissed the complaint against the manufacturer defendants. In addition, the court dismissed claims based on plaintiffs’ purchases from the alleged co-conspirator generic manufacturer for the same reason.