By Jonathan Randles
The U.S. Supreme Court on Monday refused SigmaPharm Inc.'s bid to revive its lawsuit over royalties for a proposed generic version of prescription muscle relaxant Skelaxin, declining to review a rule that only market competitors and consumers have standing to sue under U.S. antitrust law.
SigmaPharm urged the high court in April to review a Third Circuit decision upholding the dismissal of its antitrust and contract suit that alleges the company was entitled to a share of a settlement between Mutual Pharmaceutical Co. Inc. and King Pharmaceuticals Inc. that halted plans to bring a generic version of the drug to market.
The Third Circuit said SigmaPharm lacked standing to bring antitrust claims because the drugmaker was neither a Skelaxin consumer nor a competitor in the U.S. market for the muscle relaxer. The appeals court rejected SigmaPharm's argument that a development agreement the company had with Mutual to produce a generic equivalent to Skelaxin made it a market participant.
SigmaPharm argued that the consumer-or-competitor rule invoked by the Third Circuit precludes a spectrum of technological innovators from protection under federal antitrust laws. A group of leading economists, including noted industrial economist F. M. Scherer, filed amici curiae brief urging the Supreme Court to review the case.
The dispute stems from a 1999 agreement between SigmaPharm and Mutual to collaborate on new pharmaceutical products. Under the deal, SigmaPharm performed research and development and Mutual manufactured and marketed products that were produced, one of which was a Skelaxin generic.
But SigmaPharm claims Mutual then turned around and entered into a deal with King, which owns Skelaxin, not to bring a generic version of the drug to market. Skelaxin is a skeletal muscle-relaxing drug that has been marketed in the U.S. for more than four decades.
SigmaPharm received nothing from the King deal, and it sued seeking royalties based on the development deal, arguing that it was entitled to 25 percent of the more than $200 million King paid out in the settlement. The suit accused the companies of violating the Sherman Act with the allegedly anti-competitive settlement and also brought a state law breach of contract claim.
Scherer and the other economists who sided with SigmaPharm contend that the pharmaceutical company did suffer an economic injury as a result of King's alleged deal with Mutual because SigmaPharm's research is what gave rise to potential market competition. Development deals like the one SigmaPharm struck with Mutual are common in the drug industry and allow small and medium-sized companies to create innovations that give rise to new medications and treatments, the economists said.
"Thus, in the circumstances of the case as alleged by petitioner, not only has petitioner suffered damages that ?ow directly from a collusive exclusionary agreement that restricts competition but, if standing to recoup damages is not recognized by the courts, an entire class of technological innovators will be left in a vulnerable position with no legal recourse to redress a potentially profound harm to competition," the amici curiae brief said.
SigmaPharm also argued that the consumer-or-competitor rule had created a split among the circuit courts, saying the Fourth Circuit rejected the rule in a 2007 decision in the long-running antitrust dispute between Novell Inc. and Microsoft Corp.
An attorney representing SigmaPharm declined to comment.
SigmaPharm is represented by John F. Duffy, James W. Dabney, Stephen S. Rabinowitz and Randy C. Eisensmith of Fried Frank Harris Shriver & Jacobson LLP.
In the Third Circuit, Mutual Pharmaceutical was represented by Robert T. Cahill, Michael J. Klisch and Lori R. Mason of Cooley LLP, James J. Rodgers of Dilworth Paxson LLP and T. Joel Zuercher of Pepper Hamilton LLP. King was represented by Debra S. Clayman, Shay Dvoretzky, Christopher R. Farrell, Phillip Proger and William V. O'Reilly of Jones Day and Murray S. Levin, Deirdre E. McInerney and T. Joel Zuercher of Pepper Hamilton.
The case is SigmaPharm Inc. v. Mutual Pharmaceutical Co. Inc. et al., case number 11-1275, in the U.S. Supreme Court.
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