Appeal from the United States District Court for the Northern District of California, Claudia Wilken, District Judge, Presiding, D.C. Nos. 4:04-cv-01511-CW; 4:04-cv-4203-CW.
The opinion of the court was delivered by: Rymer, Circuit Judge
Argued and Submitted May 13, 2009 -- San Francisco, California.
Before: Mary M. Schroeder, Stephen Reinhardt and Pamela Ann Rymer, Circuit Judges.
Do allegations of monopoly leveraging through pricing conduct in two markets state a claim under § 2 of the Sherman Act, 15 U.S.C. § 2, absent an antitrust refusal to deal (or some other exclusionary practice) in the monopoly market or below-cost pricing in the second market? Following Pacific Bell Telephone Co. v. linkLine Communications, Inc., 129 S.Ct. 1109 (2009), we hold that no such claim may be brought. As the district court held to the contrary, we reverse.*fn1
John Does 1 and 2 and the Service Employees International Union Health and Welfare Fund (collectively, "Does") represent certified classes of HIV patients and their medical plans who purchase Norvir, a drug made by Abbott Laboratories that "boosts" the effectiveness of protease inhibitors used to fight the disease. According to Does, Norvir gives Abbott a monopoly in the booster market. Norvir was originally sold as a standalone protease inhibitor, but it turned out to be more useful as a booster taken in low dosages along with other inhibitors. Abbott also sells a "boosted" protease inhibitor, Kaletra, which consists of Abbott's protease inhibitor compound lopinavir combined in a single pill with a boosting dose of ritonavir (the generic name for Norvir).
Meanwhile, Abbott competitors such as Bristol Meyers-Squibb (whose protease inhibitor is marketed as Reyataz) and GlaxoSmithKline (whose inhibitor is marketed as Lexiva), were given permission by the FDA to promote Norvir as a booster to be taken along with their own inhibitors. Once this happened, Abbott increased the price of Norvir from $1.71 to $8.57 per 100 mg, but did not increase the price of Kaletra. The effect, Does say, was to raise the total cost to the patient of boosted protease inhibitor therapies provided by Abbott's competitors (that is, when a patient uses Norvir along with a competitor's inhibitor such as Reyataz or Lexiva). In this way, Abbott allegedly leveraged its Norvir monopoly to attempt to monopolize the boosted market for Kaletra.
Abbott moved for dismissal and for summary judgment on the grounds that no § 2 claim was stated, that Does failed to show antitrust injury, and that Abbott lacked monopoly power in the boosted protease inhibitor market. The district court disagreed in a series of rulings. See In re Abbott Labs. Norvir Antitrust Litig., 562 F. Supp. 2d. 1080 (N.D. Cal. 2008); 442 F. Supp. 2d 800 (N.D. Cal. 2006); Serv. Employees Int'l Union Health & Welfare Fund v. Abbott Labs., No. 04-4203-CW (N.D. Cal. Mar. 2, 2005) (order denying Abbott's motion to dismiss); Doe v. Abbott Labs., No. 04-1511-CW (N.D. Cal. Oct. 21, 2004) (same).
The parties then entered into a settlement agreement. Assuming approval by the district court, the agreement provides that Abbott will pay $10 million into a settlement fund and take an interlocutory appeal on condition that, if the case ends up being dismissed, Abbott will pay no more but if Does prevail, it will pay up to an additional $17.5 million depending on the degree of success. The district court approved both the settlement and interlocutory appeal, certifying three issues: (1) whether antitrust injury has been shown; (2) whether Abbott has monopoly power in the boosted protease inhibitor market; and (3) whether the below-cost pricing test for bundled discounts that we adopted in Cascade Health Solutions v. PeaceHealth, 515 F.3d 883 (9th Cir. 2008), applies to this monopoly leveraging case.
Abbott timely appealed.*fn2
The settlement arrangement in this case implicates Gator.com Corp. v. L.L. Bean, Inc., 398 F.3d 1125, 1128-32 (9th Cir. 2005) (en banc), thus our jurisdiction, so we address this issue first. In Gator, the parties to an action for declaratory judgment reached a settlement that ended the controversy on the merits and left open only a side issue of personal jurisdiction. In those circumstances we believed the appeal was moot. Unlike Gator, however, we are persuaded that the merits are still at issue here. Accordingly, we have ...