Federal Trade Commission v. Vyera Pharmaceuticals, LLC

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK -------------------------------------- X :

FEDERAL TRADE COMMISSION, STATE OF NEW : 20cv00706 (DLC) YORK, STATE OF CALIFORNIA, STATE OF :

OHIO, COMMONWEALTH OF PENNSYLVANIA, : OPINION AND ORDER STATE OF ILLINOIS, STATE OF NORTH :

CAROLINA, and COMMONWEALTH OF :

VIRGINIA, : :

Plaintiffs, : -v- : :

VYERA PHARMACEUTICALS, LLC, AND :

PHOENIXUS AG, MARTIN SHKRELI, : individually, as an owner and former : director of Phoenixus AG and a former : executive of Vyera Pharmaceuticals, :

LLC, and KEVIN MULLEADY, individually, : as an owner and former director of :

Phoenixus AG and a former executive of :

Vyera Pharmaceuticals, LLC, : :

Defendants. : : -------------------------------------- X

APPEARANCES:

For plaintiff Federal Trade Commission:

James H. Weingarten

Markus H. Meier

Bradley S. Albert

Amanda Triplett

Armine Black

Daniel W. Butrymowicz

J. Maren Schmidt

Lauren Peay

Leah Hubinger

Matthew B. Weprin

Neal J. Perlman

Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, DC 20580

For plaintiff State of New York:

Amy E. McFarlane

Jeremy R. Kasha

Elinor R. Hoffman

Saami Zain

Office of the New York Attorney General

Antitrust Bureau

28 Liberty Street, 20th Floor

New York, NY 10005

Bryan Lewis Bloom

Freshfields Bruckhaus Deringer US LLP

700 13th St. NW 10th fl.

Washington, DC 20005

For plaintiff State of California:

Michael D. Battaglia

Office of the Attorney General of California Golden Gate Avenue, Suite 11000

San Francisco, CA 94102

For plaintiff State of Ohio:

Beth Finnerty

Office of the Ohio Attorney General

150 E. Gay Street, 22nd Floor

Columbus, OH 43215

For plaintiff Commonwealth of Pennsylvania: Joseph Betsko

Pennsylvania Office of Attorney General

Strawberry Square, 14th Floor

Harrisburg, PA 17120

For plaintiff State of Illinois:

Richard S. Schultz

Office of the Attorney General of Illinois

100 W. Randolph Street, 11th Floor

Chicago, IL 60601

For plaintiff State of North Carolina:

K.D. Sturgis

Jessica V. Sutton

North Carolina Dept. of Justice

Consumer Protection Division

114 West Edenton Street

Raleigh, NC 27603

For plaintiff Commonwealth of Virginia:

Sarah Oxenham Allen

Tyler T. Henry

Office of the Attorney General of Virginia

202 North Ninth Street

Richmond, VA 23219

For defendants Vyera Pharmaceuticals, LLC and Phoenixus AG: Stacey Anne Mahoney

Sarah E. Hsu Wilbur

Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, NY 10178

Scott A. Stempel

William Cravens

Melina R. Dimattio

Morgan, Lewis & Bockius LLP

1111 Pennsylvania Avenue, NW

Washington, D.C. 20004

Steven A. Reed

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103

Noah J. Kaufman

Morgan, Lewis & Bockius LLP

One Federal Street

Boston, MA 02210

Michael M. Elliott

Rachel J. Rodriguez

Phillips Nizer LLP

485 Lexington Avenue

New York, NY 10017

Michael L. Weiner

Dechert LLP (NYC)

1095 Avenue of the Americas

New York, NY 10036-6797

For defendant Martin Shkreli:

Christopher H. Casey

Andrew J. Rudowitz

Jeffrey S. Pollack

Sarah O'Laughlin Kulik

Duane Morris LLP

30 South 17th Street

Philadelphia, PA 19103

Sarah Fehm Stewart

Duane Morris, LLP (NJ)

One Riverfront Plaza, Suite 1800

Newark, NJ 07102-3889

For defendant Kevin Mulleady:

Kenneth R. David

Albert Shemtov Mishaan

Nicholas Anthony Rendino

Kasowitz, Benson, Torres LLP (NYC)

1633 Broadway

New York, NY 10019

DENISE COTE, District Judge:

Trial is scheduled to begin in this antitrust action on December 14, 2021. Defendant Martin Shkreli has moved to preclude the plaintiffs from offering evidence at trial regarding Retrophin, Inc., a pharmaceutical company that Shkreli founded in 2011. The motion is denied.

Background

The plaintiffs seek to prove at trial that Vyera Pharmaceuticals, LLC (“Vyera”), a pharmaceutical company that Shkreli founded in 2014, and the two individual defendants violated the antitrust laws through a scheme that involved, inter alia, purchasing an off-patent, single-source rare-disease drug, raising the price for the drug dramatically, and entering into agreements that effectively closed the distribution system of the drug and blocked competition by generic pharmaceuticals. The plaintiffs seek to offer evidence that Shkreli pioneered this anticompetitive strategy at Retrophin, which applied the strategy to two drugs that Retrophin acquired and/or licensed: Chenodal and Thiola. After Retrophin obtained control of those drugs it raised their prices by 400% and 2,000%, respectively. In this lawsuit, the plaintiffs seek to hold Shkreli liable for violations of §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2; § 5(a) of the FTC Act, 15 U.S.C. § 45(a); and various state statutes. They seek equitable monetary relief and an injunction banning Shkreli from the pharmaceutical industry.

Discussion

The evidence regarding Shkreli’s activities at Retrophin in connection with Chenodal and Thiola is admissible. First, it is admissible as background evidence regarding the conspiracy alleged in the complaint. Evidence of uncharged conduct is independently admissible and is “not evidence of other crimes, wrongs, or acts under Rule 404(b)” if that conduct arose out of the same series of transactions, is “inextricably intertwined” with the conduct at issue at trial, or is necessary “to complete the story” of the claimed offense at trial. United States v. Robinson, 702 F.3d 22, 37 (2d Cir. 2012).

It is also admissible under Rule 404(b) as evidence of motive, intent, plan, knowledge, and the absence of mistake. Fed. R. Evid. 404(b); United States v. Curley, 639 F.3d 50, 57 (2d Cir. 2011). The conduct, as proffered by the plaintiffs, is sufficiently similar to the conduct at issue at trial to permit the inferences argued by the plaintiffs. The probative value of the evidence is not outweighed by any unfair prejudice to Shkreli or any other concern identified by Rule 403.

Finally, if Shkreli is found liable, the evidence is relevant to the request for injunctive relief. That request will require a determination of the extent to which the violation was an isolated occurrence and the degree of willfulness involved. See S.E.C. v. Cavanagh, 155 F.3d 129, 135 (2d Cir. 1998)(listing the factors courts consider in assessing a prospective injunction).

In moving to preclude this evidence, Shkreli argues that the plaintiffs will not be able to prove that Retrophin actually impeded generic competition with either Chenodal or Thiola. It is Shkreli’s planning for and initiation of a similar anticompetitive scheme at Retrophin, assuming that the plaintiffs establish that plan and initiation, that is relevant to Shkreli’s scienter while at Vyera, not whether the Retrophin scheme succeeded. Shkreli argues as well that absent evidence of actual harm to competition, Shkreli’s intent is irrelevant. The plaintiffs seek to prove at trial both that Shkreli conspired to block generic competition with Vyera’s drug Daraprim and that he succeeded in doing so for a not inconsiderable period of time.

Conclusion

Shkreli’s October 20, 2021 motion to preclude evidence relating to Retrophin is denied.

Dated: New York, New York

November 5, 2021

A

DENISE COTE United States District Judge