Forty-nine states sued 20 manufacturers of generic drugs, alleging an anticompetitive scheme to “fix, maintain, and stabilize prices, rig bids, and engage in market and customer allocations” of certain generic pharmaceuticals. The district court recently decided defendants’ motion to dismiss, holding that although the states could not seek disgorgement, they do have parens patriae standing to pursue their claims.
Citing the Supreme Court’s recent decision in AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021), the district court held that disgorgement was not a remedy available under section 16 of the Clayton Act. Section 16 provides, “Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief . . . against threatened loss or damage by a violation of the antitrust laws . . .” The court held that like section 13(b), addressed by the Supreme Court in the AMG decision, “the “injunctive relief” provided by § 16 of the Clayton Act does not authorize disgorgement.” The court found that there were other avenues for injured parties to recover monetary relief. The court also found that allowing the states to pursue disgorgement would be an impermissible end run around the ban on recovery of federal antitrust damages by indirect purchasers.
The court next addressed the defendants’ argument that the states lacked parens patriae standing. Defendants argued that the states had not shown that (1) the states had interests distinct from the interests of their injured citizens; (2) the defendants’ actions affected enough of the states’ citizens; and (3) individual citizens could not secure their own relief.
The court began by describing the parens patriae authority of the states in federal antitrust suits. States must show a “quasi-sovereign” interest in remedying the harm. “Preventing antitrust harms to a state’s citizenry is a recognized quasi-sovereign interest.” The court found that the states’ had a quasi-sovereign interest in “ensuring that their citizens are not denied the benefit of lower-priced drugs that would result from market participants’ adherence to fair marketplace regulations and an interest in ensuring that those who sell medication to their citizens abide by the federal antitrust system.”
The court next held that the states had sufficiently alleged that the defendants’ actions affected many of the citizens of their states. Finally, the court held that the existence of parallel private actions did not defeat the states’ parens patriae authority: “A state’s parens standing to pursue injunctive relief does not depend on whether individual citizens might succeed in independent litigation. The States’ quasi-sovereign interest (ensuring a fair marketplace) diverges from any private litigant’s interest (obtaining treble damages under federal law).” In re Generic Pharmaceuticals Antitrust Litigation (In re State Attorneys General Litigation), MDL No. 2724 (Case No. 17-3768) (E.D.Pa. June 7, 2022)
