We have been covering Pfizer’s antitrust suit against Johnson & Johnson, the manufacturer of REMICADE (infliximab), as well as a related antitrust litigation filed by retailers Walgreen and Kroger Co. and direct and indirect purchasers of Remicade. The cases generally allege that Johnson & Johnson excluded Pfizer’s infliximab biosimilar from the market through anticompetitive bundling and rebate penalties for insurers and providers, causing inflated prices. This past Friday, the Third Circuit ruled that antitrust claims brought by one of those direct purchasers arising out of a distribution contract are subject to arbitration.
Specifically, Rochester Drug Cooperative (RDC), a direct purchaser and wholesaler of REMICADE, alleges that Johnson & Johnson’s anticompetitive conduct caused RDC to pay artificially inflated prices for products purchased under a certain distribution contract. The contract contained a “Dispute Resolution” clause, which provided, in pertinent part:
4.21 Dispute Resolution. (a) Any controversy or claim arising out of or relating to this agreement (including without limitation any controversy or claim involving the parent company, subsidiaries, or affiliates under common control of the Company or the Distributor (a “Dispute”)), shall first be submitted to mediation according to the Commercial Mediation Procedures of the American Arbitration Association (“AAA”) . . . .
(b) Any Dispute that cannot be resolved by mediation within 45 days . . . shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the AAA . . . and the Federal Arbitration Act, 9 U.S.C. §1 et seq.
The District Court found that RDC’s antitrust claims were not arbitrable under this agreement because they were “separate from, and cannot be resolved based on,” the agreement.
However, this past Friday, the Third Circuit ruled that RDC’s antitrust claims do “arise out of or relate to” the distribution contract, and remanded for arbitration. The Third Circuit found that because the “gravamen of RDC’s complaint is that J&J’s anticompetitive Plan ‘enabled [it] to sell its branded Remicade infliximab product at artificially inflated prices,’”, “the only inflated price that could have caused RDC’s injury was the price it paid J&J for Remicade,” and thus, “RDC’s antitrust claims are ‘undeniably intertwined’ with the Agreement,” because the fact of RDC’s entry into the agreement containing the artificially inflated price gave rise to the claimed injury.
In considering whether to apply New Jersey or federal law to review of the arbitration clause, the panel noted that there are circumstances where federal law “may tip the scales in favor of arbitration” including “where state interpretive principles do not dictate a clear outcome,” or in cases of preemption. However, “applicable state law governs the scope of an arbitration clause… in the first instance.” Accordingly, the Court applied New Jersey law to find that the dispute was subject to the arbitration clause.