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In Re: Plasma-Derivative Protein

February 9, 2011

IN RE: PLASMA-DERIVATIVE PROTEIN THERAPIES ANITRUST LITIGATION


The opinion of the court was delivered by: Judge Joan B. Gottschall

THIS ORDER RELATES TO ALL ACTIONS

MEMORANDUM OPINION & ORDER

The United States Judicial Panel on Multidistrict Litigation ordered the consolidation of these actions pursuant to 28 U.S.C. § 1407 for the purpose of supervising pretrial proceedings. (Doc. 1.) This MDL now consists of seventeen class actions brought on behalf of purchasers of plasma-derivative protein therapies against defendants CSL Limited, CSL Behring LLC, CSL Plasma (collectively, "CSL"), Baxter International Inc. ("Baxter"), and Plasma Protein Therapeutics Association ("PPTA"). Plaintiffs allege that CSL and Baxter, the two largest domestic producers of plasma-derivative therapies, conspired along with PPTA, a trade association, to restrict supplies of the therapies, thus keeping prices high, in violation of the Sherman Act, 15 U.S.C. § 1. The court appointed a plaintiffs' steering committee to conduct and coordinate the discovery stage of litigation, and, on June 4, 2010, plaintiffs filed a Consolidated Amended Complaint ("CAC"). (Doc. 222.) All defendants have moved to dismiss for failure to state a claim under the standard in Bell Atlantic Corporation v. Twombly, 550 U.S. 544 (2007). (Doc. 265.) PPTA has filed a separate motion arguing additional grounds for dismissal (Doc. 255), and CSL Limited seeks dismissal based on a lack of personal jurisdiction (Doc. 261).

I.BACKGROUND

CSL and Baxter are the largest of only five producers of plasma-derivative protein therapies in the United States. (CAC ¶¶ 88, 219.) Plasma therapies are used by hospitals and other healthcare providers in the treatment of certain "serious illnesses including immune deficiency diseases, coagulation disorders, and respiratory diseases." (Id. ¶¶ 2, 50.) Plaintiffs allege that a series of significant changes in the market for plasma therapy products led to the formation of the conspiracy between CSL, Baxter, and PPTA beginning at least as early as July 1, 2003 and continuing to the present. During that period, prices of plasma therapies "have risen dramatically," and "Defendants have enjoyed large profit margins." (Id. ¶ 27.)

The lawsuits in this case were triggered by a Federal Trade Commission ("FTC") complaint that was filed in the United States District Court for the District of Columbia seeking to block a planned merger between CSL and one of its competitors. See FTC v. CSL Ltd. et al., 09-cv-1000, Doc. 54 (D.D.C. Nov. 11, 2009). The FTC's complaint contained many of the same facts as the CAC and suggested that the planned merger would further consolidate an already highly concentrated market. CSL eventually called off the merger, and the FTC dismissed its complaint. However, plaintiffs seized on the FTC's complaint, and they now allege that the merger was part of the broader conspiracy to ensure high prices and profits in the plasma therapies market. For the purposes of this motion, the court takes as true the following facts alleged in the CAC.*fn1

A.Characteristics of the Plasma Therapies Market

The manufacturing process for plasma therapies is a multi-step process that can take up to a year to complete. First, the blood plasma must be collected from donors. Then the plasma must be tested, and the proteins are separated out in a process called "fractionation." Finally, the proteins are finished and checked for quality. (CAC ¶ 48.) The manufacture of plasma therapies is tightly regulated by the United States Food and Drug Administration ("FDA") and state regulators. (Id. ¶ 49.) Facilities for collection and processing of blood plasma must be approved by the FDA, and the approval process can take more than two years to complete. (Id. ¶¶ 59-60.) Because plasma therapies are subject to FDA approval processes, only plasma collected and processed domestically can be sold in the United States. (Id. ¶ 59.)

Plasma therapies can be very expensive. Annual cost for treatment can exceed $90,000 per patient. But the therapies are life-saving, and no adequate substitutes exist. (Id. ¶¶ 50-51, 55, 58, 216-17.) Plasma therapies are a commodity-like product with no significant differences among suppliers. (Id. ¶¶ 213-14.) The CAC focuses on two of the "most prominent" plasma therapies, immune globulin ("Ig") and albumin. (Id. ¶ 52.) Ig is prescribed to treat a wide variety of diseases. (Id. ¶ 53.) Albumin is used primarily in surgical and trauma settings "to expand blood volume and to prime heart valves during surgery." (Id. ¶¶ 56-57.)

B.Pre-Conspiracy Developments

Although the plaintiffs allege that the conspiracy began in 2003, the CAC lays out some of the important history of the plasma therapies industry. Following a recall of albumin in 1997, the FDA closed a plant located in Kankakee, Illinois.*fn2 In 1999, a plant in California also closed temporarily.*fn3 The closure of these two facilities spurred a national shortage of plasma therapies. (Id. ¶ 62.) Concern over the health implications of these developments led to national media coverage, congressional hearings, and increased FDA regulation. (Id. ¶¶ 63-64.)

As part of its response to the crisis, the FDA established a requirement for manufacturers to monitor distribution levels of plasma therapies and to report on those levels twice per year. (Id. ¶ 65.) The International Plasma Products Industry Association ("IPPIA"), a predecessor to PPTA, organized the industry to take voluntary action, beyond that required by the FDA. Manufacturers promised to make monthly reports about both distribution and inventory of plasma therapies. (Id. ¶ 66.)

After the closed plants came back on line, the industry was faced with a reversal of market conditions. Between 2000 and 2003, there was an overabundant supply of plasma therapies. Prices dropped, and producers experienced "a 30% reduction in gross operating margins." (Id. ¶ 79.) At the same time, the industry trade association, now known as PPTA after IPPIA merged with another trade group, launched a new program in September 2002 "to monitor total industry output" and "to warn industry participants when inventory levels of Plasma-Derivative Protein Therapies reached certain levels." (Id. ¶ 85.)

C.Consolidation of Plasma Therapies Industry

The efforts at greater industry coordination on monitoring of supply coincided with a period of consolidation among producers. The industry shrunk from thirteen domestic producers in 1990, to nine in 2003, and down to only five by 2005. (Id. ¶ 88.) Today, CSL and Baxter together control approximately 60% of the market for plasma therapies. The rest of the market is divided among three other competitors: Talecris Biotherapeutics Holdings Corporation ("Talecris") which controls 23% of the market, Grifols USA ("Grifols") which controls 7%, and Octapharma USA, Inc. ("Octapharma") which controls 5%. (Id. ¶ 219.) With respect to Ig and albumin, CSL and Baxter control even larger market shares. (Id. ¶¶ 219-21.)

The industry also transformed itself in the direction of more vertical integration. (Id. ¶¶ 88-97.) The vast majority of plasma collection centers were privately owned in 2000, but, over the next few years, Baxter, CSL, and other plasma therapy producers acquired many of the independent plasma collectors and facilities. By 2008, 80% of the plasma collection centers were owned by the five producers. (Id. ¶ 942.) The changes in the industry have left CSL, Baxter, and Talecris as ...


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