Opinion ID: 788070
Heading Depth: 2
Heading Rank: 3

Heading: Obtaining a Source of Clathrate

Text: 14 In the early 1990's Barr identified warfarin sodium as a product with high barriers to entry because of the difficulty in procuring commercial quantities of clathrate. Barr began to research potential suppliers, and in 1991 it discussed purchasing clathrate from ACIC/Brantford. ACIC/Brantford confirmed that it would be able to produce commercial quantities of clathrate. In February 1991 Barr placed a small order for it. On March 15, 1995 ACIC/Brantford filed a Master File for clathrate, and on April 3, 1995, it provided a reference letter to the FDA in support of Barr's warfarin sodium Abbreviated New Drug Application. On May 10, 1995 Barr filed its application, listing ACIC/Brantford as its supplier of clathrate.
15 In September 1995 the defendants entered into an exclusive supply agreement pursuant to which ACIC/Brantford would supply Barr with clathrate. The agreement obligated Barr to purchase $1.8 million worth of clathrate. It also provided that ACIC/Brantford would supply Barr exclusively with commercial quantities of clathrate until another manufacturer began selling generic warfarin sodium. Barr agreed to purchase 100 percent of its supply from ACIC/Brantford during the exclusivity period. One week after they entered into the supply agreement, the defendants executed a confidentiality agreement that for five years prohibited either party from disclosing valuable, proprietary, technical, commercial and other confidential information. 16 This agreement only covered commercial quantities of clathrate. Hence, it did not prohibit ACIC/Brantford from selling small samples or developmental quantities, or from acting as a broker between manufacturers and other suppliers. The agreement also permitted Barr to purchase small quantities of clathrate from other sources in order to qualify that supplier as an alternate source.
17 From September 1995 through September 1996, Barr ordered larger shipments of clathrate from ACIC/Brantford, the last of which was shipped in February 1997. On March 26, 1997, the FDA approved Barr's application and authorized it to begin marketing, which it did starting in July 1997. The FDA determined that Barr's warfarin sodium tablets were bioequivalent, and therefore therapeutically equivalent to the name brand drug Coumadin. 18 Barr continued to place orders for large quantities of clathrate from ACIC/Brantford. In a September 1997 document Barr referred to ACIC/Brantford as the only source [of clathrate] available to the generic industry. The district court found that Barr had attempted to secure a back-up producer, but as of March 1998 had not succeeded.

19 Geneva's attempt to obtain a source of clathrate encountered nearly insurmountable obstacles. Between 1993 and 1996 it sought to obtain a clathrate supply from numerous chemical companies, including Hoechst Celanese, Chemoswede, Banyan Chemicals, and others. A critical issue in the present dispute is whether any of these potential suppliers was in fact a viable commercial source of clathrate because nearly all of plaintiff's accusations depend on its theory that ACIC/Brantford's monopoly on clathrate created a bottleneck for others attempting entry into the generic warfarin market. At the relevant time, Geneva concluded that ACIC/Brantford was its only viable supplier. But, the district court found several other sources were available to plaintiffs. 20 Geneva had purchased a variety of products from ACIC/Brantford during the 1980's and 90's. Dr. Panjak Dave, Geneva's regulatory manager, had represented Geneva in most of the prior dealings with ACIC/Brantford. Sergio Getrajdman was ACIC/Brantford's sales representative responsible for sales to Geneva. On September 20, 1994 when Dr. Dave contacted Getrajdman to discuss the availability of clathrate, Getrajdman told him that ACIC/Brantford had no exclusive arrangement with respect to clathrate and that it could supply clathrate to Geneva. The next day, Dr. Dave telephoned ACIC/Brantford for a price quote on a small purchase and was quoted approximately $2,500 per kg. 21 From late 1994 through early 1995, ACIC/Brantford sent Geneva several samples and R & D quantities of clathrate. At one point, Geneva purchased 15 kg. In March 1995 ACIC/Brantford sent three additional samples along with technical information that Geneva had requested. In April 1995 ACIC/Brantford sent the FDA a Master File reference letter on behalf of Geneva (then known as Invamed). The letter provided: 22 Dear Sir, Re: WARFARIN SODIUM DMF # 11387 23 Authorization is hereby given to the Food and Drug Administration to refer to our Master File for WARFARIN SODIUM on behalf of: 24 INVAMED, INC. 2400 Route 130 North 25 Dayton, NJ 08810 — U.S.A. 26 In support of any new drug application they may file on pharmaceutical preparation containing the drug manufactured by us. 27 ACIC (CANADA) INC. herewith commits itself to manufacture all of their pharmaceutical products in accordance with the current good manufacturing practices and by the methods described in this specific Drug Master File, and to issue a new DMF reference letter after each amendment on the above Drug Master File. 28 In July 1995 Geneva ordered 5 more kg of clathrate at $2,500 per kg and requested ACIC/Brantford's safety and handling procedures. ACIC/Brantford shipped the product along with information about its procedures.
29 From this point forward, communications between ACIC/Brantford and Geneva are in considerable dispute. In the background of these communications is the Barr/ACIC/Brantford exclusive dealing arrangement signed in late September 1995, and the confidentiality agreement signed one week later. The district court found that on August 23, 1995 ACIC/Brantford's Getrajdman attempted to dissuade Geneva from pursuing its FDA application on the pretext that others were ahead of it, and that its market share would thus be proportionally smaller. In January 1996 Geneva's Dave placed an order for 12 to 14 kg of clathrate from ACIC/Brantford to perform tests on a particular machine. Getrajdman advised Dave that he did not know when availability would permit ACIC/Brantford to accept this order. 30 Before and during 1996, Geneva avers it informed Getrajdman that it would be working with ACIC/Brantford's clathrate and intended to use its clathrate to file its Abbreviated New Drug Application. Geneva insists it also specifically advised ACIC/Brantford that it would be obligated to supply Geneva with commercial clathrate once Geneva's application was approved, and asserts that it received repeated assurances from ACIC/Brantford. Geneva says that ACIC/Brantford never mentioned its exclusive contract with Barr and never said it was unwilling or unable to supply Geneva with clathrate. 31 In the spring of 1997 Dr. Dave asked Getrajdman for 100-150 kg of clathrate. Getrajdman responded that ACIC/Brantford would be able to deliver the order as soon as the FDA approved two generic manufacturers' applications for generic warfarin sodium. Getrajdman gave no explanation for this condition, but it is essentially consistent with the terms of the Barr/ACIC/Brantford supply agreement. 32 In September 1997 Geneva received FDA approval for its generic warfarin sodium application. The next day it sent ACIC/Brantford an order to purchase 750 kg of clathrate for $1.8 million. By October 1997 Geneva still had not received an acceptance of its order, and it threatened legal action. On October 20, 1997 ACIC/Brantford formally rejected Geneva's order, and thereafter refused to accept further Geneva orders. It was then that Geneva first learned of the exclusive deal between ACIC/Brantford and Barr, and that as a result, ACIC/Brantford would not be able to supply it with clathrate. 33 Finding itself suddenly without a supplier, Geneva turned to Banyan Chemicals (Private) Ltd. (Banyan), an Indian manufacturer. Geneva and Banyan had previously worked together on several products, and in 1995 had signed a Memorandum of Understanding that included a provision that Banyan would begin to develop the capability to manufacture clathrate. Banyan had never manufactured clathrate before, and at the time Geneva expected Banyan's development process to take years. 34 After ACIC/Brantford rejected Geneva's order, Geneva decided that the fastest way it could enter the market was by assisting Banyan to develop a process for manufacturing clathrate. Geneva and Apothecon eventually entered the generic warfarin sodium market using Banyan clathrate in October 1998, after a one-year delay from the date of Geneva's unfilled order to ACIC/Brantford.