Federal Trade Commission v. Vyera Pharmaceuticals, LLC

Background

Trial in this antitrust action was scheduled to begin on December 14, 2021. The plaintiffs—the Federal Trade Commission and several states and commonwealths—allege that Vyera Pharmaceuticals, LLC, Martin Shkreli, Kevin Mulleady, and Phoenixus AG violated federal and state antitrust laws through a scheme involving Daraprim. According to the opinion, the alleged scheme included purchasing an off-patent, single-source rare-disease drug, dramatically increasing its price, and entering agreements that effectively restricted distribution and blocked generic competition.

The plaintiffs also sought to present evidence about Shkreli’s activities at Retrophin, a pharmaceutical company he founded in 2011. They alleged that, after Retrophin obtained control of Chenodal and Thiola, their prices increased by 400% and 2,000%, respectively. The plaintiffs argued that Shkreli’s planning and initiation of a similar strategy at Retrophin was relevant to his intent and knowledge in the alleged Vyera scheme, regardless of whether the Retrophin strategy successfully blocked generic competition.

Motion and arguments

Shkreli moved to preclude, meaning exclude, the plaintiffs’ evidence concerning Retrophin. He argued that the plaintiffs could not prove that Retrophin had actually impeded generic competition involving Chenodal or Thiola. He also argued that, without proof of actual competitive harm at Retrophin, his intent was irrelevant.

Court’s analysis

The court ruled that the evidence was admissible for several reasons. First, it could serve as background evidence concerning the conspiracy alleged in the complaint. The court explained that evidence of uncharged conduct may be admitted when it arises from the same series of transactions, is closely connected with the conduct at issue, or is needed to complete the story of the alleged offense.

Second, the court held that the evidence could be admitted under Federal Rule of Evidence 404(b), which allows evidence of other acts for purposes such as showing motive, intent, plan, knowledge, or the absence of mistake. The court found the Retrophin conduct, as described by the plaintiffs, sufficiently similar to the conduct at issue at trial to support the inferences the plaintiffs sought to draw. It also concluded that the evidence’s usefulness was not outweighed by unfair prejudice or other concerns under Rule 403, the rule governing exclusion of evidence whose unfair prejudice or other risks substantially outweigh its value.

Finally, the court found the evidence relevant to the plaintiffs’ request for an injunction barring Shkreli from the pharmaceutical industry. If Shkreli were found liable, the court would need to consider whether the violation was isolated and how willful it was. The court stated that the success of the Retrophin strategy was not necessary to make Shkreli’s planning and initiation of a similar scheme relevant to his state of mind concerning Vyera.

Disposition

The court denied Shkreli’s October 20, 2021 motion to preclude evidence relating to Retrophin. This opinion decided the evidentiary issue and did not determine whether Shkreli or the other defendants were liable for the alleged antitrust violations.