Federal Trade Commission v. Vyera Pharmaceuticals, LLC
- Denise Cote
- 1:20-cv-00706
- U.S. District Court · Southern District of New York
- 16
FTC v. Shkreli: Judge Cote denied Shkreli’s request to pause or narrow his lifetime pharmaceutical-industry ban while he appealed.
Martin Shkreli remains subject to the $64.6 million judgment and lifetime ban from participating in the pharmaceutical industry while his appeal proceeds. The ruling also affects the Federal Trade Commission, the seven state plaintiffs, and the patients, families, health care professionals, generic drug manufacturers, and others whom the court identified as potentially harmed by renewed anticompetitive conduct.
What happened
In Federal Trade Commission v. Martin Shkreli, the Federal Trade Commission and seven states had obtained a judgment finding that Shkreli participated in an illegal scheme to delay generic competition for Daraprim, a drug used to treat a serious parasitic infection. The judgment required him to pay $64.6 million and permanently barred him from the pharmaceutical industry.
Shkreli asked the court to pause the ban while he appealed, or alternatively to limit it during the appeal so that it would prohibit only certain supply and distribution agreements. He argued, among other things, that the court had applied the wrong antitrust standard, wrongly held him responsible for Vyera’s profits, and imposed an overly broad ban.
Judge Cote denied both requests. She found that Shkreli had not shown a strong chance of success on appeal, irreparable harm without a pause, or that the other parties and the public would be better served by suspending the ban. She also denied his request to modify the injunction.
The detailed version
- Federal Trade Commission v. Vyera Pharmaceuticals, LLC · No. 1:20-cv-00706
- Denise Cote
- Apr. 25, 2022
Background
The Federal Trade Commission and seven states brought this antitrust enforcement action against Martin Shkreli, Vyera Pharmaceuticals, LLC, Phoenixus AG, and Kevin Mulleady. Vyera and Mulleady settled before trial, and only Shkreli proceeded to a bench trial. In an earlier ruling after that trial, the court found that Shkreli had directed an anticompetitive scheme involving Daraprim, a brand-name drug whose active ingredient is pyrimethamine.
According to the findings described in this opinion, Vyera acquired U.S. distribution rights to Daraprim in 2015 and increased its price to $750 per pill. Shkreli and Vyera then used restrictive distribution contracts and exclusive supply agreements to limit generic drug manufacturers’ access to Daraprim and pyrimethamine. The court found that the scheme delayed generic competition for at least eighteen months and produced at least $64.6 million in excess profits.
The final judgment imposed joint and several liability on Shkreli for $64.6 million and permanently barred him from participating in the pharmaceutical industry. Shkreli appealed the judgment. He filed the motion addressed here on March 7, 2022, seeking a stay of the lifetime ban while the appeal proceeded or, alternatively, a modification of the ban. By the time of this opinion, he was representing himself.
Legal standard
Federal Rule of Civil Procedure 62(d) allows a district court to pause an injunction while a judgment is appealed. The person seeking the pause bears the burden of showing that it is justified. The court considered four factors: whether Shkreli showed a strong likelihood of success on appeal, whether he would suffer irreparable harm without a stay, whether a stay would substantially harm other interested parties, and where the public interest lay.
Reasons for denying a stay
The court concluded that Shkreli had not shown a substantial possibility that he would overturn the judgment or injunction. It rejected his renewed arguments that the injunction was too broad, punitive, or vague; that the court used the wrong standard for evaluating anticompetitive effects; that the evidence did not establish causation; that he could not be jointly and severally liable for Vyera’s profits; and that the court defined the relevant product market incorrectly.
On the antitrust standard, the court stated that even under Shkreli’s proposed interpretation, the evidence showed that Vyera’s agreements substantially affected competition in the market for FDA-approved pyrimethamine. The court also clarified that the prior findings concerned at least five generic manufacturers, even though the trial record supported a conservative calculation of the delay for only two manufacturers when the excess profits were calculated.
On causation, the court said that the trial opinion had considered the timing and business decisions cited by Shkreli. It found that the evidence overwhelmingly showed that Shkreli’s anticompetitive scheme caused the delay in generic entry. On liability, the court held that the plaintiffs did not need to show that the unlawful gains personally went to Shkreli in order to impose disgorgement for profits causally related to the wrongdoing.
The court also found no showing of irreparable harm. Shkreli did not identify an actual and imminent injury that could not be remedied without a stay. The court noted that he did not address the reasons previously given for the lifetime ban, including the breadth of his illegal conduct and his lack of remorse. It also rejected his renewed arguments concerning the First Amendment and the possible divestment of shares in Vyera.
The court found a serious risk that, without the injunction, Shkreli could engage in anticompetitive conduct again and harm patients, their families, health care professionals, generic drug manufacturers, and others in the pharmaceutical industry. It rejected his argument that the Creating and Restoring Equal Access to Equivalent Samples Act eliminated that risk, explaining that the statute addressed only one part of the broader scheme described in the case.
Finally, the court held that the public interest favored keeping the injunction in place. It rejected Shkreli’s speculation that the public might benefit if he returned to the industry and developed a life-saving drug. The court stated that the trial record showed his prior conduct harmed public health and undermined confidence in the government’s ability to control predatory conduct in the pharmaceutical industry.
Disposition
Judge Denise Cote denied Shkreli’s motion to stay or modify the February 4 injunction pending appeal. The Clerk of Court was directed to mail him a copy of the opinion and note service on the docket.
Read the full 16-page opinion on CourtListener, the free public archive maintained by the Free Law Project.