Update January 2011: The Third Circuit affirmed the district court’s holding that the hospital was not a direct purchaser under Illinois Brick and therefore lacked standing under Section 4 of the Clayton Act. This decision may be erroneous for at least two reasons. First, the Illinois Brick rule prohibits indirect purchasers from recovering damages for “passed on” anticompetitive overcharges. It does not deny standing to challenge and seek to enjoin the anticompetitive activity. The court appears to have errneously interpreted the rule as jurisdictional when in fact it only limits the remedy. Second, the anticompetitive impact in this case arose from the decision to link red and white blood cell drugs through a bundled discount scheme. That scheme was aimed directly at hospitals and amounted to a claim that Amgen used its market power in white blood cell drugs to restrain competition in the potentially competitive market for red blood cell growth-factor drugs. The harm arose not because Amgen engaged in a conspiracy that allowed it to overcharge its distributor who then passed on that overcharge to the hospital plaintiff. Rather, Amgen harmed the hospital directly by effectively forcing it to purchase Amgen’s higher priced red bloodcell products by blunting competition. The middleman distributor was irrelevant to the operation of the anticompetitive scheme. That Amgen negotiated and paid the rebates directly to the hospital confirmed this basis for distinguishing Illinois Brick.
District of NJ Judge Stanley Chesler dismissed a hospital’s claim that Amgen acted anticompetitively by offering a discount on white blood cell growth-factor products, over which it had market power, only if the purchaser also bought red blood cell growth factor products, on which Amgen competed with other firms. The court held that as an indirect purchaser the hospital lacked standing to sue, and that the challenged conduct did not constitute a tie-in sale because Amgen would sell the products separately, only without the discount.