Tenth Circuit grapples with intent, consumer welfare standard in decision involving the alleged monopolization of a healthcare market

On July 29, 2022, the Tenth Circuit[1] affirmed the grant of summary judgment to defendants by the District of Kansas[2] in an important, albeit at times misguided, monopolization opinion.

The antitrust claim by Sanofi-Aventis U.S., LLC against Mylan, Inc. and Mylan Specialty, LP, arose from competition (or, perhaps more precisely, a lack thereof) among these pharmaceutical companies in the market for epinephrine autoinjectors (“EAIs”), which are self-administered medical devices used to treat life-threatening allergic reactions.[3] The Tenth Circuit’s opinion may have made at least two fundamental errors, including failing to include any analysis of whether prices in the actual world were lower than in a but-for world (that is, a world without the challenged restraint), as well as its insertion of a recoupment element into exclusive dealing jurisprudence. The opinion is also notable for (1) its treatment of evidence of a monopolist’s intent to exclude competitors, (2) its application of the consumer welfare standard, and (3) its deference to the existing structure of the healthcare industry.


The first EAI was approved by the FDA in 1987.[4] Following a series of acquisitions, Mylan acquired marketing rights in 2007.[5] There is no dispute that Mylan was a dominant firm in the EAI market, capturing nearly 100% of the share of EAI users.[6] In fact, Mylan is so dominant that even rival EAIs are commonly referred to by Mylan’s own genericized trademark: EpiPen®.

When Sanofi introduced its own novel EAI to the market in 2013 (branded as “Auvi-Q”), Mylan responded by offering aggressive 17-36% rebates to pharmacy benefit managers (“PBMs”) in exchange for exclusivity agreements requiring that those PBMs only cover EpiPens, and not Auvi-Q devices.[7] Prior to Auvi-Q’s introduction, Mylan’s rebates to PBMs were only 3-10% and were not conditioned on exclusivity.[8] The result was that Mylan, an EAI monopolist, had (in its own words) prevented 31% of the entire country from accessing a meaningful alternative to EpiPen.[9]

Auvi-Q was subject to a product recall in 2015[10] and, citing its lack of success entering the market, returned distribution rights to the original inventors of the device.[11]

Mylan prevails at the district court

In 2017, Sanofi sued Mylan under Section 2 of the Sherman Act alleging monopolization of the EAI market.[12] After the close of discovery, the parties filed cross motions for summary judgment on the monopolization claim.[13] Mylan sought a finding that there was no triable issue as to its “willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.”[14] Sanofi requested judgment as a matter of law that “(1) the relevant market consists of epinephrine auto-injector devices in the United States, and (2) Mylan possessed and exercised monopoly power in that market.”[15] The district court granted Mylan’s motion, finding that no reasonable jury could conclude that Mylan engaged in exclusionary conduct, and therefore the court denied Sanofi’s motion as moot.[16] Sanofi appealed to the Tenth Circuit.[17]

The Tenth Circuit affirms

In an 89-page opinion, the Tenth Circuit concurred with the district court’s decision and affirmed the grant of summary judgment to Mylan dismissing the suit.[18]

After surveying the structure of the prescription drug market, the appellate court described the market for EAIs, and then summarized Mylan’s exclusionary conduct in that market from 2012-15.[19] The court divided Sanofi’s allegations of exclusionary conduct into three categories, addressing each category “separately,” and in so doing rebuking the

 Supreme Court’s admonition that Sanofi was entitled to “the full benefit of all its proof without tightly compartmentalizing the various factual components.”[20] Those three categories of exclusionary conduct were: “(1) Mylan’s use of exclusive rebate agreements; (2) the leveraging of EpiPen’s entrenched demand to deny Sanofi a meaningful opportunity to compete for the nonentrenched demand; and (3) other conduct working in concert to lock Sanofi out of the market, including Mylan’s EpiPen4Schools program and the misclassification of EpiPen as a generic drug for Medicaid purposes.”[21] The gravamen of the Tenth Circuit’s opinion was a seemingly singular analysis of Mylan’s exclusive rebates to PBMs in isolation from the other two categories, which were only briefly considered.[22]

In setting out a legal standard, the Tenth Circuit first determined that an exclusive dealing arrangement is only “anticompetitive under the consumer welfare standard if it harms consumers by excluding rivals.”[23] To prove a violation under Section 2 of the Sherman Act, “the rival plaintiff must show that the agreements are likely to foreclose it from doing business in the relevant market.”[24] Factors considered in the foreclosure analysis include “duration, ease of terminability, and percentage of the market foreclosed by the contracts.”[25] Next, “the rival plaintiff must show that, once foreclosed, the defendant could reduce output or increase prices and those consumer harms would outweigh any consumer benefit received from the period of lower prices.”[26] The Tenth Circuit did not evaluate whether the actual prices were lower than prices that would have persisted “‘but-for’ the antitrust violation,” as antitrust precedents instruct.[27]

In doing so, the Tenth Circuit fell prey to “the rhetoric of the word ‘discounts[,’ which] has beguiled many into mistakenly assuming that [exclusionary] discounts must lower prices to buyers and thus should be deemed ‘presumptively procompetitive.’”[28] The Tenth Circuit declined to consider whether the “price charged to the noncompliant buyer [i.e., the buyer that declines exclusivity] exceeds the but-for level,” in which case the exclusivity provision “in fact imposes a price penalty on buyers who refuse” exclusivity.[29] Instead, the Tenth Circuit concluded that “Mylan’s exclusive rebate agreements brought about lower prices for epinephrine auto-injectors,” despite acknowledging that during the conduct period, and faced for the first time by a meaningful competitive entrant, Mylan was able to increase net prices for the EpiPen by 35%.[30] Moreover, the Tenth Circuit injected a recoupment element into exclusive dealing cases, or at least those premised on single product market discounts, something no court of appeals has done outside the context of predatory pricing claims. The Tenth Circuit ultimately held that “Sanofi fail[ed] to present a triable issue” on the exclusionary conduct requirement, and affirmed the lower court without reaching the question of market power.[31]

Significant takeaways

The Tenth Circuit’s opinion is significant in how it grappled with the intent behind Mylan’s efforts to exclude Sanofi from the EAI market, its application of the consumer welfare standard, and its deference to the current structure of the healthcare industry.

The Circuit Court declined to consider evidence of intent to exclude competitors.

The Tenth Circuit briefly addressed and rejected Sanofi’s argument that “Mylan’s clear plan confirms Sanofi’s substantial foreclosure.”[32] While recognizing that “some caselaw suggests intent evidence is relevant in antitrust analysis[,]” the court determined that “intent is only relevant to whether the challenged conduct is fairly characterized as “‘exclusionary.’”[33] And “[w]hen the challenged conduct is so wholly devoid of any inference of exclusionary effect, intent cannot save the plaintiff’s case.”[34] The Tenth Circuit also noted that “[i]ntent evidence is too easily misleading,” and that it is sometimes “‘legitimately used by business people in the heat of competition.’”[35] With this understanding, the court was not moved by Mylan’s internal documents emphasizing the need to “hammer Sanofi at launch” or “pre-empt Auvi-Q.”[36]

While the court acknowledged that “some caselaw” supports the probative value of intent evidence in antitrust, the Supreme Court actually has declared that “the question of intent is relevant to the question whether the challenged conduct is fairly characterized as ‘exclusionary’ or ‘anticompetitive.’”[37] And even under the Tenth Circuit’s articulation of the relevance of intent evidence, intent is probative when a restraint is not wholly devoid of exclusionary effect, and the court recognized that Mylan’s aggressive rebate agreements with PBMs had an exclusionary effect and foreclosed Sanofi from 31% of the United States population.[38] In this respect, the Tenth Circuit’s treatment of intent evidence is challenging to square with precedent.

The Tenth Circuit was highly deferential to the current structure of the healthcare industry.

In its application of the consumer welfare standard, the appellate court declined to apply a “consumer choice framework” as advocated by certain amici curiae, “[b]ecause of the industry at issue.”[39] The “amici argue[d] the district court erred by failing to consider the patients’ deprivation of choice arising from Mylan’s exclusive rebate agreements.”[40] The Tenth Circuit, however, stated that “it is hard to say patients were ever deprived of choice” as “[e]ven when a patient’s health plan excluded Auvi-Q, the patient could seek a medical necessity exemption or otherwise pay out of pocket for the device” at a substantial price without insurance reimbursement.[41] And “even if the inability to choose between multiple covered products was considered a deprivation of choice, it would subvert the health insurance industry to adopt a consumer choice framework.”[42] In this respect, the Tenth Circuit’s rationale seems contrary to that of the Supreme Court in Blue Shield of Virginia v. McCready, a decision that upheld the viability of a claim involving a scheme to limit insurance reimbursement, under which the plaintiff received, as a result of the challenged conduct, “the offer of a Hobson’s choice” and was “compelled to choose between visiting a psychologist and forfeiting reimbursement, or receiving reimbursement by forgoing treatment by the practitioner of their choice.”[43]

The Tenth Circuit treated PBMs as representatives of consumer interests.

The court appeared to credit the controversial argument that PBMs represent the collective interests of patients and consumers. The court stated that “PBMs are effectively purchasing cooperatives. Instead of hundreds or thousands of health plans individually negotiating formulary access and rebates, the PBM acts in their collective interest, wielding the health plans’ aggregate purchasing power to gain greater discounts than the health plans could obtain individually.”[44] The Tenth Circuit also favorably quoted an article that argued “[b]y adopting exclusivity, a PBM can be thought of as acting as the bargaining agent for all its loyal consumers, so they are made better off as a group.”[45] On this point, the Federal Trade Commission has argued that PBM rebates and fees “may incentivize PBMs and other intermediaries to steer patients to higher-cost drugs over less expensive alternatives.”[46]

The Tenth Circuit did not engage with scholarship or case law raised by certain amici and standing for the proposition that the PBMs were perversely incentivized to increase, not lower, EpiPen prices because “EpiPen price increases benefitted the PBM[s]” as “the rebates and administrative fees that they received were generally calculated as a percentage of the EpiPen’s WAC [price].”[47] Or that “conflicts of interest inherent in the PBM business model create perverse incentives for drug price increases[,]” because “the rebates paid to PBMs are typically a percentage of a drug’s list price,” which creates “pressure[] to increase list prices in order to satisfy PBMs’ demands for higher rebates.”[48] And only a small “portion of the increasing rebate[s]” are ever passed onto patients and consumers “in the form of lower co-pays” while patients otherwise “suffer from the list price[] increases.”[49] Coupling the Tenth Circuit’s recognition that net EpiPen prices actually increased during the period that Mylan employed exclusive contracting strategies with the scholarship surrounding PBMs’ pricing incentives might draw into question the Tenth Circuit’s judicial deference to existing market structures and forces, including the court’s questionable conclusion that PBMs play a procompetitive (and proconsumer) role in the healthcare industry.

*Gary I. Smith, Jr. is a Partner and Debashish Bakshi is an Associate in San Francisco. 


[1] In re EpiPen (Epinephrine Injection, USP) Mktg., Sales Pracs. & Antitrust Litig., 44 F.4th 959 (10th Cir. 2022).
[2] In re EpiPen (Epinephrine Injection, USP) Mktg., Sales Pracs. & Antitrust Litig., 507 F. Supp. 3d 1289 (D. Kan. 2020).
[3] Epinephrine Auto-injector, American College of Allergy, Asthma & Immunology, https://acaai.org/allergies/management-treatment/epinephrine-auto-injector/.
[4] Drugs@FDA: NDA 019430, Food and Drug Administration, https://www.accessdata.fda.gov/scripts/cder/daf/index.cfm?event=overview.process&ApplNo=019430.
[5] Ben Popken, Mylan CEO’s Pay Rose Over 600 Percent as EpiPen Price Rose 400 Percent, NBC News (Aug. 23, 2016), https://www.nbcnews.com/business/consumer/mylan-execs-gave-themselves-raises-they-hiked-epipen-prices-n636591.
[6] C.Y. Johnson & C. Ho, How Mylan, the maker of EpiPen, became a virtual monopoly, Washington Post (Aug. 25, 2016), https://www.washingtonpost.com/business/economy/2016/08/25/7f83728a-6aee-11e6-ba32-5a4bf5aad4fa_story.html.
[7] See In re EpiPen., 44 F.4th at 970.
[8] See id.
[9] See id. at 988.
[10] Carly Helfand, Sanofi’s Auvi-Q recall puts Mylan’s rival EpiPen in full control of blockbuster market, FiercePharma (Nov. 2, 2015), https://www.fiercepharma.com/marketing/sanofi-s-auvi-q-recall-puts-mylan-s-rival-epipen-full-control-of-blockbuster-market.
[11] In re EpiPen., 44 F.4th at 969.
[12] 15 U.S.C. §§ 2, 15.
[13] See In re EpiPen, 507 F. Supp. 3d at 1298.
[14] Id. at 1336.
[15] Id. at 1298.
[16] See id. at 1363, 1382.
[17] See In re EpiPen, 44 F.4th at 959.
[18] See id. at 1006.
[19] See id. at 965-979.
[20] Id. at 982 (citing Cont’l Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699 (1962)).
[21] Id.
[22] See id. at 1000-1006.
[23] Id. at 985-986.
[24] See id. at 986-1000.
[25] Id.
[26] Id.
[27] See 1 ABA Section of Antitrust Law, Antitrust Law Developments 783 (7th ed. 2012) (“Thus, damages are to be calculated by determining what the plaintiff’s experience would have been ‘but for’ the antitrust violation, and then comparing that to its experience in the actual world.”).
[28] Einer Elhauge, Tying, Bundled Discounts, and the Death of the Single Monopoly Profit Theory, 123 Harv. L. Rev. 397, 450 (2009).
[29] Id.
[30] In re EpiPen, 44 F.4th at 971, 986 (Mylan’s “EpiPen’s net price, on average, increased” during the conduct period from “$111” when Sanofi entered the market to “$150 per device by the time Sanofi exited the market”).
[31] Id. at 987.
[32] Id. at 990.
[33] Id. at 990-991.
[34] Id. at 991.
[35] Id.
[36] Id.
[37] Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 586, 602 (1985) (noting that “there is agreement on the proposition that ‘no monopolist monopolizes unconscious of what he is doing.’”). Lower courts concur. See, e.g.McWane, Inc. v. FTC, 783 F.3d 814, 840 n.25, n.26 (11th Cir. 2015) (“[e]vidence of [anticompetitive] intent is highly probative” of monopolist’s scheme to exclude.); LePage’s, Inc. v. 3M, 324 F.3d 141, 150, 163 (3d Cir. 2003) (“The Supreme Court has made clear that intent is relevant to proving monopolization.”); United States v. Microsoft Corp., 253 F.3d 34, 59 (D.C. Cir. 2001); Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 288 (2d Cir. 1979) (“‘consideration of intent may play an important role in divining the actual nature and effect of the alleged anticompetitive conduct’”); Castro v. Sanofi Pasteur Inc., 134 F. Supp. 3d 820, 846 (D.N.J. 2015) (considering evidence such as “internal [defendant] documents indicating intent to leverage its broad product line to prevent head-to-head competition and to create a significant barrier to competition”).
[38] In re EpiPen, 44 F.4th at 988 (acknowledging how Mylan foreclosed Auvi-Q from 31% of the U.S. population).
[39] Id. at 985.
[40] Id.
[41] Id.
[42] Id. (second emphasis added).
[43] 457 U.S. 465, 483 (1982) (emphasis added).
[44] In re EpiPen, 44 F.4th at 966.
[45] Id. at 1001 n.21 (quoting Benjamin Klein & Kevin M. Murphy, Exclusive Dealing Intensifies Competition for Distribution, 75 Antitrust L.J. 433, 437, 452 (2008)).
[46] Policy Statement of the Federal Trade Commission on Rebates and Fees in Exchange for Excluding Lower-Cost Drug Programs (June 16, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/Policy%20Statement%20of%20the%20Federal%20Trade%20Commission%20on%20Rebates%20and%20Fees%20in%20Exchange%20for%20Excluding%20Lower-Cost%20Drug%20Products.near%20final.pdf.
[47] E.g.In re EpiPen Direct Purchaser Litig., No. 20-cv-0827, 2021 WL 147166, at *4 (D. Minn. Jan. 15, 2021).
[48] Joanna Shepherd, Pharmacy Benefit Managers, Rebates, and Drug Prices: Conflicts of Interest in the Market for Prescription Drug, 38 Yale L. & Pol’y Rev. 360, 360-61 (2020).
[49] Id.