14‐4624‐cv  
State of New York v. Actavis 
                                              

                         In the
             United States Court of Appeals
                For the Second Circuit
                              ________ 
                                     
                         AUGUST TERM, 2014 
                                     
                       ARGUED: APRIL 13, 2015  
                       DECIDED: MAY 22, 20151 
                                     
                             No. 14‐4624 
                                     
     PEOPLE OF THE STATE OF NEW YORK, by and through ERIC T. 
    SCHNEIDERMAN, Attorney General of the State of New York, 
                          Plaintiff‐Appellee, 
                                     
                                   v. 
                                     
             ACTAVIS PLC, FOREST LABORATORIES, LLC, 
                        Defendants‐Appellants. 
                              ________ 
                                     
           Appeal from the United States District Court 
               for the Southern District of New York. 
             No. 14 Civ. 7473 – Robert W. Sweet, Judge. 
                              ________ 
                                     
Before: WALKER, RAGGI, and DRONEY, Circuit Judges. 
                              ________ 


      This  opinion  was  filed  under  seal  on  May  22,  2015,  and  the  parties  were 
    1

permitted  to  request  redactions  of  confidential  information.    This  published 
version of the opinion indicates the redactions allowed by the court. 
2                                                   No. 14-4624-cv



      The State of New York brought this antitrust action against

Defendant-Appellant Actavis plc and its wholly-owned subsidiary

Forest Laboratories, LLC (collectively, “Defendants”). New York

alleges that as Namenda IR, Defendants’ twice-daily drug designed

to treat moderate-to-severe Alzheimer’s disease, neared the end of

its patent exclusivity period in July 2015, Defendants introduced a

new once-daily version called Namenda XR. The patents on XR

ensure exclusivity, and thus prohibit generic versions of XR from

entering the market, until 2029.     Faced with the prospect of

competition from generic IR, Defendants decided to withdraw

virtually all Namenda IR from the market in order to force

Alzheimer’s patients who depend on Namenda IR to switch to XR

before generic IR becomes available. Because generic competition

depends heavily on state drug substitution laws that allow

pharmacists to substitute generic IR for Namenda IR―but not for

XR, New York alleges that Defendants’ forced-switch scheme would

likely impede generic competition for IR. Moreover, the substantial

transaction costs of switching from once-daily XR back to twice-
3                                                     No. 14-4624-cv

daily IR therapy would likely further ensure that Defendants would

maintain their effective monopoly in the relevant drug market

beyond the time granted by their IR patents.

      The United States District Court for the Southern District of

New York (Robert W. Sweet, Judge) issued a preliminary injunction

barring Defendants from restricting access to Namenda IR prior to

generic IR entry. We conclude that the district court did not abuse

its discretion by granting New York’s motion for a preliminary

injunction because New York has demonstrated a substantial

likelihood of success on the merits of its claim under the Sherman

Act, 15 U.S.C. § 2, and has made a strong showing of irreparable

harm to competition and consumers in the absence of a preliminary

injunction. Accordingly, we affirm the district court’s order issuing

a preliminary injunction.

                             ________

                  LISA S. BLATT, Arnold & Porter LLP, Washington,
                  D.C. (Sarah M. Harris, Robert A. DeRise, Arnold
                  & Porter, LLP, Washington, D.C.; George T.
                  Conway III, Wachtell, Lipton, Rosen & Katz, New
                  York, N.Y.; J. Mark Gidley, Peter J. Carney, Claire
                  A. DeLelle, White & Case LLP, Washington, D.C.;
4                                                    No. 14-4624-cv

                  Jack E. Pace III, Martin M. Toto, White & Case
                  LLP, New York, N.Y., on the brief), for Defendants-
                  Appellants.

                  ANISHA S. DASGUPTA, (Barbara D. Underwood,
                  Andrew Kent, Eric J. Stock, Elinor R. Hoffmann,
                  on the brief), for Eric T. Schneiderman, Attorney
                  General of the State of New York, New York,
                  N.Y., for Plaintiff-Appellee.

                              ________

JOHN M. WALKER, JR., Circuit Judge:

      The State of New York brought this antitrust action against

Defendant-Appellant Actavis plc and its wholly-owned subsidiary

Forest Laboratories, LLC (collectively, “Defendants”). New York

alleges that as Namenda IR, Defendants’ twice-daily drug designed

to treat moderate-to-severe Alzheimer’s disease, neared the end of

its patent exclusivity period in July 2015, Defendants introduced a

new once-daily version called Namenda XR. The patents on XR

ensure exclusivity, and thus prohibit generic versions of XR from

entering the market, until 2029.      Faced with the prospect of

competition from generic IR, Defendants decided to withdraw

virtually all Namenda IR from the market in order to force

Alzheimer’s patients who depend on Namenda IR to switch to XR
5                                                   No. 14-4624-cv

before generic IR becomes available. Because generic competition

depends heavily on state drug substitution laws that allow

pharmacists to substitute generic IR for Namenda IR―but not for

XR, New York alleges that Defendants’ forced-switch scheme would

likely impede generic competition for IR. Moreover, the substantial

transaction costs of switching from once-daily XR back to twice-

daily IR therapy would likely further ensure that Defendants would

maintain their effective monopoly in the relevant drug market

beyond the time granted by their IR patents.

      The United States District Court for the Southern District of

New York (Robert W. Sweet, Judge) issued a preliminary injunction

barring Defendants from restricting access to Namenda IR prior to

generic IR entry. We conclude that the district court did not abuse

its discretion by granting New York’s motion for a preliminary

injunction because New York has demonstrated a substantial

likelihood of success on the merits of its claim under the Sherman

Act, 15 U.S.C. § 2, and has made a strong showing of irreparable

harm to competition and consumers in the absence of a preliminary
6                                                                No. 14-4624-cv

injunction. Accordingly, we affirm the district court’s order issuing

a preliminary injunction.

                              BACKGROUND

        This case raises a novel question of antitrust law: under what

circumstances does conduct by a monopolist to perpetuate patent

exclusivity through successive products, commonly known as

“product hopping,” 2 violate the Sherman Act, 15 U.S.C. §§ 1 and 2.

This question is an issue of first impression in the circuit courts.

Determining       whether       Defendants’       actions     are    unlawfully

anticompetitive requires some understanding of the idiosyncratic

market characteristics of the complex and highly-regulated

pharmaceutical industry, as well as some peculiar characteristics of

treatment for Alzheimer’s disease. We begin by describing several

key features of the pharmaceutical industry.




    2The term “product hopping” was coined by Herbert Hovenkamp. See Alan
Devlin, Exclusionary Strategies in the Hatch-Waxman Context, 2007 Mich. St. L. Rev.
631, 658 (2007) (citing Herbert Hovenkamp et al., IP and Antitrust: An Analysis of
Antitrust Principals Applied to Intellectual Property Law (2002)).
7                                                          No. 14-4624-cv

    I.   FDA Requirements, the Hatch-Waxman Act, and State Drug
         Substitution Laws

         In compliance with the Federal Food, Drug, and Cosmetic Act,

21 U.S.C. §§ 301-399f, when a pharmaceutical manufacturer seeks to

bring a new drug to market, it must submit a New Drug Application

(“NDA”) for approval by the U.S. Food and Drug Administration

(“FDA”). 21 U.S.C. § 355. An NDA must contain scientific evidence

that demonstrates the drug is safe and effective, which inevitably

requires “a long, comprehensive, and costly testing process.” F.T.C.

v. Actavis, Inc., 133 S. Ct. 2223, 2228 (2013). NDA-approved drugs

are generally referred to as brand-name or brand drugs. An

approved brand drug enjoys a period of patent exclusivity in the

market at the end of which one or more generic drugs, 3 exhibiting

the same characteristics as the brand drug, may enter the market at a

lower price to compete with the brand drug.

         In 1984, Congress amended the Federal Food, Drug, and

Cosmetic Act by enacting the Drug Price Competition and Patent

     Generic drugs “are copies of brand-name drugs and are the same as those
     3

brand name drugs in dosage form, safety, strength, route of administration,
quality, performance characteristics and intended use.” FDA, Understanding
Generic Drugs, http://1.usa.gov/1SjEIso (last visited Apr. 14, 2015).
8                                                    No. 14-4624-cv

Term Restoration Act (the “Hatch-Waxman Act” or “Hatch-

Waxman”), Pub. L. No. 98-417, 98 Stat. 1585. Hatch-Waxman was

designed to serve the dual purposes of both encouraging generic

drug competition in order to lower drug prices and incentivizing

brand drug manufacturers to innovate through patent extensions.

To   incentivize    innovation,   Hatch-Waxman      grants    brand

manufacturers opportunities to extend their exclusivity period

beyond the standard 20-year patent term:        it allows a brand

manufacturer to seek a patent extension of up to five years to

compensate for time that lapsed during the FDA regulatory process,

35 U.S.C. § 156, and an additional six-month period of “pediatric

exclusivity” if the manufacturer conducts certain pediatric studies,

21 U.S.C. § 355a.    Defendants applied for, and received, both

extensions for Namenda IR.

      Hatch-Waxman also promotes competition from generic

substitute drugs. It permits a manufacturer that seeks to market a

generic version of an NDA-approved drug to file what is known as

an Abbreviated New Drug Application (“ANDA”). See 21 U.S.C.
9                                                           No. 14-4624-cv

§ 355(j); see also In re Adderall XR Antitrust Litig., 754 F.3d 128, 130 (2d

Cir. 2014). An ANDA allows a generic manufacturer to rely on the

studies submitted in connection with the already-approved brand

drug’s NDA to show that the generic is safe and effective, provided

that the ANDA certifies that the generic drug has the same active

ingredients as and is “biologically equivalent” or “bioequivalent” to

the already-approved drug. 4 21 U.S.C. § 355(j)(2)(A)(iv); see also

Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 132 S. Ct. 1670, 1676

(2012) (citing 21 U.S.C. §§ 355(j)(2)(A)(ii), (iv)).

        A generic drug is bioequivalent to a brand drug if “the rate

and extent of absorption” of the active ingredient is the same as that

of the brand drug. 21 U.S.C. § 355(j)(8)(B)(i). In other words, two

drugs are bioequivalent if they deliver the same amount of the same

active ingredient content into a patient’s blood stream over the same

amount of time.        By enabling generic manufacturers to “piggy-

back” on a brand drug’s scientific studies, Hatch-Waxman “speeds

the introduction of low-cost generic drugs to market, thereby
    4An ANDA also requires a manufacturer to demonstrate other measures of
equivalence between the brand and generic drugs, which are not relevant here.
21 U.S.C. § 355(j)(2)(A).
10                                                              No. 14-4624-cv

furthering drug competition.” Actavis, 133 S. Ct. at 2228 (internal

quotation marks, alteration, and citation omitted); see also H.R. Rep.

No. 98-857, pt. 2, at 9 (1984) (stating the Hatch-Waxman Act’s

“policy objective” was to “get[] safe and effective generic substitutes

on the market as quickly as possible after the expiration of the

patent”).

         By the time Congress enacted the Hatch-Waxman Act, many

states had enacted drug substitution laws to further encourage

generic competition. 5       Today, all 50 states and the District of

Columbia have drug substitution laws. 6 Although the specific terms

of these laws vary by state, drug substitution laws either permit or

require pharmacists to dispense a therapeutically equivalent, lower-

cost generic drug in place of a brand drug absent express direction

from the prescribing physician that the prescription must be


     5 See Alison Mason & Robert L. Steiner, Fed. Trade Comm’n, Generic
Substitution and Prescription Drug Prices: Economic Effects of State Drug Product
Selection Laws 1 (1985), available at http://1.usa.gov/1IS44Ju (“FTC, Generic
Substitution”).
    6 Michael A. Carrier, A Real-World Analysis of Pharmaceutical Settlements: The

Missing Dimension of Product Hopping, 62 Fla. L. Rev. 1009, 1017 (2010) (“Carrier,
A Real-World Analysis”); see also Jessie Cheng, Note, An Antitrust Analysis of
Product Hopping in the Pharmaceutical Industry, 108 Colum. L. Rev. 1471, 1479-80
(2008) (“Cheng, Product Hopping”).
11                                                             No. 14-4624-cv

dispensed as written. 7 For example, New York’s drug substitution

law requires a pharmacist to “substitute a less expensive drug

product containing the same active ingredients, dosage form and

strength as the drug product prescribed” provided certain

conditions are met. N.Y. Educ. Law § 6816-a(1).

         All state drug substitution laws prohibit pharmacists from

substituting generic drugs that are not therapeutically equivalent to

the brand drug, but state laws do not all define therapeutic

equivalence in the same way. 8 Thirty states, including New York

and the District of Columbia, adopt the FDA’s definition of

therapeutically equivalent and only allow generic substitution if the

FDA designates the generic as “AB-rated” in a publication

commonly referred to as the “Orange Book.” 9 N.Y. Education Law


     7The FTC, like the district court, has found that only a “modest[]”
difference in the frequency of substitution rates exists between states with
mandatory substitution laws and states with permissive substitution laws. See
FTC, Generic Substitution, at 99.
    8 See Jesse C. Vivian, Generic-Substitution Laws, U.S. Pharmacist (June 19,

2008), http://www.uspharmacist.com/content/s/44/c/9787; see also FTC, Generic
Substitution, at 3 (Vivian, Generic-Substitution Laws).
    9 Some states explicitly require generic drugs to have an AB-rating, some

states adopt the requirements of an AB-rating without using the term, some
states develop formularies that list permissible or impermissible drug
substitutes, and some states give discretion to individual pharmacists as long as
12                                                               No. 14-4624-cv

§ 6816-a(1); N.Y. Public Health Law § 206(1)(o). To receive an AB-

rating,    a   generic      must     not    only     be    bioequivalent       but

pharmaceutically equivalent to the brand drug, meaning it has the

same active ingredient, dosage form, strength, and route of

administration as the brand drug. U.S. Dep’t of Health & Human

Servs., FDA, Approved Drug Products with Therapeutic Equivalence

Evaluations vii-x (35th ed. 2015), available at http://1.usa.gov/1PzbMxF

(the “Orange Book”). The AB-rating requirement is designed to

provide guidance regarding which drugs are therapeutically

equivalent, but, as has been observed, it also provides an

opportunity for brand manufacturers to “game” the system. 10 S.A.

28.



the drugs are pharmaceutically equivalent. See Vivian, Generic-Substitution Laws
tbl.2.
     10 See, e.g., Stacey L. Dogan & Mark A. Lemley, Antitrust Law and Regulatory

Gaming, 87 Tex. L. Rev. 685, 709 (2009) (explaining that the regulatory framework
that governs the pharmaceutical industry “presents a perfect storm for
regulatory gaming”); Cheng, Product Hopping, at 1494 (“Product hopping itself
amounts to little more than a thinly disguised scheme to game the
pharmaceutical industry’s regulatory system.”); Intellectual Property and
Antitrust Professors Amicus Brief in Support of Appellee (“IP and Antitrust Prof.
Br.”) at 3 (explaining that product hopping “presents a paradigmatic case of a
regulatory game. . . . [It] exploits the product-approval process precisely because
of its exclusionary effects and converts it into a tool for suppressing competition”
(alterations in original)); American Antitrust Institute Amicus Brief in Support of
13                                                        No. 14-4624-cv

      Hatch-Waxman and state substitution laws were enacted, in

part, because the pharmaceutical market is not a well-functioning

market. In a well-functioning market, a consumer selects and pays

for a product after evaluating the price and quality of the product.

In the prescription drug market, however, the party who selects the

drug (the doctor) does not fully bear its costs, which creates a price

disconnect. Moreover, a patient can only obtain a prescription drug

if the doctor writes a prescription for that particular drug.         The

doctor selects the drug, but the patient, or in most cases a third-party

payor such as a public or private health insurer, pays for the drug.

As a result, the doctor may not know or even care about the price

and generally has no incentive to take the price into account. See

American Antitrust Institute Amicus Brief in Support of Appellee

(“AAI Br.”) at 6; see also Intellectual Property and Antitrust

Professors Amicus Brief in Support of Appellee (“IP and Antitrust

Prof. Br.”) at 12. As the Federal Trade Commission has explained:


Appellee (“AAI Br.”) at 6, 10-11 (explaining that branded manufacturers can
game the system by changing the form of the brand product before generics
enter the market).
14                                                                No. 14-4624-cv

          The basic problem is that the forces of competition do
          not work well in a market where the consumer who
          pays does not choose, and the physician who chooses
          does not pay.      Patients have little influence in
          determining which products they will buy and what
          prices they must pay for prescription.

Fed. Trade Comm’n Bureau of Consumer Prot., Drug Product

Selection 2-3 (1979), available at http://bit.ly/1JqKd4G. (“FTC, Drug

Product Selection”). State substitution laws are designed to correct

for this price disconnect by shifting drug selection, between brand

drugs and their corresponding generics from doctors, to pharmacists

and patients, who have greater financial incentives to make price

comparisons. 11 See AAI Br. at 8-9.

 II.      The Relevant Market

          The relevant market, undisputed on appeal, is the memantine-

drug market in the United States.                   Defendants manufacture




     11Perhaps counter-intuitively, pharmacists have an incentive to dispense
lower-cost generic drugs because pharmacies typically realize higher profit
margins on generic drugs due to health plan incentives. See Antitrust
Economists Amicus Brief in Support of Appellants (“Antitrust Economists Br.”) at
12; see also Carrier, A Real-World Analysis, at 1017 (“[State drug product selection]
laws carve out a role for pharmacists, who are much more sensitive to prices
than doctors.”).
15                                                               No. 14-4624-cv

Namenda, a memantine hydrochloride-based 12 (“memantine”) drug

designed      to    treat    moderate-to-severe         Alzheimer’s       disease.

Namenda is currently available in two formulations: a twice-daily

immediate-release drug, Namenda IR, and a once-daily extended-

release drug, Namenda XR. When Forest introduced Namenda IR

tablets in January 2004, Namenda IR was the first medication

approved      for   individuals      suffering     from     moderate-to-severe




     12 Memantine is an N-Methyl D-Aspartate (“NMDA”) receptor antagonist
that affects the glutamate pathway in the brain. As expert Dr. Alan Jacobs, a
neurologist in private practice, explained at the preliminary injunction hearing:
         Neurons in the brain communicate by signaling each other. Some
         of these signals are transmitted through an influx of calcium into a
         molecule on the surface of neurons called the NMDA receptor.
         This influx of calcium is triggered when glutamate, an excitatory
         neurotransmitter, docks at the NMDA receptor, causing the
         calcium influx. When patients enter the moderate stage of
         Alzheimer’s disease, there can be overexcitation of the NMDA
         receptor by glutamate.
S.A. 16. Memantine-based drugs, like Namenda, partially block the brain’s
NMDA receptor in order to prevent “overexcitation” of that receptor, “which can
cause toxicity to neurons in the brain.” S.A. 17.
    In contrast, the three other FDA-approved drugs on the market to treat
Alzheimer’s        disease―Aricept,      Exelon,     and      Razadyne―are       all
acetylcholinesterase inhibitors (“CIs”).        CIs reduce the breakdown of
acetylcholine, a chemical messenger that transmits information between nerve
cells, in the brain. Rather than work on the glutamate pathway, like Namenda,
CIs work on the acetylcholine pathway. CIs are generally prescribed to patients
experiencing the early stage of Alzheimer’s disease, and are prescribed in
conjunction with―but not independently of―Namenda during the moderate-to-
severe stages of Alzheimer’s disease.
16                                                               No. 14-4624-cv

Alzheimer’s disease. 13 Namenda IR became one of Forest’s best-

selling drugs―generating approximately $1.5 billion in annual sales

in 2012 and 2013. The FDA approved Namenda XR in June 2010,

and Forest began marketing XR in 2013. The two drugs are the only

memantine           therapies    in   their   class―N-Methyl        D-Aspartate

(“NMDA”) receptor antagonists―currently on the market. 14

           Namenda IR and Namenda XR have the same active

ingredient and the same therapeutic effect. The relevant medical

difference between the two is that IR, which is released immediately

into the bloodstream, is taken twice a day while XR, which is

released gradually, is taken once a day. 15 All other Alzheimer’s

disease treatments are administered once a day.

           The non-medical difference between IR and XR relates to their

patent protection. Defendants’ patents on Namenda IR prohibit any


     13   Defendants also introduced a twice-daily liquid version of Namenda IR in
2005.
     14Because CIs perform different functions, Aricept, Exelon, and Razadyne are
not substitutes for Namenda.
    15 Additionally, Namenda IR and Namenda XR have different dosage forms.

J.A. 673 n.57. Namenda IR is marketed in tablet form, whereas Namenda XR is
marketed in capsule form. Id.; see also Dosing for Patients Currently Taking
NAMENDA,               http://www.namendaxrhcp.com/patients-currently-taking-
namenda.aspx (last visited Apr. 16, 2014).
17                                                             No. 14-4624-cv

manufacturer from marketing a generic version of IR until July 11,

2015 (Namenda IR’s “exclusivity period”). 16 The exclusivity period

for Namenda XR does not expire until 2029.                   A brand drug’s

exclusivity period is significant because when that period ends and

generic versions enter the market, the brand drug often loses more

than 80 to 90% of the market within six months.                   This period

following the end of patent exclusivity has been referred to in this

litigation and throughout the industry as the “patent cliff.”

III.        Defendants’ Introduction of Namenda XR and Withdrawal
            of Namenda IR

            Namenda IR and Namenda XR currently occupy the entire

memantine-drug market. However, five generic versions of IR have

tentative FDA approval to enter the market on July 11, 2015, and

seven others may enter the market as early as October 2015. Because

Namenda          XR   has   a   different   strength    and    daily    dosage

regimen―Namenda IR involves two immediate-release tablets of

10mg each and Namenda XR involves one 28mg extended-release

       Defendants’ patents on Namenda IR prohibit generic entry until October
       16

2015. But in 2009 and 2010, in order to resolve patent litigation, Forest entered
into licensing agreements permitting ten generic competitors to enter the market
three months before Namenda IR’s official exclusivity period ends.
18                                                      No. 14-4624-cv

capsule 17―the generic IR versions that are poised to enter the

market will be therapeutically equivalent under FDA regulations to

Namenda IR, but not to Namenda XR. Therefore, pharmacists are

prohibited from substituting generic IR for Namenda XR under

most, if not all, state drug substitution laws.

           When Defendants brought Namenda XR to market in July

2013 (approximately three years after it was approved), they

adopted so-called “product extension” strategies to convert patients

from Namenda IR to Namenda XR and, thus, to avoid the patent

cliff.      Initially, Defendants sold both Namenda IR and XR but

stopped actively marketing IR. During that time, they spent

substantial sums of money 18 promoting XR to doctors, caregivers,

patients, and pharmacists. They also sold XR at a discounted rate,

making it considerably less expensive 19 than Namenda IR tablets,

and issued rebates to health plans to ensure that patients did not

have to pay higher co-payments for XR than for IR. The parties have

     17See Dosing for Patients Currently Taking NAMENDA, Namenda XR,
http://www.namendaxrhcp.com/patients-currently-taking-namenda.aspx (last
visited Apr. 16, 2014).
     18
          The original numbers have been redacted.
     19
          The original numbers have been redacted.
19                                                    No. 14-4624-cv

referred to Defendants’ efforts to transition patients to XR while IR

was still on the market as the “soft switch,” and we will adopt that

term.

        In early 2014, Defendants decided on a more direct approach.

They were concerned that they would be unable to convert a

significant percentage of Alzheimer’s patients dependent upon

memantine therapy from IR to XR prior to the entry of generic IR.

Defendants’ internal projections estimated that only 30% of

Namenda IR users would voluntarily switch prior to July 2015. On

February 14, 2014, Defendants publicly announced that they would

discontinue Namenda IR on August 15, 2014, notified the FDA of

their plans to discontinue Namenda IR, and published letters on

their websites urging caregivers and healthcare providers to

“discuss switching to Namenda XR” with their patients. S.A. 51-52.

Defendants also sought to convert Namenda IR’s largest customer

base, Medicare patients, to XR by sending a letter to the Centers for

Medicare & Medicaid Services requesting that the agency remove IR

from the formulary list, so that Medicare health plans would not
20                                                    No. 14-4624-cv

cover it. Their planned discontinuance was delayed by a disruption

in XR production, and in June 2014, Defendants announced that

Namenda IR would be available until the fall of that year.

        But before Defendants withdrew IR entirely, intervening

events again prompted them to modify their plans. In September

2014, New York State filed a complaint alleging that Defendants’

planned withdrawal of Namenda IR violated the antitrust laws.

Defendants     subsequently   entered   into   an   agreement     with

Foundation Care, a mail-order-only pharmacy, to provide for

limited access to Namenda IR if medically required.          Under the

terms of the agreement, Foundation Care is authorized to dispense

Namenda IR tablets only after receiving a form from a doctor stating

that it is “medically necessary” for the patient to take Namenda IR.

Defendants estimated internally that less than 3% of current

Namenda IR users would be able to obtain IR through Foundation

Care.    S.A. 67.   Although the agreement with Foundation Care

makes IR available to a limited number of patients, Defendants’

actions effectively withdrew Namenda IR from the market. The
21                                                     No. 14-4624-cv

parties have referred to Defendants’ efforts to withdraw Namenda

IR from the market as the “hard switch” or “forced switch,” terms

we also adopt. The hard switch began on February 14, 2014 with the

announcement of Defendants’ intention to withdraw Namenda IR

and was suspended in September 2014 when Defendants agreed to a

“standstill” during the litigation proceedings described below.

Because a manufacturer does not simply withdraw a drug at once,

absent   pressing   safety   concerns,    announcing   the   imminent

discontinuation of a drug is tantamount to withdrawal.

IV.   Procedural History

      In September 2014, New York State filed a complaint in the

District Court for the Southern District of New York (Robert W.

Sweet, Judge) alleging that Defendants were violating the Sherman

Antitrust Act, 15 U.S.C. §§ 1 and 2, as well as New York’s Donnelly

Act, N.Y. Gen. Bus. Law § 340 et seq., and seeking a permanent

injunction and damages.       New York also sought a preliminary

injunction barring Defendants from restricting access to Namenda

IR during the course of the litigation.
22                                                    No. 14-4624-cv

      New York’s theory of antitrust liability, in substance, is as

follows. As Namenda IR neared the end of its exclusivity period,

Defendants introduced Namenda XR and, before generic IR was

available, withdrew Namenda IR in order to force patients to switch

from IR to XR (for which generic IR will not be substitutable under

most states’ laws).   In doing so, Defendants intended to thwart

generic entry into and competition in the memantine-drug market in

order to maintain their monopoly in that market.

      The district court held a five-day hearing on the preliminary-

injunction motion, during which it received testimony from 24

witnesses and reviewed over 1,400 exhibits. After considering that

evidence,   the   district   court   made   several   key   findings.

(1) Withdrawing Namenda IR from the market prior to generic entry

forces Alzheimer’s patients dependent on memantine therapy to

switch to Namenda XR because it is the only available alternative;

(2) The generic versions of IR poised to enter the market in July and

October of 2015 will not be AB-rated to XR because they have

different strengths and dosages; (3) Pharmacists will not be
23                                                    No. 14-4624-cv

permitted to substitute generic IR for Namenda XR under New York

and many other states’ substitution laws because generic IR is not

therapeutically equivalent to Namenda XR; (4) If Defendants forced

Alzheimer’s patients to switch to Namenda XR prior to generic

entry, those patients would be very unlikely to switch back to twice-

daily IR therapy even after less-expensive generic IR becomes

available, due to the high transaction costs associated with

Alzheimer’s patients first switching from one formulation of a drug

to a new formulation and then back to the original formulation

(“reverse commuting”); (5) Preventing generic IR from competing

under state drug substitution laws would likely thwart generic entry

into and competition in the memantine-drug market; and (6) In

withdrawing Namenda IR from the market, Defendants’ explicit

purpose was to impede generic competition and to avoid the patent

cliff―which occurs at the end of a drug’s exclusivity period when

generics gain market share through state substitution laws.

      Based on those findings, the district court granted New York’s

request for a preliminary injunction. The district court concluded
24                                                         No. 14-4624-cv

that New York raised serious questions regarding the merits of its

claims under Sections 1 and 2 of the Sherman Act and the Donnelly

Act, demonstrated the potential for irreparable harm, and concluded

that the balance of the equities favored an injunction. The injunction

states:

          1. During the Injunction Term . . . the Defendants shall
             continue to make Namenda IR (immediate-release)
             tablets available on the same terms and conditions
             applicable since July 21, 2013 . . .
          2. Defendants shall inform healthcare providers,
             pharmacists, patients, caregivers, and health plans of
             this injunction . . . and the continued availability of
             Namenda IR . . .
          3. The Defendants shall not impose a “medical
             necessity” requirement or form for the filling of
             prescriptions of Namenda IR during the Injunction
             Term.

S.A. 137-38. The injunction is effective from the date of issuance,

December 15, 2014, until “thirty days after July 11, 2015 (the date

when generic memantine will first be available) (the ‘Injunction

Term’).” S.A. 138. Defendants timely appealed the grant of the

preliminary injunction, and we granted expedited review.
25                                                     No. 14-4624-cv

                            DISCUSSION

      We review a district court’s grant of a preliminary injunction

for abuse of discretion. Faiveley Transp. Malmo AB v. Wabtec Corp.,

559 F.3d 110, 116 (2d Cir. 2009). A district court has abused its

discretion if it based its ruling on an error of law or a clearly

erroneous assessment of the evidence, or if its “decision . . . cannot

be located within the range of permissible decisions.” Id. (internal

quotation marks omitted). We review legal conclusions, such as the

appropriate standard for relief, de novo. See Somoza v. N.Y.C. Dep't of

Educ., 538 F.3d 106, 112 (2d Cir. 2008).

      On appeal, Defendants argue that (1) the district court applied

the wrong legal standard for a preliminary injunction; (2) product

hopping is not anticompetitive or exclusionary under § 2 of the

Sherman Act; (3) Defendants’ patent rights foreclose antitrust

liability; (4) the agreement with Foundation Care does not violate § 1

of the Sherman Act; (5) New York failed to show irreparable harm;

and (6) the injunction is vague and overbroad.
26                                                    No. 14-4624-cv

 I.   The Applicable Preliminary Injunction Standard

      Defendants argue that the district court erred by applying the

ordinary standard for a preliminary injunction, rather than a

heightened standard, because the injunction provides New York

with “substantially all the relief sought.” Defendants’ Brief (“Defs.

Br.”) at 25. We agree that a heightened standard applies.

      Section 16 of the Clayton Act entitles a party to obtain

injunctive relief “against threatened loss or damage by a violation of

the antitrust laws.” California v. Am. Stores Co., 495 U.S. 271, 280

(1990) (quoting 15 U.S.C. § 26).    A party seeking a preliminary

injunction must ordinarily establish (1) “irreparable harm”; (2)

“either (a) a likelihood of success on the merits, or (b) sufficiently

serious questions going to the merits of its claims to make them fair

ground for litigation, plus a balance of the hardships tipping

decidedly in favor of the moving party”; and (3) “that a preliminary

injunction is in the public interest.” Oneida Nation of New York v.

Cuomo, 645 F.3d 154, 164 (2d Cir. 2011) (internal quotation marks

omitted).
27                                                       No. 14-4624-cv

      We have held the movant to a heightened standard where: (i)

an injunction is “mandatory,” or (ii) the injunction “will provide the

movant with substantially all the relief sought and that relief cannot

be undone even if the defendant prevails at a trial on the merits.”

Tom Doherty Assocs., Inc. v. Saban Entm't, Inc., 60 F.3d 27, 33-34 (2d

Cir. 1995). When either condition is met, the movant must show a

“clear” or “substantial” likelihood of success on the merits, Beal v.

Stern, 184 F.3d 117, 123 (2d Cir. 1999), and make a “strong showing”

of irreparable harm, Doe v. N.Y. Univ., 666 F.2d 761, 773 (2d Cir.

1981), in addition to showing that the preliminary injunction is in

the public interest.

      The injunction issued by the district court in this case remains

in place until 30 days after generics enter the market, and therefore

“grant[s] plaintiffs substantially all the relief they ultimately sought,

in effect, as if the injunction had been permanent.” Eng v. Smith, 849

F.2d 80, 82 (2d Cir. 1988). The district court found that Defendants’

plan is contingent on switching patients to Namenda XR before

generic IR enters the market. S.A. 20. The injunction, however, bars
28                                                          No. 14-4624-cv

Defendants from withdrawing IR, and thus forcing a switch, “until

thirty days after July 11, 2015 (the date when generic memantine will

first be available).”    S.A. 138.     Because the injunction prevents

Defendants’ hard switch from succeeding, the injunction “render[s]

a trial on the merits largely or partly meaningless.” Tom Doherty

Assocs., 60 F.3d at 35. 20     Accordingly, the heightened standard

applies.

          That conclusion, however, is of little import in this case

because New York has satisfied the heightened standard.                 The

district court did not abuse its discretion in granting a preliminary

injunction because New York has demonstrated a substantial

likelihood of success on the merits of its monopolization and

attempted monopolization claims under § 2 of the Sherman Act, see

Beal, 184 F.3d at 123, and has made a strong showing that

Defendants’ conduct would cause irreparable harm to competition

in the memantine-drug market and to consumers, Doe, 666 F.2d at

773. The district court’s factual findings, which were based, for the

     Although New York also seeks a permanent injunction, disgorgement, civil
     20

penalties, and damages, the preliminary injunction is the gravamen of the
complaint.
29                                                      No. 14-4624-cv

most part, on Defendants’ own internal documents, cannot be said

to be clearly erroneous, and its injunction prohibiting Defendants

from withdrawing Namenda IR prior to generic entry was not an

abuse of discretion as being outside the range of permissible

decisions.

II.   Monopolization and Attempted Monopolization Under § 2
      of the Sherman Act

      Section 2 of the Sherman Act makes it an offense to

“monopolize, or attempt to monopolize . . . any part of the trade or

commerce among the several States.” 15 U.S.C. § 2; see also Geneva

Pharm. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485, 495 (2d Cir. 2004).

To establish monopolization in violation of § 2, a plaintiff must

prove not only that the defendant possessed monopoly power in the

relevant market, but that it willfully acquired or maintained that

power “as distinguished from growth or development as a

consequence of a superior product, business acumen, or historic

accident.” Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko,

LLP, 540 U.S. 398, 407 (2004) (quoting United States v. Grinnell Corp.,

384 U.S. 563, 570-71 (1966)). “To safeguard the incentive to innovate,
30                                                               No. 14-4624-cv

the possession of monopoly power will not be found unlawful

unless it is accompanied by an element of anticompetitive conduct.”

Id. In order to show attempted monopolization, the plaintiff must

prove: “(1) that the defendant has engaged in predatory or

anticompetitive conduct with (2) a specific intent to monopolize and

(3) a dangerous probability of achieving monopoly power.”

Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993).

Attempted monopolization, unlike monopolization, requires a

finding of specific intent. See, e.g., Delaware & Hudson Ry. Co. v.

Consol. Rail Corp., 902 F.2d 174, 180 (2d Cir. 1990).

          Defendants’ patents on Namenda IR indisputably grant them

a legal monopoly in the U.S. memantine-drug market until July 11,

2015. 21    The parties do not dispute the district court’s factual

findings that the relevant market is the memantine-drug market in

the United States and that Namenda IR and XR represent 100% of

that market. S.A. 108-10. Consequently, the parties do not dispute

that Defendants possess monopoly power. See Geneva Pharm., 386

      See Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 816
     21

(1945) (“[A] patent is an exception to the general rule against monopolies and to
the right to access to a free and open market.”).
31                                                                 No. 14-4624-cv

F.3d at 500 (monopoly power can be “proven directly through

evidence of control over prices or the exclusion of competition,” or

“inferred from a firm’s large percentage share of the relevant

market”).

          Given   that    Defendants’        monopoly        power      has     been

established, this case turns on whether Defendants willfully sought

to maintain or attempted to maintain that monopoly in violation of

§ 2. In United States v. Microsoft Corp., 253 F.3d 34, 58-60 (D.C. Cir.

2001) (en banc), the D.C. Circuit, sitting en banc, established a

helpful framework for determining when a product change violates

§ 2 based on the rule-of-reason test articulated by the Supreme Court

in Standard Oil Co. v. United States, 221 U.S. 1 (1911), and generally

applied to antitrust claims.          See also Paycom Billing Servs., Inc. v.

Mastercard Int'l, Inc., 467 F.3d 283, 289-90 (2d Cir. 2006) (explaining

that courts analyze most antitrust claims under the rule of reason). 22



      See also Mid-Texas Commc'ns Sys., Inc. v. Am. Tel. & Tel. Co., 615 F.2d 1372,
     22

1389 n.13 (5th Cir. 1980) (“It is clear, however, that the analysis under section 2 is
similar to that under section 1 regardless whether the rule of reason label is
applied per se.” (citing Byars v. Bluff City News Co., 609 F.2d 843, 860 (6th Cir.
1979))); Cal. Computer Prods., Inc. v. Int'l Bus. Machs. Corp., 613 F.2d 727, 737 (9th
Cir. 1979) (“[U]nder § 2 attempt as with § 1 monopolization individual conduct is
32                                                        No. 14-4624-cv

Under the Microsoft framework, once a plaintiff establishes that a

monopolist’s conduct is anticompetitive or exclusionary, the

monopolist      may      proffer    “nonpretextual”       procompetitive

justifications for its conduct. 253 F.3d at 58-59. The plaintiff may

then either rebut those justifications or demonstrate that the

anticompetitive harm outweighs the procompetitive benefit. Id.

          a. Anticompetitive and Exclusionary Conduct

      “As a general rule, courts are properly very skeptical about

claims that competition has been harmed by a dominant firm’s

product design changes.” Microsoft, 253 F.3d at 65; see also Foremost

Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534, 544-45 (9th Cir.

1983). Product innovation generally benefits consumers and inflicts

harm on competitors, so courts look for evidence of “exclusionary or

anticompetitive effects” in order to “distinguish ‘between conduct

that defeats a competitor because of efficiency and consumer

satisfaction’” and conduct that impedes competition through means

other than competition on the merits. Trans Sport, Inc. v. Starter


measured against the same ‘reasonableness’ standard governing concerted and
contractual activity under § 1.”).
33                                                               No. 14-4624-cv

Sportswear, Inc., 964 F.2d 186, 188-89 (2d Cir. 1992) (quoting U.S.

Football League v. Nat’l Football League, 842 F.2d 1335, 1359 (2d Cir.

1988)).

          Well-established case law makes clear that product redesign is

anticompetitive       when     it   coerces     consumers       and     impedes

competition. 23 The leading case in our circuit for § 2 liability based



     23Our emphasis on consumer coercion in evaluating a monopolist’s product
redesign is in accord with several of our sister circuits. See Allied Orthopedic
Appliances Inc. v. Tyco Health Care Grp. LP, 592 F.3d 991, 994 (9th Cir. 2010) (“A
monopolist’s discontinuation of [an old product] may violate § 2 if it effectively
forces customers to adopt its new [product].”); Microsoft, 253 F.3d at 65
(explaining that Microsoft’s redesign of its operating system was anticompetitive
because the redesign impeded competition “not by making Microsoft’s own
browser more attractive to consumers but, rather, by discouraging
[manufacturers] from distributing rival products”); cf. Multistate Legal Studies,
Inc. v. Harcourt Brace Jovanovich Legal & Prof'l Publ’ns, Inc., 63 F.3d 1540, 1550
(10th Cir. 1995) (noting that illegal tie-ins under Section 1 may “qualify as
anticompetitive conduct for Section 2 purposes”). Similarly, the other district
courts that have considered product hopping cases also examined consumer
coercion. And those district courts that have ruled in favor of plaintiffs alleging
antitrust violations stemming from product hopping have found consumer
coercion. See In re Suboxone (Buprenorphine Hydrochloride & Naloxone) Antitrust
Litig., No. 13-MD-2445, 2014 WL 6792663, at *12 (E.D. Pa. Dec. 3, 2014) (plaintiffs
alleged exclusionary conduct under § 2 where the brand manufacturer coerced
patients into switching from the tablet form of a drug―for which their patent
was set to expire―to a new film version of the drug by raising allegedly false
safety concerns about the tablet and announcing that it would soon be
withdrawn from the market); Abbott Labs. v. Teva Pharm. USA, Inc., 432 F. Supp.
2d 408, 430 (D. Del. 2006) (plaintiffs alleged antitrust violations where the
defendants introduced new drug formulations and withdrew the prior versions
whose exclusivity period would soon expire). In contrast, in cases in which
there is no evidence of coercion, district courts have rejected such claims. See
Mylan Pharm. Inc. v. Warner Chilcott PLC et al., No. Civ. 12-3824, 2015 WL
34                                                              No. 14-4624-cv

on product redesign is Berkey Photo, Inc. v. Eastman Kodak Co., 603

F.2d 263 (2d Cir. 1979).           In that case, Kodak simultaneously

introduced its new Kodacolor II film and new Kodak 110 camera,

which was designed so that it could only be used with the

Kodacolor II film (the “110 system”). Id. at 277-78. Kodak, which

possessed a lawful monopoly in film but not in cameras, heavily

advertised Kodacolor II film as “a remarkable new film,” and for 18

months, Kodak made Kodacolor II film only for the 110 camera. Id.

at 278.       Berkey Photo, Inc. (“Berkey”), a smaller camera

manufacturer, alleged that Kodak unlawfully used its monopoly in

film to increase camera sales and monopolize the camera market. Id.

We rejected that claim and held that the introduction of the 110

system and advertising of the Kodacolor II film did not violate the

1736957, at *13 (E.D. Pa. Apr. 16, 2015) (noting that because generics had already
entered the market at the time of defendants’ product reformulation, “doctors
remained free to prescribe generic Doryx; pharmacists remained free to
substitute generics when medically appropriate; and patients remained free to
ask their doctors and pharmacists for generic versions of the drug”); Walgreen Co.
v. AstraZeneca Pharm. L.P., 534 F. Supp. 2d 146, 151 (D.D.C. 2008) (dismissing a
case alleging attempted market monopolization because unlike in Abbott Labs,
“there is no allegation that AstraZeneca eliminated any consumer choices.
Rather, AstraZeneca . . . introduced a new drug to compete with already-
established drugs―both its own and others’―and with the generic substitutes
for at least one of the established drugs”).
35                                                               No. 14-4624-cv

Sherman Act because “[Kodak’s] success was not based on any form

of coercion.” Id. at 287. But, of significance to the case before us, we

cautioned that “the situation might be completely different if, upon

the introduction of the 110 system, Kodak had ceased producing

film in the 126 size, thereby compelling camera purchasers to buy a

Kodak 110 camera.” Id. at 287 n.39. 24

          In this case, Defendants argue that withdrawing a product is

not anticompetitive or exclusionary conduct, especially when the

new product is superior to the old product. 25 Certainly, neither

product       withdrawal      nor     product      improvement         alone      is

anticompetitive.       But under Berkey Photo, when a monopolist

combines product withdrawal with some other conduct, the overall

effect of which is to coerce consumers rather than persuade them on

the merits, id. at 287, and to impede competition, id. at 274-75, its



     24We also noted that restricting Kodacolor II to the 110 format for 18 months
may have been anticompetitive conduct, but we did not decide the question
because there was no proof of injury to Berkey. Berkey Photo, 603 F.2d at 290.
    25 Whether XR is superior to IR is not significant in this case. When there is

coercion, “the technological desirability of the product change . . . bear[s] on the
question of monopolistic intent,” id. at 287 n.39, rather than the permissibility of
the defendant’s conduct. Here, there is no genuine dispute that Defendants
intended to avoid the patent cliff. See, e.g., J.A. 132, 155.
36                                                            No. 14-4624-cv

actions are anticompetitive under the Sherman Act. 26 Cf. Cont'l Ore

Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699 (1962) (noting

that when an antitrust conspiracy involves multiple acts, “[t]he

character and effect of [the] conspiracy are not to be judged by

dismembering it and viewing its separate parts, but only by looking

at it as a whole” (internal quotation marks omitted)). Here,

Defendants’ hard switch―the combination of introducing Namenda

XR into the market and effectively withdrawing Namenda

IR―forced Alzheimer’s patients who depend on memantine therapy

to switch to XR (to which generic IR is not therapeutically

equivalent) and would likely impede generic competition by

precluding generic substitution through state drug substitution

laws.


      Several other courts have held that product redesign violates § 2 when
     26

combined with other conduct and the combined effect is anticompetitive or
exclusionary. See Allied Orthopedic, 592 F.3d at 1000 (explaining that § 2 is
violated when “some conduct of the monopolist associated with its introduction
of a new and improved product design constitutes an anticompetitive abuse or
leverage of monopoly power, or a predatory or exclusionary means of
attempting to monopolize the relevant market” (internal quotation marks
omitted)); In re Suboxone, 2014 WL 6792663, at *10 (“The key question is whether
the defendant combined the introduction of a new product with some other
wrongful conduct, such that the comprehensive effect is likely to stymie
competition, prevent consumer choice and reduce the market’s ambit.”).
37                                                              No. 14-4624-cv

                   i. Consumer Coercion

          Defendants’ hard switch crosses the line from persuasion to

coercion and is anticompetitive. As long as Defendants sought to

persuade patients and their doctors to switch from Namenda IR to

Namenda XR while both were on the market (the soft switch) and

with generic IR drugs on the horizon, patients and doctors could

evaluate the products and their generics on the merits in furtherance

of competitive objectives.

          By effectively withdrawing Namenda IR prior to generic

entry, Defendants forced patients to switch from Namenda IR to

XR―the only other memantine drug on the market. 27 S.A. 49; Tr.

183:22-184:17 (Stitt) (“So the unique thing [about the Namenda IR

hard switch] I think is that there’s really no place for prescribers to,

to go with a drug to treat that condition.”). In fact, the district court

found that Defendants devised the hard switch because they

projected that only 30% of memantine-therapy patients would

voluntarily switch to Namenda XR prior to generic entry. S.A. 56-

      As previously noted, the other available Alzheimer’s drugs, all CIs, are not
     27

substitutes for Namenda because they perform different medical functions and
are not designed to treat moderate-to-severe Alzheimer’s disease.
38                                                                 No. 14-4624-cv

57. Defendants’ hard switch was expected to transition 80 to 100%

of Namenda IR patients to XR prior to generic entry, S.A. 81, and

thereby impede generic competition.

           Defendants argue that courts should not distinguish between

hard and soft switches. But this argument ignores one of Berkey

Photo’s basic tenets: the market can determine whether one product

is superior to another only “so long as the free choice of consumers

is preserved.” 603 F.2d at 287. Had Defendants allowed Namenda

IR to remain available until generic entry, doctors and Alzheimer’s

patients could have decided whether the benefits of switching to

once-daily Namenda XR would outweigh the benefits of adhering to

twice-daily therapy using less-expensive generic IR (or perhaps

lower-priced Namenda IR). By removing Namenda IR from the

market prior to generic IR entry, Defendants sought to deprive

consumers of that choice.             In this way, Defendants could avoid

competing against lower-cost generics based on the merits of their

redesigned drug by forcing Alzheimer’s patients to take XR, 28 with



     28   Alternatively, patients could discontinue memantine-therapy entirely.
39                                                     No. 14-4624-cv

the knowledge that transaction costs would make the reverse

commute by patients from XR to generic IR highly unlikely.

               ii. Impedes Competition

      As the district court concluded, Defendants’ hard switch

would likely have anticompetitive and exclusionary effects on

competition in the memantine market, creating a “dangerous

probability” that Defendants would maintain their monopoly power

after generics enter the market. Spectrum Sports, 506 U.S. at 456.

Based on careful consideration of the unique characteristics of the

pharmaceutical market, the district court found that “[p]rice

competition at the pharmacy, facilitated by state substitution laws, is

the principal means by which generics are able to compete in the

United States.” S.A. 26.

      We agree with the district court’s analysis. Forcing patients to

switch to XR would prevent generic substitution because generic

versions of IR are not AB-rated to Namenda XR.             And if, as

Defendants’ own internal predictions estimate, the hard switch

successfully converted 80 to 100% of IR patients to XR prior to
40                                                                No. 14-4624-cv

generic entry, there would be “few to no prescriptions” left for

which generics would be eligible to compete.                 S.A. 82.     Because

Defendants’      forced     switch      “through     something       other    than

competition on the merits[] has the effect of significantly reducing

usage of rivals’ products and hence protecting its own . . .

monopoly, it is anticompetitive.” Microsoft, 253 F.3d at 65.

          Defendants    and     their   amici    argue     that   generics     can

successfully compete by persuading third-party payors and

prescription-benefit managers to promote generic IR through the use

of formularies, tiered-drug structures, step programs, and prior-

authorization requirements. 29 But, as the district court determined,

competition through state drug substitution laws is the only cost-


      Formularies, tiered-drug structures, step programs, and prior-authorization
     29

requirements are all tools that third-party payors may use to incentivize patients
to take less-expensive drugs. A formulary is a list of approved drugs that a
health plan will pay for, either in whole or in part. S.A. 19. A tiered-drug
structure divides the drugs listed on a plan’s formulary into categories or “tiers.”
S.A. 20. Typically, health plans use a three-tiered system, which reserves tier 1
for generic drugs, tier 2 for preferred branded drugs, and tier 3 for non-preferred
branded drugs. The portion of the cost of the drug that the patient is responsible
for paying, known as the “co-payment” or “co-pay,” increases with each tier. A
step program requires a patient to first try a preferred, and usually less
expensive, drug. Only if that treatment is unsuccessful will the health plan pay
for the patient’s drug of choice. S.A. 20. A prior authorization policy requires a
patient to obtain the third-party payor’s approval for payment prior to taking a
particular drug. Antitrust Economists Br. at 14.
41                                                               No. 14-4624-cv

efficient means of competing available to generic manufacturers.30

S.A. 78. For there to be an antitrust violation, generics need not be

barred “from all means of distribution” if they are “bar[red] . . . from

the cost-efficient ones.” Microsoft, 253 F.3d at 64; see also United States

v. Dentsply Int'l, Inc., 399 F.3d 181, 191 (3d Cir. 2005) (“The test is not

total foreclosure, but whether the challenged practices bar a

substantial number of rivals or severely restrict the market’s

ambit.”).      Moreover, as the district court found, additional

expenditures by generics on marketing would be impractical and

ineffective because a generic manufacturer promoting a product

would have no way to ensure that a pharmacist would substitute its

product, rather than one made by one of its generic competitors.

          Although in theory, Alzheimer’s patients would be free to

switch back to IR therapy after generic entry, the district court found

      The district court found that the regulatory context makes it impractical
     30

and uneconomical for generic manufacturers to market their products to doctors
or pharmacists because, among other reasons, marketing costs severely impact
generic manufacturers’ ability to offer the lower prices upon which they
compete. S.A. 78. Two other district courts confronted with product hopping
cases concluded that plaintiffs plausibly alleged that the unique characteristics of
the pharmaceutical industry “make generic substitution the cost-efficient means
of competing for companies selling generic pharmaceuticals.” In re Suboxone,
2014 WL 6792663, at *12; see also Abbott Labs., 432 F. Supp. 2d at 423 (same).
42                                                             No. 14-4624-cv

that, in practice, such a reverse commute would be a highly unlikely

occurrence. As one of Defendants’ own executives explained during

a January 21, 2014 earnings call: “if we do the hard switch and we

convert patients and caregivers to once-a-day therapy versus twice a

day, it’s very difficult for the generics then to reverse-commute

back.” S.A. 51. This is because there are high transaction costs

associated with reverse commuting.              Any patient who wants to

switch back to twice-daily IR therapy must first obtain a new

prescription from a doctor.           But, as the district court found, the

nature         of   Alzheimer’s     disease    makes      moderate-to-severe

Alzheimer’s patients especially vulnerable to changes in routine,

and makes doctors and caregivers very reluctant to change a

patient’s medication if the current treatment is effective. As a result,

if Defendants forced patients to switch from twice-daily Namenda

IR to once-daily XR, those patients would be very unlikely to switch

back to twice-daily generic IR even if generic IR is more cost-

effective. 31 Moreover, third-party payors are reluctant to require



     31   The Department of Health and Human Services (“HHS”) reached this same
43                                                         No. 14-4624-cv

patients to switch from a drug they are currently taking to a new

drug, so health plans would be unlikely to require patients to switch

to less-expensive generic IR.

      Defendants and their amici argue that the district court’s focus

on AB-ratings is misplaced because up to 20 states do not impose an

AB-rating requirement and thus “may let pharmacists unilaterally

substitute generic IR for Namenda XR.” Defs. Br. at 13 (emphasis

added). Defendants’ argument, however, exaggerates the variance

in state substitution laws. Many states that do not explicitly require

generic drugs to have the same AB-rating effectively require the

same degree of therapeutic equivalence. For example, Defendants

cite Iowa Code § 155A.32 as an example of a state law that “do[es]

not rely on the Orange Book.” Defs. Br. at 13. Section 155A.32(1)

conclusion, explaining:
        The unique nature of this patient population―Alzheimer’s
        patients with moderate-to-severe dementia―makes it likely that a
        switch from the twice-daily Namenda IR to the once-daily
        Namenda XR would be a permanent one for practical purposes, as
        providers, patients, and families would be reluctant to switch
        back to twice-a-day therapy even if they believed that it
        represented a better value.
HHS, Office of the Assistant Sec’y for Planning and Evaluation, Some
Observations Related to the Generic Drug Market 5 (2015), available at
http://aspe.hhs.gov/sp/reports/2015/GenericMarket/ib_GenericMarket.pdf (HHS,
Some Observations).
44                                                                  No. 14-4624-cv

permits pharmacists to substitute a generic drug if it has the same

“demonstrated bioavailability” as the brand drug, Iowa Code Ann.

§ 155A.32(1), but Section 155A.3(9) clarifies that a generic is only

considered to have the same “demonstrated bioavailability” if it has

the same “rate and extent of absorption of a drug or drug ingredient

from a specified dosage form,” Iowa Code Ann. § 155A.3(9).

Because the dosage and absorption rates of generic IR differ from

that of XR, the drugs are not bioequivalent under Iowa law.

Moreover, because generic IR is manufactured in tablet form and

Namenda XR is marketed in capsule form, they do not have the

same dosage form. 32 As a result, as in New York and the 29 other

states that require an AB-rating, Iowa pharmacists will not be

permitted to substitute generic IR for XR. 33


     32Generic IR is manufactured in 5 and 10 mg tablet dosage formulations
whereas Namenda XR is marketed in 7, 14, 21, and 28 mg capsule dosage
formulations. J.A. 673 n.57. As Dr. Ernest R. Berndt, Ph.D. explains in his
declaration, “tablets and capsules are not the same ‘dosage form.’” Id.
    33 Defendants argue that up to 20 states may allow pharmacists to substitute

generic IR for Namenda XR; however, throughout their briefs, Defendants and
their experts point to 21 different states. Of the states identified by Defendants
and their experts, 16 require the same dose and/or dosage form and thus will not
allow generic IR to be substituted for Namenda XR. See Ala. Code § 34-23-8;
Alaska Stat. Ann. §§ 08.80.295(a), 08.80.480(11); Ark. Code Ann. §§ 17-92-
503(a)(1), 17-92-101(6), (11); Cal. Bus. & Prof. Code §§ 4073(a), 4052.5(a), (f); Colo.
45                                                                  No. 14-4624-cv

       Defendants argue that their conduct was not anticompetitive

because preventing “free riding” is a legitimate business purpose.

But what Defendants call “free riding”―generic substitution by

pharmacists following the end of Namenda IR’s exclusivity

period―is authorized by law; is the explicit goal of state substitution

laws; and furthers the goals of the Hatch-Waxman Act by promoting

drug competition, Actavis, 133 S. Ct. at 2228, and by preventing the

“practical extension of [brand drug manufacturers’] monopoly




Rev. Stat. Ann. §§ 12-42.5-122(1)(a), as amended by 2015 Colo. Legis. Serv. Ch. 77
(S.B. 15-071), 12-42.5-102(40); Conn. Gen. Stat. Ann. § 20-619(b); Fla. Stat. Ann.
§§ 465.025(2), (1)(b); Ga. Code Ann. § 26-4-81(a); Mo Ann. Stat. § 338.056(1);
Mont. Code Ann. § 37-7-505(1); Neb. Rev. Stat. §§ 71-5403(1), 71-5402(1), (5), (6),
as amended by 2015 Nebraska Laws L.B. 37; N.C. Gen. Stat. Ann. §§ 90-85.28(a), 90-
85.27(1); Or. Rev. Stat. Ann. § 689.515(2)(a); R.I. Gen. Laws Ann. §§ 21-31-16.1(a),
5-19.1-2(k); S.C. Code Ann. § 39-24-30a. Mich. Comp. Laws Ann. § 333.17755(1)
allows for substitution of “generically equivalent” drugs, which courts in
Michigan have interpreted to require “chemical equivalence,” meaning that the
drugs “contain the same active ingredients and are identical in strength, dosage
form and route of administration.” Pennwalt Corp. v. Zenith Labs., Inc., 472 F.
Supp. 413, 417 (E.D. Mich. 1979). Oklahoma prohibits substitution “without
authority of the prescriber or purchaser,” so we cannot determine whether
generic IR will be substituted for Namenda XR under Oklahoma law. See Okla.
Stat. Ann. tit. 59, § 353.13(D). Of the states that allow pharmacists to substitute
generic drugs without consulting the prescribing physician, four states may―but
will not necessarily―allow substitution of generic IR for Namenda XR. See
Minn. Stat. Ann. § 151.21 Subd. 3; Minn. R. 9505.0340 Subp.3(H); N.D. Cent. Code
Ann. §§ 19-02.1-14.1(3), (1)(g); Vt. Stat. Ann. tit. 18, § 4605(a), 4601(4); Wash. Rev.
Code Ann. § 69.41.120; 69.41.110(4). Those four states account for less than 6% of
the U.S. population. J.A. 673.
46                                                                   No. 14-4624-cv

. . . beyond the expiration of the[ir] patent[s],” H.R. Rep. No. 98-857,

pt. 2, at 4 (1984).

          Defendants also argue that antitrust law is not a vehicle for

enforcing the “spirit” of drug laws. Defs. Br. at 46. But the Supreme

Court has made clear that “[a]ntitrust analysis must always be

attuned to the particular structure and circumstances of the industry

at issue.” Trinko, 540 U.S. at 411. Leading antitrust authorities have

encouraged courts to acknowledge market defects, such as a price

disconnect and the exclusivity of patents, in their antitrust analysis. 34

And in other Hatch-Waxman contexts, this court has recognized that

efforts to manipulate aspects of the Hatch-Waxman incentive

structure to exclude competition could state an antitrust claim. See,

e.g., Arkansas Carpenters Health & Welfare Fund v. Bayer AG, 604 F.3d


     34 See IIIB Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis
of Antitrust Principles and Their Application ¶ 776c, at 297 (3d ed. 2008); Herbert
Hovenkamp et al., IP and Antitrust: An Analysis of Antitrust Principles Applied to
Intellectual Property Law § 15.3, at 25 (2012); C. Scott Hemphill, Paying for Delay:
Pharmaceutical Patent Settlement as a Regulatory Design Problem, 81 N.Y.U. L. Rev.
1553, 1557 (2006) (“A particular regulatory regime sets the boundaries of feasible
anticompetitive conduct.”); Jonathan Jacobson, et al., Predatory Innovation: An
Analysis of Allied Orthopedic v. Tyco in the Context of Section 2 Jurisprudence, 23 Loy.
Consumer L. Rev. 1, 8 (2010) (“There are two scenarios where an exclusionary
redesign may be especially harmful: (a) in the context of networked markets
. . . and (b) in pharmaceutical markets . . . .”).
47                                                       No. 14-4624-cv

98, 106 (2d Cir. 2010) (“[A] plaintiff can have antitrust claims” where

a pharmaceutical manufacturer “manipulate[s] the [Hatch-Waxman-

conferred] 180-day exclusivity period in a manner that bars

subsequent challenges to the patent or precludes the generic

manufacturer from marketing non-infringing products unrelated to

the patent.”), abrogated on other grounds by Actavis, 133 S. Ct. at 2231.

Therefore, we conclude that the district court appropriately

considered the unique market characteristics of the pharmaceutical

industry in concluding that antitrust law “requires [Defendants] to

allow generic competitors a fair opportunity to compete using state

substitution laws.” S.A. 95-96.

            b. Procompetitive Justifications

      All     of   Defendants’    procompetitive     justifications   for

withdrawing IR are pretextual. The record is replete with evidence

showing that Defendants were, in the words of Defendants’ own

CEO, “trying to . . . put up barriers or obstacles” to generic

competition.       J.A. 132; see also S.A. 49 (“We need to transition

volume to XR to protect our Namenda revenue from generic
48                                                    No. 14-4624-cv

penetration in 2015 when we lose IR patent exclusivity.”); J.A. 155

(“[W]hat we’re trying to do is make a cliff disappear and rather have

a long―a prolonged decline. And we believe that by potentially

doing a forced switch, we will hold on to a large share of our base

users.”); S.A. 49 (“Our mission is to convert to Namenda XR and lift

the franchise . . . . We need to convert as much IR business to

Namenda XR as quickly as possible.”).            Based largely on

Defendants’ own documents, New York has rebutted Defendants’

procompetitive justifications.

         c. Procompetitive Benefits v. Anticompetitive Harms

      Because we have determined that Defendants’ procompetitive

justifications are pretextual, we need not weigh them against the

anticompetitive harms. But in any event, New York has shown that

whatever procompetitive benefits exist are outweighed by the

anticompetitive harms.     Defendants argue that their conduct is

procompetitive because “[l]aunching a new product . . . advances

competition by adding a better product to the market and by paving

the way for further innovation.” Defs. Br. at 51. While introducing
49                                                     No. 14-4624-cv

Namenda XR may be procompetitive, that argument provides no

procompetitive justification for withdrawing Namenda IR.

      Defendants argue that withdrawing IR was procompetitive

because it would maximize their return on their investment in XR.

But in deciding to take IR off the market, Defendants were willing to

give up profits they would have made selling IR―Forest’s best-

selling drug.    This “willingness to forsake short-term profits to

achieve an anticompetitive end” is indicative of anticompetitive

behavior. In re Adderall, 754 F.3d at 135 (internal quotation marks

omitted). Moreover, Defendants fail to explain why the potential

                in additional XR sales that they stood to earn―which

is less than the approximately $1.5 billion in annual sales they have

made from Namenda IR in recent years―makes economic sense in

the absence of the benefit derived from eliminating generic

competition. See id. at 133 (stating that anticompetitive effects could

be shown where defendants’ conduct “makes sense only because it

eliminates competition”). As a result, we agree with the district

court that:
50                                                     No. 14-4624-cv

      Defendants’ short-term loss of                in IR sales,
      translating to             in income, is most rationally
      construed as an investment in moving the memantine
      market in [their] favor [through impeding generic
      competition], yielding [D]efendants
              in income over the course of the next      years.

S.A. 74.

      Finally, Defendants have presented no evidence to support

their argument that antitrust scrutiny of the pharmaceutical industry

will meaningfully deter innovation.        To the contrary, as the

American Antitrust Institute amici argue, immunizing product

hopping from antitrust scrutiny may deter significant innovation by

encouraging manufacturers to focus on switching the market to

trivial or minor product reformulations rather than investing in the

research and development necessary to develop riskier, but

medically significant innovations.

      In sum, we conclude that the combination of withdrawing a

successful drug from the market and introducing a reformulated

version of that drug, which has the dual effect of forcing patients to

switch to the new version and impeding generic competition,
51                                                        No. 14-4624-cv

without a legitimate business justification, violates § 2 of the

Sherman Act.

III.   Patent Rights as a Defense to Liability

       Defendants argue that their patent rights under Namenda IR

and Namenda XR shield them from antitrust liability. To be sure,

there is tension between the antitrust laws’ objective of enhancing

competition by preventing unlawful monopolies and patent laws’

objective of incentivizing innovation by granting legal patent

monopolies. See In re Adderall, 754 F.3d at 133; see also SCM Corp. v.

Xerox Corp., 645 F.2d 1195, 1205 (2d Cir. 1981).

       But in its recent landmark antitrust case, F.T.C. v. Actavis, Inc.,

the Supreme Court made clear that “patent and antitrust policies are

both relevant in determining the scope of the patent monopoly—and

consequently antitrust law immunity—that is conferred by a

patent.” 133 S. Ct. at 2231 (internal quotation marks omitted); see also

United States v. Gypsum Co., 333 U.S. 364, 390–91 (1948) (indicating

that courts must “balance the privileges of [the patent holder] and its
52                                                     No. 14-4624-cv

licensees under the patent grants with the prohibitions of the

Sherman Act against combinations and attempts to monopolize”).

      The Court’s decision in Actavis reaffirmed the conclusions of

circuit courts that a patent does not confer upon the patent holder an

“absolute and unfettered right to use its intellectual property as it

wishes,” Microsoft, 253 F.3d at 63, and “[i]ntellectual property rights

do not confer a privilege to violate the antitrust laws,” In re Indep.

Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1325 (Fed. Cir. 2000). See

also Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp. LP, 592

F.3d 991, 998 (9th Cir. 2010) (“[C]hanges in product design are not

immune from antitrust scrutiny and in certain cases may constitute

an unlawful means of maintaining a monopoly under Section 2.”).

      Defendants argue that their conduct does not violate antitrust

law because they have merely “exercised rights afforded by the

Patent Act.” Defs. Br. at 34. But patent law gives Defendants a

temporary monopoly on individual drugs―not a right to use their

patents as part of a scheme to interfere with competition “beyond

the limits of the patent monopoly.” United States v. Line Material Co.,
53                                                         No. 14-4624-cv

333 U.S. 287, 308 (1948). Defendants have essentially tried to use

their patent rights on Namenda XR to extend the exclusivity period

for all of their memantine-therapy drugs. As explained above, it is

the combination of Defendants’ withdrawal of IR and introduction of

XR in the context of generic substitution laws that places their

conduct beyond the scope of their patent rights for IR or XR

individually.

IV.   The Sherman Act § 1 and the Donnelly Act

      In light of New York’s substantial likelihood of success on the

merits of its monopolization and attempted monopolization claims,

we need not address the merits of its Sherman Act § 1 or Donnelly

Act claims, which are based on the agreement between Defendants

and Foundation Care. We do note, however, that an agreement

related to a party’s violation of § 2 does not trigger liability under § 1

unless the agreement itself unreasonably restrains trade, Geneva

Pharm., 386 F.3d at 506, and there is mutual anticompetitive intent,

see id. at 507 (“[L]ack of intent by one party . . . precludes a

conspiracy      to   monopolize.”).     Conduct     that    satisfies   the
54                                                    No. 14-4624-cv

unreasonable restraint prong under § 2 does not necessarily violate

§ 1 absent evidence that the agreement furthers the anticompetitive

conduct. Id. at 506.

V.    Irreparable Harm

      New York has made a “strong” showing that competition and

consumers will suffer irreparable harm in the absence of the

injunction. Doe, 666 F.2d at 773. Irreparable harm is “injury that is

neither remote nor speculative, but actual and imminent and that

cannot be remedied by an award of monetary damages.” Forest City

Daly Hous., Inc. v. Town of N. Hempstead, 175 F.3d 144, 153 (2d Cir.

1999) (internal quotation marks omitted). To obtain injunctive relief

under § 16 of the Clayton Act, that injury must be an injury “of the

type the antitrust laws were designed to prevent and that flows from

that which makes defendants’ acts unlawful.” Consol. Gold Fields

PLC v. Minorco, S.A., 871 F.2d 252, 257 (internal quotation marks

omitted), amended by 890 F.2d 569 (2d Cir. 1989).

      As the district court concluded, “[p]ermanent damage to

competition in the memantine market can . . . result from
55                                                               No. 14-4624-cv

Defendants’ planned hard switch strategy.” 35 S.A. 131. If generics

cannot compete with Defendants’ drugs via state substitution laws,

they “cannot compete effectively for sales of a branded drug in the

same class, such as Namenda XR, even if the price of the generics is

much lower than the brand.” S.A. 80-81; see also IP and Antitrust

Prof. Br. at 13-14 (explaining that absent substitution at the

pharmacy, “the market for generics will collapse”).                   Moreover,

generics cannot simply move into the market for generic XR. To

become substitutable for Namenda XR, generic manufacturers must

develop new once-daily Namenda tablets, begin the ANDA-

approval process all over again, and await the end of XR’s patent

exclusivity period in 2029. Because Defendants’ conduct does not

simply harm a competitor or two, but threatens to “reduce

competition in the [memantine-drug] market[,] . . . [it] is precisely




     See also LePage's Inc. v. 3M, 324 F.3d 141, 159 (3d Cir. 2003) (“When a
     35

monopolist’s actions are designed to prevent one or more new or potential
competitors from gaining a foothold in the market by exclusionary, i.e.
predatory, conduct, its success in that goal is not only injurious to the potential
competitor but also to competition in general.”).
56                                                               No. 14-4624-cv

the type that the antitrust laws were designed to protect against.”

Consol. Gold, 871 F.2d at 257-58.

          The district court also found that, in addition to harming

consumer choice, Defendants’ hard switch would cause economic

harm to consumers. Based on Defendants’ own data, the district

court found that consumers would pay almost $300 million more

and third-party payors would pay almost $1.4 billion more for

memantine therapy if Defendants were permitted to switch patients

to Namenda XR before generic IR entry. And HHS reports that

Defendants’ withdrawal of Namenda IR prior to generic entry

would cost Medicare and its beneficiaries a minimum of $6 billion

over the next ten years. 36        “Threaten[ed] economic harm to . . .

consumers . . . is plainly sufficient to authorize injunctive relief.”

Am. Stores Co., 495 U.S. at 283. 37

          Defendants argue that the district court erred in finding

irreparable harm because any increase in costs to consumers and

      HHS, Some Observations, at 7.
     36

      Given that we conclude that the district court did not abuse its discretion in
     37

granting a preliminary injunction based on the harm to competition and
economic harm to consumers, we need not consider whether the district court’s
findings related to medical harm to patients provided a basis for injunctive relief.
57                                                               No. 14-4624-cv

third-party payors is “compensable and readily quantifiable.” Defs.

Br. at 26. But compensating the approximately 500,000 Alzheimer’s

patients who take Namenda IR tablets, and an unknown number of

public and private third-party payors, for an ongoing harm would

impose “the task of disentangling overlapping damages claims

[which] is not lightly to be imposed upon potential antitrust

litigants, or upon the judicial system.” Blue Shield of Va. v. McCready,

457 U.S. 465, 475 n.11 (1982); see also Salinger v. Colting, 607 F.3d 68,

81 (2d Cir. 2010) (“Harm might be irremediable, or irreparable, for

many reasons, including that a loss is difficult to replace . . . .”). 38 In


     38Defendants also argue that the district court erred in discounting the harm
that they will suffer as a result of the injunction. We need not consider the
balance of the hardships given that New York has demonstrated a substantial
likelihood of success on the merits. In any event, we agree with the district court
that the balance of the hardships tips decidedly in New York’s favor.
        Defendants argue that they will be injured if they cannot convert patients
to Namenda XR prior to July 2015, but that argument begets the question of
whether their conduct is lawful. Certainly, courts do not consider the harm a
party suffers from being prevented from violating the law.
        Defendants also argue that they “had stopped making IR batches and
ha[d] been implementing plans to limit distribution for months.” Defs. Br. at 25.
Ordering Defendants to manufacture IR, Defendants argue, impedes production
of XR and delays the development of Namzaric, an even newer Alzheimer’s
drug, because the FDA has only certified one plant to produce IR, XR, and
Namzaric. This argument is belied by the record. At the preliminary injunction
hearing, one of Defendants’ executives testified that the plant could manufacture
IR while manufacturing XR. J.A. 533. Defendants also informed the district
court that there was no cap on the amount of IR that would be supplied through
58                                                          No. 14-4624-cv

addition, many of the victims of Defendants’ hard switch, such as

patients and health plans, may be prevented from direct recovery for

their antitrust losses because of the “indirect purchaser” rule, which

bars those who do not directly purchase a product from recovering

antitrust damages, thus further supporting New York’s claim of

irreparable injury. See Illinois Brick Co. v. Illinois, 431 U.S. 720, 745-46

(1977).

      Additionally, we agree with the district court, and the parties

do not dispute, that the preliminary injunction serves the public’s

interest in a competitive market for memantine drugs. See United

States v. Siemens Corp., 621 F.2d 499, 506 (2d Cir. 1980) (finding that

the government represents the public’s interest in a competitive

marketplace in seeking to enjoin a merger under § 7 of the Clayton

Act); see also Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 424 (2d Cir.


Foundation Care and that the supply could be “adjusted as necessary based on
demand.” J.A. 904. Another of Defendants’ experts testified that the “biggest
problem [Defendants] have with [manufacturing both IR and XR] is the labor
force,” but “the equipment is completely different equipment.” J.A. 202.
Defendants’ expert clarified that they need skilled labor but, at most, he
explained that there might be some delay caused by training employees to use
the new XR equipment where employees who had manufactured IR would be
able to transition more quickly. J.A. 203.
59                                                        No. 14-4624-cv

2004) (“[G]overnment action taken in furtherance of a regulatory or

statutory scheme . . . is presumed to be in the public interest”).

VI.   The Preliminary Injunction

      Defendants argue that the injunction provision requiring them

to make Namenda IR tablets available on the same terms and

conditions applicable since July 21, 2013 is vague because the terms

and conditions have shifted over the past 17 months. We disagree.

The injunction plainly prohibits Defendants from charging more for

Namenda IR than it did during the specified timeframe and from

restricting access to IR. If Defendants need additional clarification,

they can seek it in the district court.

      Defendants also argue that the injunction is overbroad

because there is no antitrust violation in the 20 states in which drug

substitution laws might allow pharmacists to substitute generic IR

for Namenda XR. Defendants did not raise this argument before the

district court, and therefore have forfeited it. See, e.g., Zalaski v. City

of Hartford, 723 F.3d 382, 395 (2d Cir. 2013) (“[P]laintiffs failed to

raise the argument in the district court, thereby forfeiting it on
60                                                       No. 14-4624-cv

appeal.”). In any event, that argument is not persuasive because, as

explained above, it exaggerates the extent to which state substitution

laws differ. Defendants have not brought to our attention a single

state in which drug substitution laws will definitively allow

pharmacists to submit generic IR for Namenda XR, and have thus

failed to identify any state for which there is no antitrust violation.

                            CONCLUSION

      For the reasons stated above, we AFFIRM the District Court’s

order granting New York’s motion for a preliminary injunction.
