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January 19, 2021
By Khorri Atkinson | Law360 (January 19, 2021) -- A Minnesota federal judge has refused to throw out a proposed class action that accuses drugmaker Mylan Inc. of paying bribes and kickbacks to a group of pharmacy benefit managers and conspiring to engage in anti-competitive practices that jacked up the price of its anti-allergy injection EpiPen.
Mylan and the so-called PBM defendants — Express Scripts, Optum and CVS Caremark — each argued in separate but identical motions to dismiss that they did nothing unlawful outside their normal commercial business practices. They also stated, among other things, that drug distributors Rochester Drug Cooperative Inc. and Dakota Drug Inc. failed to show that they violated the Racketeer Influenced and Corrupt Organizations Act, or, in Mylan's case, the Sherman Act.
U.S. District Judge Eric Tostrud disagreed with their arguments, ruling Friday that the drug distributors did allege plausible claims to keep the lawsuit afloat, at least for now.
Judge Tostrud was also unconvinced by the defendants' assertion that the plaintiffs failed to sufficiently show they had orchestrated illegal enterprises with the "common purposes" of "perpetuating the use of inflated EpiPen list prices," administering prescriptions for the emergency allergy treatment and "deriving secret profits from these activities."
Mylan and the PBMs argued in part that the challengers had not plausibly alleged a "common purpose" because the defendants were simply pursuing their own "divergent goals." But Judge Tostrud said the distributors presented "a better argument."
The complaint, the judge said, "contains a fairly clear description of why Mylan and the PBM defendants all had interests in keeping EpiPen prices inflated."
"Mylan allegedly paid higher rebates to each PBM defendant in exchange both for favorable formulary placement and to ensure that the PBMs would not police its price increases," he added.
"This unsurprisingly benefited Mylan, which got to charge more for its products. But the PBM defendants stood to benefit too, because the amount they received in rebates and other fees was tied to the EpiPen's list price, and they did not share the wealth with their clients the way they used to," according to the ruling. "This type of mutual benefit shows that enterprises had a common purpose."
Mylan's and the PBMs' notion that the distributors failed to allege they engaged in anti-competitive conduct also fell short. The alleged payments of kickbacks to keep competitors off the market were enough to support that claim, the judge concluded.
The timeliness of the distributors' RICO claims was also challenged on the basis that they should have discovered their injury based on EpiPen price increases alone as soon as 2013.
But the judge ruled in part that the alleged injury is an unlawfully inflated price, not just a higher price. Moreover, nothing in the complaint established that a reasonable drug wholesaler would immediately have realized that it was paying more for EpiPens than it should have been, the judge added.
While discovery may "reveal that the statute of limitations has run on those claims, it would be inappropriate to dismiss them as untimely at this stage," the judge further emphasized.
The PBMs did win their bid to release their corporate owners from the case. The judge found that their general public statements, in which they stated that the PBMs lowered their clients' costs by negotiating prices and rebates with their clients' interests at heart, are not enough to hold them liable under RICO.
"Plaintiffs acknowledge that, in other contexts, PBMs can and do negotiate rebates in a legitimate way," the order said. "They do not tie these public statements of the corporate parents to the alleged deviation from industry norms that the EpiPen pricing scheme represented. Absent such a connection, the corporate parents will be dismissed."
Representatives for the parties did not immediately reply Tuesday to requests for comment on Friday's order.
Mylan is facing a number of legal challenges over alleged anti-competitive conduct related to EpiPen, including a trial in multidistrict litigation in Kansas originally scheduled for April but postponed because of the COVID-19 pandemic.
Rochester Drug initially lodged this case against Mylan and the PBM defendants in March 2020, alleging that the bribery and kickback scheme violated RICO and that the drug giant violated federal antitrust law to maintain its EpiPen's dominance.
The drug distributor brought the claims on behalf of itself and a proposed class of other direct purchasers of EpiPen products. Dakota Drug, represented by the same counsel as Rochester Drug, filed a similar suit in June against the same defendants. The two cases were consolidated in August.
Rochester Drug Cooperative Inc. and Dakota Drug Inc. are represented by Garwin Gerstein & Fisher LLP, Berger & Montague PC, Silver Golub & Teitell LLP, Smith Segura & Raphael LLP, Heim Payne & Chorush LLP, Faruqi & Faruqi LLP and Odom & Des Roches LLC.
Mylan Inc. is represented by Hogan Lovells US LLP.
The case is In re: EpiPen Direct Purchaser Litigation, case number 20-cv-0827, in the U.S. District Court for the District of Minnesota.
--Editing by Peter Rozovsky.