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SGT in the News: Ruling in EpiPen Antitrust Litigation Could Give Rise to Private Anti-Kickback Cause of Action
March 3, 2021
Troutman Pepper partners Allan Thoen and Callan Stein recently wrote for Law360 about the potentially far-reaching consequences of an excellent result achieved by SGT and our co-counsel in an antitrust action against Mylan, the manufacturer of EpiPen.
In a recent decision denying Mylan's motion to dismiss, the US District Court for the District of Minnesota approved a new liability theory that could create a private right of action for violations of the federal Anti-Kickback Statute (AKS). The case, In re: EpiPen Direct Purchaser Litigation, involves the pricing and sale of the EpiPen, an allergy treatment manufactured by Mylan Inc. The plaintiffs, drug wholesalers who purchased the EpiPen from Mylan at list price, alleged that Mylan had paid rebates to pharmacy benefit managers to maintain favorable formulary status, thereby reducing the pharmacy benefit managers' net costs for EpiPen prescriptions covered by their plans, but not reducing the list price paid by the wholesalers. The wholesalers alleged these rebates were kickbacks in violation of the AKS.
As private litigants cannot bring a lawsuit directly under the AKS, the EpiPen plaintiffs brought their AKS theory before the court with a novel combination of the Racketeering Influenced and Corrupt Organizations Act (RICO) and the Travel Act. RICO makes it unlawful for any person to conduct or participate in the affairs of a RICO enterprise through a pattern of racketeering activity. It allows any injured party to bring a civil action for treble damages, as well as attorney fees and costs. The Travel Act makes it illegal for a person to "travel in interstate or foreign commerce or uses the mail or any facility in interstate or foreign commerce" to engage in unlawful activity, including bribery in violation of federal or state law.
The plaintiffs argued that the defendants' alleged violations of the AKS also violated the Travel Act, which RICO lists as a predicate, thereby allowing private litigants to sue competitors, suppliers or others for treble damages and attorney fees if they can prove they were injured by the defendants' AKS violation and can satisfy the other elements of a RICO claim. The court tentatively accepted the plaintiffs' argument that a violation of the AKS is bribery in violation of the federal Travel Act and so violates RICO.
The decision in EpiPen could significantly increase AKS risk and RICO litigation in some areas. The AKS is a broad, far-reaching law that touches almost every corner of the health care sector. It has been applied to prohibit business practices that are considered ordinary and acceptable in other industries and that do not constitute bribery under a normal understanding of the word. However, the possibility of private litigants pursuing AKS violations through RICO lawsuits raises a number of questions and concerns. For instance, will it remain confined to niche areas or fact patterns that are particular susceptible to RICO litigation? Or will private AKS lawsuits become common enough to set the agenda for AKS compliance?
Time will tell on these and other questions, but today we can identify some of the elements inherent to any RICO claim that will affect whether the EpiPen theory has a broad or narrow impact. Two, in particular, stand out. First, RICO's enterprise element, which requires the existence of both an enterprise and a person who committed the predicate act through the enterprise. Second, RICO's causation element, which requires RICO plaintiffs to prove that the predicate act committed by the defendant caused harm to the plaintiffs' business or property.
The action is In re: EpiPen Direct Purchaser Litig., No. 20-cv-02827 (D. Minn. Jan. 15, 2021).
Thoen and Stein's article for Law360 can be found here: EpiPen Ruling Could Embolden Private Anti-Kickback Claims.