In re EpiPen Direct Purchaser Litig.

Decision Date05 April 2022
Docket Number20-cv-0827 (ECT/JFD)
PartiesIn re EpiPen Direct Purchaser Litigation
CourtU.S. District Court — District of Minnesota

Noah Silverman, Bruce E. Gerstein, Jonathan M. Gerstein, and Joseph Opper, Garwin Gerstein & Fisher LLP, New York, NY David F. Sorenson, Caitlin G. Coslett, Andrew C. Curley, and John Parron, Berger Montague PC, Philadelphia, PA; E Michelle Drake, Berger & Montague PC, Minneapolis, MN David S. Golub and Steven Bloch, Silver Golub & Teitell LLP, Stamford, CT; Susan C. Segura, David C. Raphael, Jr. and Erin R. Leger, Smith Segura & Raphael, LLP, Alexandria, LA; Russell Chorush and Eric Enger, Heim Payne & Chorush LLP, Houston, TX; Christopher M. First, Houston, TX; Joseph T. Lukens and Peter Kohn, Faruqi & Faruqi, LLP, Philadelphia, PA; Stuart Des Roches, Andrew Kelly, Amanda Leah Hass, Chris Letter, Dan Chiorean, and Thomas Maas, Odom & Des Roches, LLC, New Orleans, LA, for Plaintiffs Rochester Drug Co-Operative, Inc., and Dakota Drug, Inc.

Adam K. Levin, Anthony Ufkin, Carolyn A. DeLone, Christine A. Sifferman, Elizabeth Jose, Justin Bernick, Kathryn Marshall Ali, Charles A. Loughlin, and David M. Foster, Hogan Lovells U.S. LLP, Washington, DC; Peter H. Walsh, Hogan Lovells U.S. LLP, Minneapolis, MN; and Katherine Booth Wellington, Hogan Lovells U.S. LLP, Boston, MA, for Defendants Mylan Inc. and Mylan Specialty L.P.

Adithi S. Grama, Craig D. Singer, Daniel M. Dockery, Enu A. Mainigi, Williams & Connolly LLP, Washington, DC, and John W. Ursu and Isaac B. Hall, Faegre Drinker Biddle & Reath LLP, Minneapolis, MN, for Defendants Caremark PCS Health LLC, Caremark LLC, Caremark Rx LLC, and CVS Caremark Part D Services, LLC.

Donald G. Heeman, Jessica J. Nelson, and Randi J. Winter, Spencer Fane LLP, Minneapolis, MN; Jonathan Gordon Cooper, Michael John Lyle, Eric Christopher Lyttle, and Samel Johnson, Quinn Emanuel Urquhart & Sullivan LLP, Washington, DC, for Defendants Express Scripts Inc. and Medco Health Solutions Inc.

Kadee Jo Anderson and Andrew Glasnovich, Stinson LLP, Minneapolis, MN; Elizabeth Broadway Brown, David Andrew Hatchett, Bradley Harder, and Jordan Elise Edwards, Alston & Bird LLP, Atlanta, GA; Brian David Boone and Brandon C.E. Springer, Alston & Bird LLP, Charlotte, NC, for Defendants OptumRX Inc. and United Healthcare, Inc.

OPINION AND ORDER
ERIC C. TOSTRUD UNITED STATES DISTRICT COURT

This is the second Motion to Dismiss this putative class action alleging a conspiracy to fix the prices of EpiPen, an epinephrine auto-injector (“EAI”) with a ninety-plus percent market share.[1] Familiarity with relevant facts[2] and procedural history from the previous opinion addressing the first motion to dismiss is assumed. ECF No. 125.

Plaintiffs are two drug wholesalers, Rochester Drug Co-Operative, Inc. and Dakota Drug, Inc., that purchase Epi-Pens directly from the manufacturers of the devices, Defendants Mylan Inc. and Mylan Specialty L.P. (collectively, “Mylan”). Plaintiffs allege that Mylan paid bribes and kickbacks to a group of pharmacy benefit managers-referred to collectively as CVS Caremark, Express Scripts, and OptumRx (or “PBM Defendants)[3]-to ensure that Mylan could raise the price of the EpiPen while keeping a monopoly share of the market.

After Defendants' initial motions to dismiss were granted in part and denied in part [ECF No. 125], Plaintiffs amended their complaint. The First Amended and Consolidated Class Action Complaint (“1st Am. Compl.”) [ECF No. 271], purports to raise four claims against the original Defendants as well as two newly named Defendants on behalf of a putative class. Counts One and Two assert that all Defendants violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c). Count Three alleges that Mylan violated the Sherman Antitrust Act, 15 U.S.C. § 2. Count Four contends that all Defendants violated the Sherman Act's § 1.

Defendants once again move to dismiss many of Plaintiffs' claims. They reassert some arguments raised previously, namely that Plaintiffs' antitrust claims are time-barred and that the claims against the PBMs' corporate parent entities should be dismissed, and they again challenge some of the predicate acts that form the basis of Plaintiffs' RICO claims. Defendants also seek dismissal of Plaintiffs' newly raised claim under § 1 of the Sherman Act, contending that Plaintiffs have not plausibly alleged the elements of an antitrust conspiracy. Defendants do not again move to dismiss the § 2 claim (other than arguing that it may be untimely, as discussed below), and their arguments regarding predicate acts do not mandate dismissal of the RICO claims in their entirety.

At the outset, there is no dispute that the previous determination regarding the timeliness of Plaintiffs' Sherman Act § 2 claim applies with equal force to the newly raised Sherman Act § 1 claim. Mot. to Dismiss Hr'g Tr. [ECF No. 404] at 30. The prior order found that the Sherman Act's four-year limitations period begins to run when the alleged wrongful act occurs, not when the plaintiff becomes aware of the injury. ECF No. 125 at 16-17. Plaintiffs allege that Defendants' scheme began in 2012, and thus the initial antitrust injury, at least, falls outside the statute of limitations. Id. at 17. The previous decision also made clear that Plaintiffs had not sufficiently pleaded equitable tolling for Plaintiffs' original Sherman Act claim, and that holding applies equally to the newly asserted antitrust claim. Id. at 18. Because Plaintiffs could save some aspects of their Sherman Act claims with evidence of continuing violations, a final decision on the timeliness of the antitrust claims will be postponed until such discovery can be taken. Thus, as before, until summary judgment, “the statute of limitations does not provide a basis to dismiss Plaintiffs' antitrust claims in their entirety.” Id. at 20. This aspect of the motion will be denied without prejudice.

The remainder of the motion to dismiss, however, will be granted. Plaintiffs have not alleged a plausible basis for holding either the previously dismissed or newly named corporate parents of the PBMs liable.[4] Nor have Plaintiffs plausibly asserted their Sherman Act § 1 claim. Finally, Plaintiffs' invocation of the Anti-Kickback Statute and West Virginia's bribery statute as violations of the Travel Act and therefore actionable RICO predicates fails because these statutes define bribery more broadly than does the Travel Act.

I

As discussed in detail in the previous order, this case involves drug formularies, which are lists of drugs that health insurance companies agree to cover for their insureds. PBMs act as the middlemen in the prescription-drug process, not purchasing or selling those drugs but rather performing functions such as (1) negotiating with manufacturers to obtain rebates that offset the list prices of drugs; and (2) “designing, developing and managing formularies and formulary compliance programs.” 1st Am. Compl. ¶ 54. Drug manufacturers are understandably eager to tap into health insurers' formularies, given the No. of consumers those plans cover. And because formularies set the specific drugs that plan participants can receive, they can and often do favor some drugs over others. See Id. ¶ 4.

Plaintiffs argue that Mylan's eagerness for preferential placement on formularies led Mylan to pay substantial kickbacks, or bribes, to Defendant PBMs in exchange for EpiPen's preferential placement on the formularies these PBMs administered. Id. ¶ 3. According to Plaintiffs, rather than lowering costs for their clients as PBMs claim to do, these concerted activities ultimately doubled or nearly tripled the list price of EpiPens. Id. ¶ 9. While such price increases might have been expected to lead drug wholesalers such as Plaintiffs to purchase EpiPen's competitors' products, Plaintiffs claim that the PBMs bolstered Mylan's market share by not including competitive products on their formularies or giving those products less preferential formulary placement in exchange for the kickbacks.

The PBMs benefitted from EpiPen's rising prices because the alleged kickbacks they received were generally calculated as a percentage of the EpiPen's wholesale price. Id. ¶ 102. Plaintiffs also allege that whereas PBMs had historically passed savings like these on to their clients, the PBM Defendants began to keep more of the increased fees for themselves. Id. ¶ 101. Mylan, in turn, used its list-price increases to recoup the costs of its increasing payments to the PBMs, and its operating profit increased by almost 150% between 2012 and 2016. Id. ¶ 123, 125. Plaintiffs, who paid the list price for EpiPens, were left to bear the burden of these steep price increases. See Id. ¶ 45.

II

In reviewing a motion to dismiss for failure to state a claim under Rule 12(b)(6), a court must accept as true all of the factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor. Gorog v. Best Buy Co., 760 F.3d 787, 792 (8th Cir. 2014) (citation omitted). Although the factual allegations need not be detailed, they must be sufficient to “raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted). The complaint must “state a claim to relief that is plausible on its face.” Id. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

III

To establish a civil RICO claim, a plaintiff must show that that the defendant “engaged in (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering...

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