Pfizer Inc. v. Johnson & Johnson & Janssen Biotech, Inc.

Citation333 F.Supp.3d 494
Decision Date08 August 2018
Docket NumberCIVIL ACTION No. 17-cv-4180
Parties PFIZER INC., Plaintiff, v. JOHNSON & JOHNSON and Janssen Biotech, Inc., Defendants.
CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)

Bryan Daniel Gant, Michael J. Gallagher, Robert A. Milne, Ross E. Elfand, White & Case LLP, New York, NY, Elliott E. Dionisio, White & Case LLP, Los Angeles, CA, H. Robert Fiebach, Cozen O'Connor, Philadelphia, PA, Trisha Grant, White & Case LLP, Washington, DC, for Plaintiff.

Adeel A. Mangi, Jonathan H. Hatch, Sara A. Arrow, George A. Lobiondo, William F. Cavanaugh, Jr., Patterson Belknap Webb & Tyler LLP, New York, NY, Ashley E. Bass, Thomas O. Barnett, Covington & Burling LLP, Washington, DC, Leslie E. John, Matthew Vahey, Ballard Spahr Andrews & Ingersoll LLP, Philadelphia, PA, Jayne A. Goldstein, Shepherd Finkelman Miller & Shah LLP, Media, PA, for Defendants.


Joyner, District Judge

Before the Court are Defendants' Motion to Dismiss (Doc. No. 27) and Corrected Memorandum in Support thereof (Doc. No. 31), Plaintiff's Response in Opposition thereto (Doc. No. 42), Defendants' Reply in Support thereof (Doc. No. 48), and Plaintiff's Notice of Supplemental Authority (Doc. No. 54). We deny Defendants' Motion for the following reasons.


This case arises from an antitrust action brought by Pfizer, Inc. ("Pfizer") against Johnson & Johnson, along with its wholly owned subsidiary, Janssen Biotech, Inc. (collectively, "J & J"), for allegedly anticompetitive practices in the pharmaceutical market for infliximab products. The practices at issue are embodied by exclusive agreements and bundled rebates. Pfizer's principal claim is that J & J violated federal antitrust laws by engaging in anticompetitive behavior to shield Remicade

from competition posed by Pfizer's biosimilar, Inflectra.

Under consideration is J & J's Motion to Dismiss Pfizer's Complaint for failure to state a claim under Fed. R. Civ. P. 12(b)(6). This Motion is fully briefed and ripe for the Court's adjudication. The Court has considered the parties' submissions and decides this matter without oral argument. Fed. R. Civ. P. 78 ; Loc. R. Civ. P. 7.1(f).


The subject medications in this litigation are J & J's Remicade

and Pfizer's Inflectra. Both are branded forms of infliximab, which is a biologic drug used to treat a range of immune-mediated diseases. Compl. ¶ 35. Biologics are relatively new medications to the pharmaceutical market, and their unique qualities are relevant to our decision.

Biologic medications, such as infliximab

, are complex mixtures derived from living systems. Id. ¶ 28. Biologics stand in contrast to more common drugs that are chemically synthesized and whose structure is known. Id. Therefore, the composition of biologics are not easily identified or characterized. Id. This makes biologic medications difficult to replicate and produce in generic form. Id.

The emergence of biologics prompted Congress to enact the Biologic Price Competition and Innovation Act ("BPCIA"). Id. ¶ 31. The BPCIA provides an abbreviated regulatory approval pathway for the introduction of drugs that are biosimilar to a biologic, similar to the abbreviated approval process for generic drugs under the Hatch-Waxman Act. Id. ¶ 33. To prove that an applicant drug is biosimilar to an originator product, the applicant must show that it is "highly similar to the [originator] notwithstanding minor differences in clinically inactive components" and that "there are no clinically meaningful differences between the [proposed biosimilar] and the [originator] in terms of safety, purity, and potency." Id. (quoting 42 U.S.C. § 262(i)(2) ).

One important difference between biosimilars approved under the BPCIA and generic medications approved under the Hatch-Waxman Act is that biosimilars are not automatically substitutable with the originator biologic. Id. ¶ 34. While it appears there is a process in which a biosimilar can become automatically substitutable once achieves interchangeability status with the FDA, Pfizer claims that whether the biosimilar can be automatically substituted would ultimately depend on state law. Id. A key aspect to this distinction, according to Pfizer, is that "it enables biologic originator firms to leverage their monopolies over existing patients to extract anticompetitive commitments from insurers and providers." Id.

With this in mind, we turn to the competing products in this case. J & J introduced the first infliximab

product under the brand name Remicade in the United States in 1999. Id. ¶ 38. The FDA has approved Remicade's indications for rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis

, ulcerative colitis, Chron's disease, and plaque psoriasis. Id. ¶¶ 45, 83. Pfizer estimates that 475,000 patients in the United States receive at least one dose of Remicade annually. Id. ¶ 39. Because of its patients, J & J enjoyed a monopoly over the infliximab market in the United States until 2016. Id. ¶ 3.

Pfizer brought Inflectra to market in 2016 after it received FDA approval as the first biosimilar to Remicade

. Id. ¶ 5. The FDA approved Inflectra for the same indications as Remicade, except for pediatric ulcerative colitis, which accounts for a minimal amount of Remicade's sales. Id. ¶ 45.


and Inflectra are administered intravenously at an institutional setting, such as a clinic or hospital. Id. ¶ 49. They are "medical benefit" products, in contrast to "pharmacy benefit" products. Id. ¶¶ 49-50. As medical benefit products, Remicade and Inflectra are first purchased by the providers, who later seek reimbursement after administering it on patients. Id. Because the provider bears financial risk posed by the patient or patient's insurer not reimbursing them for the cost of medical benefit products, providers have an interest in utilizing drugs that are widely covered by insurers. Id. ¶ 50.

Within weeks of Inflectra's launch in 2016, J & J began to deploy its "Biosimilar Readiness Plan." Id. ¶ 6. Pfizer claims that the "core features of the plan are exclusionary contracts that foreclose Pfizer's access to an overwhelming share of consumers, coupled with anticompetitive bundling and coercive rebate policies designed to block both insurers from reimbursing, and hospitals and clinics from purchasing, Inflectra or other biosimilars of Remicade

despite their lower pricing." Id. Pfizer alleges that J & J's anticompetitive scheme targeted both insurers and providers and involved exclusive contracts for Remicade, multi-product bundled rebates, rebates based on the bundling of existing (incontestable) and new (contestable) infliximab patients, and creating a "rebate trap" that prevented Pfizer and other competitors from competing with Remicade. Pfz. Resp. at 6 (citing Compl. ¶¶ 8, 9, 11, 55-79, 98) (Doc. No. 42).

Exclusive Contracts. A key component of J & J's scheme was to secure contractual commitments from commercial insurance companies to exclude biosimilars from coverage under their plans, thereby making Remicade

the exclusive infliximab available to patients covered under those plans. Id. ¶ 58. A portion of these agreements contained express terms that would exclude biosimilars from their medical policies and drug formularies. Id. The remaining portion of these agreements contained a "fail first" provision, which would require a patient to first try and fail on Remicade before the insurance company would reimburse Inflectra or another biosimilar. Id. However, if a patient first fails on Remicade, it would "defy sound medical judgment" for a physician to switch to a therapeutic equivalent biosimilar, such as Inflectra, rather than try another therapy. Id. At least 70 percent of commercially insured patients in the United States fall under plans that have adopted these express or de facto agreements to exclude Inflectra and other biosimilars. Id. ¶ 59.

Bundled Rebates and Multi-Product Bundling. Pfizer also alleges that J & J has forced insurers into accepting exclusive contracts by introducing a rebate program that would provide savings off Remicade's

increasing list price for all existing Remicade patients. Id. ¶¶ 9, 66. The threat of not qualifying for the rebate would result in significant costs for insurance companies because it would apply to both new and existing Remicade patients. Id.

Pfizer posits that the force of J & J's "all-or-nothing" rebate program is effective because it bundles the base of existing Remicade

patients with new patients entering the infliximab market. Id. ¶¶ 9, 65. Pfizer asserts that the exiting Remicade patients represent inelastic demand, or incontestable patients, who are "highly unlikely" to stitch to a biosimilar regardless of price. Id. By premising rebates on this incontestable population, J & J is able to force insurance companies to exclude Inflectra from competing for new patients entering the infliximab market. Id. ¶¶ 9, 66. Pfizer refers to this as the "rebate trap." Id. ¶ 66.

Beyond bundling contestable and incontestable patients, J & J has also bundled rebates across multiple products. Id. ¶¶ 9, 67. In essence, if an insurer refuses to grant exclusivity to Remicade

, the insurer would be forced to pay a higher price on other J & J products in addition to Remicade. Id. Pfizer identifies Simponi, Simponi Aria, and Stelara as other J & J products included in its multi-product bundled rebate program. Id. Pfizer also claims it could offer no competing drugs to these products. Id.

Pfizer claims that Inflectra's exclusion from coverage by most insurers results in an even greater foreclosure than just the patients covered by those insurers. Id. ¶¶ 10, 69, 70, 71. As an infusion product, infliximab is administered at a provider's facility. The provider therefore purchases and stocks infliximab

products. According to Pfizer, the risk that Inflectra will not be reimbursed by a significant portion of patients' insurers causes physicians to only purchase,...

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