State ex rel. Fitch v. Eli Lilly & Co.
| Decision Date | 09 August 2022 |
| Docket Number | Civil Action 3:21-CV-674-KHJ-MTP |
| Parties | THE STATE OF MISSISSIPPI, EX REL. LYNN FITCH, ATTORNEY GENERAL PLAINTIFF v. ELI LILLY AND COMPANY, et al., DEFENDANTS |
| Court | U.S. District Court — Southern District of Mississippi |
Before the Court are Defendants Eli Lilly and Company (“Eli Lilly”), Novo Nordisk Inc. (“Novo Nordisk”), and Sanofi-Aventis U.S. LLC.'s (“Sanofi”) motions to dismiss. [85], [83]. For the following reasons, the Court denies the motions.
This case is about insulin drug prices. Plaintiff, The State of Mississippi, ex rel. Lynn Fitch, its Attorney General (“the State”) originally sued in Hinds County Chancery Court, alleging that the “Manufacturer Defendants”[1] conspired with the “Pharmacy Benefit Manager Defendants” (also called, “PBM Defendants”)[2] to artificially inflate the price of insulin drugs and other diabetes medications. See Second Amend. Compl. ¶ ¶ 5-16.
The State alleges that the Manufacturer Defendants manufacture the “vast majority of insulins and other diabetic medications available in Mississippi.” Third Amend. Compl. [71] ¶ 5. Likewise, the State alleges that the PBM Defendants “manage the pharmacy benefits for the vast majority of individuals in Mississippi.” Id. ¶ 6. As part of this work, the State alleges, the PBM Defendants “establish standard formulary offerings” that determine which of the Manufacturer Defendants' diabetes medications are covered “by nearly every payor in Mississippi.” Id. ¶¶ 6-7. The State alleges that the Manufacturer Defendants and the PBM Defendants engaged in an “Insulin Pricing Scheme” to increase each type of Defendant groups' profits. Id. ¶¶ 12 19.
The heart of the “Insulin Pricing Scheme” as alleged by the State is that the Manufacturer Defendants “artificially and willingly” raise their prices to gain formulary access for their respective diabetic treatments from the PBM Defendants. Id. ¶ 20. The State alleges that the Manufacturer Defendants pay a “significant, yet undisclosed, portion of that false list price back to the PBM [Defendants].” Id. ¶ 20. The reason this system exists, the State alleges, is so the Manufacturer Defendants can pay rebates to the PBM Defendants in exchange for formulary access without sacrificing their profit margin. Id. at ¶ 23. The PBM Defendants in turn retain a significant percentage of these undisclosed rebates, while using the false list price to generate additional profits from their own pharmacies and pharmacies in their networks. Id. at ¶ 24.
The publicly available price is known as its “Average Wholesale Price” (“AWP”) or “Wholesale Acquisition Cost” (“WAC”). Id. ¶ 301. Allegedly, this price and prices based on the AWP or WAC are self-reported by drug manufacturers and published in compendiums such as First DataBank, Redbook, and others. Id. at ¶ 302. The State's 118-page Complaint contains in-depth detail about specific insulin drug pricing over time, and how those prices relate to each Defendant.
The State alleges that the Manufacturer Defendants' prices “have become so untethered from the actual prices realized by either Defendant group” that they “constitute a false price.” Id. ¶ 21. The State alleges, then, the price of certain insulins has increased by more than 1000% since 2003-the same year in which the PBM Defendants “began their rise to power.” Id. at 278.
As a result, the State sued the Defendants, alleging that it has been overcharged millions of dollars per year in its position as a payor for the at-issue drugs through its employee health plans and as a purchaser of the drugs for its staterun facilities. Id. ¶ 28. The State also sued to protect its “sovereign interest in the health and economic interests of its residents, its own interests, and the integrity of its marketplace.” Id. at ¶ 39.
The State brought claims against the Defendants for violating the Mississippi Consumer Protection Act (“MCPA”), common-law conspiracy, and unjust enrichment. [71] ¶¶ 1, 518-551. The Manufacturer Defendants then filed two motions to dismiss: one for lack of personal jurisdiction under Rule 12(b)(2), and one for failure to state a claim under Rule 12(b)(6). The Court addresses each in turn.
Under Rule 12(b)(2), a lawsuit may be dismissed for a lack of personal jurisdiction. See Fed. R. Civ. 12(b)(2). “When a nonresident defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing the district court's jurisdiction over the nonresident.” Unified Brands, Inc. v. Teders, 868 F.Supp.2d 572, 577 (S.D.Miss. 2012) (quoting Jobe v. ATR Mktg., Inc., 87 F.3d 751, 753 (5th Cir. 1996)). The Court must take the “allegations contained in the complaint, except insofar as controverted by opposing affidavits,” as true. Colwell Realty Invs., Inc. v. Triple T Inns of Az., Inc., 785 F.2d 1330, 1333 (5th Cir. 1986). If the Court does not rely on an evidentiary hearing but decides the motion based on the pleadings and exhibits on file, the plaintiff need only present a prima facie case of personal jurisdiction. DeCarlo v. Bonus Stores, Inc., 413 F.Supp.2d 770, 775 (S.D.Miss. 2006) (citing Brown v. Flowers Indus., Inc., 688 F.2d 328, 332 (5th Cir. 1982)). When deciding whether a prima facie case has been established, all conflicts in the facts alleged in the complaint and opposing affidavits must be resolved in the plaintiff's favor. DeCarlo, 413 F.Supp.2d at 775 ().
“A federal court sitting in diversity may exercise personal jurisdiction over a nonresident defendant if (1) the long-arm statute of the forum state confers personal jurisdiction over the defendant; and (2) exercise of such jurisdiction by the forum state is consistent with due process under the United States Constitution.” Mink v. AAAA Dev., LLC, 190 F.3d 333, 335 (5th Cir. 1999).
The Manufacturer Defendants assert that, regardless of the Court's ruling on Mississippi's long-arm statute, exercise of jurisdiction would not comport with due process under the United States Constitution. Mem. in Support of Mot. to Dismiss [86] at 5-6.
Any nonresident person, firm, general or limited partnership, or any foreign or other corporation not qualified under the Constitution and laws of this state as to doing business herein, who shall make a contract with a resident of this state to be performed in whole or in part by any party in this state, or who shall commit a tort in whole or in part in this state against a resident or nonresident of this state, or who shall do any business or perform any character of work or service in this state, shall by such act or acts be deemed to be doing business in Mississippi and shall thereby be subjected to the jurisdiction of the courts of this state.
Miss. Code Ann. § 13-3-57.
Mississippi courts have interpreted the statute to contain three components: contract, tort, and “doing-business.” Fitch v. Wine Express, Inc., 297 So.3d 224, 228 (Miss. 2020). In other words, to exercise jurisdiction, the Court must find that: (1) the Manufacturer Defendants entered into a contract to be performed, in whole or in part, in Mississippi, (2) the Manufacturer Defendants committed a tort, in whole or in part, in Mississippi, or (3) the Manufacturer Defendants were “doing business” in Mississippi. Farani v. File, 565 F.Supp.3d 804, 808 (S.D.Miss. 2021). Only one of these components need be present to confer personal jurisdiction under the statute. Id.
The State alleges that the Manufacturer Defendants “are registered to do business in Mississippi, conduct business in Mississippi, and sold the at-issue drugs to the State and its citizens in Mississippi.” Mem. in Opp. of Mot. to Dismiss. [100] at 6 (citing [71] at ¶¶ 41-82). The State therefore contends that the Manufacturer Defendants are subject to Mississippi courts' jurisdiction under the long-arm statute. Id. The Manufacturer Defendants do not dispute these allegations in their reply brief. See generally Reply [103]. The Court therefore finds that it may exercise personal jurisdiction over the Manufacturer Defendants under the “doing business” prong of Mississippi's long-arm statute. See Fitch, 297 So.3d at 229-30 ().
The Court next turns to whether the exercise of personal jurisdiction is consistent with due process under the United States Constitution.
“The Due Process Clause of the Fourteenth Amendment permits the exercise of personal jurisdiction over a nonresident defendant when (1) that defendant has purposefully availed himself of the benefits and protections of the forum state by establishing ‘minimum contacts' with the forum state; and (2) the exercise of jurisdiction over that defendant does not offend ‘traditional notions of fair play and substantial justice.'” Mink, 190 F.3d at 336 (quoting Latshaw v. Johnston 167 F.3d 208, 211 (5th Cir. 1999) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316-17 (1945))).
Personal jurisdiction is either general or specific. See Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 271 (5th Cir. 2006). “If a defendant's contacts with the forum state are continuous and systematic, a court may exercise general jurisdiction over any action brought against that defendant, regardless of whether the action is...
To continue reading
Request your trial