In re: EpiPen Direct Purchaser Litigation

Background

The plaintiffs are Rochester Drug Co-Operative, Inc., and Dakota Drug, Inc., two drug wholesalers that bought EpiPens directly from Mylan Inc. and Mylan Specialty L.P. The plaintiffs brought a putative class action alleging that Mylan paid bribes and kickbacks to pharmacy benefit managers—CVS Caremark, Express Scripts, and OptumRx—to obtain favorable EpiPen formulary placement and preserve Mylan’s market share while increasing EpiPen’s prices.

The amended complaint asserted four claims: two civil Racketeer Influenced and Corrupt Organizations Act claims under 18 U.S.C. § 1962(c), a Sherman Act Section 2 claim against Mylan, and a newly added Sherman Act Section 1 claim against all defendants. The defendants filed a second motion to dismiss.

Antitrust Claims and Timeliness

The court declined to dismiss the Sherman Act claims as untimely. It relied on its earlier determination that the four-year limitations period begins when the alleged wrongful act occurs, not when the plaintiff learns of the injury. The plaintiffs alleged that the scheme began in 2012, but the court said evidence of continuing violations could potentially preserve some parts of the claims. The court therefore postponed a final timeliness decision until discovery and denied without prejudice the motion as to the timeliness of the Sherman Act claims.

RICO Predicate Acts

The plaintiffs alleged that violations of the federal Anti-Kickback Statute and West Virginia Code § 47-11A-3 qualified as bribery under the federal Travel Act and therefore could serve as predicate acts for their RICO claims. The court rejected that theory. It held that Travel Act bribery uses a generic definition that includes a special-trust element, while the Anti-Kickback Statute does not require proof of a special trust or fiduciary relationship. Because the Anti-Kickback Statute is broader than generic Travel Act bribery, its alleged violation could not serve as a Travel Act predicate for the plaintiffs’ RICO claims. The court concluded that the West Virginia statute could not serve as a Travel Act predicate for the same reason and granted the motion as to the plaintiffs’ reliance on those two statutes. The opinion states that other alleged RICO predicates, including mail and wire fraud and several state bribery statutes, were not challenged in this motion.

Sherman Act Section 1

The plaintiffs alleged both a horizontal conspiracy among all defendants and separate vertical agreements between Mylan and each pharmacy benefit manager. For the alleged horizontal conspiracy, the plaintiffs used a “hub-and-spoke” theory, with Mylan as the hub and the pharmacy benefit managers as the spokes. The court held that the complaint did not plausibly allege the required “rim”—an agreement among the pharmacy benefit managers. Alleging that each pharmacy benefit manager knew Mylan had similar agreements with other pharmacy benefit managers was not enough to establish an agreement.

For the vertical-restraint theory, the court held that the relevant market for assessing the pharmacy benefit managers’ power was the pharmacy-benefit-manager market, not the EpiPen market. Because each pharmacy benefit manager allegedly had a market share of 30% or less, the complaint did not plausibly allege that any individual pharmacy benefit manager had substantial market power capable of harming competition. The court therefore granted the motion as to the Sherman Act Section 1 claim and dismissed that claim with prejudice. The court noted that the plaintiffs had not requested permission to replead and that discovery had begun.

Corporate Parent Companies

The court also dismissed the claims against CVS Health Corporation, Express Scripts Holding Company, United Health Group, Inc., United Healthcare Services, Inc., United Healthcare, Inc., Optum, Inc., and OptumRx Holdings, LLC. It held that allegations about employees using parent-company email addresses or logos, negotiating with Mylan, or participating in formulary decisions did not plausibly connect the parent companies to the alleged illegal kickbacks or formulary decisions based on those kickbacks. The allegations concerning United Healthcare Services, Inc., and United Healthcare, Inc., were not sufficient because they were identical and lacked particularity. The claims against all seven parent companies were dismissed with prejudice.

Order

Judge Eric C. Tostrud ordered that the PBM Defendants’ motion to dismiss was granted in part and denied in part. The motion was granted as to the seven corporate parent companies, whose claims were dismissed with prejudice; granted as to the plaintiffs’ Sherman Act Section 1 claim, which was dismissed with prejudice; granted as to reliance on the Anti-Kickback Statute and West Virginia Code § 47-11A-3 as Travel Act predicates for the RICO claims; and denied without prejudice as to the timeliness of the plaintiffs’ Sherman Act claims.