In re: EpiPen Direct Purchaser Litigation

Background

Rochester Drug Co-Operative, Inc., and Dakota Drug, Inc., drug wholesalers, sued on behalf of a proposed class. They alleged that Mylan Inc. and Mylan Specialty L.P., collectively Mylan, manufacturers of EpiPen products, paid bribes and kickbacks to pharmacy benefit managers to help Mylan raise EpiPen prices and maintain a monopoly share of the market. The wholesalers asserted claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), including a RICO-conspiracy claim, and a Sherman Act claim against Mylan.

The defendants sought partial judgment on the pleadings under Federal Rule of Civil Procedure 12(c). A judgment-on-the-pleadings motion tests whether the complaint states a legally sufficient claim, using the same standard as a motion to dismiss for failure to state a claim. The motion challenged the use of specified state bribery laws as direct RICO predicate acts or as predicate acts through the federal Travel Act.

Rulings on the challenged predicate acts

The court held that the plaintiffs could not plausibly allege a RICO predicate act based on California Penal Code § 641.3. Reading the statute’s definitions and relevant California decisions, the court concluded that the statute does not reach conduct by business organizations acting as the employee who solicits or accepts a bribe. The claims in Counts I and II were therefore dismissed with prejudice to the extent they relied on that statute, as to all defendants.

The court rejected arguments that the Rhode Island bribery statutes apply only to individuals. It concluded that the statutes’ use of the word “person,” together with Rhode Island law, permits them to apply to business organizations. The court also rejected arguments concerning an alleged lack of secrecy or consent under the New Jersey and Missouri statutes. It held that the amended New Jersey statute does not require proof that the principal lacked knowledge or consent, and found the Missouri statute substantively identical on the point.

The court rejected the defendants’ argument that delegating authority to negotiate prices and rebates necessarily showed consent under Pennsylvania, Illinois, and Virginia law. The plaintiffs alleged that the defendants concealed information about the payments and rebate arrangements, and those allegations had to be accepted as true at this stage. The court therefore denied the motion as to those arguments.

For the Texas statute, the court held that the plaintiffs plausibly alleged Texas-based conduct by Mylan and Caremark. The allegations that a Texas-based Caremark entity solicited, agreed to accept, or accepted payments at its Texas headquarters were sufficient for the motion. But the plaintiffs did not allege that OptumRx or an affiliated entity was headquartered in Texas or otherwise allege facts showing Texas-based conduct by OptumRx. The court dismissed Counts I and II with prejudice to the extent they relied on Texas Penal Code § 32.43 as to OptumRx, and denied the plaintiffs’ request for leave to amend.

Disposition

Judge Eric C. Tostrud ordered that the defendants’ motion for partial judgment on the pleadings was granted in part and denied in part. Counts I and II were dismissed with prejudice to the extent they relied on California Penal Code § 641.3 as to all defendants or Texas Penal Code § 32.43 as to OptumRx, whether directly or through the Travel Act. The remainder of the motion was denied. The court separately ordered the docket amended to reflect that United Healthcare, Inc. was no longer a party; the opinion states that United Healthcare had previously been dismissed.