Industry: Health Care
Last week Markus Meier, the Acting Director of the Bureau of Competition at the Federal Trade Commission, gave testimony to the House Judiciary Committee concerning “Antitrust Concerns and the FDA Approval Process.”
“But what is more common than exclusive dealing?” Affirming summary judgment for defendant Saint Francis Medical Center, the Seventh Circuit recently held that the hospital’s contracts with health care insurers—though admittedly exclusive—did not harm competition. In fact, such contracts were likely the product of a competitive market in which Saint Francis was simply the best competitor.
In a split decision, on April 28, 2017, the Court of Appeals for the District of Columbia Circuit affirmed the district court’s decision to issue a permanent injunction blocking the merger of Anthem, Inc. and Cigna Corp., two of the nation’s largest health insurance providers. As we’ve previously written, in July 2016, the Department of Justice and attorneys general from multiple states sued to halt the merger pursuant to Section 7 of the Clayton Act, alleging that it would substantially lessen competition in the market for employers purchasing insurance for more than 5,000 employees ( “national accounts”) in multiple states and employers purchasing insurance for more than 50 employees (“large group employers”) in Richmond, Virginia. After a six-week bench trial, the district court enjoined the merger on the basis of its likely substantial anticompetitive effects in both markets.
The incentive is high to identify a Sherman Act violation in your competitor’s conduct—three times higher, to be precise, than to bring a claim for an ordinary business tort or even a false advertising claim under the Lanham Act. But as we noted in December, the Fifth Circuit recently refused to recognize a claim for attempted monopolization under Section 2 based on a defendant’s false advertising “absent a demonstration that [the] false advertisements had the potential to eliminate, or did in fact eliminate, competition.” The court relied on a prior decision in which it expressed “extreme reluctance to allow a treble damage verdict to rest upon business torts alone.” The case is Retractable Technologies, Inc. v. Becton Dickinson & Co.
Tying is a chameleon in antitrust law. Courts can condemn tying arrangements as either per se violations or as unlawful under the rule of reason. For a per se tying violation, plaintiff must show that the defendant had economic power in the market for the tying item sufficient to enable it to restrain trade in the tied product market. But a rule of reason analysis also requires consideration of the defendant’s economic power in the tying market, since a seller with no power whatsoever will not be able to coerce purchasers to buy the tied product. Thus, in tying cases, the per se and rule of reason analyses tend to bleed together, leaving courts and litigants without a clear analytical pathway.
Since we last reported on the state and federal government’s generic drug pricing investigations and litigations (click here to read more), the U.S. Department of Justice (“DOJ”) has obtained its first guilty pleas. On January 9, 2017, Heritage Pharmaceutical Inc.’s former CEO and its former president (the defendants are brothers-in-law) pleaded guilty to manipulating the prices of and divvying up customers for an antibiotic, doxycycline hyclate, and a diabetes medicine, glyburide. The defendants are scheduled to be sentenced on September 28, 2017, and they face up to ten years of imprisonment. The government’s filings in other lawsuits make clear that the defendants’ sentencing was delayed until the defendants complete their cooperation with the government.
A tale of two mergers: Following their losses in DOJ merger challenges, Anthem fights on and Aetna gives up
In the past month, the DOJ and several state governments scored two trial wins in their challenges to mergers among some of the country’s largest health insurers. First, Judge Bates of the District of Columbia blocked the combination of Aetna and Humana, finding that the “proffered efficiencies do not offset the anticompetitive effects of the merger.” Weeks later, Judge Jackson of the same district scuttled a deal between Anthem and Cigna, which she found “likely to lessen competition substantially” in the relevant market.
In a December 2, 2016 decision, Retractable Technologies, Inc. v. Becton Dickinson & Company, the Fifth Circuit opined on when false advertising can lead to liability under the Sherman Act. The Fifth Circuit’s answer: Very rarely.
The trial over Aetna and Humana's $37 billion proposed merger kicked off today in a Washington, D.C. federal court.
PinnacleHealth System and Penn State Hershey Medical Center have abandoned their merger plans following a Third Circuit defeat last month. The announcement underscores the uncertainty faced by hospitals considering consolidation as a way to keep costs down and promote a value-based system of payment.
On August 23, 2016, the District Court for the Eastern District of Missouri allowed claims by a compounding pharmacy to proceed, denying a motion to dismiss filed by the defendant pharmacy benefit manager (“PBM”). In Precision Rx Compounding LLC, et al. v. Express Scripts Holding Co., et al., No. 16-cv-0069 (E.D. Mo.), the plaintiff Precision Rx is a compounding pharmacy and the defendant, Express Scripts, is a PBM that contracts with health plan administrators and insurance payors to manage pharmacy benefit plans.
The Department of Justice and attorneys general from multiple states last week sued to halt two health insurance mergers, each worth billions of dollars.
The challenged deals are Anthem's planned merger with Cigna and Aetna's proposed acquisition of Humana. The deals would whittle down the number of top competitors in the health insurance industry from five to just three: an Anthem-Cigna entity, an Aetna-Humana entity, and the current industry giant UnitedHealth Group. Each would have revenue of more than $100 billion a year.
The Federal Trade Commission has made clear that it considers the regulation of competition in health care markets one of its top priorities, but in recent weeks the FTC has been dealt a string of tough losses in its healthcare merger challenges. Here, we examine some of the key takeaways from the FTC’s recent defeats in this area.
On June 14, 2016, in FTC v. Advocate Health Care et al., No. 15-cv-11473, the District Court for the Northern District of Illinois denied the Federal Trade Commission’s attempt to stop the merger of Advocate Health Care Network and NorthShore University HealthSystem.
Freedom to Whiten: Teeth-Whitener’s Antitrust Suit Against Georgia Board of Dentistry Allowed to Proceed
Earlier this week, in Colindres v. Battle, et al., No. 15-CV-2843 (N.D. Ga.), the District Court for the Northern District of Georgia refused to dismiss antitrust claims brought by the owner of a teeth-whitening company against the members of Georgia’s Board of Dentistry. The plaintiffs, the owner and her company, allege that the Board has been sending agents to threaten her and her company with felony charges for unlicensed practice of dentistry, carrying a possible sentence of as much as five years in prison, though the Board has refused to take formal enforcement action or even put its complaints in writing.
The Penn State Hershey–Pinnacle Merger: A Turning Point in FTC’s Enforcement Authority, or Just a Temporary Setback?
As we have reported previously, the Federal Trade Commission recently has taken an aggressive stance in regulating mergers in the healthcare sector. The Commission has racked up a string of victories, but last week the Middle District of Pennsylvania dealt a blow to that track record by denying the Commission’s request for a preliminary injunction to block a merger of two major healthcare providers in central Pennsylvania: Penn State Hershey Medical Center and PinnacleHealth Systems. The FTC is pursuing an emergency appeal to the Third Circuit, but this loss could signal a waning in the FTC’s enforcement authority in the healthcare sector.
Judge Merrick Garland, if he is confirmed, may become one of the Supreme Court’s foremost authorities in antitrust law. He taught antitrust law at Harvard, and he has published on the subject, so it’s fair to expect him to seek a role in shaping antitrust jurisprudence and perhaps voting to hear more antitrust cases than currently end up on the Court’s docket.
Direct and indirect purchasers of Nexium recently appealed District of Massachusetts Judge William Young’s denial of a request for a new trial in In re: Nexium to the First Circuit.
FTC Provides Guidance on State Regulatory Board Antitrust Liability Following Supreme Court Decision
Earlier this year, we covered the Supreme Court’s decision in North Carolina State Board of Dental Examiners v. FTC, which held that a state regulatory board composed of “active market participants” was not immune to federal antitrust laws unless the state “actively supervised” the board. We noted that the Court left open what level of active supervision would be required for a state board to enjoy antitrust immunity.
Drug company Turing Pharmaceuticals made headlines recently when it reportedly raised the price of Daraprim, used commonly by AIDS patients to fight life-threatening infections, from $13.50 to $750 per tablet. Amidst vociferous protest, the company agreed to reduce the price. But the attention garnered by media reports has led to some allegations that Turing may have run afoul of antitrust laws through a less-publicized aspect of its marketing of Daraprim: the elimination of certain distribution channels, including wholesalers and retailers.
Better Early than Never: SDNY Dismisses Lawsuit over Patent Settlement where Generics were Granted Early-Entry Licenses with Acceleration Clauses
On September 22, Judge Ronnie Abrams of the Southern District of New York dismissed an antitrust lawsuit against Takeda Pharmaceuticals and three generic drug manufacturers based on settlements they had reached regarding a patent dispute over the drug ACTOS. The court held that the settlements were not illicit “reverse payments” warranting scrutiny under the Sherman Act because there was no plausible basis for holding that the settlements reduced competition for the drug. In the settlements, the generics did not receive any cash payments and primarily gained early entry licenses with acceleration clauses.
This is our fourth post on the DOJ’s expanding investigation into possible price fixing by generic drug manufacturers. Since our last update, the DOJ has subpoenaed Allergan Plc’s Actavis unit. In its August 6, 2015, 8-K, Allergan disclosed that it had received a subpoena from the DOJ “seeking information relating to the marketing and pricing of certain of the Company’s generic products and communications with competitors about such products.” As the fourth largest distributor of pharmaceuticals in the U.S., Allergan is the largest company that has been targeted by the DOJ.
We have been following developments in People of the State of New York v. Actavis, the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC (together, “Actavis”). Now, an FTC Commissioner and a D.C. Circuit Judge have weighed in as well—and they are criticizing a key portion of the Second Circuit’s ruling.
We have previously posted about the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC (together, “Actavis”), including our analysis of the District Court’s opinion enjoining Actavis from discontinuing sales of the Alzheimer’s drug Namenda IR, and of the Second Circuit’s decision affirming the district court’s ruling. The Second Circuit panel that heard the appeal has now denied rehearing, and the active members of the Second Circuit have also denied rehearing en banc.
Portions of a reverse payment suit against Endo Pharmaceuticals and others were recently dismissed by Judge William H. Orrick of the Northern District of California. The case was brought by plaintiffs who allege that a settlement agreement resolving a patent dispute over the drug Lidoderm illegally delayed the release of a generic version.
On June 26, 2015, the Third Circuit extended Actavis to non-cash settlements and held that Actavis can cover a no-AG agreement – “a settlement in which the patentee drug manufacturer agrees to relinquish its right to produce an ‘authorized generic’ of the drug” during the statutorily guaranteed 180 days of market exclusivity for the first-filing generic drug manufacturer.
Together with the State of Michigan, the United States Department of Justice’s Antitrust Division has filed a civil suit against four Michigan hospital systems for allegedly agreeing to limit marketing in each other’s territories. Three of the hospital systems—Hillsdale Community Health Center, Community Health Center of Branch County, and ProMedica Health System—have agreed to settle the charges.
We’ve previously covered the New York State Attorney General’s (“NYS AG”) lawsuit against Actavis PLC and Forest Laboratories seeking to prevent them from discontinuing sales of the Forest drug Namenda IR, which is used to treat Alzheimer’s disease. New York has alleged that Actavis and Forest are engaging in “product hopping”—attempting to force prescribers and patients to switch to a new extended-release version of Namenda (Namenda XR) before a generic version can be launched.
Yesterday, the FTC announced that it reached a settlement in its pay-for-delay lawsuit, FTC v. Cephalon Inc. in the U.S. District Court for the Eastern District of Pennsylvania, with Teva Pharmaceuticals Industries, Ltd., which acquired Cephalon in 2012. This case is the first FTC case to be resolved since the Supreme Court’s 2013 decision in FTC v. Actavis, in which the Court announced that reverse-payment patent settlements could be subject to antitrust challenges.
Since we last reported on the generic pricing investigations, the investigations have expanded. Par Pharmaceutical Companies, Inc. disclosed in its March 13, 2015 Annual Report that it had received a December 5, 2014 subpoena from the DOJ’s Antitrust Division that sought “communications with competitors regarding [Par’s] authorized generic version of Covis’s Lanoxin® (digoxin) oral tablets and [Par’s] generic doxycycline products.”
Following Actavis, California Supreme Court Crafts “Structured Rule of Reason” Test for Evaluating Pay-for-Delay Settlements
Last Thursday the Supreme Court of California decided In re Cipro Cases I & II, No. S198616 (Cal. May 7, 2015), holding that reverse payment, or “pay-for-delay,” settlements can be challenged as unreasonable restraints on trade. In so doing, it followed the U.S. Supreme Court’s 2013 decision in Federal Trade Commission v. Actavis, Inc., 133 S.Ct. 2223 (2013).
Promoting competition among health care providers remains a top priority for the Federal Trade Commission and it is expected that the FTC will continue to challenge mergers in the health care industry.
On April 13, 2015 the Second Circuit (Hon. Walker, Raggi, Droney) heard oral argument in People of the State of New York v. Actavis PLC.
St. Luke’s Health System and Saltzer Medical Group last week asked the full Ninth Circuit to reconsider its ruling that their merger violated federal antitrust laws.
In In re Lipitor Antitrust Litigation, No. 12 Civ. 2389 (D.N.J.), U.S. District Judge Peter G. Sheridan has confirmed his prior ruling that under the Supreme Court’s decisions in Twombly, Iqbal, and FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013), plaintiffs claiming an antitrust violation based on a non-monetary settlement must allege the value of the settlement to survive dismissal of their complaint.
Second Circuit Agrees to Earlier Oral Arguments in Actavis, Although Preliminary Injunction Will Remain in Place
The Second Circuit announced on Monday that it would hear Actavis PLC’s appeal to overturn the preliminary injunction issued by Judge Robert Sweet of the Southern District of New York as soon as possible, with a projected date for oral argument during the week of April 13.
DOJ and FTC Announce Proactive Approach to Monitoring Post-Affordable Care Act Antitrust Compliance at Joint Workshop
On February 24 and 25, the DOJ and FTC held their second joint workshop to examine the state of health care competition in the United States. The workshop explored five main themes: (1) early observations regarding accountable care organizations; (2) alternatives to traditional fee-for-service payment models; (3) trends in provider consolidation; (4) trends in provider network and benefit design strategies; and (5) early observations regarding health insurance exchanges.
The Ninth Circuit on Tuesday held that St. Luke’s Health System’s purchase of a physician practice group violated federal antitrust laws. In doing so, it upheld a district court’s order that the merger be dissolved.
The expedited appeal to the Second Circuit pits New York State’s arguments for facilitating competition in a “molecule market” (a product market defined by the active ingredient of a prescription drug) against the brand name manufacturer’s arguments about innovation and compelled support of potential competitors.
As we reported earlier, the jury in In re: Nexium found that AstraZeneca had violated the antitrust laws by acting to keep generics off the market but that no generic would have been introduced earlier in the market even without the violation. Thus, the jury found that the plaintiffs were not entitled to relief.
Following the S.D.N.Y.’s award to the New York State Attorney General of an injunction requiring Actavis to continue distributing the immediate-release tablet version of its dementia drug, Namenda, the Second Circuit Court of Appeals has denied Actavis’ request for a stay of the injunction pending appeal.
As reported previously, the first post-Actavis jury verdict in a “reverse payment” antitrust case handed a win to the defendants. Now, plaintiffs in In re: Nexium (Esomeprazole) Antitrust Litigation have moved for a new trial, arguing that the Massachusetts federal district court committed error in formulating the jury charge and in excluding some of plaintiffs’ evidence.
The Federal Trade Commission staff recently issued a report detailing the number of “potential pay-for-delay settlements” that took place in fiscal year 2013. The FTC is a staunch opponent of so-called “pay-for-delay”—also known as “reverse payment”—settlements.
Last week, we briefly reported on the injunction granted by the U.S. District Court for the Southern District of New York in the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC. On Monday, the court held a hearing on the injunction and released a copy of its decision (portions of which are redacted from public view).
In July of this year, the European Commission imposed fines on French pharmaceutical company Servier and five generic drug makers, including Lupin Ltd., totaling €427.7 million. The fines were the result of a five-year investigation into alleged anticompetitive agreements that prevented generic versions of perindopril, Servier’s best-selling blood pressure medication, from entering the market.
Yesterday, Judge Robert Sweet granted the New York Attorney General’s request to block Actavis and its New York-based subsidiary Forest Laboratories LLC from pulling Namenda, a dementia drug commonly used to treat Alzheimer’s, off the market. In this “product hopping” case brought in the Southern District of New York, the Attorney General has alleged that the defendants are attempting to force prescribers and patients to switch to a new extended-release version of Namenda before a generic version of the drug can be introduced into the market.
District Court Allows Monopolization Claims to Move Forward on Allegations of Direct Evidence of Monopoly Power
Traditionally, plaintiffs asserting claims under Sections 1 and 2 of the Sherman Act allege the existence of one or more product markets relevant to the defendants’ anticompetitive conduct and the defendants’ shares of those markets in order to state a plausible claim of defendants’ market power and/or monopoly power in a product market. But plaintiffs can also convince courts they can proceed to trial by alleging “direct evidence” of defendants’ market power.
After six weeks of trial and two days of deliberation, the jury has returned its verdict in favor of the defendants in In re: Nexium. This trial began as a challenge to the allegedly anticompetitive effects of the settlements of prior patent infringement litigations between AstraZeneca and Teva and between AstraZeneca and Ranbaxy concerning AstraZeneca’s Nexium.
Court Allows “Product Hopping” Claims to Proceed in Suboxone Litigation Based on Allegations of Removal of Prior Formulation and Disparagement of Generic Competition
We’ve previously discussed antitrust claims related to “product hopping”—allegations that pharmaceutical manufacturers have reformulated or otherwise altered their products to prevent automatic generic substitution. Earlier this week, the district court for the Eastern District of Pennsylvania in In re Suboxone Antitrust Litigation denied a motion to dismiss similar allegations regarding the drug Suboxone, which is used to treat opioid dependence.
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