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.”

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.

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.

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. 

The trial over Aetna and Humana's $37 billion proposed merger kicked off today in a Washington, D.C. federal court. 
 

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 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.

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.  

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.

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.

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.

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. 

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.

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.

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.

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).  

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.

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.

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 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.  

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. 

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. 

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.

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.  

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.