In re Remicade Antitrust Litig.

345 F.Supp.3d 566

IN RE REMICADE ANTITRUST LITIGATION

This Document Relates To:

Indirect Purchaser Actions (Consolidated)

Direct Purchaser Actions

CIVIL ACTION No. 17-cv-04326

No. 18-cv-00303

United States District Court, E.D. Pennsylvania.

Signed December 4, 2018

Filed December 7, 2018

MEMORANDUM

Joyner, District Judge

Before the Court are Defendants' Johnson & Johnson and Janssen Biotech, Inc. (collectively "Janssen") ("J & J") Motion to Dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6) (Doc. No. 67-1), Indirect and Direct Purchaser Plaintiffs' Joint Opposition thereto (Doc. No. 73), and Defendants' Reply in Support thereof (Doc. No. 75).

I. Background

This case arises from an antitrust action brought by Direct and Indirect Purchasers of Defendants' drug Remicade, against Johnson & Johnson, along with its wholly owned subsidiary, Janssen Biotech, Inc. (collectively, "J & J"), alleging artificially inflated prices and monopolization of the pharmaceutical market for biologic infliximab drugs. The Direct and Indirect Purchasers' principle claim is that J & J undertook an anticompetitive scheme, consisting of exclusive agreements and coercive bundled rebates, to foreclose competition posed by biosimilar versions of Remicade, specifically Pfizer's Inflectra and Merck's Renflexis. The scheme allegedly caused providers and insurers to pay overcharges for infliximab products that they would not have paid absent J & J's anticompetitive conduct.

Under consideration is J & J's Motion to Dismiss the Indirect Purchasers' Consolidated Amended Complaint and to Dismiss the Amended Direct Purchaser Class Action Complaint for failure to state a claim under Fed. R. Civ. P. 12(b)(6) (Doc. No. 67-1). This Motion is fully briefed and ripe for the Court's adjudication. The Court has considered the parties' submissions and decides this matter without oral argument. Fed. R. Civ. P. 78 ; Loc. R. Civ. P. 7.1(f).

II. Alleged Facts

This case arises from essentially the same facts that have been described in detail in this Court's related decision denying Defendants J & J's motion to dismiss Pfizer's complaint alleging federal antitrust violations. Pfizer Inc. v. Johnson & Johnson, 333 F.Supp.3d 494 (E.D. Pa. 2018) ; Doc. No. 58). For the purposes of considering Defendants' motion, we will summarize facts relevant to Indirect and Direct Purchaser Plaintiffs' claims.¹

The medications at the center of this litigation are biologic infliximab products, used as treatment for maintaining chronic auto-immune inflammatory conditions. Dir. AC ¶ 2, ¶ 41. Infliximab products cannot be taken orally and are only administered intravenously, generally by an in-office health care provider. Id. at ¶ 5. J & J's drug Remicade was the first biologic infliximab to enter the market in 1998. Ind. CAC ¶ 21. In 2009, Congress enacted the Biologic Price Competition and Innovation Act (BPCIA), an analog to the shortcut for FDA approval that the Hatch-Waxman amendments provide for chemically synthesized medications. Dir. AC ¶ 8-9. To attain approval as a "biosimilar" under the BPCIA, a manufacturer must demonstrate that "there are no clinically meaningful differences between the biological product and the reference product in terms of safety, purity and potency." Ind. CAC ¶ 38. Once J & J's patent on Remicade expired in 2016, the FDA approved three other medications including Pfizer's Inflectra and Merck's Renflexis. Dir. AC ¶ 16-19, Ind. CAC ¶ 4. Competition from the introduction of biosimilars into the infliximab market was expected to lower prices for potentially lifesaving biologic medications that otherwise might have been unaffordable for some patients.² Dir. AC ¶ 14, ¶ 20.

The Direct and Indirect Purchaser Plaintiffs argue that insurance coverage is key to biologic infusion products like infliximab because treatment is so expensive that most patients will not be able to pay out of pocket. Id. at ¶ 54. Therefore, infliximab products are either reimbursed by insurance companies, or they are paid for by health care providers who administer the drug through a "buy and bill" system where they pay upfront for the drug then bill an insurer or third-party payor for reimbursement. Id. at ¶ 57. Plaintiffs argue that this system incentivizes providers to choose a biologic that is "widely covered by insurance" to avoid the risk that their reimbursement claim could be denied. Id. at ¶ 58, ¶ 60.

Defendants' Biosimilar Readiness Plan

1. Exclusive agreements

Plaintiffs allege that Defendants' exclusive contracts with insurers block biosimilar competition in more than one way. Ind. CAC ¶ 47, 48. Some contracts require insurers to deny coverage for biosimilars altogether. Other contractual preconditions effectively preclude biosimilar competition. For example, the "fail first" exception, under which providers cannot choose a biosimilar unless a patient has first failed to respond to treatment with Remicade. Dir. AC ¶ 23.

2. Bundled rebates

J & J allegedly uses bundled rebates as leverage over insurers by threatening a rebate penalty in "many millions of dollar[s] annually" if insurers do not enter contracts that foreclose them from reimbursing competitor biosimilars. Dir. AC ¶ 76. First, J & J engages in multi-product bundling, linking rebates for Remicade to other J & J drugs and medical devices that their competitors do not offer. Through this "portfolio approach," "insurers and providers that refuse to grant exclusivity to Remicade would be forced to pay higher prices or forego enhanced rebates on multiple J & J products." Id. at ¶ 84.

Second, J & J also bundles demand from "contestable" patients (new users of infliximab or those who have switched to a biosimilar product) and "incontestable" patients (those "already controlling their chronic conditions with Remicade are less likely to switch to a lower-priced biosimilar."). Id. at ¶ 77. J & J's contracts threaten to deny rebates "on allRemicade prescriptions if anyinfliximab biosimilar prescriptions are reimbursed." Id. at ¶ 79. Plaintiffs call this the "rebate trap." Id. at ¶ 80, ¶ 139.

3. Anticompetitive Effects

Pricing data, insurance coverage, and overpayment are among the anticompetitive effects of Defendants' plan. Although Pfizer's Inflectra and Merck's Renflexis entered the market with WAC's (Wholesale Acquisition Cost or list price) at up to a 35% discount to Remicade, Remicade's WAC has increased since Pfizer and Renflexis entered the market in 2016 and 2017. Notably, J & J "still has over a 90% market share." Id. at ¶ 102.

Additionally, Plaintiffs show evidence that "between 2007 and 2017, Remicade's Average Sales Price ("ASP") increased more than 62 percent. Despite Remicade's price hikes, unit sales of Remicade have actually grown 15 percent...from 2012 to 2016." Ind. CAC. ¶ 109. Providers, seeking to avoid rebate penalties, allegedly choose not to stock Inflectra even when it is covered by Medicare and other government programs, id. at ¶ 105, shifting costs to the government, which is "forced to continue reimbursing for Remicade, the more expensive product." Id. Both Direct and Indirect Purchaser Plaintiffs allege they have paid artificially inflated prices that are "substantially greater than the prices they would have paid absent the unlawful conduct alleged." Id. at ¶ 146; Ind. CAC ¶¶ 131-132, 137.

III. Legal Standard

Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, Plaintiffs are required only to plead "a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the claim is and the grounds upon which it rests, and ... this standard does not require detailed factual allegations." Phillips v. Cty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). To survive a motion to dismiss, a complaint "must ‘state a claim for relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). We must accept well-pleaded allegations in the complaints as true and construe them in the light most favorable to Plaintiffs, drawing all reasonable inferences in Plaintiffs' favor.

Hartig Drug Co. Inc. v. Senju Pharm. Co., 836 F.3d 261, 268 (3d Cir. 2016) ; Santiago v. Warminster Twp., 629 F.3d 121, 128 (3d Cir. 2010). " ‘Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice’ " to defeat a Rule 12(b)(6) motion to dismiss. UniStrip Technologies, LLC v. LifeScan, Inc. 153 F.Supp.3d 728, 735-6 (E.D. Pa. 2015) (quoting Iqbal, 556 U.S. at 663, 129 S.Ct. 1937 ).

The plausibility standard "calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of [the claim]." Twombly, 550 U.S. at 556, 127 S.Ct. 1955. We also consider Plaintiffs' allegations "about [Defendants'] anti-competitive conduct as a whole, and [our] legal analysis must not ‘tightly compartmentaliz[e] the various factual components’ of [Plaintiffs'] allegations, ‘wiping the slate clean after scrutiny of each.’ " In re Thalomid and Revlimid Antitrust Litig., No. 14-6997 (KSH)(CLW), 2015 WL 9589217, at *16 (D.N.J. Oct. 29, 2015). "Antitrust complaints, in particular, are to be liberally construed at this stage of the proceeding," id. because "inherent in such an action is the fact that all details and specific facts relied upon cannot properly be set forth as part of the pleadings." In re Neurontin Antitrust Litig., No. 1479, 2009 WL 2751029 at *7, 2009 U.S. Dist. LEXIS 77475 at *36 (D.N.J. Aug. 27, 2009) (citing Lucas Indus. v. Kendiesel, Inc., No. 93-4480, 1995 WL 350050, at *2, 1995 U.S. Dist. LEXIS 7979 (D.N.J. June 9, 1995) ).

IV. Discussion

1. Direct and Indirect Purchaser Plaintiffs' Joint Sherman Antitrust Act Claims

Plaintiffs have asserted claims under Section 1 and 2 of the Sherman Act and Section 3 of the Clayton Act.³ Ind. ¶¶ 138-144, ¶¶ 147...