MSP Recovery Claims, Series LLC v. Abbott Labs., Abbott Diabetes Care, Inc.

MSP RECOVERY CLAIMS, SERIES LLCand MSPA CLAIMS 1, LLC, Plaintiffs, v. ABBOTT LABORATORIES, ABBOTT DIABETES CARE, INC.,ABBOTT DIABETES CARE SALES CORP., BAYER HEALTHCARE, LLC,ASCENSIA DIABETES CARE U.S. INC., LIFESCAN, INC.,JOHNSON & JOHNSON, and ROCHE DIAGNOSITCS CORP., Defendants.

Civil Action No. 19-21607 (FLW) (ZNQ)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

May 28, 2021

*NOT FOR PUBLICATION*

OPINION

WOLFSON, Chief Judge:

Plaintiffs MSP Recovery Claims, Series, LLC ("MSP Recovery") and MSPA Claims 1, LLC ("MSPA Claims") (together, "Plaintiffs") have filed a Complaint against Defendants Abbott Laboratories ("Abbott Labs"), Abbott Diabetes Care, Inc. ("Abbott Diabetes"), Abbott Diabetes Care Sales Corporation ("Abbott Diabetes Sales"), Bayer Healthcare LLC ("Bayer Healthcare"), Ascensia Diabetes Care US, Inc. ("Ascensia"), Lifescan, Inc. ("Lifescan"), Johnson & Johnson, and Roche Diagnostics Corporation ("Roche") (together, "Defendants"), alleging that Defendants, which develop, manufacture, market, and sell blood glucose testing equipment, violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c), and various state consumer protection laws. Plaintiffs further assert state common law fraud and unjust enrichment claims against Defendants.¹ Before the Court is a Motion to Dismiss filed jointly by Defendants pursuant to Federal Rule of Civil Procedure 12(b)(6).

For the reasons stated herein, Defendants' Motion is GRANTED IN PART and DENIED IN PART. Specifically, Plaintiffs' RICO claims (Counts X to XII), and their claims under the Arizona Consumer Fraud Act, West Virginia Consumer Credit and Protection Act, and Wisconsin Deceptive Trade Practices Act are DISMISSED WITH PREJUDICE; and Plaintiffs' claims under the Hawaii Unfair or Deceptive Acts and Practices Act and New York General Business Law are DIMISSED WITHOUT PREJUDICE. Plaintiffs' common law fraud and unjust enrichment claims under New Jersey and Indiana law are DISMISSED as withdrawn. Defendants' Motion to Dismiss is DENIED with respect to the common law fraud and unjust enrichment claims under Illinois and Pennsylvania law, and the claims pursuant to the Arkansas Deceptive Trade Practices Act, Connecticut Unfair Practices Act, Delaware Consumer Fraud Act, Delaware Uniform Deceptive Trade Practices Act, Florida Deceptive and Unfair Trade Practices Act, Idaho Consumer Protection Act, Indiana Deceptive Consumer Sales Act, Massachusetts Regulation of Business Practice & Consumer Protection Act, Michigan Consumer Protection Act, Minnesota Private Attorney General Statute & Consumer Fraud Act, Minnesota Uniform Deceptive Trade Practices Act, Nebraska Consumer Protection Act, Nevada Deceptive Trade Practices Act, New Hampshire Consumer Protection Act, New Mexico Unfair Trade Practices Act, North Dakota Unlawful Sales or Advertising Practices Law, Ohio Deceptive Trade Practices Act, Pennsylvania Unfair Trade and Consumer Protection Law, South Carolina Unfair Trade PracticesAct, Tennessee Consumer Protection Act, and Virginia Consumer Protection Act of 1977.

I. BACKGROUND

A. The Parties

MSP Recovery is a Delaware limited liability company with a principal place of business in Coral Gables, Florida, the members of which are citizens of Florida and Texas. (Compl. ¶ 10.) MSP Claims is a Florida limited liability company, also with a principal place of business in Coral Gables, Florida. (Id. ¶ 11.) The members of MSP Claims are citizens of Florida. (Id.) Plaintiffs have been assigned recovery rights by numerous third-party payors, including Medicare Advantage Plans ("MA Plans"), Medicare Advantage organizations, health maintenance organizations, management service organizations, and other first-tier and downstream entities across the United States (collectively, "Plaintiffs' Assignors"). (Id. ¶ 12.) Plaintiffs' Assignors administer Medicare benefits for Medicare enrollees under Medicare Part C and Part D. (Id. ¶ 25.)

Abbott Labs is an Illinois corporation with a principal place of business in Illinois. (Id. ¶ 13.) Abbott Labs manufactures and markets healthcare products, including the Freestyle brand of diabetes test strips (which includes the Lite, InsuLinx, and Precision Neo varieties). (Id. ¶ 13.) Abbott Diabetes is a Delaware Corporation with a principal place of business in Illinois. (Id. ¶ 14.) Abbott Diabetes is a wholly owned subsidiary of Abbott Labs, and develops and sells glucose monitoring systems, including test strips. (Id.) Abbott Diabetes Sales is also a wholly owned subsidiary of Abbott Labs and is a Delaware corporation with a principal place of business in Illinois. (Id. ¶ 15.) Abbott Diabetes Sales markets and sells glucose monitoring systems, including test strips. (Id.)²

Bayer Healthcare is a Delaware limited liability company with a Pennsylvania principal place of business whose members are citizens of Delaware, New Jersey, Pennsylvania, Germany and the Netherlands. (Id. ¶ 17.) Bayer Healthcare produced test strips under the names Contour, Contour Next, and Breeze2, until Bayer Diabetes Care was acquired by Panasonic Healthcare Holdings in 2016. (Id.) Ascencia is a Delaware corporation with a principal place of business in New Jersey. (Id. ¶ 18.) Ascencia was established in 2016 through the acquisition of Bayer Diabetes Care by Panasonic Healthcare Holdings and currently produces Contour, Contour Next, and Breeze2 test strips. (Id.)³

Johnson & Johnson is a New Jersey corporation with a principal place of business in New Jersey. (Id. ¶ 20.) Johnson & Johnson manufactures and markets healthcare products, such as the OneTouch brand of test strips, which includes the Ultra and Verio varieties. (Id.) Lifescan is a California corporation with a principal place of business in Pennsylvania. (Id. ¶ 21.) Lifescan is a wholly owned subsidiary of Johnson & Johnson that develops and sells blood glucose monitoring systems, including test strips. (Id.)

Roche is an Indiana corporation with a principal place of business in Indiana. (Id. ¶ 23.) Roche manufactures the Accu-Check brand of test strips, including the Guide, Aviva, Aviva Plus, Compact, SmartView, Performa, and Active varieties. (Id.)

B. Diabetes & Glucose Test Strips

Diabetes is a disease that causes elevated blood glucose levels and can be severely debilitating or fatal if left untreated. (Compl. ¶¶ 34-35.) Diabetics either do not make enough insulin, a hormone made by the pancreas that enables glucose to be absorbed into cells and converted into energy, or do not use insulin well, resulting in glucose not being absorbed by thecells. (Id. ¶ 34.) Diabetes affects nearly 30 million Americans, approximately 10% of the population. (Id. ¶ 1.)

Self-monitoring of blood glucose is core component of managing the disease. (Id. ¶ 36.) In order to avoid episodes of high blood sugar ("hyperglycemia") and low blood sugar ("hypoglycemia"), diabetics must monitor their blood glucose concentration several times daily to properly manage their diet and insulin needs. (Id.) Defendants manufacture blood glucose test strips and testing meters. (Id. ¶¶ 1-3.) Glucose meters, like those manufactured by Defendants, are used to self-monitor blood glucose levels. (Id. ¶ 38.) Users place a small drop of blood on a one-time-use test strip that measures blood glucose concentration. (Id.) The meter interprets the result and displays it numerically. (Id.) Glucose meters are often sold for a nominal amount or given to patients for free. (Id. ¶ 102.) However, to use the glucose meter patients must use compatible test strips from the meter manufacturer. (Id.) Test strips can cost one dollar or more per strip. (Id.) Plaintiffs allege that the high price of test strips is not due to production expenses or significant product development, but rather it is the result of rebates and reimbursements paid to pharmaceutical benefit managers ("PBMs"). (Id.¶ 103-04.)

C. Medicare

Medicare enrollees have two options for obtaining Part D prescription drug coverage: (1) through a MA Plan that offers Part C benefits as well as prescription coverage; or (2) through a separate Medicare Prescription Drug Plan. (Id. ¶ 42.) MA Plans that offer Part C benefits generally include prescription drug benefits. (Id. ¶ 43.) Plans that provide Part D coverage must provide qualified prescription drug coverage which includes "standard prescription drug coverage" or "alternative prescription drug coverage" with at least actuarially equivalent benefits. (Id. ¶ 44.) Part D has different stages of cost sharing until an enrollee reaches a set limit on out-of-pocketcosts for the year. For example, the limit on out-of-pocket costs for the year 2019, when the Complaint was filed, was $5,100. (Id. ¶ 45.) After the out-of-pocket limit is reached, the MA Plan pays most of the costs for pharmaceutical products for the remainder of the year. (Id.)

MA Plans may require that a deductible be met prior to paying for pharmaceutical products coverage. (Id. ¶ 46.) In 2019, the maximum deductible an enrollee could be charged was $ 415. (Id.) During the deductible stage, the enrollee pays all costs for his or her prescriptions. (Id.) Once the deductible is met, the initial coverage period begins. (Id. ¶ 47.) During this period, the enrollee pays a portion of the pharmacy benefit product's cost and the MA Plan pays the remainder. (Id.) The amount paid by the enrollee will either be a copayment or coinsurance. (Id.) A copayment is a set amount for all pharmaceutical products based on what tier the pharmacy benefit product falls into on the MA Plan's formulary, and the coinsurance requires an enrollee to pay a percentage of the cost of the pharmacy benefit product. (Id.)

Most Part D plans have a coverage gap known as the "Donut Hole" wherein there is a temporary limit on what the Part D plan will cover. (Id. ¶ 48.) The coverage gap begins after the enrollee and the MA Plan have paid a certain amount for covered pharmaceutical products. (Id.)...