United Ass'n of Plumbers & Pipefitters Local 322 v. Mallinckrodt Ard, LLC

UNITED ASSOCIATION OF PLUMBERS & PIPEFITTERS LOCAL 322 OF SOUTHERN NEW JERSEY,individually and on behalf of all others similarly situated, Plaintiff, v. MALLINCKRODT ARD, LLC, et al., Defendants.

Civil No. 20-188 (RBK/KMW)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CAMDEN VICINAGE

August 18, 2020

NOT FOR PUBLICATION

OPINION

KUGLER, United States District Judge:

This case concerns allegations of a long running conspiracy to dramatically inflate the price of a venerable drug, H.P. Acthar Gel ("Acthar"). Presently before the Court are a number of motions: Plaintiff United Association of Plumbers & Pipefitters Local 322 of Southern New Jersey's ("Local 322") Motion to Transfer Case to the Eastern District of Pennsylvania (Doc. No. 12); Defendants Mallinckrodt ARD, LLC and Mallinckrodt plc's (collectively, "Mallinckrodt") Motion to Stay Proceedings (Doc. No. 16); Defendants Accredo Health Group, Inc., Cigna Corporation, CuraScript SD, CuraScript, Inc., Cigna Holding Company, Express Scripts Holding Company, Express Scripts, Inc., Priority Healthcare Corp. and Priority Healthcare Distribution, Inc., and United Biosource Corporation's (collectively, "Express Scripts") Motion to Dismiss (Doc. No. 18); Mallinckrodt's Motion to Dismiss (Doc. No. 19); Defendant Lisa Pratta's Motion to Dismiss (Doc. No. 25); Mallinckrodt and Express Scripts' Joint Motion to Strike (Doc. No. 41); Pratta's Motion to Strike (Doc. No. 43); Mallinckrodt's Motion to Dismiss Plaintiff's Amended Complaint (Doc. No. 49); Express Scripts' Motion to Dismiss Plaintiff's Amended Complaint (Doc. No. 50); and Pratta's Motion to Dismiss Plaintiff's Amended Complaint (Doc. No. 55).

For the reasons set forth below, Plaintiff's Motion to Transfer is DENIED; Mallinckrodt's Motion to Stay is DENIED; Mallinckrodt, Express Scripts, and Pratta's Motions to Dismiss are DENIED as moot; the Motions to Strike are DENIED; Mallinckrodt's Motion to Dismiss the Amended Complaint is GRANTED IN PART and DENIED IN PART; and Express Scripts and Pratta's Motions to Dismiss are GRANTED.

I. BACKGROUND¹

A. The Parties

Plaintiff is a Taft-Hartley union fund providing health and welfare benefits to its members and their families. (FAC at ¶ 27). As such, Plaintiff is a "third-party payor" or "TPP" in health care industry parlance. This lawsuit arises from Plaintiff's 2018 payment of $26,100.28 for one administration of Acthar on behalf of one of its beneficiaries. (Id. at ¶¶ 27-29, 239).

Acthar is the only therapeutic adrenocorticotropic hormone ("ACTH") product sold in the United States. (Id. ¶¶ 3, 64). Mallinckrodt ARD, LLC is the sole manufacturer of Acthar in the United States. (Id. at ¶ 3). Since August 2014, Mallinckrodt ARD, LLC has been a wholly-owned subsidiary of Mallinckrodt plc. (Id. ¶ 31-33). Prior to its acquisition by Mallinckrodt plc, Mallinckrodt ARD, LLC was known as Questcor Pharmaceuticals, Inc. (Id. at ¶ 30). For simplicity, throughout this Opinion the Court will refer to this entity as "Mallinckrodt," even when discussing the time period when it was known as Questcor Pharmaceuticals, Inc.

Unlike most prescription drugs, Acthar is a "specialty pharmaceutical," meaning that it is not sold in retail pharmacies, but only distributed through "specialty pharmacy distributors" and "specialty pharmacy providers." (Id. at ¶ 5). CuraScript, Inc. and its affiliates CuraScript SD and Priority Healthcare Corp. and Priority Healthcare Distribution, Inc. (collectively, "CuraScript") is the specialty pharmacy distributor for Acthar. (Id. at ¶¶ 6, 44-46). Accredo Health Group, Inc. ("Accredo") is the specialty pharmacy provider for Acthar. (Id. ¶¶ 6, 49). Accredo reviewed and approved the administration of Acthar that Plaintiff paid for, and CuraScript delivered that administration of Acthar to Plaintiff's beneficiary. (Id. at ¶¶ 48, 51).

CuraScript and Accredo are wholly-owned subsidiaries of Express Scripts, Inc. (Id. at ¶¶ 45, 49). As of December 2018, Express Scripts, Inc. is a wholly-owned subsidiary of Cigna Corporation and Cigna Holding Company. (Id. at ¶ 42).

United BioSource Corporation ("UBC") coordinates Acthar sales, distribution, and payment between Mallinckrodt, Express Scripts, patients, physicians, and TPPs. (Id. at ¶¶ 52-55). UBC processed the paperwork submitted by Plaintiff to obtain the Acthar dose for its beneficiary. (Id. at ¶ 56). Between 2012 and November 2017, UBC was a wholly owned subsidiary of Express Scripts. (Id. at ¶ 52). In November 2017, UBC was sold to Avista Capital Partners, a private equity firm; presently, UBC is a wholly owned subsidiary of United BioSource Holdings, Inc., which is held by various entities affiliated with Avista Capital Partners. (Id. at ¶ 53).

Lisa Pratta was an Acthar sales representative for Questcor and Mallinckrodt from September 2010 until June 2017. (Id. at ¶¶ 59, 401). Pratta was in charge of the South New Jersey region. (Id. ¶ 410).

B. Acthar

As an ACTH drug, Acthar causes the body to produce cortisone and other steroid hormones. (FAC at ¶ 64). ACTH triggers the adrenal glands to make cortisol, which is equivalent to the steroid prednisone. (Id. at ¶ 66). Consequently, taking ACTH effectively replicates the effects of taking prednisone. (Id.). Acthar is known generically as corticotropin. (Id. at ¶ 102).

Acthar was developed by the Armour Pharmaceutical Company and in 1952 was initially approved by the Food and Drug Administration ("FDA") for over fifty indications. (Id. at ¶¶ 63-65). However, after an FDA review in the 1970s concluded that many of Acthar's indications lacked substantial evidence of effectiveness, Acthar was left with only nineteen approved indications. (Id. at ¶¶ 109-112). Today, Acthar's approved indications include the treatment of infantile spasms ("IS"), the acute exacerbations of Multiple Sclerosis ("MS"), and "[a]s adjunctive therapy for short term administrations . . . in the following Rheumatic Disorders: Psoriatic arthritis, Rheumatoid arthritis, including juvenile arthritis . . . [and] Ankylosing spondylitis." (Id. at ¶ 120). Many of these indications can be effectively treated by generic corticosteroids, such as prednisone, which are widely available for little more than $4 per dose. (Id. at ¶¶ 114-15, 122-34).

By contrast, Acthar does not face competition from these generics in the market for treating IS. (Id. at ¶ 114). Indeed, Acthar is the "gold standard" treatment for IS. (Id. at ¶ 140). However, the IS treatment market is limited, as the condition affects less than 2,000 children per year. (Id.).

C. The New Strategy

In 2001, Mallinckrodt acquired Acthar from Aventis Pharmaceutical Products, Inc. for $100,000. (Id. at ¶ 138). At the time of Mallinckrodt's acquisition, a vial of Acthar sold for $40. (Id. at ¶ 114). Further, Acthar was not approved for treating IS; the FDA would not approve this indication until 2010. (Id. at ¶ 140). Nevertheless, between 2001 and 2007, Acthar's primary sales were for treating IS as an off-label indication. (Id. at ¶ 141).

Plaintiff alleges that in 2007, Mallinckrodt launched an "orphan drug strategy" designed to leverage its market power in the IS treatment market. (Id. at 174). Under this plan, Mallinckrodt would attempt to make it appear as though Acthar was a new product by "relaunching" it with a limited distribution system and a substantially higher price, emphasizing that it was the only product available for treating IS. (Id. at ¶ 174). Plaintiff alleges that this plan had three distinct elements: (1) a "distribution scheme," by which Mallinckrodt made Express Scripts the sole distributor of Acthar; (2) a "pricing scheme," by which Mallinckrodt dramatically inflated the price of Acthar; and (3) a "marketing scheme" by which Mallinckrodt and Express Scripts disseminated misleading information about the safety and efficacy of Acthar in order to maintain and even grow demand despite the price increases.

i. The "Distribution Scheme"

Prior to Mallinckrodt's acquisition, Acthar was distributed to any doctor, hospital, wholesaler, or specialty pharmacy who requested the drug. (Id. at ¶ 152). However, on July 2, 2007, Mallinckrodt restricted distribution of Acthar to Express Scripts. (Id. at ¶ 153). Specifically, Mallinckrodt entered into an exclusive distribution agreement with CuraScript. (Id. at ¶¶ 44-46, 163). Mallinckrodt also entered into an agreement with UBC whereby UBC would coordinate the sale, distribution, and reimbursement for Acthar. (Id. at ¶¶ 154, 163).

With the CuraScript and UBC agreements in place, Mallinckrodt implemented a new distribution program known as the "Acthar Support & Access Program" ("ASAP"). (Id. at ¶ 180). Under the ASAP, the only way for a patient or physician to obtain Acthar is by completing an Acthar Start Form and faxing it to UBC. (Id. at ¶ 184). Upon receipt of this form, UBC confirms the prescription by the provider and the associated specialty pharmacy and confirms the patient's insurance. (Id. at ¶ 185). If everything checks out, UBC arranges for CuraScript to deliver theActhar directly to the patient. (Id.). UBC also receives payment from the patient and/or their TPP and then distributes payment to Mallinckrodt. (Id. at ¶ 189). Mallinckrodt maintains all rights, title, and interest in the Acthar until UBC approves delivery to the patient. (Id. at ¶ 191).

ii. The "Pricing Scheme"

Upon its acquisition of Acthar, Mallinckrodt moved quickly to increase the price, and by September 2001 the average wholesale price ("AWP") was $935.20. (Id. at ¶ 209).² By 2007, the AWP had grown to $2,062.79. (Id. at ¶ 211). After Mallinckrodt implemented the new strategy in August 2007, Acthar's AWP increased dramatically to $29,086.25—a 1,310% increase in the span of a month. (Id. at ¶ 214). Once Mallinckrodt obtained FDA approval for the IS indication in 2010, it increased the AWP of Acthar again, such that by 2012 the AWP was $34,150.00. (Id. at ¶ 215). Plaintiff alleges that CuraScript and UBC conspired...