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Motions to Dismiss Filed in Alleged Insulin Price Fixing, RICO Conspiracy

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On Wednesday in the District of New Jersey, two motions to dismiss were filed by groups of defendants — pharmacy benefit managers (PBM defendants) and manufacturer defendants — in a suit brought by FWK Holdings LLC and Professional Drug Company Inc. that alleged a kickback and price-fixing scheme involving insulin drugs.

The plaintiffs claimed that beginning in 2009, the PBM defendants — CVS Health Corporation, CaremarkPCS Health LLC, Caremark LLC, Caremark Rx LLC, Express Scripts Holding Company, Express Scripts Inc., Medco Health Solutions Inc., UnitedHealth Group Inc., United Healthcare Services Inc., Optum Inc., OptumRx Holdings LLC, and OptumRx Inc. — solicited kickbacks from the manufacturer defendants — Eli Lilly and Company, Sanofi-Aventis U.S. LLC, and Novo Nordisk Inc. — who paid them “to induce the PBMs to include the Insulin Drugs on health benefit providers’ ‘formularies’ controlled by the PBMs — formularies that determine whether and to what extent the nation’s health benefit providers pay for their insureds to receive life sustaining insulins,” particularly Levemir, NovoLog, Lantus, and Humalog.

Then, the plaintiffs alleged, the defendants as a whole “combined or conspired to fix, maintain and stabilize the price of the Insulin Drugs at supra-competitive levels,” in violation of the Sherman Act, by “publishing artificially increased prices and systematically making false representations through the U.S. mail and interstate wires that the operation of the formulary system (controlled by the PBM Defendants) and the pricing mechanism for the Insulin Drugs used by the Manufacturer Defendants operated to reduce the cost of analog insulin to purchasers. In reality, however, Defendants were systematically acting to increase prices of the Insulin Drugs by engaging in kickback and price-fixing schemes,” in violation of the Racketeer Influenced and Corrupt Organization (RICO) Act. Both the PBM and manufacturer defendants move to dismiss their respective allegations for numerous reasons. 

According to the PBM defendants’ motion, the PBMs are “barely mention(ed)” in the price-fixing argument, so they are left to “guess about their role” in the alleged conspiracy, and “(i)n any antitrust case, courts must ensure that a plaintiff alleges ‘who was in agreement with whom’ and ‘about what.’” Additionally, the PBMs argue that the plaintiffs do not sufficiently allege a buyer-seller relationship between the PBMs and manufacturers, which is necessary for stating a claim under the Robinson-Patman Act, among making other arguments that the plaintiffs’ claims are not sufficiently pleaded.

The manufacturer defendants, regarding the RICO claims, argued that the plaintiffs predicated RICO liability on anti-kickback statute violations, which do not stand because the alleged injury is not “‘substantially caused by the defendants’ alleged violations.’ … As private corporations, Plaintiffs lack standing to assert an AKS claim because that statute protects the federal government. … Because Plaintiffs are neither a federal health care program nor a person who uses such a program, they were not the direct victims of the alleged AKS violations and lack standing to pursue a RICO claim on that basis.” The manufacturer defendants further argued that the plaintiffs have not appropriately alleged that they had a part in directing the racketeering enterprise in that the plaintiffs fail to show how “‘the payment of the kickbacks could possibly’ amount to directing the affairs of an enterprise when ‘(d)efendants made the payments in order to protect their own respective businesses, not to serve an enterprise’” — nor do they argue that such an enterprise exists in which both groups of defendants have participated: “Indeed, this claim is contradicted by Plaintiffs’ own (conclusory) allegations that each Manufacturer and PBM formed separate, bilateral enterprises.”

The plaintiffs are represented by Faruqi & Faruqi and Berger Montague. The PBM defendants are represented by O’Toole Scrivo LLC, Alston & Bird LLP, Marino, Tortorella & Boyle PC, and Williams & Connolly LLP. The manufacturer defendants are represented by Reed Smith LLP, Covington & Burling LLP, Walsh Pizzi O’Reilly Falanga LLP, Jones Day, Gibbons PC, and Davis Polk & Wardwell LLP.

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