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`IN THE DISTRICT COURT
`FOR THE DISTRICT OF NEW JERSEY
`
`
`Case No. 3:20-cv-3426-BRM-LHG
`
`
`Document Filed Electronically
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`ORAL ARGUMENT REQUESTED
`
`Motion return date: May 3, 2021
`
`
`IN RE: DIRECT PURCHASER
`INSULIN PRICING LITIGATION
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`PHARMACY BENEFIT MANAGER DEFENDANTS’ BRIEF
`SUPPORTING THEIR RULE 12(b)(6) MOTIONS TO DISMISS THE
`FIRST AMENDED CLASS ACTION COMPLAINT
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`(Counsel Listed on Next Page)
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`Case 3:20-cv-03426-BRM-LHG Document 131-1 Filed 01/13/21 Page 2 of 54 PageID: 1402
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`Thomas P. Scrivo
`O’TOOLE SCRIVO, LLC
`14 Village Park Road
`Cedar Grove, NJ 07009
`T: (973) 239-5700
`tscrivo@oslaw.com
`
`Brian D. Boone (pro hac vice)
`ALSTON & BIRD LLP
`101 S. Tyron St., Ste. 4000
`Charlotte, NC 28280
`T: (704) 444-1000
`brian.boone@alston.com
`
`John M. Snyder (pro hac vice)
`ALSTON & BIRD LLP
`950 F. Street, NW
`Washington, D.C. 20004
`T: (202) 239-3300
`john.snyder@alston.com
`
`D. Andrew Hatchett (pro hac vice)
`ALSTON & BIRD LLP
`1201 W. Peachtree St. NW, Ste. 4900
`Atlanta, GA 30309
`T: (404) 881-7000
`andrew.hatchett@alston.com
`
`Attorneys for Defendants OptumRx, Inc., Optum, Inc., OptumRx Holdings, LLC,
`United Healthcare Services, Inc., and UnitedHealth Group
`
`
`Enu A. Mainigi (pro hac vice)
`Daniel M. Dockery (pro hac vice)
`WILLIAMS & CONNOLLY LLP
`725 Twelfth Street, N.W.
`Washington, D.C. 20005
`T: (202) 434-5000
`F: (202) 434-5029
`emainigi@wc.com
`ddockery@wc.com
`
`
`Kevin H. Marino
`John D. Tortorella
`MARINO, TORTORELLA &
`BOYLE, P.C.
`437 Southern Boulevard
`Chatham, New Jersey 07928
`T: (973) 824-9300
`F: (973) 824-8425
`kmarino@khmarino.com
`jtortorella@khmarino.com
`
`
`
`Attorneys for Defendants CVS Health Corporation, CaremarkPCS Health LLC,
`Caremark LLC, and Caremark RX LLC
`
`
`ii
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`
`Drew Cleary Jordan
`MORGAN, LEWIS & BOCKIUS
`LLP
`502 Carnegie Center
`Princeton, NJ 08540-6289
`T: (202) 739-5962
`F: (609) 919-6701
`drew.jordan@morganlewis.com
`
`
`Jason R. Scherr (pro hac vice)
`Patrick A. Harvey (pro hac vice)
`MORGAN, LEWIS & BOCKIUS
`LLP
`1111 Pennsylvania Avenue, NW
`Washington, DC 20004
`T: 202.739.3000
`F: 202.739.3001
`jr.scherr@morganlewis.com
`patrick.harvey@morganlewis.com
`
`Attorneys for Defendants Express Scripts Holding Company, Express Scripts
`Inc., and Medco Health Solutions, Inc.
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`iii
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`
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`B.
`
`C.
`
`II.
`
`TABLE OF CONTENTS
`
`INTRODUCTION ..................................................................................................... 1
`BACKGROUND ....................................................................................................... 2
`LEGAL STANDARD ................................................................................................ 4
`ARGUMENT ............................................................................................................. 5
`I.
`THE ANTITRUST CLAIMS AGAINST THE PBMS FAIL RULE
`8’S PLAUSIBILITY STANDARD. ................................................................ 5
`A.
`Plaintiffs do not allege that the PBMs participated in a
`horizontal price-fixing conspiracy. ....................................................... 6
`Plaintiffs fail to allege anticompetitive vertical agreements
`plausibly violating the rule of reason. ................................................... 7
`Plaintiffs fail to plausibly allege that the PBMs joined an
`“overarching conspiracy” to fix WAC prices. ...................................... 8
`THE ROBINSON-PATMAN ACT CLAIM FAILS ON ITS FACE. ..........12
`A.
`The Robison-Patman Act claims fail because Plaintiffs do not
`allege a buyer-seller relationship, a fiduciary duty, or sham
`payments. .............................................................................................12
`Plaintiffs lack standing to assert a claim under Section 2(c). .............14
`B.
`III. THE RICO CLAIMS FAIL THE APPLICABLE PLEADING
`STANDARDS. ..............................................................................................15
`A.
`Plaintiffs fail to allege predicate acts of racketeering. ........................16
`1.
`The Anti-Kickback Statute is not a RICO predicate. ...............17
`2.
`A rebate-based AKS violation does not violate the Travel
`Act. ............................................................................................17
`Even if the AKS could serve as a RICO predicate,
`Plaintiffs do not allege an AKS violation. ................................19
`
`3.
`
`iv
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`4.
`
`2.
`
`B.
`
`C.
`
`D.
`
`Plaintiffs fail to allege mail and wire fraud with
`particularity. ..............................................................................22
`Plaintiffs fail to allege proximate causation or injury. ........................27
`1.
`Plaintiff wholesalers were not directly injured by an
`alleged RICO scheme premised on the AKS or mail or
`wire fraud. .................................................................................27
`Plaintiffs’ failure to allege reliance also defeats their
`RICO claims predicated on mail and wire fraud. .....................30
`Plaintiffs fail to allege any concrete financial injury. ...............32
`3.
`Plaintiffs fail to plausibly allege that each PBM operated and
`managed a RICO enterprise’s affairs rather than its own affairs. .......33
`Plaintiffs fail to allege the existence of a RICO enterprise
`distinct from the alleged racketeering. ................................................38
`IV. PLAINTIFFS FAIL TO ALLEGE A RICO CONSPIRACY. ......................40
`CONCLUSION ........................................................................................................40
`
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`v
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`
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`
`CASES
`2660 Woodley Road Joint Venture v. ITT Sheraton Corp.,
`369 F.3d 732 (3d Cir. 2004) ................................................................... 12, 14, 15
`Annulli v. Panikkar,
`200 F.3d 189 (3d Cir. 1999) ............................................................................... 17
`Anza v. Ideal Steel Supply Corp.,
`547 U.S. 451 (2006) ................................................................................ 16, 27, 29
`Arthur v. Guerdon Indus.,
`827 F. Supp. 273 (D. Del. 1993) ......................................................................... 32
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) .............................................................................................. 4
`Baar v. Jaguar Land Rover N. Am., LLC,
`295 F. Supp. 3d 460 (D.N.J. 2018) ....................................................................... 7
`Baglio v. Baska,
`940 F. Supp. 819 (W.D. Pa. 1996) ...................................................................... 28
`Barton & Pittinos, Inc. v. SmithKline Beecham Corp.,
`118 F.3d 178 (3d Cir. 1997) ............................................................................... 15
`Beck v. Prupis,
`529 U.S. 494 (2000) ...................................................................................... 16, 17
`Bell Atl. Corp. v. Twombly,
`550 U.S. 544 (2007) .....................................................................................passim
`Bible v. United Student Aid Funds, Inc.,
`799 F.3d 633 (7th Cir. 2015) .............................................................................. 36
`Bonilla v. Volvo Car Corp.,
`150 F.3d 62 (1st Cir. 1998) ................................................................................. 26
`Bowen v. Georgetown Univ. Hosp.,
`488 U.S. 204 (1988) ............................................................................................ 22
`
`vi
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`
`
`Bridges v. MacLean-Stevens Studios, Inc.,
`201 F.3d 6 (1st Cir. 2000) ................................................................................... 13
`Brittingham v. Mobil Corp.,
`943 F.2d 297 (3d Cir. 1991) ............................................................................... 37
`Burtch v. Milberg Factors, Inc.,
`662 F.3d 212 (3d Cir. 2011) ................................................................................. 5
`Bus. Elecs. Corp v. Sharp Elecs. Corp.,
`485 U.S. 717 (1988) .............................................................................................. 6
`City of Rockford v. Mallinckrodt ARD, Inc.,
`360 F. Supp. 3d 730 (N.D. Ill. 2019) .................................................................. 26
`Coleman v. Commonwealth Land Title Ins. Co.,
`318 F.R.D. 275 (E.D. Pa. 2016) .......................................................................... 31
`Crest Constr. II, Inc. v. Doe,
`660 F.3d 346 (8th Cir. 2011) .............................................................................. 39
`CZ Servs., Inc. v. Express Scripts Holding Co.,
`2020 WL 4368212 (N.D. Cal. July 30, 2020) .................................................... 14
`Devon Drive Lionville, LP v. Parke Bancorp, Inc.,
`2018 U.S. Dist. LEXIS 125011 (E.D. Pa. July 26, 2018) .................................. 31
`Devon Drive Lionville, LP v. Parke Bancorp, Inc.,
`791 F. App’x 301 (3d Cir. 2019) ............................................................ 29, 30, 31
`Dist. 1199P Health & Welfare Plan v. Janssen, L.P.,
`784 F. Supp. 2d 508 (D.N.J. 2011) ............................................................... 31, 32
`Eller v. EquiTrust Life Ins. Co.,
`778 F.3d 1089 (9th Cir. 2015) ............................................................................ 26
`Elliott v. Foufas,
`867 F.2d 877 (5th Cir. 1989) .............................................................................. 16
`Env’t. Tectonics v. W.S. Kirkpatrick, Inc.,
`847 F.2d 1052 (3d Cir. 1988) ............................................................................. 13
`
`vii
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`

`

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`
`
`Gross v. Waywell,
`628 F. Supp. 2d 475 (S.D.N.Y. 2009) ................................................................ 15
`H. J., Inc. v. Nw. Bell Tel. Co.,
`492 U.S. 229 (1989) ............................................................................................ 27
`Hamm v. Rhone-Poulenc Rorer Pharms.,
`187 F.3d 941 (8th Cir. 1999) .............................................................................. 30
`Hemi Grp., LLC v. City of New York,
`559 U.S. 1 (2010) ................................................................................................ 27
`Holmes v. Secs. Inv. Prot. Corp.,
`503 U.S. 258 (1992) ............................................................................................ 27
`Humphrey v. GlaxoSmithKline PLC,
`905 F.3d 694 (3d Cir. 2018) ............................................................................... 38
`Ill. Farmers Ins. Co. v. Mobile Diagnostic Imaging, Inc.,
`2014 WL 4104789 (D. Minn. Aug. 19, 2014) .............................................. 17, 39
`In re Aetna UCR Litig.,
`2015 U.S. Dist. LEXIS 84600 (D.N.J. June 30, 2015) ....................................... 37
`In re EpiPen ERISA Litig.,
`2020 U.S. Dist. LEXIS 139066 (D. Minn. Aug. 5, 2020) .................................. 10
`In re Express Scripts, Inc., PBM Litig.,
`2008 WL 2952787 (E.D. Mo. July 30, 2008) ............................................... 14, 42
`In re Ins. Brokerage Antitrust Litig.,
`618 F.3d 300 (3d Cir. 2010) ................................................................................. 9
`In re Insulin Pricing Litig.,
`2019 U.S. Dist. LEXIS 25185 (D.N.J. Feb. 15, 2019) ..................... 24, 25, 37, 38
`In re Insulin Pricing Litig.,
`No. 3:17-cv-00699 (D.N.J. Mar. 29, 2018), ECF No. 131 ................................. 38
`In re Intuniv Antitrust Litig.,
`2019 WL 4645502 (D. Mass. Sept. 24, 2019) .................................................... 16
`
`viii
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`
`
`In re Processed Egg Prods. Antitrust Litig.,
`821 F. Supp. 2d 709 (E.D. Pa. 2011) .................................................................... 7
`InterVest, Inc. v. Bloomberg, L.P.,
`340 F.3d 144 (3d Cir. 2003) ............................................................................... 11
`Kolar v. Preferred Real Estate Invs., Inc.,
`361 F. App’x 354 (3d Cir. 2010) ........................................................................ 27
`Langford v. Rite Aid of Ala., Inc.,
`231 F.3d 1308 (11th Cir. 2000) .......................................................................... 26
`Leegin Creative Leather Prods. v. PSKS, Inc.,
`551 U.S. 877 (2007) .............................................................................................. 7
`Lightning Lube v. Witco Corp.,
`4 F.3d 1153 (3d Cir. 1993) ................................................................................. 40
`Lum v. Bank of Am.,
`361 F.3d 217 (3d Cir. 2004) ............................................................... 4, 16, 22, 23
`Lupian v. Joseph Cory Holdings LLC,
`905 F.3d 127 (3d Cir. 2018) ............................................................................... 22
`Malvino v. Delluniversita,
`840 F.3d 223 (5th Cir. 2016) .............................................................................. 26
`McCullough v. Zimmer, Inc.,
`2009 WL 775402 (W.D. Pa. Mar. 18, 2009) ...................................................... 36
`Menzies v. Seyfarth Shaw LLP,
`943 F.3d 328 (7th Cir. 2019) .............................................................................. 27
`N.V.E., Inc. v. Palmeroni,
`2015 U.S. Dist. LEXIS 192712 (D.N.J. Feb. 23, 2015) ............................... 34, 40
`Naporano Iron & Metal Co. v. Am. Crane Corp.,
`79 F. Supp. 2d 494 (D.N.J. 1999) ....................................................................... 23
`Nelson v. Nelson,
`833 F.3d 965 (8th Cir. 2016) .............................................................................. 38
`
`ix
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`

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`
`
`Reves v. Ernst & Young,
`507 U.S. 170 (1993) ............................................................................................ 33
`Rolo v. City Investing Co. Liquidating Tr.,
`155 F.3d 644 (3d Cir. 1998) ............................................................................... 24
`Russello v. United States,
`464 U.S. 16 (1983) .............................................................................................. 26
`Santomenno ex rel. John Hancock Tr. v. John Hancock Life Ins. Co.,
`768 F.3d 284 (3d Cir. 2014) ............................................................................... 22
`Santos v. Beeler,
`40 F. Supp. 2d 566 (D.N.J. 1999) ....................................................................... 22
`Seaboard Supply Co. v. Congoleum Corp.,
`770 F.2d 367 (3d Cir. 1985) ......................................................................... 12, 13
`Shaw v. Nissan N. Am., Inc.,
`220 F. Supp. 3d 1046 (C.D. Cal. 2016) .............................................................. 36
`Silverstein v. Percudani,
`422 F. Supp. 2d 468 (M.D. Pa. 2006) ................................................................. 23
`Smith v. Jones, Gregg, Creehan & Gerace LLP,
`2008 WL 5129916 (W.D. Pa. Dec. 5, 2008) ...................................................... 33
`Stephens, Inc. v. Geldermann, Inc.,
`962 F.2d 808 (8th Cir. 1992) ........................................................................ 39, 40
`Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue
`Shield,
`552 F.3d 430 (6th Cir. 2008) ................................................................................ 6
`
`United Ass’n of Plumbers & Pipefitters Local 322 of S. N.J. v.
`Mallinckrodt ARD, LLC.,
`2020 U.S. Dist. LEXIS 148343 (D.N.J. Aug. 18, 2020) .................................... 26
`
`United Food & Com. Worker Unions & Emps. Midwest Health
`Benefits Fund v. Walgreen Co.,
`719 F.3d 849 (7th Cir. 2013) ............................................................ 33, 35, 36, 37
`
`x
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`

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`
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`United States ex rel. Arnstein v. Teva Pharms. USA, Inc.,
`2019 WL 1245656 (S.D.N.Y. Feb. 27, 2019) .................................................... 28
`United States ex rel. Fox Rx, Inc. v. Dr. Reddy’s Inc.,
`2014 WL 6750786 (S.D.N.Y. Dec. 1, 2014) ...................................................... 20
`United States v. Turkette,
`452 U.S. 576 (1981) ............................................................................................ 39
`Young v. E. Tex. Med. Ctr. Reg’l Healthcare Sys.,
`2017 U.S. Dist. LEXIS 218257 (N.D. Okla. Nov. 6, 2017) ............................... 17
`RULES
`Fed. R. Civ. P. 8 ..................................................................................................... 4, 5
`Fed. R. Civ. P. 9(b) ........................................................................................ 4, 22, 24
`Fed. R. Civ. P. 12(b)(6) ............................................................................................ 22
`STATUTES
`15 U.S.C. § 13(c) ................................................................................... 12, 13, 14, 15
`18 U.S.C. § 1952(b) ................................................................................................. 18
`18 U.S.C. §1961(1) ............................................................................................ 16, 17
`18 U.S.C. § 1962(c) ................................................................................. 5, 32, 37, 40
`18 U.S.C. § 1962(d) ............................................................................................. 5, 40
`18 U.S.C. §1964(c) .................................................................................................. 27
`42 U.S.C. §1320a-7b ..................................................................................... 17, 18 19
`42 U.S.C. § 1395w-3a(c)(6)(B) ............................................................................... 25
`PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ............................... 6
`OTHER AUTHORITIES
`42 C.F.R. §1001.952(h)(5) ....................................................................................... 20
`42 C.F.R. §1001.952(j) ............................................................................................ 20
`
`xi
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`42 CFR § 1001.952(h)(3) ......................................................................................... 18
`42 CFR § 1001.952(h)(4) ......................................................................................... 18
`84 Fed. Reg. 2340 (Feb. 6, 2019) ............................................................................ 21
`85 Fed. Reg. 76666 (Nov. 30, 2020)........................................................................ 21
`CBO’s Budget Projections, CONGRESSIONAL BUDGET OFFICE (May
`2019) ................................................................................................................... 21
`Exec. Order No. 13939, Lowering Prices for Patients by Eliminating
`Kickbacks to Middlemen,
`85 Fed. Reg. 45759, 45759 (July 24, 2020) ....................................................... 21
`Medicare and State Health Care Programs: Fraud and Abuse,
`64 Fed. Reg. 63518, 63518 (Nov. 19, 1999) ...................................................... 20
`OIRA Conclusion of EO 12866 Regulatory Review: Removal of Safe
`Harbor Protection for Rebates to Plans or PBMs Involving
`Prescription Pharmaceuticals and Creation of New Safe Harbor
`Protection, Office of Info. & Reg. Affs. (July 10, 2019) ................................... 21
`OIG Compliance Program Guidance for Pharmaceutical
`Manufacturers,
`68 Fed. Reg. 23731, 23734, 23736 (May 5, 2003) ............................................. 20
`The Prescription Drug Landscape Explored - A look at retail
`pharmaceutical spending from 2012 to 2016 THE PEW
`CHARITABLE TRS. (Mar. 2019) ........................................................................... 11
`
`
`
`xii
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`
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`INTRODUCTION
`Plaintiffs Professional Drug Company and Frank W. Kerr Holdings make the
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`sweeping allegation that three drug manufacturers and three pharmacy benefit
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`managers (PBMs) engaged in an industry-wide, “overarching conspiracy” to inflate
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`insulin prices. This is not a typical conspiracy case; Plaintiffs ask this Court to hold
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`that the normal operation of the country’s pharmaceutical reimbursement system—
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`including
`
`the PBMs’
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`respective arm’s-length
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`rebate negotiations with
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`manufacturers—constitutes racketeering and violates the antitrust laws. Whatever
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`one’s policy views about the most effective way to lower drug costs, the
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`pharmaceutical-rebate system is neither criminal nor illegal.
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`Plaintiffs are not the first to sue over insulin prices. This Court has considered
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`variants of a supposed insulin “scheme” three times before. But those earlier cases
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`were exclusively against the insulin manufacturers who set the list price—not PBMs.
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`And although some factual allegations here resemble those earlier cases, Plaintiffs
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`press claims never litigated before this Court—including under the Robinson-
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`Patman Act and the Sherman Act—and allege different RICO predicates not raised
`
`in other cases. Plaintiffs do so because, as wholesalers that resell insulin at a markup,
`
`they cannot fit their claims in traditional boxes. All of Plaintiffs’ claims fail the
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`applicable pleading standards, and in many instances, Plaintiffs’ own allegations
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`betray them.
`
`1
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`

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`BACKGROUND
`Plaintiff Professional Drug Company is a drug wholesaler who purchased
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`certain insulin products in 2010 and earlier. Compl. ¶¶ 14, 15. Plaintiff Frank W.
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`Kerr Holdings is a shell company that acquired antitrust claims from a defunct drug
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`wholesaler that went bankrupt in 2016. Id. ¶¶ 12, 55. Drug wholesalers like Plaintiffs
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`purchase pharmaceutical products from manufacturers and then resell them at a
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`mark-up to pharmacies, which then dispense the products to patients. Id. ¶ 57.
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`PBMs are not in the same business as drug wholesalers (or manufacturers).
`
`Id. ¶ 60. Instead, PBMs contract with health plans and third-party payors (the PBMs’
`
`clients) to administer their clients’ prescription-drug benefits. Id. In that role, PBMs
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`develop formularies (lists of approved drugs) that their clients may adopt or
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`customize when designing their prescription benefits and plan coverage. Id. ¶¶ 68–
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`71. PBMs also negotiate rebates with drug manufacturers to lower their clients’ net
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`drug costs. Id. ¶ 61.
`
`The PBMs’ role in formulary development “forces drug companies to engage
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`in price negotiation.” Id. ¶ 61. In contrast to “open” formularies that included
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`“virtually all available FDA-approved drugs,” PBMs in recent years allegedly
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`switched to “closed” formularies enabling them to exclude a given drug if its
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`manufacturer refuses to offer favorable pricing. Id. ¶¶ 73–80. Drug manufacturers
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`fear exclusion because “if a drug is excluded, it can dramatically hobble sales.” Id.
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`2
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`

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`¶ 76. Plaintiffs allege that PBMs “pit[] [drug companies] against each other” and
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`“will move market share” to the companies that offer “the best price.” Id. ¶ 78.
`
`At issue here is a subset of insulin products: Novo Nordisk’s NovoLog and
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`Levemir, Eli Lilly’s Humalog, and Sanofi’s Lantus. Id. ¶ 2. Plaintiff Professional
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`Drug Company did not purchase any of those products during the relevant period.1
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`Plaintiffs allege that beginning in 2012, the Insulin Manufacturers increased
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`the price of Insulin Drugs in lockstep (id. ¶ 120) as part of a price-fixing conspiracy.
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`Id. ¶ 149. Plaintiffs never explain what role, if any, the PBMs played in that alleged
`
`conspiracy. They do not allege that the PBMs controlled, knew about, or had input
`
`into the Manufacturers’ list prices (the wholesale acquisition cost or “WAC”).
`
`Instead, Plaintiffs allege that the Manufacturers—acting independently—increased
`
`their list prices in response to, not in concert with, the PBMs’ negotiations for
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`increased rebates. Id. ¶¶ 101–03. Although Plaintiffs allege that the PBMs benefited
`
`from higher WAC prices because manufacturers pay rebates as a percentage of WAC
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`(id. ¶ 93), they do not allege that the Manufacturers increased WAC prices at the
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`PBMs’ direction, nor could they.
`
`
`1 Professional Drug Company alleges that it purchased only Levemir and Lantus but
`does not say when those purchases occurred. Compl. ¶15. In a prior complaint that
`PDC voluntarily dismissed, PDC alleged making only three relevant purchases, the
`last in 2010. See Complaint, Pro. Drug Co. v. Sanofi-Aventis U.S. LLC, No. 3:19-
`cv-18326 (D.N.J. Sept. 25, 2019), ECF No. 1, at ¶¶ 2, 51, 364. Accordingly, PDC’s
`last relevant purchase was two years before the alleged price inflation began. Its
`claims should be dismissed for lack of standing. See Mfr. Br. at 39–40.
`
`3
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`

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`LEGAL STANDARD
`To survive a motion to dismiss, “a complaint must contain sufficient factual
`
`matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
`
`Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
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`U.S. 544, 570 (2007)). “Threadbare recitals of the elements of a cause of action,
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`supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. In
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`a case alleging conspiracy, the “need at the pleading stage for allegations plausibly
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`suggesting (not merely consistent with) agreement reflects the threshold requirement
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`of Rule 8(a)(2) that the ‘plain statement’ possess enough heft ‘to sho[w] that the
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`pleader is entitled to relief.’” Twombly, 550 U.S. at 557 (quoting Rule 8).
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`
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`Plaintiffs’ fraud claims must also satisfy Rule 9(b), which requires “plead[ing]
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`with particularity the circumstances of the alleged fraud in order to place the
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`defendants on notice of the precise misconduct with which they are charged, and to
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`safeguard defendants against spurious charges of immoral and fraudulent behavior.”
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`Lum v. Bank of Am., 361 F.3d 217, 223–24 (3d Cir. 2004) (internal quotations
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`omitted). To satisfy Rule 9(b), a plaintiff must allege facts describing “the ‘date,
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`place or time’ of the fraud,” or otherwise offer enough facts to “inject[] precision
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`and some measure of substantiation into their allegations of fraud.” Id. They “also
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`must allege who made a misrepresentation to whom and the general content of the
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`misrepresentation.” Id. at 224.
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`4
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`

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`Case 3:20-cv-03426-BRM-LHG Document 131-1 Filed 01/13/21 Page 17 of 54 PageID: 1417
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`
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`I.
`
`ARGUMENT
`THE ANTITRUST CLAIMS AGAINST THE PBMS FAIL RULE 8’S
`PLAUSIBILITY STANDARD.
`Plaintiffs’ central Sherman Act claim—captioned “Violation of the Sherman
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`Act”—is directed solely against the Manufacturers (Count Two). As to the PBMs,
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`Plaintiffs attempt to repackage those allegations as a “Conspiracy to Violate the
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`Sherman Act” (Count Three). Plaintiffs do not advance a clear legal theory against
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`the PBMs,2 but whatever their theory, it does not work.
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`A plaintiff suing under Section 1 must plead, among other things, that “(1) the
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`defendant was a party to a contract, combination . . . or conspiracy” and “(2) the
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`conspiracy to which the defendant was a party imposed an unreasonable restraint on
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`trade.” Burtch v. Milberg Factors, Inc., 662 F.3d 212, 221–22 (3d Cir. 2011).
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`Plaintiffs don’t satisfy those requirements against the PBMs.
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`Plaintiffs allege that the PBMs joined some ill-defined “overarching
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`conspiracy to artificially fix, raise, maintain and/or stabilize the prices of the Insulin
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`Drugs.” Compl. ¶ 212. But the nine pages in the Complaint devoted to the price-
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`fixing claims barely mention the PBMs—leaving them to guess about their role in
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`2 Unlike RICO, which includes both a substantive violation and a separate claim for
`conspiracy (see 18 U.S.C. § 1962(c), (d)), there is no separate claim for “conspiracy”
`to violate Section 1. Because Section 1 is itself a conspiracy claim, Plaintiffs’ claim
`for “Conspiracy to Violate the Sherman Act” is effectively a claim for conspiracy to
`conspire. It makes no sense.
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`5
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`

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`Case 3:20-cv-03426-BRM-LHG Document 131-1 Filed 01/13/21 Page 18 of 54 PageID: 1418
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`
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`the “conspiracy.” See Compl. ¶¶120–42. After Twombly (550 U.S. at 557) that sort
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`of threadbare pleading does not suffice. See Total Benefits Planning Agency, Inc. v.
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`Anthem Blue Cross & Blue Shield, 552 F.3d 430, 436 (6th Cir. 2008) (“Generic
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`pleading, alleging misconduct against defendants without specifics as to the role
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`each played in the alleged conspiracy, was specifically rejected by Twombly.”).
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`In any antitrust case, courts must ensure that a plaintiff alleges “who was in
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`agreement with whom” and “about what” before “mov[ing] on to look for the
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`necessary agreement.” PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST
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`LAW: AN ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION (5th ed.
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`2020), at ¶ 1409 (hereinafter, “Hovenkamp”). The complaint fails to answer those
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`basic questions. As to the PBMs, Plaintiffs do not even allege whether the
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`supposedly unlawful agreements fall into recognized horizontal or vertical
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`categories. Whether viewed as an alleged horizontal or vertical conspiracy or a
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`nebulous and far-fetched “overarching” conspiracy, Plaintiffs’ claims fall short.
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`A.
`
`Plaintiffs do not allege that the PBMs participated in a horizontal
`price-fixing conspiracy.
`A horizontal agreement is an agreement between competitors at the same level
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`
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`of the distribution chain. Bus. Elecs. Corp v. Sharp Elecs. Corp., 485 U.S. 717, 730
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`(1988). PBMs and Manufacturers do not compete with each other because PBMs do
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`not make or sell insulin. See Compl. ¶¶ 56, 60. Manufacturers and PBMs thus cannot
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`horizontally conspire with each other.
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`6
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`

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`Case 3:20-cv-03426-BRM-LHG Document 131-1 Filed 01/13/21 Page 19 of 54 PageID: 1419
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`
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`And Plaintiffs do not even attempt to allege a horizontal price-fixing
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`conspiracy among the PBMs. At most, Plaintiffs allege that PBMs were “members
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`of trade associations” like the Pharmaceutical Care Management Association
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`(PCMA) and that they attended multiple PCMA conferences. Compl. ¶¶ 130–33.
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`But participating in those types of routine business activities is, without more,
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`presumptively legitimate. In re Processed Egg Prods. Antitrust Litig., 821 F. Supp.
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`2d 709, 722 (E.D. Pa. 2011), aff’d, 962 F.3d 719 (3d Cir. 2020) (“[L]egal authority
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`is clear that participation in a trade group association and/or attending trade group
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`meetings, even those meetings where key facets of the conspiracy allegedly were
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`adopted or advanced, are not enough on their own to give rise to the inference of
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`agreement to the conspiracy.”).
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`B.
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`Plaintiffs fail to allege anticompetitive vertical agreements
`plausibly violating the rule of reason.
`If, instead, Plaintiffs’ Section 1 theory is predicated on a vertical agreement
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`between each PBM and each Manufacturer, that theory also fails. Vertical
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`arrangements are analyzed under the rule of reason, not the per se rule. Leegin
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`Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877, 898 (2007). Plaintiffs do not
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`allege any of the facts necessary to establish an unlawful vertical arrangement under
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`the rule of reason. See, e.g., Baar v. Jaguar Land Rover N. Am., LLC, 295 F. Supp.
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`3d 460, 464 (D.N.J. 2018) (claims analyzed under the rule of reason require factual
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`allegations supporting all four elements of a Section 1 claim, including “concerted
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`7
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`

`

`Case