`
`IN RE: DIRECT PURCHASER
`INSULIN PRICING LITIGATION
`
`
`This Document Relates To:
`
`All Actions
`
`
`
`
`
`
`
`
`
`
`
`
`
`Civil Action No. 20-03426
`(BRM)(LHG) (Consolidated)
`
`ORAL ARGUMENT
`REQUESTED
`
`Case 3:20-cv-03426-BRM-LHG Document 145 Filed 04/26/21 Page 1 of 37 PageID: 1639
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`UNITED STATES DISTRICT COURT
`DISTRICT OF NEW JERSEY
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`
`
`
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`MANUFACTURER DEFENDANTS’ REPLY BRIEF IN SUPPORT OF
`THEIR MOTION TO DISMISS THE FIRST AMENDED COMPLAINT
`
`
`
`
`
`(Counsel Listed on Next Page)
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`

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`Case 3:20-cv-03426-BRM-LHG Document 145 Filed 04/26/21 Page 2 of 37 PageID: 1640
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`REED SMITH LLP
`Melissa A. Geist
`506 Carnegie Center, Suite 300
`Princeton, NJ 08540
`Tel.: (609) 514-5978
`
`COVINGTON & BURLING LLP
`Shankar Duraiswamy
`Henry Liu (admitted pro hac vice)
`One CityCenter
`850 Tenth Street, N.W.
`Washington, DC 20001
`Tel.: (202) 662-6000
`
`
`
`Attorneys for Defendant Eli Lilly and Company
`
`
`
`
`
`WALSH PIZZI O’REILLY
` FALANGA LLP
`Liza M. Walsh
`Katelyn O’Reilly
`William T. Walsh, Jr.
`Three Gateway Center
`100 Mulberry Street, 15th Floor
`Newark, NJ 07102
`Tel.: (973) 757-1100
`
`JONES DAY
`Michael R. Shumaker
`
`(admitted pro hac vice)
`William D. Coglianese
`
`(admitted pro hac vice)
`51 Louisiana Avenue, N.W.
`Washington, DC 20001
`Tel.: (202) 879-3939
`
`
`Attorneys for Defendant Sanofi-Aventis U.S. LLC
`
`
`
`GIBBONS P.C.
`Michael R. Griffinger
`Michael R. McDonald
`Christopher Walsh
`One Gateway Center
`Newark, NJ 07102
`Tel.: (973) 596-4500
`
`
`DAVIS POLK & WARDWELL LLP
`James P. Rouhandeh*
`David B. Toscano*
`450 Lexington Avenue
`New York, NY 10017
`Tel.: (212) 450-4000
`
`Neal A. Potischman*
`Andrew Yaphe*
`1600 El Camino Real
`Menlo Park, CA 94025
`Tel.: (650) 752-2000
`
`*pro hac vice pending
`
`Attorneys for Defendant Novo Nordisk Inc.
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`

`

`Case 3:20-cv-03426-BRM-LHG Document 145 Filed 04/26/21 Page 3 of 37 PageID: 1641
`
`TABLE OF CONTENTS
`
`Page
`
`TABLE OF AUTHORITIES ................................................................................... iii
`
`INTRODUCTION .................................................................................................... 1
`
`ARGUMENT ............................................................................................................ 2
`
`I.
`
`Plaintiffs’ Robinson-Patman Act Claim Should Be Dismissed. .................... 2
`
`A.
`
`B.
`
`C.
`
`Plaintiffs Lack Antitrust Standing to Assert a Section 2(c)
`Claim. ................................................................................................... 2
`
`Plaintiffs Fail to Plead the Requisite Buyer-Seller Relationship. ........ 4
`
`Plaintiffs Fail to Plead a Section 2(c) Commercial Bribery
`Claim. ................................................................................................... 6
`
`D.
`
`Plaintiffs Fail to Plead a Dummy Brokerage Claim. ......................... 10
`
`II.
`
`Plaintiffs’ Sherman Act Claims Should Be Dismissed. ............................... 11
`
`A.
`
`B.
`
`Plaintiffs Fail to Plead a Plausible Price-Fixing Claim Among
`the Manufacturer Defendants. ............................................................ 11
`
`Plaintiffs Fail To Plead A Conspiracy Involving All
`Defendants. ......................................................................................... 15
`
`III.
`
`Plaintiffs’ RICO Claims Should Be Dismissed. ........................................... 15
`
`A.
`
`B.
`
`C.
`
`Plaintiffs Abandon Their Mail and Wire Fraud Predicate Acts. ........ 15
`
`Plaintiffs Lack Standing to Assert Alleged Violations of the
`Anti-Kickback Statute as Predicate Acts. .......................................... 16
`
`Plaintiffs Fail to Plead Any Predicate Violations of the Anti-
`Kickback Statute. ................................................................................ 18
`
`D.
`
`Plaintiffs Fail to Allege a RICO Conspiracy...................................... 19
`
`
`
`i
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`

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`IV. Plaintiffs’ Claims Are Partially Time-Barred............................................... 20
`
`V.
`
`Plaintiff PDC’s Claims Should Be Dismissed. ............................................ 25
`
`CONCLUSION ....................................................................................................... 25
`
`
`
`
`
`
`
`
`
`
`
`ii
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`

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`
`
`
`TABLE OF AUTHORITIES
`
` Page(s)
`
`CASES
`2660 Woodley Rd. Joint Venture v. ITT Sheraton Corp.,
`369 F.3d 732 (3d Cir. 2004) ..................................................................... 1, 2, 3, 4
`In re Aetna UCR Litig.,
`2015 WL 3970168 (D.N.J. June 30, 2015) ......................................................... 13
`Allen v. Verizon Commc’ns, Inc.,
`2019 WL 399922 (D.N.J. Jan. 31, 2019) ...................................................... 13, 14
`In re Allergan ERISA Litig.,
`975 F.3d 348 (3d Cir. 2020) ..................................................................... 1, 11, 12
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) ............................................................................................ 18
`In re Aspartame Antitrust Litig.,
`416 F. App’x 208 (3d Cir. 2011) ........................................................................ 24
`In re Avandia Mktg. Sales Pracs. & Prod. Liab. Litig.,
`804 F.3d 633 (3d Cir. 2015) ............................................................................... 18
`In re Baby Food Antitrust Litig.,
`166 F.3d 112 (3d Cir. 1999) ............................................................................... 14
`Baglio v. Baska,
`116 F.3d 467 (3d Cir. 1997) (unpublished table decision) ................................. 17
`Baglio v. Baska,
`940 F. Supp. 819 (W.D. Pa. 1996) ................................................................ 16, 17
`Barton & Pittinos, Inc. v. SmithKline Beecham Corp.,
`118 F.3d 178 (3d Cir. 1997) ................................................................................. 4
`Bell Atlantic Corp. v. Twombly,
`550 U.S. 544 (2007) ...................................................................................... 14, 18
`
`
`
`iii
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`

`

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`
`In re Blood Reagents Antitrust Litig.,
`756 F. Supp. 2d 623 (E.D. Pa. 2010) .................................................................. 15
`Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels & Resorts
`Worldwide, Inc.,
`369 F.3d 212 (2d Cir. 2004) ......................................................................... 6, 7, 8
`Bridge v. Phoenix Bond & Indem. Co.,
`553 U.S. 639 (2008) ............................................................................................ 17
`Carmen v. Metrocities Mortg.,
`2010 WL 421115 (D.N.J. Feb. 1, 2010) ....................................................... 20, 21
`Castro v. Sanofi Pasteur Inc.,
`2012 WL 12516572 (D.N.J. Aug. 6, 2012) ...................................................... 2, 3
`Cetel v. Kirwan Fin. Grp.,
`460 F.3d 494 (3d Cir. 2006) ................................................................... 20, 21, 23
`In re Chocolate Confectionary Antitrust Litig.,
`602 F. Supp. 2d 538 (M.D. Pa. 2009) ........................................................... 14, 15
`In re Chocolate Confectionary Antitrust Litig.,
`801 F.3d 383 (3d Cir. 2015) ............................................................................... 14
`Cottman Transmission Sys., LLC v. Kershner,
`536 F. Supp. 2d 543 (E.D. Pa. 2008) .................................................................... 3
`Drug Mart Pharmacy Corp. v. Am. Home Prods. Corp.,
`472 F. Supp. 2d 385 (E.D.N.Y. 2007) .............................................................. 5, 6
`In re EpiPen ERISA Litig.,
`2020 WL 4501925 (D. Minn. Aug. 5, 2020) ........................................................ 9
`FTC v. Henry Broch & Co.,
`363 U.S. 166 (1960) ............................................................................................ 10
`Fuentes v. Royal Dutch Shell PLC,
`2019 WL 7584654 (E.D. Pa. Nov. 25, 2019) ..................................................... 24
`Harris v. Duty Free Shoppers Ltd. P’ship,
`940 F.2d 1272 (9th Cir. 1991) .............................................................................. 5
`
`
`
`iv
`
`

`

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`
`Hartford Cas. Ins. Co. v. Am. Dairy & Food Consulting Lab’ys, Inc.,
`2009 WL 4269603 (E.D. Cal. Nov. 25, 2009) .............................................. 10, 11
`Hemi Grp., LLC v. City of New York,
`559 U.S. 1 (2010) ................................................................................................ 17
`In re Insulin Pricing Litig.,
`2019 WL 643709 (D.N.J. Feb. 15, 2019) ........................................................... 25
`In re Ins. Brokerage Antitrust Litig.,
`618 F.3d 300 (3d Cir. 2010) ......................................................................... 13, 14
`Lawlor v. ESPN Scouts, LLC,
`2011 WL 675215 (D.N.J. Feb. 16, 2011) ........................................................... 16
`In re Magnesium Oxide Antitrust Litig.,
`2011 WL 5008090 (D.N.J. Oct. 20, 2011) ................................................... 22, 24
`In re Magnesium Oxide Antitrust Litig.,
`2012 WL 1150123 (D.N.J. Apr. 5, 2012) ........................................................... 20
`McCullough v. Zimmer, Inc.,
`382 F. App’x 225 (3d Cir. 2010) .......................................................................... 4
`Mills v. Ethicon, Inc.,
`406 F. Supp. 3d 363 (D.N.J. 2019) ..................................................................... 10
`Moe Dreams, LLC v. Sprock,
`2008 WL 4787493 (N.D. Ga. Oct. 27, 2008) ................................................... 3, 7
`N.V.E., Inc. v. Palmeroni,
`2015 WL 13649814 (D.N.J. Feb. 23, 2015) ....................................................... 19
`Perry v. NYSARC, Inc.,
`424 F. App’x 23 (2d Cir. 2011) .......................................................................... 12
`In re Pharm. Indus. Average Wholesale Price Litig.,
`230 F.R.D. 61 (D. Mass. 2005) ......................................................................... 8, 9
`In re Processed Egg Prods. Antitrust Litig.,
`2011 WL 5980001 (E.D. Pa. Nov. 30, 2011) ..................................................... 24
`
`
`
`v
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`

`

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`
`Robinson v. Jackson Hewitt, Inc.,
`2019 WL 5617512 (D.N.J. Oct. 31, 2019) ......................................................... 20
`Seaboard Supply Co. v. Congoleum Corp.,
`770 F.2d 367 (3d Cir. 1985) ................................................................................. 5
`SigmaPharm, Inc. v. Mut. Pharm. Co.,
`454 F. App’x 64 (3d Cir. 2011) ........................................................................ 2, 4
`SigmaPharm, Inc. v. Mut. Pharm. Co.,
`772 F. Supp. 2d 660 (E.D. Pa. 2011) .................................................................... 4
`In re Treasury Sec. Auction Antitrust Litig.,
`2021 WL 1226670 (S.D.N.Y. Mar. 31, 2021) .................................................... 25
`Tubby’s #14, Ltd. v. Tubby’s Sub Shops, Inc.,
`2005 WL 3556199 (E.D. Mich. Dec. 29, 2005) ............................................... 7, 8
`United States v. Bryant,
`655 F.3d 232 (3d Cir. 2011) ................................................................................. 7
`In re Warfarin Sodium Antitrust Litig.,
`1998 WL 883469 (D. Del. Dec. 7, 1998) ............................................................. 9
`STATUTES
`15 U.S.C. § 13(c) ....................................................................................................... 5
`REGULATIONS
`42 C.F.R. §§ 1001.952(h)(6) .................................................................................... 19
`42 C.F.R. §§ 1001.952(h)(7) .................................................................................... 19
`42 C.F.R. §§ 1001.952(h)(8) .................................................................................... 19
`42 C.F.R. §§ 1001.952(h)(9) .................................................................................... 19
`42 C.F.R. §§ 1001.952(cc) ....................................................................................... 19
`42 C.F.R. §§ 1001.952(dd) ...................................................................................... 19
`86 Fed. Reg. 15,132 (Mar. 22, 2021) ....................................................................... 19
`
`
`
`vi
`
`

`

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`
`OTHER SOURCES
`Letter from B. Sanders and E. Cummings to L. Lynch and E. Ramirez
`(Nov. 3, 2016) ............................................................................................... 21, 22
`Staff of S. Comm. on Fin., 117th Congress., Insulin (2021) ................................... 12
`
`
`
`vii
`
`

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`INTRODUCTION
`Plaintiffs’ opposition confirms that this case is unique among the insulin
`
`
`
`actions pending in this Court. Plaintiffs are not consumers who allege they paid too
`
`much for insulin. Instead, they are a corporate drug wholesaler and a wholesaler’s
`
`assignee that “pass-through” the cost of insulin by charging pharmacies a profitable
`
`markup. See Opposition (“Opp.”) 59. And rather than claim that they were misled
`
`about the manufacturers’ insulin prices (as plaintiffs in other cases allege), Plaintiffs
`
`rely on an entirely different theory: namely, that manufacturers and PBMs engaged
`
`in bribery to breach the duty of fidelity that PBMs owe to their health plan clients.
`
`
`
`Plaintiffs’ theory runs afoul of Third Circuit precedent, which requires
`
`dismissal. As to their commercial bribery claim under the Robinson-Patman Act,
`
`Plaintiffs lack standing under 2660 Woodley Road Joint Venture v. ITT Sheraton
`
`Corp., 369 F.3d 732 (3d Cir. 2004), and they fail in any event to plead the elements
`
`of such a claim. Plaintiffs’ Sherman Act claim is indistinguishable from the claim
`
`that the Third Circuit rejected in In re Allergan ERISA Litigation, 975 F.3d 348 (3d
`
`Cir. 2020). Finally, Plaintiffs fail to defend their RICO predicate acts of mail and
`
`wire fraud, and their RICO predicate acts under the Anti-Kickback Statute fail both
`
`for lack of standing and because a statutory safe harbor exempts the alleged conduct
`
`from liability. The Complaint should therefore be dismissed with prejudice.
`
`
`
`1
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`

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`
`ARGUMENT
`
`I.
`
`Plaintiffs’ Robinson-Patman Act Claim Should Be Dismissed.
`
`Plaintiffs Lack Antitrust Standing to Assert a Section 2(c) Claim.
`
`A.
`Plaintiffs’ opposition is notable for what it is missing: a single case that has
`
`allowed a Section 2(c) commercial bribery claim to be pursued by anyone other than
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`(i) a competitor of a bribe payer, or (ii) a principal whose agent breached its fiduciary
`
`duties by accepting a bribe. See Opp. 20–25. Since Plaintiffs do not fall into either
`
`category, they lack the type of antitrust injury that Congress designed Section 2(c)
`
`to prevent. See Woodley Rd., 369 F.3d at 738–41; SigmaPharm, Inc. v. Mut. Pharm.
`
`Co., 454 F. App’x 64, 70 (3d Cir. 2011) (“Ultimately, the question [of antitrust
`
`injury] comes down to whether the injury [plaintiff] allege[s] is of the type that the
`
`antitrust statute was intended to forestall.”). “The absence of such injury is fatal to
`
`[Plaintiffs’] attempt to establish antitrust standing.” Woodley Rd., 369 F.3d at 739.
`
`Seeking to avoid this conclusion, Plaintiffs insist that Castro v. Sanofi Pasteur
`
`Inc., 2012 WL 12516572 (D.N.J. Aug. 6, 2012), recognized that “direct purchasers
`
`of a vaccine had standing to recover overcharges attributable to commercial bribes
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`in violation of Section 2(c).” Opp. 21. That is plainly incorrect. The Castro
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`plaintiffs brought claims under the Sherman Act, and the court held that they had
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`standing precisely because they did not bring “a commercial bribery case . . . under
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`
`
`2
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`

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`Case 3:20-cv-03426-BRM-LHG Document 145 Filed 04/26/21 Page 12 of 37 PageID: 1650
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`the Robinson-Patman Act.” 2012 WL 12516572, at *6 n.5 (distinguishing the
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`standing analysis in Woodley Road because it involved the Robinson-Patman Act).
`
`Plaintiffs are equally mistaken that paying higher prices is a “quintessential”
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`antitrust injury under Section 2(c). Opp. 23. That argument was rejected by
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`Woodley Road, which held that “paying inflated purchasing prices to vendors,
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`without more”—i.e., without showing that the plaintiff suffered some “competitive
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`disadvantage”—is not “an injury of the type” Section 2(c) is “intended to prevent.”
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`369 F.3d at 738–39 & n.7 (citation omitted).1 Ignoring this part of Woodley Road,
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`Plaintiffs cite a slew of cases that did not involve the Robinson-Patman Act, are from
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`outside this Circuit, or both. Opp. 23–25 & n.18. But not one of those cases holds
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`that entities like Plaintiffs—neither competitors of an alleged briber nor principals
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`whose agent allegedly took a bribe—can plead antitrust injury under Section 2(c).
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`Unable to square their theory with Third Circuit precedent, Plaintiffs seek to
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`defer the standing inquiry by arguing that it involves a multi-factor test that should
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`not be resolved on a motion to dismiss. Opp. 22. But the multi-factor test applies
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`only if a plaintiff has first pleaded an antitrust injury: “Antitrust injury . . . is a
`
`
`1 Accord Cottman Transmission Sys., LLC v. Kershner, 536 F. Supp. 2d 543, 558–
`59 (E.D. Pa. 2008) (applying Woodley Road to dismiss Section 2(c) claim by
`franchisees that allegedly paid inflated prices due to bribery); Moe Dreams, LLC v.
`Sprock, 2008 WL 4787493, at *6, *8 (N.D. Ga. Oct. 27, 2008) (agreeing with
`Woodley Road that alleging bribe payers “passed the cost of ‘kickbacks’ on to
`Plaintiffs” is not sufficient to establish antitrust injury under Section 2(c)).
`3
`
`
`
`

`

`Case 3:20-cv-03426-BRM-LHG Document 145 Filed 04/26/21 Page 13 of 37 PageID: 1651
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`necessary but insufficient condition of antitrust standing.” Woodley Rd., 369 F.3d
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`at 741 (citation and quotation marks omitted). The Third Circuit has “made it
`
`abundantly clear . . . that a cognizable antitrust injury is a necessary precursor to
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`antitrust standing, regardless of whether other . . . factors support such a finding.”
`
`McCullough v. Zimmer, Inc., 382 F. App’x 225, 230 (3d Cir. 2010). “Because
`
`[Plaintiffs] fail[] the antitrust injury requirement, [they] would lack standing even if
`
`the other . . . factors favored it.” Barton & Pittinos, Inc. v. SmithKline Beecham
`
`Corp., 118 F.3d 178, 184 n.9 (3d Cir. 1997); SigmaPharm, Inc. v. Mut. Pharm. Co.,
`
`772 F. Supp. 2d 660, 672 (E.D. Pa. 2011) (“if a court finds lack of antitrust injury it
`
`need go no further before dismissing the case”), aff’d, 454 F. App’x at 67–71
`
`(affirming dismissal where “pleadings failed adequately to allege antitrust injury”).2
`
`Plaintiffs Fail to Plead the Requisite Buyer-Seller Relationship.
`
`B.
`Plaintiffs concede that a Section 2(c) claim requires “a payment that ‘crosses
`
`the buyer-seller line.’” Opp. 7. They contend that they satisfy this requirement
`
`
`2 Even if the Court were to reach the other antitrust standing factors, those factors
`only confirm that Plaintiffs lack standing. Plaintiffs argue that no other plaintiffs
`could bring a Section 2(c) claim against Defendants. Opp. 25. But competing
`manufacturers who lost market share because of Defendants’ purported bribes would
`have standing. So too would health plans whose PBM accepted the alleged bribes,
`if they could show a “competitive disadvantage.” Woodley Rd., 369 F.3d at 739 &
`n.7. While Plaintiffs argue that health plans are barred under the indirect purchaser
`rule, Opp. 25, that rule does not apply to Section 2(c) claims predicated on
`commercial bribery. See Woodley Rd., 369 F.3d at 739 (noting that “in an
`appropriate case” a principal whose agent breaches a fiduciary duty by taking a bribe
`could show it suffered antitrust injury).
`
`
`
`4
`
`

`

`Case 3:20-cv-03426-BRM-LHG Document 145 Filed 04/26/21 Page 14 of 37 PageID: 1652
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`based on cases that have treated health plans as “essentially retail purchasers of
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`insulin.” Id. at 13 (emphasis added); see also id. at 11–12. Plaintiffs’ argument is
`
`inconsistent with the text of Section 2(c), which prohibits a party to a “sale or
`
`purchase of goods” from paying “anything of value . . . to the other party to such
`
`transaction.” 15 U.S.C. § 13(c) (emphasis added). The buyer and seller thus must
`
`be parties to the same sales transaction—a statutory requirement Plaintiffs ignore.
`
`See id.; see also Seaboard Supply Co. v. Congoleum Corp., 770 F.2d 367, 372–73
`
`(3d Cir. 1985) (challenged payment must pass from seller to buyer who “acquired
`
`title to the goods”). Thus, even if health plans are “essentially retail purchasers of
`
`insulin” because they reimburse pharmacies on behalf of consumers, Opp. 13, they
`
`are not “buyers” in the same transaction in which the manufacturers sell insulin.
`
`Rather, as the Complaint explains, manufacturers sell to wholesalers, and consumers
`
`separately buy from pharmacies. FAC ¶¶ 56–59; see also Harris v. Duty Free
`
`Shoppers Ltd. P’ship, 940 F.2d 1272, 1275 (9th Cir. 1991) (“[r]eference must be
`
`made to the transactions in question to determine whether or not the necessary
`
`relationship [under Section 2(c)] exists” (alteration in original) (citation omitted)).
`
`Plaintiffs thus obtain no support from cases that “treated [health plans] like
`
`purchasers under the antitrust laws,” as discussed in Drug Mart Pharmacy Corp. v.
`
`American Home Products Corp., 472 F. Supp. 2d 385 (E.D.N.Y. 2007). Opp. 12
`
`(emphasis omitted). To the contrary, Drug Mart held that those cases did not apply
`
`
`
`5
`
`

`

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`to a Robinson-Patman Act claim “as a matter of law” because they were all
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`“Sherman Act cases.” 472 F. Supp. 2d at 402–03 (noting that “[d]espite this
`
`voluminous list of Sherman Act cases,” the court could not find “a single related
`
`case applying this doctrine to a claim under the Robinson-Patman Act”).
`
`Plaintiffs Fail to Plead a Section 2(c) Commercial Bribery Claim.
`C.
`Plaintiffs’ opposition confirms that they have failed to plead both the specific
`
`
`
`intent and breach of the duty of fidelity necessary for a commercial bribery claim.
`
`
`
`Specific Intent. Plaintiffs do not dispute that they failed to allege that the
`
`Manufacturer Defendants paid rebates to PBMs with the specific intent that PBMs
`
`would improperly act against their clients’ interests. See Mfr. Br. (“Br.”) 16–17.
`
`They instead argue that such intent is not required. Opp. 19–20. But elsewhere in
`
`their brief, Plaintiffs concede the opposite, acknowledging that a commercial bribery
`
`claim requires the alleged bribe to be made “with the intention of improperly
`
`influencing a sale”—even relying on the same Second Circuit case that Defendants
`
`cited. Id. at 9 (citing Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels &
`
`Resorts Worldwide, Inc., 369 F.3d 212, 222 (2d Cir. 2004)); see also Br. 17 (same).
`
`Blue Tree is directly on point and warrants dismissal of Plaintiffs’ commercial
`
`bribery claim. As in Blue Tree, Plaintiffs claim that the PBMs negotiated rebates as
`
`“agent[s]” for health plans, but then kept the rebates “for personal gain rather than
`
`transfer[]” them to their clients. 369 F.3d at 214–15, 224; cf. FAC ¶¶ 88–100. But
`
`
`
`6
`
`

`

`Case 3:20-cv-03426-BRM-LHG Document 145 Filed 04/26/21 Page 16 of 37 PageID: 1654
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`“[i]n the absence of any allegations that the . . . payments were, in fact, bribes—that
`
`is, that the[]” manufacturers made them “with the intent to improperly influence or
`
`corrupt [the agent’s] conduct on behalf of the [principal],” this claim should be
`
`dismissed. Blue Tree, 369 F.3d at 222 (emphasis added).
`
`Plaintiffs ignore this requirement altogether. Instead, they appear to argue
`
`that they pleaded the intent necessary for bribery of a public official, pointing to
`
`generic allegations that the manufacturers paid rebates to PBMs for the purpose of
`
`securing favorable formulary placement. See Opp. 19–20.3 But Plaintiffs’
`
`commercial bribery claim requires more—i.e., allegations that the Manufacturer
`
`Defendants specifically intended for the PBMs to breach their duty of fidelity by
`
`withholding rebates from their health plan clients. See Blue Tree, 369 F.3d at 222;
`
`FAC ¶¶ 88–100. Without such allegations, Plaintiffs’ commercial bribery claim
`
`should be dismissed. See Moe Dreams, LLC v. Sprock, 2008 WL 4787493, at *8
`
`(N.D. Ga. Oct. 27, 2008) (applying Blue Tree to dismiss Section 2(c) commercial
`
`bribery claim for failure to allege specific intent); Tubby’s #14, Ltd. v. Tubby’s Sub
`
`
`3 Plaintiffs rely on the standard for the federal crime of “bribery of a public official,”
`which requires only “a specific intent to give or receive something of value in
`exchange for an official act.” Opp. 20 (quoting United States v. Bryant, 655 F.3d
`232, 240–41 (3d Cir. 2011)). An “official act” is an act by a public official in her
`official capacity. See Bryant, 655 F.3d at 241. While Bryant recognized that specific
`intent is an element of bribery, the particular intent element at issue in Bryant does
`not apply in this case, which involves neither public officials nor official acts.
`
`
`
`7
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`Case 3:20-cv-03426-BRM-LHG Document 145 Filed 04/26/21 Page 17 of 37 PageID: 1655
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`Shops, Inc., 2005 WL 3556199, at *6 (E.D. Mich. Dec. 29, 2005) (dismissing
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`Section 2(c) claim in the “absence of any allegations . . . that the manufacturers[’]
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`payments were bribes paid by the manufacture[r]s with the intent to improperly
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`influence or corrupt”).4
`
`
`
`Breach of Duty. Plaintiffs acknowledge that a breach of the duty of fidelity
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`is a necessary element of a commercial bribery claim, Opp. 7, but allege no such
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`breach in the Complaint. To the contrary, Plaintiffs’ own allegations make clear that
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`health plans expressly authorize PBMs to negotiate and retain manufacturer rebates
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`and fees. See Br. 16 (citing FAC ¶ 90); see also Opp. 14 (acknowledging that rebates
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`“are then passed on—at least in part—to the TPPs”); see also In re Pharm. Indus.
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`Average Wholesale Price Litig. (“AWP”), 230 F.R.D. 61, 73 (D. Mass. 2005)
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`(recognizing that “PBM clients typically receive 70% to 90% of the manufacturer
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`rebates,” although the percentage varies based on individual contracts).
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`
`
`Plaintiffs do not respond to these points, but instead simply note the overall
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`size of the rebate payments and reiterate that PBMs “forwarded only a portion to the
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`TPPs.” Opp. 17. That is a non sequitur. Regardless of the size of the rebates,
`
`
`4 Simply labeling the rebates “kickbacks” is insufficient to plead the requisite intent.
`See Blue Tree, 369 F.3d at 221 (“Substituting the Blue Tree Owners’ repeated use
`in their complaint of the freighted word ‘Kickback’ with the more benign ‘vendor
`payment’ reveals that the Blue Tree Owners have not alleged any improper intent or
`conduct on the part of the vendors who made the payments to Starwood.”).
`8
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`Case 3:20-cv-03426-BRM-LHG Document 145 Filed 04/26/21 Page 18 of 37 PageID: 1656
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`Plaintiffs do not explain how the PBMs breached a fiduciary duty by retaining
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`rebates when PBMs and insurers agree to such arrangements. See AWP, 230 F.R.D.
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`at 73. As one federal court recently observed, how PBM rebates are shared with
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`health insurers “depend[s] almost entirely on the terms of the individual plans”
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`negotiated between PBMs and their clients. In re EpiPen ERISA Litig., 2020 WL
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`4501925, at *3–4 (D. Minn. Aug. 5, 2020); see also PBM Br. 10.
`
`
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`As a fallback, Plaintiffs assert that their allegations are “virtually identical” to
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`the kickback scheme in In re Warfarin Sodium Antitrust Litigation. Opp. 18 (citing
`
`1998 WL 883469 (D. Del. Dec. 7, 1998), rev’d on other grounds, 214 F.3d 395 (3d
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`Cir. 2000)). That compares apples to oranges. Warfarin did not address whether
`
`the plaintiffs had adequately alleged a breach of the duty of fidelity. And the court’s
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`ruling hinged on allegations that a defendant with monopoly control over the market
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`made payments to a wide range of industry participants (including PBMs, managed
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`care companies, retail pharmacies, and pharmacy wholesalers) for the sole purpose
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`of blocking a generic competitor from entering the market. Warfarin, 1998 WL
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`883469, at *2, *16. The payments “were never offered by defendant until the
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`introduction of generic warfarin sodium,” and were part of a “multifaceted attack”—
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`including false statements about the generic product—designed to exclude it from
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`the market altogether. Id. at *2, *11, *16. Plaintiffs make no such allegations here.
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`
`
`9
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`Plaintiffs Fail to Plead a Dummy Brokerage Claim.
`D.
`Confronted with the flaws in their commercial bribery claim, Plaintiffs
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`attempt—for the first time in their opposition—to reinvent their Section 2(c) claim
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`as a dummy brokerage claim. Opp. 13–14. The failure to assert a dummy brokerage
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`claim in the Complaint alone warrants dismissal. See FAC ¶¶ 192–94 (describing
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`the Robinson-Patman Act claim as a “kickback and commercial bribery scheme,”
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`not a dummy brokerage claim); Mills v. Ethicon, Inc., 406 F. Supp. 3d 363, 387
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`(D.N.J. 2019) (“‘It is axiomatic that the complaint may not be amended by the briefs
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`in opposition to a motion to dismiss.’” (citation omitted)).
`
`In any event, Plaintiffs have not stated a dummy brokerage claim. A dummy
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`brokerage fee is a payment from a seller to a “dummy” broker that is passed on to a
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`buyer, allowing the buyer to extract an indirect price concession from the seller. See
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`FTC v. Henry Broch & Co., 363 U.S. 166, 169 (1960). Not only are the health plans
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`not “buyers” from the manufacturers under the Robinson-Patman Act, supra § I.B,
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`but the premise of Plaintiffs’ Section 2(c) claim is that the Manufacturer Defendants
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`(as “sellers”) make unlawful payments to the PBMs (as “agents”) that are not passed
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`on to health plans. See FAC ¶¶ 88, 92, 99. That premise is in direct conflict with a
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`dummy brokerage theory. See Hartford Cas. Ins. Co. v. Am. Dairy & Food
`
`Consulting Lab’ys, Inc., 2009 WL 4269603, at *12 (E.D. Cal. Nov. 25, 2009) (“[I]f
`
`
`
`10
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`a pled claim is internally inconsistent with itself, the inconsistencies may cancel each
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`other out and render the claim subject to dismissal for failure to state a claim.”).
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`II.
`
`
`Plaintiffs’ Sherman Act Claims Should Be Dismissed.
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`Plaintiffs’ opposition does not identify any direct evidence of a price-fixing
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`conspiracy among the Manufacturer Defendants. Instead, Plaintiffs attempt to stitch
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`together “circumstantial” evidence of a conspiracy based on allegations of parallel
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`price increases and “plus factors.” Opp. 26–27. Under the law of this Circuit,
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`Plaintiffs’ circumstantial allegations fail to sustain a plausible conspiracy claim.
`
`A.
`
`Plaintiffs Fail to Plead a Plausible Price-Fixing Claim Among the
`Manufacturer Defendants.
`Plaintiffs’ circumstantial allegations of price fixing face a threshold problem:
`
`
`
`the Third Circuit’s Allergan decision. The plaintiffs in Allergan tried to plead an
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`antitrust conspiracy based on virtually identical allegations of “parallel price
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`increases among []drug manufacturers,” plus the existence of congressional and
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`Department of Justice (“DOJ”) investigations. 975 F.3d at 353–54. The Allergan
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`plaintiffs even added that the DOJ brought criminal price-fixing charges against at
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`least one drug manufacturer. Id. at 353. The Third Circuit nevertheless held that
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`“those allegations fail to support a plausible infe