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`IN THE DISTRICT COURT
`FOR THE DISTRICT OF NEW JERSEY
`
`
`Case No. 3:20-cv-3426-BRM-LHG
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`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’ REPLY 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 146 Filed 04/26/21 Page 2 of 35 PageID: 1677
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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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`
`
`TABLE OF CONTENTS
`TABLE OF AUTHORITIES ................................................................................... vi 
`INTRODUCTION ..................................................................................................... 1 
`ARGUMENT ............................................................................................................. 1 
`I. 
`PLAINTIFFS FAIL TO PLAUSIBLY ALLEGE A SECTION 1
`CLAIM AGAINST THE PBMS. .................................................................... 1 
`A. 
`Plaintiffs have not alleged facts about who agreed with whom
`and about what. ...................................................................................... 2 
`Plaintiffs fail to plead facts plausibly suggesting that the PBMs
`joined an overarching conspiracy. ......................................................... 2 
`1. 
`Allegations of parallel pricing by the Manufacturers do
`not plausibly suggest an agreement involving the PBMs. .......... 3 
`Allegations about vertical rebate arrangements do not
`plausibly suggest an “overarching” price-fixing
`conspiracy. .................................................................................. 4 
`Allegations that the PBMs benefited from higher WAC
`prices do not plausibly suggest an “overarching”
`conspiracy. .................................................................................. 6 
`The Court’s RICO analysis in the Indirect Purchaser
`action is inapposite. ..................................................................... 7 
`Plaintiffs have not plausibly alleged an agreement involving the
`PBMs that would be subject to per se liability. .................................... 8 
`THE ROBINSON-PATMAN ACT CLAIM FAILS ON ITS FACE. .......... 10 
`A. 
`Plaintiffs do not allege that a bribe crossed the buyer-seller line. ...... 10 
`B. 
`There are no factual allegations plausibly suggesting that PBMs
`owed a duty of fidelity to their health-insurer clients. ........................ 12 
`Plaintiffs do not allege an antitrust injury. .......................................... 14 
`
`2. 
`
`3. 
`
`4. 
`
`iv
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`B. 
`
`C. 
`
`C. 
`
`II. 
`
`

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`D. 
`
`III.  THE RICO CLAIMS FAIL THE APPLICABLE PLEADING
`STANDARDS. .............................................................................................. 15 
`A. 
`Plaintiffs fail to allege predicate acts of racketeering. ........................ 15 
`B. 
`Plaintiffs fail to allege proximate causation or injury. ........................ 18 
`C. 
`Plaintiffs fail to plausibly allege that each PBM operated and
`managed a RICO enterprise’s affairs rather than its own affairs. ....... 22 
`Plaintiffs fail to allege the existence of a RICO enterprise
`distinct from the alleged racketeering. ................................................ 24 
`CONCLUSION ........................................................................................................ 25 
`
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`v
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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) ............................................................. 10, 12, 14, 15
`Anza v. Ideal Steel Supply Corp.,
`547 U.S. 451 (2006) ...................................................................................... 18, 22
`Baglio v. Baska,
`940 F. Supp. 819 (W.D. Pa. 1996) ................................................................ 19, 20
`Bell Atl. Corp. v. Twombly,
`550 U.S. 544 (2007) ...................................................................................... 1, 2, 5
`
`Blue Tree Hotels Inv. (Canada) Ltd. v. Starwood Hotels & Resorts
`Worldwide, Inc.,
`369 F.3d 212 (2d Cir. 2004) ............................................................................... 10
`Bridge v. Phoenix Bond & Indem. Co.,
`553 U.S. 639 (2008) ............................................................................................ 20
`Bridges v. MacLean-Stevens Studios, Inc.,
`201 F.3d 6 (1st Cir. 2000) ................................................................................... 11
`Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,
`429 U.S. 477 (1977) ............................................................................................ 14
`Daugherty v. Tiversa Holding Corp.,
`2020 U.S. Dist. LEXIS 14987 (W.D. Pa. Jan. 29, 2020) ................................... 17
`Devon Drive Lionville, LP v. Parke Bancorp, Inc.,
`2018 U.S. Dist. LEXIS 125011 (E.D. Pa. July 26, 2018) .................................. 21
`Dist. 1199P Health & Welfare Plan v. Janssen, L.P.,
`784 F. Supp. 2d 508 (D.N.J. 2011) ..................................................................... 19
`Dreibelbis v. Scholton,
`274 F. App’x 183 (3d Cir. 2008) ........................................................................ 17
`
`vi
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`

`

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`
`
`Eisai, Inc. v. Sanofi Aventis U.S. LLC,
`821 F.3d 394 (3d Cir. 2016) ................................................................................. 8
`Env’t Tectonics v. W.S. Kirkpatrick, Inc.,
`847 F.2d 1052 (3d Cir. 1988) ............................................................................. 10
`Frederico v. Home Depot,
`507 F.3d 188 (3d Cir. 2007) ............................................................................... 10
`Griglak v. CTX Mortg. Co., LLC,
`2010 U.S. Dist. LEXIS 34941 (D.N.J. Apr. 8, 2010) ......................................... 17
`Harris v. Duty Free Shoppers Ltd. P’ship,
`940 F.2d 1272 (9th Cir. 1991) ............................................................................ 11
`Hemi Grp., LLC v. City of N.Y.,
`559 U.S. 1 (2010) ................................................................................................ 19
`Ill. Farmers Ins. Co. v. Mobile Diagnostic Imaging, Inc.,
`2014 WL 4104789 (D. Minn. Aug. 19, 2014) .............................................. 15, 24
`In re Allergan ERISA Litig.,
`975 F.3d 348 (3d Cir. 2020) ................................................................................. 3
`In re Baby Food Antitrust Litig.,
`166 F.3d 112 (3d Cir. 1999) ................................................................................. 6
`In re EpiPen Direct Purchaser Litig.,
`2021 U.S. Dist. LEXIS 8362 (D. Minn. Jan. 15, 2021)................................ 16, 25
`In Re EpiPen Marketing, Sales Practices and Antitrust Litigation,
`— F. Supp. 3d —, 2020 WL 8374137 (D. Kan. Dec. 17, 2020) .......................... 8
`In re Express Scripts, Inc., PBM Litig.,
`2008 WL 2952787 (E.D. Mo. July 30, 2008) ............................................... 13, 27
`In re Generic Pharms. Pricing Antitrust Litig.,
`386 F. Supp. 3d 477 (E.D. Pa. 2019) ............................................................ 3, 6, 7
`In re Ins. Brokerage Antitrust Litig.,
`618 F.3d 300 (3d Cir. 2010) ......................................................................... 2, 5, 9
`
`vii
`
`

`

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`
`
`In re Insulin Pricing Litigation,
`2019 WL 643709 (D.N.J. Feb. 15, 2019) ................................................. 7, 17, 23
`In re LMI Legacy Holdings, Inc.,
`2020 WL 7339917 (D. Del. Dec. 14, 2020) ....................................................... 14
`Kimmel v. Phelan Hallinan & Schmieg, PC,
`847 F. Supp. 2d 753 (E.D. Pa. 2012) .................................................................. 20
`Krauter v. Siemens Corp.,
`725 F. App’x 102 (3d Cir. 2018) ........................................................................ 14
`Leegin Creative Leather Products, Inc. v. PSKS, Inc.,
`551 U.S. 877 (2007) .......................................................................................... 8, 9
`Maio v. Aetna Inc.,
`221 F.3d 472 (3d Cir. 2000) ............................................................................... 22
`Pappa v. Unum Life Ins. Co. of Am.,
`2008 U.S. Dist. LEXIS 21500 (M.D. Pa. Mar. 18, 2008) .................................. 23
`Stephen Jay Photography, Ltd. v. Olan Mills, Inc.,
`903 F.2d 988 (4th Cir. 1990) .............................................................................. 13
`Stephens, Inc. v. Geldermann, Inc.,
`962 F.2d 808 (8th Cir. 1992) .............................................................................. 24
`Toledo Mack Sales & Serv. v. Mack Trucks, Inc.
`530 F.3d 204 (3d Cir. 2008) ................................................................................. 9
`
`United Food & Com. Worker Unions & Emps. Midwest Health Benefits
`Fund v. Walgreen Co.,
`719 F.3d 849 (7th Cir. 2013) ........................................................................ 22, 24
`United States v Apple, Inc.,
`791 F.3d 290 (2d Cir. 2015) ................................................................................. 9
`United States v. Paris,
`159 F.3d 790 (3d Cir. 1998) ............................................................................... 23
`RULES
`Fed. R. Civ. P. 8 ......................................................................................................... 2
`
`viii
`
`

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`Fed. R. Civ. P. 9(b) .................................................................................................. 16
`STATUTES
`15 U.S.C. § 13(c) ..................................................................................................... 11
`OTHER AUTHORITIES
`42 C.F.R. § 1001.952 ............................................................................................... 18
`
`ix
`
`

`

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`INTRODUCTION
`For decades, PBMs have negotiated with drug manufacturers to secure
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`discounts (or rebates) off prescription-drug prices. Policymakers can—and do—
`
`debate whether rebates are the best way to reduce drug costs, but Plaintiffs ask this
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`Court to render moot that debate by finding that pharmaceutical rebates are criminal,
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`despite years of government approval. Plaintiffs allege that the PBMs, by negotiating
`
`for rebates, joined an industry-wide antitrust conspiracy to increase prices for insulin
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`products. And they claim that insulin rebates constitute commercial bribery under
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`the Robinson-Patman Act (RPA) and racketeering under federal RICO.
`
`Plaintiffs ignore the pleading defects identified in the PBMs’ opening brief,
`
`arguing instead for standards that would render Twombly a dead letter and distorting
`
`the substantive laws beyond recognition. Their claims should be dismissed.
`
`I.
`
`ARGUMENT
`PLAINTIFFS FAIL TO PLAUSIBLY ALLEGE A SECTION 1 CLAIM
`AGAINST THE PBMS.
`In their Opposition, Plaintiffs recycle their conclusory allegations that the
`
`PBMs joined an “overarching” scheme to fix insulin prices. But Plaintiffs do not
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`identify factual allegations in their Complaint plausibly supporting their claim that
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`the PBMs joined an industry-wide conspiracy or did anything other than pursue their
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`independent business interests.
`
`1
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`

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`A.
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`Plaintiffs have not alleged facts about who agreed with whom and
`about what.
`The PBMs showed that Plaintiffs fail to allege “who was in agreement with
`
`whom” and “about what.” PBM Br. 5–6; see also In re Ins. Brokerage Antitrust
`
`Litig., 618 F.3d 300, 339 (3d Cir. 2010). Plaintiffs respond by pointing to five
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`conclusory paragraphs that parrot the elements of a Section 1 violation. See Opp’n
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`42 & n. 27 (citing FAC ¶¶ 212, 213, 216, 128, and 129). Plaintiffs’ threadbare
`
`assertions that “Defendants engaged in an overarching conspiracy to artificially fix,
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`raise, maintain and/or stabilize the prices of the Insulin Drugs” (FAC ¶ 212), that
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`Defendants “entered into, and engaged in, a contract, combination, or conspiracy in
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`unreasonable restraint of trade in violation of Section 1 of the Sherman Act” (id. ¶
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`213), and that “Defendants and their co-conspirators engaged in anticompetitive
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`activities” such as fixing prices (id. ¶ 216) are not factual allegations. They are
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`“labels and conclusions” that flunk Rule 8’s plausibility requirement. Bell Atl. Corp.
`
`v. Twombly, 550 U.S. 544, 555 (2007).
`
`B.
`
`Plaintiffs fail to plead facts plausibly suggesting that the PBMs
`joined an overarching conspiracy.
`In their Opposition, Plaintiffs do not identify a single factual allegation in the
`
`Complaint plausibly suggesting parallel conduct by the PBMs and “plus factors”
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`sufficient to meet their pleading burden under Twombly.
`
`2
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`

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`1.
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`Allegations of parallel pricing by the Manufacturers do not
`plausibly suggest an agreement involving the PBMs.
`In defending Count II—the horizontal price-fixing claim against only the
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`manufacturers (not the PBMs)—Plaintiffs emphasize portions of the Complaint that
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`purportedly allege “parallel, lock-step price increases” by the insulin manufacturers.
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`Opp’n 26. Those allegations are insufficient as to the manufacturers. Mfr. Br. 21–22
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`(citing In re Allergan ERISA Litig., 975 F.3d 348 (3d Cir. 2020)). But more
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`importantly, allegations of parallel conduct by the manufacturers cannot sustain
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`Count III—Plaintiffs’ tag-along antitrust claim against the PBMs. See Opp’n 37–38
`
`& n.23.
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`Plaintiffs concede, as they must, that manufacturers—not PBMs—set insulin
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`prices. FAC ¶ 57. And Plaintiffs fail to allege any facts explaining what role the
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`PBMs purportedly played in the manufacturers’ parallel pricing decisions. See In re
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`Generic Pharms. Pricing Antitrust Litig., 386 F. Supp. 3d 477, 483 (E.D. Pa. 2019)
`
`(allegations of price inflation among drug manufacturers did not support an
`
`inference of parallel conduct by distributor, which was “situated at a different level
`
`of the supply chain from the manufacturers and fulfills a wholly different function
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`from the manufacturers”). Plaintiffs’ failure to allege facts about how the PBMs
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`supposedly contributed to the manufacturers’ alleged parallel pricing is fatal to their
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`claims against the PBMs.
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`3
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`

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`2.
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`Allegations about vertical rebate arrangements do not
`plausibly suggest an “overarching” price-fixing conspiracy.
`Plaintiffs also fail to allege “plus factors” sufficient to convert their
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`(nonexistent) allegations of parallelism into a plausible claim that the PBMs
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`participated in an industry-wide conspiracy.
`
`Plaintiffs point to their allegations about “a system of rebates, fees and price
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`increases.” Opp’n 38. But even accepting those allegations as true, Plaintiffs fail to
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`explain how the PBMs’ rebate negotiations plausibly suggest an agreement with the
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`Manufacturers to increase prices in lockstep. For example, Plaintiffs allege that
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`prices for Eli Lilly’s Humalog and Novo Nordisk’s Novolog increased in lockstep
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`between July 2011 and May 2017. FAC ¶¶ 122–23. But Plaintiffs never allege that
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`any PBM negotiated lockstep prices (or rebates for that matter) for Humalog and
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`Novolog, much less that they all did. There is one list price for each drug, so an
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`industry-wide conspiracy to fix that list price would require, among other things, an
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`agreement among all PBMs (not just the three named in this litigation) to fix that
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`single list price and not separately negotiate for different rebates. There are no
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`factual allegations along those lines, and there are no factual allegations supporting
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`a plausible inference that PBM-negotiated rebates contributed to parallel pricing by
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`the manufacturers.
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`
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`On the contrary, Plaintiffs’ allegations defeat, rather than support, any
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`inference of a conspiracy. Plaintiffs allege that PBMs negotiate for rebates to secure
`
`4
`
`

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`the lowest net cost for prescription drugs. FAC ¶ 60. Plaintiffs then allege that PBMs
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`used the threat of formulary exclusion to “pit” the Manufacturers “against each
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`other” to secure the greatest discounts possible. FAC ¶¶ 67, 77–78. Plaintiffs further
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`allege that the Manufacturers responded by increasing WAC prices “in an attempt
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`to offset the increased rebates, discounts and price concessions to maintain a
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`profitable and sustainable business.” FAC ¶ 117. Those allegations, accepted as true,
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`suggest that each PBM acted unilaterally in its own self-interest and are inconsistent
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`with an “overarching” conspiracy in which all PBMs and insulin manufacturers
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`agreed to fix prices.
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`
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`Plaintiffs all but concede that their allegations are consistent with the PBMs
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`acting independently to advance their own self-interest, arguing instead that they do
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`not need to “set forth allegations tending to rule out potential alternative
`
`explanations.” Opp’n 49. Plaintiffs miss the point: “[A]llegations of conspiracy are
`
`deficient if there are ‘obvious alternative explanation[s]’ for the facts alleged.” In re
`
`Ins. Brokerage Antitrust Litig., 618 F.3d at 322–23 (quoting Twombly, 550 U.S. at
`
`567). On its face, the Complaint supports obvious alternative explanations for the
`
`PBMs’ conduct, including that they sought rebates to further their own independent
`
`business interests. See, e.g., FAC ¶¶ 60, 67, 77–78, 117. Without factual allegations
`
`that would tend to rule out those obvious alternative explanations, Plaintiffs’ price-
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`fixing assertions cannot stand.
`
`5
`
`

`

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`3.
`
`Allegations that the PBMs benefited from higher WAC
`prices do not plausibly suggest an “overarching” conspiracy.
`Plaintiffs argue that a conspiracy can be inferred from allegations that the
`
`PBMs benefited from higher WAC prices. See Opp’n 38–41. But as the Third Circuit
`
`has explained, “[i]n a free capitalistic society, profit is always a motivating factor in
`
`the conduct of a business.” In re Baby Food Antitrust Litig., 166 F.3d 112, 134 (3d
`
`Cir. 1999). As a result, courts require more than suggestions that engaging in a
`
`conspiracy would be mutually beneficial; a plaintiff must set forth plausible
`
`allegations that the defendants would not have engaged in the same conduct absent
`
`an agreement. Id. No factual allegations along those lines appear in the Complaint.
`
`In fact, Plaintiffs ignore that they could be subject to antitrust scrutiny if
`
`benefiting from a higher WAC were evidence of a conspiracy. Plaintiffs’ allegations
`
`suggest that wholesalers benefit when WAC prices go up. See PBM Br. 10 & Section
`
`III.B.3. Plaintiffs dismiss this as an “irrelevant aside” and characterize it as a “pass-
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`on defense” (Opp’n 38 & n.24), but yet again Plaintiffs miss the point. Industry
`
`participants at many levels, including direct purchasers, may benefit when drug
`
`manufacturers increase list prices. But when that fact was alleged as a “plus factor”
`
`in a price-fixing case against a direct purchaser, the court rejected the notion that
`
`allegedly benefiting from higher prices supported an inference of conspiracy. In re
`
`Generic Pharms. Pricing Antitrust Litig., 386 F. Supp. 3d at 485. Just as allegedly
`
`benefiting from a higher WAC was insufficient to support a conspiracy between
`
`6
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`

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`manufacturers and direct purchasers, so too is it insufficient to support a conspiracy
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`between manufacturers and PBMs.1
`
`4.
`
`The Court’s RICO analysis in the Indirect Purchaser action
`is inapposite.
`Plaintiffs also argue (Opp’n 45) that this Court should accept their threadbare
`
`
`
`allegation that the PBMs joined an “overarching” price-fixing conspiracy because it
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`sustained allegations “that the PBMs and the Manufacturers were part of a RICO
`
`‘enterprise’” in In re Insulin Pricing Litigation, 2019 WL 643709 (D.N.J. Feb. 15,
`
`2019). Not so. The indirect purchasers in In re Insulin never alleged an
`
`“overarching” enterprise involving all Manufacturers and all PBMs. Instead, they
`
`alleged nine distinct enterprises, each consisting of a single insulin manufacturer and
`
`a single PBM. See id. at *7 (in addition to alleging a RICO conspiracy among
`
`manufacturers themselves, indirect purchasers “also allege separate conspiracies of
`
`pricing enterprises” between each manufacturer and PBM); Indirect Purchaser
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`Complaint ¶ 298 (“The RICO ‘enterprises’ are associations-in-fact consisting of (a)
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`one of the three largest PBMs—CVS, Express Scripts, or OptumRx . . . and (b) one
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`of the Defendant Drug Manufacturers . . . .” ). Those nine alleged bilateral and
`
`
`1 Plaintiffs’ assertion that PBMs are “chummy” with manufacturers because they
`attended the same trade-association meetings (Opp’n 38) is likewise insufficient for
`the same reason that same allegation was insufficient when levied against direct
`purchasers. In re Generic Pharms. Pricing Antitrust Litig., 386 F. Supp. 3d at 486
`(rejecting allegations that direct purchasers sponsored and attended “cozy” trade
`association events with drug manufacturers).
`
`7
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`

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`
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`vertical enterprises alleged by the indirect purchasers bear no resemblance to the
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`supposed industry-wide, “overarching” price-fixing conspiracy alleged here.
`
`C.
`
`Plaintiffs have not plausibly alleged an agreement involving the
`PBMs that would be subject to per se liability.
`The only “agreements” involving the PBMs for which Plaintiffs allege any
`
`facts are the rebate contracts between individual manufacturers and PBMs. Courts
`
`examining PBM rebate agreements have found that they benefit competition and
`
`reduce consumer prices. See In Re EpiPen Marketing, Sales Practices and Antitrust
`
`Litigation, — F. Supp. 3d —, 2020 WL 8374137, at *48 n.22 (D. Kan. Dec. 17,
`
`2020) (finding that the challenged “rebating practices provided consumers greater
`
`discounts on pharmaceutical products—something that benefited consumers”); see
`
`also Eisai, Inc. v. Sanofi Aventis U.S. LLC, 821 F.3d 394, 407 (3d Cir. 2016)
`
`(pharmaceutical rebates to hospitals for exclusivity were “a far cry from the
`
`anticompetitive conduct”). As the Supreme Court held in Leegin Creative Leather
`
`Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), those vertical agreements are
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`tested under the Rule of Reason, not under a per se standard. Id. at 907.
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`That is true notwithstanding Plaintiffs’ effort to rebrand the vertical
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`arrangements between PBMs and Manufacturers as contributing to a horizontal
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`scheme to increase insulin prices:
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`The rule of reason analysis applies even when, as in this case, the
`plaintiff alleges that the purpose of the vertical agreement between a
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`manufacturer and its dealers is to support illegal horizontal agreements
`between multiple dealers.
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`Toledo Mack Sales & Serv. v. Mack Trucks, Inc. 530 F.3d 204, 225 n.15 (3d Cir.
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`2008).
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`
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`Plaintiffs cannot plead a violation under the Rule of Reason (PBM Br. 6–7),
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`so they try to sidestep Toledo Mack and Leegin by citing decisions that pre-date
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`Leegin, involve group boycotts (which are beyond Leegin’s scope), or clash with
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`Third Circuit precedent. Plaintiffs rely, for instance, on United States v Apple, Inc.,
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`791 F.3d 290 (2d Cir. 2015), even though the dissent in that case acknowledged that
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`the majority’s decision conflicts with Toledo Mack. Id. at 346–47.2
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`Plaintiffs also cite In re Insurance Brokerage Antitrust Litigation, 618 F.3d
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`300, 327 (3d Cir. 2010), and allude in a footnote to the concept of “[s]o called ‘hub
`
`and spoke’ conspiracies.” Opp’n 48, 43 & n.28. Yet Plaintiffs never mention a “hub
`
`and spoke” conspiracy in the Complaint, nor do they claim now that they alleged
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`one. There are no allegations about who is the supposed “hub,” who are the supposed
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`“spokes,” and which agreements form the “rim” or the “wheel.” In re Ins. Brokerage
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`Antitrust Litig., 618 F.3d at 327.
`
`
`2 Even if Apple applied, Plaintiffs haven’t alleged facts fitting this case into that
`decision. In Apple, the government alleged (and eventually proved) that Apple
`facilitated the conspiracy among the publishers by developing, proposing, and
`policing the challenged pricing agreements. Here, by contrast, there is no factual
`allegation that connects the PBMs to any pricing decision by the Manufacturers.
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`II. THE ROBINSON-PATMAN ACT CLAIM FAILS ON ITS FACE.
`Defendants showed in their opening briefs that Plaintiffs failed to allege a
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`violation of Section 2(c) of the Robinson-Patman Act (RPA) and that they lack
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`antitrust standing to assert a Section 2(c) claim. PBM Br. 12–15; Mfr. Br. 11–17. In
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`their Opposition, Plaintiffs ignore the law and their own allegations by relying on
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`supposed fiduciary relationships that do not exist and, if they did exist, have no
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`connection to the transactions that Plaintiffs claim implicate Section 2(c).
`
`A.
`Plaintiffs do not allege that a bribe crossed the buyer-seller line.
`In addition to prohibiting so-called dummy brokerage fees,3 the Third Circuit
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`has read Section 2(c) to prohibit certain types of commercial bribery. See, e.g., 2660
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`Woodley Rd. Joint Venture v. ITT Sheraton Corp., 369 F.3d 732, 738 (3d Cir. 2004).
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`As Plaintiffs recognize, a Section 2(c) claim requires that “the illegal payments in
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`question crossed the line from buyer to seller or vice versa.” Env’t Tectonics v. W.S.
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`Kirkpatrick, Inc., 847 F.2d 1052, 1066 (3d Cir. 1988); Opp’n 7 & n.7. That is, the
`
`entity receiving the alleged bribe must be directly involved in the challenged
`
`
`3 Plaintiffs now assert that they allege a “paradigmatic dummy brokerage” claim
`even though there are no factual allegations of that sort in the Complaint. Opp’n 13.
`Plaintiffs cannot assert a new claim in an opposition brief. See Frederico v. Home
`Depot, 507 F.3d 188, 202 (3d Cir. 2007). At any rate, Plaintiffs argue that a
`“dummy” brokerage claim turns on a sham broker “pass[ing] the fees on” to the
`buyer.” Opp’n 5 (quoting Blue Tree Hotels Inv. (Canada) Ltd. v. Starwood Hotels
`& Resorts Worldwide, Inc., 369 F.3d 212, 221 (2d Cir. 2004). But Plaintiffs
`elsewhere allege that PBMs do not pass on rebates to their clients. See, e.g., FAC ¶¶
`88–100. Their unpleaded dummy brokerage argument makes no sense.
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`transaction as either the buyer or seller of the product in question (or as the buyer or
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`seller’s agent), and the bribe must cross the line between buyer and seller.
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`To determine if that requirement is met, courts look at the “transactions in
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`question” rather than the “parties’ relationship generally.” Bridges v. MacLean-
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`Stevens Studios, Inc., 201 F.3d 6, 12–13 (1st Cir. 2000); see also Harris v. Duty Free
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`Shoppers Ltd. P’ship, 940 F.2d 1272, 1275 (9th Cir. 1991) (“reference must be made
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`to the transactions in question to determine whether or not the necessary relationship
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`exists”). Section 2(c) is concerned only with payments made in connection “with the
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`sale or purchase of goods, wares or merchandise . . . to the other party to such
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`transaction” or its agent. 15 U.S.C. § 13(c) (emphasis added).
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`Here, the Plaintiff Wholesalers allege that Manufacturers sell insulin, and that
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`Plaintiffs buy insulin. FAC ¶ 56. Accordingly, for the purposes of Section 2(c), the
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`relationship for the “transaction in question” is this:
`
`
`
`Defendant Manufacturers
`(Sellers)
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`Plaintiff Wholesalers
`(Buyers)
`
`For the transactions between the Manufacturers and Plaintiff Wholesalers,
`
`Plaintiffs do not allege that PBMs are either a party or an agent to either the buyers
`
`(Plaintiffs) or the sellers (the Manufacturers). The alleged payments to the PBMs do
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`not come within the ambit of Plaintiffs’ Section 2(c) claim.
`
`Plaintiffs’ argument that PBMs are agents of employer-funded health plans
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`(Opp’n 14) doesn’t change the analysis. Plaintiffs challenge allegedly illegal
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`payments by the insulin Manufacturers. Retail transactions between insurers, insulin
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`patients, and pharmacies are irrelevant to the RPA claim that Plaintiffs have pleaded.
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`In re Warfarin Sodium Antitrust Litigation cannot salvage Plaintiffs’ RPA
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`claim. Far from “alleging a kickback scheme virtually identical to that alleged in the
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`FAC” (Opp’n 18), the Warfarin Sodium plaintiff was a competing manufacturer—
`
`not a direct purchaser—who claimed that other manufacturers paid commercial
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`bribes to “pharmacy wholesalers,” among others, to exclude the plaintiff
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`manufacturer from the market. 1998 WL 883469, at *16 (D. Del. Dec. 7, 1998).
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`Defendants there never challenged whether the allegations identified supposed
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`bribes that crossed the buyer-seller line, and the court never addressed the question.
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`At bottom, Plaintiffs allege that they are the “buyers” of insulin products—
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`but only when it suits their interest. They are the “buyers” when they need to avoid
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`the indirect-purchaser bar for their RICO claims. See, e.g., Opp’n 59. They are also,
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`apparently, the “buyers” for antitrust standing purposes. Opp’n 24–25. Their attempt
`
`to ignore that allegation to avoid dismissal of their Section 2(c) claim smacks of
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`gamesmanship and, in any event, fails as a legal matter.
`
`B.
`