ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
Healthcare Antitrust
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Judge Upholds Poaching Claims in Pharmaceutical Data Antitrust Case

by | Aug 22, 2014 | , ,

On Friday, August 15, 2014, Judge Gerald McHugh of the Eastern District of Pennsylvania let stand several counterclaims that IMS Health Inc. (IMS) made against Symphony Health Solutions Corp. (Symphony) in connection with related to allegations that Symphony had poached IMS employees to steal trade secrets.

In July 2013, Symphony brought a complaint against IMS, the largest pharmaceutical data and analytics company in the world, alleging that IMS unlawfully abused its monopoly power in pharmaceutical data markets and violated the antitrust laws through various types of horizontal and vertical exclusionary conduct, including entering into exclusive long-term agreements with data suppliers, requiring data suppliers to sign most-favored-nation clauses, acquiring rivals to eliminate competition, and bundling its products.  In response to the complaint, IMS filed multiple counterclaims alleging that Symphony poached IMS employees to steal IMS’s trade secrets. Symphony then filed a motion to dismiss IMS’s counterclaims.

After reviewing Symphony’s motion to dismiss, Judge McHugh dismissed IMS’s trade secret misappropriation claims as to two former IMS employees as barred by res judicata.  Specifically, a prior consent order already addressed concerns that Symphony gained access to IMS’s trade secrets through the two former IMS employees.  Judge McHugh also dismissed IMS’s claim of tortious interference regarding a vendor because IMS’s “prediction” of future harm could not sustain its claim.

However, Judge McHugh let IMS’s poaching claims go forward and refused to dismiss IMS’s claims of improper procurement of confidential information and unfair competition.  As to improper procurement, Judge McHugh highlighted IMS’s allegation that its former employee hired by Symphony made a public presentation with IMS materials.  With respect to unfair competition, Judge McHugh ruled that IMS had stated facts sufficient to support its claim when it alleged that “Symphony targeted for hire groups of employees who worked in parts of IMS’s business that Symphony wished to duplicate, with the purpose of appropriating IMS’s trade secrets.”



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Contractual Duty to Deal Does Not Equal Antitrust Duty to Deal

by | Jul 31, 2014 | , ,

Addressing for the first time whether a patent holder under a contractual duty to deal is also subject to an antitrust duty to deal, the U. S. Court of Appeals for the Second Circuit upheld dismissal of a putative antitrust class action challenge to a drug manufacturer’s refusal to fully supply competitors’ requested quantities under patent settlement agreements.  In re Adderall XR® Antitrust Litigation, Case No. 13-1232 (2d Cir., June 9, 2014) (Sack, J.).

The defendants, Shire, hold patents covering Adderall XR.  Previously, Shire sued generic drug manufacturers Teva and Impax for patent infringement after those manufacturers—seeking U.S. Food and Drug Administration (FDA) approval to produce generic Adderall XR—argued that Shire’s patents were “invalid or will not be infringed.”  Shire settled with Teva and Impax in 2006 with variants of the traditional reverse-payment agreement.  In these settlement agreements, Teva and Impax agreed to stay out of the Adderall XR market for three years (even if FDA approval came earlier), but unlike a traditional reverse-payment agreement (where the patent holder pays money to the potential entrant), Shire agreed to grant licenses starting in 2009 for making and selling the drug and, if FDA approval had not yet occurred, to supply Teva and Impax’s requirements of unbranded Adderall XR for resale.  The 2d Circuit summarized the arrangement as follows: “Shire undertook to give its competitors both the rights and the supplies necessary to participate in the market for [Adderall XR].”  By the time Shire’s contractual exclusivity expired, the FDA had not approved either Teva or Impax’s applications, so Teva and Impax began purchasing from Shire.  Shortly thereafter, both companies alleged that Shire breached the settlement agreement obligations by refusing to fully fulfil their requirement orders.  However, both companies eventually settled with Shire.

In the present case, drug wholesaler and plaintiff Louisiana Wholesale Drug Company (LWD) brought a putative class action against Shire.  It alleged antitrust violations stemming from the effect of the supply shortfall on the prices the proposed class of drug wholesalers paid.  LWD argued that Shire’s “ordinary breach of contract” became “an unlawful act of monopolization” because, by entering into the agreements, Shire “relinquish[ed] its monopoly control over” Adderall XR vis-à-vis Teva and Impax and thereby created a “duty to deal” with its competitors under the Supreme Court’s 1985 Aspen Skiing decision.  Specifically, LWD alleged that Shire artificially inflated prices by holding back some of its supply from generic manufacturers/patent licensees Teva and Impax, from whom LWD purchased Adderall XR.  After the district court dismissed the complaint on a R. 12(b)(6) motion to dismiss, LWD appealed.

The 2d Circuit affirmed the district court’s dismissal for failure to state a claim, concluding that LWD’s “allegations amount to the self-defeating claim that Shire monopolized the market by ceding its monopoly” and that “the complaint does little more than attach antitrust ‘labels and conclusions’ to what is, at most, an ordinary contract dispute to which the plaintiffs are not even parties.”  The court reasoned that “‘the sole exception to the broad right of [...]

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Getting the Deal Through: Pharmaceutical Antitrust 2014

by | Jul 16, 2014 | ,

McDermott has contributed to the Italian chapter of the 2014 edition of “Pharmaceutical Antitrust” published by Getting the Deal Through, a valuable work tool for legal practitioners dealing with antitrust rules in the pharmaceutical sector.  The chapter addresses the most significant regulatory and antitrust issues affecting the marketing, authorization and pricing of pharmaceutical products in Italy.

Click here to read the full chapter.



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Federal Judge Puts Narcolepsy Drug Horizontal Conspiracy Claims to Bed

by | Jun 27, 2014 | ,

On Monday, June 23, 2014, a Federal Judge in the Eastern District of Pennsylvania granted summary judgment for five pharmaceutical companies on horizontal conspiracy claims brought by Apotex Inc. and direct purchaser and end payor plaintiffs regarding the popular narcolepsy drug Provigil.  Provigil’s key ingredient is modafinil, “a wakefulness-promoting agent” used to treat sleep disorders like narcolepsy.  Apotex and the Provigil buyers claimed that Cephalon, Inc. unlawfully restrained trade and maintained a monopoly on modafinil sales by facilitating a horizontal conspiracy through reverse payment settlements with generic-drug manufacturers.

Cephalon, which manufacturers Provigil, entered into reverse payment settlements (also known as “pay-for-delay”) between 2005-2008 to settle patent infringement litigation with Teva Pharmaceutical Industries Ltd., Ranbaxy Laboratories Ltd, Mylan Inc., and Barr Laboratories, Inc.  Although Judge Mitchell Goldberg previously held the plaintiffs’ claims were sufficient to withstand a motion to dismiss, on summary he judgment he found insufficient evidence of a conspiracy.

Judge Goldberg held that the plaintiffs lacked sufficient evidence to demonstrate the existence of the alleged hub-and-spoke conspiracy.  He reasoned that evidence of “conscious parallelism” among the defendants’ behavior was not enough to levy an antitrust claim when equally plausible independent explanations for their behavior exist.  For example, the generic-drug manufacturers were separately compensated and some would receive favored treatment regarding royalty rates.  The “pay-for-delay” settlement agreements also created contingent launch provisions, reassuring generic companies that they would not lose the opportunity to launch if another generic-drug manufacturer obtained an earlier date.  Had the agreements been contrary to the generic-drug manufacturers’ self-interest, the claims would have more closely resembled noteworthy hub-and-spoke conspiracy cases.

Judge Goldberg cautioned, however, that the court’s opinion does not address the legality of each individual “pay-for-delay” settlement agreements between Cephalon and the generic-drug manufacturers.  The Federal Trade Commission is separately challenging the settlements under antitrust law.



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Perspectives from the Federal Antitrust Enforcement Agencies

by , and | May 20, 2014 | , ,

At the recent Antitrust in Health Care conference in Arlington, Virginia, representatives from the Federal Trade Commission and U.S. Department of Justice Antitrust Division discussed important health care and antitrust topics.  Speakers stressed that the Affordable Care Act is not an opportunity for anticompetitive consolidation and conduct.  Providers and payers alike should continue to analyze every acquisition, collaborative arrangement, contract or unilateral action under the traditional framework of antitrust law.

Please click here to read the full article.



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The Case of Ophthalmic Drugs in Italy and France: A Lesson to Learn – Parallel Antitrust Investigations and Cooperation Between National Competition Authorities

by and | May 7, 2014 | , ,

The recent investigations into two pharmaceutical companies active in the ophthalmic drugs market in Italy and France serve as a reminder of the cooperation that takes place between national competition authorities. International groups should therefore take into account all the jurisdictions where they have a presence or do business when developing their antitrust audit and compliance programmes.

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FTC Hosts Public Workshop, “Examining Health Care Competition”

by , and | Mar 26, 2014 | ,

During the last several years, the Federal Trade Commission (FTC) has taken an active role in antitrust enforcement in the health care industry, particularly with respect to hospital and physician group acquisitions.  Last week, the FTC held a two-day public workshop to examine new trends and developments in the health care industry related to professional regulations of health care providers, health information technology, new care delivery models, quality measurements and pricing transparency and how those developments may affect competition.  Health care providers should anticipate increased FTC scrutiny of these trends and how they affect health care costs, quality, access and care coordination.

Click here to read the full article.



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Court Orders Divestiture of Consummated Physician Practice Acquisition

by | Feb 14, 2014 | ,

In a challenge brought both by private plaintiffs and the government, a court has ruled that a health system’s acquisition of a competing physician group practice violated the antitrust laws where the transaction resulted in the health system employing 80 percent of the primary care physicians in one area.  Hospitals and health systems pursuing physician practice mergers should carefully consider the implications of this decision on proposed acquisitions and should incorporate antitrust due diligence into their transaction planning.

Click here to read the full article.



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FTC Focuses Enforcement Efforts on Health Care, Technology and Energy Sectors

by | Nov 25, 2013 | , , , ,

On November 15, 2013, Chairwoman Edith Ramirez testified on behalf of the Federal Trade Commission (FTC) before the House Subcommittee on Regulatory Reform on the topic of antitrust oversight and enforcement.  Ramirez explained that the FTC “focuses its enforcement efforts on sectors that most directly affect consumers, such as health care, technology and energy.”

The FTC has identified health care provider consolidation as a significant component of increasing health care costs, and overseeing provider combinations has remained a key priority for the agency.  The FTC has also undertaken efforts to promote competition between manufacturers of generic and brand-name drugs.  In addition to litigating “pay-for-delay” settlements, the Commission has filed amicus briefs to advocate against other practices it considers anticompetitive, such as “product hopping,” the practice of altering the formula of a brand-name drug in a minor, non-therapeutic way in order to preserve monopoly power in the face of generic competition.

In the technology arena, the FTC has targeted the problem of patent hold-up.  The Commission has pursued enforcement actions aimed at preventing holders of standard essential patents from rescinding agreements to license the patents on reasonable and non-discriminatory (RAND) terms.  The FTC is also actively looking into the potential harms and efficiencies of “patent assertion entities,” which are companies “with a business model focused primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technology.”

The Chairwoman noted that the Commission utilizes “all the powers at its disposal” to police competition in the energy sector, and it considers merger review “essential to preserving competition in these markets.”  The agency also monitors gasoline and diesel fuel prices on a daily basis for unusual pricing activity, which could be a sign of anticompetitive conduct.



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Healthcare Provider Fees May Constitute Kickbacks Even Without Direct Referrals

by | Nov 15, 2013 |

In a recent advisory opinion, the Department of Health and Human Services inspector general warned health care providers about entering into contracts that may generate illegal kickbacks and result in administrative penalties.  An unnamed anesthesiology provider requested advice regarding a proposed contract with an in-hospital psychiatric service.  Currently, the anesthesiology provider is the exclusive provider of anesthesia services to a hospital, with the exception of the in-house psychiatric service, which uses its own provider.  Prior to 2011, the anesthesiology provider was the exclusive provider for the hospital, including psychiatric services.  In December 2010, however, the psychiatric service relocated its practice to the hospital and negotiated for the right of its anesthesiologist to offer services to its patients, thus eliminating the anesthesiology provider’s exclusivity contract for psychiatric care.

Under the proposed arrangement, the in-house psychiatric service would contract out anesthesiology services to the anesthesiology provider for days when its anesthesiologist is unavailable or an additional anesthesiologist is needed.  The anesthesiology provider would receive a per diem payment for each day its services were requested.  Per the arrangement, the psychiatric service would retain a fee equal to the difference in the fee billed by the in-house psychiatric service and collected from Medicare, Medicaid, third party payors and patients, and the per diem amount paid to the anesthesiology provider.

Although there was no direct referral for the anesthesiology services, the inspector general cautioned that such remuneration could violate anti-kickback statutes, resulting in the imposition of penalties under sections 1128(b)(7) or 1128A(a)(7) of the Social Security Act.  Both of those sections refer to the commission of acts detailed in the federal anti-kickback statute.  The inspector general stated that the arrangement essentially allowed the psychiatric service to accomplish indirectly that which it could not do directly—receive a fee from the anesthesiology provider’s revenues in exchange for sending patients to the provider.  In effect, such an arrangement constituted a referral.

Under the federal anti-kickback statute, it is illegal to knowingly and willfully offer, pay, solicit or receive any remuneration to induce or reward referrals of items or services reimbursable by a federal health care program.  The statute is violated if remuneration is purposefully paid—even if it is just one purpose of the remuneration—with the intent to induce or reward further referrals of items or services payable by a federal health care program.  Some safe harbors exist for practices that are unlikely to result in fraud or abuse.  Additionally, a determination of intent is required to assess the illegality of the kickbacks.  Health care providers should consider how to structure contracts and other arrangements to avoid illegal kickbacks and other anticompetitive effects that may result in administrative penalties.



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