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.
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.
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.
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.
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.
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.
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.
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.
On October 11, 2013, the plaintiffs in the Detroit nurses litigation who have accused Detroit-area hospitals of conspiring to suppress their wages opposed VHS of Michigan, D/B/A Detroit Medical Center’s (DMC) petition to the Sixth Circuit for leave to appeal the district court’s decision granting class certification.
DMC had asked the Sixth Circuit to do an interlocutory appeal of a September ruling certifying a class of more than 20,000 registered nurses seeking more than $1.7 billion in damages based on a purported antitrust conspiracy among Detroit-area hospitals to reduce nurse wages.
The lawsuit was first filed in December 2006 and accuses the Detroit area hospitals of conspiring with one another to keep registered nurses’ wages low. In particular, the lawsuit alleges that the hospitals agreed to exchange compensation information to reduce wages and competition to hire and retain Detroit nurses. DMC is the only remaining defendant in the case. The other seven defendants previously settled the litigation.
In September, a district court judge granted plaintiffs’ motion for class certification. The hospital asked the Sixth Circuit to review that ruling a few weeks later. In support of that request, DMC argued that the district court’s decision conflicts with the approach followed by other federal courts and raises important questions about the proper interpretation of the Supreme Court’s recent decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013) (Comcast).
In particular, DMC argued that plaintiffs should not have been able to establish predominance through a damages model that calculated damages based in part on a theory of liability (wage fixing claim) that had already been dismissed on a motion for summary judgment. In addition, DMC argued that the district court failed to take a “close look” at the damages model before certifying the class.
Plaintiffs argued that DMC attempted to make a strained analogy to Comcast and also criticized DMC for raising arguments on appeal that were not raised with the district court. Plaintiffs argued that this case does not present the sort of “novel or unsettled question” of “class litigation in general” that is worthy of the Sixth Circuit’s discretionary review.
The full case name is In re: VHS of Michigan, Inc., No. 13-113 (6th Cir. filed Sep. 27, 2013).
The New York Department of Health recently published a proposed regulation that lays out the rules governing the issuance of certificates of public advantage for health care collaborations within the state.
To read the full article please click here.
Subscribe
