SAN FRANCISCO (CN) – A Las Vegas vaccination clinic on Monday tried to persuade the Ninth Circuit that the Southern Nevada Health District and GlaxoSmithKline are driving doctors out of business by abusing a federal drug discount program to dole out cheap vaccines while pocketing millions of dollars.
The Vaccine Center, a profit-seeking vaccination clinic, claimed in 2012 that the Southern Nevada Health District abused the federal 340B Prime Vendor Program, which requires drug companies to offer health care providers that serve poor and indigent patients deep discounts on vaccines.
The Vaccine Center said in a brief to the court that the Health District bought vaccines from Glaxo at reduced prices and resold them at a markup to people and businesses that can pay full price - such as casinos that vaccinate employees and residents planning African safaris - in violation of antitrust law.
Glaxo and Apexus were also named as defendants. Glaxo sold the vaccines and Apexus managed the federal program.
But at the Monday hearing, Circuit Judge N. Randy Smith said the Health District had acted lawfully.
“This is the state of Nevada and the County of Clark saying, 'This is what you gotta do,'" Smith said.
The Southern Nevada Health District, based in Las Vegas, the seat of Clark County, serves 70 percent of Nevada citizens.
According to the Vaccine Center, the Health District paid Glaxo $22.02 per dose for a hepatitis A vaccine and resold it for $40 to $50.
The Vaccine Center says it paid $62.34 per dose and resold it for $84.
The Vaccine Center said it paid $90.09 per dose for Twinrix vaccine, for hepatitis A and B, and resold it for $139, while the Health District got it for $50.26 and resold it for $70.
By illegally exploiting the discount, the Health District established a virtual monopoly that has driven doctors in southern Nevada out of business, the Vaccine Center said in its brief to the court.
Seeking reversal Monday, Vaccine Center attorney Richard Kellner told the court the defendants are using the Health District’s mission statement, "to promote the health and well-being of Nevada citizens," to claim an "own use" exemption under the Robinson-Patman Act afforded by the Nonprofit Institutions Act.
The Nonprofit Institutions Act exempts a nonprofit from liability under Robinson-Patman when it buys supplies for its own use.
Kellner said exemptions must be narrowly interpreted. In this case, he said, that means looking at the Health District’s operations, not its mission statement.
Kellner said the Health District and Glaxo are not entitled to "own use" immunity for selling vaccines to casinos, which he said the Health District actively solicits.
"They're wiping out doctors," Kellner said. "I don't believe you can expand the whole concept of this exemption to wipe out one side. The Health District wants to wipe it all out because they are choosing this grand large mission, and that just can't be consonant with the narrowly construed exemptions.”
A federal judge ruled in 2014 that the Health District’s and Glaxo’s vaccine sales were immune from antitrust liability based on "own use" because they were sold as part of the agency's mission to maintain public health. Apexus was ruled immune based on implied immunity.
Judge Smith disagreed with Kellner's argument Monday.
"The broad mission statement, I agree," Smith said. "But it isn't. It's Nevada law - not only saying what they do, but directing them to do it. That's different than a broad goal."
Kellner countered that the law does not direct the defendants to compete with private doctors, but Smith said the plight of doctors is irrelevant.
"I have to look at what is in fact their institutional function, and then after finding the function, then I have to say, 'Does this meet the function or not?'" Smith said, referring to the Health District and Glaxo.
"Whether it drives out the doctors or not, that's an end result that has not one thing to do with it. I'd be the first one to say we ought to have competition, but I have to now put this law into effect."
Asking the appellate panel to affirm, Health District attorney Terry Coffing said vaccinating people no matter what they can afford is the "clearest example" of "own use."
Vaccinating travelers who can afford full price vaccines is within the Health District’s mandate to immunize as many people as possible, he said, because once they return to Nevada from areas with communicable diseases, they can transmit the diseases in Nevada.
"That is why there is no distinction between who we inoculate or their economic means," Coffing said. "That is not a test for 'own use.'"
Smith agreed, saying: "I don't know why they wouldn't have the idea they're supposed to vaccinate as many people as they can."
U.S. Circuit Judge Alex Kozinski and U.S. District Judge Sharon Gleason, sitting by designation from the District of Alaska, joined the panel.
Kellner is with Kabateck Brown Kellner in Los Angeles, Coffing with Marquis Aurbach Coffing in Las Vegas.
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