Drugmakers Cleared of Price-Chopping Claims

(CN) - Johnson & Johnson and other drug manufacturers did not violate federal law by offering HMOs lower prices on drugs like Lipitor, Celebrex and Zoloft, the Second Circuit ruled.

The dispute stems from a Northern Illinois multidistrict litigation wherein a class of pharmacies failed to prove that drugmakers' pricing violated the Sherman Act.

A group of 28 plaintiffs, including Cash & Henderson Drugs Inc. of Chesnee, S.C., opted out, suing Johnson & Johnson, Caremark LLC and other drug producers in Brooklyn, N.Y.

Since the early 1990s, the defendants have offered "favored purchasers" lower prices -often via rebates or discounts - on brand-name prescription drugs like Lipitor, Celebrex and Zoloft.

The buyers include staff-model health maintenance organizations, which offer services provided by the HMOs' own staff rather than by third-party contracted providers.

Also snagging the slashed prices are pharmacy benefit managers, which handle benefits for insurers and HMOs and sometimes engage in retail sales directly or through mail-order pharmacies that they control, according to court records.

The favored purchasers illegally used their drug formularies - lists specifying which medications are approved for reimbursement - to get lower prices, the lawsuit claims.

The lower prices allegedly violated the Robinson-Patman amendment to the Clayton Act by stealing customers and harming the plaintiffs' ability to compete.

An Eastern New York district court granted the drugmakers summary judgment in 2012, finding that the pharmacies could prove neither a competitive nor antitrust injury to support their claims for money damages and injunctive relief.

The pharmacies appealed, but the Second Circuit upheld the lower court's ruling on Thursday.

"The evidence showed that only approximately 3 percent of lost customers could be confirmed as lost to the favored purchasers through the matching process," Judge Barrington Parker wrote for a three-judge panel. "The participants in the matching process lost an average of approximately 18 customers and 54 transactions per year. This loss must be measured in the context of the tens of thousands of prescriptions that an independent retail pharmacy fills every year."

Klein's Pharmacy, the plaintiff with the highest number of lost transactions, lost just over one percent of brand name drug transactions per year, according to the ruling. The judge said that does not demonstrate competitive injury.

The pharmacies also failed to show their alleged injuries are the type contemplated by the Robinson-Patman Act, as required to prove antitrust injury, the ruling states.

"Plaintiffs cannot show a reasonable probability of future injury because, although they have alleged injury to competition over an extended period of time, the allegations fail for lack of evidence," Parker wrote. "That failure militates strongly against injunctive relief. Plaintiffs have offered no argument that future conditions will change in such a way as to make the injuries they claim to have suffered more pronounced than currently alleged. Thus, injunctive relief is inappropriate."

The parties did not immediate respond to requests for comment from Courthouse News.

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