Insulin makers ask 2nd Circuit to keep price-fixing suit tossed

MANHATTAN (CN) — An upstate New York community health care provider asked a Second Circuit Court panel on Friday to revive its antitrust conspiracy claims against four top major drug manufacturers it accuses of colluding to manipulate the pricing of insulin products to boost profits on discounted drugs under a federal subsidy program.

During oral arguments Friday, U.S. Circuit Judge Maria Araújo Kahn questioned whether the community pharmacy had in fact mounted a plausible inference that the relative timing of the drugmakers’ rollouts of restrictions on diabetes drug discounts had been surreptitiously coordinated.

“Isn’t it plausible that they came up with this plan to engage in slightly different conduct to achieve what they sought to achieve through their lobbying efforts that became unsuccessful,” the Joe Biden appointee said, appearing remotely by video teleconference.

Responding to the drugmakers’ suggestion it was not plausible to think that sophisticated drug manufacturers would have staggered announcements of 340B restriction to avoid detection, only to have two of the pharmaceuticals announce their restrictions within a day of the other, Kahn pondered: “One might argue it’s a clever attempt to disguise the conduct by spreading it over time, but failed in that one instance.”

Mosiac Health and Central Virginia Health Services initially filed their complaint in 2021 to certify a nationwide class of thousands of clinics and hospitals covered by the 340B drug discount program of the Public Health Service Act, while attempting to enact significant national healthcare policy reform through the antitrust laws, and collect treble damages for millions of dollars in drug sales.

The discounted drug pharmacies accused the manufacturers — Eli Lilly & Co., Safoni-Aventis, AstraZeneca Pharmaceuticals, and Novo Nordisk — of lobbying to curtail abuse of the 340B drug discount program, and when those efforts failed, they conspired to adopt parallel policy changes that reduced the availability of 340B discounts for insulin products.

U.S. District Judge Elizabeth Wolford of Western District of New York in Rochester dismissed Mosaic’s amended complaint in 2024, finding that the plaintiffs failed to present a viable antitrust claim under the Sherman Act.

Appealing that dismissal to the Second Circuit, Mosaic argued that the lower court’s definition of parallel conduct was too narrow and erroneous. On appeal, the discount drug pharmacy says Wolford erred in holding that “historically unprecedented restraints on 340B discounting,” all announced in the second half of 2020, could not qualify as “parallel conduct” because of “substantial variations in their timing and particulars.”

“All drugmakers could benefit from fewer discounts — but only defendants controlled key diabetes markets, giving them a special safety-in-numbers motive to conspire,” Mosaic wrote in an appellant brief. “There was nearly zero chance that defendants only randomly became the first movers out of 1,000. Their unprecedented changes give rise to a strong inference of conspiracy.”

During oral arguments on Friday, Aurelian Law attorney Brian Feldman told the three-judge panel: “The conspiracy alleged is to decimate contract pharmacy sales, which all of them achieved.”

Each of the defendant pharmaceutical companies adopted the same rule to stop shipping to contract pharmacies, Feldman argued.

“Then they adopted different exceptions, right — we have a single pharmacy exception; we have an insulin and cost exception; We have we’re going to exclude these particular covered entities,” he said.

“Those exceptions differ, but the rule was the same, and the result was the same,” he continued. “The variety here is much less variety than in Twombly itself,” he said, referring to the U.S. Supreme Court’s 2007 decision in Bell Atlantic Corp. v. Twombly,  which set requirements for plaintiffs to include enough facts in their complaint to plausibly support their claims.

The pharmaceutical companies challenge that claim, arguing in an appellee brief that the timing and particulars of each their policy changes “are far too divergent to constitute parallel conduct."

“In fact, the sequence of alleged events demonstrates defendants acted independently — there was an initial mover, followed by subsequent actors, each of which reacted individually and differently over many month,” they argued.

“The district court rightly dismissed plaintiffs’ first amended complaint and denied leave to amend further, recognizing that the defendants’ independent actions are insufficient to support a conspiracy claim, and plaintiffs’ far-fetched theory is implausible on its face,” they wrote in the appeals brief. “Defendants acted independently in their own self-interest when they implemented varying policies to govern their individual 340B sales to individual covered entities, and plaintiffs do not offer any plausible allegations to the contrary.”

Fellow Biden appointees U.S. Circuit Judges Alison Nathan and Myrna Pérez rounded out the panel, which did not indicate when it would rule.

Congress created the 340B Drug Pricing Program to allow covered entities such as qualifying safety-net hospitals, clinics and other providers to buy outpatient drugs at a discount from drugmakers participating in Medicaid. Health care providers also benefit through insurance reimbursements that usually exceed the discounted cost of such drugs, which they use improve other provided services.

According to a Government Accountability Office analysis, over 2,600 hospitals — approximately a third of the nation’s hospitals — participate in the 340B program.

The discounts average from 25% to 50% and allow health care providers to offer uninsured and underinsured patients free or low-cost drugs.

The distribution of the drugs is not uniform, as some contract pharmacies maintain separate inventories of Section 340B drugs, while most have a mixed inventory of discounted and nondiscounted drugs.

Pharmacies with mixed inventories determine after a drug has been dispensed whether it was eligible for the discount, outsourcing those determinations to third-party administrators who receive larger fees for every prescription deemed eligible.

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