Drugmakers, PBMs must face RICO claims over insulin drug pricing

(Reuters) - Drug manufacturers Eli Lilly and Co, Novo Nordisk Inc and Sanofi-Aventis US LLC, along with leading pharmacy benefit managers must face drug wholesalers' class action claims that they schemed to inflate the price of insulin drugs, a federal judge has ruled.

U.S. District Judge Brian Martinotti in Trenton, New Jersey on Friday denied motions by the drugmakers and by the PBMs — United Health Group's OptumRx Inc unit, CVS Health Corp's Caremark LLC and Express Scripts Inc — to dismiss claims under the federal Racketeer Influenced and Corrupt Organizations Act, though he dismissed related antitrust claims without prejudice.

"We're pleased that the court dismissed all of the antitrust claims, and we will continue to defend the company against the remaining claims," Novo Nordisk, represented by James Rouhandeh of Davis Polk & Wardwell, said in a statement.

"Sanofi is pleased that the court has narrowed the claims at issue," a spokesperson for the company, represented by Michael Shumaker of Jones Day, said in an email. "The remaining claims are also without merit."

The other defendants and their lawyers – Melissa Geist of Reed Smith for Lilly, Brian Boone of Alston & Bird for OptumRx, Enu Mainigi of Williams & Connolly for Caremark and Jason Scherr of Morgan, Lewis & Bockius for Express Scripts – did not immediately respond to requests for comment.

Nor did Michael Roberts of Roberts Law Firm, Don Barrett of Barrett Law Group and Dianne Nast of NastLaw, who represent the plaintiffs – Missouri-based distributor Professional Drug Co Inc and FWK Holdings LLC, an entity that owns antitrust claims formerly belonging to bankrupt Michigan distributor Frank W. Kerr Co.

The lawsuit, filed last year, involves so-called insulin analog drugs used to treat diabetes. Novo Nordisk makes insulin analog drugs NovoLog and Levemir, Sanofi makes Lantus and Lilly makes Humalog.

The plaintiffs alleged that insulin drug prices have been inflated by kickbacks, in the form of rebates and administrative fees, paid by drugmakers to PBMs in exchange for favorable placement on PBMs' drug formularies.

The plaintiffs alleged that the rebates and fees, which are often based on drugs' average wholesale prices, create an incentive for PBMs to accept higher prices rather than negotiate on behalf of buyers.

The plaintiffs brought claims under RICO and two federal antitrust laws: the Robinson-Patman Act, which bans anticompetitive price discrimination, and the Sherman Antitrust Act, which more broadly bans anticompetitive conduct.

Martinotti wrote on Friday that plaintiffs lacked standing to sue under Robinson-Patman Act claim because they were not direct competitors of the drug companies that allegedly paid bribes, and did not have a fiduciary relationship with the PBMs that allegedly received them.

He wrote that the Sherman Act claims failed because the plaintiffs did not allege that the drugmakers colluded with one another to fix prices.

However, the judge said the plaintiffs had supported their RICO claim by alleging illegal kickbacks and inflated drug prices. He noted that a Minnesota court earlier this year allowed a similar RICO case to go forward against EpiPen maker Viatris Inc.

The case is In re Direct Purchaser Insulin Pricing Litigation, U.S. District Court, U.S. District Court, District of New Jersey, No. 20-cv-03426.

For plaintiffs: Michael Roberts of Roberts Law Firm; Don Barrett of Barrett Law Group; and Dianne Nast of NastLaw

For Lilly: Melissa Geist of Reed Smith

For Novo Nordisk: James Rouhandeh of Davis Polk & Wardwell

For Sanofi: Michael Shumaker of Jones Day

For UnitedHealth and Optum: Brian Boone of Alston & Bird

For CVS Caremark: Enu Mainigi of Williams & Connolly

For Express Scripts: Jason Scherr of Morgan, Lewis & Bockius

Read more:

Mylan loses bid to dismiss EpiPen antitrust claims

Sanofi, Novo Nordisk and Lilly named in patients' price fixing suit

Our Standards: The Thomson Reuters Trust Principles.