Antitrust Law Daily Wrap Up, ANTITRUST—DNJ: Health Benefit Providers Lack Standing to Pursue Claims Against Merck over Pharmaceutical Discount Programs, (May 1, 2013)

By Tobias J. Gillett, J.D., LL.M.

Health benefit providers lacked standing to assert RICO and commercial bribery claims against pharmaceutical manufacturer Merck & Co., Inc. over pharmaceutical discount programs that allegedly violated health insurance and anti-kickback laws and constituted insurance fraud, according to the federal district court in Newark. The providers failed to allege that the programs caused the providers to pay for drugs for which they otherwise would not have had to pay, and therefore could not show an injury (Plumbers and Pipefitters Local 572 Health and Welfare Fund v. Merck & Co., Inc., April 29, 2013, Shipp, M.).

Merck is a major pharmaceutical manufacturer that offers discount cards and coupons to privately insured individuals that cover some or all of the co-pay that the individuals would otherwise have to pay for certain Merck prescription drugs. Individuals can obtain these coupons or cards from a doctor’s office or through a website operated by Merck. Pharmacists will enter an individual’s prescription drug insurance information first, and then the discount card as a form of secondary insurance.

Health benefit providers filed suit against Merck, alleging that Merck’s programs "bribe plan members to choose its branded drugs over less-expensive therapeutic alternatives" by reducing the cost of the drugs to the plan members, but that the cost borne by the providers may be as much as ten times the cost of the generic alternative. They alleged that the programs constituted a secondary form of insurance that did not comply with laws governing health insurance, and that the programs violated federal and state anti-kickback laws. In addition, they alleged the programs constituted "insurance fraud because routine waiver of co-payments reduces true acquisition costs, yet drug manufacturers withhold co-payment information, do not decrease the applicable reimbursement benchmark for the drugs, and cause inflated payments to be imposed upon private prescription drug benefit providers."

The providers asserted putative class action claims for violations of the RICO Act, conspiracy to violate the RICO Act, commercial bribery in violation of the Robinson-Patman Act, and tortious interference with contractual relations. Merck moved to dismiss.

The court agreed with Merck that the health benefit providers lacked Article III standing to pursue their claims. The court explained that, to have Article III standing, a plaintiff must establish "1) an injury in fact, 2) a causal connection between the injury and the conduct complained of, and 3) that the injury will be redressed by a favorable decision."

Here, the health benefit providers failed to allege facts demonstrating that their alleged increased costs were the result of Merck’s programs, in the court’s view. The court adopted Merck’s argument that the providers’ alleged standing was "based on pure conjecture about the actions and motivations of unidentified doctors and unidentified patients with respect to unidentified prescriptions and unidentified payments by" the providers.

The providers failed to allege that any individual doctor prescribed a Merck drug when he or she otherwise would not have due to the Merck programs, the court observed. Moreover, the providers did not allege that "1) any patient insisted on receiving a prescription for a drug covered by the program that his doctor would not have otherwise prescribed, 2) that drug was prescribed, and 3) plaintiffs were compelled to pay for the prescription in lieu of a cheaper alternative medication." The providers made no allegations that the programs had any direct effects on the prescribing activities of the providers’ members’ physicians, nor did they allege any facts which would "identify any individual instance in which [the providers] were forced to pay for medication they otherwise would not have."

Therefore, the court dismissed the providers’ claims with leave to file amended complaints.

The cases are Nos. 12-1379 (MAS) (LHG), 12-3652 (MAS) (LHG), and 12-7027 (MAS) (LHG).

Attorneys: Lisa J. Rodriguez (Trujillo Rodriguez & Richards, LLC) for Plumbers and Pipefitters Local 572 Health and Welfare Fund. Douglas Scott Eakeley (Lowenstein & Sandler PC) for Merck & Co., Inc.

Companies: Plumbers and Pipefitters Local 572 Health and Welfare Fund; Merck & Co., Inc.

Cases: Antitrust RICO NewJerseyNews