Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Pa. Sup. Ct.: Judgment that pharmaceutical companies engaged in deceptive practices was vacated and remanded over drug rebates, (Jun 18, 2014)

By Greg Hammond, J.D.

A judgment that fourteen pharmaceutical companies violated the Pennsylvania Unfair Trade Practices Consumer Protection Law by manipulating price data of prescription drugs—and an award of more than $27.5 million in favor of the Commonwealth of Pennsylvania—was vacated by the Supreme Court of Pennsylvania (Pennsylvania v TAP Pharmaceutical Products, Inc., June 16, 2014, Saylor, T).

The case was remanded for a determination of whether prescription drug rebates offset any alleged losses experienced by the state due to the pharmaceutical companies’ allegedly deceptive behavior.

Background. The Commonwealth of Pennsylvania filed suit against Bristol-Myers Squibb Company and 13 other pharmaceutical companies on behalf of the state’s Department of Public Welfare and the Pharmaceutical Assistance Contract for the Elderly (PACE), alleging that the pharmaceutical companies violated the Unfair Trade Practices Consumer protection Law (TPCPL) by causing inflated average wholesale prices (AWPs) for their brand-name drugs. At trial, the director of the PACE program testified that it is well known in the industry that AWPs are not transaction prices and are frequently marked up 20 to 25 percent. The director further stated that he was not deceived by BMS with regard to AWPs and that rebates offset money spent on the AWP. The Commonwealth’s damages expert, an economist, also noted that rebates flowed like “backwash” relative to the Commonwealth’s reimbursement payments.

The trial court found that BMS violated the UTPCPL, and permanently enjoined the company from “reporting, or contributing to the reporting of, AWPs to” the Commonwealth’s agencies. The court also awarded the Commonwealth over $27.5 million in restoration damages. The Commonwealth Court largely dismissed BMS’ post-trial motion for relief, and BMS appealed to the Supreme Court of Pennsylvania.

Decision reversed. According to the Pennsylvania Supreme Court, the Commonwealth’s failure to account for the billions of dollars it received in rebates from drug manufacturers was fatal to its case. Specifically, the Court found that because the issue of rebates was not discussed, the Commonwealth failed to prove any harm that resulted from the pharmaceutical companies’ pricing practices. Consequently, the lower court’s decision was vacated, and the case was remanded to the lower court, according to the terms of Justice Baer’s concurring opinion, which submits the rebate issue to the lower court to put an end to the litigation.

The case number is 85 MAP 2011.

Attorneys: Robert C. Heim (Dechert LLP) for Bristol-Myers Squibb Co. Steven M. Edwards (Hogan Lovells US LLP) for Bristol-Myers Squibb Co. Donald E. Haviland, Jr. (Haviland Hughes, LLC) and Joseph Stephen Betsko (PA Office of Attorney General) for Commonwealth of Pennsylvania. Kevin Joseph Kehner (Obermayer Rebmann Maxwell & Hippel, LLP) for Johnson & Johnson.

Companies: Bristol-Myers Squibb Co.; Bristol-Myers Squibb Co.; Johnson & Johnson

Cases: StateUnfairTradePractices PennsylvaniaNews