Antitrust Law Daily No standing for union health plan claims against Sanofi for free drug sample scheme
Tuesday, May 9, 2017

No standing for union health plan claims against Sanofi for free drug sample scheme

By Edward L. Puzzo, J.D.

A union health plan lacked standing to bring state unfair trade practices claims against a pharmaceutical company it charged caused monetary damage through a free samples scheme involving the osteoarthritis medication Hyalgan, and a diabetes drug switching scheme, because they failed to specifically allege that the plan or any of its beneficiaries paid, let alone overpaid, for the drug in the relevant states during the relevant time period, the federal district court in Newark, New Jersey has ruled. Another plaintiff, an association of union third-party payors, did not have associational standing because the monetary claims required individual participation. It did have standing, however, for some of its claims of injunctive and declaratory relief (Plumbers’ Local Union No. 690 Health Plan v. Sanofi, S.A., May 4, 2017, McNulty, K.).

Plaintiff Plumbers’ Local Union No. 690 Health Plan (Local 690), with members in five states, is a third-party payor (TPP) that reimburses its members for the cost of prescription drugs. Plaintiff Delaware Valley Health Care Coalition (DVHCC) is a coalition of union TPPs that negotiate prescription drug benefit contracts with pharmacy benefit managers (PBMs). DVHCC’s TPPs are located in 12 states and the District of Columbia.

Local 690 and DVHCC brought an action against pharmaceutical company Sanofi and certain of their officers and managers, alleging, among other claims, that a free sample scheme and a diabetes drug scheme, allegedly engaged in by defendants, violated New Jersey's Consumer Fraud Act (NJCFA), Pennsylvania's Unfair Trade Practices and Consumer Protection Law (UTPCPL), New York's General Business Law (NYGBL), and California’s Unfair Competition Law Business & Professions Code (UCL). Defendants moved to dismiss, based on a lack of standing and the failure to state a claim.

Free samples scheme. Plaintiffs alleged that they were damaged by having to pay inflated prices for Hyalgan due to Sanofi’s scheme to manipulate Medicare and Medicaid reimbursement rates, which are based on the drug’s average sales price (ASP), by giving doctors hundreds of thousands of free samples. However, the court noted, the dollars, dates, and circumstances of any particular overcharge were not identified by plaintiffs. Despite a reference in the second amended complaint to a settlement involving Hyalgan, there was no non-speculative factual allegation that Local 690 actually paid an inflated price for Hyalgan attributable to any free sample distributed in the relevant states. Specific doctors and patients were not named, nor was there a minimal factual allegation that Local 690 ever paid for Hyalgan treatment for any of its North Carolina or New Jersey beneficiaries. Allegations regarding the conduct of pharmaceutical sales representatives in Florida—promises of rebates of free samples of Hyalgan after a certain amount was purchased—were more specific, but still did not specifically allege that Local 690 or any of its beneficiaries paid, let alone overpaid, anything for Hyalgan in any of the relevant states during the relevant time.

Article III standing, the court explained, requires a non-speculative injury-in-fact, with a causal connection between the injury and the conduct at issue. Because Local 690 did not allege factually that it paid for a Hyalgan treatment in North Carolina or Florida at all, it necessarily did not allege that it overpaid, and therefore did not allege that it suffered an injury-in-fact. Even assuming the allegations were sufficient to provide Article III constitutional standing, they were insufficient to state a claim under Federal Rule of Civil Procedure 12(b)(6), the court found.

Associational standing. As to plaintiff DVHCC, as a coalition of TPPs, it lacked first-party standing and sought associational standing. Among the requirements for associational standing are that its members have standing to sue on their own, and that neither the claim asserted nor the relief sought required individual participation by its members. The first requirement doomed most of DVHCC’s claims, the court found. DVHCC sued on behalf of its member TPPs in over a dozen states, but only alleged that Hyalgan samples were distributed and paid for by certain member TPPs in 4 states during a specific time period. These allegations were general and conclusory, the court found. The court concluded that DVHCC only presented a plausible case for its members’ standing in two states, based on its members paying for Hyalgan while free samples of the drug were simultaneously being distributed to doctors who treated DVHCC’s members’ beneficiaries.

However, the individual-participation prong of the associational standing analysis—the requirement that that neither the claim asserted nor the relief required individual participation by its members—largely eliminated any claims that met the first requirement. Claims for monetary relief usually require individual participation, meaning associations generally cannot raise these claims on behalf of their members. Therefore, the only claims DVHCC could maintain, the court found, were prospective claims of injunctive and declaratory relief.

The court concluded that Local 690 did not have standing to bring any claims related to the alleged free samples scheme. DVHCC had standing only on behalf of its New York and California beneficiaries, only for injunctive relief, and only against defendant Fidia, which assumed the rights to market Hyalgan in the U.S. in 2011.

Diabetes drug scheme. In addition to the alleged free sample scheme, the plaintiffs also alleged that they were damaged by a kickback scheme that induced retail pharmacies, such as Walgreens and Rite Aid, switch plaintiffs’ beneficiaries from competitors’ diabetes drugs to more expensive Sanofi diabetes drugs. The court noted that the complaint did not cite to any example of DVHCC or its members having paid an increased cost for a Sanofi diabetes drug due to a pharmacy’s switching a beneficiary from a lower cost drug. As to Local 690, the complaint alleged merely that a medication was switched, but did not specify whether the decision to switch was made by a doctor or patient, rather than the pharmacist. These allegations were insufficient to establish a justiciable injury, let alone one cause by defendants’ conduct. Therefore, the court found that neither Local 690 nor DVHCC had standing to bring claims related to the alleged diabetes drug scheme.

The case is No. 2:15-cv-00956-KM-MAH.

Attorneys: Donald E. Haviland, Jr. (Haviland Hughes) for Plumbers' Local Union No. 690 Health Plan. Liza M. Walsh (Walsh Pizzi O'Reilly Falanga LLP) for Sanofi-Aventis US, Inc. and Sanofi, SA.

Companies: Plumbers' Local Union No. 690 Health Plan; Delaware Valley Health Care Coalition; Sanofi-Aventis US, Inc.; Sanofi, SA.

MainStory: TopStory StateUnfairTradePractices NewJerseyNews

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