Health Law Daily Drug maker’s claims of Medicare Part D market shut out dismissed
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Wednesday, March 27, 2019

Drug maker’s claims of Medicare Part D market shut out dismissed

By David Yucht, J.D.

Sherman Antitrust claim of a drug company whose eye care drug was shut out of Medicare Part D market by a rival manufacture failed to plausibly plead a broad enough relevant market or anticompetitive conduct. State law claim for tortious interference was also dismissed.

A federal district judge in New Jersey found that Shire US, Inc., a manufacturer of a drug for the treatment of dry eye disease (DED), did not plausibly plead claims of anticompetitive conduct under the Sherman Act against its rival manufacturer, Allergan, Inc. for allegedly shutting Shire’s drug out of the Medicare Part D market. Shire’s proposed relevant market—Medicare Part D—was not plausibly pled because it was too narrow and did not take into account the general market. Also, Shire’s allegations that Allergan had agreements where it bundled its DED medication with other drugs and entered into exclusive agreements were insufficient to make out a case of anticompetitive conduct. As a result, Shire’s Sherman Act claims were dismissed. The court also dismissed a state law claim for tortious interference (Shire US, Inc. v.Allergan, Inc., March 22, 2019, Vazquez, J.).

Dry eye disease. DED occurs when the eye does not produce enough tears or when tears are not of the correct consistency. The disease is evidenced by inflammation and damage to the ocular surface, resulting in blurry or fluctuating vision and eye fatigue. About one million Americans receive prescription drug treatment for DED. Shire’s Xiidra® and Allergan’s Restasis® are the only FDA-approved prescription drugs on the market for treatment of DED. There are no reasonable over-the-counter substitutes for treating DED. The FDA approved Shire’s Xiidra for treatment of both the symptoms and signs of DED. Restasis® was approved only for treatment of a specific symptom of DED—reduced tear fluid volume—which affects only 10 percent of those with DED. Shire alleged that Allergan coerced Medicare Part D prescription drug plans to exclude Shire’s DED drug from the market by anticompetitive bundling and exclusive dealing arrangements in violation of the federal Sherman Antitrust Act (15 U.S.C. sec. 1 et seq.) and state laws. Shire filed suit in federal court. The district court granted Allergan’s motion to dismiss.

Medicare Part D. For purposes of its antitrust claims, Shire identified the Medicare Part D DED market as the relevant product market. Part D is an optional outpatient prescription drug program for senior citizens to receive discounted and subsidized prescription drugs. Participants in Part D can choose from a variety of plans. The list of drugs covered by a plan is called the plan’s "formulary." Formularies offer drugs in tiers that dictate the patient’s copayment. Drugs with the lowest copayment are listed in the "preferred" tier, followed by the "non-preferred" tier. If a drug is not listed on a formulary, then it is considered "not covered" and the patient must either pay for the drug in full or file a successful appeal with the plan.

Alleged anticompetitive practices. Shire alleged that Allergan engaged in anticompetitive bundling by contracting with two plans to offer Restasis in a bundled portfolio of drugs at a price below its average cost. Allergan offers a number of products in its Part D portfolio aside from Restatsis, including a series of glaucoma drugs. Shire alleged that Allergan offers Restasis to Part D plans at a below cost price in consideration of the placement of the glaucoma drugs on preferred tiers. Shire also alleged that Allergan engaged in an exclusive dealing contract with another plan which barred the plan from offering Shire’s DED drug on its formulary. Shire asserted that these practices resulted in its being effectively blocked from the Part D market.

Relevant market. The court dismissed Shire’s lawsuit. It noted that in an antitrust matter, the relevant markets must be defined. The court found that the relevant product market here consisted of those to whom Shire could sell unless special circumstances existed. As a result, Shire’s proposed relevant market—Medicare Part D—was not plausibly pled because it was too narrow. The proposed market failed to account for others, such as non-government commercial payers. There was no allegation that Part D DED sales were essential to Shire’s survival. The court also noted that neither bundled rebates nor exclusive dealing contracts were inherently anticompetitive. Also, there was no allegation that Allergan had a monopoly over the glaucoma drugs which it bundled with Restasis, which would have given Allergan an unfair advantage. Shire had not plausibly pled the requisite anticompetitive conduct. The state claim of tortious interference was also dismissed because it was based solely on alleged anticompetitive conduct, which the court had ruled was not plausibly pled.

The case is No. 2:17-cv-07716-JMV-SCM.

Attorneys: Elina Slavin (Saul Ewing Arnstein & Lehr LLP) for Shire US, Inc. Liza M. Walsh (Walsh Pizzi O'Reilly Falanga LLP) for Allergan, Inc., Allergan Sales, LLC and Allergan USA, Inc.

Companies: Shire US, Inc.; Allergan, Inc.; Allergan Sales, LLC; Allergan USA, Inc.

MainStory: TopStory CaseDecisions CMSNews AntitrustNews DrugBiologicNews PartDNews PrescriptionDrugNews NewJerseyNews

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