The Franchise Memorandum

The United States District Court for the District of Kansas has granted in part and denied in part motions by the distributor and supplier of EpiPen® products (“Mylan” and “Pfizer,” respectively) to dismiss a class action lawsuit initiated by the products’ consumers. In re EpiPen Mktg., Sales Practices, & Antitrust Litig., 2018 WL 3973153 (D. Kan. Aug. 20, 2018). The consumers’ 1,400-paragraph complaint alleges that Mylan and Pfizer have devised an unlawful scheme to establish a monopoly over the epinephrine auto-injector products market. It claims Mylan and Pfizer’s conduct violated state and federal antitrust laws, the federal RICO act, and state consumer protection laws. The court’s rulings with respect to certain of the antitrust claims are discussed here.

Among other theories of antitrust liability, the consumers allege that Mylan’s switch to the distribution of two EpiPen devices in one package, exclusively, constitutes an unlawful tying arrangement. In denying Mylan’s motion to dismiss this claim, the court held that the consumers adequately pled that, although qualitatively identical, the EpiPen devices in the single package involved two separate product markets—one for primary-use devices, the other for back-up devices. Thus, the two-pack arguably forces consumers to buy a product in another market that it may not have otherwise purchased. The class complaint also asserts antitrust claims based on Mylan’s alleged exclusive dealing contracts with Pharmacy Benefits Managers (PBMs) (third parties responsible for administering health insurers’ prescription drug benefit programs) and public schools. The court held that the complaint adequately alleged that the significant rebates that Mylan offered to PBMs on EpiPen products were designed to have, and had, the anticompetitive effect of excluding competitors from the PBMs’ prescription coverage formularies. The court, however, held that the consumers’ related claim concerning rebates offered to state-based Medicaid agencies was barred by the Noerr-Pennington doctrine, which immunizes a private entity’s legitimate use of political process from antitrust liability, even where the intent is to eliminate competition. Finally, the court held that the consumers had adequately alleged that Mylan’s exclusive dealing contracts with schools and school districts had the probable effect of foreclosing a substantial share of competition in the market.