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From Antitrust Law Daily, August 28, 2015

Johnson & Johnson, Caremark evade price discrimination claims

By Greg Hammond, J.D.

Summary judgment against a group of 28 retail pharmacies’ price discrimination claims was proper where the pharmacies failed to demonstrate competitive or antitrust injury. The U.S. Court of Appeals in New York City affirmed the lower court’s order granting Johnson & Johnson’s and Caremark LLC’s motion for summary judgment, finding that the pharmacies merely demonstrated they lost a nominal number of customers and transactions (Cash & Henderson Drugs, Inc. v. Johnson & Johnson, August 27, 2015, Parker, B.).

The pharmacies claimed that certain pharmaceutical manufacturers—including Johnson & Johnson, Caremark, and Express Pharmacy Services of PA, LLC—offered lower prices through rebates or discounts on brand name prescription drugs to health maintenance organizations (HMOs) and pharmacy benefit managers, in violation of the Robinson-Patman Act and Clayton Act. In addition, the pharmacies asserted they lost customers to the favored purchasers. The district court granted summary judgment against the antitrust claims, finding that the pharmacies’ matching process—under which plaintiffs attempted to identify customers they had lost to the favored purchasers—showed that the plaintiffs only lost a minuscule number of customers and that they could therefore not demonstrate competitive or antitrust injury. The pharmacies appealed.

Competitive, antitrust injury. The appellate court agreed that the evidence before the lower court failed to raise a question of material fact as to whether the pharmacies suffered competitive injury. While the matching process demonstrated the pharmacies occasionally lost customers to some favored purchasers—approximately three percent, or an average of 18 customers and 54 transactions per year—the number of lost customers was de minimis when compared to the tens of thousands of prescriptions a pharmacy fills each year. The court rejected the pharmacies’ argument that they were entitled to an inference of competitive injury, finding that to accept the minimal evidence of displaced sales as creating an irrebuttable presumption of competitive injury made little sense because it would introduce theoretical rigidity in an area of law that aims to respond to economic reality. Further, an irrebuttable presumption would allow for the protection of competitors to trump consideration of competition generally, which the Supreme Court has expressly counseled against.

The pharmacies’ argument that the lower court relied entirely on the matching process in reaching its decision and improperly excluded other evidence was also rejected. Rather, the lower court considered the additional non-specific evidence of damages and affidavits claiming additional lost customers, but found that the evidence was not sufficiently probative to create a genuine factual dispute as to competitive injury or damages, the appellate court concluded.

Because the pharmacies failed to raise a genuine issue of material fact as to competitive injury, the court also determined that the pharmacies failed to raise a question of material fact as to whether their alleged injuries are the type of injury contemplated by the Robinson-Patman Act, as required to show antitrust injury.

Lastly, because the claims of competitive and antitrust injury failed, the pharmacies could not show a reasonable probability of future injury. The court therefore affirmed the order granting summary judgment over the claim for injunctive relief.

The case number is 12-4689-cv.

Attorneys: Nicholas A. Gravante, Jr. (Boies Schiller & Flexner LLP) for Cash & Henderson Drugs, Inc. William F. Cavanaugh Jr. (Patterson Belknap Webb & Tyler LLP) for Johnson & Johnson. Michael Sennett (Jones Day) for Caremark, LLC and Express Pharmacy Services of PA, LLC.

Companies: Cash & Henderson Drugs, Inc.; Johnson & Johnson; Caremark LLC.; Express Pharmacy Services of PA, LLC

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