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From Antitrust Law Daily, August 13, 2018

Pfizer suit against J&J over conduct in biologic markets survives motion to dismiss

By Robert B. Barnett Jr., J.D.

Pfizer adequately stated claims that Johnson & Johnson engaged in an anticompetitive scheme to prevent Pfizer’s Inflectra and other biosimilars from competing with Johnson & Johnson’s Remicade in the drug market for products treating immune-mediated diseases, a federal district court in Philadelphia has ruled. By alleging that Johnson & Johnson used exclusive dealing arrangements and bundled rebates with insurers and providers to lock the biosimilars out of the market, which harmed not just Pfizer and the other biosimilar manufacturers but also private insurers, government payers, and consumers, Pfizer has sufficiently met its obligation of pleading anticompetitive conduct that caused an antitrust injury (Pfizer Inc. v. Johnson & Johnson, August 10, 2018, Joyner, J.).

Background. Johnson & Johnson produces a biologic drug called Remicade to treat conditions such as rheumatoid arthritis, ulcerative colitis, and Chron’s disease. A biologic is a complex mixture derived from living systems, in contrast to the typical drug, which is chemically synthesized. As a mixture derived from living systems, where the exact chemical structure is not precisely known, biologics are more difficult to replicate and produce. As a result, knock-offs of biologics are referred to as biosimilars rather than as generics. In any event, Johnson & Johnson developed Remicade in 1999 and came to dominate the market. Pfizer developed a biosimilar to Remicade called Inflectra, received FDA approval for it, and then launched it in 2016 at prices that were lower than Remicade’s price. As this point, according to Pfizer’s allegations, Johnson & Johnson launched a plan to pressure insurers and providers to sign exclusionary contracts that shut out the biosimilars. For example, the contract would either exclude biosimilars from the plan or it would state that the insurer could approve a biosimilar only if the patient first failed on Remicade. Johnson & Johnson also allegedly used multi-product bundled rebates, rebates based on bundling of existing and new patients (Johnson & Johnson already controlled virtually all of the exiting patients), and rebate traps that prevented others from competing with Remicade. According to Pfizer, the scheme has resulted in Pfizer being locked out of 70% of the market and 90% of the providers refusing to stock Inflectra. Johnson & Johnson reportedly has a 96% market share in the U.S.

Pfizer and its subsidiary Janssen Biotech, Inc. filed suit in Pennsylvania federal court against Johnson & Johnson, alleging claims under Section 1 of the Sherman Act, Section 2 of the Sherman Act, and Section 3 of the Clayton Act. Johnson & Johnson filed a motion to dismiss. The pleading requirements were the same under all three sections: Pfizer was required to show that Johnson & Johnson engaged in anticompetitive conduct that caused Pfizer to suffer an antitrust injury.

Anticompetitive conduct. Pfizer set forth the anticompetitive conduct in detail, including Johnson & Johnson’s exclusionary contract terms, the incentives that led payors and providers into accepting those terms, and Pfizer’s efforts to compete under those conditions. The court rejected Johnson & Johnson’s argument that the allegations were insufficient, and it concluded that Pfizer had satisfied the pleading requirements for establishing anticompetitive conduct.

Antitrust injury. Pfizer was required to allege harm to competition, not just harm to its own business. The court concluded that Pfizer sufficiently alleged an antitrust injury from Johnson & Johnson’s anticompetitive conduct. For example, Pfizer alleged that Johnson & Johnson’s efforts to keep Pfizer out of the market raised prices for consumers and limited options for end payors, providers, and patients. In arguing that Pfizer failed to allege an antitrust injury, Johnson & Johnson made several arguments for alternative explanations for market conditions. The court acknowledged that the arguments may have validity, while also reminding Johnson & Johnson that their arguments were more appropriately made after discovery at the summary judgment stage. The court, therefore, rejected Johnson & Johnson’ argument that Inflectra’s lack of success was caused by Pfizer’s own actions. The court also rejected Johnson & Johnson’s argument that Pfizer failed to plead facts establishing that it attempted to compete in the market. Once again, while Johnson & Johnson’s arguments that Pfizer wrongly relied on Average Sales Price and Wholesale Acquisition Cost because they lack specificity may have validity, the arguments were premature. Much discovery remains to be done. In the meantime, however, Pfizer satisfied its pleading requirements at the motion to dismiss stage for establishing an antitrust injury.

The court, therefore, denied Johnson & Johnson’s motion to dismiss.

The case is No. 2:17-cv-04180-JCJ.

Attorneys: Bryan Daniel Gant (White & Case LLP) for Pfizer Inc. Adeel A. Mangi (Patterson Belknap Webb & Tyler LLP) and Ashley E. Bass (Covington & Burling LLP) for Johnson & Johnson and Janssen Biotech, Inc.

Companies: Pfizer Inc.; Johnson & Johnson; Janssen Biotech, Inc.

MainStory: TopStory Antitrust PennsylvaniaNews

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