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From Antitrust Law Daily, September 8, 2014

Physicians adequately allege Merck monopolized mumps vaccine market

By Jeffrey May, J.D.

A monopolization claim against Merck & Co., Inc. over its conduct in the market for mumps vaccines was adequately alleged, the federal district court in Philadelphia has decided. Merck's motion to dismiss the Sherman Act, Section 2 claim, as well as claims under the New York Deceptive Acts and Practices Act (NYDAPA) and New Jersey Consumer Fraud Act (NJCFA), was denied (U.S. v. Merck & Co., Inc., September 5, 2014, Jones, C.).

Merck is the sole manufacturer licensed by the Food and Drug Administration (FDA) to sell mumps vaccine in the United States. Former employees of Merck brought a qui tam action in accordance with the False Claims Act (FCA) against their former employer. They alleged that Merck fraudulently misled the government and omitted, concealed, and adulterated material information regarding the efficacy of its mumps vaccine in violation of the FCA.

Complaining physicians filed a separate putative class action against Merck based on the qui tam action. The physicians alleged that Merck's manipulation and misrepresentation of the mumps vaccine to the U.S. government secured the defendant’s monopoly in the market in violation of the Sherman Act. They also sought to pursue claims under 24 state consumer protection laws.

Despite "a slightly novel theory of liability," the complaining physicians sufficiently pleaded a monopolization claim. The plaintiffs contended that Merck willfully maintained its monopoly power through falsifying data presented to the government. According to the plaintiffs, potential rivals were dissuaded from entering the market because these firms presumed that the U.S. government would not create additional contracts for new vaccine products while the defendant’s vaccine had a 95% efficacy rate. The defendant’s fraudulent misrepresentations about its own product, coupled with the unique facts of the case—such as Merck's 100% market share and its arguable statutory and contractual duties to disclose information—created the basis for an antitrust claim that Merck willfully maintained monopoly power through exclusionary conduct, the court ruled.

State law claims. The physicians who purportedly were deceived into purchasing the defendant’s product also adequately stated claims against Merck under New Jersey and New York state consumer protection laws, according to the court. While the complaint provided sufficient basis to conclude that the named plaintiffs were injured in their home states—including New Jersey and New York—these plaintiffs lacked standing to bring claims based on the laws of states in which they did not reside. They had not sufficiently pleaded injuries-in-fact in those states. Because the plaintiffs alleged that the defendant's deception was one part of a larger scheme to maintain an anticompetitive business regime, the court rejected Merck's contention that the NYDAPA and NJCFA allegations were preempted by federal law as a "private fraud-on-the-Food & Drug Administration (FDA) claim." Thus, the only state consumer protection law claims not dismissed were the NYDAPA and NJCFA claims. In addition, breach of contract and unjust enrichment claims were dismissed without prejudice.

The cases are Nos. 10-4374 and 12-3555.

Attorneys: Andra Waniek (Labaton Sucharow LLP) and Bernard Persky (Robins Kaplan Miller & Ciresi LLP) for Chatom Primary Care, P.C., Andrew Klein, M.D. and John I. Sutter, M.D. Dino S. Sangiamo (Venable LLP) for Merck & Co., Inc.

Companies: Chatom Primary Care, P.C.; Merck & Co., Inc.

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