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1 A Publication of the Health Care and Pharmaceuticals Committee of the American Bar Association s Antitrust Section Co-Chairs: Philip Nelson Economists Incorporated Washington, DC Jeffrey Brennan McDermott Will & Emery Washington, DC Editors: Kari Wallace Fed. Trade Comm n Washington, DC kwallace@ftc.gov About Recent Developments December 2013 Recent Developments is published six times a year by the ABA Antitrust Section Health Care and Pharmaceuticals Committee and contains summaries of recent federal and state court cases, government enforcement actions, and other recent developments involving antitrust and privacy issues in the health care and pharmaceutical industries. Please contact the editors, Kari Wallace (kwallace@ftc.gov), Imran Ahmad (iahmad@casselsbrock.com), or Nina Frant (nina.frant@kirkland.com); if you would like to get involved with the publication or if you have any comments or suggestions. This publication is being distributed via the Committee listserv (AT-HCIC) and will be available through the Recent Developments archive on the Committee website at: To get involved with any other activities of the Committee, please contact the Committee Chairs, Philip Nelson (nelson.p@ei.com) and Jeffrey Brennan (jbrennan@mwe.com). Recent Developments Contributors Imran Ahmad Cassels Brock Toronto, ON iahmad@casselsbrock.com Nina Frant Kirkland & Ellis LLP Washington, DC nina.frant@kirkland.com Ahron D. Cohen Snell & Wilmer LLP Phoenix, AZ Mollie McGowan Lemberg Akin Gump Strauss Hauer & Feld LLP San Francisco, CA Amy D. Paul Ropes & Gray LLP Washington, DC Raphael Avraham Snell & Wilmer LLP Phoenix, AZ Thomas M. Triplett Schwabe, Williamson & Wyatt LLP Portland, OR 1

2 Health Care Antitrust and Pharmaceuticals Health Care Chronicle - Recent Developments September December Contents FEDERAL COURT CASES... 3 CSL to Settle Blood Plasma Antitrust Suit for $64M...3 Effexor Suit Stalled Until Supreme Court Decides K-Dur Cert Petition...3 AndroGel Class Action Judge Says He Will Grant Rule 60(b) Motion...3 Nurses Argue for Sixth Circuit to Reject Hospital s Class Certification Appeal...4 Becton Dickinson Urges Judge to Overturn Jury Verdict and Order New Trial...5 Highmark Asks Pennsylvania Court to Intervene in Tentative Deal to End Antitrust Dispute with UPMC...5 Federal Judge Allows Economist s Testimony to the Benefits of St. Luke s Acquisition of Saltzer Medical Group PA...6 NC Dental Board Files Cert Petition with Supreme Court...6 STATE COURT CASES... 7 Pennsylvania AG Settles Hospital Merger Challenge...7 AGENCY DECISIONS... 8 FTC Sues Diet Product Marketer for Deceptive Advertising...8 Commissioner Wright Urges Additional Study of Pay-for-Delay Cases...8 FTC Finalizes Amendments to HSR Rules on Transfers of Exclusive Pharmaceutical Patent Rights...8 FEDERAL AND STATE LEGISLATIVE TOPICS NY Is the First State to Extend Antitrust Immunity to a Public Hospital...10 INTERNATIONAL UK Competition Commission Blocks Hospital Merger

3 Health Care and Pharmaceuticals - Recent Developments December 2013 CSL to Settle Blood Plasma Antitrust Suit for $64M Baxter Int l Inc. et al. v. Food and Drug Admin., No. 1:13-mc (D.D.C.) Australian medical product manufacturer CSL Ltd. has agreed to settle a consolidated antitrust class action for $64 million. The plaintiff hospital groups, which commenced legal proceedings against CSL in 2009, alleged that CSL conspired to artificially increase the price of plasmaderivative therapies. According to the plaintiffs, CSL and industry group co-defendant Plasma Protein Therapeutics Association (PPTA) met with competitors and colluded to limit the supply of life-saving plasma products, even as demand for the products continued to grow. According to plasma buyers, CSL and Baxter International Inc. hold a combined 60 percent share of the market for plasma therapies and met through the PPTA to discuss the pricing of those plasma therapies. The class action also alleged that CSL and Baxter, in coordination with the PPTA, publicly denied supply shortages, over-reported industry supply figures and blamed Medicare reimbursement rates when patients had trouble obtaining the therapies. The settlement is pending court approval. Effexor Suit Stalled Until Supreme Court Decides K-Dur Cert Petition In re Effexor XR Antitrust Litig., No. 3:11-cv (D.N.J.) U.S. District Judge Joel A. Pisano of the District of New Jersey has stayed several class actions by direct purchasers including Rite Aid and Walgreens, which challenged the legality of reverse-payment settlement agreements FEDERAL COURT CASES between Wyeth and generic drug manufacturer Teva Pharmaceuticals. The direct purchasers contend that Wyeth paid Teva to delay the launch of a generic Effexor XR product by promising not to introduce its own authorized generic product to compete against Teva during Teva s 180-day exclusivity period. Judge Pisano issued the stay pending a decision by the Supreme Court on the certiorari petition related to the circuit split created by the Third Circuit s decision in In re K-Dur Antitrust Litigation. In that case, the Third Circuit ruled that in settling infringement litigation, a payment from a patent-holding pharmaceutical company to the alleged generic infringer, coupled with a restriction on the generic s entry into the market, is prima facie evidence of an antitrust violation. Other circuits held that such reverse-payment agreements are anticompetitive only when they exceed the scope of the patent at issue. In FTC v. Actavis, the Supreme Court ruled that reversepayment settlements can be anticompetitive and must be evaluated under the rule of reason. The plaintiffs contested the district court s stay, expressing a need for prompt resolution of their claims. Judge Pisano, in his ruling, noted that if the petition is denied, the stay will be short, and if the Supreme Court hears K-Dur, the decision will determine the appropriate standard of review. AndroGel Class Action Judge Says He Will Grant Rule 60(b) Motion In Re: AndroGel Antitrust Litig. (No. II), No. 1:09-md (N.D. Ga.) U.S. District Judge Thomas W. Thrash Jr. issued an order on October 23, 2013, indicating that he would grant a Rule 60(b) motion in favor of the 3

4 Health Care and Pharmaceuticals - Recent Developments December 2013 plaintiffs in the AndroGel class action if the case were remanded to him by the Eleventh Circuit. The suit, brought by direct purchasers of AndroGel, a testosterone replacement pharmaceutical product, alleges that Androgel manufacturer Solvay Pharmaceuticals Inc. (now AbbVie Products LLC), in settling infringement litigation, paid the manufacturers of potential generic competitors to AndroGel to delay the launch of their competing products. Judge Thrash dismissed the class action before the U.S. Supreme Court issued its decision in FTC v. Actavis. The plaintiffs appealed the dismissal to the Eleventh Circuit. After the Supreme Court decided FTC v. Actavis, the plaintiffs asked the Eleventh Circuit to vacate and remand the decision to the district court. The defendants argued that the Eleventh Circuit should resolve the case because the class action also involves an allegation of sham litigation by the plaintiffs, which was not an issue in the Supreme Court decision. The Eleventh Circuit declined to vacate and remand the decision, noting instead that the plaintiffs could seek Rule 60(b) relief from the district court. Judge Thrash s order states that he will grant the Rule 60(b) relief from the judgment since the Eleventh Circuit eventually will have to reverse his earlier dismissal of the suit regardless of how it ultimately rules on the sham litigation claims. Nurses Argue for Sixth Circuit to Reject Hospital s Class Certification Appeal VHS of Mich. v. Pat Cason-Merenda, No (6th Cir.) In October, a class of more than 20,000 Detroitarea nurses urged the Sixth Circuit to reject VHS of Michigan s (VHS) appeal to review class certification in its seven-year-old antitrust case. The nurses filed the lawsuit in 2006 and accused VHS, among other hospitals, of regularly exchanging nurses wage information in an effort to keep wages low in violation of the Sherman Act. The other hospitals negotiated settlements with the nurses, leaving VHS the sole remaining defendant. In its appeal, VHS argued that the district court erroneously certified the class on the grounds that the plaintiffs expert damages analysis did not properly isolate damages resulting from the alleged information exchange. Specifically, VHS contends that the district court s ruling conflicts with the Supreme Court s holding in Comcast v. Behrend that to satisfy the predominance requirement, a class action damages model must measure only those damages attributable to a viable antitrust theory. VHS also claimed that the plaintiffs did not present precise damage calculations. In response, the plaintiffs contend that it did not run afoul of Comcast because its expert damages analysis identified the damages arising from the only conduct alleged to cause underpayment of nurse wages in Detroit. Further, the plaintiffs argue that the court should reject VHS s interlocutory appeal because VHS did not raise the issue below. The plaintiffs also maintain that computing damages in the aggregate and for each nurse individually adequately assesses damages under the law and therefore does not present grounds for class decertification. In sum, the plaintiffs contend that VHS s appeal simply represents buyer s remorse. The plaintiffs argue that VHS had multiple opportunities to settle the case, and when VHS lost its class certification argument, it appealed simply to rescue its litigation strategy. That, according to the nurses, does not merit appellate review. 4

5 Health Care and Pharmaceuticals - Recent Developments December 2013 Becton Dickinson Urges Judge to Overturn Jury Verdict and Order New Trial Retractable Tech., Inc. v. Becton Dickinson & Co., Inc., No. 2:08-cv-16 (E.D. Tex.) Also in October, Becton Dickinson & Co. (Becton) filed a renewed motion for judgment as a matter of law, or alternatively, for a new trial or remittitur, to overturn a $114 million jury verdict in favor of Retractable Technologies. The jury found that Becton had violated the Sherman Act by attempting to monopolize the safety syringe market with deceptive advertising. Becton argued that deceptive practices in this case could not give way to a finding of monopolistic behavior, as misleading ads are a byproduct of highly competitive markets. Furthermore, Becton contended that there was no evidence presented to the jury suggesting that Becton engaged in anticompetitive conduct. Specifically, Becton claimed that Retractable Technologies failed to present evidence that Becton: (1) engaged in exclusionary conduct; (2) would achieve monopoly power in the market for safety syringes; or (3) had specific intent to monopolize the safety syringe market. Becton stated that most of Retractable Technologies claims disproved, as opposed to supported, its antitrust case. Becton stated in its motion, [m]isleading ads and product comparisons are prevalent indeed, they most often are found in highly competitive markets. In September 2013, the jury found that Becton attempted to monopolize the safety syringe market with false advertising practices. The jury also struck down Retractable Technologies other claims, including allegations that Becton obtained monopolistic power within the syringe and intravenous catheter markets through anticompetitive bundling, loyalty discounts, grouping arrangements with clinics and patent infringement. Retractable Technologies filed the case in 2007, alleging patent infringement as well as antirust and false advertising claims against Becton. Highmark Asks Pennsylvania Court to Intervene in Tentative Deal to End Antitrust Dispute with UPMC UPMC v. Highmark Inc., No. 2:12-cv (W.D. Pa.) Nearly a week after the University of Pittsburgh Medical Center (UPMC) and Highmark Inc. reached a tentative agreement to end their twoway antitrust dispute, Highmark filed a motion with U.S. District Judge Joy Flowers Conti requesting the court to force UPMC to sign a mutual release in the tentative agreement. In a statement, Highmark explained that, UPMC s refusal to sign a binding agreement that makes explicit that the release would preclude both parties from attempting to impose liability upon each other by any means demonstrates that UPMC s real intent is to litigate the released claims in the guise of a defense to the Royal Mile litigation. At issue is the release of all current and future litigation, a clause Highmark added to the mutual release after the deal was struck on October 23, Highmark argued that the clause is merely clarifying language and does not materially change the terms of the agreement, whereas UPMC claims that Highmark added new terms on an entirely new subject matter that was neither before the court nor was it discussed amongst the lawyers. The dispute has been ongoing since Highmark s planned acquisition of West Penn in October Under the terms of the original tentative 5

6 Health Care and Pharmaceuticals - Recent Developments December 2013 agreement, Highmark would abandon West Penn s 2009 suit against UPMC and UPMC would abandon its 2012 claims against Highmark and West Penn. The court has yet to rule on the motion. Federal Judge Allows Economist s Testimony to the Benefits of St. Luke s Acquisition of Saltzer Medical Group PA St. Alphonsus Med. Ctr.-Nampa. v. St. Luke s Health Sys. Ltd., No. 1:12-cv (D. Idaho) On October 16, 2013, U.S. District Judge B. Lynn Winmill denied the Federal Trade Commission s (FTC) request to block Dr. Alain Enthoven from testifying about the benefits of St. Luke s purchase of Saltzer Medical Group PA. Joining the FTC s request were the Idaho Attorney General s Office and several competitor hospitals, all of which argued that Enthoven was not qualified to testify to whether the acquisition created the requisite integration to achieve the purportedly greatest benefits of integrated patient care. Rejecting the FTC s argument, Judge Winmill noted that Enthoven had interviewed several key executives at both hospitals and was familiar with dozens of depositions, thus creating sufficient familiarity with the hospitals strategies and operations. The court also dismissed FTC arguments that Enthoven could not testify about the benefits of electronic medical record systems and the competitive effects of the deal. St. Alphonsus Health System Inc. and Treasure Valley Hospital LP sued to block the transaction in November 2012; the FTC and the Idaho attorney general joined the suit in March The trial phase is over and the judge is deliberating. NC Dental Board Files Cert Petition with Supreme Court N. C. State Bd. of Dental Exam rs v. Fed. Trade Comm n, No (petition for cert. filed Oct. 25, 2013) The North Carolina State Board of Dental Examiners (Board) has filed a petition for writ of certiorari asking the Supreme Court to review the Fourth Circuit finding that the board did not qualify for antitrust immunity. In an administrative decision issued in 2011, the FTC determined that the Board violated Section 5 of the Federal Trade Commission Act by prohibiting non-dentists from performing teeth-whitening services in North Carolina. According to the FTC, the Board members, who include practicing dentists, have a financial interest in the industry being tightly regulated, and should not be permitted to exclude competitors from the market. The Board argued that its actions were protected by the state-action doctrine, which provides antitrust immunity to actions taken by states in their sovereign capacity. The FTC found that the Board s actions were not actively supervised by the state and, therefore, the state-action doctrine did not apply. The Board appealed the FTC s decision to the Fourth Circuit, which upheld the FTC s decision in May Since the petition was filed, Attorneys General from West Virginia, Alabama, Colorado, Delaware, Florida, Kansas, Maryland, North Carolina, Ohio and South Carolina have filed an amicus brief in support of the Board s position. 6

7 Health Care Antitrust and Pharmaceuticals Health Care Chronicle - Recent Developments September December Pennsylvania AG Settles Hospital Merger Challenge See On October 28, 2013, Pennsylvania Attorney General Kathleen G. Kane announced that Geisinger Heath Services Foundation had agreed to take actions to alleviate concerns that its acquisition of Lewistown Hospital would have lessened or eliminated competition in Mifflin and Juniata counties in central Pennsylvania. According to the complaint, Attorney General, Geisinger owns five hospitals, a physician group practice, and a health care plan. The Attorney General s office was concerned that Geisinger s acquisition of a sixth hospital would cause an STATE COURT CASES increase in prices or decrease in access to health services for residents of Pennsylvania. In the Attorney General s agreement with Geisinger, which has an eight-year term, Geisinger must: (1) not arbitrarily increase prices; (2) continue to operate Lewistown Hospital as an acute-care hospital for at least eight years; (3) waive any restrictions on the ability of Lewistown's physicians to practice at competing hospitals; (4) maintain Lewistown's contracts with health plans and its physician group; and (5) continue to allow health plans to offer products to consumers with different tiers of providers based on cost and quality. 7

8 Health Care Antitrust and Pharmaceuticals Health Care Chronicle - Recent Developments September December FTC Sues Diet Product Marketer for Deceptive Advertising See On October 30, 2013, the FTC filed a lawsuit against Kevin Wright, HCG Platinum, LLC, and Right Way Nutrition, LLC, alleging that they falsely advertised that HCG Platinum diet products cause substantial weight loss (i.e., 1 to 2 pounds a day). The FTC also named seven relief defendants in the lawsuit who allegedly received funds linked to defendants weight loss product advertising and sales. The FTC alleges that defendants HCG Platinum weight loss advertisements constitute deceptive acts and false advertisements in violation of Sections 5(a) and 12 of the FTC Act. The FTC is seeking a permanent injunction against defendants alleged false advertising practices as well as relief including rescission or reformation of contracts and disgorgement of ill-gotten monies to redress injury to consumers. Further, the FTC requested that the defendants be required to disgorge all funds and assets traceable to the alleged deceptive and unlawful practices. On November 28, 2011, before bringing suit, the FTC, along with the U.S. Food & Drug Administration, issued a warning letter to the defendants. The letter cautioned defendants that it is unlawful under the FTC Act to make weight loss claims that are not substantiated by reliable scientific evidence and informed defendants that their HCG products are misbranded drugs under the FDA Act. AGENCY DECISIONS Commissioner Wright Urges Additional Study of Pay-for-Delay Cases See In a speech at the Concurrences Journal Annual Dinner in late September, FTC Commissioner Joshua D. Wright suggested that the agency should conduct additional research to identify facts or circumstances that would assist courts in developing a presumption that a particular type of agreement is always or almost always anticompetitive. Although the Supreme Court did not endorse the FTC s position in the Actavis case that pay-for-delay agreements are presumptively anti-competitive, the decision did indicate that lower courts could develop that sort of presumption, Commissioner Wright said. According to Commissioner Wright, the FTC should investigate whether certain factors, such as reverse-payment settlements for a particular class of drugs or with particular contractual features, are more likely to be anticompetitive. Commissioner Wright concluded by identifying the types of evidence that lower court should look for in evaluating pay-for-delay cases, and observing that the FTC can assist the courts in establishing case-specific presumptions to use in reviewing these types of settlements. FTC Finalizes Amendments to HSR Rules on Transfers of Exclusive Pharmaceutical Patent Rights See The FTC approved a new rule governing filing requirements under the Hart-Scott-Rodino (HSR) Act. The change is intended to capture pharmaceutical and biological transactions that are functionally equivalent to the outright 8

9 Health Care and Pharmaceuticals - Recent Developments December 2013 purchase of a patent or the grant of an exclusive license to a patent (and therefore are potentially reportable), but that were not previously subject to HSR review because of the transaction s nonexclusive structure. The effect of the new rule is that transactions that transfer all commercially significant rights to a pharmaceutical patent or part of a patent are potentially HSR-reportable (assuming other reporting triggers apply), even if the licensor retains certain limited rights under the patent. All commercially significant rights is defined as the exclusive rights to a patent that allow only the recipient of the exclusive patent rights to use the patent in a particular therapeutic area (or specific indication within a therapeutic area). Previously, the FTC has applied a make, use, and sell approach to HSR review of pharmaceutical and biological patent license agreements, in which a license would not constitute an asset acquisition unless it conveyed the exclusive rights to develop, manufacture, and sell without restriction. A transaction is not HSR-reportable if the patent holder retains rights to manufacture for the benefit of itself or anyone other than the licensor. The new rule only applies to agreements involving pharmaceutical and biological patents. The FTC published the draft rules for public comment in October 2012 and voted to make the rules final on November 6, The rules take effect thirty days after publication in the Federal Register. 9

10 Health Care Antitrust and Pharmaceuticals Health Care Chronicle - Recent Developments September December FEDERAL AND STATE LEGISLATIVE TOPICS NY Is the First State to Extend Antitrust Immunity to a Public Hospital See Despite opposition from both the New York Attorney General and Antitrust Bureau Chief, New York Governor Andrew Cuomo signed legislation extending state and federal antitrust immunity to the state-chartered Nassau Health Care Corporation (NuHealth). NuHealth is a New York public benefit corporation that operates a hospital, nursing facility, and five community health centers. The new law explicitly authorizes NuHealth to engage in arrangements, contracts, information sharing and other collaborative activities with public or private entities and individuals regardless of the competitive consequences of these activities and notwithstanding that these activities may have the effect of displacing competition in the provision of hospital, physician, or other health care-related services. New York s new law comes in the wake of the recent Supreme Court decision in FTC v. Phoebe Putney Health System, Inc., which overturned a lower court holding that a hospital merger was immune from antitrust scrutiny and clarified the state action antitrust immunity doctrine, which applies only if a state clearly articulates and affirmatively expresses a policy displacing competition and conferring immunity from antitrust scrutiny. The legislation passed unanimously by both the New York State Assembly and Senate. New York Attorney General Eric Schneiderman opposed the law, asserting that the exemption was overly broad given that it allows NuHealth and any partnering health care company, including health insurance companies and physician practice groups, to escape antitrust liability for all combinations. Schneiderman urged the state to provide exemptions on a case-by-case basis. Under the new law, NuHealth must file an annual report with the State Department of Health concerning the impact of the collaborations. In response to the report, the Department of State then can request that NuHealth voluntarily make changes to its policies. 10

11 Health Care Antitrust and Pharmaceuticals Health Care Chronicle - Recent Developments September December UK Competition Commission Blocks Hospital Merger See The UK Competition Commission (CC) blocked the proposed merger between Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust (RBCH) and Poole Hospital NHS Foundation (PHFT). The CC found that there was insufficient evidence that the merger would result in overall benefits for local patients. The merger of RBCH and PHFT would have combined the only two National Health Service district hospitals in the coastal towns of Bournemouth and Poole. The CC found that the merger would eliminate competition and choice across a wide range of elective specialties INTERNATIONAL accounting for about a third of the clinical revenues for each hospital. In their submissions to the CC, the hospitals argued that the merger would allow them to reconfigure accident and emergency units, with one hospital providing a full service and the other a minor injuries unit; build a new maternity hospital; set up a hub and spoke arrangement for specialized hematology services; and to provide better consultant cover in cardiology at Poole. However, the CC had significant doubts that the maternity hospital would be built given financial pressures on NHS finances over the next few years. Similar concerns were raised about the reconfiguration of the hematology and cardiology services. The CC concluded that insufficient details had been provided as to the reconfiguration of services envisioned post-merger. 11

12 Health Care Antitrust and Pharmaceuticals Health Care Chronicle - Recent Developments September December DISCLAIMER STATEMENT Recent Developments is published six times a year by the American Bar Association Section of Antitrust Law Health Care and Pharmaceuticals Committee. The views expressed in this publication are the authors only and not necessarily those of the American Bar Association, the Section of Antitrust Law or the Health Care and Pharmaceuticals Committee. If you wish to comment on the contents of Recent Developments, please write to the American Bar Association, Section of Antitrust Law, 321 North Clark Street, Chicago, IL COPYRIGHT NOTICE Copyright 2013 American Bar Association. The contents of this publication may not be reproduced, in whole or in part, without written permission of the ABA. All requests for reprint should be sent to: Director, Copyrights and Contracts, American Bar Association, 321 N. Clark, Chicago, IL , FAX: , copyright@abanet.org. 12