Insights

Drug Manufacturer Rebates to PBM for Exclusive Formulary Listing Do Not Violate the Sherman Act

A U.S. District Court in Ohio granted summary judgment for defendants in a class action suit alleging that a drug manufacturer's rebates to pharmacy benefit managers in order to obtain an exclusive listing in the PBMs' drug formulary violated Section 1 of the Sherman Act.

The plaintiffs, representing wholesale and retail pharmacies who purchased Premarin, an estrogen replacement therapy directly from Wyeth, claimed that the rebates granted by Wyeth in order to gain exclusive listings on PBM formularies violated Section 1 of the Sherman Act as unlawful exclusive dealing and Section 2 of the Sherman Act as monopolization.

The court first held that Wyeth's conduct did not violate Section 1. Although Premarin was the only conjugated estrogen product listed in many PBM formularies, a number of those formularies also included other estrogen replacement products. Other formularies were "open" and reimbursed equally for all estrogen replacement therapy drugs. The court held that the plaintiffs failed to establish that Wyeth's conduct substantially foreclosed actual competition in the relevant market, and granted summary judgment in favor of the defendant on the Section 1 claim.

The court also granted summary judgment in favor of the defendants on the Section 2 claim. The court explicitly declined to follow the Third Circuit's holding in LePage's v. 3M, which held similar rebates unlawful, stating that the LePage's decision left unclear the precise nature of the antitrust violation. "Absent explicit, controlling appellate authority that Wyeth's conduct in executing those [PBM] contracts, a practice that is widespread throughout the larger and unique pharmaceutical market in the U.S., runs afoul of the guiding principles of Section 2 liability, this Court believes that .... Wyeth's pricing behavior 'plus' -- in this case the 'plus' factor being the 'sole CE' contract clause [the exclusivity for Premarin] -- did not violate Section 2 of the Sherman Act."

A link to the opinion is provided here. 

For additional information about the information in this Antitrust Update, please contact Toby G. Singer, leader of the Health Care Antitrust Practice. 

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