Pfizer's Antitrust Lawsuit Against J&J Provides Insights Into Biosimilar Antitrust Issues
I recently spoke at a biosimilars conference in Boston, MA and one topic that came up multiple times is the antitrust issue relating to Remicade®. I reviewed the recent decision involving Remicade® and its biosimilar, Inflectra®, to see if the court provided any insights into how antitrust issues dealing with biosimilars, particularly those involving “exclusionary contracts” and rebates, will be addressed.
On August 10, 2018, the Pennsylvania Court denied Johnson & Johnson’s (“J&J”) motion to dismiss Pfizer’s antitrust lawsuit relating to its Remicade® biosimilar, Inflectra®. We previously wrote how Pfizer sued J&J in the U.S. District Court for the Eastern District of Pennsylvania in September 2017 alleging that J&J has been conducting “anti-competitive practices” to prevent biosimilar competition by effectively preventing health insurers, hospitals, and clinics from offering Pfizer's lower-priced biosimilar product. According to Pfizer, J&J forced hospitals and insurers to enter exclusive arrangements and bundled rebate programs to ensure that Remicade® was given preferential treatment over Inflectra®.
J&J moved to dismiss the lawsuit, but on August 10, the Court denied Janssen’s motion and is allowing the antitrust suit, the first lawsuit of its kind in the biosimilar field, to continue. In it’s ruling, the Court provides insights as to how some antitrust issues relating to biosimilar market entry may be analyzed.
First, the Court addressed the issue of exclusionary agreements. In Pfizer’s lawsuit, Pfizer alleged that J&J forced hospitals and insurers to enter exclusive arrangements to exclude biosimilars other than Remicade® from coverage under their plans, thereby making Remicade® the exclusive infliximab available to patients covered by that plan. These exclusionary agreements are particularly important in the context biologics. Remicade® and Inflectra®, like most biologics, are administered intravenously at a clinic or hosptial. They are a “medical benefit” product, rather than a “pharmacy benefit” product, which means they must be stocked in advance by providers, rather than directly purchased by patients on an as-needed basis. Since the providers bear the financial risk of reimbursement, there is an incentive for them to stock the drug that will actually be covered by most insurers.
J&J tried to argue that there is no correlation between Inflectra’s® poor market traction and sales and J&J’s exclusionary contracts with insurers and providers and pointed to a number of alternative theories to explain the marked difference in sales between the two products. In particular, J&J argued that the lack of commercial success of Inflectra® was independent of J&J’s exclusionary agreements, and instead were due to provider’s lack of comfort with biosimilars, Inflectra's® status as a “biosimilar” rather than as an “interchangeable”, and Remicade’s® cost-effectiveness.
In the end, the Court dismissed J&J’s argument that Pfizer needed to disprove all of their alternate theories of why sales of its product were lagging at this stage of litigation. By holding that Pfizer was not required to disprove all other theories on a motion to dismiss, the Court left open the possibility that J&J, or a future innovator, could exonerate itself using one or more of these alternate theories. That is an important takeaway because it suggests that even though J&J’s actions could lead to antitrust liability, i.e., by entering into exclusionary contracts, it also provided ways to avoid such liability.
Bundled Rebates and Multi-Product Bundling Programs
Second, the Court addressed the issue of bundled rebates and multi-product bundling programs. In one instance, Pfizer alleged that J&J introduced a rebate program that would provide savings off Remicade®’s increasing list price for all existing Remicade® patients, which would, in effect, bundle the base of existing Remicade® patients with new patients entering the infliximab market. To this end, the Court held that bundled rebates can be anticompetitive when they preclude competition for new infliximab patients by being linked to noncontestable (existing) patients. This, of course, assumes that new patients are contestable because they are not anchored to a product while existing patients are incontestable because they are anchored to a product. Under this reasoning, the Court found that J&J’s rebate program could be anticompetitive since it “bundled its power over existing Remicade patients to break the competitive mechanism and deprive new infliximab patients (and their insurers) of the ability to make a meaningful choice between Remicade and its biosimilars.” The Court, therefore, refused to dismiss Pfizer’s bundling claim. Since most biologics have legacy patients, this factor may be relevant to future rebate schemes. Specifically, this shows that rebate schemes may be tailored by innovators to potentially exclude non-competitive products and avoid antitrust liability
Additionally, Pfizer alleged that J&J bundled rebates across multiple products to force insurers to grant exclusivity to Remicade® or pay higher prices on other J&J products. J&J argued that this claim should be dismissed because Pfizer failed to offer its own multi-product bundles. The Court appears to have sided with J&J on this issue and held that bundling rebates across multiple products is not, per se, an antitrust violation. The Court noted that Pfizer was not a single-product company and therefore had the capacity to offer such bundles itself. This seems to suggest that whether or not rebates schemes are permissible will depend, in part, on who the biosimilar competitor actually is.
Companies developing innovator and biosimilar products, alike, should be aware of the outcomes of this dispute. At least one United States District Court has found that certain pricing tactics may rise to the level of impermissible monopolization. The outcome of this case will likely provide more insights on which pricing practices are permissible under antitrust laws and which are not.
We will continue to monitor the case and provide updates as they become available.
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