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McKesson, Walgreens, Drug Distributors Dodge Price-Fixing Claims

May 25, 2022, 6:36 PM

AmerisourceBergen Corp., Cardinal Health Inc., McKesson Corp., Walgreens Boots Alliance Inc., and other drug distributors Wednesday escaped federal antitrust litigation in Philadelphia over an alleged industry-wide price-fixing scheme by top manufacturers of generic drugs.

Judge Cynthia M. Rufe let the wholesalers exit part of a sprawling multidistrict dispute that includes several parallel class actions, individual lawsuits by large health care companies, and claims on behalf of major municipalities and nearly every state. The proposed class action on behalf of independent pharmacies and hospitals also targeted Morris & Dickson Co., a family-run drug distributor.

Rufe, writing for the U.S. District Court for the Eastern District of Pennsylvania, threw out claims that the wholesalers participated in an “overarching conspiracy” by “orchestrating coordinated price increases,” acting as an informational conduit for the cartel, and “policing” the scheme to ensure no drugmakers defected.

Although the generic drug industry may give the distributors an incentive to help inflate prices, “a desire for profit does not itself constitute a conspiratorial motive,” the judge wrote. “Something more must be alleged.”

The decision comes about two weeks after about a dozen major pharmaceutical companies lost their bid to chip away at the litigation, which began with claims involving the heart-rhythm drug digoxin and the antibiotic doxycycline but grew to cover 200 generic drugs, as well as allegations of a broader conspiracy.

Rufe on May 10 denied motions by Glenmark Pharmaceuticals Ltd., Lupin Ltd., Mylan NV, Novartis AG, Teva Pharmaceutical Industries Ltd., Sun Pharmaceutical Industries Ltd., and several other companies to dismiss or narrow certain consumer protection and unjust enrichment claims on technical or state-specific grounds.

Aiding and Abetting?

In her ruling Wednesday, the judge denied a bid by the pharmacies to analyze any role played by the distributors through the lens of aiding and abetting liability, rather than the framework that covers alleged “vertical” cartels involving more than one supply chain level.

“There is no case law supporting aiding and abetting as a valid theory of” antitrust liability, she wrote. “Because distributor and manufacturer defendants are vertically related, their conduct will be analyzed accordingly.”

Rufe also rejected allegations that the distributors participated peripherally in a “hub and spoke” conspiracy centering on the manufacturers. Although most hub-and-spoke schemes can’t be proven by direct evidence, the suit failed to offer even circumstantial evidence of concerted action by the wholesalers, the judge said.

She gave the pharmacies permission to refile their claims but indicated they may also be doomed by the rule barring federal antitrust damages for downstream indirect purchasers. As it stands, they’re well short of establishing the narrow “co-conspirator” exception, Rufe warned.

The case is In re Generic Pharms. Pricing Antitrust Litig., E.D. Pa., No. 16-md-2724, 5/25/22.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com