Court Denies Mylan and PBMs’ Motions to Dismiss on RICO and Antitrust Claims for EpiPen Overcharges

Judge Eric Tostrud of the District of Minnesota allowed a putative direct purchaser class to go forward with its case against Mylan and a group of Pharmacy Benefit Managers (“PBMs”) for engaging in an alleged kickback and bribery scheme that resulted in inflated prices for EpiPens.  The EpiPen is an auto-injector device that allows patients to quickly self-administer the drug epinephrine through a spring-loaded needle.  From at least 2011 to 2017, Mylan – which markets and distributes EpiPens – held a near-total market share for epinephrine auto-injectors in the United States. 

Plaintiffs’ complaint alleged the following: In the face of impending competition, in or around 2012, Mylan devised a scheme with the PBMs to exclude Mylan’s competitors from the market in exchange for increased payments to the PBMs.  Insurers and other third-party payors typically hire PBMs to negotiate for lower drug prices on their behalf and to manage their formularies, which define which drugs an insurance plan does and does not cover.  Instead of using preferred formulary placement as a bargaining tool to decrease drug prices, however, Mylan conspired with the PBMs to grant the EpiPen favorable formulary status in exchange for higher list prices on EpiPen.  Because the PBMs’ compensation was calculated as a percentage of the EpiPen’s list price, “as the list prices increased, so did the amounts that the PBM Defendants received.”  Moreover, the PBMs classified the payments from Mylan as “fees,” which they could conceal and retain, rather than “rebates” that would have to be passed on to their clients.  Accordingly, in a “cycle of mutual benefit,” Mylan enjoyed favorable formulary status, to the exclusion of its competitors, and the PBMs were paid more the higher Mylan charged for EpiPens.  Unchecked by the PBMs, the price of EpiPens soared and Mylan maintained its monopoly, despite the entry of two competing epinephrine auto-injectors in 2013. 

The Court denied Mylan and the PBM defendants’ motions to dismiss and held that the plaintiffs stated claims for violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and Section 2 of the Sherman Antitrust Act.  The plaintiffs will now be able to proceed with discovery.      

Faruqi & Faruqi represents direct purchasers in the case, which is In re EpiPen Direct Purchaser Litigation, No. 20-cv-0827 (D. Minn.).