Three times in recent weeks, a big drug maker sued another for allegedly using illegal tactics to win valuable contracts with payers. In one lawsuit, Pfizer claimed that Johnson & Johnson violated antitrust law when convincing insurers not to cover its biosimilar version of the Remicade rheumatoid arthritis treatment. Then, Shire alleged Medicare Part D plans refused to cover its Xiidra dry-eye treatment, because Allergan used “bundled discounts” and “exclusive” deals to lock down the market. And Sanofi accused Mylan of thwarting its move to sell an EpiPen rival. Drug makers regularly offer discounts to payers, but the lawsuits are drawing new attention to behind-the-scenes dealings. We spoke with Michael Carrier, a Rutgers University School of Law professor who specializes in antitrust matters in the pharmaceutical industry, about the implications.
Drug makers pay rebates and discounts all the time. What is it about these lawsuits that deserves our attention?
These are two of the only lawsuits that seek to pull back the curtain on the hidden and potentially anti-competitive world of drug pricing. They’re raising issues relating to rebates and bundling. In the Pfizer (PFE) lawsuit against J&J (JNJ), Pfizer challenged J&J’s exclusive contracts with insurance companies and health care providers. They also challenged bundling by which the insurers and health care providers were encouraged to group J&J products together, which made it harder for Pfizer to compete.
Let’s take one issue at a time. What’s the problem with exclusive contracts?
In a word, it depends. The main question with these arrangements, which is known in antitrust law as exclusive dealing, comes down to the percentage of the market that’s foreclosed. If J&J had 2 percent of the market, its contract might be considered pro-competitive, because it would allow J&J to establish a relationship with an insurer. But if J&J has 90 percent of the market, which in this case is defined as just one drug, then we start to see that competitors could be harmed.
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