JnJ, Bayer escape RICO claims over glucose test strips: Report

Chief U.S. District Judge Freda Wolfson of the District of New Jersey ruled Friday that plaintiff MSP Recovery, a company that specializes in recovering claims wrongly paid out by third-party Medicare administrators, lacked standing to sue under the Racketeering Influenced and Corrupt Organizations Act.

"We are thankful for the court's time and attention in considering the positions of all of the parties and look forward to litigating this case on the merits," said Christopher Placitella of Cohen, Placitella & Roth, a lawyer for MSP.

Roche, which is represented by William Sarraille of Sidley Austin, declined to comment. The other defendants and attorneys representing them – Andrew Kassof of Kirkland & Ellis for Abbott, David Rosenbloom of McDermott Will & Emery for Bayer, William Cavanaugh of Patterson Belknap Webb & Tyler for J&J – did not immediately respond to requests for comment.

MSP filed the lawsuit in 2019, acting as assignee for claims by various private Medicare Advantage plans, health maintenance organizations and other entities that administer plans for Medicare beneficiaries.

It alleged that the companies schemed with pharmacy benefit managers (PBMs), the companies that act as middlemen between drugmakers, health plans and pharmacies, to inflate the prices paid for drugs by health plans for glucose test strips, which are used by diabetic patients to monitor blood sugar. This allowed the PBMs to pocket the excess in the form of rebates, while the defendants benefited from favorable treatment of their products in PBMs' formularies, they said.

MSP said the defendants accomplished this by reporting inflated average wholesale prices, which are used as the basis for reimbursement. They brought claims under RICO as well as numerous state consumer protection laws.

In moving to dismiss, the defendants said that MSP lacked standing under RICO in light of the U.S. Supreme Court's 1977 ruling in Illinois Brick Co v. Illinois, which held that only direct purchasers, not indirect purchasers, can bring antitrust claims under the Clayton Antitrust Act. New Jersey courts have applied that same standard to RICO claims, they said.

MSP countered by citing the 3rd U.S. Circuit Court of Appeals' ruling allowing third-party payors to bring RICO claims against the manufacturers of the diabetes drug Avandia for allegedly concealing health risks.

Wolfson said that case was different because the third-party payors relied directly on representations about Avandia. In MSP's case, she said, the alleged injury was only that prices were higher than they should have been because PBMs did not disclose rebates they received.

"This injury is too far downstream from the conduct of defendants for plaintiffs to proceed with a RICO claim," she wrote.

She further found that even if the plaintiffs had standing under RICO, they would not be able to seek injunctive relief under established 3rd Circuit law.

The ruling leaves intact dozens of state consumer protection claims.

The case is MSP Recovery Claims Series LLC v. Abbott Laboratories, U.S. District Court, District of New Jersey, No. 19-cv-21607.

For MSP: Christopher Placitella of Cohen, Placitella & Roth

For Abbott: Andrew Kassof of Kirkland & Ellis

For Bayer: David Rosenbloom of McDermott Will & Emery

For J&J: William Cavanaugh of Patterson Belknap Webb & Tyler

For Roche: William Sarraille of Sidley Austin

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