E-briefs, News and Notes: September 2024

By Cheryl Lee Johnson 

Plaintiffs, ecommerce purchasers using PayPal alternatives,  sued PayPal alleging that its merchant contracts’ antidiscrimination provisions (ADPs) prevented merchants from steering consumers to cheaper payment platforms and forbid discounts on purchases made with non-PayPal payments. Together these ADP provisions were alleged to eliminate price competition in payment method, depriving plaintiffs of the discounts they could have otherwise secured. 2024 WL 3924686, at *1. The court dismissed the complaint, deeming the assumption that merchants would have offered discounts to customers not using PayPal in the absence of the ADPs to be “too attenuated” to maintain antitrust standing.

Plaintiffs also alleged that the ADPs caused increased prices across all the products because they undermined rival payment processors’ incentive to undercut PayPal.  This theory, said the court, was even “more attenuated” than the first, and was simply too indirect and speculative to establish antirust standing. Id. at  *4.

California state antitrust claims were then dismissed because the “Cartwright Act mirrors the Sherman Act, the claims rise and fall together.” Id. at  *4.  Nor were the claims cognizable under the unfair prong of the UCL “because a UCL claim sounding in antitrust rises and falls with the antitrust claim.” Id. at *4.  Leave to amend was granted. 

By Lee Berger and Travis West

On August 26, 2024, Judge Edgardo Ramos in the Southern District of New York dismissed a class action against Deutsche Bank AG, Deutsche Bank Securities Inc., Coöperatieve Rabobank U.A., and Rabo Securities USA, Inc.  The plaintiffs, several pension funds, alleged that the defendants engaged in a per se illegal agreement in violation of Section 1 of the Sherman Act to fix and manipulate the price of European government bonds (“EGBs”).  Specifically, the plaintiffs alleged that the defendants, all active participants in the secondary market for EGBs, set prices by sharing information through chatrooms.  The plaintiffs submitted evidence that the buy price the defendants would pay to purchase the EGBs was often four to five times lower than the sell price, which they alleged demonstrated collusion.

          The plaintiffs had good reason to suspect some sort of collusion: the European Commission stated that Deutsche Bank and Rabobank colluded to influence prices of EGBs on December 6, 2022.  Interestingly, the same plaintiffs had brought a similar case in 2019 against various banks for the same violations (also supported by a statement from the European Commission).  Given the similarity of the claims, defenses, and supporting facts, Judge Ramos relied on this earlier case often in his opinion.

The defendants moved to dismiss, arguing that the claims were implausible, the plaintiffs lacked antitrust standing, the Court lacked personal jurisdiction over the foreign defendants, and the claims were time-barred.  The Court did not find that the claims were time-barred, finding that the plaintiffs’ reliance on the defendants’ code of conduct meant that the plaintiffs had acted with reasonable due diligence during the tolled period. 

The Court likewise rejected the defendants’ claim that the plaintiffs lacked antitrust standing.  Judge Ramos found that plaintiffs had suffered antitrust injury, rejecting the defendants’ argument that the plaintiffs had failed to specify which transactions were anticompetitive, and found that the plaintiffs were “efficient enforcers” of the antitrust laws as they had directly suffered the injury and were best situated to vindicate the claims.  (The Court did dismiss some claims between specific plaintiffs and defendants where the complaint had not alleged transactions between them.)

The plaintiffs  nonetheless failed at alleging a conspiracy.  The Court found that plaintiffs had not alleged direct evidence of a conspiracy and alleged only parallel conduct accompanied by circumstantial evidence and plus factors.  Their parallel conduct evidence consisted of a chart demonstrating that the bid-ask spread narrowed at a four to five times greater magnitude than those of a non-defendant control group in the year after the end of the class period.  Although plaintiffs portrayed it as similar to the statistical evidence that succeeded in the other EGB case, the Court agreed with defendants’  argument that it failed to discuss the market during the period.  Without any evidence during the class period, the Court was unwilling to infer activity that would support parallel conduct allegations and granted the motion to dismiss.

Because the Court dismissed the claims, it found it did not need to reach whether it had personal jurisdiction. 

By David Lerch

On August 22, 2024, Judge Harvey Bartle III in the Eastern District of Pennsylvania issued an order denying plaintiffs’ motion to require the defendants to provide elections as to the subjective belief of defendants’ decisionmakers in the underlying patent actions and settlements. 

Background

          The Plaintiffs in this action are direct purchaser wholesalers of pharmaceutical drugs who allege that the brand defendants (including Abbott Laboratories and AbbVie Inc.) brought meritless patent infringement lawsuits to maintain the brand defendants’ patent monopoly of a topical testosterone gel drug product (Order at 1-2).  Plaintiffs further allege that the generic defendants were complicit in this anticompetitive scheme by accepting reverse settlement payments from the brand defendants in exchange for delaying the entry of competing generic drug products (Order at 2). 

          Plaintiffs moved to have the District Court enter an order compelling all of the defendants “to make an election stating certain subjective beliefs on which they intend to rely in this case and whether in doing so they intend to waive [attorney-client] privilege as to those beliefs.” (Order at 2).  Specifically, plaintiffs sought elections as to the subjective beliefs of defendants’ decisionmakers in the underlying patent actions and settlements “relating to patent strength, settlement negotiations and strategy, and how defendants would have conducted themselves absent the challenged payments.” (Order at 2).

Motion to Compel

The Court found that it was undisputed that defendants’ subjective beliefs were highly relevant to plaintiffs’ antitrust claims (Order at 2).  The Supreme Court has made clear that in cases involving reverse settlement payments, “the relevant antitrust question” is “[w]hat are th[e] reasons” for the payment. F.T.C. v. Actavis, Inc., 570 U.S. 136, 158 (2013), and “[i]f the basic reason is a desire to maintain and to share patent-generated monopoly profits, then, in the absence of some justification, the antitrust laws are likely to forbid the arrangement.” Id. (Order at 2).

Plaintiffs, the Court noted, filed the motion to ferret out whether defendants would waive the attorney-client privilege and rely on the advice of counsel or would assert the privilege and rely on non-privileged bases for the subjective beliefs of their decisionmakers (Order at 3).  The Court recognized that while defendants declared that they would not waive the attorney-client privilege in order to assert an “advice of counsel” defense, plaintiffs feared that at the eleventh hour, defendants would waive the privilege and try to introduce evidence of their attorneys’ advice and communications to support their defenses.  (Order at 3).

The Court reasoned that it is not possible to anticipate all questions which will be asked of a witness at trial or the answers that will be forthcoming, nor is it possible to determine in advance if and in what form the waiver of attorney-client privilege may be implicated at trial, and plaintiffs’ proposed election would not achieve that goal (Order at 4).  The Court urged plaintiffs to use interrogatories, depositions, motions to compel, and motions in limine to learn the subjective beliefs of defendants’ decision makers on all subjects relevant to the action (Order at 5).

In closing, the Court noted that defendants had represented to the court that they would not invoke reliance on the advice of counsel with respect to any of the issues raised in plaintiffs’ motion and that that the Court “in the interest of fairness will not permit them to reverse course.” (Order at 5).

By Amar S. Naik

On August 26, 2024, U.S. District Judge Richard Seeborg issued a 47-page order that largely rejected competing motions for summary judgment brought in the pending multidistrict litigation involving manufacturers of the drug sodium oxybate (brand name Xyrem).^[1] Although the court dismissed some of Plaintiffs’ claims, it largely preserved Plaintiffs’ case because there were too many factual disputes to resolve key issues in favor of one side or another.

Plaintiffs consisting of health plans, insurers, and others allege Defendants Jazz Pharmaceuticals, Inc., Hikma Labs, Inc., and related corporate affiliates violated state and federal antitrust laws by delaying the market entry of generic versions of Xyrem (a central nervous system depressant that treats narcolepsy).^[2] Plaintiffs allege Jazz paid off generic rivals to not to enter the market, used regulatory safeguards to restricted the availability of key samples to potential generic rivals, and allocated the market through authorized generic (“AG”) agreements. As a result of this conduct, Plaintiffs claim that Defendants raised the price of Xyrem by more than 800% between 2007 and 2014, prevented nine potential generic rivals from entering the market between 2010 and 2017, and delayed AG entry until 2023.

Judge Seeborg denied several critical aspects of Jazz’s motion for summary judgment. Jazz argued that no reasonable juror could conclude that its petitioning of the U.S. Food & Drug Administration regarding requirements for risk evaluation and mitigation strategies (“REMS”) lacked a valid basis in law or fact and asserted that such petitioning was protected speech under the Noerr-Pennington doctrine. Jazz further claimed that its failure to reach agreements with generic rivals during statutory-based REMS negotiations could not be interpreted as anticompetitive conduct. Judge Seeborg, however, rejected these arguments. He held that there were questions of fact regarding whether Jazz “could have reasonably expected success on the merits of its [REMS] petitions” and observed that some evidence indicated that Jazz considered the REMS negotiations to be useful barriers to generic competition.

That said, Judge Seeborg did rule in favor of Jazz on several issues of fact and law. He dismissed Plaintiffs’ claim that Jazz’s anticompetitive scheme included unlawfully forcing patients onto a newer drug, Xywav, because there was “an insufficient causal link between the anticompetitive conduct Jazz is accused of engaging in relating to Xyrem and [] plaintiffs’ reimbursements for Xywav.” He also granted summary judgment in favor of Jazz on Plaintiffs’ unilateral monopolization claims brought under California, Kansas, New York, and Tennessee state laws because those laws do not recognize such claims. Finally, he dismissed Plaintiffs’ sham litigation claims because Plaintiffs withdrew these claims during briefing.

Judge Seeborg likewise disagreed with several arguments made in  Defendants Jazz and Hikma’s joint motion for summary judgment. First, he found that there was enough support to sustain Plaintiffs’ reverse payment claims. For example, Judge Seeborg concluded that there was enough evidence to suggest an implicit no‑AG agreement between Jazz and Hikma where Jazz would not market its own generic of Xyrem during the six-month exclusivity period enjoyed by Hikma. The court added: “There is no rule that any implicit no‑AG agreement must have hurt Jazz to have constituted a reverse payment to Hikma.” The court further determined that factual disputes exist regarding whether Jazz charged Hikma below-market royalty rates and the competitive implications of the acceleration clause in the agreement between Jazz and Hikma. Second, Judge Seeborg rejected Defendants’ efforts to dismiss Plaintiffs’ market allocation claims based on a “holistic” view of the record, noting the potential interpretations of some interfirm communications and internal forecasts. Finally, he also rejected Defendants’ causation arguments, finding that there were factual disputes over whether Hikma could have brought a generic to market prior to 2024 because of other commercial and technical issues.

 Judge Seeborg ruled in favor of Defendants on several issues. First, the  Court dismissed Plaintiffs’ claim that Jazz’s cash payments to Amneal Pharmaceuticals, Lupin Pharmaceuticals, and Par Pharmaceutical, Inc. constituted unlawful reverse payments because Plaintiffs failed to present sufficient evidence suggesting  that the settlements paid exceeded Jazz’s expected litigation costs. Second, the Court dismissed claims brought by Plaintiffs Humana, Health Care Service Corporation, and BCBS Florida because these administrative services only (“ASO”) plans lacked standing to sue on behalf of non-party clients for whom they did not pay any of the alleged overcharges. Finally, Judge Seeborg dismissed Plaintiffs’ request for injunctive relief because they failed to identify the type of injunctive relief that would redress their injuries.

While Judge Seeborg granted Plaintiffs’ motion to strike Defendants’ affirmative defenses based on statutes of limitations and laches, he otherwise rejected Plaintiffs’ motion for summary judgment. Relying on applicable New Jersey contract law, he rejected Plaintiffs’ argument that evidence relating to Jazz and Hikma’s negotiations should be excluded when interpreting the executed agreements. Plaintiffs had “no basis to conclude, at summary judgment, that plaintiffs have met their initial burden under the rule of reason by showing the [a]greements had the potential to cause anticompetitive effects.” The Court also rejected Plaintiffs’ argument that Jazz would not have been able to show infringement of the relevant Xyrem patent because Plaintiffs’ own expert testimony contradicted this argument. Again, the Court found  that there remained factual disputes regarding Jazz’s motivations to not to launch an authorized generic, the impact of Defendants’ conduct on output; if lower lower prices of generics prove supracompetitive pricing, the scope of the relevant market, and intrastate commerce requirements for certain state law claims. Finally, Judge Seeborg concluded that Plaintiffs’ motion for summary judgment on antitrust injury were premature as they depend upon issues that Plaintiffs must prove at trial.

^[1] Dkt. No. 801, Order on Motions for Summary Judgment, In re Xyrem (Sodium Oxybate) Antitrust Litigation, Case No. 20-md-02966-RS (N.D. Cal., Aug. 26, 2024).

^[2][2] Plaintiffs settled similar claims brought against Amneal Pharmaceuticals and Lupin Pharmaceuticals, and the court has stayed Plaintiffs’ claims against Par Pharmaceutical, Inc. because of pending bankruptcy proceedings.

By Wesley Sweger

On September 6, 2024, Judge George Russell, III of the District of Maryland certified a class of third-party payors who purchased Tracleer (the brand name for bosentan).

Background

Actelion produces and sells Tracleer, brand name for bosentan, which is used to treat pulmonary artery hypertension. *1. Actelion has been the sole licensee of the Tracleer patent since 1997. The FDA granted Actelion two regulatory exclusives which guaranteed Actelion would not face competition from generics until 2008 at the earliest. “After receiving FDA approval, Actelion launched the Tracleer Access Program (‘TAP’), which limited sales of Tracleer to purchasers who agreed to certain limitations on the use of the drug. In 2009, the FDA approved a Risk Evaluation and Mitigation Strategy (‘REMS’) for Tracleer. The REMS provided that ‘Tracleer is available only through a special restricted distribution program called [TAP]’ and ‘Tracleer may be dispensed only to patients who are enrolled in and meet all conditions of [TAP].’ The REMS also explained that only prescribers and pharmacies registered with TAP may prescribe and distribute Tracleer.” *2.

Beginning in 2009, various generic drug manufacturers “sought to purchase samples of Tracleer from Actelion’s certified distributors and wholesalers in order to conduct bioequivalence testing, which is a prerequisite to FDA approval of the generic version of the brand-name drug.” Id. “Actelion and its certified distributors and wholesalers repeatedly denied the Generics’ requests to purchase Tracleer.” Id. Actelion provide two reasons for its refusal to sell Tracleer to the Generics: (1) Actelion sought to protect its intellectual property rights; and (2) providing Tracleer to Generics would violate the REMS’ distribution restrictions.” Id.

Starting in 2012, several Generics sued Actelion “alleging that Actelion’s refusal to distribute samples of Tracleer for bioequivalence testing constituted an abuse of monopoly power in violation of federal and state antitrust laws and FDA regulations.” Id. From 2013–2014, Actelion settled its suits with the Generics. Actelion’s patent expired in November 2015, ending Actelion’s legal exclusivity over bosentan. There is no generic version of bosentan on the market at present. *3.

In January 2019, Government Employees Health Associations filed a consolidated class action complaint. In its Second Amended Complaint, Plaintiffs alleged unlawful refusals to deal and attempts to monopolize in violation of Section 2, and brought forty-five additional state law claims from various states, including a claim under California’s UCL.

Class Certification

There was no real dispute that Plaintiffs’ proposed class satisfied the numerosity, commonality, typicality, and adequacy requirements of Rule 23(a). The parties disagreed about whether the class is ascertainable and whether the common questions predominate over individual questions.

Ascertainability

Plaintiffs’ expert opined that identification of class members is possible by “using a combination of detailed pharmaceutical data sets and affidavits contained in claims forms.” *11. Actelion argued that Plaintiffs’ proposed methodologies did not present an “administratively feasible way for the Court to distinguish between the final TPPs, which are potential class members, and non-class member intermediaries and non-payors” such as pharmacy benefits managers, third-party administrators, and administrative service only providers. Id. Plaintiffs argued ascertainability would not be a challenge because “‘[p]rescription drugs are likely the most heavily documented purchase transactions for any consumer good in the United States,’ and there is a ‘vast collection of detailed transaction records which . . . can be used to confirm members of the class and apply the specified exclusions.’” *12. The court agreed with Plaintiffs and noted similar classes with similar methods to determine class membership have been found.

Predominance

Actelion challenged predominance on two grounds: the presence of uninjured class members and the ability to measure damages on a class-wide basis. Id.

Actelion argued that a number of TPPs’ members were uninjured because brand loyalists continued to purchase the brand-name Tracleer even after generic bosentan became available.*14. The court agreed with Plaintiffs’ argument that even if there were brand loyalty, there is still injury because “the price of brand-name Tracleer may have been lower had the generic version entered the market earlier and created competition thus driving the price of even the brand-name bosentan down.” Id.

Regarding damages, Plaintiffs’ expert used a “yardstick approach,” which the Court noted is a fairly common approach to damages in antirust. Under this model, Plaintiffs’ damages expert uses data from the actual entry of generic bosentan to create a yardstick to estimate the price of brand-name and generic bosentan had the generic bosentan been available at a given date. *16.  Using this, the expert calculated “the difference between the amount TPPs actually paid for generic and brand-name bosentan and the amount they would have paid had generic bosentan been available at the time.” Id.*

To calculate prices and quantities of brand and generic bosentan, Plaintiffs’ expert used claims data from specialty pharmacies that tracks transactions between the pharmacies and pharmacy benefits managers. Actelion argued that the input data does not adequately show injury as to the class members because “the payment a [pharmacy benefits manager] remits to a pharmacy can differ from the amount a TPP pays to a [pharmacy benefits manager].” Id. The Court found that Actelion had provided no evidence of this and certified the class.  Id.

By Lillian Grinnell

Last month, in the closely watched governmental antitrust suit against Google, Judge Amit Mehta of the DC District Court handed down a 286-page opinion (in which the conclusions of law do not begin until page 134) after a more than nine-week trial. This case is one consolidated two separate lawsuits – the first filed in October 2020 by the Department of Justice (“DOJ”), arguing three separate Sherman Act Section 2 claims, and the second by 38 states in December 2020, which advanced a theory under Section 16 of the Clayton Act. This second suit adopted the allegations of the DOJ suit but substituted the DOJ’s “search advertising” market for “general search advertising.” The states also alleged that Google engaged in exclusionary conduct targeting specialized vertical providers, and that Google had also used its proprietary advertising platform, SA360, to engage in more exclusionary conduct in the alleged relevant markets.

In the opinion, after an exhaustive deep dive into the mechanics of search engines and digital advertising, Judge Mehta held “that (1) there are relevant product markets for general search services and general search text ads; (2) Google has monopoly power in those markets; (3) Google’s distribution agreements are exclusive and have anticompetitive effects; and (4) Google has not offered valid procompetitive justifications for those agreements. Importantly, the court also found that Google has exercised its monopoly power by charging supracompetitive prices for general search text ads. That conduct has allowed Google to earn monopoly profits.  Slip op at 29.

But for the other two alleged advertising markets, Judge Mehta found  for Google, deciding that there was no “general search advertising” market and that though there was a market for simply “search advertising,” Google did not have a monopoly.  With regards to SA360, Google was not liable. Lastly, in a win for Google, the Court declined to sanction it for its failure to preserve chat messages for discovery.

The two alleged search advertising markets failed for different reasons. The DOJ’s version, which was found to exist, is defined as consisting of “all advertisements served in response to a query” (slip op. at 166) excluding display ads, retargeted display ads, and non-search social media ads. Google argued for a broader market of all digital advertising. But Judge Mehta disagreed, holding that the social media and display ads rely on indirect signals to read user intent – not so much queries – and therefore are less valuable to advertisers. In addition, they are produced differently.

The plaintiffs, however, failed to meet the burden of showing a monopoly, with most direct evidence relating to the narrower subset of text ads, which are 64% of the search ads market. The Court “decline[d] to make such a simplistic extrapolation to sustain a finding of monopoly power” (id. at 182) in the broader search ads market from only the text ads. Moreover, with regards to indirect evidence, Judge Mehta was not persuaded by expert opinions that Google held 74% of the market, stating that there was not sufficient proof of barriers to entry in the market to make that number in itself indicative of monopoly power. And the Court cited several examples of powerful new entrants to the market, like Amazon, Meta, and the retailers Walmart and Target.

The “general search advertising” market, on the other hand, was allegedly a submarket of search advertising that “includes all ads that appear on a results page in response to a user query, which overwhelmingly consists of text ads and product listing ads but also encompasses local ads and travel ads.” Id. at 191 (internal quotation marks omitted). But while such a market “makes intuitive sense, and there is some record evidence to support it” (id. at 192), the Court found that advertisers did not view text ads and product listings in the same light at all, with some major companies only relying on one or the other. Not only were there distinct customers, but also distinct prices. Nor did the record reflect, in Judge Mehta’s view, any public recognition of a general search advertising market.

Judge Mehta did find Section 2 violations with regard to the general search text advertising and general search services markets, however, finding that they were relevant markets, that Google had monopoly power, and finally that they engaged in unlawful exclusive agreements. These agreements are the browser agreements, primarily between Apple and Mozilla, and Google’s Android agreements. These agreements, which make Google the default search engine on Safari, Firefox, and all Android devices, “effectively block Google’s rivals from the most effective channels of search distribution.” Id. at 197. Moreover, Androids also have Chrome preloaded as the exclusive browser, effectively locking up a good half of the market for search and general search text ads. Furthermore, the contracts specifically constrain Apple from diverting queries from Google, and the Android agreements prohibit partners from preloading alternative search services on the devices.

Google attempted to defend itself by arguing that preloaded search engines were in fact part of the product design of its partners, and it had fairly won its default spot on those platforms with “business acumen.” Id. at 199.  Indeed, Judge Mehta did admit that it is the best search engine. Yet he still found Google held a monopoly with no real contender, with market stasis for the past several years. Google had no competition for those default spots, and its grip on the market has been growing steadily stronger.  The partners with whom it made the contracts at issue have no choice to go elsewhere because it is simply not financially feasible to do so. There were several instances in the trial record showing these partners had tried to gain more flexibility with the contracts but ultimately failed, even though they were massive Fortune 500 companies. Applying the Microsoft exclusive dealing framework, the court found these agreements foreclosed the relevant markets from real competition, and that there were real-world anticompetitive effects.

For example, 65% of queries on Apple devices go through the default search engine, Google. By comparison, on Microsoft Edge, which uses Bing as the default, only 20% of users choose Google – even though Google’s share on Windows devices overall is 80%. The fact users do have the option to opt out of the default is not a defense to exclusive dealing, as Microsoft found when its agreements were found to be exclusive even though Netscape was not totally blocked from offering Navigator for users to download from the Internet. Indeed, Judge Mehta found this case to be parallel to that of Microsoft – users are technically free to pick something other than the default, but in practice they simply don’t tend to do so.

The Court found three anticompetitive effects from these agreements: (1) foreclosing a substantial part of the market to competition; (2) preventing Google’s rivals from achieving scale; and (3) disincentivizing them from investing and innovation in search. Google argued that there was no foreclosure because rivals were still theoretically able to compete for queries under the terms of the agreements, but again the Court found that this went expressly against the holding of Microsoft. Importantly, the Court also measured the impact of the agreements as an aggregate whole, rather than separately as Google argued, finding that 50% of the market was foreclosed.

In addition, similar to the general search services market, Google’s exclusive distribution agreements in the general search text advertising market effectively caps the spending of advertisers on its competitors as they can offer far less query volume. For Bing, this was as low as 10% of what would be spent on Google.

The plaintiffs were however unsuccessful in their claim that Google’s advertising tool, SA360, impermissibly advantages Google’s ad platform over Microsoft’s. They cited Google’s refusal to implement auction time bidding onto its platform that would allow advertisers to change bid strategies during auctions, which they said caused anticompetitive effects in diminishing the efficiencies of advertisers ad spend on SA360. But Judge Mehta decided that this allegation  conflicted with “the settled principle that firms have ‘no duty to deal’ with a rival” and that therefore the Sherman Act could not impose liability. Dominant firms have no duty “to share the source of their advantage.” Id. at 266 (quoting Verizon Commc’ns Inc. v. Law Off. of Curtis V. Trinko LLP, 540 U.S. 398, 407–08 (2004)). Moreover, Judge Mehta did not find any anticompetitive effects, pointing out that no advertisers had testified that their ad spend efficacy had been reduced on SA360.

Finally, Google did escape sanctions for its practice of routinely destroying employee chat logs, which continued after it had received a litigation hold notice. This was “not because Google’s failure to preserve chat messages might not warrant them. But because the sanctions Plaintiffs request do not move the needle on the court’s assessment of Google’s liability.” Id. at 275. The Court warned that Google “may not be so lucky” the next time it failed to preserve this kind of evidence.

EDITORS’ NOTE:   This E-Brief provides a summary of the highlights only from a  lengthy (286 page) trial opinion.

The Justice Department announced today its withdrawal from the 1995 Bank Merger Guidelines and emphasized that the 2023 Merger Guidelines remain its sole and authoritative statement across all industries.

The department today also released commentary explaining the application of the 2023 Merger Guidelines in banking. This commentary identifies competition issues that may commonly occur in bank mergers and outlines which guidelines best inform analysis of those issues. As with the 2023 Merger Guidelines, this commentary offers transparency into the department’s merger review process but does not create rights or obligations of any party under the laws governing mergers of banks and bank holding companies.

Today, the Federal Trade Commission brought action against the three largest prescription drug benefit managers (PBMs)—Caremark Rx, Express Scripts (ESI), and OptumRx—and their affiliated group purchasing organizations (GPOs) for engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs, impaired patients’ access to lower list price products, and shifted the cost of high insulin list prices to vulnerable patients.

The FTC’s administrative complaint alleges that CVS Health’s Caremark, Cigna’s ESI, and United Health Group’s Optum, and their respective GPOs—Zinc Health Services, Ascent Health Services, and Emisar Pharma Services—have abused their economic power by rigging pharmaceutical supply chain competition in their favor, forcing patients to pay more for life-saving medication. According to the complaint, these PBMs, known as the Big Three, together administer about 80% of all prescriptions in the United States.

The FTC alleges that the three PBMs created a perverse drug rebate system that prioritizes high rebates from drug manufacturers, leading to artificially inflated insulin list prices. The complaint charges that even when lower list price insulins became available that could have been more affordable for vulnerable patients, the PBMs systemically excluded them in favor of high list price, highly rebated insulin products. These strategies have allowed the PBMs and GPOs to line their pockets while certain patients are forced to pay higher out-of-pocket costs for insulin medication, the FTC’s complaint alleges.

“Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks in part to powerful PBMs and their greed,” said Rahul Rao, Deputy Director of the FTC’s Bureau of Competition. “Caremark, ESI, and Optum—as medication gatekeepers—have extracted millions of dollars off the backs of patients who need life-saving medications. The FTC’s administrative action seeks to put an end to the Big Three PBMs’ exploitative conduct and marks an important step in fixing a broken system—a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers.”

Insulin medications used to be affordable. In 1999, the average list price of Humalog—a brand-name insulin medication manufactured by Eli Lilly—was only $21. However, the complaint alleges that the PBMs’ chase-the-rebate strategy has led to skyrocketing list prices of insulin medications. By 2017, the list price of Humalog soared to more than $274—a staggering increase of over 1,200%. While PBM respondents collected billions in rebates and associated fees according to the complaint, by 2019 one out of every four insulin patients was unable to afford their medication.

The FTC’s Bureau of Competition makes clear in a statement issued today that the PBMs are not the only potentially culpable actors – the Bureau also remains deeply troubled by the role drug manufacturers like Eli Lilly, Novo Nordisk, and Sanofi play in driving up list prices of life-saving medications like insulin. Indeed, all drug manufacturers should be on notice that their participation in the type of conduct challenged here raises serious concerns, and that the Bureau of Competition may recommend suing drug manufacturers in any future enforcement actions.

The PBMs Benefit from Higher List Prices

The PBMs’ financial incentives are tied to a drug’s list price, also known as the wholesale acquisition cost. PBMs generate a portion of their revenue through drug rebates and fees, which are based on a percentage of a drug’s list price. PBMs, through their GPOs, negotiate rebate and fee rates with drug manufacturers. As the complaint alleges, insulin products with higher list prices generate higher rebates and fees for the PBMs and GPOs, even though the PBMs and GPOs do not provide drug manufacturers with any additional services in exchange.

The complaint further alleges that PBMs keep hundreds of millions of dollars in rebates and fees each year and use rebates to attract clients. PBMs’ clients are payers, such as employers, labor unions, and health insurers. Payers contract with PBMs for pharmacy benefit management services, including creating and administering drug formularies—lists of prescription drugs covered by a health plan.

The PBMs’ Chase-the-Rebate Strategy Reduced Patients’ Access to Lower List Priced Insulins, the FTC Alleges

Insulin list prices started rising in 2012 with the PBMs’ creation of exclusionary drug formularies, the FTC’s complaint alleges. Before 2012, formularies used to be more open, covering many drugs. According to the complaint, which changed when the PBMs, leveraging their size, began threatening to exclude certain drugs from the formulary to extract higher rebates from drug manufacturers in exchange for favorable formulary placement. Securing formulary coverage was critical for drug manufacturers to access patients with commercial health insurance, the FTC alleges.

Competition usually leads to lower prices as sellers try to win business. But in the upside-down insulin market, manufacturers—driven by the Big Three PBMs’ hunger for rebates—increased list prices to provide the larger rebates and fees necessary to compete for formulary access, the FTC’s complaint alleges. According to the complaint, one Novo Nordisk Vice President said that PBMs were “addicted to rebates.” While PBMs’ rebate pressures continued, insulin list prices soared. For example, the list price of Novolog U-100, an insulin medication manufactured by Novo Nordisk, more than doubled from $122.59 in 2012 to $289.36 in 2018.

The complaint alleges that even when low list price insulins became available, the PBMs systematically excluded them in favor of identical high list price, highly rebated versions. As described in the complaint, one PBM Vice President acknowledged that this strategy allowed the Big Three to continue to “drink down the tasty … rebates” on high list price, highly rebated insulins.

The PBMs Caused the Burden of High Insulin List Prices to Shift to Vulnerable Patients, the FTC Alleges

According to the complaint, as insulin list prices escalated, the PBMs collected rebates that, in principle, should have significantly reduced the cost of insulin drugs for patients at the pharmacy counter. Certain vulnerable patients, such as patients with deductibles and coinsurance, often must pay the unrebated higher list price and do not benefit from rebates at the point of sale. Indeed, they may pay more out-of-pocket for their insulin drugs than the entire net cost of the drug to the commercial payer. Caremark, ESI, and Optum knew that escalating insulin list prices and exclusion of low list price insulins from formularies hurt vulnerable patients—yet continued to pursue and incentivize strategies that shifted the burden of high list prices to patients, the FTC’s complaint alleges.

Caremark, ESI, and Optum and their respective GPOs engaged in unfair methods of competition and unfair acts or practices under Section 5 of the FTC Act by incentivizing manufacturers to inflate insulin list prices, restricting patients’ access to more affordable insulins on drug formularies, and shifting the cost of high list price insulins to vulnerable patient populations, the FTC’s complaint alleges.

The Commission vote to file an administrative complaint was 3-0-2, with Commissioners Melissa Holyoak and Andrew N. Ferguson recused.

Today, the Federal Trade Commission announced that Ryan Cohen, managing partner of RC Ventures, LLC, and Chairman and CEO of GameStop Corp., will pay a $985,320 civil penalty to settle charges that his acquisition of Wells Fargo & Company (Wells Fargo) shares violated the Hart-Scott-Rodino (HSR) Act.

According to the complaint, Cohen, who is also the founder and former CEO of Chewy, Inc., acquired more than 562,000 Wells Fargo voting securities resulting in aggregated holdings of Wells Fargo securities that exceeded HSR filing thresholds. Cohen’s purchase triggered an obligation to file an HSR form with federal antitrust agencies and wait before completing the acquisition. Yet Cohen failed to do so, which violated the HSR Act, according to the complaint.

The HSR Act requires companies and individuals to report large transactions, including securities acquisitions, over a certain threshold to the FTC and DOJ so that the federal agencies can investigate the deals before they close. The agencies have 30 days after a transaction has been reported to conduct an initial investigation and file a “second request” demand for additional information. It is generally illegal to finalize an acquisition during this investigatory period. The maximum civil penalty for an HSR violation at the time Cohen made the corrective filing was currently $43,792 per day.

According to the complaint, Cohen’s acquisition of Wells Fargo voting securities was not exempt under the Investment-Only Exemption of the HSR Act, even though his holding represented less than 10 percent of the outstanding voting securities of Wells Fargo.

When acquiring the Wells Fargo shares Cohen intended to influence Wells Fargo’s business decisions as evidenced by Cohen’s emails when he advocated for a board seat. After acquiring the shares, Cohen proceeded to have periodic communications with Wells Fargo’s leadership regarding suggestions to improve Wells Fargo’s business and to advocate for a potential board seat, according to the complaint.

The Federal Trade Commission is sending more than $2.6 million in refunds to consumers harmed by online cash advance provider FloatMe. The company deceived consumers with false promises of “free money” and discriminated against some consumers who applied for cash advances.

The FTC first took action against FloatMe in January 2024, alleging that the company and its co-founders used empty promises of quick and free cash advances to entice consumers to join its service. According to the FTC, the company then failed to deliver the promised advance amounts, charged fees to get the cash quickly, made it difficult for consumers to cancel their subscription, and discriminated against consumers who received public assistance. The FTC’s complaint also alleged the company made baseless claims that cash advance limits would be increased by an algorithm or another automated system.  The FTC plans to send PayPal payments on September 23, 2024, to 449,344 FloatMe members who paid for instant cash advances. Consumers who are eligible for a payment will get an email between now and September 20. Recipients should redeem their PayPal payment within 30 days.

SAN FRANCISCO — California Attorney General Rob Bonta today announced the filing of a lawsuit against ExxonMobil for allegedly engaging in a decades-long campaign of deception that caused and exacerbated the global plastics pollution crisis. In a complaint filed in the San Francisco County Superior Court, the Department of Justice alleges that ExxonMobil has been deceiving Californians for half a century through misleading public statements and slick marketing promising that recycling would address the ever-increasing amount of plastic waste ExxonMobil produces. Through this lawsuit, the Attorney General seeks to compel ExxonMobil, which promotes and produces the largest amount of polymers—essentially the building blocks used to make single-use plastic—that become plastic waste in California, to end its deceptive practices that threaten the environment and the public. Attorney General Bonta also seeks to secure an abatement fund, disgorgement, and civil penalties for the harm inflicted by plastics pollution upon California’s communities and the environment.

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California Department of Justice Legal Claims

On April 28, 2022, the Attorney General launched his investigation into fossil fuel and petrochemical industries for their role in causing the global plastics waste and pollution crisis. As part of its investigation, the DOJ issued investigative subpoenas to ExxonMobil and related plastics industry groups to seek details about the nature and extent of the company’s deception efforts. The DOJ has actively been conducting the investigation into the petrochemical industry for the past two years, including subpoenas that uncovered never-before-seen documents, culminating in today’s lawsuit.

The lawsuit alleges that ExxonMobil has misled consumers and continues to do so by engaging in an aggressive campaign to deceive the public and perpetuate the myth that recycling will solve the crisis of plastic pollution. For decades, ExxonMobil has dumped the cleanup and environmental costs of its deception and plastic production onto the public, and Californians are paying the price.

The lawsuit alleges that ExxonMobil’s decades-long campaign of deception violated state nuisance, natural resources, water pollution, false advertisement, and unfair competition laws. The Attorney General is seeking nuisance abatement, disgorgement (which would require the defendants to give up the profits gained through their illegal conduct), and civil penalties; and injunctive relief to both protect California’s natural resources from further pollution, impairment, and destruction, as well as to prevent ExxonMobil from making any further false or misleading statements about plastics recycling and its plastics operations. 

A copy of the complaint can be found attached to the press release on the State of California Department of Justice website.