Consumers look to salvage suit over Big Pharma price-fixing scheme

Consumers claim Chicago pharmaceutical company AbbVie wrongfully inflated the price of Humira — the world's first $20 billion drug — and granted illegal kickbacks to pharmacy benefit managers.CHICAGO (CN) — A group of consumers maintained to a Seventh Circuit panel Wednesday morning that a Chicago pharmaceutical company wrongfully inflated drug prices and paid illegal kickbacks to pharmacy benefit managers.A lower court dismissed the consumers’ unfair business practice class action against pharmaceutical giant AbbVie back in January, and characterized it as nothing more than complaints about high drug prices. In their 103-page class action, the consumers accuse AbbVie of coordinating a scheme with pharmacy benefit managers to artificially inflate the price of Humira, which became the first prescription drug to surpass $20 billion in annual sales globally in 2021.Plaintiffs’ attorney Steve Berman told the three-judge panel that the lower court mischaracterized his clients’ claims, and in doing so, did not draw all inferences in their favor.“We complained about a multiparty scheme where first AbbVie publishes a phony list price, right?” said Berman, managing partner at Seattle-based Hagens Berman. “Then it pays massive undisclosed rebates to the [pharmacy benefit managers] in exchange for formula replacement, and in addition, a fact completely ignored by the district court was the shadow pricing with Amgen.”Shadow pricing is the practice of routinely mirroring the price hikes of a primary competitor instead of undercutting them to gain market share. The plaintiffs note in their complaint that AbbVie routinely engaged in this practice with Amgen, which manufacturers the Enbrel, the largest competitor to Humira. “One Amgen pricing committee presentation prepared in May 2016 described Amgen’s pricing strategy for Enbrel: ‘Price increase strategy is to follow AbbVie’s price increases.’”AbbVie’s attorney Sean Berkowitz argued the consumers did not face substantial injury, because there were ample alternatives of relief programs so that they could get their necessary prescriptions.“I want to be really clear, we’re not unsympathetic to the problem of high drug prices,” said Berkowitz, a Chicago-based partner at Latham Watkins. “The issue is whether the consumer protection laws are the right method and the right instrument to address those, and we respectfully say that they are not, and would ask that you affirm the district court opinion.”U.S. Circuit Judge Amy St. Eve asked Berman about the actual behavior of which the consumers are seeking relief.“What’s the unfair conduct that’s directed at the consumer?” the Donald Trump appointee asked.“The result of the conduct is directed at the consumer,” Berman responded. “Okay, so the unfair conduct is this scheme that the district court didn’t deal with at all.”U.S. Circuit Judge Doris Pryor, a Joe Biden appointee, attempted to pin down Berman’s argument further. She asked him what facts support the claim of unfair business practices, “other than saying ’the scheme.'”“The facts are undisclosed, massive rebates to [pharmacy benefit managers], in exchange for formula replacement. The facts are shadow pricing, all resulting in a massive list price that only a small list of consumers bear, okay?” Berman said. “And I know that the House Oversight Committee might go into the policy prong of my argument, but the House Oversight Committee, after reviewing these documents, found the practices that we’re complaining about to be ‘unsustainable, unjustified, and unfair.’”Federal courts have historically used a three-part test from 1993 Supreme Court case Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. to define unfair business acts or practices. The test requires that a practice offends public policy, is immoral, unethical or oppressive, and causes substantial injury to consumers.In response to Berman, St. Eve noted the House report is too broad, and said public policy has to be specific to satisfy the test. U.S Circuit Judge Josh Kolar, another Biden appointee, pressed Berman about the limiting principle of his argument.Berman pointed to consumer protection statutes, which have long regulated this sort of conduct. “It’s a rare circumstance when things get so bad and the scheme is so blatant that someone comes and sues,” he said. “That’s the limiting principle. There has to be egregious facts, and here we believe there are egregious facts.”Berkowitz disagreed with Berman’s characterization of the limiting principle. He reiterated St. Eve’s point, and remarked that the House Oversight Committee’s report failed to come to any conclusions about insurance rebates and shadow pricing.“If you were to use that as the public policy, you’d end up in a scenario, unfortunately where everybody in America — all drug companies — would be faced with unfair conduct,” Berkowitz said. “There’s no standard of conduct to which AbbVie could conform its actions based on this complaint.”The panel of judges took the case under advisement and did not indicate when it might rule on the matter.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads