Last Monday Sanofi brought an antitrust suit against Mylan, alleging that Mylan engaged in illegal conduct to suppress competition in the epinephrine auto-injector (“EAI”) market, which is dominated by Mylan’s billion-dollar EpiPen® product. In particular, Sanofi alleges that Mylan has had a virtual monopoly in the EAI market, but felt threatened when Sanofi entered the market in 2013 with its Auvi-Q® product, which Sanofi touted for its smaller size and voice instructions (as opposed to EpiPen®’s written instructions).
To combat the perceived threat, Mylan allegedly offered rebates to insurance companies, state-based Medicaid agencies, and pharmaceutical benefit managers—rebates that were conditioned on Auvi-Q® not being a device that those entities would put on their formularies and provide reimbursement. Sanofi alleges that Mylan’s actions resulted in Auvi-Q® being blocked from nearly 50% of the market and its eventual withdrawal in October 2015 because it could not gain sufficient traction in the market.
Sanofi alleges that, in violation of Section 2 of the Sherman Act, Mylan entered into exclusive dealing arrangements for the purpose of excluding competitors from the market. An exclusive dealing arrangement is an agreement by a buyer to purchase certain goods or services only from a particular seller for a period of time. Such arrangements can have procompetitive benefits, such as lower prices, assured supply, protection against rising prices, and the ability for long-term planning, but antitrust concerns are raised when a monopolist enters into these arrangements for the purpose of inhibiting competition from emerging rivals.
The first step in the court’s analysis will be to decide whether or not Sanofi’s claim of exclusive dealing is based predominantly on the allegation that Mylan used offers of lower prices to secure a favored position versus a new rival. If so, at least one circuit court has indicated that the “predatory pricing” test articulated in Liggett should apply; if not, then Mylan’s arrangements should be reviewed under a rule of reason standard. If the predatory pricing test applies, then Sanofi must show that Mylan priced EpiPen® below cost to try to eliminate competition with the expectation that it would later recoup the supracompetitive profits it was surrendering. If a rule of reason applies, the court will consider several factors, including whether
- the market power of Mylan is significant;
- Sanofi was substantially foreclosed from the relevant market;
- the contracts were of sufficient duration to prevent meaningful competition;
- the anticompetitive effects outweigh procompetitive benefits;
- Mylan’s behavior was coercive; and
- customers were able to terminate the agreements.
Sanofi’s allegations come at a controversial time for Mylan who was just recently under scrutiny by both the public and Congress for its 600% price increase of the EpiPen®. However, unlike the price increase, Sanofi’s allegations and Mylan’s defenses should fit more comfortably within the tests used to define whether conduct violates the Sherman Act. Mylan’s response to the complaint is due May 15.