Tenth Circuit Refuses to Inject Consumer Choice Framework into Antitrust Challenge to EpiPen Distribution
The framework of choice for antitrust challenges—at least in the insurance industry—remains the consumer welfare standard, not the consumer choice standard, according to the recent decision by U.S. Court of Appeals for the Tenth Circuit in Sanofi-Aventis U.S. v. Mylan, et al.
In a unanimous decision, the Tenth Circuit affirmed a decision by the U.S. District Court for the District of Kansas granting summary judgment to Mylan on claims that its policies governing distribution of EpiPen had monopolized the epinephrine auto-injector (“EAI”) market in the United States.
Plaintiff Sanofi-Aventis argued that Auvi-Q—its innovative epinephrine auto-injector—was illegally foreclosed from the market as a result of Mylan’s rebates on EpiPen through exclusive agreements with insurers and Pharmacy Benefits Managers (“PBMs”). The appellate court ruled that Sanofi had failed to show harm to consumers under the traditional consumer welfare standard, and that only reduced output or increased prices mattered.
But buried in the Tenth Circuit’s opinion is a brief discussion regarding the importance of consumer choice to antitrust law. Mylan’s conduct resulted in only one EAI product—the EpiPen—available to many consumers who rely on healthcare insurance because of the exclusion of Auvi-Q from insurer and PBM formularies. Does that deprivation of consumer choice result in antitrust injury even if, as the court seemed to find, consumer prices were also lowered as a result of the challenged conduct?
According to several amici curiae, yes. They argued that greater consumer choice should lead to greater competition on both price and on features, a concept basic to economics. If courts only analyze price and efficiency for the formulary, the totality of harm to the consumer, including non-price related factors like innovation and quality, is left out of the equation, and consumers are left worse off as a result.
There is factual support for this position. For example, prior to Sanofi’s entry into the market, Mylan’s EpiPen faced little competition and EpiPen prices were high, EpiPen prices dropped after Auvi-Q’s introduction, and once Sanofi withdrew, EpiPen prices shot back up. Sanofi also alleged that Auvi-Q provided much-needed innovation. Auvi-Q was a smaller device compared to the EpiPen, could be injected without a “swing and jab motion,” and offered voice-activated instructions for blind patients.
And there is legal support for the importance of consumer choice to antitrust law. For example, the amicus brief of Committee to Support Antitrust Law cited to Second, Third, and Tenth Circuit decisions that emphasize consumer choice in evaluating antitrust injury. And as the Supreme Court has explained, a “coercive activity that prevents its victims from making free choices between market alternatives” is a form of antitrust injury. Associated Gen. Contractors of Cal., Inc. v. Cal State Council of Carpenters, 459 U.S. 519, 528 (1983).
Ultimately, the Tenth Circuit rejected “supplementing” the consumer welfare standard with a consumer choice “framework.”
First, the panel rejected the argument that consumers were deprived of choosing Auvi-Q because they could apply for an exemption from their insurer or pay out of pocket. Whether or not either option is viable for many (or most) consumers is questionable, at best.
Second, the court declared that its “only concern” was whether Mylan’s conduct “reduced output or increased prices,” thus refusing to inject the judiciary into “the workings of the private market.” While judicial reluctance to intervene in any industry—much less the byzantine healthcare industry—is understandable, the record indicates that PBMs often sparked competition on bids between Mylan and Sanofi, and negotiated prices down while designating Auvi-Q and EpiPen as “co-preferred” drugs.
In our view, the consumer welfare standard requires courts to consider reduced consumer choice in conducting a rule of reason analysis of alleged exclusionary conduct. Moreover, taking into consideration the effects of exclusionary conduct on consumer choice would not be a drastic break from fundamental antitrust principles.
When analyzing the totality of the circumstances, it is not a stretch to conclude that evidence of Mylan’s actions and the potential consumer harm as a result of those actions should have been presented to a jury.
Written by Osob Samantar
Edited by Gary J. Malone