City of Rockford v. Mallinckrodt ARD, Inc.

360 F. Supp. 3d 730
CourtDistrict Court, E.D. Illinois
DecidedJanuary 25, 2019
DocketCase No: 17 C 50107
StatusPublished
Cited by25 cases

This text of 360 F. Supp. 3d 730 (City of Rockford v. Mallinckrodt ARD, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City of Rockford v. Mallinckrodt ARD, Inc., 360 F. Supp. 3d 730 (illinoised 2019).

Opinion

FREDERICK J. KAPALA, District Judge

Plaintiffs, City of Rockford, Illinois, and Acument Global Technologies Inc., filed a second amended complaint (the "SAC") against two groups of defendants: (1) Mallinckrodt plc and Mallinckrodt ARD, Inc.

*743(including its acquisition of "Questcor Pharmaceuticals, Inc.") (collectively, "Mallinckrodt"); and (2) Express Scripts Holding Company and its four wholly-owned subsidiaries, Express Scripts, Inc. ("ESI"), Curascript, Inc., Accredo Health Group, Inc., and United Biosource Corp. ("UBC") (collectively, "Express Scripts"), pursuant to federal and state antitrust and consumer protection laws, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), various state-law claims, and 28 U.S.C. §§ 2201 - 2202 for declaratory judgment. Before this court are defendants' motions to dismiss. For the reasons that follow, defendants' motions to dismiss are granted in part and denied in part.

I. BACKGROUND

The following facts are drawn from the allegations in the SAC. Because this case comes before the court pursuant to a motion to dismiss, the court accepts all non-conclusory allegations in the SAC as true.

A. Acthar and the Exclusive Dealing Arrangement

Acthar is an adrenocorticotropic hormone ("ACTH") drug, which causes the body to produce cortisone and other steroid hormones. SAC ¶ 41. In 1952, the Food and Drug Administration approved Acthar's application to over fifty conditions. Id. ¶ 40. One of those conditions is infantile spasms, a serious condition but one with an annual patient population of less than 2,000 children. Id. ¶ 45. In 2001, Questcor Pharmaceuticals, Inc. acquired the rights to Acthar. In 2014, Mallinckrodt plc, another pharmaceutical company, acquired Questcor and, with it, Acthar. Id. ¶ 44. As a result of the acquisition Questcor's name was changed to Mallinckrodt ARD, Inc. Id. ¶ 22.1

Before 2007, Acthar was distributed to any doctor, hospital, wholesaler, or specialty pharmacy who requested the drug to treat seriously ill patients. Id. ¶ 47. On August 27, 2007, Mallinckrodt embarked on a "new strategy" that sought to limit Acthar's distribution by designating Express Scripts2 as Mallinckrodt's sole distributor *744of Acthar. Id. ¶¶ 48-49, 221.3 Plaintiffs allege that the "new strategy" is in fact a vertical price-fixing conspiracy, in which Mallinckrodt used Express Scripts as its exclusive distributor of Acthar through a program called the "Acthar Support & Access Program" (the "ASAP") to raise prices, restrict distribution, and stifle competition. According to plaintiffs, the structure of the ASAP allows defendants to restrict the distribution of Acthar to just one distributor, Express Scripts, thereby eliminating other distributors from negotiating for lower prices for Acthar. Id. ¶¶ 48, 90, 231.

Express Scripts' role is to provide "integrated specialty services" to facilitate every other facet of the distribution chain, where each Express Scripts entity plays different roles at different levels of this process. Id. ¶ 58. UBC, a pharmaceutical support services company,4 acts as the "hub" between these entities, coordinating Acthar's sale, distribution, and reimbursement between Mallinckrodt, ESI, CuraScript, and Accredo. Id. ¶ 51. Specifically, after being contacted directly by patients or notified by Mallinckrodt that a patient wants to purchase Acthar, UBC confirms the medical necessity of the prescription through Accredo (a specialty pharmacy services company) and then arranges payment through ESI (the pharmacy benefit manager ("PBM") ) for shipment of Acthar to patients through CuraScript (the wholesale pharmacy/distributor).5 Id. ¶¶ 57-62, 67. This allows Mallinckrodt to simply ship Acthar directly to patients and receive payments directly from the patients' third-party payors, while Express Scripts handles the rest. Id. ¶ 50.

Plaintiffs further allege various anticompetitive acts that enabled defendants to use the ASAP to price-fix and maintain Mallinckrodt's monopoly. One example is the timing of Acthar's first large price increase. As soon as defendants implemented the ASAP, Mallinckrodt increased the price of Acthar from approximately $ 1,980 to $ 27,922.80-a 1,310% increase in the span of a month, and a 69,707% increase from 2001.

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360 F. Supp. 3d 730, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-rockford-v-mallinckrodt-ard-inc-illinoised-2019.