Seventh Circuit: Consumers Revive AbbVie Humira Price-Fixing Appeal

• Consumers are appealing a lower court's dismissal of their class action lawsuit against AbbVie over alleged inflated Humira prices and illegal kickbacks to PBMs.
• The lawsuit claims AbbVie engaged in a scheme involving a 'phony list price,' 'massive undisclosed rebates' to PBMs, and 'shadow pricing' with competitor Amgen.
• AbbVie's attorney argued consumers suffered no substantial injury due to relief programs and that consumer protection laws are not the correct method to address high drug prices.
• Judges at the Seventh Circuit questioned the specific unfair conduct and supporting facts, with the plaintiffs' attorney pointing to undisclosed rebates and shadow pricing.
• This Seventh Circuit consumer class action could establish significant precedents for how antitrust and consumer protection laws apply to pharmaceutical pricing strategies, including PBM rebates and shadow pricing.

This appeal could set important precedents for how consumer protection and antitrust laws apply to pharmaceutical pricing, particularly concerning PBM rebates and 'shadow pricing'.

A group of consumers recently presented their arguments before a Seventh Circuit panel, seeking to revive their class action lawsuit against Chicago-based pharmaceutical giant AbbVie. The legal challenge centers on allegations that AbbVie engaged in a scheme to wrongfully inflate the price of its blockbuster drug, Humira, while simultaneously providing illegal kickbacks to pharmacy benefit managers (PBMs). This appeal follows a lower court's decision in January to dismiss the consumers' unfair business practice claims, which the district court characterized as merely complaints about high drug prices.

The consumers' 103-page complaint asserts that AbbVie orchestrated a multi-party scheme with pharmacy benefit managers, leading to an artificial inflation of Humira's price. Humira, a significant revenue generator for AbbVie, became the first prescription drug globally to exceed $20 billion in annual sales in 2021. Plaintiffs' attorney Steve Berman, a managing partner at Seattle-based Hagens Berman, argued before the three-judge panel that the lower court fundamentally mischaracterized his clients' claims and failed to draw all reasonable inferences in their favor, thereby improperly dismissing the AbbVie Humira antitrust lawsuit.

Central to the consumers' argument is a detailed description of the alleged pricing manipulation. Attorney Berman outlined a strategy where AbbVie would publish what he termed a 'phony list price' for Humira. Following this, the company allegedly paid 'massive undisclosed rebates' to pharmacy benefit managers in exchange for 'formula replacement,' a practice that effectively ensures Humira's preferred status on PBM formularies. A critical element of the alleged scheme, which Berman noted was overlooked by the district court, involves 'shadow pricing' with Amgen, the manufacturer of Enbrel, Humira's primary competitor.

Shadow pricing, as defined in the complaint, involves routinely mirroring a competitor's price increases rather than strategically undercutting them to gain market share. The plaintiffs contend that AbbVie consistently engaged in this practice with Amgen. Evidence cited includes a May 2016 Amgen pricing committee presentation, which explicitly stated Amgen's pricing strategy for Enbrel was 'to follow AbbVie’s price increases.' In response, Sean Berkowitz, a Chicago-based partner at Latham Watkins representing AbbVie, argued that the consumers did not suffer substantial injury because ample alternative relief programs were available to help them obtain necessary prescriptions. Berkowitz contended that consumer protection laws are not the appropriate instrument to address high drug prices and urged the court to affirm the district court's opinion, thereby dismissing the AbbVie drug pricing litigation.

During the Seventh Circuit hearing, judges probed the specifics of the consumers' allegations. U.S. Circuit Judge Amy St. Eve, a Donald Trump appointee, questioned attorney Berman about the precise nature of the 'unfair conduct' directed at consumers. Berman clarified that while the conduct itself might not be directly consumer-facing, 'the result of the conduct is directed at the consumer,' emphasizing that the unfair conduct constitutes the entire scheme that the district court allegedly failed to properly consider. U.S. Circuit Judge Doris Pryor, a Joe Biden appointee, further pressed Berman to provide specific facts supporting the unfair business practices beyond merely referencing 'the scheme.'

Berman reiterated that the core facts include the 'undisclosed, massive rebates' paid to pharmacy benefit managers for formula replacement, coupled with the practice of pharmaceutical shadow pricing. He asserted that these actions collectively led to a 'massive list price' primarily borne by a limited segment of consumers. Berman also referenced findings from the House Oversight Committee, which, after reviewing relevant documents, characterized the practices complained about as 'unsustainable, unjustified, and unfair.' This AbbVie Humira price-fixing appeal could set important precedents for how consumer protection and antitrust laws apply to pharmaceutical pricing, particularly concerning PBM rebates and 'shadow pricing,' potentially influencing future regulatory enforcement and litigation risk for pharmaceutical companies and PBMs.

This appeal could set important precedents for how consumer protection and antitrust laws apply to pharmaceutical pricing, particularly concerning PBM rebates and 'shadow pricing'. Legal and compliance teams in pharma and PBMs should track this case for potential shifts in regulatory enforcement and litigation risk related to drug pricing strategies.

Source: Original reporting via CN