Wednesday, 1 April 2020

EpiPen maker cannot use loophole-closing law as shield

By Anne Sherry, J.D.

An opt-out lawsuit over Mylan N.V.’s alleged misstatements about the EpiPen only partially withstood Mylan’s motion to dismiss. The Southern District of New York dismissed the plaintiff’s claims of anticompetitive conduct and misstatements about disclosure protocols and regulatory risk. However, the court rejected Mylan’s attempt to dismiss claims that it misrepresented the “risk of errors” in its Medicaid rebate calculations while at the time of those statements it was allegedly manipulating EpiPen’s rebate eligibility (MYL Litigation Recovery I LLC v. Mylan N.V., March 30, 2020, Oetken, J.).

The plaintiff opted out of the class action currently pending against Mylan over EpiPen-related and other issues. That class action alleges that Mylan unlawfully misclassified the EpiPen as a generic drug and offered it at a rebate to third parties who promised to decline to reimburse for a competitor’s product. The opt-out suit concerns these allegations and adds another claim based on Mylan’s statements that it had effective disclosure protocols and procedures.

“Risks of errors.” Although it granted much of Mylan’s motion to dismiss, the court allowed to proceed a claim that Mylan misled investors by stating that its Medicaid rebate calculations carried “risks of errors.” According to the plaintiff, these statements implied that the calculations could be correct; in fact, Mylan was deliberately misclassifying the EpiPen as a generic drug at the time. Mylan unsuccessfully argued that the Medicaid Drug Rebate Program was ambiguous at the time, as evidenced by the enactment of an intervening statute, the Right Rebate Act, to resolve the ambiguity.

In rejecting the argument, the court noted that the statute was expressly enacted to prevent Mylan and others from misclassifying the EpiPen and other drugs: “It beggars belief that Mylan would be able to hide behind the RRA in order to defeat [plaintiff’s] allegations regarding the ‘risk of error’ statements—statements that have already survived a motion to dismiss in one of this Court’s prior opinions in the Class Action.” Furthermore, whether or not Congress thought there was an ambiguity, the plaintiff pleaded that the Centers for Medicare & Medicaid Services had explicitly told Mylan that EpiPen was misclassified.

American Pipe tolling. The court also held that the plaintiff’s Section 18 claims were not time-barred and that the plaintiff adequately pleaded reliance. Because the claims rested on the same facts as the class action, the two-year statute of limitations was tolled under American Pipe.

Other claims dismissed. Mylan successfully defeated several of the plaintiff’s Section 10(b) claims. Allegations of anticompetitive conduct based on Mylan’s market dominance and offer of rebates were not pleaded with the requisite particularity—they were “so conclusory that they do not meet the standard that those in the Class Action complaint cleared,” the court wrote. The court also dismissed claims relating to Mylan’s certifications that it had effective disclosure protocols. Here, the complaint merely pointed to the fact that Mylan had entered into a Control Integrity Agreement intended to improve its compliance procedures. The plaintiff failed to allege a link between this agreement and Mylan’s disclosure protocols or to allege how the disclosure protocols were inadequate. Finally, the plaintiff waived its position on statements regarding regulatory risk because it failed to address Mylan’s argument when responding to the motion to dismiss.

The case is No. 19-cv-1799.

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