Overview
On November 21, 2023, Judge Gerald Austin McHugh of the United States District Court for the Eastern District of Pennsylvania largely denied Defendant’s motion to dismiss, finding that Plaintiffs plausibly alleged that Merck violated the antitrust laws through its bundled “loyalty” program for the rotavirus vaccine called RotaTeq.
Plaintiffs allege that Merck implemented its bundling scheme to leverage its monopoly power in certain vaccine markets to maintain its monopoly in Rotavirus vaccines despite entry by a competing vaccine manufacturer. As a consequence, Plaintiffs claim that Merck is able to charge customers supercompetitive prices.
Case Background
Merck is one of the world’s largest vaccines manufacturers and a leading manufacturer of vaccines in the United States. It is the sole U.S. manufacturer in the markets for multiple pediatric vaccines, including for varicella and human papilloma virus (“HPV”), holding 100% of United States sales for those vaccines. It similarly had a monopoly in MMR (measles, mumps, and rubella) vaccines until June of 2022.
Merck is also, by far, the dominant seller of rotavirus vaccines, marketing its vaccine under the trade name RotaTeq; its only competitor in this market is GlaxoSmithKline plc (“GSK”).
Merck was the only seller of rotavirus vaccine in the United States from 2006 until 2008, when GSK received FDA approval to market its rotavirus vaccine, named “Rotarix.” Plaintiffs allege that in preparation for GSK’s introduction of a competing rotavirus vaccine, Merck added a condition to its contracts that required customers to buy all or nearly all their pediatric rotavirus vaccines from Merck or face substantial price penalties on not only RotaTeq but also on all other bundled Merck vaccines.
Plaintiffs allege that the this bundled discount scheme forecloses competition in the rotavirus vaccine market, reducing both the incentive and ability for GSK to compete for customers. As a result, of the softened competition caused by the Merck Bundle, there is less competitive pressure on Merck to reduce pricing of RotaTeq.
Due to the Merck Bundle, instead of significantly decreasing the price of RotaTeq when GSK entered the market, as would normally be expected to result from competitive entry into a monopoly market, Merck has maintained the price of RotaTeq at supracompetitive levels, actually increasing its list price despite facing competition from GSK. Those supracompetitive prices are passed on by healthcare providers to patients and third-party payors such as Plaintiff and members of the class. As a result, Plaintiff and the class paid, and continue to pay, artificially inflated prices for rotavirus vaccines.
Case name: Mayor and City Council of Baltimore v. Merck, Case No. 2:23-cv-00828, United States District Court for the Eastern District of Pennsylvania