On January 23, 2019, Judge J. Curtis Joyner for the U.S. District Court, Eastern District of Pennsylvania denied Defendant’s motion to dismiss the consolidated class action, in which purchasers allege that Merck engaged in an anticompetitive bundled discount scheme to maintain its monopoly power in the rotavirus vaccines market after entry by GlaxoSmithKline plc (GSK). On the same day, the court denied Merck’s motion to compel arbitration.
On October 29, 2019, the U.S. Court of Appeals for the Third Circuit vacated the order denying arbitration and remanded for discovery on the issue of agency. As of November 1, 2020, the arbitration claims are still being litigated. After completing this discovery, Merck renewed its motion to compel arbitration and plaintiffs moved for summary judgment as to arbitrability on July 6, 2020. The motions are pending.
On May 2, 2018, Daniel A. Small, Daniel H. Silverman and other lawyers filed a putative class action against Merck & Co., Inc. on behalf of direct purchasers of the rotavirus vaccine. Cohen Milstein developed this proprietary action in which plaintiffs allege that Merck engaged in an anticompetitive bundled discount scheme to maintain its monopoly power in the rotavirus vaccine market.
Merck is one of the world’s largest vaccine manufacturers and a leading manufacturer of vaccines in the United States. It is the sole United States manufacturer in the markets for multiple pediatric vaccines, including MMR (measles, mumps, and rubella), Varicella, and human papilloma virus (HPV), holding 100% of United States sales for those vaccines. Merck is by far the dominant seller in the Rotavirus Vaccine Market, marketing its vaccine under the trade name RotaTeq; its only competitor in the Rotavirus Vaccine Market is GSK, which markets its rotavirus vaccine under the trade name Rotarix.
From 2006-2008, Merck was the only seller of the rotavirus vaccine in the U.S. Following GSK’s entry into the market, plaintiffs allege that Merck amended its contracts to require customers to buy nearly all their pediatric rotavirus vaccines from Merck or face substantial price penalties on subsequent purchases of RotaTeq and all other bundled Merck vaccines (“Merck Bundle”). As a result, any customer who wished to buy more than a de minimis supply of Rotarix from GSK faced substantial penalties on subsequent purchases of RotaTeq, as well as on all other Merck vaccines (including those for which there is no other supplier).
The Merck Bundle substantially forecloses competition by limiting GSK’s ability to profitably win sales to foreclosed buyers with price cuts, thereby allowing Merck to maintain its monopoly share of the Rotavirus Vaccine Market despite continuing to charge foreclosed buyers monopoly prices. The Merck Bundle bifurcated the market between loyal and disloyal customers, reducing the ability of GSK to compete on price for the former, and the incentive to compete on price for the latter. The Merck Bundle thus incentivized GSK to maintain high prices instead of competing aggressively with Merck on the price of rotavirus vaccines.
As a result, Plaintiff and the proposed class allege that they have been overcharged for RotaTeq.
The original case name is: Schwartz Pediatrics, et al. v. Merck & Co., Inc., Case No. 2:18-cv-01851-JCJ (E.D. Penn.)