Merck Hit with Class Action Over Alleged Scheme to Maintain Pediatric Rotavirus Vaccine Monopoly

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A proposed class action alleges an “anticompetitive scheme” on the part of Merck Sharp & Dohme Corp. has caused customers to pay artificially inflated prices for its pediatric rotavirus vaccine, RotaTeq, and for the sole competing vaccine manufactured by GlaxoSmithKline plc (GSK), Rotarix.

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The 85-page lawsuit claims Merck, one of the world’s largest vaccine manufacturers, has maintained its monopoly power over the United States market for rotavirus vaccines by imposing a “bundled loyalty condition” in a series of exclusionary contracts with physician buying groups (PBGs) and other group purchasing organizations (GPOs). Under this condition, customers must buy all or nearly all of their pediatric rotavirus vaccines from Merck or face substantial price penalties on RotaTeq and the other Merck vaccines that are part of the bundle, the complaint says.

Ultimately, the Merck bundle lets the company sell its vaccine to healthcare providers at “supracompetitive levels,” the filing contends. The suit says these prices get passed on to patients and third-party payors like the plaintiff, the city of Baltimore, which covers all or part of the cost of vaccines for its health plan participants.

According to the case, “disloyal” Merck customers, i.e., those who buy Rotarix from GSK in addition to RotaTeq, are faced with steep penalties on any RotaTeq they continue to purchase from Merck. Additionally, disloyal buyers face substantial price penalties on all other Merck vaccines in the bundle, including its hepatitis A, hepatitis B, haemophilus influenzae type b (Hib), varicella (chicken pox), HPV, and measles, mumps, and rubella (MMR) vaccines, the case relays.

The lawsuit claims that, depending on the vaccine, these penalties force consumers to pay prices between two and 58 percent higher than the standard contract prices. Worse yet, Merck is the sole seller of pediatric varicella and HPV vaccines in the United States, leaving “disloyal” healthcare providers with no choice but to pay its inflated prices, the suit stresses. The case adds that Merck was the United States’ only provider of MMR vaccines until 2022.

As the case tells it, RotaTeq was the only rotavirus vaccine on the market when it was approved by the U.S. Food and Drug Administration (FDA) in February 2006. 

“Before rotavirus vaccines were prevalent, rotavirus disease was a common and serious health problem for children in the United States, with nearly all children in the United States experiencing at least one rotavirus infection before their fifth birthday,” the complaint explains, adding that rotavirus is the leading cause of severe acute gastroenteritis among infants and young children worldwide.

Per the case, Merck began enforcing the RotaTeq bundled loyalty condition in 2008 when Rotarix entered the market as the vaccine’s sole competitor. As part of its “anticompetitive and exclusionary” scheme, Merck has worked with 10 PGGs, “who are paid by the vaccine manufacturers even though they ostensibly work on behalf of physicians,” to coerce healthcare providers into refraining from purchasing or administering vaccines that compete with RotaTeq, the complaint contends.

The lawsuit says that normally, the emergence of a competitor in the market drives down high costs previously set by the monopoly power. However, the RotaTeq bundled loyalty condition has significantly squashed competition between the two rotavirus vaccine manufacturers, allowing Merck to actually increase the price of RotaTeq over the years, the filing contends.

The complaint further notes that “[b]ecause the Merck Bundle penalizes Merck Disloyal Buyers with high penalty prices, GSK can maximize its profits by selling to such Disloyal Buyers at high prices just below the penalty prices charged by Merck.”

“As a result, patients and health plans within each state have been forced to continue paying supra-competitive prices for RotaTeq, which, in the absence of Merck’s anticompetitive scheme, would have been reduced as a result of competition from GSK’s Rotarix,” the suit states.

The lawsuit looks to cover all third-party payors in the following states or territories who, since March 3, 2019, indirectly purchased, paid and/or provided reimbursement for some or all of the purchase price of RotaTeq, other than for resale: Arizona, California, Connecticut, District of Columbia, Florida, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, West Virginia and Wisconsin.

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