District Of Massachusetts Certifies Direct And Indirect Purchaser Classes In Alleged Pay-For-Delay Action Relating To Solodyn
On October 16, 2017, Judge Denise J. Casper of the United States District Court for the District of Massachusetts granted class certification to two classes of purchasers allegedly injured by a pay-for-delay scheme relating to prescription drug Solodyn: a Direct Purchaser Plaintiff class (“DPPs”) and an End-Payor Plaintiff class (“EPPs”). In Re Solodyn (Minocycline Hydrochloride) Antitrust Litig., No. 14-md-02503 (D. Mass. Oct. 16, 2017). In certifying the DPP class, the Court rejected the argument that affiliated corporate entities should be consolidated in evaluating the numerosity requirement of Federal Rule of Civil Procedure 23(a). In certifying both classes, the Court accepted the plaintiffs’ experts’ proffered methodologies to establish common or class-wide impact as adequate for Rule 23 purposes over a variety of defense challenges.
Solodyn is a pharmaceutical drug that treats inflammatory lesions resulting from acne that is marketed and sold by defendant Medicis. In 1999, Medicis received a patent on Solodyn, and in 2006, the FDA approved a New Drug Application (“NDA”) for three new dosages for Solodyn (the “Legacy Strengths”). In October 2007, defendant Impax sought FDA approval to market generic versions of Legacy Strength Solodyn. While Impax’s request was pending, in November 2008, Medicis and Impax entered into two agreements: Impax agreed to drop its challenge to Medicis’s Solodyn patent, and Medicis paid Impax approximately $40 million. In February 2009, the FDA approved Impax’s application to market generic versions of Legacy Strength Solodyn, but Impax did not begin selling generic Solodyn until November 2011. During that same period—early 2009 to late 2011—several other companies (defendants Teva, Sando, and Mylan) launched generic Solodyn “at-risk” for brief periods, but withdrew their offerings within days of launch pursuant to agreements with Medicis to stop selling generic Solodyn. Those manufacturers re-launched sales of generic Legacy Strength Solodyn in November 2011. In 2009 and 2010, Medicis launched sales of additional dosages of Solodyn (“Add-On Strengths”) and in July 2011 stopped selling Legacy Strength Solodyn. Each of the generic manufacturers also agreed with Medicis to delay launch of generic Add-On Strength Solodyn until at least February 2018.
In 2013, DPPs and EPPs independently brought antitrust claims against defendants. After surviving motions to dismiss, DPPs and EPPs each moved to certify their putative classes under Federal Rule of Civil Procedure 23(b)(3). EPPs also moved to certify an injunctive class under Rule 23(b)(2).
Defendants opposed DPPs’ motion to certify, arguing that the putative class was not “so numerous that joinder would be impractical.” Defendants argued that DPPs’ proposed class of forty-eight members was not “numerous” because they did not account for corporate ownership structure and because several putative class members share a common corporate parent. Consolidating putative class members based on common parentage would result in a class of only thirty-nine members. The Defendants also argued that five direct purchasers who had already filed their own separate lawsuits should also be carved out of the numerosity analysis because their lawsuits evidenced an intention to opt-out of any certified class.
The Court rejected these arguments, and instead credited DPPs’ argument that, regardless of corporate ownership structure, each separately incorporated company is a distinct legal entity that should be treated as a separate class member in order to vindicate its own individual antitrust injury. Absent evidence that the putative class was attempting to use corporate subsidiaries to wrongfully inflate the number of potential class members, the Court held, such subsidiaries should be considered as individual potential class members. The Court stated that, even if it did consider only corporate parents for a class of only thirty-nine members, other “subjective factors” nevertheless weighed in favor of finding that the class was so numerous that joinder would be impractical, including the geographic dispersion of the plaintiffs throughout the country, the administrative burden on the courts of coordinating the claims of (at least) thirty-nine different plaintiffs if the case were not litigated as a class action, and the “significant business obstacle” that proposed plaintiffs’ competitive relationships would pose to joining them all in one action.
Turning to the issue of whether common issues would predominate as required by Rule 23(b)(3), the Court methodically addressed defense arguments that the plaintiffs had not established a reliable methodology for establishing common impact and damages. Defendants argued that the methodology proposed by DPPs’ expert was flawed because it relied on forecasts and generalized economic literature and failed to account for “actual data” about purchasers’ rates of conversion to generic Solodyn during the brief periods in 2009 and 2010 when the three at-risk entries were on the market. The Court rejected this argument, finding that the expert’s predictive forecasts served a better proxy for unrestrained generic competition than the “actual data,” which were based on brief periods of generic sales and impacted by the generic manufacturers’ withdrawal announcements, which caused sharp downturns in sales. The Court thus credited the plaintiffs’ expert’s conclusions that these brief generic entries did not establish a true competitive benchmark for evaluating the effect of the allegedly anti-competitive restrictions in the sale of generic Solodyn.
As with the DPPs, defendants also opposed the EPPs’ motion to certify the putative class under Rule 23(b)(3) on the grounds that the common issues of law or fact shared by the class did not predominate over questions affecting only individual members of the class. Like DPPs, EPPs argued that but-for the allegedly anti-competitive agreements between Medicis and the generic manufacturers, consumers would have purchased generic Solodyn at a lower price and that they were entitled to damages based on the difference between what they actually paid and what they would have paid absent the agreement. Defendants argued that individual issues predominated because determining whether a consumer would have switched to generic Solodyn in an unrestrained competitive market would require examining several individualized factors, such as whether the consumer (a) was a “brand loyalist,” (b) used coupons or received reimbursements, (c) was subject to an annual out-of-pocket maximum or deductible, or (d) had access to generic Solodyn during the delay period. The Court rejected all of these arguments, finding that if the jury were to accept the EPPs’ theory of liability, many of the consumers defendants characterized as uninjured would have experienced antitrust injury with regard to at least one transaction, and that the defendants had not demonstrated that the number of uninjured class members would be more than de minimis. Similarly, as with the DPPs, the Court found that the “actual data” from the brief periods of generic availability were an inferior proxy for the “but for” world based on forecasts and models; that the Defendants inflated the number of putative class members affected by these issues; and that to the extent any uninjured consumers remained in the class, a mechanism could be developed to distinguish them prior to judgment.
Defendants also argued that the Court should deny certification of the EPP class because differences between the various state antitrust and consumer protection laws would overwhelm the case, causing these individualized issues to predominate. Though the Court recognized that class actions governed by the law of multiple states should be met “with serious skepticism,” the Court accepted the EPPs’ argument that most of the differences in the applicable state laws were not material and could be accommodated through a special verdict form or other mechanisms. Still, the Court found that Montana’s consumer protection statute (Mont. Code Ann. § 30-14-133(1)) restricts plaintiffs to bringing “an individual, but not a class action” and that this prohibition of class actions was “so intertwined” with the state right that it “functions to define the scope of the state-created right.” Accordingly, the Court found that the Montana state-law prohibition on class actions was not preempted by Rule 23 and excluded claimants under Montana’s consumer protection statute from the EPP class.
Finally, though it certified the EPP class as Rule 23(b)(3) class, the Court refused to certify the EPP class as a Rule 23(b)(2) class for injunctive relief. The Court accepted defendants’ argument that class certification under Rule 23(b)(2) is not appropriate when the primary form of relief sought by the class is money damages. Instead, because the Court found that injunctive relief was “merely incidental to the vast monetary damages” sought by EPPs, it would be inappropriate to certify the class as a Rule 23(b)(2) class.