Eastern District Of Virginia Certifies Class Of Cholesterol Drug End Payors
09/09/2021On August 20, 2021, Judge Rebecca Smith of the United States District Court for the Eastern District of Virginia certified a class of end-payor plaintiffs (“EPPs”) alleging that defendant pharmaceutical companies (“defendants”) entered into a reverse payment agreement that delayed generic competition to the branded cholesterol drug Zetia in violation of Section 1 of the Sherman Act. In re Zetia (Ezetimibe) Antitrust Litig., MDL No. 2:18-md-2836 (E. D. Va. 2021). This case is part of a multidistrict litigation against defendants, and Judge Smith’s certification decision was in the face of a Fourth Circuit decision two weeks prior that vacated her decision to certify a different class of plaintiffs.
Defendants argued that EPPs could not satisfy the predominance and ascertainability requirements for class certification (other certification requirements were argued only in earlier stages of the litigation), but the magistrate judge disagreed. Judge Smith conducted a de novo review, and she agreed with the magistrate judge’s findings and recommendations that EPPs’ putative class should be certified.
Predominance requires that common questions of law or fact must “predominate over any questions affecting only individual members.” Fed. R. Civ. P. 23(b)(3). The Court found that this question required EPPs to show that they could prove each element of their antitrust claim – antitrust law violation, antitrust injury, and measurable damages – through evidence common to the class, but not that individual questions were entirely absent. Defendants argued that EPPs failed this standard because the putative class included “thousands of uninjured class members” that EPPs offered no method of identifying without individualized inquiries. Specifically, defendants contended that the magistrate judge (1) applied the wrong legal standard to assess antitrust injury and (2) erroneously relied on anecdotes and averages, which obscured the existence of uninjured class members.
The Court agreed with the legal standard that the magistrate judge applied, specifically that “antitrust injury occurs the moment the purchaser incurs an overcharge, whether or not that injury is later offset.” In re Nexium, 777 F.3d 9, 27 (1st Cir. 2015). Defendants argued that antitrust injury should instead be assessed on a net basis. The court agreed with the magistrate judge that the “overwhelming weight of authority” supported the Nexium standard, and it characterized defendants’ contrary authority as “vague statements” in cases “based on patently different facts.”
The Court also rejected defendants’ second argument that it was improper for the magistrate judge to use averages to assess classwide injury. Defendants relied on a case holding that averages cannot be used when they mask individualized injury, but the court distinguished that case on the basis that it involved “nuance[s] in that particular market,” which defendants did not attempt to analogize to the facts in this case. The Court further noted that EPPs had already limited their class definition to exclude many likely uninjured entities, such as government-subsidized plans and plans with high rebates on branded Zetia.
Defendants also argued that EPPs failed the ascertainability requirement, under which a class must be defined so that a court can administratively feasibly determine, without extensive, individualized mini-trials, whether an individual is a class member. EPPs proposed to identify class members by having their expert analyze data maintained by pharmacy benefit managers. The magistrate judge found EPPs’ expert to be reliable, credible, and persuasive, and the court agreed. The expert had conducted a similar analysis in another pharmaceutical end-payor action that a district court had found administratively feasible, and she had “squarely addressed” the issues that a different court found with her analysis. As such, the court adopted in full the magistrate judge’s recommendation to certify the class.
This case highlights the continued importance of presenting robust market analysis at the class certification stage. It further underscores the expanding role of magistrate judges in defining key aspects of the case.