Third Circuit Affirms Denial Of Motion To Certify Indirect Purchaser End-Payor Class In Niaspan Antitrust MDL
06/01/2023On May 4, 2023, the United States Court of Appeals for the Third Circuit unsealed its April 24, 2023, Opinion upholding the Eastern District of Pennsylvania’s denial of a motion to certify an indirect purchaser class of insurance plans and other end-payors allegedly injured by a “reverse payment” settlement that allegedly delayed the entry of a generic competitor to the brand-name prescription drug, Niaspan. In Re: Niaspan Antitrust Litigation, No. 21-2895 (3d Cir. Apr. 24, 2023).
This lawsuit alleged a now-familiar pattern in so-called “reverse settlement” or “pay-for-delay” antitrust litigation involving patented pharmaceutical products. In short, the brand-name manufacturer brought a patent lawsuit against a generic competitor. The parties settled the underlying lawsuit with the patent holder agreeing to drop the lawsuit, the upstart agreeing not to sell the generic version of the product for a time, and the patent holder agreeing to pay the generic competitor a meaningful sum of money (called a “reverse payment” because the payment is made from patent holder to the alleged infringer, rather than vice versa). Plaintiff end-payors then brought an action under state antitrust and consumer protection laws, alleging that the reverse-payment settlement improperly eliminated competition for Niaspan and caused them to pay supracompetitive prices. Plaintiffs sought certification of a class of end-payors who either purchased, paid for, or provided reimbursements for Niaspan or its generic version in various states from 2007 to 2018.
The district court denied class certification on several grounds, including that plaintiffs failed to establish ascertainability, finding that plaintiffs did not establish a reliable and “administratively feasible mechanism to distinguish between class members and mere intermediaries such as fully insured plans.” In re Niaspan Antitrust Litig., 555 F. Supp. 3d 155, 159 (E.D. Pa. 2021).
On appeal, the primary issues related to whether, in the complicated context of prescription drug payments and reimbursements, plaintiffs had demonstrated that they could accurately identify insurance plans and other end-payors that actually paid for Niaspan (and thereby suffered an injury based on the allegedly supracompetitive prices) and those who did not (and were therefore not properly included in the class). Plaintiffs argued that they could successfully identify and exclude fully insured health plans (which, by definition, are not end payors) from the putative class by relying on data provided by pharmacy benefit managers (“PBMs”). Because PBMs serve as intermediaries between prescription-drug plans and the pharmacies that beneficiaries use, plaintiffs argued they could use PBM data to determine whether a plan is fully insured or self-insured. However, in upholding the district court’s ruling, the Third Circuit emphasized that PBM data captures only the identity of the entity directly paying the PBM and not whether that entity is participating in the process as a fully insured health plan sponsor, an insurer, or a third-party administrator. As the Court pointed out, “[n]ot all end-payors are health plan sponsors, and not all health plan sponsors are end-payors. The identity of the end-payor is based on the structure of each particular prescription drug plan.”
The Court also upheld as not clearly erroneous the lower court’s finding that the “prevalence of intermediaries” was a “significant problem, especially since the same players in this industry may be end-payors, fully insured health plans, or merely administrators in any given transaction, and the PBM data does not indicate which role they are playing.” Moreover, beyond the difficulty in isolating and identifying the actual end payors and noting the “millions” of PBM data transactions, the Third Circuit pointed to feasibility issues regarding the “remaining ambiguity” in the data. The Third Circuit noted that “PBM data contains code numbers, not names or descriptions of entities, and those numbers are not designed to indicate the relationships between parties.” Finally, the Third Circuit found that plaintiffs’ argument that ambiguities as to class membership could be resolved by having claimants submit affidavits had not been properly presented at the district court and was therefore forfeited.
On May 8, 2023, plaintiffs filed a petition seeking a rehearing from either the panel or the full Third Circuit. Plaintiffs argue that the ascertainability finding was flawed because it stopped short of considering all plaintiffs’ evidence, including “individual class members’ Niaspan transaction records, as well as the district court’s holding that such records were obtainable.” The Third Circuit has not ruled on this petition as of this writing.