There’s been a wave of antitrust class actions predicated on patent misuse by pharmaceutical companies of the past decade. The troublesome Illinois Brick decision prevents “indirect purchasers” — which means you, me, and our health insurance plans — from bringing federal antitrust claims, so plaintiffs’ lawyers have had to get creative in use of state law to obtain relief for companies that have been overcharged for their medication, like the Sheet Metal Workers tried to do with the Pennsylvania Unfair Trade Practices and Consumer Protection Law (PUTPCPL). Given decades of efforts by anti-competition legislatures and judges to undermine consumer fraud law, it can be a tough sell.
When the direct purchasers, who are really wholesale dealers several steps removed from patients, come in, though, it’s a different story entirely, like in the Neurotin decision last week from the District Court for New Jersey:
Plaintiffs in the instant action each directly purchased Neurontin, a brand-name version of the drug compound gabapentin anhydrous (‘gabapentin’), from Defendants Pfizer, Inc. and Warner-Lambert Company, LLC (collectively, ‘Warner-Lambert’). In their Amended Complaint, Plaintiffs allege that Warner-Lambert engaged in an overarching anticompetitive scheme to acquire and maintain monopoly power in the market for gabapentin products in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Warner-Lambert is alleged to have carried out this scheme by:
(1) procuring two additional patents that it improperly listed in the Orange Book; (2) manipulating the patent approval process so that a third patent with claims so limited that they are impossible to accurately measure or distinguish from the prior art enabling the patent to be used to delay generic entry; (3) filing and prosecuting multiple sham lawsuits on these patents that no reasonable litigant could have expected to succeed; and (4) engaging in fraudulent off-label promotion to convince doctors to prescribe Neurontin for uses for which it was not approved.
DPNC Complaint ¶ 29. Plaintiffs claim that these actions were designed to, and did in fact, delay the entry of generic gabapentin into the market until late 2004. Plaintiffs allege that but for Warner-Lambert’s anticompetitive scheme, generic manufacturers would have entered the market at lower prices as early as 2000. As a result of this delayed entry, Plaintiffs contend that they and other direct purchasers of Neurontin were foreclosed from the opportunity of purchasing lower-priced generic versions of the drug for years, and were accordingly compelled to pay non-competitive prices for gabapentin. Plaintiffs seek damages for this overcharge pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26.
Neurontin Antitrust Litig. v. Pfizer, Inc., 2011 U.S. Dist. LEXIS 7453, at *4–5 (D.N.J. Jan. 25, 2011). It’s a case made for class action status, a case in which a large company damaged dozens or hundreds (depending on who’s counting) of smaller companies through the same course of conduct.
But it’s defense lawyers job to raise issues, whether there are any or not, so they gave it the old college try in opposing class certification. As usual in class actions, the battleground was over Federal Rule of Civil Procedure 23(b) (23(b)(3), that is, rather than 23(b)(2), at issue in Dukes v. Wal-Mart) and whether plaintiffs could show that (1) ‘questions of law or fact common to class members predominate over any questions affecting only individual members,’ and that (2) ‘a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.’ Fed. R. Civ. P. 23(b)(3).
The drug company’s hook this time:
The critical disputed issue here concerns whether common questions predominate with respect to antitrust impact. As noted above, ‘impact’ or ‘fact of damage’ is an essential element of Plaintiffs’ claim, and requires proof that Plaintiffs suffered some injury that was caused by Warner-Lambert’s antitrust violation. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n.9, 89 S. Ct. 1562, 23 L. Ed. 2d 129 (1969). At the class certification stage, the Court’s concern is only whether Plaintiffs could prove impact through predominately class-wide evidence; not whether, in fact, they have. Hydrogen Peroxide, 522 F.3d at 311; Linerboard, 305 F.3d at 152.
In the instant case, Plaintiffs assert that Warner-Lambert’s scheme delayed the market entry of generic gabapentin, in turn delaying the ability of Class Members to substitute purchases of Neurontin with purchases of a generic alternative. Plaintiffs contend that their injury stems from the higher prices they paid for Neurontin as a result of being foreclosed from buying lower-priced generics (the ‘overcharge’). To show this injury, Plaintiffs plan to demonstrate that, absent Warner-Lambert’s anticompetitive conduct, Class Members would have purchased the lower-priced generic in place of Neurontin. Warner-Lambert has conceded that this is a cognizable theory of injury, recognizing that ‘class members suffered damages to the extent that each entity would have substituted generic gabapentin for its purchases of Neurontin.’
Frankly, I find this line of attack to be silly, since there’s no doubt that Plaintiffs could prove impact through predominately class-wide evidence — the only question is the extent to which that actually happened, which is a question for the jury — and I’m glad to see the District of New Jersey rejected it.
That’s all well and good, and would be somewhat standard for a direct purchaser antitrust class action, but the interesting part came in one of the Court’s footnotes discussing what evidence satisfies the “predominance” factor in class certification:
See, e.g., Relafen, 218 F.R.D. at 343 (finding predominance requirement met where direct purchasers relied on ‘governmental and academic studies, projections and analyses described in [defendant’s] and its competitors’ internal documents, and price and sales data for Relafen and its generic equivalents’); Wellbutrin, 2008 U.S. Dist. LEXIS 36719, 2008 WL 1946848, at *8 (approving Dr. French’s use of literature examining impact of generic entry into pharmaceutical market and analysis of public data collected on dispensation and purchases of prescription drugs to prove common impact); Cardizem, 200 F.R.D. at 308 (approving the use of academic studies, defendants’ internal sales documents, and marketplace sales data, to prove common impact); Nifedipine, 246 F.R.D. at 370 (noting that plaintiffs’ expert explained that common impact could be proved by studies of generic entry on the pharmaceutical industry, evidence obtained from defendants, and publicly available sales data, and concluding that ‘plaintiffs have offered a sufficient colorable method of proving class-wide impact with common evidence as to the issue of causation’); Tricor, 252 F.R.D. at 229 (same); Meijer, 246 F.R.D. at 308 (same); K-Dur, 2008 U.S. Dist. LEXIS 118396, 2008 WL 2669390, at *15 (same).
Neurontin Antitrust Litig. v. Pfizer, Inc., 2011 U.S. Dist. LEXIS 7453, at *30–31 n.16 (D.N.J. Jan. 25, 2011). Undoubtedly right on the merits — what better way to prove what a defendants’ customers did than to look at the actual sales? — and a good cite to remember next time you’re litigating a nationwide, multi-million dollar patent abuse lawsuit. Or, if you really want the scoop, Barry over at Blawgletter is hosting a Webinar on just these sorts of issues today.