Parsing NJ Court's Rationale For Denying Lipitor Class Certification
On June 6, a motion for summary judgment was granted in In re: Lipitor Antitrust Litigation, dismissing claims of a pay-for-delay settlement from Pfizer Inc., the manufacturer of Lipitor, to Ranbaxy.
The plaintiffs alleged that Pfizer entered into a reverse payment agreement with Ranbaxy to delay its launch of generic Lipitor, a cholesterol medication.
The U.S. District Court for the District of New Jersey, however, held that the plaintiffs failed to demonstrate that absent the settlement, the U.S. Food and Drug Administration would have approved
Ranbaxy's Lipitor earlier.[1] If the launch was not delayed, there could be no antitrust impact or damages.
In addition to granting summary judgment, the New Jersey district court denied motions for class certification for the two plaintiff classes. Though the summary judgment raised the issue of causation in class arguments, the court noted that class status would still be inappropriate for other reasons.
For example, the court concluded that direct purchasers failed to prove that groups of plaintiffs could not bring their own cases outside of a class action, and that end payors did not present a feasible method to determine who qualified for the class.
These decisions from the Third Circuit are notable in that they identify several threshold issues that the court found plaintiffs did not address sufficiently.
The district court's rationale in the ruling offers insight into the level of rigorous analysis required by both parties and their experts to satisfy the requirements of class certification, including impracticability joinder and ascertainability of class members.
Direct Purchaser Payor Class
The direct purchaser plaintiffs, or DPP, class consisted of entities that purchased Lipitor or its generic alternative, atorvastatin, directly from Ranbaxy or Pfizer, i.e., wholesalers and pharmacies.
The plaintiffs argued that these direct purchasers were financially injured as they paid brand prices longer than they would have absent the alleged conduct
The DPPs claimed that due to the alleged conduct, they were denied an earlier opportunity to purchase either Ranbaxy's generic Lipitor or an alternative generic as "Ranbaxy's exclusivity had cornered the generic market."[2]
The motion for class certification was denied for the DPPs on two grounds: causation and numerosity. As the court concluded that the plaintiffs failed to prove that the settlement between Ranbaxy and Pfizer delayed the launch of generic Lipitor, it found no material fact to the case.
Since this is a requirement for causation and class status, the court granted summary judgment.[3] However, the court noted that even if summary judgment had been denied, the class could still not be certified as the DPPs failed to demonstrate impracticability of joinder — i.e., numerosity.[4]
Federal Rule 23(a) generally requires plaintiffs seeking class certification to prove the following:
1. Numerosity: Class is so numerous that joinder of all members is impracticable;
2. Commonality: Questions of law or fact common to the class;
3. Typicality: Claims or defenses of the representative parties are typical of the claims or
defenses of the class; and
4. Adequacy: Representative parties must fairly and adequately protect the interests of the
class.[5]
In their numerosity arguments, the plaintiffs stated that there were 63 DPP class members, and that the class size, judicial economy and geographic dispersion made joinder impracticable.[6]
However, the court found that the DPPs had not met their burden of proof. Their arguments failed to substantively address the relevant impracticability factors:
- Judicial economy;
- Ability and motivation to litigate as joined plaintiffs;
- Financial resources of class members;
- Geographic dispersion of class members;
- Ability to identify future claimants; and
- Whether the claims are for injunctive relief or damages.[7]
While the defendant found that there were, at most, 18 DPP class members after accounting for common corporate ownership and uninjured purchasers, the court noted that this is best addressed in a Rule 23(b)(3) predominance analysis and would not be analyzed in numerosity.[8]
The court took particular issue with the plaintiffs' arguments regarding the claimant's ability and motivation to be joined, which aims to broaden the larger goal of Rule 23 to provide small claims plaintiffs with access to the judicial system.[9]
The plaintiffs argued that most class members have claims worth less than the cost of litigation. In his report, Jeffrey Leitzinger, an expert for the DPPs, estimated damages from overcharges ranging from $800 to $778,7 million.[10]
Using the 2013 In re: Nexium Antitrust Litigation in the U.S. District Court for the District of Massachusetts as a benchmark, the DPPs estimated the cost of litigation to be approximately $3.7 million.
However, the defendants argued that this estimate improperly compares the full cost of one plaintiff litigating on its own to the shared costs of a joinder action.
The court agreed with the defendants, explaining that the court must compare the cost of a class action to the shared costs in a joined action, where many costs including expert fees would be shared.
The alternative is not the hypothetical cost incurred by each proposed class member if they were to bring individual suits.[11]
Additionally, even without a benchmark for the cost of litigation, the court found that the DPP class members have sizable claim values. Leitzinger's estimates showed that more than 60% of the proposed class members had at least $1 million in damages and 70% had at least $500,000.[12]
The court found these claims to be significant, saying the claims "do not render the extraordinary treatment afforded by class membership."[13]
Further, the court noted that three of the proposed DPP class members represented a large portion of the proposed class claims — 91% of the total.[14]
Citing the U.S. Court of Appeals for the Third Circuit's 2016 decision in In re: Modafinil Antitrust Litigation, the court expressed serious reservations that these three class members "can hardly be considered candidates who need the aggregative advantages of the class device."[15]
Bruce Stangle, an expert for the defense, demonstrated in his report a willingness and ability for members of the proposed class to cooperate among themselves.
As many proposed class members had common corporate ownership and had combined through mergers and acquisitions, the court was convinced that joinder was practicable.
Stangle cited examples of such mergers, ranging from before 2011 to as recently as 2018. For example, he noted that AmerisourceBergen acquired Bellco Drug Corp. in 2007 and Cigna Health merged with Express Scripts in 2018.
Other notable corporate ownerships highlighted in his report are:
- H.D. Smith Inc. and Valley Wholesale Drug Co.'s merger with AmerisourceBergen
Corp.; - Dik Drug Co., Kinray Inc. and The Harvard Drug Group LLC all merging with Cardinal
Health Inc.; and - Burlington Drug Co. merging with J.M. Smith Drug Co.[16]
The court agreed with the defense that these mergers and acquisitions occurring broadly over time showed that the incentives for the proposed class members to cooperate with each other have and continue to exist.[17]
End Payor Class
The end payor plaintiffs, or EPPs, consisted of two classes that encompassed "hundreds of thousands, if not millions, of consumers, and thousands of third-party payers," according to the EPP class certification denial.[18]
The first class was the third-party payors, or TPPs, that purchased branded Lipitor orgeneric atorvastatin for their members, employees, insureds, participants or beneficiaries (i.e., insurers), self-funded plans, fully insured plans, and union health and welfare funds.
The consumer class consisted of all individuals who purchased either branded Lipitor, without the use of a Pfizer copay card, or generic atorvastatin.[19]
The EPP's motion for class certification was denied both on causation and ascertainability grounds. As was the case with the DPP class, the court's granting of summary judgment found there is no cause of action, i.e., causation, which is "inextricably linked with antitrust injury" and prevented the court from certifying a class.[20]
However, the court noted that even had summary judgment not been granted, the class would still not be certified as the EPPs failed to show that there is a reliable and administratively feasible mechanism for determining whether class members fall within the class definition.[21]
The court explained that parties seeking certification on the basis of Rule 23(b)(3) must satisfy, among other things, the requirement of ascertainability.
Ascertainability requires the class to be defined with an objective criteria, and requires a reliable and administratively feasible mechanism for identifying class members based on the objective criteria.[22]
Though plaintiffs need not identify all members at class certification, they must prove that class members can be identified without extensive and individualized inquiry or minitrials, which would make a class action inappropriate.[23]
To assess whether ascertainability is satisfied, the court must analyze the method put forth by the EPPs to determine the class, which the court explained relies on an understanding of the complex payment flow of prescription pharmaceuticals.
The EPP's ascertainability expert Laura Craft opined that class members could be identified through data on prescription drug dispensing that is centralized by pharmacy benefit management and can be confirmed by TPP and consumer data.[24]
Craft supported these claims largely using declarations from pharmacy benefit management executives, Caremark LLC and Prime Therapeutics, stating that respective data could be used to identify class members, although neither produced this data, which they claimed can assist with ascertaining the class.[25]
The defendant argued that the EPPs had not proven a reliable and administratively feasible methodology, and, further, had not demonstrated a methodology at all. It argued that Craft simply pointed to the available data that can be used later, without outlining a specific methodology.
James Hughes, an expert for the defense, argued that stating the data is available is "not methodology, it's not a system, not a set of steps that one would go through to identify the class members," according to the EPP certification denial.[26]
When asked if she had specified a step-by-step methodology, Craft responded that the data to be produced can be "literally by a computer, analyzed to identify any claims that do not comply with the basic conditions of the class definition."[27]
The court agreed with the defendant that there was no methodology proposed that was specific to the case, and that a reference to a computer program did not present the court with an approach that could be critically evaluated.[28]
The court further found that the only evidence presented was the declarations of two pharmacy benefit management executives, which did not meet the rigorous analysis that the class certification process requires.[29]
Concerns with the methodology itself, assuming the data existed, were also raised by the court, explaining that the EPPs had failed to provide evidence that the data provided from multiple different entities could be harmonized, especially given the age of the records in question.
The plaintiffs failed to provide specifics for the process of harmonizing data to make the identification of class members possible, including how long it would take or how much it would cost.
The court found that statements that only opine that this process has been done or could be done are insufficient to show the reliability of the data.[30]
The court's opinions in the Lipitor Antitrust Litigation further reinforce previous decisions requiring rigorous analysis to meet Rule 23 criteria.
In a statement, counsel for Ranbaxy, Devora Allon, said that the court's decisions to deny certification for both classes "confirm that district courts are not just rubber stamping class actions."[31]
This ruling, in the context of similar previous decisions from the Third Circuit, including the April 4, 2023, decision in In re: the 2020 decision In re: Lamictal in 2020; as well as the 2016 Modafinil decision, indicates a changing trend in the requirements for class status.
The courts have raised the bar — simply pointing to programs that can analyze data to ascertain class membership is not enough. Parties and their economic experts should use this decision as a reminder that the courts are closely examining the rigor of arguments presented under Rule 23.
To satisfy the requirements, plaintiffs must substantively address requirements of numerosity and ascertainability, substantively addressing all relevant impracticability factors, and presenting a specific, systematic method of identifying class members using available data.
This rationale is not isolated and will likely be applied to other pharmaceutical antitrust cases going forward.
Catia Twal is a principal consultant at Edgeworth Economics.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice
CITATIONS
[1] In Re Lipitor Antitrust Litigation, Summary Judgment Decision, June 6, 2024, p. 82. We note that Pfizer settled with direct purchaser plaintiffs. See "Lipitor Buyers Get Final OK For $93M Deal In Antitrust Fight," Law360, June 12, 2024, https://www.law360.com/articles/1847211.
[2] In Re Lipitor Antitrust Litigation, DPP Class Certification Denial, June 6, 2024 ("DPP Class Certification Denial"), p. 2.
[3] DPP Class Certification Denial, p. 3.
[4] DPP Class Certification Denial, p. 3.
[5] "Rule 23. Class Actions," Legal Information Institute, Cornell Law School, https://www.law.cornell.edu/rules/frcp/rule_23.
[6] DPP Class Certification Denial, p. 6.
[7] DPP Class Certification Denial, p. 8.
[8] DPP Class Certification Denial, p. 10.
[9] DPP Class Certification Denial, p. 15.
[10] DPP Class Certification Denial, pp. 16-17.
[11] DPP Class Certification Denial, pp. 16-17.
[12] DPP Class Certification Denial, p. 17.
[13] DPP Class Certification Denial, p. 17.
[14] DPP Class Certification Denial, p. 19.
[15] DPP Class Certification Denial, p. 19.
[16] DPP Class Certification Denial, footnote 6.
[17] DPP Class Certification Denial, p. 19.
[18] In Re Lipitor Antitrust Litigation, EPP Class Certification Denial, June 6, 2024 ("EPP Class Certification Denial"), p. 3.
[19] EPP Class Certification Denial, p. 3-4.
[20] EPP Class Certification Denial, p. 4.
[21] EPP Class Certification Denial, p. 57.
[22] EPP Class Certification Denial, p. 6.
[23] EPP Class Certification Denial, p. 7.
[24] EPP Class Certification Denial, p. 11.
[25] EPP Class Certification Denial, p. 13.
[26] EPP Class Certification Denial, p. 32.
[27] EPP Class Certification Denial, p. 31.
[28] EPP Class Certification Denial, p. 40.
[29] EPP Class Certification Denial, p. 41.
[30] EPP Class Certification Denial, p. 42.
[31] "Ranbaxy Units Overcome Lipitor Antitrust MDL," Law360, June 7, 2024, https://www.law360.com/articles/1845284.
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