The opinion of the court was delivered by: McLaughlin, J.
The plaintiffs are a group of indirect purchasers of Wellbutrin XL, a once-a-day antidepressant, who are suing the producers of Wellbutrin XL (Biovail Corp., Biovail Laboratories, and Biovail Laboratories International (together, "Biovail")), and its distributors (SmithKline Beecham Corp. and GlaxoSmithKline PLC (together, "GSK")), for illegally conspiring to prevent generic versions of Wellbutrin XL from entering the American market. The plaintiffs seek to certify a class of end-purchasers and third-party payors ("TPPs") under the antitrust and/or consumer protection laws of six states.
The defendants contend that the plaintiffs have failed to meet several requirements for class certification under Federal Rule of Civil Procedure 23. The defendants' primary argument against certification is that common issues do not predominate over individual issues for antitrust impact and damages. The defendants argue that antitrust impact may not be inferred for TPPs without individualized evidence. The defendants also argue that individual proof will be required for measuring damages because different class members paid different amounts for Wellbutrin XL and its generic equivalents. Class certification, the defendants argue, will also require a choice of law analysis to determine if named plaintiffs have claims under the six states at issue in this case.
The Court concludes that the plaintiffs have demonstrated that common issues will predominate and that the Rule 23 requirements for class certification have been met. The Court, however, will exclude from the class definition entities that did not purchase generic extended-release buproprion hydrochloride in a class state after it became available. The Court will therefore grant in part and deny in part the plaintiffs' motion.
I. Background and Procedural History
This case is brought by several "employee welfare benefit plans" and "employee benefit plans"*fn1 and Aetna Health of California (collectively, "indirect purchaser plaintiffs" or "plaintiffs"). On March 26, 2009, the plaintiffs filed their first amended complaint seeking treble damages for the defendants' alleged unlawful exclusion of generic versions of Wellbutrin XL through the filing of sham patent litigation.
On July 30, 2009, the Court granted in part and denied in part the defendants' motions to dismiss. At the motion to dismiss stage, the Court concluded that it must address issues of standing prior to class certification. See Wellbutrin XL, 260 F.R.D. 143, 151 (E.D. Pa. 2009). The Court concluded that the named plaintiffs have standing "in those states where the named plaintiffs are located or their members reside or in which the named plaintiffs reimbursed purchases of Wellbutrin XL made by its members." See Wellbutrin XL, 268 F.R.D. 539, 541 (E.D. Pa. 2010).
The Court's formulation of standing was intended to encompass the full scope of the plaintiffs' standing under Article III of the Constitution and prudential limitations. See Wellbutrin XL, 260 F.R.D. at 152. By the terms of the decision, the Court did not purport to address whether the named plaintiffs would have claims under choice-of-law principles. See id. at 155 n.5 ("[T]he issue of . . . standing to assert a particular claim . . . does not depend on choice of law or on class certification.").
The Court subsequently denied Aetna Inc.'s motion to intervene on behalf of the entire proposed class, but allowed the subsidiary Aetna Health of California Inc. ("Aetna") to intervene for California claims. See In re Wellbutrin XL Antitrust Litig., 268 F.R.D. 539, 547 (E.D. Pa. 2010) (denying Aetna, Inc.'s motion to intervene on behalf of the entire proposed class); Sept. 21, 2010 Order (Docket No. 200) (granting Aetna Health of California Inc.'s motion to substitute as a class representative for California claims).
On December 22, 2010, the Court granted the plaintiffs leave to amend their complaint to assert a claim under New York's Donnelly Act in light of the Supreme Court decision, Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010). See In re Wellbutrin XL Antitrust Litig., 756 F. Supp. 2d 670, 682 (E.D. Pa. 2010). The plaintiffs submitted a second amended complaint on January 7, 2011.
The plaintiffs' complaint alleges that the defendants conducted a four-part scheme to delay the entry of generic equivalents of Wellbutrin XL into the market, primarily by misusing patent litigation. Specifically, the plaintiffs allege that the defendants (1) filed three sham patent litigations, (2) filed a sham listing with the FDA's Approved Drug Products with Therapeutic Equivalence Evaluation (the "Orange Book") (3) filed a baseless FDA citizen petition and suit against the FDA, and (4) formed agreements with potential generic competitors. The plaintiffs contend that the effect of these activities was to delay the market entry of cheaper, generic alternatives to Wellbutrin XL. The plaintiffs contend that this scheme caused 300 mg generic extended-release bupropion hydrochloride to enter the market in December, 2006 instead of in November, 2005 and that the scheme prevented entry of 150 mg generic extended-release bupropion hydrochloride until May, 2008.
The plaintiffs have successfully pled antitrust claims arising under the laws of California, New York, Nevada, Tennessee and Wisconsin, and consumer protection claims arising under the laws of California and Florida. See Wellbutrin XL, 260 F.R.D. at 168; Wellbutrin XL, 756 F. Supp. 2d at 682.*fn2
The plaintiffs argue that class members have been injured by the defendants' alleged exclusionary conduct in two ways. First, the plaintiffs argue that they overpaid for each purchase of generic extended-release bupropion hydrochloride. According to the plaintiffs' expert, prices for generic drugs decrease rapidly after they enter the market. The plaintiffs argue that each actual generic purchase would have cost less if generics had entered the market earlier. The Court will refer to this theory as the "generic overcharge theory."
Second, the plaintiffs assert that TPPs were overcharged if they purchased Wellbutrin XL prior to generic entry. The TPPs theory of impact for purchases of branded Wellbutrin XL is that TPP class members paid an illegal overcharge when they purchased Wellbutrin XL because they would have substituted some branded purchases for cheaper generics, but for the alleged exclusionary conduct. The Court will refer to this theory as the "branded overcharge theory." Under this theory, the plaintiffs include both entities that purchased generic Wellbutrin XL and entities that did not purchase generic Wellbutrin XL after it became available.*fn3
On September 30, 2010, the Honorable Lawrence F. Stengel denied class certification in a case that alleged unlawful delay of generic entry for another bupropion product, Wellbutrin SR. Judge Stengel expressed several concerns regarding whether antitrust impact could be proven with common evidence, particularly for individuals who would continue to purchase branded drugs after generic entry (so-called "brand loyalists") and individuals who paid the same co-pay for branded and generic drugs (so-called "flat co-payers"). See Wellbutrin SR, 2010 U.S. Dist. LEXIS 105646, at *85-87 (E.D. Pa. Sept. 30, 2010).*fn4
In response to the Wellbutrin SR class certification decision, on October 28, 2010, the indirect purchasers submitted an amended class definition in this case to address some of Judge Stengel's concerns. See Docket No. 217. The plaintiffs' revised class definition purported to exclude all end-payors that did not purchase generic XL (thereby eliminating so-called "brand loyalists") as well as "flat co-payers." This revision, however, had the effect of excluding several named TPP plaintiffs that had not made generic extended-release bupropion hydrochloride purchases in class states. On November 30, 2010, the plaintiffs then submitted a "corrected" revised class definition to reincorporate TPPs whether or not they had purchased generic extended-release bupropion hydrochloride. See Docket No. 226. The current proposed class is:
All persons or entities who purchased an AB-rated generic bioequivalent of Wellbutrin XL ("generic XL") at any time during the "Class Period" (hereafter defined) and all entities that purchased 150 mg or 300 mg Wellbutrin XL before an AB-rated generic bioequivalent was available for such dosages, and resided or had their place of business, or purchased the drug in California, Florida, Nevada, New York, Tennessee and Wisconsin. For purposes of the Class definition, persons and entities purchased Wellbutrin XL or generic XL if they paid some or all of the retail purchase price.
Excluded from the Class are "flat co-payers" meaning natural persons whose only purchases of generic XL were made pursuant to contracts with third party payers ("TPP") whereby the amount paid by the natural person for generic XL was the same regardless of the retail purchase price.
The Class Period begins November 14, 2005 and ends on the earlier of the date of judgment or the date (to be determined) when the price of generic XL reached or reaches "steady state," i.e. the price was no longer higher than it would have been on that date but for the delayed availability of generic XL caused by Defendants' alleged illegal conduct.
Pls.' Second Am. Compl. ¶ 184 (Docket No. 249). The plaintiffs' counsel notified the Court that they intended the class period to end on April 29, 2011. See Notes of Testimony, Class Certification Hr'g, April 29, 2011 ("N.T.") at 13 (Docket No. 317).
The Court held a day-long evidentiary hearing on the plaintiffs'
motion for class certification on April 29, 2011. The plaintiffs
presented the testimony of Professor Meredith Rosenthal and the
defendants presented the testimony of Dr. Andrew Joskow.*fn5
On May 27, 2011, the Court held oral argument on
the plaintiffs' motion. The parties then submitted two rounds of
supplemental briefing to address choice of law and other
A related law suit has been filed by direct purchasers of Wellbutrin XL for violations of federal antitrust law. The Court granted in part and denied in part the plaintiff's motion for class certification. See In re Wellbutrin XL Antitrust Litigation, No. 08-2431 (direct) (Docket Nos. 368, 369).
II. Choice of Law Analysis
After the Court's decisions on the motion to dismiss, Aetna's motion to intervene, and the addition of New York as a potential class state, there were six states under which the named plaintiffs potentially had claims. These were states where the named plaintiffs either had their principal place of business or paid for purchases at pharmacies in the state. Aetna had been explicitly allowed to intervene to represent California so California was the only state for which Aetna was, at that point, a class representative. The states and potential class representatives were:
Nevada Painters No. 30 New York Local 505 Wisconsin Painters No. 30 California Aetna Tennessee Local 572 The defendants contend that at the class certification stage, the Court must do a choice of law analysis to decide if the named plaintiff designated to represent a certain state has a claim under that state's law and can be a class representative. The defendants argue that the law of the location of the named plaintiff should govern with the result that the only two states with class representatives who have principal places of business in those states are California (Aetna) and Tennessee (Local 572). The plaintiffs contend that the location of the pharmacy where the prescriptions were filled should control and the law of that state should govern.*fn6 That would lead to six states with class representatives except that the designated class representatives for Wisconsin and New York did not make any generic purchases in that state and under the Court's analysis below, they do not have a claim. In that situation, the plaintiffs seek to have Aetna represent not just California but also Wisconsin and New York where Aetna has paid for purchases of generic drugs.
Although the parties do discuss this issue as choice of law and, therefore, the Court will conduct such an analysis, another way to frame the issue is whether an out-of-state plaintiff would have a claim under the law of the particular state under consideration. To put it another way, could Aetna state a claim under New York law for purchases it made in New York even though it is a resident of California?
The Court, exercising diversity jurisdiction, must apply the choice of law rules of Pennsylvania, the forum in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496--97 (1941). The first step in a choice of law analysis under Pennsylvania law is to determine whether an actual or true conflict exists between the laws of the competing states. If no conflict exists, further analysis is unnecessary. If there is a conflict, the court must conduct a choice of law analysis using Pennsylvania choice of law principles.
In deciding whether there is a true conflict, the Court must determine whether there is a conflict between the substance of the laws of each respective potential forum. Here, for TPPs, the potentially applicable laws that have been proposed are that of the TPP's home state, and the states in which it and its members purchased Wellbutrin XL. Conflicts may exist between and among the laws of the relevant states for a given TPP. For example, the home state of Local 505 (Alabama) does not recognize the plaintiffs' claims whereas the states in which Local 505 purchased Wellbutrin XL (New York and Florida) could provide a basis for recovery on these allegations.
In a putative class action in which the plaintiffs assert that a TPP should be able to bring claims under the laws of the location of purchase, and those claims are not cognizable under the laws of the TPP's home state, there will be actual conflicts between the antitrust and consumer protection laws of the relevant states. The Court, therefore, finds that there is an actual or true conflict here and will apply Pennsylvania's choice of law principles to this matter.*fn7
Pennsylvania applies a "flexible rule which permits analysis of the policies and interests underlying the particular issue before the court" and directs courts to apply the law of the state with the "most interest in the problem." Hammersmith v. TIG Ins. Co., 480 F.3d 220, 227 (3d Cir. 2007) (quoting Griffith v. United Air Lines, Inc., 203 A.2d 796, 805-06 (Pa. 1964)). The Court must consider each state's contacts as set forth in the Restatement (Second) of Conflict of Laws as well as a qualitative appraisal of the relevant states' policies. Id. at 231.
The Supreme Court has observed that "antitrust violations are essentially tortious acts . . . ." Associated Gen. Contractors v. Cal. State Council of Carpenters, 459 U.S. 519, 547 (1983) (quotations omitted). For actions that sound in tort, the Restatement directs courts to consider the following contacts: (a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered." Rest. 2d Conflicts § 145(2). See also Griffith, 203 A.2d at 802. Section 158(2) of the Restatement notes that "[t]he applicable law will usually be the local law of the state where the injury occurred." Rest. 2d Conflicts § 158(2).
The parties dispute where the alleged injury occurs for TPPs. The plaintiffs argue that the injury occurs at the point of sale because the pharmacy is paid in part by the insurer, much like a credit card transaction. The defendants counter that a TPP may have little or no direct connection with the place of purchase because it may use an intermediate payment agent or pharmacy benefits manager ("PBM"). The defendants also argue that ...