The opinion of the court was delivered by: Anita B. Brody, J.
THIS DOCUMENT RELATES TO: Indirect Purchaser Action
Plaintiffs A.F. of L.-A.G.C. Building Trades Welfare Plan ("AFL"), IBEW-NECA Local 505 Health & Welfare Plan ("IBEW"), Painters District Council No. 30 Health & Welfare Fund ("Painters"), and Andrea Kehoe ("Kehoe"), collectively "Indirect Purchasers," are indirect purchasers of the prescription drug Flonase and its generic equivalent. Flonase is the brand-name version of fluticasone propionate ("FP")-a steroid nasal spray produced by Defendant SmithKline Beecham Corporation, doing business as GlaxoSmithKline PLC ("GSK"). Indirect Purchasers allege that GSK filed sham citizen petitions with the Food and Drug Administration ("FDA") to delay the entry of a cheaper, generic version of Flonase into the market. Indirect Purchasers have moved to certify a class of consumers and third-party payors ("TPPs")*fn1 under the monopolization, unfair and deceptive trade practices ("UDTP"), and unjust enrichment laws of five states.*fn2 Also before me are three Daubert motions seeking to exclude expert reports and testimony critical to this class certification determination: (1) GSK's Motion to Exclude the Expert Report and Testimony of Gordon Rausser; (2) Indirect Purchasers' Motion to Exclude the Report and Testimony of Bruce Stangle; and (3) Indirect Purchasers' Motion to Exclude the Report and Testimony of Robert Navarro.
GSK asserts that Indirect Purchasers have failed to meet certain requirements for class certification under Federal Rule of Civil Procedure 23-in particular, that common issues do not predominate over individual issues for purposes of establishing antitrust impact and damages. GSK contends that only through individual proof and inquiries can the fact of injury or the extent of damage for each class member's purchase and/or reimbursement of Flonase or its generic equivalent be determined.
I am satisfied that Indirect Purchasers have demonstrated that common issues will predominate and that the Rule 23 requirements have been met. In reaching that conclusion, however, certain adjustments to Indirect Purchasers' proposed class definition will be necessary. As opposed to the larger proposed class, a more limited indirect purchaser class will be certified that excludes those class members who did not purchase a generic equivalent of Flonase after it became available. Furthermore, I will only certify the class under the state laws which Indirect Purchasers have demonstrated standing to invoke. Therefore, I will grant in part and deny in part Indirect Purchasers' motion for class certification.
A. Hatch-Waxman and the Generic Drug Approval Process
In order to market a drug in the United States, a company must obtain FDA approval by filing a "New Drug Application" ("NDA") to demonstrate the safety and efficacy of its product.
21 U.S.C. § 355(b). The NDA process is usually lengthy and expensive, and in 1984, Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984 ("Hatch-Waxman Act") to expedite the approval process for generic drugs. Under Hatch-Waxman, to receive FDA approval for a generic drug, a prospective manufacturer need only file an Abbreviated New Drug Application ("ANDA"), which relies on the safety and efficacy data previously provided in the NDA for its branded equivalent. 21 U.S.C. § 355(j). Instead of clinical trials, an ANDA requires a demonstration of a certain level of bioequivalence*fn4 to a listed drug. The FDA issues and regularly modifies bioequivalence guidance for various categories of generic drugs in order to inform the public of the bioequivalence standards that ANDAs must meet in order to be approved. Generic drugs certified by the FDA as bioequivalent to the brand drug are completely interchangeable with that branded drug and are referred to as "AB-rated."
While an ANDA is pending before the FDA, any interested party can file a citizen petition with the FDA to register a complaint about the pending application. 21 C.F.R. §§ 10.25(a), 10.30. Until 2007, the FDA was required to consider and respond to every citizen petition.*fn5 For this reason, filing a citizen petition necessarily delayed the approval of any pending ANDA-only after the FDA responded to all pending citizen petitions could an ANDA be approved. The citizen petition process often was abused by pharmaceutical companies attempting to prolong their monopoly in the market.
B. Flonase and GSK's Alleged Misconduct
In October 1994, the FDA approved GSK's NDA to treat nasal inflammation caused by seasonal and non-seasonal allergies. GSK released Flonase in the United States in 1995, and it quickly became the most prescribed nasal steroid inhalant in the United States. By 2000, Flonase commanded 38% of brand-name inhaled nasal steroid sales in the United States, resulting in over $600 million in sales. By 2005, the peak year for Flonase sales and the last full year of GSK's market exclusivity, Flonase sales exceeded $1.3 billion.
GSK's single patent on Flonase expired on November 13, 2003. However, GSK obtained a statutory extension of market exclusivity from the FDA to August 2004. By the time Flonase's market exclusivity was set to expire in 2004, GSK had identified a number of generic pharmaceutical manufacturers-including Roxane Laboratories, Inc. ("Roxane")-intent on filing ANDAs and bringing competitive generic FP nasal sprays to the market. This case concerns GSK's alleged "brand maturation strategy," crafted to maintain Flonase's market dominance in the face of inevitable generic competition.
Indirect Purchasers offer evidence that GSK's alleged "brand maturation strategy" included four tactics to delay the entry of generic FP nasal sprays into the market: (1) GSK improperly influenced the FDA's bioequivalence guidance process; (2) GSK filed several frivolous citizen petitions with the FDA regarding pending generic FP ANDAs in order to force the FDA to respond and delay approval; (3) GSK drafted an FP monograph for submission to the United States Pharmacopeia-which lists tests, procedures, and acceptance criteria in order to set standards for the quality, purity, strength, and consistency of the pharmaceutical ingredients in an approved drug-in attempt to raise the bar for FP market entry; and (4) GSK supplemented its original NDA in an attempt to delay the FDA from approving any ANDAs before approving GSK's supplements.
Roxane's generic version of Flonase did not enter the market until March 6, 2006. Indirect Purchasers argue that GSK used each of these four tactics to delay the market entry of AB-rated generic equivanlents of Flonase, and that, absent GSK's exclusionary conduct, generic FP would have entered the market in August 2004. As a result, Indirect Purchasers claim that they were prevented from purchasing and/or reimbursing for less-expensive generic FP between August 2004 and March 2006, and that they were forced to pay inflated prices for generic FP between March 2006 and March 2009.*fn6
Indirect Purchasers initiated this case in September 2008. In December 2011, they filed their motion for class certification now before me. During this time, as a result of two Third Circuit opinions and GSK's filing of several motions to dismiss and motions for summary judgment, the claims and issues presented in this motion for class certification have been narrowed to a significant degree. A review of this procedural history follows.
On September 3, 2008, Indirect Purchasers filed a first amended class action complaint ("FAC") against GSK asserting claims of monopolization, UDTP, and unjust enrichment under numerous state laws. On October 17, 2008, GSK moved to dismiss the FAC. In addressing this motion on April 15, 2009, I concluded that it was appropriate to analyze issues regarding Indirect Purchasers' standing prior to class certification. I granted GSK's motion for two reasons: (1) although Indirect Purchasers could establish standing to bring their claims in the states where they resided or had a principal place of business, they failed to state a claim under any of those state laws; and (2) Indirect Purchasers could not establish standing merely by relying on claims of putative class members. See In re Flonase Antitrust Litig., 610 F. Supp. 2d 409, 413 (E.D. Pa. 2009) ("Unless at least one named Plaintiff can state a claim for relief under each count Plaintiffs do not have standing to bring claims as part of a putative class action."). I dismissed the FAC without prejudice, so that Indirect Purchasers could amend their complaint and, as Indirect Purchasers specifically noted, "named Plaintiffs from additional states could join the case" to address issues of standing. Id.
On May 21, 2009, Indirect Purchasers filed a second amended class action complaint ("SAC") asserting state law claims under the laws of seven states and adding Kehoe, an individual consumer from Massachusetts, as a named plaintiff. GSK moved to dismiss the SAC by again contending that Indirect Purchasers had not sufficiently plead an injury to have standing to bring their state law claims, or, alternatively, failed to state a claim under those state laws.
On January 21, 2010, I held that Indirect Purchasers had sufficiently plead standing "in states where they reside, and where they purchased Flonase or reimbursed for purchases of Flonase." In re Flonase Antitrust Litig., 692 F. Supp. 2d 524, 534 (E.D. Pa. 2010). Additionally, inter alia, Indirect Purchasers' unjust enrichment claim under Florida law was dismissed because, unlike most unjust enrichment state law, Florida requires that a plaintiff confer a direct benefit upon a defendant in order to state a claim for unjust enrichment. Id. at 544.
Indirect Purchasers filed a third amended class action complaint ("TAC") on March 1, 2010, asserting the following state law claims: monopolization under the laws of Arizona, Iowa, North Carolina, and Wisconsin; (2) unfair and deceptive trade practices under the laws of Arizona, Florida, Massachusetts, and North Carolina; and (3) unjust enrichment under the laws of Arizona, Iowa, Massachusetts, and Wisconsin. GSK subsequently filed three different motions for summary judgment in October 2010. I denied GSK's motions for summary judgment on Noerr-Pennington and causation grounds in June and July 2010, respectively. GSK's third motion for summary judgment against Indirect Purchasers rested on the following three arguments: (1) Indirect Purchasers failed to provide sufficient evidence to raise a genuine issue of material fact as to whether they have standing to bring their state law claims; (2) choice of law rules require that the Indirect Purchasers' claims be governed by the laws of their home states, rather than the laws of the states in which they purchased and/or reimbursed for purchases of Flonase; and (3) Indirect Purchasers failed to provide sufficient evidence to support several of their state law claims.
On September 26, 2011, I granted in part and denied in part GSK's motion. In addressing GSK's standing argument, I again noted that in a class action, [t]he initial inquiry . . . is whether the lead plaintiff individually has standing." Winer Family Trust v. Queen, 503 F.3d 319, 326 (3d Cir. 2007); see also O'Shea v. Littleton, 414 U.S. 488, 494 (1974). And although GSK's standing contentions had previously been addressed, at the summary judgment stage the standing inquiry changed because Indirect Purchasers could no longer rely on their allegations; instead, they needed to put forth evidence to establish standing. See Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 902 (1990). Considering this burden, I granted GSK's motion as to the following named Plaintiffs' claims for lack of standing: (1) IABORI's monopolization and UDTP claims under North Carolina law and (2) Painters' monopolization and unjust enrichment claims under Iowa law; and (3) Painters' UDTP claim under Florida law.*fn7
I also conducted a thorough choice of law analysis and concluded that Indirect Purchasers' claims were best considered under the laws of the states in which Flonase or its generic equivalent were purchased (the "purchase states"), as opposed to the states in which Indirect Purchasers resided or had a principal place of business (the "home states"). In re Flonase Antitrust Litig., 815 F. Supp. 2d. 867, 882-85 (E.D. Pa. 2011). Finally, GSK's motion was granted as to Painters' Arizona UDTP claim because no genuine issue of fact had been raised regarding whether GSK had deceived Indirect Purchasers as required under Arizona UDTP law. Id. at 885-86.
Indirect Purchasers have since filed a fourth amended class action complaint.*fn8 The following named Plaintiffs and state law claims remain*fn9
Type of Claim State Relevant Plaintiff(s)
Monopolization Arizona Painters Monopolization Wisconsin Painters UDTP Florida AFL, IBEW UDTP Massachusetts Kehoe Unjust Enrichment Arizona Painters Unjust Enrichment Massachusetts Kehoe Unjust Enrichment Wisconsin Painters In December 2011, Indirect Purchasers moved for class certification.*fn10 On February 22, 2012, a hearing was held to establish the parameters of the class sought for certification. In that hearing, Indirect Purchasers generally asserted that: (1) the laws of North Carolina, GSK's home state, should be applied for choice of law purposes, and (2) their proposed class could consist of class members in states where no named plaintiff had established standing.
With regard to choice of law, for the reasons set forth in my September 26, 2011 opinion on GSK's motion for summary judgment and stated on the record in the February 22, 2012 hearing, I find that the Indirect Purchasers' claims are best considered under the laws of the states where they either purchased FP, or where TPP's plan members purchased FP and were reimbursed for those purchases.
Regarding standing and class certification, the Third Circuit has held that "to be a class representative on a particular claim, the plaintiff himself must have a cause of action on that claim." Zimmerman v. HBO Affiliate, 834 F.2d 1163, 1169 (3d Cir. 1987). Although Indirect Purchasers are correct that named plaintiffs may generally represent other plaintiffs with common but not identical claims, see Sullivan, 667 F.3d at 302, Indirect Purchasers cannot attempt to expand their class to include states in which no named plaintiff has demonstrated injury after the completion of discovery and three rounds of dispositive motions addressing the issue of standing. See Griffin v. Dugger, 823 F.2d 1476, 1483 (11th Cir. 1987) ("Each claim must be analyzed separately, and a claim cannot be asserted on behalf of a class unless at least one plaintiff has suffered the injury that gives rise to that claim."); In re Packaged Ice Antitrust Litig., 779 F. Supp. 2d 642, 657 (E.D. Mich. 2011) (detailing the numerous federal district courts that have held that named plaintiffs lack standing to assert claims under the laws of the states in which they do no reside or in which they suffered no injury); In re Wellbutrin XL Antitrust Litigation, 260 F.R.D. 143, 156-158 (E.D. Pa. 2009) (reviewing extensively the applicable case law and subsequently rejecting plaintiffs' argument that named plaintiffs with standing in one state may represent absent plaintiffs from states in which the named plaintiff does not have standing).
Therefore, as a result of my choice of law and standing decisions, and as stated on the record in the February 22, 2012 hearing, I find that the indirect purchaser class can only consist of individuals and entities that purchased and/or reimbursed for FP in Arizona, Florida, Massachusetts, and Wisconsin (the "class states")-states in which at least one named plaintiff has demonstrated injury.
From February 27-29, 2012, a hearing was held on Indirect Purchasers' motion for class certification, with both sides offering the testimony of their respective experts, and the three Daubert motions lodged against each expert. The parties have since filed post-hearing briefs, particularly focused on whether Indirect Purchasers have demonstrated that common issues predominate over individual issues for purposes of establishing antitrust impact and damages.
Subsection (a) of Fed. R. Civ. P. 23 lists four prerequisites for any class action: numerosity, commonality, typicality, and adequacy. Fed. R. Civ. P. 23(a). Subsection (b) specifies additional requirements for each type of class action. For certification under subsection (b)(3), the movant must also show "that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). These requirements are called predominance and superiority.
In In re Hydrogen Peroxide, the Third Circuit clarified the standard of review for motions for class certification. The court held that "proper analysis under Rule 23 requires rigorous consideration of all the evidence and arguments offered by the parties." In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 321 (3d Cir. 2008). A district court must "consider carefully all relevant evidence and make a definitive determination that the requirements of Rule 23 have been met before certifying a class." Id. at 320. Further, "the court must resolve all factual or legal disputes relevant to class certification, even if they overlap with the merits . . . [and] [f]actual determinations necessary to make Rule 23 findings must be made by a preponderance of the evidence." Id. at 307, 320. Finally, "[w]eighing conflicting expert testimony at the certification stage is not only permissible; it may be integral to the rigorous analysis Rule 23 demands." Id. at 323. "[A] district court may find it unnecessary to consider certain expert opinion with respect to a certification requirement, but it may not decline to resolve a genuine legal or factual dispute" relevant to class certification. Id. at 324.
The following are certified as a class pursuant to Federal Rule of Civil Procedure 23 for the class period of August 2004 through March 2009:
A. With respect to the monopolization and UDTP claims
(1) For the Class Period from August 2004 through March 2006 All persons or entities throughout the United States and its territories who from August 2004 through March 2006 purchased, paid for, and/or reimbursed for branded Flonase in any of the following four states-Arizona, Florida, Massachusetts, or Wisconsin. These persons or entities must have also purchased, paid for, and/or reimbursed for an AB-rated generic fluticasone propionate nasal spray equivalent of branded Flonase ("generic FP") from March 2006 to March 2009 in the same designated state in which the Flonase purchase was made.
(2) For the Class Period from March 2006 through March 2009 All persons or entities throughout the United States and its territories who from March 2006 to March 2009 purchased, paid for, and/or reimbursed for generic FP in the following states-Arizona, Florida, Massachusetts, or Wisconsin.
B. With respect to the unjust enrichment claims
(1) All persons or entities throughout the United States and its territories who from August 2004 through March 2006 purchased, paid for, and/or reimbursed for branded Flonase in any of the following three states-Arizona, Massachusetts, or Wisconsin. These persons or entities must have also purchased, paid for, and/or reimbursed for generic FP from March 2006 to March 2009 in the same designated state in which the Flonase purchase was made.
C. For purposes of the class definition, the Flonase and/or generic FP drugs must have been intended for consumption by the class members, their families or their members, employees, plan participants, beneficiaries, or insureds.
D. The following are excluded from the class:
(1) GSK and its respective subsidiaries and affiliates;
(2) all governmental entities (except for government funded employee benefit plans);
(3) all persons or entities that purchased FP nasal spray, including Flonase, for purposes of resale or directly from GSK to the extent and solely to the extent of such purpose for resale or as a direct purchase;
(4) insured individuals covered by plans imposing a flat dollar co-pay that was the same dollar amount for generic as for brand name drug purchases;
(5) fully insured health plans, i.e. plans that purchased insurance from another third-party payor covering 100% of the plan's reimbursement obligations to its members; and
(6) insured individuals who purchased only generic FP (never branded Flonase) and whose health plans imposed a flat dollar co-pay applicable to generic drugs.
E. From August 2004 through March 2009 will be referred to as the "Class Period."
A. Rule 23(a) Requirements
I will first consider the Rule 23(a) requirements of numerosity, commonality, typicality, and adequacy. These prerequisites must be ...