United States District Court, E.D. Pennsylvania
IN RE WELLBUTRIN XL ANTITRUST LITIGATION THIS DOCUMENT RELATES TO INDIRECT PURCAHSER ACTION
This indirect purchaser class action involves claims that the defendants SmithKline Beecham Corporation d/b/a GlaxoSmithKline and GlaxoSmithKline plc (collectively, “GSK”) delayed the entry of generic versions of the drug Wellbutrin XL to the American market by entering into illegal agreements with generic drug companies to settle patent infringement lawsuits. In August 2011, the Court certified the Indirect Purchaser Plaintiff Class (“IPC”) under Federal Rule of Civil Procedure 23(b)(3). See In re Wellbutrin XL Antitrust Litig., 282 F.R.D. 126 (E.D. Pa. 2011).
GSK now moves to decertify the IPC based on a quartet of Third Circuit cases dealing with the requirement that Rule 23(b)(3) classes be ascertainable. See generally Byrd v. Aaron’s Inc., 784 F.3d 154 (3d Cir. 2015); Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013); Hayes v. Wal-Mart Stores, Inc., 725 F.3d 349 (3d Cir. 2013); Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir. 2012). GSK argues that the IPC cannot satisfy this requirement, and that the IPC should therefore be decertified. In connection with GSK’s motion to decertify the IPC, GSK has filed a Daubert motion to exclude the opinions and testimony of one of the IPC’s experts, Dr. Meredith Rosenthal. The IPC also filed a Daubert motion to exclude the opinions and testimony of GSK’s expert, Dr. Bruce Strombom.
To satisfy the ascertainability requirement, a putative class must show that there is a reliable, administratively feasible mechanism that can identify which potential class members fall within the class definition. Byrd, 784 F.3d at 163. In this case, the IPC must show that it can identify (1) which entities paid some or all of the retail purchase price of Wellbutrin XL and later purchased its generic equivalent (“generic XL”), and (2) which individual consumers and entities paid some or all of the retail purchase price of generic XL. Individual consumers who made only flat co-payments for the generic drug are excluded from the class.
There is no dispute among the parties that third party payers (“TPPs”), such as health insurers and health and welfare benefit plans, may have been entities that paid some or all of the retail purchase price of Wellbutrin XL and/or generic XL. The potential class membership of pharmacy benefit managers (“PBMs”), on the other hand, is hotly contested. PBMs, which generally act as middlemen between TPPs and retail pharmacies, sometimes offer price discount guarantees or spread pricing arrangements on pharmaceutical drugs to their TPP customers. GSK argues that these pricing guarantees caused PBMs to pay for Wellbutrin XL or generic XL. Conversely, the IPC argues that such pricing arrangements constitute “off-transaction financial flows” that do not cause PBMs to pay for Wellbutrin XL or generic XL.
The IPC contends that it has a mechanism for identifying which individual consumers and PBMs (if necessary) are members of the class: utilizing pharmaceutical purchase records maintained by PBMs and retail pharmacies. The IPC must show that such records exist, can identify class members, and can be used in a reliable, administratively feasible fashion to satisfy the ascertainability inquiry.
The Court will grant GSK’s Daubert motion because Dr. Rosenthal’s methodology is not reliable. The Court will deny the IPC’s Daubert motion because it finds that Dr. Strombom is qualified to be an expert on this matter and that his methodology is sufficiently reliable. Finally, the Court will grant GSK’s motion to decertify the IPC because the IPC has not carried its burden of showing that the class is ascertainable.
An understanding of the roles of some of the major players in the retail pharmaceutical industry is necessary to analyze some of the ascertainability issues in this case. Many individual consumers obtain prescription drugs from retail pharmacies. If they are covered by a health insurance plan, consumers may share the cost of prescription drugs with their insurer or health plan. These entities are often referred to as “third party payers” (“TPPs”). GSK’s Daubert Mot. Ex. A, ¶¶ 11, 24 (“Rosenthal Decl.”); GSK’s Mot. to Decertify Ex. A, ¶¶ 48-53 (“Strombom Report”).
In many cases, TPPs employ a PBM as a sort of middleman between the TPP and the retail pharmacy. TPPs provide PBMs with information about individual consumers and the details of their insurance coverage. When a consumer goes to the pharmacy to obtain a prescription drug, he or she provides insurance information to the pharmacist. The pharmacy contacts the PBM with that information, and the PBM determines what price, if any, the consumer is responsible for. The PBM also often forwards the TPP’s portion of the retail price of the drug to the pharmacy. This is usually accomplished via an electronic, automated system. St. Phillip Decl. Ex. 6 at 8-9, Mar. 9, 2015.
II. Relevant Procedural History
The IPC claims that that GSK (along with former co-defendants Biovail Corporation, Biovail Laboratories, Inc., and Biovail Laboratories International SRL (collectively, “Biovail”), who have since settled) delayed the entry of generic versions of the drug Wellbutrin XL (“generic XL”) by entering into illegal agreements with generic drug companies to settle patent infringement lawsuits.
In August 2011, the Court certified the IPC as a Rule 23(b)(3) class after extensive briefing and several days of hearings. See Wellbutrin XL, 282 F.R.D. 126. The Court defined the IPC as follows:
(1) 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) in California, Florida, Nevada, New York, Tennessee and Wisconsin; and
(2) All entities that purchased 150 mg or 300 mg Wellbutrin XL before an AB-rated generic bioequivalent was available for such dosages AND purchased generic XL in the same state after generic XL became available in California, Florida, Nevada, New York, Tennessee and Wisconsin.
For purposes of the Class definition, persons or 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 April 29, 2011.
Order, August 12, 2011 (Docket No. 354). The parties did not raise the ascertainability question in the previous certification proceedings, and the Court did not consider it when it certified the class. See generally Wellbutrin XL, 282 F.R.D. 126.
On September 22, 2014, GSK filed the pending motion to decertify the IPC. The IPC filed a motion to strike GSK’s motion shortly thereafter. Following a status conference in chambers with the parties’ counsel, the Court denied the IPC’s motion to strike. During the status conference, the IPC’s counsel indicated that it needed discovery to properly respond to GSK’s motion to decertify. The Court granted the IPC’s request for discovery, and issued a scheduling order allowing for fact and expert discovery on the motion to decertify and setting deadlines for the filing of any opposition briefs, reply briefs, and related Daubert motions. Scheduling Order, November 19, 2014 (Docket No. 517).
During the fact discovery period, the IPC filed a motion to compel against GSK, mostly seeking information about the TPP-PBM relationship. The Court denied this motion, as the information sought would be in the possession of PBMs and TPPs, not drug manufacturers like GSK. Order, December 10, 2014 (Docket No. 521). The Court also noted that the IPC had served subpoenas for documents and depositions to nine different PBMs regarding their purchase records for Wellbutrin XL and financial arrangements with members of the class. Id. Despite serving these subpoenas, the IPC did not introduce any such PBM documents or deposition testimony to the Court in support of its ascertainability arguments. Oral Ar. Tr. 57:6-60:2, May 29, 2015.
On May 29, 2015, the Court held oral argument on the pending motion to decertify and related Daubert motions.
III. The Ascertainability Record
A. Expert Witnesses
Both GSK and the IPC have introduced expert witnesses to support their arguments on the ascertainability issue. GSK relies on the opinions and conclusions of Dr. Bruce A. Strombom, while the IPC relies on Dr. Meredith Rosenthal and Paul DeBree.
All three experts provided reports and were deposed. A summary of the expert reports follows.
1. Dr. Bruce A. Strombom
Dr. Strombom generally opines that the IPC is not ascertainable because identifying class members would require extensive individualized analysis, and identifies three main theories as to why this is the case. First, Dr. Strombom claims that PBMs, depending on their contracts with TPPs, may have borne financial risk for the purchase of Wellbutrin XL or generic XL due to rebate and price guarantees. He states that determining when and whether a PBM bore financial risk stemming from these types of guarantees would depend on individual contracts with TPPs and would therefore require individualized inquiry.
Second, Dr. Strombom opines that TPPs may have passed on their portion of the increased price of Wellbutrin XL and/or generic XL by, for example, charging higher premiums the following year to consumers of health insurance. Third, Dr. Strombom states that in some cases, available records do not allow individual consumer class members to be ascertained.
a. The PBM Theory
Dr. Strombom highlights the presence of both rebate guarantee provisions and price discount guarantee provisions in PBM-TPP contracts. PBMs may negotiate with pharmaceutical manufacturers to obtain rebates that can be used to lower the price paid for prescription drugs. Similarly, PBMs may negotiate with retail pharmacies to obtain price discounts on purchases made by TPP plan members. Some PBM-TPP contracts include provisions in which the PBM guarantees minimum rebate amounts or minimum price discounts. Dr. Strombom opines that if a PBM is unable to obtain rebates or discounts at the levels guaranteed, the PBM would be responsible to make up the difference. This would cause a PBM to bear financial risk for the retail purchase price of Wellbutrin XL and/or generic XL, making it a member of the class. Strombom Report ¶¶ 16-25.
Dr. Strombom states that these arrangements present an ascertainability problem because they differ from PBM contract to PBM contract and would thus necessitate an individualized inquiry. Additionally, rebate payments from PBMs to TPPs are usually paid in a lump sum incorporating rebates for many different drugs. Determining which PBMs bore financial risk due to rebate payments and discount guarantees for Wellbutrin XL would therefore require individualized inquiries. Strombom Report ¶ 25.
b. The Premium Pass-On Theory
Dr. Strombom also opines that TPPs likely would not be harmed by any overcharge on the price of Wellbutrin XL or generic XL because they would pass on the increased price of the drug to their consumers in the form of higher premiums for the next year’s coverage. Dr. Strombom states that
[a]s health care costs increase for these plans and insurers, they must increase the amount of funds allocated to pay claims. This increase in funds is achieved through various types of adjustments, with the exact adjustments for any given TPP being highly individualized. The specific adjustments that are made, however, determine which parties bear the burden of the alleged overcharge. Thus, class membership is only ascertainable through analysis of these individualized adjustments.
Strombom Report ¶ 28. Dr. Strombom describes the various adjustments that insurance companies can make in order to pass on the cost of increased health care to consumers. Strombom Report ¶¶ 28-29.
Dr. Strombom claims that
there are no records readily identifying the class members who bore the alleged overcharges after pass-on is taken into account. Accordingly, class members can only be ascertained through extensive individualized inquiry into the specific adjustments made by TPPs to their healthcare coverage and premiums, as well as the specific parties (employers versus members) who are ultimately responsible for paying the health insurance premiums.
Strombom Report ¶ 46.
To support this theory, Dr. Strombom cites the fact that insurance companies generally increase insurance premiums to reflect the rising costs of health care, and observes that there is a positive correlation between the cost of health care and ...