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In re Niaspan Antitrust Litigation

United States District Court, E.D. Pennsylvania

August 13, 2019

IN RE NIASPAN ANTITRUST LITIGATION THIS DOCUMENT RELATES TO ALL ACTIONS

          MEMORANDUM

          DuBois, J.

         I. INTRODUCTION

         This multidistrict litigation concerns what has come to be known as a “pay-for-delay, ” or “reverse payment, ” settlement-a practice in which a brand-name drug manufacturer brings a patent-infringement action against a generic drug manufacturer and then compensates the generic drug manufacturer for its agreement to delay entering the market with a competing generic version of the brand-name drug. In this case, two putative classes-the Direct-Purchaser Plaintiffs (“DPPs”) and the End-Payor Plaintiffs (“EPPs”)-aver that the brand-name manufacturer of the drug Niaspan, Kos Pharmaceuticals, Inc. (“Kos”), entered into anticompetitive settlement agreements in March of 2005 with the generic manufacturer of that drug, Barr Pharmaceuticals, Inc. (“Barr”), in order to terminate patent-infringement litigation brought by Kos against Barr in the District Court for the Southern District of New York. Kos was later acquired by defendant AbbVie Inc. (“AbbVie”), and Barr was later acquired by defendant Teva Pharmaceuticals, Inc. (“Teva”).

         Presently before the Court is Direct Purchaser Class Plaintiffs' Motion for Class Certification. For the reasons that follow, DPPs' Motion is granted.

         II. BACKGROUND

         The background of this case is set forth in detail in the Court's Memorandum and Order of September 5, 2014. See In re Niaspan Antitrust Litig., 42 F.Supp.3d 735 (E.D. Pa. 2014). This Memorandum recites only the facts and procedural history relevant to this Motion for Class Certification. Defendant AbbVie, a drug manufacturer that was spun off from Abbott Laboratories (“Abbott”) in January 2013, markets and sells Niaspan, a brand-name prescription drug, primarily used in the treatment of lipid disorders. In the early 1990s, Kos, acquired by AbbVie in December 2006, developed a therapeutically-effective time-release version of niacin, Niaspan, which does not cause the side effects previously associated with niacin. Kos obtained a series of U.S. patents on time-release niacin and marketed the drug using the trademark Niaspan. Niaspan has been marketed and sold by AbbVie (and AbbVie's predecessor corporations) since September of 1997.

         In October 2001, Barr, acquired by Teva in January 2009, filed an Abbreviated New Drug Application (“ANDA”) with the Food and Drug Administration (“FDA”) seeking authorization to manufacture and sell a generic equivalent of certain dosages of Niaspan. The ANDA process provides for streamlined FDA approval of a bioequivalent generic version of an FDA-approved brand-name drug. As part of the ANDA process, Barr filed certifications with the FDA stating that its generic drug did not infringe any of the patents covering Niaspan and/or that the patents were invalid or unenforceable.

         In March 2002, Kos initiated the first of a series of patent-infringement lawsuits against Barr in the Southern District of New York, alleging infringement of its Niaspan patents. After three years of litigation, on April 12, 2005, Kos and Barr entered into several related settlement agreements terminating the litigation. These agreements constitute the alleged “pay for delay” or “reverse payment” settlement that is the subject of this litigation.

         DPPs allege that defendants' conduct constituted unlawful restraint of trade in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2. They contend that absent the alleged reverse payments, Barr (or later Teva) would have launched generic Niaspan earlier than September 2013, the date on which Barr launched its generic, and Kos (or later Abbott or AbbVie) would have launched an authorized generic[1] at or about the same time. DPPs proffer three possible scenarios of earlier market entry: (1) at risk in June 2005, while the Kos v. Barr patent litigation was pending, (2) after Barr would have prevailed in the patent litigation in September 2007, or (3) as a result of reaching a no-reverse-payment settlement with Kos permitting a correspondingly earlier date (March 2009) for Barr's generic to enter the market.

         On December 19, 2018, DPPs filed a Motion for Class Certification. In their Motion, DPPs seek certification of the following class:

All persons or entities in the United States and its territories who purchased brand name Niaspan directly from any defendant, and generic Niaspan (extended-release niacin) at any time during the period April 5, 2009 through June 26, 2014; or who purchased generic Niaspan (extended-release niacin) directly from any defendant during that time period; or who purchased brand name Niaspan directly from any defendant at any time after April 5, 2009 but ceased operations before generic Niaspan entered in September 2013. Excluded from the class are the defendants, their officers, directors, management, employees, subsidiaries, and affiliates, and all federal governmental entities.

         Direct Purchaser Class Plaintiffs' Motion for Class Certification (“DPPs' Mot.”) 2.

         The proposed class consists of forty-eight class members, six of which have since been acquired by other class members.[2] Direct Purchaser Class Pls.' Mem. L. Supp. Mot. for Class Cert. (“DPPs' Mem.”) 17; Mem. L. Opp'n to Direct Purchaser Plaintiffs' Motion for Class Certification (“Defs.' Opp'n”) 38. Twenty-one class members purchased brand and generic Niaspan from defendants. Direct Purchaser Pls.' Mem. L. Supp. Mot. for Class Certification (“DPPs' Reply”) 6. Two class members, King Drug Co. of Florence, Inc. and Professional Drug Company Inc., purchased brand Niaspan but ceased business operations before generic Niaspan became available in 2013. Defs.' Opp'n 27; DPPs' Reply 6. Twenty-five class members purchased only generic Niaspan directly from defendants. DPPs' Mem. 32-33.

         DPPs also move the Court to appoint plaintiffs Rochester Drug Co-Operative, Value Drug, and Professional Drug Co. as class representatives and to appoint Berger Montague PC, Garwin Gerstein & Fisher LLP, and Hagens Berman Sobol Shapiro LLP as Co-Lead Counsel for the Class pursuant to Fed.R.Civ.P. 23(c)(1)(B) and 23(g). Defendants responded to the Motion on February 25, 2019; DPPs filed a Reply on March 25, 2019. The Court held Hearings on DPPs' Class Certification Motion on May 14 and July 23, 2019. The Motion is ripe for decision.

         III. LEGAL STANDARD

         “The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” In re Modafinil Antitrust Litig., 837 F.3d 238, 248 (3d Cir. 2016). Subsection (a) of Federal Rule of Civil Procedure 23 sets out four prerequisites for a class action-numerosity, commonality, typicality, and adequacy. Subsection (b) provides additional requirements for each type of class action. To obtain certification under Rule 23(b)(3), as plaintiffs seek to do in this case, the moving party must 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.” These requirements are referred to, respectively, as predominance and superiority. Rule 23(b)(3) also contains an implied, judicially-created requirement that the identities of class members are ascertainable. See In re Domestic Drywall Antitrust Litig., 322 F.R.D. 188, 200 (E.D. Pa. 2017) (citing Carrera v. Bayer Corp., 727 F.3d 300, 305 (3d Cir. 2013)).

         “The party seeking certification bears the burden of establishing each element of Rule 23.” In re Modafinil Antitrust Litig., 837 F.3d at 248. “[T]rial courts ‘must engage in a rigorous analysis and find each of Rule 23[ ]'s requirements met by a preponderance of the evidence before granting certification.' They must do so even if it involves judging credibility, weighing evidence, or deciding issues that overlap with the merits of a plaintiff's claims.” Harnish v. Widener Univ. Sch. of Law, 833 F.3d 298, 304 (3d Cir. 2016) (citing In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 316-25 (3d Cir. 2008)). This Rule 23 analysis also requires courts to “determine the nature of the evidence, and how plaintiffs would present this evidence at trial.” In re Domestic Drywall Antitrust Litig., 322 F.R.D. at 221. However, “a court should not address merits-related issues ‘beyond what is necessary to determine preliminarily whether certain elements will necessitate individual or common proof.'” Harnish, 833 F.3d at 305.

         The Third Circuit has “repeatedly emphasize[d] that [a]ctual, not presumed conformance with Rule 23 requirements is essential.” Gonzalez v. Corning, 885 F.3d 186, 192 (3d Cir. 2018) (internal quotations omitted). “When courts harbor doubt as to whether a plaintiff has carried her burden under Rule 23, the class should not be certified.” Mielo v. Steak 'n Shake Operations, Inc., 897 F.3d 467, 483 (3d Cir. 2018).

         IV. DISCUSSION

         DPPs argue that they have satisfied their burden of establishing each Rule 23 requirement by a preponderance of the evidence. The Court considers each requirement in turn.

         A. RULE 23(A) REQUIREMENTS

         DPPs must initially satisfy the four prerequisites detailed in Rule 23(a): numerosity, commonality, typicality, and adequacy. The Court concludes that each requirement is satisfied.

         i. Numerosity

         Rule 23(a)(1) requires that the class be “so numerous that joinder of all members is impracticable.” The numerosity determination “calls for an inherently fact-based analysis that requires a district court judge to ‘take into account the context of the particular case,' thereby providing district courts considerable discretion in making numerosity determinations.” In re Modafinil Antitrust Litig., 837 F.3d 238, 249 (3d Cir. 2016) (quoting Pa. Pub. Sch. Emps. Ret. Sys. v. Morgan Stanley & Co., 772 F.3d 111, 120 (2d Cir. 2014)). The non-exhaustive list of relevant factors that are appropriate for district court judges to consider when determining whether joinder would be impracticable includes “judicial economy, the claimants' ability and motivation to litigate as joined plaintiffs, the financial resources of class members, the geographic dispersion of class members, the ability to identify future claimants, and whether the claims are for injunctive relief or for damages.” In re Modafinil Antitrust Litig. at 252-53. “[J]udicial economy and the ability to litigate as joined parties are of primary importance.” Id. at 253. “While ‘[n]o minimum No. of plaintiffs is required to maintain a suit as a class action,' [the Third Circuit] has said that ‘generally if the named plaintiff demonstrates that the potential No. of plaintiffs exceeds 40, the first prong of Rule 23(a) has been met.'” Id. at 249-50.

         DPPs contend that the putative class contains forty-eight members, creating a presumption that joinder is impracticable. DPPs' Mem. 17-18. They further argue that the class has widespread geographic dispersion, that many class members do not have large enough claims to make an individual suit practicable, and that some class members may not sue for fear of retaliation by defendants. Id. at 18-20. Defendants respond that the putative class contains only forty-two members and that joinder is practicable because “[a]ll, or virtually all, of the members of the proposed class have the resources and financial incentives to litigate through joinder.” Defs.' Opp'n 40.

         For the reasons below, the Court concludes that the numerosity requirement is satisfied.

         1. Number of Class Members

         Defendants contend that DPPs' calculation of forty-eight class members wrongly includes “six entities that have been acquired by other members of the proposed class.” Defs.' Opp'n 38. They argue that “[a]s a practical matter, Parents and subsidiaries will not make different litigating decisions because they have a ‘unity of interests.'” Id. at 39.

         DPPs correctly note that courts have consistently rejected this argument. See, e.g., In re Loestrin 24 Fe Antitrust Litig., No. 13-2472, 2019 WL 3214257, at *10 (D.R.I. July 2, 2019); In re Namenda Direct Purchaser Antitrust Litig., 331 F.Supp.3d 152, 207 (S.D.N.Y. 2018) (“I join with other courts that have considered this issue and have ruled that where there is distinct and separate injury, a corporate relationship with another class member does not defeat individual member status.”); In re Solodyn (Minocycline Hydrochloride) Antitrust Litig., No. 14-02503, 2017 WL 4621777, at *4 (D. Mass. Oct. 16, 2017) (holding class members with common corporate parents are considered distinct entities for class certification purposes); Am. Sales Co., LLC v. Pfizer, Inc., No. 14-361, 2017 WL 3669604, at *8 (E.D. Va. July 28, 2017) (allowing subsidiaries to vindicate their own antitrust injuries).

         The Court agrees with DPPs that the six class members subsequently acquired by other class members should be treated as separate entities in the numerosity analysis. However, even assuming arguendo that there were only forty-two class members, the result would not change.

         A class size of forty-eight members, or forty-two members, raises a presumption that joinder is impracticable. See In re Modafinil Antitrust Litig., 837 F.3d 238, 250-251 (3d Cir. 2016).

         2. Practicality of Joinder

         The Court next turns to the other relevant numerosity factors-judicial economy, the claimants' ability and motivation to litigate as joined plaintiffs, the financial resources of class members, and the geographic dispersion of class members. A review of those factors does not rebut the presumption that joinder is impracticable.

         Judicial economy will be served by allowing this case to proceed as a class action. If this case proceeds through joinder, the Court faces the prospect of individual plaintiffs represented by dozens of different attorneys with the potential for a multitude of summary judgment briefs espousing an array of arguments and additional complications at trial. See July 23, 2019, Hr'g Tr. 40:21-41:11.

         ORDER

         The Court finds that the claimants' ability and motivation to litigate as joined plaintiffs is a neutral factor in determining whether joinder would be impracticable. DPPs assert that non-recoverable expert costs in complex antitrust cases “can easily exceed $3 million.” DPPs' Mem. 18-19. Even assuming that DPPs recover the full amount of trebled prospective claims based on their damages expert's highest aggregate overcharge estimate, they argue that twenty-seven class members would have claims below $3 million. Id. However, defendants correctly note that DPPs err in their claims valuation because “the numerosity rule does not envision the alternative of individual suits; it considers only the alternative of joinder.” In re Modafinil Antitrust Litig., 837 F.3d at 258. DPPs offer no assessment as to how expert costs could be economically shared through joinder. DPPs' Reply 28.

         Defendants argue that contrary to DPPs' representation, “[a]ll, or virtually all, of the members of the proposed class have the resources and financial incentives to litigate through joinder.” Defs.' Mem. 40. They rely upon their expert, Dr. Daniel Rubinfeld, who determined that “if the putative class members split those costs evenly, 41 of the 42 ‘would have trebled claims in excess of their share of expected litigation costs.'” Id. at 41. The Court is not persuaded by defendants' argument. To assess whether bringing a claim is economical, a claimant must consider not only the trebled value of the maximum possible recovery, but also the possibility that a lawsuit will result in a less favorable outcome-either through partial recovery or no recovery at all. Dr. Rubinfeld's calculation is fundamentally flawed due to his failure to take the likelihood of litigation success into account. Thus, the Court concludes that neither party has provided a persuasive analysis of DPPs' financial motivation to litigate through joinder.

         DPPs also assert that some class members might not be motivated to litigate through joinder out of fear of retaliation by defendants. They highlight dicta from the Supreme Court in which the Court “recognize[d] that direct purchasers sometimes may refrain from bringing a treble-damages suit for fear of disrupting relations with their suppliers.” Illinois Brick Co. v. Illinois, 431 U.S. 720, 746 (1977). DPPs allege that this fear of retaliation explains why in a similar reverse payment case, several plaintiffs chose not to pursue their claims through joinder after the court denied their motion for class certification. DPPs' Mem. 18 n.84 (citing King Drug Co. of Florence, Inc. v. Cephalon, Inc., No. 06-1797 (E.D. Pa.)). However, DPPs do not provide any evidence that the putative class members in this case fear retaliation or that participation through joinder sparks greater fear of retaliation than does participation through a class action. See King Drug Co. of Florence, Inc. v. Cephalon, Inc., No. 06-1797, 2017 WL 3705715, at *10 (E.D. Pa. Aug. 28, 2017) (“Direct Purchasers have again failed to offer any concrete evidence to support their concern about the hypothetical risk of retaliation.”).

         The Court also finds relevant, though less significant, DPPs' widespread geographic diversity as a factor favoring finding joinder impracticable. In re Solodyn (Minocycline Hydrochloride) Antitrust Litig., No. 14-02503, 2017 WL 4621777, at *5 (D. Mass. Oct. 16, 2017) (“[G]eographic dispersion suggests joinder is impracticable, even when putative class members are corporate entities.”). In this case, DPPs are scattered across ...


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