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Blue Cross Blue Shield Association v. Glaxosmithkline LLC

United States District Court, E.D. Pennsylvania

September 30, 2019

BLUE CROSS BLUE SHIELD ASSOCIATION, et al.
v.
GLAXOSMITHKLINE LLC

          MEMORANDUM

          JUAN R. SÁNCHEZ, C.J.

         Plaintiffs, 38 private health insurance companies that purchased billions of dollars’ worth of adulterated pharmaceutical drugs from Defendant GlaxoSmithKline LLC (GSK), bring the instant action, alleging they purchased the drugs at issue based on GSK’s misrepresentations that the drugs were manufactured in accordance with the Food and Drug Administration’s “current Good Manufacturing Practices.”[1] Plaintiffs claim the adulterated drugs were worthless and had they known of the adulteration they would not have included the drugs in their formularies. GSK has moved to exclude Plaintiffs’ five expert witnesses pursuant to Federal Rule of Evidence 702- Phillip Russ; David A. Kessler, M.D.; Matthew Perri III, B.S. Pharm, PhD, RPh; Stephen W. Schondelmeyer, PhD; and Rena Conti, PhD. GSK’s motion will be granted insofar as Dr. Kessler will be precluded from defining “material impact” or referring to certain cGMP violations as having a “material impact” during his testimony at trial, and Dr. Schondelmeyer will be excluded from testifying at trial. The balance of the Motion will be denied.

         BACKGROUND

         This case arises out of Plaintiffs’ providing prescription drug coverage for seventeen drugs-Albenza, Avandia, Avandamet, Bactroban, Compazine, Coreg, Denavir, Dibenzyline, Dyazide, Dyrenium, Factive, Horowitz, Kytril, Paxil IR, Paxil OS, Stelazine, and Thorazine (collectively, the At-Issue Drugs). The drugs were manufactured by GSK’s corporate affiliate, SB Pharmco Puerto Rico Inc. (SB Pharmco), at a pharmaceutical manufacturing plant in Cidra, Puerto Rico (the Cidra Plant). From 2000 to 2005 (the Relevant Period), Plaintiffs assert SB Pharmco’s poor manufacturing process and quality control system at the Cidra Plant were non-compliant with the Food and Drug Administration’s (FDA) “current Good Manufacturing Practices” (cGMP). According to Plaintiffs, the drugs were therefore “adulterated” under the Food, Drug & Cosmetic Act (FDCA). See 21 U.S.C. §§ 331(a), 351(a)(2)(B). Plaintiffs allege GSK fraudulently misrepresented that the At-Issue Drugs manufactured at the Cidra Plant were cGMP compliant, resulting in Plaintiffs providing coverage for adulterated drugs they claim were worthless.[2] In support of their case, Plaintiffs have retained the five expert witnesses.

         Plaintiffs retained Philip Russ to analyze the nature and extent of the cGMP violations at the Cidra Plant during the Relevant Period. See Pls.’ Resp. in Opp’n to Def.’s Daubert Mot. (Pls.’ Opp’n) 2. Russ is the owner and president of Innovative Consultants GXP, which “provides a range of regulatory compliance and quality assurance services to clients in the pharmaceutical, medical device, and biologics industry.” GSK’s Mot. to Exclude Expert Test. of Phillip Russ, Drs. David Kessler, Matthew Perri, Stephen Schondelmeyer, and Rena Conti (GSK Mot.) Ex. 3, at 4. Russ has twenty-three years of experience in the pharmaceutical, medical device, and biologics industry, focusing on the regulatory compliance aspects of developing and managing quality management systems and cGMP compliance. See Id . Russ’s report evaluates “the extent to which manufacturing at the [Cidra Plant] was in material violation of 21 U.S.C. § 351.” Id. at 3. Russ’s report is based upon a review of (1) cGMP records of compliance activities; (2) FDA inspection results; (3) GSK’s internal audits; (4) internal GSK emails and other correspondence and memoranda related to the Quality Management System (QMS) at the Cidra Plant; and (5) the observations of Quantic Regulatory Services, the third-party expert engaged by GSK to evaluate cGMP compliance at the Cidra Plant as a result of a Consent Decree entered into between GSK and the FDA. Id. at 3-4. After review of these documents, Russ concluded “all products manufactured at the Cidra Plant between 2000 and 2005 were materially non-compliant with cGMPs and lacked the assurance of conformance to their represented properties.” Id. at 105.

         Plaintiffs retained David A. Kessler, M.D., as an expert on cGMP regulations and cGMP compliance. Dr. Kessler was FDA Commissioner from 1990 until 1997. See Id . Ex. 7, at ¶ 2 As the FDA Commissioner, Dr. Kessler oversaw the FDA’s promulgation and implementation of proposed and finalized regulations concerning cGMPs for pharmaceuticals. See Id . at ¶ 5-7. Dr. Kessler’s expert report opines on four central questions: (1) “[w]hy is compliance with cGMPs important?”; (2) “[w]hy are a drug manufacturer’s responsibilities with regard to cGMP compliance?”; (3) “[f]rom a regulatory point of view, what types of cGMP violations can have a ‘material impact’ on a drug?”; (4) “[i]f specific drugs are recalled from the market or seized from a plant because they violate cGMPs, what conclusions can be drawn as to whether other drugs at the same plant are cGMP compliant?” id. at ¶ 11(a)-(d). Dr. Kessler opines that (A) cGMP compliance is important “because it assures that what a drug manufacturer says is in a drug is actually in the drug;” id. at ¶ 12, (B) drug manufacturers “[can]not sell products that fall below the represented standards, ” id. at ¶ 28, and must “investigate, understand, and correct quality deviations, ” id. at ¶ 30, (C) there “are three categories of cGMP violations that can have a ‘material impact’ on a drug, ” id. at ¶ 35, and (D) “[t]he fact that specific drug products are recalled from the market or seized from a plant because they violate cGMPs does not mean that other drugs are cGMP-compliant, ” id. at ¶ 43.

         Matthew Perri III, B.S. Pharm, PhD, RPh, is offered as an expert in pharmaceutical marketing and his expert report assesses “the nature and significance of the marketing activities of [GSK] related to ongoing problems at [the Cidra Plant].” Id. Ex. 8, at 3. Dr. Perri is a Professor at the University of Georgia, teaching undergraduate and graduate courses in healthcare and pharmaceutical marketing and other related areas. See Id . at ¶ 1-3. Dr. Perri offers seven opinions including, inter alia, (1) it is the pharmaceutical manufacturer’s job to ensure its drug products are manufactured in compliance with all FDA regulations; (2) patients, pharmacists, prescribers, and third-party payers rely on the assurance that a drug is what the manufacturer represents it to be; (3) major pharmaceutical manufacturers control the information their personnel disseminate into the market place; and (4) it is not feasible, or expected, for third-party payers to monitor FDA enforcement actions, given the number of drugs listed on third-party payers’ formularies. See Id . at 3. In reaching his conclusions, Dr. Perri asserts his opinions are based on “universally accepted principles of marketing.” Id. at ¶ 11.

         Next, Plaintiffs offer Stephen Schondelmeyer, PhD, as a causation expert to demonstrate that, had Plaintiffs known about the cGMP violations at the Cidra Plant, they would have removed the At-Issue Drugs from their formularies and that non-cGMP compliant drugs have no economic value to third-party payors. Dr. Schondelmeyer is a Professor of Pharmaceutical Management and Economics at the University of Minnesota. See Id . Ex. 11, at ¶¶ 1, 4. Dr. Schondelmeyer has more than 40 years of experience related to pharmaceutical economics and public policy research. See Id . at ¶ 4. In his six-page opinion, Dr. Schondelmeyer concludes, based on his experience, “no payer in the United States would knowingly and willingly pay for such material non-compliant drugs [and] [s]uch drug products for all practical purposes have no value in the U.S. market and would be considered non-salable.” Id. at ¶ 19.

         Finally, Plaintiffs offer Rena Conti, PhD, as an expert on damages. Dr. Conti is an Associate Professor at Boston University’s Questrom School of Business and an economist for the FDA’s Center for Drug Evaluation and Research. See Id . Ex. 15, at ¶ 8. She focuses her research on the market for prescription drugs and the pricing of pharmaceutical products in the United States market. See Id . at ¶ 10. Dr. Conti concludes only prescription drugs “manufactured in compliance with [cGMPs] may be assigned a non-zero value by patients and third-party payers, and drugs which fail to meet those standards have no economic value.” Id. at ¶ 4. Applying the economic principle of supply and demand, Dr. Conti concluded there can be no legitimate supply curve to establish an economic value because the FDCA prohibits the sale of adulterated drugs. See Id . at ¶ 37-40. Dr. Conti further determined that, “[b]ecause GSK produced and sold non-compliant drugs, plaintiffs paid for illegitimate products that have no economic value.” Id. at ¶ 5. As a result, Dr. Conti calculated the aggregate damages for all Plaintiffs as $2.82 billion, and individual damages for each Plaintiff as ranging between $3.3 million to $483.7 million. See Id . at ¶ 52.

         DISCUSSION

         Federal Rule of Evidence 702 governs the admissibility of expert testimony. Rule 702 provides:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) that testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and ...

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