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From Antitrust Law Daily, October 31, 2018

Class certification efforts fail for now in Thalomid/Revlimid antitrust suit against Celgene

By Robert B. Barnett Jr., J.D.

A collection of consumers and third parties have been denied class certification in their putative class action alleging that Celgene illegally delayed the entry of generic version of its cancer drugs Thalomid and Revlimid in order to monopolize the market and reap extra profits, the New Jersey federal district court has ruled. Although the court accepted most of the consumer and third parties’ arguments for class certification, it denied their motion on three grounds: (1) potentially uninjured class members (i.e., brand loyalists) remain in the class in violation of Rule 23(b)(3)’s predominance requirement, and a method for identifying them without resorting to individualized inquiry still needs to be proposed; (2) excluding flat co-pay consumers could require extensive individualized inquiry and mini-trials in violation of Rule 23(b)(3)’s ascertainability requirement, and an administratively feasible method of determining class membership still needs to be proposed; and (3) insufficient evidence has been produced addressing Rule 23(b)(2)’s legal requirements for an injunction class, particularly the preclusive effect on an injunction-only class action on class members’ ability to bring subsequent damages claims. The court also, however, rejected Celgene’s argument that the concerns were so pervasive as to render certification impossible, and it gave the consumers and third parties leave to renew their class certification application with the necessary corrections (In Re Thalomid and Revlimid Antitrust Litigation, October 30, 2018, Arleo, M.).

Background. Celgene Corporation manufactures and sells Thalomid and Revlimid to treat various types of cancer (Thalomid is also used to treat leprosy). A group of consumers and third parties filed suit in New Jersey federal court, alleging that Celgene engaged in a series of groundless and illegal efforts, including suing to enforce invalid patents, refusing to sell the samples needed to develop generics, and filing objections to generic applications with the FDA based on sham safety concerns, in an effort to delay introduction of generic substitutes for Thamlomid and Revlimid in order to monopolize the market and reap an extra $5.8 million in profits. Those consumers and third parties filed a motion seeking certification of three classes: (1) the Antitrust/Consumer Protection Damages Class under Federal Rule of Civil Procedure 23(b)(3), (2) the Unjust Enrichment Damages Class under Rule 23(b)(3), and (3) the Injunction Class under Rule 23(b)(2).

Predominance. To establish predominance, the consumers and third parties need only show that the elements of their claim can be proved by common rather than by individualized proof. Celgene made three arguments on predominance: (1) injury cannot be determined class-wide because the class includes large numbers of uninjured persons and entities, (2) damages cannot be properly determined without individualized analysis, and (3) variations in state laws involving the unjust enrichment and consumer protection claims would render a class-wide trial impractical.

The court first addressed the antitrust injury argument. Uninjured class members, Celgene argued, included (1) brand-loyal customers, (2) consumers who purchased Thalomid or Revlimid after meeting an annual out-of-pocket maximum or deductible, (3) consumers who pay the same for a generic or a brand drug, and (4) consumers who obtain patient assistance. The court rejected three of the four categories as involving only a de minimis number of class members, accepting only the first category—brand-loyal customers. The Third Circuit requires a greater standard of proof at certification than do some other circuits. In the First Circuit, for example, a plaintiff need not propose a specific mechanism to exclude uninjured consumers at the time of class certification, as long as the court is convinced that such a mechanism exists. In the Third Circuit, however, a non-individualized means of identifying brand loyalists must be available at certification. Because the consumers and third parties failed to provide an appropriate common method of proving injury-in-fact given the presence of brand loyalists, their certification application was fatally flawed. Any later application must permit the court to offer a reasonable and workable plan for how challenges to allegations of injury-in-fact will be provided in a manner that protects Celgene’s constitutional rights and will not cause individual inquires to overwhelm common issues.

Turning to the damage calculation argument, the court concluded that the model for determining damage that the consumers and third parties offered via expert testimony was sufficient. Similarly, the court rejected the state law variations argument, ruling that any differences could be accommodated without overcoming the efficacy of the class action.

Superiority. To establish superiority, the consumers and third parties must establish that the class action approach is superior to other available methods. The court concluded that they satisfied their requirement, noting that the vast majority of district courts have concluded that class action treatment is superior to other methods in end payor class actions alleging generic entry.

Ascertainability. The consumers and third parties must also establish that the class is ascertainable, which includes a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition. The court concluded that the methodology proposed by the consumers and third parties—identifying class members by (1) purchase receipts, (2) pharma prescription records, (3) insurer prescription records, and (4) Celgene’s REM database—would not be effective in identifying class members. In offering their approach, the consumers and third parties offered the incomplete record of one consumer to show that a feasible, reliable method exists. Several deficiencies in that approach existed, including failing to account for the period when the consumer took Revlimid and the failure of the offered brochure to accurately reflect the Revlimid copayment, deficiencies that the consumers and third parties failed to rebut. As a result, the court concluded that the consumers and third parties failed to demonstrate that the excluded, flay co-pay members of the class could be identified using those records.

Injunction class. Celgene sought to defeat certification of the injunction class by arguing that the relief sought by the class was primarily money. The court determined that, when a Rule 23(b)(2) class is proposed alongside Rule 23(b(3) classes, the proper approach is to rigorously analyze whether the proposed class is appropriate. The court concluded that the consumers and third parties failed to meet their certification requirements for Rule 23(b)(2). "[O]nly a fraction of their analysis," the court said was spent addressing Rule 23(b)(2)’s legal requirements. One issue that the court wanted addressed was the preclusive effect of an injunction-only class action on class members’ ability to bring subsequent damages claims. As a result, this part of the certification motion was denied as well.

The court, therefore, denied the motion for class certification without prejudice.

This case is No. 2:14-cv-06997-MCA-MAH.

Attorneys: Frank Rocco Schirripa (Hach Rose Schirripa & Cheverie LLP) for International Union of Bricklayers and Allied Craft Workers Local 1 Health Fund, International Union of Operating Engineers Stationary Engineers Local 39 Health and Welfare Trust Fund and The Detectives' Endowment Association, Inc. Gavin J. Rooney (Lowenstein Sandler, PC) and Frank Charles Calvosa (Quinn Emanuel Uquhart & Sullival LLP) for Celgene Corp.

Companies: International Union of Bricklayers and Allied Craft Workers Local 1 Health Fund; International Union of Operating Engineers Stationary Engineers Local 39 Health and Welfare Trust Fund; The Detectives' Endowment Association, Inc.; Celgene Corp.

MainStory: TopStory Antitrust NewJerseyNews

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