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From Antitrust Law Daily, October 17, 2017

Class certification granted in antitrust suit involving Medicis’s acne drug Solodyn

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

In a massive antitrust suit against Medicis, a pharmaceutical, and others, alleging that they conspired to keep generic versions of Solodyn, an acne medication, off the market, the Massachusetts federal district court has certified as classes both the Direct Purchaser Plaintiffs (pharmacies and others that purchased the drug directly) and the End-Payor Plaintiffs (states, insurers, and consumers who indirectly paid for the drug). As a result, the multistate litigation, which has been consolidated in the Massachusetts court, will continue as a class action as the two groups of plaintiffs seek significant monetary damages from Medicis and its alleged co-conspirators (In Re Solodyn Antitrust Litigation, October 16, 2017, Casper, D.).

Background. Medicis Pharmaceutical Corporation received in 2006 permission from the FDA to market and sell three dosages of Solodyn to treat inflammatory lesions in patients age 12 and older. In October 2007, Impax Laboratories, Inc., sought permission from the FDA to market a generic version of those three dosages. In November 2008, Medicis and Impax reached an agreement in which Impax agreed to abandon its challenge to Medicis’s patent in return for $40 million. In February 2009, Impax received FDA approval but did not begin selling its generic Solodyn until November 2011. Meanwhile, three more companies—Teva, Sandoz, and Mylan—launched generic Solodyn "at risk" (i.e., without FDA approval). Within days of their launch, all three companies entered into agreements with Medicis to stop selling generic Solodyn. In November 2011, they too re-launched sales of generic Solodyn. In 2009 and 2010, Medicis began selling Solodyn in four additional dosages. In July 2011, it stopped selling the original dosages altogether. Under the agreements with the various generic manufacturers, no generic versions of the four additional dosages will be sold until at least February 2018.

In July 2013, direct purchasers of Soldoyn (DPPs) brought the first antitrust suit against Medicis, Impax, Sandoz, Lupin Limited, and Lupin Pharmaceuticals, Inc., in Pennsylvania federal district court alleging violations of Section 1 of the Sherman Act (15 U.S.C. §1). Soon, various end purchasers (EPPs) sued those same defendants, under state law claims prohibiting monopolization, conspiracy, and restraint of trade. In 2014, the Judicial Panel of Multidistrict Litigation consolidated all Solodyn antitrust actions in the Massachusetts federal court. In 2017, Sandoz, Lupin Limited, and Lupin Pharmaceuticals settled their claims by agreeing to pay $6.7 million. Meanwhile, the DPPs and the EPPs filed for class certifications.

DPPs. The DPP class has 48 members, all entities, including pharmacies, that purchased Solodyn directly from Medicis. In determining whether the DPPs met Rule 23(a)’s four requirements for class certification, only numerosity was at issue. Medicis and Impax argued that numerosity was not satisfied because, by the time common ownership and the members that expressed a desire to opt out were considered too few class members remained. The court rejected that argument, finding that the class was sufficiently large to make joinder impracticable given geographic dispersion and the competitive relationships among the various class members. As a result, the court deemed numerosity to be satisfied.

Next up was the consideration of whether sufficient questions of law or fact common to class members predominated over questions affecting only individual members, as required by Rule 23(b)(3). In an antitrust case, the analysis focuses on (1) whether the antitrust impact can be established through common proof and (2) whether any resulting damages would be established by sufficiently common proof. The court noted that the DPPs allege injury in the form of overcharges, a claim common to all the group. Their economics expert sufficiently established through various "but-for scenarios" that the DPPs would have paid less had the generics been available for sale. The court rejected Medicis and Impax’s argument that the expert’s analysis was flawed because it did not consider real world scenarios when generic Solodyn was actually available because those timeframes were too brief to be statistically relevant. As for damages, the court concluded that the damages were capable of measurement classwide. It involves a calculation of the difference between what was paid and what would have been paid had the generics been on the markets. Minor differences among class members can be adequately addressed in the damage phase.

Medicis and Impax’s final argument opposing certification of the DPP class was that more than a de minimis number of class members were uninjured (for example, those that would never have purchased the generic version). An adequate method, the court said, for distinguishing between the injured and the uninjured existed. Furthermore, those thought to be uninjured because they purchased no generic versions would still have been injured because the price of both the brand version and the generic version would have been affected by the existence of the generic versions on the market. Therefore, insufficient proof existed for establishing that more than a de minimis number of uninjured class members existed.

EPPs. The EPPs, as a class, were far more numerous than the DPPs. The class specifically excluded seven categories of end users, including those who were fully insured and those who are known as flat co-payers (they paid the same co-pay for brand name or generic drugs). Of the four Rule 23(a) factors, the only one in contention with the EPPs was adequate representation. Perfect symmetry, the court said, is not required. While true that third-party insurers and consumers are fundamentally different groups, they do not necessarily require separate representation. The alignment of incentives—both groups seek to recover for overcharges—was sufficient to overcome any possible conflicts of interest. If some conflict exists in damage allocation, those hypothetical conflicts do not constitute a showing of inadequate representation. The conflicts can be addressed in the damages phase.

The next question was the Rule 23(b)(3) requirement that common issues predominated over issues affecting only individual members. Unlike with the DPPs, the argument of class acertainability was raised for the EPPs. The court rejected the argument, stating that the EPPs had adequately provided objective criteria for defining the class, which establishes ascertainability. As with the DPPs, the EPPs provided sufficient testimony from an economics expert to demonstrate a common proof of impact across class members. The court also rejected the de minimis argument for the EPPs. While some class members, both individual and corporate, might not have suffered damage now, they would suffer damage if the jury accepts the EPPs’ theory of the case. Furthermore, the presence of consumer groups in the EPP class, the court said, would not cause individualized issues to predominate. Finally, as with the DPPs, the EPPs have established that the damages methodology was sufficiently classwide.

The court was also forced to consider whether the differences in the various state laws sought by the EPP class members would defeat class certification. Ultimately, the court ruled that it did not, although the court did exclude Montana’s consumer protection statute from the EEPs’ claims because Montana law forbids class actions. Various other differences can be addressed either at the summary judgment phase or with special verdict forms. Under Rule 23(b)(3), the class action approach must be superior to other available methods. In this case, for example, any one party’s damages may be insufficient to bring suit but, together, the damages justify the action. For all of those reasons, the court concluded that pursuing the case as a class action will not be unmanageable. Both fairness and efficiency, the court said, support class certification.

Rule 23(b)(2). The EPPs sought class certification under both Rule 23(b)(3) and Rule 23(b)(2). As previously noted, the court granted certification under Rule 23(b)(3). The court, however, denied the request under Rule 23(b)(2). The rule, which requires that injunctive relief be appropriate for the whole class, was inappropriate here because the EPPs were seeking primarily money damages. Class certification under Rule 23(b)(2) is not appropriate where money damages are the predominant relief.

The court, therefore, granted the DPPs’ motion for class certification, granted EPP’s motion for class certification under Rule 23(b)(3) (excluding the Montana consumer protection claims), and denied EPP’s motion for class certification under Rule 23(b)(2).

The case is No. 14-md-02503.

Attorneys: Archana Tamoshunas (Taus, Cebulash & Landau, LLP) and Daniel Walker (Berger & Montague PC) for Rochester Drug Co-Operative, Inc. Anna T. Neill (Kenny Nachwalter, PA) for Albertson's LLC and Heb Grocery Co. LP. Alexander L. Harris (Pepper Hamilton LLP) for Medicis Pharmaceutical Corp. Anna Fabish (O'Melveny & Myers LLP) for Impax Laboratories, Inc. David B. Rosenbaum (Osborn Maledon PA) for Teva Pharmaceuticals USA Inc.

Companies: Rochester Drug Co-Operative, Inc.; Albertson's LLC; Heb Grocery Co. LP; Medicis Pharmaceutical Corp.; Impax Laboratories, Inc.; Teva Pharmaceuticals USA Inc.

MainStory: TopStory Antitrust MassachusettsNews

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