George S. Cary
is a partner and
Steven J. Kaiser
is counsel in the Washington, D.C. office of the law firm Cleary Gottlieb Steen & Hamilton LLP.
Legal Backgrounder
Washington Legal Foundation
WLF
Advocate for freedom and justice
®
2009 Massachusetts Avenue, NWWashington, DC 20036202.588.0302
Vol. 26 No. 4 February 11, 2011
COURT DENIES CERTIFICATIONIN ANTITRUST CLASS ACTIONFRAUGHT WITH BASELESS CLAIMS
byGeorge S. Cary and Steven J. Kaiser
In
Sheet Metal Workers Local 441 Health & Welfare Plan v. GlaxoSmithKline, PLC
, No 04-5898,2010 U.S. Dist. LEXIS 105646 (E.D. Pa. Sept. 30, 2010), Judge Lawrence F. Stengel denied the plaintiffs’motion to certify an antitrust class of indirect purchasers of the antidepressant Wellbutrin SR against itsmanufacturer GlaxoSmithKline (“GSK”). Judge Stengel concluded that the class could not be certifiedbecause a significant number of class members did not have claims.The reasoning of Judge Stengel’s decision demonstrates how careful and considered analysis canavoid the mistake of allowing dubious or non-existent claims to be swept into a class action to the detrimentof defendants and, often, to other class members. The opinion highlights that a court must undertake avigorous analysis, including engaging in fact finding where there are disputes between the parties and theirexperts. The case makes clear that, unlike in the summary judgment context where the plaintiff is given thebenefit of competing evidence and expert opinion, a motion for class certification requires the court toaffirmatively resolve such disputes, including among experts.
Background
. Plaintiffs – indirect purchasers of GSK’s antidepressant Wellbutrin SR – alleged thatGSK violated state antitrust and consumer protection laws by pursuing sham patent litigation to prevent thelaunching of generic versions of Wellbutrin SR. Plaintiffs asserted that but for the sham litigation, genericversions of Wellbutrin SR would have been available more than two years before they were. Plaintiffscontended that the absence of generic competition enabled GSK to maintain higher prices for brandedWellbutrin SR and to prevent consumers from using less expensive generic versions of Wellbutrin SR.Plaintiffs asked the court to certify a class consisting of indirect purchasers of Wellbutrin SR (
i.e.
,non-governmental entities that purchased Wellbutrin SR from someone other than GSK). Such purchaserswere defined to include any person who paid “all or some” of the purchase price.
Sheet Metal
, at *6.According to the court, “[t]his class could include potentially hundreds of thousands of individualconsumers and more than twenty thousand third party payors – health benefit plans, health maintenanceorganizations, and health insurers, among them – who purchased Wellbutrin SR.”
Id.
The contest over class certification is often a critical part of antitrust litigation because the allegedovercharges suffered by any individual purchaser are often not significant enough to justify the expense of litigation. When such claims are aggregated in a class, however, they often prompt settlements of tens andhundreds of millions of dollars and sometimes even more. The size of the class can therefore dramatically
Copyright
8
2011 Washington Legal Foundation ISBN 1056 3059
2
affect how much each class member receives and can also affect the total amount for which the defendant isat risk.The standard for class certification is set forth in Rule 23 of the Federal Rules of Civil Procedure.Where, as in
Sheet Metal
, money damages are sought, the court must find that, in addition to satisfyingcertain conditions that were readily met in
Sheet Metal
relating to the size of the putative class and theadequacy of the plaintiffs as class representatives, “the questions of law or fact common to class memberspredominate over any questions affecting only individual members, and that a class action is superior toother available methods for fairly and efficiently adjudicating the controversy.”
See
F
ED
R.
C
IV
.
P
RO
.23(b)(3).
Judge Stengal’s Decision
. Judge Stengal began by highlighting the Supreme Court’s admonition in
General Telephone Co. v. Falcon
, 457 U.S. 147, 161 (1982), that, in ensuring that the elements for classcertification have been established, the court must undertake a “vigorous analysis.” He noted thatcertification in antitrust cases “should not be presumed,” but rather must be subjected to the same sort of vigorous analysis as in other cases.
Sheet Metal
, at *19.The court focused on whether plaintiffs had established that injury to each class member – aprerequisite for the claims that the putative class sought to assert – could be shown by common proof or, inthe alternative, that a class member by class member analysis was required. Were such an individualizedexercise required among the projected hundreds of thousands of class members, common questions of law orfact would not predominate, and class certification would be inappropriate.
See Bell Atl. Corp. v. AT&T Corp.
, 339 F.3d 294, 302 (5
th
Cir. 2003).The court observed that whether there was such common impact depended on whether the plaintiffshad shown “that prices for [both generic and branded Wellbutrin SR] were affected during the class period”and that “all purported class members actually suffered damages as a result of GSK’s allegedly anti-competitive activity.”
Sheet Metal
, *19. In considering this issue, the court focused on the Third Circuit’srecent decision in
In re Hydrogen Peroxide Antitrust Litigation
, 552 F.3d 305, 311 (3d Cir. 2008), in whichthe Third Circuit held that “the task for plaintiffs at class certification is to demonstrate that the element of antitrust impact is capable of proof at trial through evidence that is common to the class rather than theindividual to its members.”The court noted that, among other things,
Hydrogen Peroxide
requires courts to be critical of experttestimony and not accept it as dispositive to the class certification question simply because it is admissible.
Sheet Metal
, at *20. Rather, a court must make factual findings as between competing expert testimony.The court was presented with such competing expert testimony. The plaintiffs’ expert, Dr. MeredithRosenthal, opined based largely on economic literature that each and every class member was, one way orthe other, harmed by delayed generic entry because even those who would have used branded Wellbutrin SRwould have enjoyed lower prices had there been generic entry.
Sheet Metal
, at *30-36.GSK’s expert, Dr. John Bigelow, pointed out that the class, as the plaintiffs defined it, includedmany uninjured parties. As an initial matter, Dr. Bigelow observed that, had GSK faced generic entry, itwould not have promoted Wellbutrin SR as much as it did, particularly directly to consumers. As a result,GSK argued, some patients would never have been prescribed Wellbutrin SR in the first place, “in light of the fierce competition in the antidepressant market.”
Sheet Metal
, at *44. GSK argued that patients whochose Wellbutrin SR as a result of the advertising should not be members of the class because theadvertising that caused them to choose Wellbutrin SR would not have occurred in the absence of GSKbelieving it would have ongoing exclusivity.Dr. Bigelow also disputed the plaintiffs’ assertion that, with the launch of generic versions of Wellbutrin SR, prices for branded Wellbutrin SR would have changed in a way that would have benefited allclass members. Rather, according to Dr. Bigelow, prices actually increased post entry. As such, any
Copyright
8
2011 Washington Legal Foundation ISBN 1056 3059
3
member of the class that would not have chosen generic Wellbutrin SR (or have it chosen for them) actuallybenefited from the absence of generic entry and should not be members of the class.
Sheet Metal
, at *47-50.Dr. Bigelow also testified that certain putative class members had forms of insurance under whichthey could not have been harmed by the absence of generic Wellbutrin SR. Such insurance includesinsurance that does not require a co-pay for prescription drugs and insurance where the co-pay would havebeen the same whether generic or branded Wellbutrin SR were prescribed (or dispensed). Because suchinsurance would, in effect, hold patients harmless regardless of which type of Wellbutrin SR they“purchased,” they could not have been harmed and therefore should not be members of the class.
Sheet Metal
, at *53-57.The court found that there was another – and in some senses even more fundamental – flaw in theplaintiffs’ argument that each class member was adversely impacted. In particular, the court observed that,even assuming GSK’s conduct led to unlawfully high prices being charged to GSK’s customers, it did notnecessarily follow that each of those customers (numbered in the hundreds) themselves passed on suchovercharges to their own customers or that, even if they did, that the overcharges ultimately reached themembers of the proposed class.
Sheet Metal
, at *64-65.The court rejected plaintiffs’ contention that the court’s earlier decision to certify a direct purchaserclass necessarily established such “pass through” for purpose of the motion to certify an indirect purchaserclass. In essence, the court held that an indirect purchaser plaintiff itself must make a showing of overcharge to the direct purchasers and that the direct purchaser passed those overcharges on (at least inpart): “The end-payor plaintiffs cannot avoid this burden by relying in the work of the direct purchaserplaintiffs.”
Sheet Metal
, at *67. The court noted that the problem it identified – that the proposed classdefinition tended to include uninjured parties – was not relevant to the direct purchaser class certificationdecision.Considering all of the evidence before it, including most prominently the disputed expert testimony,the court concluded that the plaintiffs had failed “to show on a class-wide basis, (1) that GSK's anti-competitive conduct caused supra-competitive prices for [Wellbutrin] SR and (2) that every end-payorbought [Wellbutrin] SR at a supra-competitive price.”
Id.
at *76. The court found that, for those purchasersof Wellbutrin SR that would have purchased the branded version regardless of a generic alternative, therewas no evidence that the entry of such a generic alternative would have reduced the price of the brandedversion (or caused it to rise more slowly than it otherwise would have). The court further concluded that,because not all direct purchasers necessarily passed through overcharges and because of the variability ininsurance plans, “there are presumably significant numbers of third party payors and consumer plaintiffs,who, as a result of their applicable co-payment and co-insurance structures, did not suffer any out-of-pocketlosses.”
Sheet Metal
, at *87. Because of these issues, the court was “satisfied the defendant has shownthere are a great number of uninjured class members, that it would therefore take many mini-trials todetermine which of the class members are uninjured. Plaintiffs have failed to show they can exclude theseuninjured consumers.”
Sheet Metal
, at *95.The court also rejected the plaintiffs’ proposed method for calculating damages, which would haveused the “real world” experience that occurred when generic Wellbutrin SR entered the market in 2004.Although the court held that it did not need to resolve the issue, it indicated that it was skeptical of theplaintiffs’ methodology:The evidence presented shows there are substantial variations in the pricespaid by individual class members. Different class members purchaseddifferent forms of the drug, either branded or generic. End-payors bought the[Wellbutrin] SR at different times. Insurance plans vary across the class.Certain class members are less price sensitive than others. The plaintiffs’ useof average prices masks these individual variations. Just because an averageprice was increased or decreased by the alleged foreclosure does not mean that
of 00
02-11-11Cary_LegalBackgrounder
70 Reads
Info and Rating
| Category: | Uncategorized. |
| Rating: | |
| Upload Date: | 02/19/2011 |
| Copyright: | Attribution Non-commercial |
| Tags: |
Leave a Comment