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August 10, 2015 Practice Points

"Battle of the Experts" Results in Denial in "Pay-For-Delay" Lawsuit

The decision demonstrates the major role that the ascertainability requirement can play at class certification.

By Eric S. Hochstadt and Dan Antalics

On June 10, 2015, the U.S. District Court for the Eastern District of Pennsylvania denied class certification to End Payor plaintiffs in In re Modafinil Litigation. The End Payor's case is Vista Healthplan, Inc. v. Cephalon, Inc., No. 2:06-cv-1833, 2015 WL 3623005 (E.D. Pa. June 10, 2015). In an opinion that closely examined competing expert testimony, the district court held that the plaintiffs had failed to establish the Rule 23 requirements of ascertainability and predominance.

The plaintiffs sued Cephalon, the maker of anti-narcolepsy drug Provigil, and four generic pharmaceutical companies claiming that settlements of patent infringement lawsuits resulted in $2.5 billion in overcharges to purchasers of Provigil or its generic equivalent because Cephalon paid the generics to stay off the market. The prospective End Payor classes included consumers and third-party payors, such as health insurance plans. However, the classes excluded eight groups of purchasers, including insureds covered by plans with flat copays, "brand loyalists" who only bought branded Provigil even after generics were available, and insureds who purchased only generic modafinil pursuant to a fixed copay.

The plaintiffs' economic expert opined that a methodology comparing the price for branded and generic Provigil, and what the prices would have been if generics entered the market earlier, demonstrated the plaintiffs' claims could be satisfied through proof at trial common to the class. The defendants' economic expert opined that significant variations in the industry—contracts between health insurance plans and insureds, pharmacies, and drug manufacturers, as well as the various class exclusions—required individualized inquiry, making certification inappropriate.

The district court concluded that identification of the proposed End Payor classes would require extensive individualized fact-finding. The plaintiffs argued their classes were well-defined with clear exclusions and that comprehensive records of Provigil purchases could easily be obtained from available data. But the district court concluded that the plaintiffs' evidence of such information was lacking. For example, the district court cited the testimony of the plaintiffs' expert that "[he] ha[d]n't been asked to" identify the class members and that he could verify that they belonged in the class "when class members come forward with their claims." Vista Healthplan, 2015 WL 3623005, at *10. The district court disagreed with the plaintiffs' argument that this was more appropriate during damages allocation. Further, the district court noted the "rigorous" nature of the ascertainability requirement in the Third Circuit and did not find persuasive a recent ruling by the First Circuit in In re Nexium Antitrust Litigation, 777 F.3d 9, 20 (1st Cir. 2015), where class certification was granted in a "pay-for-delay" case notwithstanding there was no methodology for distinguishing between injured and uninjured class members.

The district court also found the plaintiffs had failed to show that common evidence of injury would predominate over individual questions. For example, the district court concluded that the plaintiffs' numerous categories of uninjured purchasers—for example, "brand loyalists"—could not be identified with common proof. Every class member's purchasing history and insurance plan would need to be reviewed. The district court disagreed with the plaintiffs' expert that a de minimis number of class members were uninjured, but also did not believe it was as high as the defendants' expert estimated at 17 percent. The district court cited the plaintiffs' expert testimony that "[y]ou have to look at individualized records … for a number of consumers" as evidence that an individualized analysis would be required. Vista Healthplan, 2015 WL 3623005, at *19.

Nevertheless, the district court disagreed with the defendants that the plaintiffs failed to demonstrate predominance with respect to common proof of damages. The plaintiffs' expert used yardsticks—data compiled from generic launches of similar drugs—to calculate rates of substitution and pricing in the "but for" world absent the challenged anticompetitive conduct. He also considered data derived from the real-world launch of generic Provigil. Citing Behrend v. Comcast Corp., 133 S. Ct. 1426 (2013), the defendants claimed that questions of individual damages calculations would overwhelm questions common to the class. The district court disagreed, finding the methods used by the plaintiffs' expert to be acceptable.

While the litigation is ongoing, the decision demonstrates the major role that the ascertainability requirement can play at class certification. At least in the Third Circuit, the plaintiffs should be prepared to submit actual evidence, including expert testimony, to demonstrate ascertainability of the proposed class. The ruling also shows the importance of expert testimony as to whether or not there is common proof of injury or the proposed class contains a meaningful number of uninjured class members.

Eric S. Hochstadt and Dan Antalics are with Weil, Gotshal & Manges LLP in New York, New York, and Washington, D.C., respectively. The views expressed in this article are solely those of the authors.

Keywords: expert witnesses, litigation, End Payor, Cephalon, Provigil

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