August 08, 2017 Practice Points

Waste Class Actions: The Line Between Dissatisfaction and Actionable Injury

By Betsy Stone

A recent trend in consumer-fraud class actions against pharmaceutical companies is waste class actions. Waste class actions contend that a certain product’s packaging strategically gives consumers more than necessary, causing waste, and forcing consumers to overspend. Plaintiffs assert these claims under state consumer-fraud statutes, the Racketeer Influenced and Corrupt Organizations Act (RICO), or antitrust theories.

The Seventh Circuit squashed the most recent example of a waste class action. In Eike v. Allergan, Inc.,850 F.3d 315 (7th Cir. 2017), the plaintiffs complained that glaucoma eyedrops were too big. They asserted that five pharmaceutical companies’ glaucoma bottles produce a drop too large for the eye, causing medication to be wasted with every dose and forcing patients to spend more money buying new bottles. Beyond poor design, the plaintiffs claimed that the defendants separately engaged in an unfair and unscrupulous scheme to increase their profits. The plaintiffs also contended that the larger drop size lacks countervailing therapeutic effect. In July 2016, the Southern District of Illinois certified this waste class action.

The plaintiffs cited scientific studies and medical journals to quantify the waste. For example, they said an eye can only absorb 15 microliters of liquid, yet these glaucoma bottles sometimes produce drops 3 times that size. Based on the plaintiffs’ analysis of the cost of glaucoma drops versus the alleged amount of waste, the plaintiffs alleged that 65 percent of the liquid eyedrops would be wasted, which may cause someone using these drops to lose about a thousand dollars a year.

Judge Posner dismissed these claims with prejudice in nine short paragraphs. Analyzing the case with a characteristic cat analogy, Judge Posner got frisky with the plaintiffs’ legal theory. Given the absence of any allegation of collusion among the defendants, misrepresentation, or safety concerns from larger eyedrops, the case amounted to a pocketbook injury. “The fact that a seller does not sell the product that you want, or at the price you’d like to pay, is not an actionable injury; it is just a regret or disappointment—which is all we have here[.] . . [T]he class . . . failed to allege ‘an invasion of a legally protected interest.’” Id. at 318.

Furthermore, the Food and Drug Administration (FDA) already approved each eyedrop product. Courts, he noted, cannot bypass a federal agency and make an independent assessment of the safety and efficacy of eyedrops. And the FDA cannot force a private company to manufacture a product that the company does not want to make. A new drop size would require additional FDA testing, costing millions of dollars.

Because the class failed to allege a violation of a legally protected interest, the three-judge panel vacated the class for lack of standing.

This was not the first waste class action. Have you ever thrown away an expensive prescription because it expired? Expiration dates are required by the government and are a guarantee from drug manufacturers that the drug is fully potent, effective, and safe until that date. In Raskas v. Johnson & Johnson, 719 F.3d 884 (8th Cir. 2013), the class-action plaintiffs claimed that pharmaceutical companies set expiration dates that were shorter than when the product actually lost potency, to cause people to buy more product.

The Raskas plaintiffs cited a study finding that 90 percent of more than 100 prescription and over-the-counter drugs were safe and effective 15 years after their expiration dates. But not all expiration dates are so generous. Many drugs—such as insulin—do not last long past their expiration dates. The Eighth Circuit ultimately remanded Raskas for lack of subject-matter jurisdiction under the Class Action Fairness Act without reaching the merits of this case. The district court dismissed the case on remand.

Waste class actions spark an interesting discussion for plaintiffs and defendants. Is the plaintiff entitled to proceed with an argument that the product received was better than expected? We learn in law school that damages in consumer-fraud cases are “benefit of the bargain” damages, meaning that one receives the difference between the product’s value as expected, and the product’s value as received. If the product as received is more than the product as expected, should there be any case at all? Judge Posner thinks the answer is “no,” so plaintiffs face a strong pleading burden (establishing an actionable injury) and defendants may have strong arguments for motions to dismiss (failing to state an actionable injury) in any future such cases.

– Betsy Stone

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