MEMORANDUM AND ORDER
DENISE J. CASPER, District Judge.
This is a putative class action in which the Plaintiffs, members of a putative class of end-payor purchasers of certain pharmaceutical products,
II. Factual Background
The following facts are taken from the parties' statements of material facts, D. 450; D. 509; D. 510; D. 545, and accompanying exhibits unless otherwise noted.
Prior to approving a product, the Food and Drug Administration ("FDA") reviews a New Drug Application ("NDA") to determine whether a proposed drug is safe and effective for its proposed uses. 21 U.S.C. § 355; D. 450 ¶ 195; D. 510 ¶ 195. Even after the FDA approves an NDA, the agency continues to monitor the safety of the drug and retains the authority to withdraw its approval if it finds that the drug is not safe or effective. 21 U.S.C. § 355(e); D. 450 ¶¶ 199-200; D. 510 ¶¶ 199-200.
After an NDA has been approved, applicants who wish to manufacture a generic version of the approved drug may receive permission to do so by submitting an Abbreviated New Drug Application ("ANDA"). D. 450 ¶ 31; D. 510 ¶ 31. The FDA then determines whether the drug proposed in the ANDA is sufficiently "bioequivalent" to the drug that was already approved — termed the "reference listed drug." D. 450 ¶ 31; D. 510 ¶ 31; D. 458-5 at 455. When a generic manufacturer submits an ANDA, it makes a filing to the FDA regarding the status of patents associated with the NDA of the reference listed drug. D. 450 ¶ 35; D. 510 ¶ 35. In that filing, the generic manufacturer must certify: (1) that the manufacturer of the reference-listed drug did not indicate to the FDA that there were any patents associated with the NDA of the reference listed drug; (2) that the patents associated with the NDA of the reference listed drug have expired; (3) that the patents associated with the NDA of the reference listed drug will expire before the generic manufacturer will begin marketing its product; or (4) that the patents associated with the NDA of the reference listed drug are invalid, unenforceable, or will not be infringed by the generic manufacturer. 21 U.S.C. § 355(j)(2)(A)(vii); D. 450 ¶ 35; D. 510 ¶ 35. A generic manufacturer certifying that it will not market the drug until the relevant patents expire is called a "Paragraph III certification," and certifying that the patents associated with the NDA are invalid, unenforceable, or will not be infringed by the generic manufacturer is called a "Paragraph IV certification." D. 450 ¶ 35; D. 510 ¶ 35.
Under certain circumstances, the first generic manufacturer who submits an ANDA with a Paragraph IV certification will be eligible for 180 days of market exclusivity, during which it is the only manufacturer authorized to market a generic version of the reference listed drug. D. 450 ¶ 38; D. 510 ¶ 38. Generic products typically gain market share from brand-name products by virtue of state laws that allow or require pharmacists to substitute a generic product for the reference listed drug that is sufficiently bioequivalent. D. 509 ¶¶ 60-62; D. 545 ¶¶ 60-62.
The filer of an ANDA with a Paragraph IV certification must provide notice to the holder of the NDA of the reference listed drug, who may then choose to file suit in federal court asserting its patent rights against the ANDA filer. D. 450 ¶ 39. However, the filer of an ANDA with a Paragraph III certification need not provide the same notice. 21 U.S.C. § 355(b)(3)(A). The filing of an ANDA with a Paragraph III certification need not be public. D. 509 ¶ 279; D. 545 ¶ 279. The FDA does, however, publicly announce its tentative or final approval of an ANDA. D. 450 ¶ 41; D. 510 ¶ 41.
The FDA Approves Asacol and Asacol HD for Ulcerative Colitis
"Ulcerative colitis is a chronic inflammatory bowel disorder that typically causes bloody diarrhea, rectal urgency, tenesmus, and abdominal cramping." D. 450 ¶ 1; D. 510 ¶ 1. The condition is cyclical, such that patients will experience periods of time without symptoms intermixed with periods of time with symptoms, termed "flares." D. 450 ¶ 2; D. 510 ¶ 2. Due to the cyclical nature of the condition, patients may use one mode of treatment during flares and another mode of treatment continuously, even when the patient is not experiencing symptoms. D. 450 ¶ 3; D. 510 ¶ 3. The most common treatment for ulcerative colitis is a class of drugs containing the active ingredient mesalamine. D. 450 ¶ 4; D. 510 ¶ 4. Mesalamine, however, is ineffective at providing relief if it is released either too early or too late. D. 450 ¶ 6; D. 510 ¶ 6.
Proctor and Gamble Pharmaceuticals Inc. ("P&G") submitted an NDA to the FDA, requesting permission to sell a delayed-release oral tablet containing 400mg of mesalamine, sold under the brand name "Asacol" ("Asacol 400mg"). D. 450 ¶ 7; D. 510 ¶ 7. There were two patents associated with Asacol 400mg, both of which expired on July 30, 2013. D. 450 ¶ 11; D. 510 ¶ 11. The Asacol 400mg tablet contained an acrylic based delayed-release coating, such that the active ingredient is released in the colon. D. 450 ¶ 9; D. 510 ¶ 9. This coating contained a plasticizer known as dibutyl phthalate ("DBP"). D. 450 ¶ 47; D. 510 ¶ 47. The FDA approved this NDA on January 31, 1992. D. 450 ¶ 7; D. 510 ¶ 7.
On May 29, 2008, the FDA approved a new NDA from P&G — this one for a 800mg, longacting mesalamine tablet, to be sold under the brand name "Asacol HD." D. 450 ¶ 12; D. 510 ¶ 12. Asacol HD differs from Asacol 400mg in two important ways: first, it is 800mg, instead of 400mg, D. 450 ¶ 13; D. 510 ¶ 13; and second, it has a dual-layer coating rather than a single-layer coating. D. 450 ¶ 14; D. 510 ¶ 14. The coating for Asacol HD when launched contained DBP, like the coating for Asacol 400mg. D. 450 ¶ 47; D. 510 ¶ 47. Asacol HD was launched on July 7, 2009. D. 450 ¶ 18; D. 510 ¶ 18. The patents associated with Asacol HD are due to expire on November 15, 2021. D. 509 ¶ 24; D. 545 ¶ 24.
P&G and the FDA Discuss Removing DBP from Asacol and Asacol HD
In March 2009, after the approval of Asacol HD but before its sale, the FDA held a teleconference with P&G regarding whether "P&G would consider removing DBP from Asacol 400mg." D. 450 ¶ 21; D. 510 ¶ 21; D. 456-6 at 58-59. According to P&G, the FDA requested the teleconference with P&G because it was aware of the "potential health risks associated with exposure to DBP demonstrated in numerous studies" and wanted to "discuss the issue" with P&G. D. 456-6 at 58. It the teleconference, P&G indicated that it was having internal discussions about removing DBP. D. 456-6 at 59. The FDA asked about P&G's plan to remove DBP from the Asacol 400mg formulation, stating that the FDA felt "some urgency on this as the public is interested in removing this chemical from products," and indicated that the FDA was "suggesting DBPs should be replaced." D. 456-6 at 59. The FDA indicated that its timetable on having a dialogue with P&G about DBP was "as fast as possible." D. 456-6 at 60.
On April 16, 2009, P&G sent a proposed plan to reformulate Asacol 400mg without DBP to the FDA. D. 450 ¶ 85; D. 510 ¶ 85. The proposed plan suggested that the FDA allow P&G to prove bioequivalence between the then-current version of Asacol 400mg and a reformulated version of Asacol 400mg without DBP through "in vitro dissolution testing." D. 450 ¶ 86; D. 510 ¶ 86.
The parties dispute the extent to which there actually was a concern at P&G regarding the premature release of mesalamine in the Asacol products caused by premature dissolution that might have informed P&G's aims in reformulating the Asacol products. Several years prior, in 2005, Asacol HD had been recalled in Canada due to dissolution testing problems, and as a result, P&G had developed "Quick Test" methods to identify batches of product with microfractures, which made the product susceptible to dissolution problems. D. 450 ¶¶ 73-74; D. 510 ¶¶ 73-74. At some point in 2009, P&G outlined the use of "soft handling" — avoiding putting physical stress on the tablets across the supply chain by, for example, minimizing drops — as a strategy. D. 450 ¶ 77; D. 510 ¶ 77; D. 456-2 at 4. In light of this strategy, it's not clear that P&G considered the problem of dissolution failures to be ongoing rather than solved by the soft handling approach. D. 456-2 at 4, 54.
On April 23, 2009, the FDA held a meeting with P&G regarding Asacol HD. D. 450 ¶ 66; D. 510 ¶ 66; D. 456-3 at 4. According to P&G, it proposed to the FDA a change to the specifications for the dissolution rate (i.e., the rate set by the FDA for the percentage of tablets that opened at a particular pH) and the FDA was supportive of that change. D. 450 ¶ 72; D. 510 ¶ 72; D. 456-3 at 4. The specification for Asacol HD at that time required a dissolution rate of 1% at a pH of 6, and P&G was proposing to change the specification for the dissolution rate to 4%. D. 450 ¶ 72; D. 510 ¶ 72; D. 456-3 at 4. P&G requested this change to allow for "one tablet in the sample [to] fail," that is, prematurely release the active ingredient, "without failing the specification," even though P&G "[did] not have a history of failing the 1% spec on release testing." D. 456-8 at 9. According to P&G, the FDA also expressed that reformulation of Asacol HD to remove DBP "needs to proceed with urgency." D. 450 ¶ 66; D. 510 ¶ 66; D. 456-3 at 4. The FDA also stated that it wanted the reformulation of Asacol HD to remove DBP to "solve the current dissolution issue." D. 450 ¶ 72; D. 510 ¶ 72; D. 456-3 at 4.
There were further communications between the FDA and P&G on these matters. D. 450 ¶ 88; D. 510 ¶ 88; D. 456-2 at 81-83. By August 6, 2009, the FDA sent a letter to P&G rejecting P&G's proposed use of "in vitro dissolution testing" and instead requiring P&G to perform "in vitro methods (comparative dissolution)" to show bioequivalence between the then-currently marketed version of Asacol 400mg and the reformulated version of Asacol 400mg. D. 450 ¶ 89; D. 510 ¶ 89; D. 456-6 at 88. On August 24, 2009, the FDA conferred with P&G to discuss bioequivalence testing and indicated that it might consider an approach of "combined in vitro dissolution and PK study," but also stated that it was in "heavy discussion internally in regard to Division policy on reformulation changes." D. 450 ¶¶ 94-98; D. 510 ¶¶ 94-98; D. 456-6 at 93.
On October 12, 2009, P&G again discussed the subject of bioequivalence testing with the FDA and stated that Warner Chilcott (which by that point had agreed to purchase P&G's Asacol business) was "leaning towards clinical trials because [it] was `concerned about the impact on the global business as well as lowering the bar for generics.'" D. 450 ¶ 99; D. 510 ¶ 99.
An October 20, 2009 Technical Report indicated that P&G tested two compounds, dibutyl sebacate ("DBS") and triethyl citrate ("TEC") as potential replacements for Asacol 400mg and Asacol HD. D. 450 ¶ 87; D. 510 ¶ 87; D. 456-8 at 16. The Technical Report concluded that DBS was the "best match to the current DBP containing formulation." D. 456-8 at 16.
Warner Chilcott Purchases the Asacol Products
On October 30, 2009, Warner Chilcott purchased P&G's portfolio of pharmaceutical products, including Asacol 400mg and Asacol HD. D. 450 ¶¶ 19-20; D. 510 ¶¶ 19-20. Warner Chilcott was concerned about the impending expiration of the patent for Asacol 400mg, but appeared to believe that it could manage that risk through product improvement including the recent launch of Asacol HD. D. 509 ¶¶ 148-155; D. 545 ¶¶ 148-155. The efforts of P&G and Warner Chilcott to convert patients from Asacol 400mg, which would lose patent protection in 2013, to Asacol HD, which would not lose patent protection until 2021, met with only limited success. D. 509 ¶¶ 156-159; D. 545 ¶¶ 156-159. By 2011, only approximately 22% of Asacol 400mg prescriptions transitioned to Asacol HD, which was far short of Warner Chilcott's internal projections. D. 509 ¶ 167; D. 545 ¶ 167.
At the time of the purchase, Warner Chilcott was also aware of P&G's discussions with the FDA about the reformulation of Asacol 400mg and Asacol HD to replace DBP. D. 450 ¶ 22; D. 510 ¶ 22. There is a dispute between the parties over whether P&G conveyed any specific concerns it may have had regarding the performance of the DBP-containing coating of Asacol 400mg and Asacol HD to Warner Chilcott.
Warner Chilcott Negotiates Bioequivalence Testing with the FDA
Warner Chilcott proceeded with the discussions P&G had been having with the FDA over the bioequivalence testing for the reformulation of Asacol 400mg to remove DBP. By November 24, 2009, Warner Chilcott had submitted a draft protocol for a clinical end point study to establish bioequivalence to the FDA. D. 450 ¶ 101; D. 510 ¶ 101. On January 21, 2010, the FDA responded to Warner Chilcott's draft protocol with an Advice Letter. D. 450 ¶ 106; D. 510 ¶ 106. On February 22, 2010, Warner Chilcott filed a citizen petition with the FDA requesting that the "requirements for establishing bioequivalence for any reference listed delayed-release mesalamine tablet include: a clinical efficacy endpoint study; comparative [PK] testing under fed and fasted conditions; and rigorous in vitro dissolution testing," and that the FDA promulgate official guidance to that effect. D. 450 ¶¶ 108-09; D. 510 ¶¶ 108-09. On April 22, 2010, the FDA communicated that "it will be acceptable to establish bioequivalence through special dissolution and PK studies," but that "if PK and dissolution testing results are not convincing, then a clinical trial may be necessary to establish equivalence based on clinical end points." D. 450 ¶¶ 113-14; D. 510 ¶¶ 113-14.
The FDA's May 20, 2010 response to Warner Chilcott's citizen petition stated that the "FDA continues to recommend in vitro dissolution testing but now recommends comparative PK studies rather than comparative clinical endpoint studies to show bioequivalence for these products." D. 456 at 3. It acknowledged that this presented a departure from its 2007 position that "comparative clinical endpoint studies, rather than PK studies, should be used (along with in vitro dissolution studies) to show bioequivalence in orally administered extended or delayed release mesalamine drugs." D. 456 at 8. It attributed the change to "new data from PK and comparative clinical endpoint studies in modified release mesalamine products as well as recent developments in regulatory science concerning analysis of PK data." D. 456 at 9. The FDA denied the request to publish guidance regarding bioequivalence testing. D. 450 ¶ 130; D. 510 ¶ 130.
Warner Chilcott Shifts to a Capsule Formulation of Mesalamine (Delzicol)
Contemporaneous with discussions with the FDA on bioequivalence testing, Warner Chilcott began to consider a potential "new product" that would be different from Asacol 400mg in more ways than just removing DBP. D. 509 ¶ 114; D. 513-46 at 2-3; D. 545 ¶ 114. By October 2010, Warner Chilcott was pursuing a "capsule containing 400mg of mesalamine," "compressed into four 100-mg mini-tablets encapsulated into a standard gelatin capsule." D. 450 ¶ 131; D. 510 ¶ 131.
On November 2, 2010 Warner Chilcott conferred again with the FDA about bioequivalence testing for the reformulation of Asacol 400mg. D. 450 ¶ 132; D. 510 ¶ 132; D. 456-7 at 12. In addition to discussing specific testing protocols, Warner Chilcott also informed the FDA that it was "considering possible reformulation of Asacol 400-mg tablets to . . . a capsule formulation." D. 450 ¶ 133; D. 510 ¶ 133.
In early 2011, Warner Chilcott worked on the proposed capsule formulation for testing, with the goal of having a batch prepared by July 1, 2011. D. 450 ¶ 138; D. 510 ¶ 138. By June 2011, management had confirmed that the prior "DBP replacement project" was "on-hold" because the plan was now "to focus on the Asacol LCM [life-cycle management] projects" including the capsule project. D. 509 ¶ 118; D. 513-45 at 2; D. 545 ¶ 118. By mid-June 2011, it was determined that the capsules had higher water levels than expected, which could jeopardize the July 1, 2011 production date. D. 450 ¶ 139; D. 510 ¶ 139; D. 456-11 at 8. By August 2011, Warner Chilcott planned to proceed with one 400-mg DBS tablet in a capsule instead of four 100-mg tablets." D. 450 ¶ 140; D. 510 ¶ 140. By August 2011, Warner Chilcott appeared to be concerned that "Asacol 400 capsule[s] would not be bioequivalent to current Asacol 400 have shifted focus to new format" such that Warner Chilcott's product could "be a moving target for generics to delay their entry" and "gain time to further modify the coating for true patent protection." D. 509 ¶ 188; D. 514-34; D. 545 ¶ 188.
On October 21, 2011, Warner Chilcott submitted an amended protocol to the FDA, which stated, among other things, that Warner Chilcott was going to submit a capsule formulation, with a single 400-mg tablet, and without DBP, for bioequivalence testing. D. 450 ¶ 143; D. 510 ¶ 143. In that same document, Warner Chilcott stated that the tablet was encapsulated in a "hydroxypropyl methylcellulose (HPMC) capsule to provide a protective layer to maintain the integrity of the delayed-release coating under the mechanical stresses of handling and packaging. This capsule layer will dissolve earlier in the gastrointestinal (GI) tract and will not interfere with the delayed release mechanism." D. 450 ¶ 144; D. 510 ¶ 144; D. 456-9 at 6. Between that point and March 2, 2012, the FDA and Warner Chilcott communicated regarding the specifications of the bioequivalence testing that would necessary. D. 450 ¶¶ 145-150; D. 510 ¶¶ 145-150. Ultimately, on June 13, 2012, the FDA agreed that Warner Chilcott had satisfactorily shown bioequivalence. D. 450 ¶ 157; D. 510 ¶ 157.
Notwithstanding a delay in obtaining validated experimental data to support Warner Chilcott's hypothesis regarding the relative stability of the capsule, D. 509 ¶¶ 199-213; D. 545 ¶¶ 199-213, on July 30, 2012, Warner Chilcott submitted an NDA to the FDA for the 400mg mesalamine delayed release single tablet in a capsule, without DBP, which was later sold under the name Delzicol. D. 450 ¶¶ 51-52; D. 510 ¶¶ 51-52. Warner Chilcott requested an expedited "6 month priority review" from the FDA on the NDA for Delzicol on the grounds that the FDA had expressed a safety concern with DBP, which was granted. D. 450 ¶ 53; D. 510 ¶ 53. On February 1, 2013, the FDA approved the NDA for Delzicol. D. 450 ¶ 54; D. 510 ¶ 54. In approving the label for Delzicol, the FDA recommended a removal of certain warning language regarding DBP. D. 450 ¶¶ 173-176; D. 510 ¶¶ 173-176.
Warner Chilcott Launches Delzicol, Pulls Asacol, and Shifts to a Patented Capsule for Delzicol
On March 18, 2013, Warner Chilcott launched Delzicol. D. 450 ¶ 55; D. 510 ¶ 55. On the same date that Warner Chilcott launched Delzicol, Warner Chilcott stopped selling and marketing Asacol 400mg. D. 450 ¶ 57; D. 510 ¶ 57. The "hard switch" — that is, pulling Asacol 400mg from the market once Delzicol was launched — meant that patients who had been taking Asacol 400mg no longer had the option of continuing with that product — they had to choose between switching to Delzicol, switching to Asacol HD (which was still on the market but had a different dosage), or switching to a different product. D. 509 ¶ 79; D. 545 ¶ 79.
In an earnings call in February 2013, Roger Boissonneault, the chief executive of Warner Chilcott, explained that the result of pulling Asacol 400mg from the market at the same time as the Delzicol launch would be that "the generic company doesn't even get launched because the reference product will be Delzicol." D. 509 ¶ 71; D. 545 ¶ 71. "There won't be any Asacol out there. We've seen that happen with Doryx [another Warner Chilcott product], when the generic company got the product approved and, by that time, the product had moved on." D. 509 ¶ 71; D. 545 ¶ 71.
When Warner Chilcott pulled Asacol 400mg from the market, sales of Asacol 400mg and of the Asacol-branded products as a whole declined. D. 509 ¶¶ 331-32; D. 545 ¶¶ 331-32. There is a dispute between the parties regarding whether the sales of oral mesalamine drugs generally declined. D. 509 ¶ 333; D. 545 ¶ 333.
When Delzicol first launched, the capsule on the tablet was an unpatented design. 450 ¶ 178; D. 510 ¶ 178. On March 12, 2013, Warner Chilcott submitted a supplemental NDA to the FDA requesting permission to use a patented capsule, termed the "Qualicaps capsule" for Delzicol. There is a dispute between the parties regarding whether Warner Chilcott experienced any cost savings as a result of the switch to the Qualicaps capsule. D. 450 ¶ 182; D. 510 ¶ 182. The FDA approved the NDA for the Qualicaps capsule on July 9, 2013. D. 450 ¶ 180; D. 510 ¶ 180. Warner Chilcott represented to the FDA that it had begun manufacturing Delzicol with the Qualicaps capsule in August 2013, but as of March 7, 2014, it had not yet begun selling Delzicol with the Qualicaps capsule. D. 450 ¶ 181; D. 510 ¶ 181.
By 2015, Warner Chilcott introduced a 4x100mg formulation for Delzicol which was approved for pediatric use, and allows patients to open the capsule to swallow the 100mg tablets, allowing for flexible dosing. D. 450 ¶¶ 331-34; D. 510 ¶¶ 331-34.
Subsequent Conduct by the Defendants
Unlike for Asacol 400mg, Warner Chilcott's removal of DBP from the Asacol HD formulation was not accompanied by other changes. Warner Chilcott filed a supplementary NDA to the FDA regarding the new, DBP-free formulation of Asacol HD on September 24, 2015. D. 509 ¶ 125; D. 545 ¶ 125. The reformulation of Asacol HD did not go through expedited review. D. 509 ¶ 125; D. 545 ¶ 125. Asacol HD contained no less DBP than Asacol 400mg; in fact, it contained twice as much DBP per tablet. D. 509 ¶ 125; D. 545 ¶ 125. The FDA approved the supplementary NDA on May 5, 2016. D. 509 ¶ 125; D. 545 ¶ 125. In the United Kingdom, Allergan, Warner Chilcott's successor, launched a version of Asacol 400mg without DBP but also without a capsule. D. 509 ¶ 228; D. 545 ¶ 228.
On October 1, 2013, Actavis PLC, which is now known as Allergan PLC, acquired Warner Chilcott, including the Asacol line of products. D. 509 ¶ 9; D. 545 ¶ 9.
FDA Policy Regarding DBP Generally
The FDA maintained a policy of encouraging manufacturers to discontinue the use of DBP and to require clearer warnings regarding the risks of DBP, but did not prohibit the use of DBP. In 2009, the FDA requested a revision to the label of Asacol 400mg and Asacol HD to provide information on the "effects of DBP in animals and humans." D. 450 ¶ 111; D. 510 ¶ 111. Warner Chilcott released an updated label containing that information in May 2010. D. 450 ¶ 112; D. 510 ¶ 112. In March 2012, the FDA issued Draft Guidance in which it outlined its "current thinking on the potential human health risks associated with exposure to . . . DBP." D. 456-3 at 109. In December 2012, the FDA released Final Guidance on the subject. D. 450 ¶ 50; D. 510 ¶ 50. Like the Draft Guidance, the Final Guidance communicated the FDA's thinking on the health risks associated with exposure to DBP and clarified that it merely provided recommendations rather than directives. D. 456-11 at 178. The Division of Gastroenterology and Inborn Errors Products recommended that "it was prudent to change the professional labeling of Asacol [400mg] to provide information on the effects of DBP in animals and humans, as well as requiring the sponsor to reformulate their product without DBP." D. 450 ¶ 67; D. 510 ¶ 67; D. 456-6 at 64. The FDA did not at any point pull Asacol HD from the market despite the fact that Asacol HD continued to have a DBP-containing coating until May 5, 2016. D. 509 ¶ 125; D. 545 ¶ 125.
The parties dispute whether generic entry for Asacol 400mg would have occurred but for Warner Chilcott's decision to pull it from the market. The following facts relevant to that determination, however, are undisputed.
First, Warner Chilcott was concerned about generic competition for Asacol 400mg. D. 509 ¶ 248; D. 515-10 at 2; D. 513-17 at 2; D. 509 ¶ 241; D. 545 ¶ 241; D. 514-39 at 6.
Second, Warner Chilcott had an agreement with Lupin Pharmaceuticals, Inc. ("Lupin"), a generic manufacturer, to be an "authorized generic" — that is, Lupin would distribute Asacol 400mg supplied by Warner Chilcott as a generic product. D. 509 ¶ 266; D. 545 ¶ 266; D. 456-12 at 3. Under the terms of that agreement, Lupin was authorized to sell generic Asacol 400mg supplied by Warner Chilcott as soon as it was able, but only after another generic manufacturer had already entered the market for Asacol. D. 456-12 at 9. Lupin was to submit its first purchase order for generic Asacol 400mg from Warner Chilcott within 30 days of another manufacturer selling a generic version of Asacol 400mg. D. 456-12 at 10.
Third, there is limited information regarding which, if any, generic manufacturers had filed ANDAs with a Paragraph III certification for Asacol 400mg. The FDA never filed any notice of either tentative or final approval of an ANDA for a generic version of Asacol 400mg. D. 450 ¶ 211; D. 510 ¶ 211. The parties agree that neither Lupin nor another manufacturer, Zydus Pharmaceutical (USA) Inc. ("Zydus"), filed an ANDA for Asacol. Lupin believed that nine manufacturers had filed Drug Master Files ("DMFs"), a filing regarding manufacturing processes for a product that might be used to support an ANDA filing. D. 509 ¶¶ 274-275; D. 545 ¶¶ 274-275; D. 515-14 at 3. There is no evidence about whether any of the following generic manufacturers had filed ANDAs with a Paragraph III certification for Asacol 400mg: Actavis Pharma. ("Actavis"), Mylan Pharmaceuticals, Inc. ("Mylan"), Teva Pharmaceutical Industries Ltd. ("Teva"), Watson Pharmaceuticals ("Watson"); Pendopharm, Sanis Health, Aspen Pharmacare, Dr. Falk GmBH, Merckle GmBH, Tillotts Pharma, Sandoz (Novartis), Aurobindo Pharmaceuticals, Torrent Laboratory Inc., West Coast, Zota Healthcare Ltd., Ipca Laboratories, Bracco, Chiesi, Crinos, Dorm, SOFAR, Wellpharma. D. 450 ¶¶ 206, 267; D. 510 ¶¶ 206, 267. Roxane Laboratories, Inc. ("Roxane") and Par Pharmaceutical, Inc. ("Par") had filed ANDAs with a Paragraph IV certification — certifying that their products did not infringe the patents associated with Asacol 400mg — but neither manufacturer proved bioequivalence to the FDA and those ANDAs were withdrawn. D. 509 ¶¶ 304-314; D. 545 ¶¶ 304-314.
Fourth, it is not clear how long the FDA would have taken to approve an ANDA for generic Asacol 400mg once any ANDA was submitted. According to the FDA, its "median review time from ANDA receipt to approval" was 27.85 months in 2010 and 29.52 months in 2011, but the time for individual drugs might be significantly above or below that median. D. 450 ¶¶ 212-215; D. 510 ¶¶ 212-215. The FDA could have expedited review of the first ANDA for generic Asacol 400mg, as FDA policy allows expedited review of "first generic products for which there are no blocking patents or exclusivities on the reference listed drug." D. 509 ¶¶ 316-17; D. 545 ¶¶ 316-17
Fifth, generic manufacturers had significant economic incentives to produce a generic version of Asacol 400mg if Warner Chilcott did not pull Asacol 400mg from the market and there is a dispute regarding whether they had the technical capacity to do so. D. 509 ¶¶ 284-85, 295-297; D. 545 ¶¶ 284-85, 295-297; D. 426-5 at 20. Generic manufacturers had already produced internationally delayed-release mesalamine oral tablets with a Eudragit S coating, similar to the Asacol 400mg tablet. D. 509 ¶ 296; D. 545 ¶ 296. Additionally, the FDA's decision to focus on PK testing rather than on clinical studies was considered by the Defendants to be "lowering the bar" to generic entry. D. 509 ¶ 289; D. 545 ¶ 289. The FDA had already approved two other oral mesalamine products based on bioequivalence, and, on July 21, 2017, approved a generic version of Asacol HD. D. 509 ¶¶ 318-19; D. 545 ¶¶ 318-19.
After Delzicol launched, Mylan, Teva and Zydus filed ANDAs for Delzicol with Paragraph IV certifications. D. 450 ¶ 328; D. 510 ¶ 328.
Other Ulcerative Colitis Treatments
There is a dispute between the parties regarding the extent to which Asacol 400mg is a product competing with other ulcerative colitis treatments. Before discussing the various facts relevant to that determination, however, it is useful to provide a brief overview of the way pharmaceutical products are purchased.
Typically, a prescription drug is prescribed by a physician to a patient, who then takes that prescription to a pharmacy to fill. D. 453-1 at 18. The pharmacy typically orders the drug wholesale from the manufacturer and resells the drug to patients.
Asacol 400mg, Asacol HD and Delzicol were not the only drugs throughout this period that were approved as ulcerative colitis treatments. D. 450 ¶ 268; D. 510 ¶ 268. Other drugs approved by the FDA for the treatment of oral ulcerative colitis were, like Asacol 400mg, Asacol HD, and Delzicol, mesalamine-containing drugs: Apriso, generic mesalamine (including a generic version of Asacol HD authorized by Warner Chilcott), Lialda, and Pentasa; others still are treatments based on compounds that are, like mesalamine, a type of 5-aminosalicylic acid or 5-ASA: Colazal, generic balsalazide disodium, Giazo, Azulfidine, generic sulfasalazine, Azulfidine EN-tabs and generic sulfasalazine SR. D. 450 ¶ 268; D. 510 ¶ 268; D. 452 at 24. Between 2009 and 2017, the percentage of oral dosage 5-ASA drugs sold that were Asacol-branded products (Asacol 400mg, Asacol HD, or Delzicol) fell from 42.9% to 8.4%, and, by some measures, the total output fell as well. D. 450 ¶ 269; D. 510 ¶ 269; D. 509 ¶ 332; D. 545 ¶ 332. At the same time, the percentage of oral dosage 5-ASA drugs sold that were Lialda-branded products increased from 12.1% to 28.3%. D. 450 ¶ 270; D. 510 ¶ 270.
Some PBMs excluded Asacol products from their formularies while including other oral 5-ASA drugs or gave other 5-ASA drugs preferential treatment on their formularies with respect to tiers. D. 450 ¶¶ 294-301, 306, 310; D. 510 ¶¶ 294-301, 306, 310. In some cases, the PBMs explicitly drew comparisons between the pricing and effectiveness of various 5-ASA drugs in determining what drugs would be on formulary or how they would place in the tiers.
Warner Chilcott continued to earn profits on the sale of Asacol-branded products. From 2009 to 2012, Warner Chilcott's gross margins on Asacol 400mg and Asacol HD ranged from 87% to 95%, and from 2013 to 2016, Warner Chilcott's gross margins for Asacol HD were 88% to 91% and for Delzicol were 86% to 90%. D. 509 ¶¶ 334-35; D. 545 ¶¶ 334-35.
The named Plaintiffs in this action are the Teamsters Union 25 Health Services & Insurance Plan ("Teamsters"), the NECA-IBEW Welfare Trust Fund ("NECA-IBEW"), the Wisconsin Masons' Health Care Fund ("Masons"), and the Minnesota Laborers Health and Welfare Fund ("Laborers"). The Teamsters are headquartered in Massachusetts, and the Plaintiffs contend that the Teamsters made purchases of Asacol 400mg, Asacol HD, or Delzicol in Massachusetts, New Jersey, Missouri, and New Hampshire during the relevant time period. D. 124 ¶¶ 13-14; D. 450 ¶¶ 335-336; D. 510 ¶¶ 335-336. The NECA-IBEW are headquartered in Illinois and made purchases of Asacol 400mg, Asacol HD, or Delzicol during the relevant time period in Indiana, Missouri, Wisconsin, Alabama, Florida, Illinois, Kentucky, and Kansas. D. 124 ¶ 15; D. 450 ¶ 337; D. 510 ¶ 337. The Masons are headquartered in Wisconsin and made purchases of Asacol 400mg, Asacol HD, or Delzicol in Wisconsin during the relevant time period. D. 450 ¶ 339; D. 510 ¶ 339. The Laborers are headquartered in Minnesota and made purchases of Asacol, Asacol HD, or Delzicol in Minnesota, Ohio, Wisconsin, Iowa, and Arizona during the relevant time period. D. 450 ¶ 340; D. 510 ¶ 340.
III. Procedural History
The procedural history of this case is recounted in detail in the Court's Memorandum and Order on the motion to dismiss, D. 110. Currently pending before this Court are the parties' motions to exclude expert testimony, D. 426; D. 427; D. 428; D. 429; D. 430; D. 431; D. 444, the Plaintiffs' motion for class certification under Fed. R. Civ. P. 23(b)(3), D. 380, and the Defendants' motion for summary judgment, D. 445. The Court held a hearing regarding these pending motions on October 26, 2017. D. 556.
IV. Motions to Strike Expert Testimony
Standard of Review
Pursuant to Fed. R. Evid. 702, a qualified expert witness can testify "in the form of an opinion, or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case."
Motion to Exclude Testimony of Todd Clark
The Defendants move to exclude the testimony of Todd Clark ("Clark"), an expert in the pharmaceutical industry, D. 426-5 at 3-4. Clark opines that "one or more generic versions of Asacol 400mg would have entered the market at or within a short time period after the product's July 2013 patent expiration if Warner Chilcott had not executed the Asacol-to-Delzicol hard switch." D. 426-5 at 9.
The Defendants first contend that Clark's opinion is speculative because it is impermissibly based on general industry information rather than actual data about which companies filed ANDAs in preparation for launch of a generic version of Asacol 400mg. D. 426-1 at 7-8. Specifically, the Defendants contend that information concerning whether generic manufacturers were technologically capable of producing a generic version of Asacol 400mg is "irrelevant" to the question of whether a generic manufacturer would have entered. D. 426-1 at 7.
In forming his opinion, Clark relied upon "industry norms, [his] experience, the nature of the product, the number of companies that we do know were interested, [and] the number of companies that would typically be interested in a product of this size," in a "holistic approach" rather than a quantitative simulation. D. 426-3 at 21. In drafting the report, Clark reviewed historical data regarding generic entry, D. 426-5 at 16, both generally and specifically with respect to treatments for ulcerative colitis, D. 426-5 at 17; developments in the international market for mesalamine products, D. 426-5 at 21-22; the technical capacities of generic manufacturers to produce the drug, D. 426-5 at 35; the incentives for generic manufacturers to consider entering the market, D. 426-5 at 20; the ability of generic manufacturers to obtain FDA approval, based on guidance released by the FDA on the standards for bioequivalence, D. 426-5 at 42; and public statements by generic manufacturers, D. 426-5 at 51. In Clark's experience of twenty five years in the pharmaceutical industry, D. 426-3 at 11, these are relevant factors in predicting the likelihood of generic entry. D. 426-3 at 21.
The Defendants acknowledge that the publicly available ANDA information is incomplete, because the publicly available information does not show which generic manufacturers had ANDAs with a Paragraph III certification pending at the time that Warner Chilcott pulled Asacol 400mg from the market, D. 509 ¶ 279, decreasing the incentives for a generic manufacturer to see that ANDA through to the tentative or final approval which would have been made public. Because the available information on ANDA filings is incomplete in this respect, excluding Clark's testimony because it does not focus on the ANDA filings does not seem warranted. The Defendants provide no reason to conclude that the technological capabilities of generic manufacturers, or any other factors relied upon by Clark, are wholly irrelevant to the forecast of generic entry. The factors relied upon by Clark constitute a sufficiently reliable foundation for forecasting generic entry. Clark's choice not to rely on whatever publicly available ANDA filings existed goes to the weight, rather than the admissibility, of his testimony.
Second, the Defendants contend that Clark's testimony is inadmissible because Clark chose not to use a quantitative simulation to forecast generic entry. D. 426-1 at 9; D. 426-3 at 21. Even assuming a quantitative simulation might have been a superior method of forecasting generic entry, Clark's failure to do so does not render his testimony inadmissible. The standard for admissibility is not whether Clark's methodology is the best; only whether it is "methodologically reliable" and rests on "good grounds,"
Finally, the Defendants contend that Clark may not opine on what intention the Defendants had in pulling Asacol 400mg from the market. D. 426-1 at 12. The Plaintiffs agree that Clark will not opine on the Defendants' intentions. D. 502 at 18. For all these reasons, the Court denies the motion to exclude Clark's expert opinion.
Motion to Exclude Testimony of Rena Conti
The Defendants move to exclude the testimony of Dr. Rena Conti ("Conti"). D. 427. The Plaintiffs have proffered Conti's opinion in predicting the effect of generic entry of Asacol 400mg on the members of the putative class if Warner Chilcott had not pulled Asacol 400mg from the market. D. 427-3 at 2. Conti is an Associate Professor of Health Economics at the University of Chicago with a Ph.D. from Harvard University in Health Policy. D. 427-3 at 3-4. She has published articles in peer-reviewed journals regarding the effect of generic entry on pharmaceutical markets. D. 427-3 at 3-4. Conti gathered data on the pricing and sales of the Asacol-branded products and other ulcerative colitis drugs and data on the historical effect of generic entry on the prices and sales of products sold for other comparable drugs (termed "yardstick products") to model the effect on the class based on certain scenarios of generic entry provided by the Plaintiffs' counsel. D. 427-3 at 13-26.
First, the Defendants contend that Conti's model does not align with the class definition and, therefore, does not meet the standard laid out by the Supreme Court in
Next, the Defendants argue that Conti impermissibly relies on assumptions provided by the Plaintiffs' counsel regarding generic entry scenarios, D. 427-1 at 10-11; that Conti does not remove uninjured class members from her analysis and therefore exaggerates the total damages, D. 427-1 at 11-14, 18-19; that Conti impermissibly extrapolates the effect of generic entry on the market for Asacol 400mg based on other products that are not comparable to Asacol 400mg, D. 427-1 at 14-17; and that Conti failed to limit damages to the four states in which the named Plaintiffs made purchases, D. 427-1 at 17.
1. Assumptions Regarding Generic Entry
Conti's choice to rely on scenarios provided by the Plaintiffs' counsel, supported by the expert testimony from Clark and McGuire, does not provide a basis for excluding her testimony. "When facts are in dispute, experts sometimes reach different conclusions based on competing versions of the facts." Advisory Committee Notes to Rule 702 of the Federal Rules of Evidence. As the Court will discuss below, there remains a genuine dispute of material fact regarding the possibility of generic entry. It is up to the factfinder to determine whether the assumptions relied on by Conti are accurate, and thus whether to accord any weight to her testimony.
2. Failure to Remove Uninjured Class Members
Conti's purported failure to remove uninjured class members from her damages calculation is similarly not grounds to exclude her testimony under Rule 702. The Defendants contend that Conti's model overestimates damages in the following ways: Conti does not exclude the "substantial percentage" of third party payors that would have been uninjured because they would have paid less for the brand-name product than the generic product due to the higher co-pays charged to consumers for brand-name products and manufacturer rebates, D. 427-1 at 12-13; that Conti failed to account for brand-loyal consumers who would have stayed with Asacol 400mg even if a generic version had been available, D. 427-1 at 9; that Conti failed to exclude consumers who paid no co-pay or used coupons, D. 427-1 at 13; and that Conti failed to account for consumers who would have shifted to Asacol HD or other drugs in the but-for world, D. 427-1 at 18-19.
The Defendants' contention that there is a substantial percentage of uninjured third-party payors rests on the estimate of Dr. Bruce Strombom ("Strombom"), the Defendants' expert, on the price of generic Asacol 400mg in the but-for world. D. 427-5 at ¶ 33. That estimate is based on the application of assumptions based on actual data from the entry of a generic version of Asacol HD, which Conti contends is not an appropriate comparator because there is currently only nine months of data available on prices of generic Asacol HD, while full penetration of a generic product usually takes over a year and the market for Asacol HD was smaller and, therefore, would attract less price competition than the market for Asacol 400mg would have. D. 427-5 at 14-15. Nevertheless, the disagreement between Conti and Strombom over which drugs constitute appropriate comparators is not grounds to exclude Conti's testimony. The but-for prices provided by the two experts are based on their different perspectives on the various characteristics of Asacol 400mg, which guided the choice of different comparator products. This dispute appears to be within "the range where experts might reasonably differ," and thus the jury should "decide among the conflicting views of experts."
Conti's assumptions about the percentage of "brand-loyal" consumers are not very different from the ones presented by the Defendants. The Defendants' expert, Strombom, estimated that approximately 5,000 consumer class members would be "brand-loyal" (i.e., would have chosen to continue purchasing Asacol HD or Delzicol even in the presence of a generic version of Asacol 400mg). D. 401-1 at 24. Strombom utilized data from benchmark products indicating that 30-40% of consumers continue to purchase the brand-name product in the first year of generic availability, dropping to 10% by the third year of generic availability. D. 401-1 at 23-24, 86. Conti, using benchmark data from other products, concluded that approximately 12.2% of class members would have purchased Asacol HD or Delzicol even in the presence of a generic version of Asacol 400mg on the market by the end of the first year of generic availability, dropping to approximately 8.6% at the end of thirty-one months of generic availability. D. 384-1 at 75; D. 384-1 at 29. Thus, between the two reports, both experts conclude that the percentage of "brand-loyal" consumers after 31 months would be between 8.6% and 10%; the experts conclude that there would be different rates of attrition over the course of that period. This dispute, again, appears to be within the range in which experts might reasonably disagree, as opposed to a way in which Conti's testimony is "so fundamentally unsupported that it can offer no assistance to the jury."
Conti's purported failure to account for customers with no co-pay or whose co-pay was effectively reduced to zero because of a coupon is similarly not a basis to exclude her testimony. Conti estimated the percentage of consumers with zero co-pay plans and excluded them from her analysis. D. 427-3 at 28. Conti also estimated the impact of coupons provided to consumers by taking data from the Defendants' financial statements. D. 427-3 at 30. She estimated that 6% or fewer of prescriptions were affected by a coupon — and because each patient filled multiple prescriptions, fewer than 6% of patients would have had all of their purchases subject to a coupon that reduced the price to zero. D. 427-3 at 30. Neither the Defendants' briefing nor Strombom's report sufficiently explain why these adjustments are so flawed as to undermine the reliability of her proffered opinion. D. 427-1 at 13; D. 427-8 at 25-26.
Finally, the Defendants contend that Conti's testimony should be excluded because her model does not account for the percentage of consumers who are uninjured because they would have responded to an increase in the price of Asacol 400mg by switching to either Asacol HD or another ulcerative colitis drug. D. 427-1 at 18. But, as discussed below, there continues to be a genuine dispute of material fact over the elasticity of consumer demand for Asacol 400mg and other ulcerative colitis treatments. Like Conti's assumptions about generic entry, her assumptions about the substitutability of other ulcerative colitis treatments is supported by the testimony of another of the Plaintiffs' experts, and will be subject to findings by the factfinder, and thus does not constitute a reason to exclude her testimony.
3. Choice of Yardstick Product
The Defendants contend that Valcyte, the "yardstick product," or product based on which Conti made assumptions about the likely effect of generic entry, was inappropriate because, unlike Asacol 400mg, the yardstick product does not involve safety concerns associated with DBP. This argument is unpersuasive, as the Plaintiffs contend that a generic version of Asacol 400mg might also have been formulated without DBP, meaning that any opinion supporting their claims would not need to account for patient safety concerns regarding DBP.
The Defendants next contend that Valcyte is different from Asacol 400mg in that it is more expensive; it did not have the same active ingredient as any other treatment on the market; and it is not an ulcerative colitis treatment. D. 427-1 at 19. The Defendants contend that Conti should have used Asacol HD as a yardstick instead. D. 427-1 at 19. However, Conti chose Valcyte as a yardstick product because, unlike Asacol HD, Valcyte had, before generic competition, similar total sales as Asacol 400mg and Valcyte had multiple generic entrants rather than a single authorized generic entrant. D. 427-3 at 23-24. This dispute over which features of Asacol 400mg are most salient, and therefore are most important to select for in a yardstick product, are within the range of reasonable disagreement by experts, and fall short of the standard required to exclude Conti's opinion.
4. Limiting Calculation to Four States
The Defendants contend that Conti's opinion must also be excluded because her model includes damages estimates from more than the states in which the named Plaintiffs made relevant purchases. D. 427-1 at 17. As discussed below, however, the Court concludes that the Plaintiffs have standing to bring claims under the laws of states in which any class member made purchases and, therefore, rejects this basis for excluding or limiting Conti's anticipated testimony.
Motion to Exclude Testimony of Richard Frank
The Defendants move to exclude the testimony of Dr. Richard Frank ("Frank"). D. 428. The Plaintiffs proffer Frank as an expert in defining the relevant market of products with which Asacol 400mg competes. D. 428-3 at 2. Frank is a Professor of Health Economics at Harvard University Medical School and has been engaged in health economics for over thirty years. D. 428-3 at 4.
Frank began by surveying the market for anti-inflammatory therapeutics, including multiple treatments for ulcerative colitis and all 5-ASA drugs. D. 428-3 at 30. Relying on FDA data, among other sources, Frank charted the differences between these products in approved indications, formulation, timing, and adverse effects. D. 428-3 at 32. After excluding certain drugs, Frank analyzed the relative wholesale prices over time of the various products and concluded that "price patterns suggest no real evidence of price changes that could lead to product substitution among the branded drugs in the analysis." D. 428-3 at 39. Rather "the relative prices for these drugs were relatively constant over time," indicating that "price competition was relatively unimportant in shifting demand away from the Asacol drugs to Lialda and/or Apriso, and rather that attribute competition (differentiated product competition) was the primary driving force." D. 428-3 at 39. Frank concluded, based on a full review of the cited data, that if Warner Chilcott had raised the prices of its Asacol products by 5%, it would not have appreciably reduced sales or profits — an example of the "hypothetical monopolist" test used by the Department of Justice in evaluating the antitrust impact of horizontal mergers. D. 428-3 at 70-71. Frank then examined the gross margins earned by the Defendants for the Asacol products and concluded that the gross margins were significantly higher than the gross margins for either generic products or products facing generic competition, providing evidence of a monopoly. D. 428-3 at 75-79. Frank concluded that "the fact that virtually all branded firms pay rebates to insurers and PBMs (especially for tier placement on formularies) does not alter a branded firm's ability to increase and sustain higher supra-competitive branded prices." D. 428-3 at 79. Finally, Frank noted that Warner Chilcott's promotional spending on Asacol HD and Delzicol accounted for over 10% of net revenues and "high levels of promotional spending imply that firms have high enough margins to provide a return to their promotional spending." D. 428-3 at 80.
As to Frank's opinion, the Defendants first argue that gross profits and promotional spending are irrelevant to the analysis of the Defendants' market power in the relevant market. D. 428-1 at 5-9. The Court disagrees; while they may not be sufficient alone to prove market power, they are certainly relevant to an analysis of market power.
Second, the Defendants contend that historic price increases are irrelevant and the ability of the hypothetical monopolist to exact a five percent price increase profitably has no place outside of the horizontal merger context. D. 428-1 at 9-10, 16-17. But the hypothetical monopolist test is the "touchstone of market definition," even in contexts outside of horizontal mergers.
Third, the Defendants contend that Frank inappropriately uses wholesale prices without accounting for rebates to third-party payors, leading him to ignore competition between brand-name manufacturers for formulary placement with PBMs. D. 428-1 at 12-16. While Frank did use wholesale prices, he also concluded that it was not necessary to account for rebates because rebates were smaller than the price increases. D. 428-3 at 79. The only evidence the Defendants have offered to support their contention that Frank erred in this conclusion is the statement of an Allergan employee, indicating that PBMs that he negotiated with told him that rebates for Lialda exceeded forty or fifty percent of list price. D. 428-15 at 3. This is not sufficient to show that Frank's use of wholesale prices and rationale for doing so are an unreliable basis for his opinion.
Finally, the Defendants argue that Frank inappropriately provided a medical opinion regarding the differences between competing ulcerative colitis treatments that he was not qualified to give. D. 428-1 at 17-18. This argument is unavailing; Frank compiled and reviewed reports documenting certain characteristics of various drugs, including FDA sources, to inform his expert economic analysis, and the Defendants will be permitted to challenge the validity of the bases of his opinion at trial.
Motion to Exclude Testimony of Irwin Jacobs
The Defendants move to exclude the testimony of Dr. Irwin Jacobs ("Jacobs"). D. 429. The Plaintiffs first proffer Jacobs as an expert regarding the therapeutic characteristics of Asacol 400mg and Delzicol and the potential for creating a version of Asacol 400mg with DBP without using a capsule. D. 429-3 at 9. Jacobs, in formulating his opinion, relied upon documents provided by Warner Chilcott; a report submitted by the Defendants' expert on the subject, Dr. Robbins; experience with the pharmaceutical industry; documents from the FDA's communication with Warner Chilcott; and his own expertise in the field. D. 429-3 at 9-19. Jacobs concluded that "[i]t was possible to achieve safety and bioequivalence to original Asacol 400mg tablets with reformulated Asacol 400mg tablets that replaced DBP with DBS without changing the dosage form to a capsule;" that there was no need to address the problem of microfractures by means of encapsulation; and that "[t]here is no technical or scientific reason why a company would need to encapsulate the tablet to accommodate a change to DBS formulation." D. 429-3 at 10-11.
The Plaintiffs also proffer Jacobs as an expert on the potential challenges that generic manufacturers would face in trying to create a generic version of Asacol 400mg. Jacobs concluded that "no major scientific or technological hurdles existed to prevent drug companies from developing a generic version of Asacol [400mg] that could meet [the] FDA's bioequivalence requirements and enter the market after Asacol [400mg]'s patents expired." D. 429-4 at 5. He reviewed the conclusions of the Defendants' expert, Dr. Juergen Siepmann, regarding certain purported difficulties in developing a generic version of Asacol 400mg, and concluded that none of those purported difficulties were valid or material. D. 429-4 at 5.
The Defendants next contend that Jacobs' testimony is speculative because Jacobs does not identify a particular generic manufacturer with the capability of producing a generic version of Asacol 400mg. D. 429-1 at 6. Jacobs, however, used sufficiently reliable information about the technological capabilities of generic manufacturers generally, based upon other products they produced and the specific characteristics of the Asacol 400mg product, in reaching his conclusion. The Defendants next contend that Jacobs impermissibly took account of the fact that generic manufacturers produced generic versions of two other mesalamine products — Asacol HD and Lialda — in reaching his conclusions, despite the fact that Asacol HD and Lialda are different products from Asacol 400mg. D. 429-1 at 7. But Jacobs relied on those products because they were similar to Asacol 400mg in ways that made it reasonable to draw an inference about the ease of creating a generic version of Asacol 400mg from information about Asacol HD and Lialda. D. 429-5 at 28.
The Defendants also argue that Jacobs' conclusions regarding the feasibility of formulating a version of Asacol 400mg without DBP and without a capsule are inadmissible. The Defendants first contend that Jacobs, in concluding that the FDA would have approved P&G's Asacol 400mg tablets made with DBS and without a capsule, relied only on P&Gs in vitro dissolution studies, whereas the FDA would have required more thorough testing. D. 429-1 at 11. But this contention is not at odds with Dr. Jacob's testimony. Rather, Jacobs opined that, based on his expertise, the academic literature and the experiments that were completed by P&G, "human trials had a very high likelihood of success." D. 429-3 at 20.
The Defendants additionally contend that Jacobs inappropriately discounted a December 2012 study by Warner Chilcott on microfractures because they were done in a "water environment." D. 429-1 at 12-13. In Jacobs' report, he dismissed the study because "it contains a small sample size, it is not a controlled experiment, and there is no substantiation of the conclusions." D. 429-3 at 31. Jacobs opined that because microfractures originate in the manufacturing, shipping, and handling process — which are dry settings — a water environment is not the appropriate environment in which to test for the development of microfractures, D. 429-5 at 51, even though the microfractures ultimately manifest in the water environment of the human body.
The Defendants also seek to exclude Jacobs' opinions on the Defendants' intent; the likelihood of certain action by the FDA such as approval of a product; and the relative costs of manufacturing an encapsulated versus non-encapsulated tablet. D. 429-1 at 15-16. But, the Plaintiffs agree that Jacobs will not testify about the Defendants' intent. D. 505 at 17. And, while Jacobs is not an expert in regulatory matters, he is a scientist who reviewed the technical documents released by the FDA on bioequivalence testing and opined on whether generic manufacturers would be able to meet those technical specifications — which is, along with manufacturing costs, within his scope of expertise. D. 429-3 at 5-6.
Finally, the Defendants seek to exclude Jacobs's testimony weighing the credibility of the evidence regarding the existence of a microfracture problem or the likelihood of generic entry, because his testimony would usurp the role of the jury. D. 429-1 at 16. This is not the case where an expert is doing so in explaining his review of the scientific evidence in rendering an opinion, a function that would aid the jury pursuant to Fed. R. Evid. 702 and the jury will be instructed that they are only required to give what weight, if any, they deem they should as to any expert or lay testimony.
Motion to Exclude Testimony of David Kessler
The Defendants move to exclude the testimony of Dr. David Kessler ("Kessler"). D. 430. The Plaintiffs proffer Kessler, a former Commissioner of the FDA, as an expert on the FDA's policy with respect to DBP and the Asacol products. D. 430-3 at 26-32. Kessler reviewed the regulatory history of Asacol 400mg, Asacol HD, and Delzicol; the physical properties of Asacol 400mg, Asacol HD, and Delzicol; the history of interactions between the FDA and P&G and its successors about the Asacol products; and the history of FDA policy on DBP. D. 426-3 at 9-25. Based on this information, Kessler concluded that Warner Chilcott could have reformulated Asacol 400mg to remove DBP through a supplement to the Asacol NDA and that the FDA did not require Warner Chilcott to remove Asacol 400mg from the market or require Warner Chilcott to switch to a capsule formulation. D. 426-3 at 26-30.
The Defendants first argue that Kessler's deposition testimony raised new opinions not disclosed in his initial report and those additional opinions should be excluded. D. 430-1 at 6.
The Defendants next contend that Kessler's opinions stating that the FDA would have approved a formulation of Asacol 400mg without DBP and without a capsule are inadmissible because Kessler was not the FDA Commissioner at the time and cannot speculate about what the FDA would have done. D. 430-1 at 8-9. But, Kessler is unquestionably an expert in the process of FDA decision-making, and to the extent that the FDA's actions in a but-for world are matters for the fact-finder to determine, based upon whether it chooses to credit such opinion, the Court does not conclude that such opinion is beyond the bounds of Rule 702.
The Defendants next seek to exclude Kessler's opinion that the FDA never required the Defendants to withdraw Asacol 400mg once Delzicol was launched, both for reasons similar to those cited above (which the Court does not accept) and because the record does not support that conclusion. D. 430-1 at 10. As to the latter point, the record does not show any evidence that the FDA did or was about to require the Defendants to pull DBP-containing Asacol 400mg from the market; rather, it shows that the FDA allowed DBP-containing Asacol HD to stay on the market for some time after Warner Chilcott pulled Asacol 400mg.
The Defendants also move to exclude Kessler's testimony regarding generic entry on the grounds that Kessler was only offered as a regulatory expert. D. 430-1 at 12-13. But the opinions of Kessler regarding generic entry are focused on the lack of regulatory barriers to generic entry, and explaining why the experiences of Par and Roxane — which had submitted ANDAs with Paragraph IV certifications and met with regulatory barriers — were not applicable to generic manufacturers that might have submitted ANDAs with Paragraph III certifications. D. 430-10 at 27. This is a fundamentally regulatory opinion and thus within the scope of Kessler's expertise.
Finally, the Defendants move to exclude Kessler's testimony on technical formulation issues; the standard of care for ulcerative colitis patients; and the intentions of the executives of the Defendants. D. 430-1 at 16-22. The Plaintiffs, however, do not seek to have Kessler opine on these topics. D. 506 at 12-15.
Motion to Exclude Testimony of Thomas McGuire
The Defendants move to exclude the testimony of Dr. Thomas McGuire ("McGuire"). D. 431. The Plaintiffs engaged McGuire, a Professor of Health Economics at Harvard Medical School, to opine regarding "if Warner Chilcott's withdrawal of Asacol 400mg precluded competition and harmed consumers," and "on whether, had Asacol 400mg not been withdrawn from the market, rational, competitively acting generic firms would have been likely to enter after patent expiry." D. 431-7 at 3-4.
McGuire opines that it would be profit-maximizing for Warner Chilcott to pull Asacol 400mg from the market only if doing so would lead to higher profits for Delzicol, which would derive from consumers who preferred Asacol 400mg but were forced to switch to an alternative and chose Delzicol. D. 431-7 at 53-54. He concluded that, based on an analysis of yardstick products, generic entry for Asacol 400mg would have been likely if Warner Chilcott had not pulled Asacol 400mg from the market. D. 431-7 at 76.
The Defendants first contend that McGuire impermissibly assumed the possibility of generic entry without pointing to any particular potential entrants. D. 431-1 at 7. That argument fails for the same reason it was rejected above for Clark's testimony. Second, the Defendants contend that McGuire did not calculate the quantity of lost profits, but only calculated the lost revenue and inferred the lost profits from that. D. 431-1 at 8. But the Defendants do not explain why that inference is flawed — especially given the other evidence in the record, provided by Frank, that Asacol 400mg was a highly profitable drug. Third, the Defendants contend that McGuire impermissibly ignored the safety hazards of DBP. D. 431-1 at 9. But, as discussed above, this is not a reason to exclude his testimony.
Fourth, the Defendants challenge McGuire's model, which indicates that a hard switch by a brand-name manufacturer generally suppresses generic entry because the brand-name manufacturer would not pull a profitable product from the market unless it could make up those profits by increased sales of the new product that would come from consumers who preferred the old product and would likely have adopted a generic competitor to that product. D. 431-7 at 58. The Defendants contend that this model has no "limiting principle" and thus would not be useful to a jury. D. 431-1 at 11. But this type of objection goes to the weight, rather than admissibility, of McGuire's testimony, and can be raised before a fact-finder in cross-examination.
Fifth, the Defendants contend that McGuire impermissibly failed to incorporate into his analysis the pro-competitive benefits of Delzicol. D. 431-1 at 11-12. However, the presence of any pro-competitive benefits of Delzicol is a disputed issue of material fact here. The Defendants are free to challenge McGuire's assumption that there were no procompetitive benefits to Delzicol before the jury, but it is not grounds for excluding his testimony.
Sixth, the Defendants argue that McGuire's test would create, in the mind of the jury, an impermissible presumption of anti-competitive conduct wherever a brand-name manufacturer executes a hard switch, which is not a proposition of law that has been adopted by any court or an economic theory published in any economic journal. D. 431-1 at 12-14. Other courts have, however, found that hard switches may be anti-competitive.
Seventh, the Defendants seek to exclude the portion of McGuire's testimony that supports his conclusion that the introduction of Delzicol did not lead to a drop in the price of Asacol HD. D. 431-1 at 14. The Defendants contend that McGuire did not specify for them at his deposition whether he used the invoice date, accrual date or pay date to calculate the relevant date to associate with particular price data, and thus must be excluded. D. 431-1 at 15. But, the Court does not conclude that this is a sufficient basis alone for the drastic measure of excluding this opinion and declines to do so.
Eighth, the Defendants contend that McGuire erred by using price data that did not reflect rebates given to third-party payors and did not include comparisons to relevant similar ulcerative colitis drugs. D. 431-1 at 16-17. But McGuire did adjust the price data to reflect rebates from the manufacturer, D. 431-7 at 64, and the Court does not conclude that such adjustment is insufficient. McGuire's analysis of price data was limited to the general proposition that prices for Asacol HD trended up from December 2012 to August 2013, so his failure to analyze price trends in other drugs is irrelevant — he does not purport to opine that Asacol HD prices moved in a way that was different from other drugs. D. 431-7 at 65.
Finally, the Defendants contend that McGuire's conclusions about the likelihood of generic entry should be excluded because McGuire does not identify any particular generic manufacturer that would have entered. The Court rejects this argument for McGuire as it did for Clark.
Motion to Exclude Testimony of Bruce Strombom
The Plaintiffs move to exclude the testimony of Dr. Bruce Strombom ("Strombom"), the Defendants' expert. D. 444. Strombom opines about the number of uninjured class members, certain putative defects in Conti's model and the aggregate damages calculation. D. 453-1 at 3-4. The Plaintiffs contend that Strombom's testimony about the number of uninjured consumers should be excluded because Strombom classifies consumers as "uninjured" where the consumer experienced an overcharge but later received recoupment for that overcharge, in contrast to legal precedent, which holds that an antitrust injury occurs "the moment the purchaser incurs an overcharge, whether or not that injury is later offset" by "savings attributable to the same or related transaction."
V. Class Certification
The Plaintiffs' Proposed Class
The Plaintiffs seek to certify a class defined as follows:
The following groups are excluded from the Class:
The Defendants contend that the Plaintiffs lack standing to bring claims under the laws of any state where one of the named Plaintiffs has not allegedly made a purchase. D. 400 at 7. Article III imposes a "threshold requirement" that "those who seek to invoke the power of federal courts must allege an actual case or controversy" by pleading "some threatened or actual injury resulting from the putatively illegal action."
The Court addresses the standing question before certifying the class.
Article III "requires that federal courts may only adjudicate an actual `case or controversy.'"
The same is shown here for the named plaintiffs' standing to bring this class action, where each named plaintiff has suffered the same injury in fact as a result of the Defendants' conduct. That is, to show standing, the named plaintiffs must assert an injury in fact — but they need not assert the same claims as the putative class members that, here, arise under the laws of different states.
Class Certification: Burden of Proof and Standard of Review
A class action may be certified only if "(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class." Fed R. Civ. P. 23(a). Where, as here, the Plaintiffs have moved to certify the class under Fed. R. Civ. P. 23(b)(3), the Court must also determine whether "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed R. Civ. P. 23(b)(3). "[T]he district court must undertake a `rigorous analysis' to determine whether plaintiffs me[e]t the four threshold requirements of Rule 23(a) (numerosity, commonality, typicality, and adequacy of representation) and Rule 23(b)(3)'s two additional prerequisites."
1. Numerosity Is Satisfied Here
To certify a class action, "the class [must be] so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a)(1). "`Impracticability' does not mean `impossibility,' but only the difficulty or inconvenience of joining all members of the class."
The Plaintiffs contend that they have met their burden of showing numerosity because the proposed class includes most individuals who filled a prescription for Asacol HD or Delzicol in the Class states, D. 381 at 14, and in 2013, there were 318,000 prescriptions for Asacol HD and 128,000 prescriptions for Delzicol in those states. D. 384-1 at 32. The Defendants respond that the number of prescriptions filled is not the same as the number of consumers who made purchases, because a single consumer may have filled multiple prescriptions. D. 400 at 12. It is true that the number of prescriptions is not the same as the number of consumers, however, it is reasonable to use "common sense assumptions" to conclude that if there were over 446,000 relevant prescriptions filled in one year, there were more than 40 individual consumers — even assuming some attrition based on class exclusions.
The Plaintiffs must also demonstrate that "there are questions of law or fact common to the class." Fed. R. Civ. P. 23(a)(2). The Plaintiffs contend that the common questions of law or fact include,
Rule 23(a)(3) requires that the "claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed. R. Civ. P. 23(a)(3). "The representative plaintiff satisfies the typicality requirement when its injuries arise from the same events or course of conduct as do the injuries of the class and when plaintiffs' claims and those of the class are based on the same legal theory."
The Defendants contend that the named plaintiffs — all unions — are not sufficiently similar to the individual consumers and health insurers included in the class. D. 400 at 13. Specifically, they contend that the Laborers and Masons were able to pass on the putative overcharge to others and so suffered no net injury, unlike other class members, and that the Laborers suffered no net injury because it received rebates that fully compensated it for the putative overcharge.
Rule 23(a)(4) requires that "the representative parties will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). "[A] class representative must be part of the class and `possess the same interest and suffer the same injury' as the class members."
The Defendants contend that the named plaintiffs are not adequate representative parties because, unlike the other class members, the named plaintiffs are third party payors who were able to offset the alleged overcharge in the price of Asacol HD or Delzicol by recouping the overcharge from the consumer through co-pays, from the manufacturer through rebates, or from employers through contributions. D. 400 at 15. As described above, however, the antitrust injury occurs at the moment of the overcharge and the presence of offsetting transactions does not change the fact of injury. Thus, there is no reason to conclude that the presence of offsetting transactions would make the named plaintiffs inadequate representatives.
The Defendants further contend that the Plaintiffs' damages model created a "conflict" because Conti's model removed consumers who had not used Asacol 400mg prior to July 30, 2013, but did not similarly exclude third-party payors who did not purchase Asacol 400mg prior to July 30, 2013. D. 400 at 15. The Defendants argue that this feature shows that the Plaintiffs "did not ask Conti to make the same adjustment for their clients as they did for consumers," demonstrating the inadequacy of the class representatives.
5. Rule 23(b)(3) Predominance
Rule 23(b)(3) requires the Court to find that "the questions of law or fact common to class members predominate over any questions affecting only individual members." Fed. R. Civ. P. 23(b)(3). The focus of the predominance inquiry is "whether proposed classes are sufficiently cohesive to warrant adjudication by representation."
Rule 23(b)(3) carries an "implied" requirement that the class definition be sufficiently definite such that the class members are "ascertainable."
The Defendants argue that the Plaintiffs have failed to propose a definite class in which the members of the class are ascertainable because the Plaintiffs have not proposed an administratively feasible mechanism for distinguishing injured from uninjured class members at this stage of the litigation. D. 400 at 10-11. The Plaintiffs, however, did propose such a mechanism. The Plaintiffs proposed that "[i]n a Court-approved notice, Class members will be asked to submit a claim form, along with data and documentation that may be deemed necessary for consideration. The Claims Administrator will evaluate each claim pursuant to a formula proposed by Plaintiffs and approved by the Court." D. 381-3 at 8. In
Rule 23(b)(3) also places a burden on the putative class to present a damages model that establishes "that damages are capable of measurement on a classwide basis."
The Plaintiffs contend that Conti's model matches the liability theory they have presented — specifically, that the Defendants exercised monopoly power over the relevant market by pulling Asacol 400mg from the market and thereby preventing generic competition. D. 381 at 24. Conti's model estimates the damages to end-payors by simulating what the price and quantity sold of Asacol 400mg would have been if the Defendants had not pulled Asacol 400mg from the market, under several potential scenarios of generic entry, based on historical data from other products regarding the effect of generic entry on the price and quantity sold of the brand-name product. D. 384-1 at 21-24. Conti concludes that, under each of these scenarios of generic entry, end-payors would have paid less for Asacol 400mg than they paid for Asacol HD and Delzicol. D. 384-1 at 32-33.
The Defendants argue that Conti's model does not match the liability theory presented by the Plaintiffs because Conti's model relied upon prescription-level data rather than patient-level data. D. 400 at 16. Because of this flaw, they contend, Conti's model is unable to calculate the damages based on the class definition used by the Plaintiffs: a class definition that requires that a member both purchased Asacol 400mg before July 31, 2013
The Defendants also contend that Conti's model diverges from the class definition by failing to exclude third-party payors who did not purchase Asacol 400mg prior to July 31, 2013. D. 400 at 17. But, as the Plaintiffs point out, a third-party payor makes purchases on behalf of many patients, and Conti assessed that only a de minimus number of third-party payors had no purchases whatsoever of Asacol 400mg, so no adjustment was needed to ensure conformity with the dual-purchase aspect of the class definition for third-party payors. D. 411 at 10.
The Defendants next contend that Conti's model fails to match the liability theory by inappropriately assuming that, but for the purportedly unlawful conduct, the number of Asacol HD consumers would stay static from February 2013 forward without any further switching from Asacol 400mg to Asacol HD. D. 400 at 18. This argument, however, amounts to an argument that the model's assumptions are flawed, which the Defendants will have an opportunity to argue before a factfinder.
The Defendants further contend that Conti's model does not appropriately exclude third-party payors from the states for which the third-party claims have been dismissed. D. 400 at 18. Conti has explained, however, that she did in fact exclude third-party claims from those states using data on aggregate expenditures by state to estimate the relative proportion of sales from those states, D. 384-1 at 31, even as Defendants' expert, Strombom contests that such was an appropriate adjustment.
Finally, the Defendants contend that Conti's model does not correspond to the liability theory because it does not account for the role of PBMs, who may reimburse third-party payors for drug expenses that exceed contractually agreed-to limits. D. 400 at 19. But the fact that PBMs may have reimbursed third-party payors for some portion of the antitrust injury does not mean that Conti's model should have included an adjustment for PBMs. Rather, because "antitrust injury occurs the moment the purchaser incurs an overcharge,"
Common Proof of Antitrust Impact
"To meet the predominance requirement, the party seeking certification must show that `the fact of antitrust impact can[ ] be established through common proof'"
The Defendants contend that Conti's model cannot provide common proof of antitrust impact for several reasons. They first argue that Conti's model is unable to estimate damages for injured and uninjured members of the class separately. D. 400 at 19. But, at the class certification stage, it is not necessary to separate out injured and injured members; it is only necessary to establish that "prior to judgment, it will be possible to establish a mechanism for distinguishing the injured from the uninjured class members."
The Defendants next contend that Conti's model inappropriately assumes that the effect of generic entry into the market for Asacol 400mg would mirror historical patterns of other drugs; that Conti's model inappropriately assumes that generic entry would occur; and that Conti's model does not adequately account for the fact that generic versions of Asacol 400mg would still contain DBP. D. 400 at 20-21. None of these arguments, however, challenge the Plaintiffs' contention that Conti's model provides a common proof of antitrust impact. These challenges to the assumptions underlying Conti's model are susceptible to class-wide contestation and the Defendants will have the opportunity to make these challenges before the factfinder.
Finally, the Defendants contend that individual issues predominate with respect to antitrust impact because Conti's model includes many uninjured members. D. 400 at 22. The Defendants identify the following as uninjured class members: consumers with no co-pay; brand-loyal consumers who would have switched to Asacol HD or Delzicol even in the presence of generic Asacol 400mg; consumers who would have paid the same co-pay for brand-name and generic products; third-party payors that are fully insured; consumers who used coupons; third-party payors who received manufacturer rebates; third-party payors who had a risk-sharing arrangement with a PBM or employer; and third-party payors who were able to recoup higher costs by passing them on to employers. D. 400 at 22-24. As described above, several of these groups suffered the antitrust injury of higher prices, and are, therefore, not uninjured (even if they were subsequently reimbursed), such as third-party payors who received manufacturer rebates, third-party payors who had a risk-sharing arrangement with a PBM or employer, third-party payors who are fully insured and third-party payors who were able to recoup higher costs by passing them on to employers. Some of these groups are explicitly excluded from the class, such as, for example, consumers with flat co-pays. Thus, even if Conti has not explicitly excluded those prescriptions from her model, the damages attributable to those consumers all accrue to the third-party payor — who is included in Conti's model. As for consumers who used coupons, Conti's model adjusted for the aggregate impact of those consumers, and the Defendants make no specific criticism of the way in which Conti's model adjusted for them. D. 384-1 at 30.
As for brand-loyal consumers, as the First Circuit explained in
6. Rule 23(b)(3) Superiority
A putative class seeking certification under Rule 23(b)(3) also bears the burden of showing that a class action "is superior to other available methods for fairly and efficiently adjudicating the controversy," Fed. R .Civ. P. 23(b)(3).
Fed. R. Civ. P. 23(b)(3). The Court here considers the alternatives to a class action, conscious that "[t]he policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for an individual to bring a solo action prosecuting his or her rights."
The Plaintiffs contend that a class action is superior to other methods of adjudication because each individual plaintiff's damages are relatively small and thus would not have sufficient incentive to bring individual lawsuits. D. 381 at 25. They further contend that the case is sufficiently administrable as a class action. D. 381 at 26-27. The Defendants contend that the class is not administrable because, as they argued with respect to ascertainability, the Plaintiffs have not proposed a mechanism to separate uninjured from injured class members. D. 400 at 25. But, for the same reasons this Court rejected that argument in the ascertainability context, it rejects that argument here.
VI. Summary Judgment
The Defendants move for summary judgment on several grounds. D. 449. First, they contend that the hard switch from Asacol 400mg to Delzicol was not exclusionary; second, they contend that the state-law antitrust claims are precluded by federal food and drug law; third, they contend that the Plaintiffs cannot prove antitrust standing because there would not have been any generic entry even without the hard switch; fourth, they contend that they did not exercise any monopoly power; and fifth, they contend that Delzicol had procompetitive benefits which outweighed any anticompetitive effects of the hard-switch. D. 449 at 3-4.
A. Standard of Review
The Court will grant summary judgment when there is no genuine dispute on any material fact and the undisputed facts show that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). "An issue is genuine if `it may reasonably be resolved in favor of either party' at trial, and material if it `possess[es] the capacity to sway the outcome of the litigation under the applicable law.'"
Under the state-law antitrust claims brought by the Plaintiffs, which the parties agreed are construed in parallel with the federal Sherman Act, the Plaintiffs must prove "(1) that the defendant possesses `monopoly power in the relevant market,' and (2) that the defendant has acquired or maintained that power by improper means."
Preemption by Federal Law
The Defendants contend that, regardless of the merits of the Plaintiffs' antitrust claims, the Defendants are entitled to summary judgment on the ground that the Plaintiffs' state law causes of action are preempted by federal food and drug law. Specifically, they contend that it was "impossible" for them to comply both with the FDA's mandate to stop selling of Asacol 400mg with DBP and with the putative state law requirement that they continue selling Asacol 400mg with DBP. D. 449 at 23.
This argument fails for two reasons. First, the record does not show that the FDA prohibited the Defendants from selling Asacol 400mg with DBP. As discussed above, the FDA provided a series of recommendations to the Defendants that they stop selling products with DBP, but at no point did the FDA require the Defendants to stop selling Asacol 400mg with DBP. Rather, the record shows that the Defendants continued to sell a different product with DBP, Asacol HD, until 2016, and even then there was no indication that the FDA was about to prohibit the Defendants from selling the product.
Second, the Plaintiffs do not contend that state antitrust law required the Defendants to continue selling Asacol 400mg with DBP; rather, they contend that the Defendants could have reformulated Asacol 400mg with DBS rather than DBP without switching to a new product under a new NDA, which would have preserved the likelihood of generic entry. D. 508 at 20. There's no suggestion that this course of action would have been prohibited by the FDA. In fact, the record shows that the Defendants pursued exactly this course of action for Asacol HD. D. 509 ¶ 125.
Monopoly Power in the Relevant Market
The Defendants contend that there is no genuine dispute of material fact regarding the Plaintiffs' contention that the Defendants wielded monopoly power in the relevant market. "Market power can be shown through two types of proof," either through "direct evidence of market power," such as "actual supracompetitive prices and restricted output," or "circumstantial evidence of market power."
1. Direct Evidence
The Plaintiffs first contend that they have shown direct evidence of monopoly power by pointing to the high gross margins of Asacol 400mg as proof of supracompetitive prices. D. 508 at 41. The Defendants contend that the Plaintiffs' showing of high gross margins is not direct evidence of monopoly power because such margins are standard for brand-name manufacturers of a patented product and those manufacturers cannot be considered per se monopolists. D. 449 at 45. In support of this proposition, they cite to
In contrast, the court in
The Court finds the approach taken in
The Plaintiffs also contend that they have provided direct evidence of market power based on restricted output, in the form of a total decrease in sales of oral mesalamine products after the Defendants pulled Asacol 400mg from the market. D. 508 at 42. The Plaintiffs interpret the Defendants' charts as showing that total volume of oral mesalamine prescriptions dropped around the time that Asacol 400mg was pulled from the market. D. 509 at 73. The Defendants dispute this interpretation. D. 449 at 45. This dispute in interpretation is one that should be reserved for the factfinder.
2. Circumstantial Evidence
Circumstantial evidence of market power requires a "showing that the defendant has a dominant share in a well-defined relevant market and that there are significant barriers to entry in that market and that existing competitors lack the capacity to increase their output in the short run."
The Plaintiffs contend that the "relevant market" to consider is the market for Asacol 400mg and the products that the FDA rated as AB-rated bioequivalents to Asacol 400mg. D. 508 at 44. The Defendants contend that the relevant market is the market of all oral 5-ASA treatments. D. 449 at 37. In support of this contention, the Defendants point to the fact that there were multiple FDA approved treatments for ulcerative colitis that the FDA, insurers, PBM, and gastroenterologists considered therapeutically interchangeable with Asacol 400mg and its bioequivalents; that the marketing documents from the Defendants and other manufacturers show that the Defendants considered Asacol 400mg to compete with other 5-ASA products; and that Asacol 400mg lost volume just as Lialda, a competing 5-ASA drug, gained volume. D. 449 at 39-42.
The Defendants, relying upon various documents and statements, also argue that patients would switch among 5-ASA drugs, sometimes based on formulary status, which were based on the level of rebates that the manufacturer provided to the PBM. D. 449 at 43; D. 450 ¶ 239; D. 458-6 at 213; D. 458-6 at 215; D. 458-7 at 303-305. The Defendants further contend that other courts, when faced with similar facts, have concluded that the relevant market includes multiple products — not just one product and its bioequivalents. They cite first to
The Plaintiffs contend that the key inquiry in market definition is whether, from the "perspective of consumers," the products were interchangeable such that there was significant cross-elasticity of demand, such that an increase in the price of one product in the market would lead to meaningful substitution to another product in the market.
Additionally, the Plaintiffs cite to
There is a genuine dispute of fact regarding the Plaintiffs' putative market definition of a market that consisted of Asacol 400mg and its bioequivalent products. As the court found in
1. Anticompetitive Effects
The Defendants argue that there is no genuine dispute of material fact regarding the exclusionary nature of the Defendants' decision to pull Asacol 400mg from the market when it launched Delzicol, for several reasons. D. 449 at 14. They contend first that the FDA requested the removal of products containing DBP and second that Delzicol is a safer product than Asacol 400mg. D. 449 at 14-19.
It is undisputed that the FDA requested the removal of products containing DBP and that the FDA considered the removal of DBP to have accompanying safety benefits. The question of whether the safety risk of DBP was substantive enough to justify the Defendants' conduct goes to whether the Defendants' conduct had sufficient procompetitive justification to outweigh the anticompetitive effects. Additionally, the Plaintiffs contend that the Defendants could have captured the safety benefits of removing DBP without switching to the capsule formulation that deterred generic entry.
The Defendants respond that antitrust law does not impose upon them a "duty to reformulate in a manner that will aid potential competitors." D. 449 at 20. But the Plaintiffs do not argue that the Defendants had the obligation to reformulate in the manner that would best facilitate generic entry. Rather, according to the Plaintiffs' narrative, the Defendants had already reformulated Asacol 400mg to have a DBS coating instead of a DBP coating, and instead of seeking FDA approval for that product, they needlessly included in the Asacol 400mg reformulation a patented capsule that conferred no additional value. Thus, the "duty" that Plaintiffs seek to impose on the Defendants is to refrain from reformulating in such a way that adds features — like the capsule — that have minimal or no value beyond their anticompetitive effects.
The Plaintiffs' theory is in line with the Second Circuit's decision in
Like the plaintiffs in
2. Procompetitive Justification
The Defendants next contend that, even if their challenged conduct was anticompetitive, the anticompetitive effects had a procompetitive justification. Specifically, they argue that DBP-free Delzicol is safer than the DBP-containing Asacol 400mg; that Delzicol improved dissolution stability and reduced the occurrence of "early openers;" and that Delzicol served as a bridge to the novel, pediatric friendly 4 × 100mg Delzicol, which offers a lower-dose option. D. 449 at 50.
The first argument fails because, as discussed above, the Plaintiffs contend that the Defendants could have produced a DBP-free version of Asacol 400mg without switching to a capsule formulation, meaning that any safety benefits from removing DBP would have been captured as well in the Plaintiff's but-for scenario. The second argument fails because there is a genuine dispute of material fact regarding whether Delzicol improved the dissolution stability and reduced the occurrence of early openers. The record shows that the Defendants did not have any validated experimental evidence of a benefit to either dissolution stability or early openers until October 2012 — after the Defendants submitted the NDA for Delzicol to the FDA. D. 509 ¶¶ 209-213; D. 450 ¶ 163; D. 510 ¶ 163. Additionally, the Plaintiffs dispute the quality of the October 2012 studies showing a stability benefit to the capsule formulation. D. 450 ¶ 163; D. 510 ¶ 163. The third argument fails because the Defendants have presented no evidence that the Defendants needed to produce a 1x400mg formulation in order to produce the later 4×100mg formulation. Instead, the record shows that the Defendants started down the path of producing a 4×100mg capsule formulation, but temporarily shifted away from that path to focus on a 1×400mg capsule formulation that might be ready before the patents for Asacol 400mg expired.
Causation and Antitrust Standing
The Defendants contend that there is no genuine dispute of material fact regarding the issue of antitrust standing. "The Supreme Court has set forth a six-factor test to determine whether a plaintiff has standing to bring an antitrust action. These factors are: (1) the causal connection between the alleged antitrust violation and harm to the plaintiff; (2) an improper motive; (3) the nature of the plaintiff's alleged injury and whether the injury was of a type that Congress sought to redress with the antitrust laws ("antitrust injury"); (4) the directness with which the alleged market restraint caused the asserted injury; (5) the speculative nature of the damages; and (6) the risk of duplicative recovery or complex apportionment of damages."
The Defendants contend that the Plaintiffs have not shown antitrust causation, that is, they have not shown that the Defendants' purportedly anticompetitive conduct caused the Plaintiffs harm because they contend that the Plaintiffs have not shown that there would have been generic versions of Asacol 400mg produced if not for the Defendants' choice to pull Asacol 400mg from the market. D. 449 at 25. The Defendants argue that the Plaintiffs have the burden of showing that a generic manufacturer was "ready, willing, and able" to enter the Asacol 400mg market during the relevant time period. D. 449 at 25;
Antitrust law, however, does not support the Defendants' contention that the Plaintiffs' causation theory is too speculative if it does not identify a specific entrant that had a pending ANDA. In
The Defendants next contend that the FDA's bioequivalence standards prevented generic manufacturers from producing a generic version of Asacol 400mg. D. 449 at 34. But, the record reflects that the Defendants perceived the FDA's shift from requiring clinical studies to focusing on PK testing as lowering the bar for generic entry, D. 509 ¶ 289 and that another generic manufacturer, Zydus, produced generic versions of both Asacol HD and another oral mesalamine product that were approved by the FDA as bioequivalent in 2017; D. 509 at 318-320.
There is a genuine dispute of material fact as to the issue of causation. Drawing all disputed facts in favor of the Plaintiffs, as this Court must in evaluating the Defendants' motion for summary judgment, the record shows that, according to the Defendants' own documents, the industry had identified Asacol 400mg as likely to face generic entry; D. 509 ¶ 241, that generic manufacturers had significant incentives to be the first-mover to create a generic version of Asacol 400mg; D. 426-5 at 20; that generic manufacturers had the technological capability to develop a generic versions of oral delayed release mesalamine products, D. 509 ¶ 296; and historical experience in the pharmaceutical industry indicates that it was highly likely that a generic version of Asacol 400mg would emerge. D. 509 ¶ 284. Drawing all inferences in favor of the Plaintiffs as the non-movants, there is a genuine dispute of fact over whether a generic manufacturer would have produced a generic version of Asacol 400mg within the relevant timeframe.
For the foregoing reasons, the Court DENIES the parties' motions to exclude testimony, D. 426; D. 427; D. 428; D. 429; D. 430; D. 431; D. 444, provides the reasons for ALLOWING the Plaintiffs' motion for class certification under Fed. R. Civ. P. 23(b)(3) in D. 559, D. 380, and DENIES the Defendants' motion for summary judgment, D. 445.