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In re Intuniv Antitrust Litigation

United States District Court, D. Massachusetts

August 21, 2019




         This pay-for-delay case involves allegations that the Defendants settled patent litigation over the ADHD drug Intuniv on anticompetitive terms. The Indirect Purchaser Plaintiffs (“IPPs”) are parents and caretakers who purchased Intuniv (the brand name for extended release guanfacine hydrochloride) or generic Intuniv[1] for a child's or ward's medical needs. They claim that the settlement agreement between brand Intuniv manufacturer Shire LLC and Shire U.S., Inc. (together, “Shire”) and generic Intuniv manufacturer Actavis Holdco U.S. Inc. and Actavis Elizabeth LLC (together, “Actavis” and collectively with Shire, “Defendants”) improperly delayed competition for both brand Intuniv and generic Intuniv, thereby causing them to pay an inflated price for the drug. See generally [ECF No. 39 (“Consolidated Complaint” or “Consol. Compl.”)]. The IPPs seek to represent two classes of consumers who were allegedly overcharged for Intuniv because of Defendants' anticompetitive conduct: a nationwide class and a class of consumers from the twenty-six jurisdictions that have Illinois Brick repealer laws.[2]

         Before the Court are the IPPs' motion for class certification [ECF No. 146], the IPPs' motion to exclude the opinions of Defendants' expert, Professor James W. Hughes (“Prof. Hughes”) [ECF No. 175], and Defendants' motion to exclude the opinions of the IPPs' expert, Professor Meredith Rosenthal (“Prof. Rosenthal”) [ECF No. 163]. For the reasons explained herein, the motions are DENIED.

         I. BACKGROUND

         This background presumes the truth of the allegations in the Consolidated Complaint. The Court's order on Defendants' motion to dismiss contains a more complete summary of the facts alleged. See Picone v. Shire PLC, No. 16-CV-12396-ADB, 2017 WL 4873506, at *1-3 (D. Mass. Oct. 20, 2017).

         A. Patent Litigation and Anticompetitive Settlement

         Shire manufactures and sells Intuniv, which is generally prescribed for young patients to treat ADHD. [Consol Compl. ¶¶ 1-2]. On September 2, 2009, the Food and Drug Administration (“FDA”) approved Shire's New Drug Application (“NDA”) for Intuniv pursuant to 21 U.S.C. § 355. [Id. ¶¶ 2, 4]. During the relevant time period, Shire held three patents that covered Intuniv (collectively, the “Intuniv Patents”). [Id. ¶¶ 45, 50]. According to the Consolidated Complaint, Wall Street analysts, generic pharmaceutical companies, and Shire itself considered the Intuniv Patents to be “weak.” [Id. ¶ 51].

         Under the Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585, commonly known as the Hatch-Waxman Act, a generic manufacturer may file an Abbreviated New Drug Application (“ANDA”) to seek approval of a proposed generic version of a brand drug. See 21 U.S.C. § 355(j). Obtaining approval for an ANDA is easier than obtaining approval for an NDA. See In re Loestrin 24 Fe Antitrust Litig., 814 F.3d 538, 543 (1st Cir. 2016). In filing an ANDA to obtain approval for a generic drug, a generic manufacturer must certify that the generic does not infringe any of the patents that the brand company lists as covering the drug at issue. See 21 U.S.C. § 355(j)(2)(A)(vii). On December 29, 2009, Actavis became the first company to file an ANDA for a generic version of Intuniv. [Consol. Compl. ¶¶ 53-54].

         The certification that Actavis filed with its ANDA constituted a constructive act of infringement, granting Shire standing to sue Actavis. See 35 U.S.C. § 271(e)(2)(A); In re Loestrin 24 Fe, 814 F.3d at 543. Shire then filed suit pursuant to 21 U.S.C.§ 355(j)(5)(B)(iii), which triggered an automatic 30-month stay of any FDA approval of Actavis' ANDA. [Consol. Compl. ¶ 58]; see In re Loestrin 24 Fe, 814 F.3d at 543. As the first filer of an ANDA, if successful in its bid for approval of its generic Intuniv, Actavis would have obtained “a 180-day period of exclusivity during which ‘no other generic can compete with the brand-name drug.'” In re Loestrin 24 Fe, 814 F.3d at 543 (quoting FTC v. Actavis, 570 U.S. 136, 144 (2013)); see 21 U.S.C. § 355(j). A critical exception to that exclusivity is that the brand company can itself market an “authorized generic” during this 180-day, first-filer exclusivity period. See Sanofi-Aventis v. Apotex Inc., 659 F.3d 1171, 1175 (Fed. Cir. 2011). Shortly after Actavis filed its ANDA, several other companies including TWi Phamaceuticals, Inc. and Anchen Pharmaceuticals, Inc. (together, “Twi/Anchen”) filed their own ANDAs. [Consol. Compl. ¶¶ 56-57]. Shire initiated patent infringement litigations against each ANDA filer. [Id. ¶¶ 59].

         The IPPs allege that Shire engineered a settlement with Twi/Anchen that would have allowed Twi/Anchen to release an authorized generic Intuniv if Actavis launched its own generic without settling the lawsuit brought by Shire. [Id. ¶¶ 77-78]. That settlement threatened Actavis with the prospect of competition during its valuable 180-day exclusivity period, which Actavis was eager to avoid. [Id. ¶ 79]. On April 25, 2013, Shire and Actavis settled Shire's claims in a manner that allegedly reduced the prospect of unwanted competition for both companies. See [id. ¶ 93]. The IPPs claim that the settlement effectively guaranteed Actavis a full 180-day exclusivity period during which it would face no authorized generic competition. [Id. ¶¶ 94-95]; see [ECF No. 148 at 6-10]. In exchange, Actavis agreed to delay its launch of generic Intuniv until December 1, 2014, thereby allowing Shire to enjoy monopoly profits for brand Intuniv in the interim. [Consol. Compl. ¶ 94]. The IPPs argue that this was sham litigation and that the anticompetitive settlement agreement caused them to pay artificially inflated prices for both brand and generic Intuniv. See [id. ¶¶ 9-12].

         B. Procedural History

         Plaintiffs initiated this action on November 23, 2016, [ECF No. 1], and filed their Consolidated Complaint on March 10, 2017, after this case was consolidated with two related actions, see [ECF No. 32; Consol. Compl.]. On November 1, 2018, the IPPs filed the instant motion for certification of the following two classes of indirect purchasers of Intuniv:

The Nationwide Consumer Class: For the period beginning November 15, 2012, to the present: (A) all persons who purchased brand or generic Intuniv in the United States for personal or household use, and who paid the purchase price themselves; and (B) all persons covered by commercial health insurance who purchased brand Intuniv in the United States for personal or household use, and who paid some of the purchase price pursuant to a co-payment or co-insurance provision.
Illinois Brick Repealer Class: For the period beginning November 15, 2012, to the present, all persons in Arizona, California, Florida, Iowa, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee, Vermont, West Virginia, Wisconsin, and the District of Columbia: (A) who paid the purchase price themselves for brand or generic Intuniv in the United States for personal or household use; and (B) all persons covered by commercial health insurance who purchased brand Intuniv in the United States for personal or household use, and who paid some of the purchase price pursuant to a co-payment or co-insurance provision.

[ECF No. 146 at 1-2]. The proposed classes exclude third-party payers, direct purchasers of Intuniv, individuals who purchased the drug for resale, individuals who purchased Intuniv with a flat co-payment or so-called Cadillac insurance plan, government entities, Defendants and certain associated individuals, and judicial officers who preside over this case. [Id. at 2].

         C. Uninjured Putative Class Members

         The market and government systems through which pharmacies are paid for the medications they sell include an alphabet soup of entities and programs. See [Rosenthal Rep. ¶¶ 13-23, ECF No. 148-55; Hughes Rep. ¶¶ 17-28, ECF No. 162-1]. For the purposes of this Memorandum and Order, one need only understand the basics of how consumers' various out-of-pocket costs for medications like Intuniv are typically determined. While some consumers pay the entire cost for their prescription medications in cash, most purchases involve a third-party payer, such as an insurance company. [Rosenthal Rep. ¶ 16]. At the point of sale, most insured consumers pay either a co-payment (often a fixed dollar amount that varies depending on which “tier” a medication is in) or co-insurance (a percentage of the retail price of the drug). [Id.]. Insurance policies that have fixed co-payments often make generic drugs cheaper for consumers than brand drugs so that consumers have an incentive to choose the less expensive generic option, see [id. ¶¶ 16, 18], but the cost of a drug may vary due not only to a consumer's insurance plan, but also based on other individual-specific circumstances, see [Hughes Rep. ¶¶ 21-24].[3] For example, insurance plans frequently include an out-of-pocket maximum that caps medical expenses, including expenses for prescription drugs, and brand manufacturers including Shire often offer coupon programs that effectively lower consumers' co-payments for their medications. [Id.]. Therefore, although generic drugs are less expensive for most consumers at the point of sale, that is not true for all consumers in all circumstances.

         Varying out-of-pocket consumer costs, consumer preferences, and drug availability cause a modest and generally declining fraction of brand consumers to continue to purchase brand medication even after a generic version of a drug enters the market. See, e.g., [Rosenthal Rep. ¶ 7]. These market complexities mean that, even assuming that Defendants entered into an anticompetitive settlement agreement, thousands of putative class members did not actually pay an overcharge because they would not have paid less for either brand or generic Intuniv absent that anticompetitive conduct. See [Hughes Rep. ¶ 14; Rosenthal Rebuttal Rep. ¶¶ 31-32, ECF No. 177-1].[4] More specifically, at least three groups of putative class members did not pay an overcharge. First, some number of “brand loyalists” would have continued to purchase brand Intuniv over a generic and were uninjured because the amount they paid for brand Intuniv would have been unaffected or increased by an earlier generic entry into the market. See [Hughes Rep. ¶¶ 14, 53-66; Rosenthal Rebuttal Rep. ¶ 32]. Second, Shire offered several co-payment coupons to eligible consumers, including $15 co-payment coupons. [Hughes Rep. ¶¶ 44-52]. Consumers who only made purchases of brand Intuniv with those $15 co-payment coupons and who could not have obtained generic Intuniv for an out-of-pocket expense less than $15 in the but-for world did not suffer any injury. See [id.; Rosenthal Rebuttal Rep. ¶ 38]. Third, some consumers likely purchased brand or generic Intuniv only after reaching out-of-pocket maximums under their insurance plans and therefore were not injured because they did not pay for Intuniv. See [Hughes Rep. ¶ 14; Rosenthal Rebuttal Rep. ¶ 39].

         The parties' experts disagree on the likely number of uninjured class members. Under the but-for scenario on which the experts have focused their analysis, Defendants' expert, Prof. Hughes, initially estimated that 44, 000 class members comprising 12.4% of the class did not incur an overcharge, including 8.0% who would not have paid an overcharge as a result of brand loyalty. [Hughes Rep. ¶¶ 14, 66]. Prof. Hughes later estimated, based on Prof. Rosenthal's analysis, that between 12.4% and 16.8% of class members were uninjured. [Hughes Sur-Rebuttal Rep. ¶ 25, ECF No. 203-2]. Conversely, the IPPs' expert, Prof. Rosenthal, contends that the number of brand loyalists who would not have incurred an overcharge is “closer to 2.8% than . . . 8%.” [Rosenthal Rebuttal Rep. ¶ 32]. Prof. Rosenthal arrives at this estimate by examining brand loyalty in the actual world after generic Intuniv became available. [Id.]. She posits that 24, 909 class members were uninjured based on her estimate of the number of consumers who were brand-loyal and paid only fixed co-payments after a generic became available. [Rosenthal Dep. 133:6-134:23, ECF No. 203-1]. Although Prof. Rosenthal asserts that Prof. Hughes' estimate of uninjured brand loyalists is too high, she acknowledges that her 2.8% estimate is too low because she calculated that figure by dividing her estimate of uninjured, ...

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