Antitrust Law Daily Certification of independent pharmacies rejected in row with PBMs
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Thursday, January 19, 2017

Certification of independent pharmacies rejected in row with PBMs

By Jeffrey May, J.D.

Independent retail pharmacies were not entitled to proceed with class action antitrust claims against providers of pharmaceutical benefits management services, the federal district court in Philadelphia has decided. Because the plaintiffs’ expert evidence, which was offered to support moving forward as a class, failed to satisfy the standard set out in Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993), the court excluded the expert testimony, denied certification of proposed classes of independent pharmacies (IPs) that contracted with pharmacy benefit managers (PBMs) Caremark, Advance PCS, and Medco, and decertified a class that was certified before the case became part of the current multidistrict litigation (MDL) (In Re: Pharmacy Benefit Managers Antitrust Litigation, January 18, 2017, Jones, D.).

In the long pending MDL, the plaintiffs alleged that: (1) Caremark and other PBMs conspired with their clients—health plans run by employers, labor unions, health insurers and health maintenance organizations—to fix prices paid to IPs; and (2) Caremark conspired with other PBMs, including Express Scripts, Advance PCS, and Medco, in a horizontal price fixing scheme to set reimbursement rates at unconscionable and punitively low levels. Before the Judicial Panel on Multidistrict Litigation (JPML) consolidated related actions for pretrial proceedings, a federal district court in Alabama had certified a class of IPs that contracted with defending PBMs. Before the court were the plaintiffs’ motions for class certification and motions by defendants to exclude the plaintiffs’ expert submissions and to decertify the previously certified class.

Expert evidence. The plaintiffs’ expert submissions failed to pass Daubert scrutiny, the court held. The court was swayed by the defendant Caremark’s arguments that the evidence did not distinguish between legal conduct and illegal conduct; the experts did not offer a reliable opinion about the existence of an antitrust violation; the expert evidence did not track the plaintiffs’ different theories of liability; antitrust impact for individual class members could not be demonstrated through the use of national averages in the expert model; and the regression model was unreliable because it found damages for class members who have suffered no damage.

Class certification. For purposes of the class certification motion, the numerosity and commonality requirements of Federal Rule of Civil Procedure 23(a) were satisfied, according to the court. There were approximately 25,000 IPs throughout the United States. In addition, common questions clearly existed, specifically whether Caremark engaged in the alleged antitrust conspiracies, in the court's view. However, because the named plaintiffs failed to puton evidence that they received lower reimbursements, they could not show they suffered the same effect of the anticompetitive conspiracies they alleged. Thus, they failed the typicality requirement. The adequacy requirement also was unsatisfied. The named plaintiffs had not demonstrated that they had individually suffered the type of antitrust injury that they alleged on behalf of the putative class. Thus, their interests diverged from other members of the proposed class who allegedly received lower reimbursements as a result of anticompetitive activity, the court explained.

As for Rule 23(b)(3), the court ruled that the proposed class was not "ascertainable" and rejected the plaintiffs’ argument that common questions could be proven through evidence that is common to the class rather than individual to its members. With respect to the predominance question, there was no actual evidence, common or otherwise, offered on the basic issue of whether a price fixing conspiracy existed. Moreover, the plaintiffs’ proposed damages model could not serve as common evidence of predominance, because the damages model did not matchup with their theories of liability as required by the U.S. Supreme Court’s 2013 decision in Comcast Corp. v. Behrend, according to the court. Lastly, the court concluded that the failure to satisfy the typicality and predominance elements established that class treatment was not a superior method of adjudicating the plaintiffs’ antitrust conspiracy claims.

Decertification. The court also decertified the class that was certified before the case became part of the MDL. The Alabama certification order was entitled to deference. However, the certification order had become deficient because federal class actions had become more challenging to certify in the intervening years. Based on current requirements, the certification record was found wanting in key respects by the court.

The case is No. 2:06-md-01782-CDJ.

Attorneys: H. Laddie Montague, Jr. (Berger & Montague PC) for Brady Enterprises, Inc. A. David Fawal (Beers Anderson Jackson Patty Van Heest & Fawal PC) and Andrew Allen (Whatley Drake & Kallas, LLC) for North Jackson Pharmacy, Inc. and C&C Inc. d/b/a Big C. Discount Drugs. Amy Neuhardt (Shearman and Sterling LLP) for Medco Health Solutions, Inc. Daniel M. Dockery (Williams & Connolly LLP) and Paul H. Saint-Antoine (Drinker, Biddle & Reath LLP) for Express Scripts Inc.

Companies: Brady Enterprises, Inc.; North Jackson Pharmacy, Inc.; C&C Inc. d/b/a Big C. Discount Drugs; Medco Health Solutions, Inc.; Express Scripts Inc.

MainStory: TopStory Antitrust PennsylvaniaNews

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