Lidoderm Buyers, Payors Near Cert. in Pay-For-Delay MDL

(Law360)  A California federal judge indicated Tuesday he’s inclined to certify a putative class of indirect drug buyers and a class of end-payors in a pay-for-delay multidistrict litigation against Endo Pharmaceuticals and others over the Lidoderm pain relief patch, saying that although the process of apportioning damages might be complex, that’s not a reason to deny certification.

Even though the buyers and end-payors propose to calculate aggregate damages using various complex methods and don’t rely on specific evidence of harm suffered by an individual class member, their methods plausibly show the classwide impact of the alleged violations and certification shouldn’t be denied based on the complexity of those calculations, U.S. District Judge William H. Orrick said during a hearing Tuesday.

“The court can deal with different damages,” Judge Orrick said.  Judge Orrick’s comments came as the buyers and end-payors urged the court to certify a class of indirect buyers and end-payors in a MDL consolidated in 2014.  The buyers allege that Teikoku Pharma USA Inc. and Endo reached an improper $266 million deal with Watson Laboratories Inc.—which is now owned by Allergan PLC—in underlying patent litigation to delay the launch of generic versions of the blockbuster anesthetic.  Meanwhile, purchasers of the drugs allege that the agreements constituted illegal “pay-for-delay” arrangements that violate competition law.

On Tuesday, Watson attorney Karen Hoffman Lent of Skadden, Arps, Slate, Meagher & Flom LLP argued that the aggregate damages model is not reliable and it does not show evidence of a common impact among indirect buyers required for certification.  Averaging the damages masks important differences between prices different buyers paid for the products and differences in generic and brand pharmaceutical products, Hoffman said.  Also, some of the proposed class members assigned some of their claims away, which further complicates the calculations, she said.

“The court needs to deal with the issues now, [or else] the individual issues are going to overwhelm the common issues,” Hoffman said.

Additionally, Hoffman said that the putative class of direct buyers don’t have enough members to form a class under numerosity requirements and the buyers failed to meet the predominance standard under Rule 23(b) requiring that questions common to the class predominate over the questions affecting individual members.

However, the direct buyer’s attorney Peter Kohn of Faruqi & Faruqi LLP said that the need to calculate individual damages should not bar certification and case law has determined that the measure of damages in antitrust cases do not need to be exact.

Kohn also argued that the Ninth Circuit has found that 40 members is enough to establish a class.

The proposed class members are dispersed in about 22 states plus Puerto Rico, which is “extremely broad and wide ranging.”  If the court were to individually litigate their claims, getting all of them to the California courtroom would not be practical, he said.

As for the end-payers’ motion for class certification, Endo attorney Daniel B. Asimow of Arnold & Porter LLP argued that the end-payers failed to show a common impact among the proposed class.  There are a “huge number of complexities” in this case that are not present in other class actions involving prescriptions and even the end-payers’ experts disagree with each other in their damages models, which “collapses” the end-payors’ impact argument, Asimow said.

“I’m not aware of an antitrust case that excuses plaintiffs from showing [common] impact proof,” Asimow said.

Joshua P. Davis of Joseph Saveri Law Firm Inc., who represented the end-payors, said that when it comes to damages, courts care about aggregation and not allocation.  Additionally, during the pleading stage, the court does not have to say one expert is right and another is wrong, Davis said.

“The question is have we provided a reliable means to come forward with our case and we have,” he said.

The Federal Trade Commission filed an antitrust enforcement suit in March against Endo and other pharmaceutical companies, targeting the alleged pay-for-delay schemes surrounding Lidoderm and the opioid Opana ER.  The case marks the first time the FTC has sued over the alleged anti-competitive effects of no-AG agreements.

The direct purchasers were represented by Peter Kohn of Faruqi & Faruqi LLP and the end-payers were represented by Joshua P. Davis of Joseph Saveri Law Firm Inc.

Watson was represented by Karen Hoffman Lent of Skadden, Arps, Slate, Meagher & Flom LLP and Endo was represented by Daniel B. Asimow of Arnold & Porter LLP.

The case is In re: Lidoderm Antitrust Litigation, case number 3:14-md-02521, in the U.S. District Court for the Northern District of California.

(Reporting by Dorothy Atkins.  Additional reporting by Eric Kroh and Jeff Zalesin. Editing by Joe Phalon.)