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Meijer, Inc. v. Warner Chilcott Holdings Co. III

October 22, 2007

MEIJER, INC., ET AL., PLAINTIFFS,
v.
WARNER CHILCOTT HOLDINGS COMPANY III, LTD., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

Currently pending before the Court is Plaintiffs' [92] Motion for Class Certification, as well as a number of motions to strike stemming from that Motion, which were filed by Defendants--Warner Chilcott Holdings Company III, Ltd., Warner Chilcott Corporation, Warner Chilcott (US) Inc., Warner Chilcott Company, Inc., Galen (Chemicals), Ltd. (together "Warner Chilcott"), and Barr Pharmaceuticals, Inc. ("Barr") (collectively with Warner Chilcott, "Defendants"). Plaintiffs are direct purchasers of Ovcon 35, a brand-name oral contraceptive marketed by Warner Chilcott, as well as certain indirect purchasers of Ovcon 35 who bring suit as assignees of direct purchasers of Ovcon 35. Plaintiffs' Amended Complaint alleges that Warner Chilcott and Barr entered into an illegal agreement to delay the market entry of Barr's FDA-approved generic version of Ovcon 35, and that this delay in generic competition forced direct purchasers to overpay for "Ovcon 35 Products."*fn1 Plaintiffs allege that Defendants' conduct violated Section 1 of the Sherman Act, 15 U.S.C. § 1, and seek damages in the form of overcharges (trebled) paid for Ovcon 35 Products during the proposed class period, pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26.

In addition to opposing Plaintiffs' Motion for Class Certification, Defendants have filed two motions to strike materials submitted by Plaintiffs in connection with their Reply brief in support of their Motion for Class Certification. Defendants' first [111] Motion to Strike relates to references to an expert report submitted by Dr. Jeffrey J. Leitzinger, which are contained in Plaintiffs' Reply and in Dr. Leitzinger's Rebuttal Declaration in support of that Reply; Defendants' second [116] Motion to Strike relates to three declarations executed on behalf of companies that are absent members of the class that Plaintiffs seek to have certified. Finally, also pending before the Court are two non-class actions filed by direct purchasers of Ovcon 35 who have preemptively opted out of the instant putative class action: Walgreen Co. v. Warner Chilcott Holdings Co. III, Ltd., Civil Action 06-494, and CVS Pharmacy Inc. v. Warner Chilcott Holdings Co. III, Ltd., Civil Action No. 06-795. The Walgreen and CVS plaintiffs (collectively the "Non-Class Plaintiffs") have filed a "Memorandum Responding to Defendants' Opposition to Class Certification" in their respective actions, in order to bring to the Court's attention a legal issue raised in Defendants' Opposition that they believe could impact the non-class actions. Defendants have moved to strike the Non-Class Plaintiffs' Memorandum.

Upon a searching review of the filings submitted by all parties in connection with the pending Motion for Class Certification and the three Motions to Strike, the exhibits attached thereto, the relevant statutes and case law, and the entire record herein, the Court shall grant Plaintiffs' Motion for Class Certification [92], shall grant Defendants' [111] Motion to Strike the references to Dr. Leitzinger's Expert Report, shall grant-in-part and deny-in-part Defendants' [116] Motion to Strike the declarations submitted on behalf of absent class members, and shall deny Defendants' Motion to Strike the Non-Class Plaintiffs' Memorandum.

I. BACKGROUND

Plaintiffs--Meijer, Inc., Meijer Distribution, Inc., Louisiana Wholesale Drug Co., Inc., Rochester Drug Co-operative, Inc., American Sales Company, Inc., SAJ Distributors, Inc., and Stephen L. LaFrance Holdings, Inc.--bring this putative class action pursuant to Federal Rule of Civil Procedure 23 on behalf of themselves and a class of direct purchasers of Ovcon 35 during the period April 22, 2004 through December 31, 2006.*fn2 In their Amended Complaint, Plaintiffs allege that they either purchased Ovcon 35 directly from Defendants during the proposed class period, see Am. Compl. ¶¶ 10-11, 13, or that they are assignees of drug wholesalers that purchased Ovcon 35 directly from Defendants during the class period, id. ¶¶ 12,14.*fn3

A company seeking to market a new drug in the United States must obtain approval from the United States Food and Drug Administration ("FDA") by filing a New Drug Application ("NDA"), demonstrating the safety and efficacy of its product. Am. Compl. ¶¶ 24, 26; 21 U.S.C. § 355(b). TheNDA process is typically time-consuming and expensive, Am. Compl. ¶ 26, and in 1984, Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984 (the "Hatch-Waxman Act"), which accelerated the approval process for generic drugs, id. ¶ 27. The Hatch-Waxman Act permits a manufacturer seeking FDA approval for a generic drug to file an Abbreviated New Drug Application ("ANDA"), which relies on the safety and efficacy data previously provided in the NDA for its branded counterpart. Id. ¶ 27; 21 U.S.C. § 355(j). Accordingly, FDA approval of an ANDA takes, on average, about 18 months. Am. Compl. ¶ 27.

FDA-approved generic drugs are certified by the FDA as bioequivalent to the branded drug whose NDA the generic drug relied upon in its ANDA, and are completely interchangeable with that branded drug. Id. ¶ 28. The FDA refers to such drugs as "AB-rated," and pharmacists may dispense AB-rated generic drugs in lieu of their branded counterparts. Id. According to Plaintiffs, upon their introduction, generic drugs generally enter the market at prices 30 to 50% (or more) below the price of their brand-name equivalents and, because generic and branded drugs are fully interchangeable in terms of safety and efficacy, the vast majority of patients switch to the less expensive generic in place of the brand-name drug. Id. ¶ 29. Furthermore, almost all states and the District of Columbia encourage generic competition through laws that allow pharmacists to substitute brand-name drugs with their AB-ratedgeneric equivalents, unless a physician directs or the patient requests otherwise. Id. ¶ 30. In addition, many third-party payors of prescription drugs (e.g., health insurance plans) have adopted policies to encourage the substitution of available AB-rated generic drugs for their branded counterparts. Id. ¶ 31.

Ovcon 35 is an oral contraceptive containing the formulation 0.035 mg of ethinyl estradiol and 0.4 mg norethindrone, which has been available to the general public since 1976 and is not subject to patent protection. Id. ¶ 32; Pls.' Mem. of Law in Support of their Mot. for Class Cert. (hereinafter "Pls.' Mem.") at 1; Defs.' Opp'n at 4 n.3. Warner Chilcott has been the exclusive marketer of Ovcon 35 since January 2000, when it purchased certain rights, title, and interest in Ovcon 35 from Bristol-Myers Squibb Company ("BMS"). Am. Compl. ¶¶ 34-35.

Plaintiffs assert that Ovcon 35 is highly profitable, has been one of Warner Chilcott's highest revenue-producing products, and that Ovcon 35's net dollar sales have more than doubled since 2000, even as Warner Chilcott has raised Ovcon 35's price. Id. ¶ 36.

In September 2001, Barr filed an ANDA with the FDA for approval to market an AB-rated generic version of Ovcon 35. Id. ¶ 37. In January 2003, Barr publicly announced its intention to launch a generic version of Ovcon 35 by the end of that year. Id. ¶ 38. Plaintiffs assert that Barr intended to sell its generic version of Ovcon 35 at an initial price approximately 30% below the price Warner Chilcott charged for Ovcon 35, and that Warner Chilcott expected Barr to do so. Id. ¶¶ 39-40. Plaintiffs further allege that both Barr and Warner Chilcott projected that within its first year of introduction, Barr's generic version would capture approximately 50% of Warner Chilcott's branded Ovcon 35 sales. Id. ¶¶ 41-42. In addition, according to Plaintiffs, Warner Chilcott calculated that, as a result of lost prescriptions, its net revenues from the sale of branded Ovcon 35 would decline by at least $100 million over a three-year period. Id. ¶ 42. Plaintiffs allege that Warner Chilcott planned a "line extension" strategy to protect its Ovcon 35 revenues from generic competition, which involved introducing a chewable form of the product ("Ovcon 35 Chewable"), converting Ovcon 35 patients to Ovcon 35 Chewable, and then ceasing sales of Ovcon 35 before generic entry occurred. Id. ¶ 43. Significantly, prescriptions for Ovcon 35 Chewable would not be able to be filled with a generic version of Ovcon 35 because the generic would not be AB-rated to Ovcon 35 Chewable. Id. ¶ 44. However, according to Plaintiffs, by mid-2003 Warner Chilcott's line extension strategy was in jeopardy because FDA-approval of Barr's generic version of Ovcon 35 appeared imminent and Ovcon 35 Chewable had not yet obtained FDA approval. Id. ¶ 45.

As a result, Plaintiffs allege, Warner Chilcott and Barr engaged in discussions regarding potential business arrangements under which Barr would refrain from competing with branded Ovcon 35. Id. ¶ 48. On September 10, 2003, Defendants signed a Letter of Intent to enter into an agreement in which Warner Chilcott would pay Barr $20 million not to compete in the United States, but instead to be available as a second supplier of Ovcon 35 to Warner Chilcott, for a term of five years following Barr's final FDA approval for its generic version of Ovcon 35. Id. ¶ 49. On March 24, 2004, Defendants executed the Agreement contemplated by their Letter of Intent, and Warner Chilcott paid Barr $1 million. Id. ¶ 50. Under the Agreement, within 45 days after the FDA's approval of Barr's generic Ovcon 35 ANDA, Warner Chilcott could elect to pay Barr the remaining $19 million to secure Barr's commitment to refrain from marketing generic Ovcon 35 in the United States. Id. ¶ 51.

The FDA granted final approval of Barr's ANDA for generic Ovcon 35 on April 22, 2004, and the next day, Barr announced that it intended to begin marketing generic Ovcon 35 under the name "Balziva" unless Warner Chilcott exercised its option under the Agreement. Id. ¶¶ 52-53. On May 6, 2004, Warner Chilcott exercised its option and paid Barr the remaining $19 million. Id. ¶ 54. Plaintiffs allege that, absent Defendants' Agreement, Barr would have begun marketing Balziva soon after it received FDA approval of its ANDA on April 22, 2004, and that as a result, Plaintiffs would have substituted Barr's lower-priced Balziva for all or a portion of their purchases of branded Ovcon 35, and/or would have paid substantially less for branded Ovcon 35 because Warner Chilcott would have lowered net Ovcon 35 prices in response to competition. Id. ¶ 57.

Plaintiffs filed their Amended Complaint in this action on April 14, 2006, alleging that Defendants' Agreement is a contract, combination, or conspiracy in restraint of trade, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Id. ¶ 72. Subsequent to Plaintiffs' filing of the instant action, on September 25, 2006, Warner Chilcott announced that it had waived the exclusivity provision of the Agreement, thereby allowing Barr to launch its generic version of Ovcon 35, Balziva. Pls.' Mem. at 8. Barr launched Balziva in October 2006, and in January 2007, Warner Chilcott entered into an agreement with Watson to launch a generic version of Ovcon 35 called Zenchent, which launched the same month. Id.

II. LEGAL STANDARD

As the party moving for class certification, Plaintiffs have the burden ofestablishing that each of the requirements for class certification set forth in Federal Rule of Procedure 23 have been met. See Amchem Prods, Inc. v. Windsor, 521 U.S. 591, 614 (1997). To obtain class certification, Plaintiffs must show that the requirements of Rule 23(a) are met and that the class is maintainable pursuant to one of Rule 23(b)'s subdivisions. Id.; Fed. R. Civ. P. 23; Richards v. Delta Air Lines, Inc., 453 F.3d 525, 529 (D.C. Cir. 2006). The four prerequisites to a class action lawsuit under Rule 23(a) are: (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 and defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. See Fed. R. Civ. P. 23(a). These four requirements are referred to as numerosity, commonality, typicality, and adequacy of representation.

In addition, Plaintiffs must demonstrate that the class is maintainable under Rule 23(b). In the instant case, Plaintiffs seek certification under Rule 23(b)(3) and, as such, must show that "questions of law or fact common to the members of the class predominate over any questions only affecting individual members, and that class action is superior to other methods for the fair and efficient adjudication of the controversy." Fed. R. Civ. P. 23(b)(3). These requirements are referred to as predominance and superiority. Rule 23(b)(3) further provides that matters pertinent to the findings include:

(A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the difficulties likely to be encountered in the management of a class action.

Id.

"In order to make the required findings of predominance and superiority to certify a class under Rule 23(b), it is necessary to identify the substantive law" that will control the outcome of the litigation. In re: Vitamins Antitrust Litigation, 209 F.R.D. 251, 256 (D.D.C. 2002); see also McCarthy v. Kleindienst, 741 F.2d 1406, 1413 n.6 (D.C. Cir. 1984) (a court will "scrutizin[e] plaintiffs' legal causes of action to determine whether they are suitable for resolution on a class wide basis" and "such scrutiny is ordinarily an essential ingredient of the determination whether to allow a case to proceed as a class action."). However, at this stage of the litigation, Plaintiffs need only show that the requirements of Rule 23 have been met by showing that common or general proof will predominate with respect to each of the elements of their antitrust claim. Vitamins, 209 F.R.D. at 257 (citing Wagner v. Taylor, 836 F.2d 578 (D.C. Cir. 1987) and Littlewolf v. Hodel, 681 F. Supp. 929, 938 (D.D.C. 1988)). The Court will not--and cannot--make a preliminary inquiry into the merits of Plaintiffs' claim in determining whether to certify the class. Eisen v. Carlisle and Jacquelin, 417 U.S. 156, 177 (1974); Richards, 453 F.3d at 531 n.5. Nevertheless, "the class determination generally involves considerations that are 'enmeshed in the factual and legal issues comprising the plaintiff's cause of action.'" and the Court is required to conduct a "rigorous analysis" of the Rule 23 requirements. Gen. Tele. Co. of the SW v. Falcon, 457 U.S. 147, 160-61 (1982) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 469 (1978)); see also Richards, 453 F.3d at 531 n.5. Therefore, while the Court accepts the substantive allegations contained in Plaintiffs' Amended Complaint as true, see Vitamins, 209 F.R.D. at 257, "it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question." Falcon, 457 U.S. at 160-61; see also McCarthy, 741 F.2d at 1413 n.8.*fn4

III. DISCUSSION

Plaintiffs seek certification of the following class pursuant to Federal Rule of Civil Procedure 23(b)(3):

All persons or entities in the United States who purchased Ovcon 35 directly from Warner Chilcott at any time during the period April 22, 2004 through December 31, 2006.*fn5 Excluded from the Class are Defendants and their officers, directors, management, and employees, subsidiaries or affiliates, and all governmental entities. Also excluded are hospitals, universities and clinics.

Pls.' Reply at 23. Before considering whether Plaintiffs have met the requirements of Rule 23, the Court notes that Plaintiffs originally proposed a class period running from "April 22, 2004, through the present and continuing until the effects of Defendants' anticompetitive conduct have ceased." Am. Compl. ¶ 61.*fn6 As a result, in their Opposition, Defendants argued that Plaintiffs' proposed class period rendered the class insufficiently ascertainable. See Defs.' Opp'n at 41-43. While Federal Rule of Civil Procedure 23 does not contain a requirement that a class be "ascertainable" or "clearly defined," such a requirement has been "routinely require[d]" in order to "help the trial court manage the class." Pigford v. Glickman, 182 F.R.D. 341, 346 (D.D.C. 1998). The Court agrees that Plaintiffs' original proposed class period lacked sufficient definition because the Court would have been required to engage in a detailed factual inquiry in order to identify the proposed class members, but finds that Defendants' concern is obviated by Plaintiffs' revised proposed class period.

A. Rule 23(a) ...


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