Affirmation of Class Certification in Antitrust Litigation: Indivior’s Strategies to Suppress Generic Competition
Introduction
The United States Court of Appeals for the Third Circuit rendered a significant decision on July 28, 2020, in the case of In re: Suboxone (Buprenorphine Hydrochloride and Naloxone) Antitrust Litigation. The litigation arose when Indivior Inc., formerly Reckitt Benckiser Pharmaceuticals, Inc., faced allegations from direct purchasers of its opioid addiction drug, Suboxone, concerning anticompetitive practices aimed at impeding the entry of generic versions into the market. The key legal issue revolved around the certification of a class action under the Sherman Act, specifically § 2, which prohibits monopolistic practices. Indivior appealed the district court's decision to certify the class, challenging both the legal sufficiency of the plaintiffs' claims and the adequacy of the class representatives. The Third Circuit affirmed the lower court's decision, setting a precedent on class action certification in the context of antitrust litigation.
Summary of the Judgment
The district court had certified a class comprising direct purchasers of Suboxone tablets, who allegedly paid higher prices due to Indivior's anticompetitive activities. The plaintiffs claimed that Indivior engaged in a strategic campaign to maintain monopoly power, which included disparaging generic versions, manipulating FDA processes, and adjusting rebate contracts to favor their film version of Suboxone over the tablet form. The district court found that the plaintiffs provided sufficient common evidence of injury and damages stemming from Indivior's actions and that the class representatives, notably Burlington Drug Company, Inc., were adequate. Indivior appealed, arguing that the class certification was improper. However, the Third Circuit affirmed the lower court's decision, emphasizing that the plaintiffs' aggregate damages model reliably estimated the overcharges resulting from the alleged anticompetitive conduct and that there was a single, predominate theory of liability supporting the class action.
Analysis
Precedents Cited
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Mylan Pharms. Inc. v. Warner Chilcott Pub. Ltd. Co., 838 F.3d 421 (3d Cir. 2016): Established the necessity for generic drug manufacturers to prove bioequivalence and pharmaceutical equivalence to gain AB-rating, which allows for substitution under state laws.
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FTC v. Actavis, Inc., 570 U.S. 136 (2013): Affirmed the "pay-for-delay" settlements where brand-name drug manufacturers pay generic entrants to delay entering the market as anticompetitive practices violating antitrust laws.
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Comcast Corp. v. Behrend, 569 U.S. 27 (2013): Discussed class action certification requirements, particularly the alignment between damages models and theories of liability.
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In re Modafinil Antitrust Litig., 837 F.3d 238 (3d Cir. 2016): Supported the use of aggregate damages models in class actions, even when individualized claims would be assessed post-judgment.
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Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016): Reinforced that ancillary issues, such as allocation of damages, do not preclude class certification if the predominant questions are common.
Legal Reasoning
The court meticulously examined whether the plaintiffs met the requirements for class certification under Federal Rule of Civil Procedure 23. Specifically, the court addressed two main criteria: predominance of common questions (Rule 23(b)(3)) and adequacy of the class representatives (Rule 23(a)(4)).
Predominance of Common Questions
The plaintiffs needed to demonstrate that the common questions predominate over individual issues. Indivior contended that the plaintiffs lacked a viable theory of liability that matched their injury claims. However, the court countered that the plaintiffs' allegations constituted a single, cohesive theory of antitrust injury stemming from a combination of anticompetitive actions. These actions collectively suppressed generic competition, resulting in higher prices for purchasers. The court emphasized that the plaintiffs did not merely claim higher prices in isolation but linked them directly to Indivior's strategic conduct aimed at maintaining monopoly power.
Aggregate Damages Model
The plaintiffs employed an aggregate damages model, which estimate the total overcharges resulting from the anticompetitive conduct. Indivior argued that such a model was insufficient as it did not allocate damages individually. The court rejected this, citing precedents that allow for aggregate models in class actions, provided they adequately estimate the total injury. The possibility of individualized assessments post-judgment does not undermine the predominance of common questions.
Adequacy of Class Representatives
Indivior challenged the adequacy of Burlington Drug Company, Inc. as the class representative, alleging potential conflicts of interest and lack of control over litigation. The court found these arguments unsubstantiated, noting that the alleged conflicts were speculative and did not meet the threshold for deeming Burlington inadequate. The court reaffirmed that Burlington possessed sufficient knowledge of the case, acted as a fiduciary, and aligned with the class's interests.
Impact
This judgment reinforces the viability of class actions in antitrust cases where plaintiffs can demonstrate a unified theory of injury resulting from a defendant's strategic conduct to suppress competition. By upholding the use of aggregate damages models, the court allows plaintiffs to efficiently seek redress for widespread overcharges without being hindered by the need for individualized damage assessments at the certification stage.
For generic drug manufacturers and purchasers, this decision underscores the legal avenues available to challenge anticompetitive practices by brand-name drug manufacturers. It sets a precedent that multifaceted strategies aimed at delaying generic entry can be effectively litigated through class actions, potentially deterring similar anti-competitive behaviors in the pharmaceutical industry.
Moreover, the affirmation of class certification standards provides clarity for future litigants on the sufficiency of evidence and damages modeling required to meet Rule 23 criteria, thus shaping the landscape of antitrust litigation strategy.
Complex Concepts Simplified
Antitrust Laws and the Sherman Act § 2
The Sherman Act, particularly Section 2, prohibits entities from monopolizing or attempting to monopolize any part of interstate commerce. In essence, it aims to maintain competitive markets by preventing companies from engaging in practices that unfairly limit competition.
Class Action Certification
A class action allows a group of people with similar claims against the same defendant to sue collectively. For a class to be certified, it must meet specific criteria ensuring that the collective action is appropriate and that the class representatives can fairly and adequately protect the interests of all class members.
AB-Rating
An AB-rating from the FDA indicates that a generic drug is both bioequivalent and pharmaceutically equivalent to a brand-name drug. This means the generic version can be substituted for the brand-name counterpart by pharmacists, promoting competition and typically lowering prices.
Aggregate Damages Model
An aggregate damages model estimates the total financial harm suffered by the class as a whole due to the defendant's actions. In antitrust cases, this often involves calculating the difference between what the class paid and what they would have paid had competition been available.
Risk Evaluation and Mitigation Strategy (REMS)
REMS are FDA-required programs aimed at ensuring that the benefits of a drug outweigh its risks. They can include strategies like medication guides or communication plans to healthcare providers. While intended for safety, REMS can be misused to delay generic drug approvals.
Conclusion
The Third Circuit's affirmation of the district court's class certification in the Suboxone antitrust litigation underscores the courts' willingness to recognize and address complex, multifaceted strategies employed by monopolistic entities to stifle competition. By validating the plaintiffs' aggregate damages approach and the adequacy of the class representatives, the court has paved the way for more efficient and collective redress in antitrust violations within the pharmaceutical sector. This decision not only provides relief to those directly impacted by overpricing and lack of competition but also serves as a deterrent against future anticompetitive conduct by incentivizing brands to allow genuine market competition.
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