The U.S. Court of Appeals for the Third Circuit has granted interlocutory review of a New Jersey-based federal district court’s certification of a class in In re Lamictal Indirect Purchaser & Antitrust Consumer Litigation. The appeal arises from an antitrust lawsuit brought against manufacturers GlaxoSmithKline (GSK) and Teva by direct purchasers of Lamictal or of its generic version lamotrigine. Plaintiffs allege that GSK and Teva’s settlement of a patent dispute both delayed and suppressed generic competition to Lamictal tablets in violation of the antitrust laws. Because the district court allowed the plaintiffs to improperly use statistical averaging to meet Rule 23’s requirement that common issues must predominate over individual issues, the Third Circuit should reverse class certification.
In conducting its predominance analysis under Rule 23, the district court ignored the complexities of prescription drug pricing and the highly individualized nature of the purchase transactions. The prices consumers pay can vary significantly depending on such individual factors as purchasing power, quantities purchased, and the types of discounts offered to various kinds of purchasers—ranging from large wholesalers and distributors to small specialized pharmacies. A consumer’s price also varies depending on whether she buys generic lamotrigine or brand Lamictal. Although the price paid is an individualized inquiry for each purchaser, the district court allowed the plaintiffs to satisfy predominance by calculating the average price paid and assuming that each class member paid that price. According to the court, such differences in pricing—and the fact that those differences were not reflected in the plaintiffs’ averaging of data—were relevant only to damages and whether “some generic purchasers were injured more or less strongly than others.”1
However, such differences, which were masked by the plaintiffs’ use of averaged prices, affect whether the alleged anti-competitive conduct injured particular purchasers at all. Indeed, the defendants’ experts concluded that a significant portion of generic purchasers paid less for generic lamotrigine as a result of the patent settlement and suffered no injury. The district court’s characterization of the issue as one related to damages, rather than antitrust impact, led it to apply the more lenient predominance standard for individual issues of damages, which do not usually stand in the way of class certification, and to disregard individual issues of antitrust injury, which are subject to a more stringent standard. As the Third Circuit has stated, in antitrust cases, the issue of antitrust injury is “critically important” for the evaluation of the Rule 23(b)(3) predominance requirement because injury “is an element of the claim that may call for individual, as opposed to common proof.”2
In its analysis, the district court declined to conduct a thorough evaluation of the facts relevant to predominance, stating that “a court should not address merits-related issues beyond what is necessary to determine preliminarily whether certain elements will necessitate individual or common proof.”3 Yet, the evaluation appears to have stopped well short of the “rigorous analysis” of factual and legal issues required when determining whether antitrust injury was a common issue that could be resolved on the plaintiffs’ common evidence of average pricing. The court accepted an averaging of discounts from roughly 20% to 60%, a range that meant individual purchasers could well have paid lower prices than they would have paid in the plaintiffs’ “but-for world.”4
Moreover, in an individual lawsuit, an individual purchaser could not show antitrust injury by relying solely on evidence of average prices and discounts, rather than the individual prices actually paid by the purchaser and the discounts actually received. The Rules Enabling Act prevents Rule 23 from being used to enlarge or reduce an individual plaintiff’s burden. That is why, under the Supreme Court’s decision in Tyson Foods, Inc. v. Bouaphakeo, class-action plaintiffs may not rely on averaged, statistical evidence to establish class-wide proof of injury to a hypothetical average plaintiff if there are significant individual differences among class members.5 The district court’s decision in this case contravenes that holding.
The district court inappropriately suggested that the plaintiffs would somehow be able to ensure that uninjured class members did not recover, but did not explain how that could be done in a way that was both administratively feasible and protective of the defendants’ due process and Seventh Amendment rights.6 The court also suggested, without apparent basis, that the issue was not one of uninjured class members, but of class members who received offsetting benefits from the alleged anti-competitive conduct, again attempting to reduce the issue to one of damages.7 In the same vein, the court suggested that class members who “did not switch … to a generic option after it became available” and therefore, as defendants argued, did not suffer injury, could still rely on the common proof provided by plaintiffs’ expert’s “but-for-world” to show what their “purchase patterns would have been” if generics had been introduced earlier.8 Here, the “but-for” world of averaging and statistics is being extended to hypothesize what specific plaintiffs would have done in different circumstances—surely a topic that in the world of individual litigation would require individual proof from the plaintiff.
The Third Circuit’s resolution of these issues will have important ramifications for antitrust litigation, especially for those involving pharmaceuticals. If allowed to stand, the district court’s decision will furnish a precedent for class-action trials that permits class certification and trials in antitrust cases on a hypothetical level that ignores real-world variations among individual class members, while also eroding the stringent requirements for proof of antitrust injury. The Third Circuit should reverse the district court’s flawed class certification in In re Lamictal and reaffirm the principles set forth in decisions such as In re Hydrogen Peroxide, Newton, and Gates.
- In re: Lamictal Indirect Purchaser & Antitrust Consumer Litig., No. 12-CV-00995, 2018 WL 6567709, at *6-7 (D.N.J. Dec.12, 2018).
- In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311-12 (3d Cir. 2008); see also Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 188 (3d Cir. 2001); Gates v. Rohm & Haas Co., 655 F.3d 255, 258-61 (3d Cir. 2011).
- In re Lamictal, 2018 WL 6567709, at *6.
- See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011).
- See Tyson, 136 S. Ct. 1036 (2016).
- In re Lamictal, 2018 WL 6567709, at *6.
- Id. at *18.