Opinion ID: 4527827
Heading Depth: 3
Heading Rank: 3

Heading: Whether the Direct Purchasers’ Claims

Text: Are Capable of Common Proof GSK and Teva opposed certification, arguing before the District Court that the Direct Purchasers were unable to show that injury is capable of common proof at trial because their proof impermissibly relies on averages, which, in a market 3 We recognize that whether the Tyson Foods no-reasonablejuror standard should control was not squarely presented in those cases. 14 characterized by individual negotiations and a discountedbrand competition strategy, masks the fact that many—up to one-third of the entire class—likely paid no more, or even less, for lamotrigine than they would have if GSK had launched an AG. Because each class member could not rely on the same common evidence to show injury, individual issues predominate; hence they contend the District Court erred by accepting the Direct Purchasers’ expert testimony that relied on these averages without conducting a rigorous analysis of the competing expert reports and resolving the competing factual disputes on which the reports rely. We agree that a more rigorous analysis is needed. The District Court refused to “address the multi-leveled microeconomic analysis of what each Defendant would or would not have possibly done in the but-for world, and instead focuse[d] on whether the presence of the Contracting Strategy raises individualized issues that defeat predominance.” In re Lamictal Indirect Purchaser & Antitrust Consumer Litig., No. 12-CV-00995, 2018 WL 6567709, at  (D.N.J. Dec. 12, 2018). Without that inquiry, it is impossible to determine whether the Contracting Strategy raised individualized issues. The Direct Purchasers’ expert, Dr. Russell Lamb, opined that evidence common to the proposed class as a whole “demonstrates that the prices paid by all or nearly all proposed Class members for lamotrigine tablets were impacted (artificially inflated) by the allegedly illegal agreement between GSK and Teva,” and thus the class was “injured by the Defendants’ alleged[ly] anticompetitive conduct.” J.A. 487–88. This “common evidence” includes: (1) economic literature showing that, on average, prices of generics are lower as more enter the market; (2) Teva’s own general pricing forecast tending to discount a generic by 50% without competition, but by 65% when facing an additional competitor; and (3) transaction-level sales data showing that the average 15 actual price paid was consistent with these predictions. Lamb also created a model purporting to show the price each purchaser would have paid absent the settlement, and he opined that the prices would have been lower both had GSK just launched an AG 4 and had it launched an AG along with the Contracting Strategy. But, as GSK and Teva accurately point out, that model still relies on an average hypothetical price, which again fails to account for individual negotiations or the effect of GSK’s Contracting Strategy on each Direct Purchaser. GSK and Teva’s expert, Dr. James Hughes, countered that it is “not possible, absent individualized inquiry, to determine whether any particular member of the proposed [c]lass suffered injury in the form of higher prices as a result of the alleged anticompetitive conduct.” J.A. 265–66. He rebutted many of Dr. Lamb’s findings, primarily criticizing the use of averages—contending that Lamb committed “meaningful error” when he assumed an aggregate “actual” price that he applied to all class-members, which failed to acknowledge that purchasers paid “dramatically different prices,” dropped charge-backs and discounts, and ignored low “outlier” prices. Further, Dr. Hughes criticized Dr. Lamb’s reliance on general forecasting documents using average prices, rather than lamotrigine-specific prices. Hughes created his own model, using lamotrigine-specific prices from Teva company documents, to show that, when accounting for Teva’s preemptive response to the Contracting Strategy, the price of 4 While the parties dispute whether GSK would have used both strategies—launching an AG and engaging in the Contracting Strategy—simultaneously, Lamb conducted a “sensitivity analysis” as part of his model purporting to show that, either way, the price of lamotrigine would have been lower absent the settlement agreement. 16 lamotrigine was likely lower for some purchasers than it would have been had GSK launched an AG. Based on this, Hughes found that 25 of the 33 generic-only purchasers likely paid the same or lower prices in the actual world under the Contracting Strategy than they would have paid had GSK launched an AG. In effect, the amount each purchaser would have paid absent the settlement required an individual analysis because Teva did not respond to the Contracting Strategy uniformly. Here, the District Court abused its discretion when it assumed, absent a rigorous analysis, that averages are acceptable. As is clear from the dueling expert reports, the acceptability of averages depends largely on the answer to several factual predicates, most importantly: 1) whether the market is characterized by individual negotiations; 2) whether Teva preemptively lowered its pricing in response to the Contracting Strategy; and 3) whether and to what extent GSK, absent the settlement agreement, would or could have pursued both the Contracting Strategy and an AG. The Court did not resolve these factual disputes, which would have required it to weigh the competing evidence and make a prediction as to how they would play out at trial. Further, much of each expert’s analysis turned on his sources of evidence for pricing and discounting data, many of which were in tension. It was up to the District Court to scrutinize the evidence to determine what was credible and could be used in the expert analysis. This lack of analysis perhaps was due to the Court’s assumption that antitrust injury here occurred “at the moment the price of generic lamotrigine was artificially inflated by the no-AG agreement, even if GSK’s Contracting Strategy later on possibly eroded some or all of the inflated price.” Lamictal, 2018 WL 6567709, at . But that assumption misunderstood GSK and Teva’s argument—the prices were never inflated to begin with because Teva preemptively lowered its prices before launching; thus some Direct Purchasers never suffered 17 an overcharge. But the District Court cannot simply make that assumption—rather, whether Teva preemptively lowered its prices is a factual matter hotly contested by the parties. And the Court was required to resolve that dispute by a preponderance of the evidence. Thus, contrary to the District Court’s belief, addressing the micro-level analysis here, even though it touches on the merits, was necessary in order to determine whether the Direct Purchasers, in light of the competing expert reports and evidence, could show that common issues predominated by a preponderance of the evidence. While averages may be acceptable where they do not mask individualized injury, see Gates v. Rohm & Haas Co., 655 F.3d 255, 266 (3d Cir. 2011), we cannot determine whether that occurred here because of the lack of analysis. Accordingly, we vacate and remand for the District Court to analyze the evidence and arguments submitted as part of class certification.