Opinion ID: 204019
Heading Depth: 2
Heading Rank: 3

Heading: AstraZeneca's Challenges

Text: AstraZeneca mounts three challenges to the district court's merits analysis, two of which we discussed extensively above and will therefore only touch upon again here. [24] First, AstraZeneca argues that by 1997, TPPs knew, or should have known, that AWP was a benchmark price that had no necessary relationship to actual average sales prices, net of discounts. This knowledge, AstraZeneca asserts, defeats Plaintiffs' claims of deception. We discussed the TPPs' knowledge of AWP inflation in detail when discussing AstraZeneca's preemption challenge, above, and need not repeat that discussion here. Suffice it to say that we are unpersuaded by the record evidence that the TPPs' knowledge of systematic AWP inflation was sufficient to insulate AstraZeneca from Chapter 93A liability for its practices of reporting one, inflated price for reimbursement purposes while charging another, discounted price to providers, and for using the difference between these prices as a lever for increasing the market share for Zoladex. We also note that Tagliente v. Himmer, 949 F.2d 1 (1st Cir.1991), the case relied upon by AstraZeneca for the proposition that a Chapter 93A plaintiff's knowledge of the extent of a potentially-deceptive business practice is immaterial if that plaintiff has any knowledge of the practice at all, cannot bear the weight of that proposition. In that case involving a misrepresentation relating to the presence of water and wetlands on a piece of property, we explicitly noted that the relevant facts could have been easily verified. Id. at 7. In contrast, the district court in this case found that the costs of acquiring and acting upon the information necessary to understand the full extent of the AWP inflation were prohibitive. In re Pharm., 491 F.Supp.2d at 86. Nor is Ahern v. Scholz, 85 F.3d 774 (1st Cir.1996), contrary to the district court's liability finding. That case involved a dispute over royalties earned by a songwriter; the songwriter claimed that certain deductions taken by his manager violated Chapter 93A. Id. at 778-79. In assessing the deductions under Chapter 93A, we found that although they were commercially unreasonable, the manager's level of rascality was not sufficient to rise to the level of a violation of Chapter 93A. Id. at 799-800. Central to that holding was the fact that the producer did not seek to conceal the nature of the deductions: he laid them out [in a written statement itemizing the royalties and deductions] in varying levels of detail. Id. at 799. AstraZeneca thus cites Ahern for the proposition that it should be released from liability under Chapter 93A because it did not seek to conceal the discounts available for Zoladex, but rather reported them accurately to HCFA via Medicaid, and to TPPs through a program AstraZeneca designed to allow TPPs to benefit from them. This argument mirrors those made below in which AstraZeneca maintained that it had disclosed accurate pricing data by report[ing] an accurate average manufacturer's price ('AMP'), a close proxy for [the providers' actual acquisition costs], to CMS for purposes of Medicaid, and that it had discussed the spreads with TPPs in the context of an alternative reimbursement system. In re Pharm., 491 F.Supp.2d at 102-03. The district court, however, considered and rejected these arguments, finding that AMP data is confidential information that is unavailable to TPPs or consumers. It also rejected a similar argument relating to prices AstraZeneca provided to another private pharmaceutical data provider, IMS Health, finding that those prices did not provide a clear representation of the spreads on Zoladex. The district court also noted that, even though some data regarding the acquisition costs of Zoladex was leaking into the public domain, this did not mitigate the unfairness of using a grossly inflated AWP because TPPs faced significant structural impediments to changing the reimbursement system for a single drug, and Medicare reimbursement was statutorily based on AWP, so TPPs were stuck paying for Zoladex based on the inflated AWP provided by AstraZeneca. We find no clear error in these findings of the district court, which are sufficient to undercut AstraZeneca's contention that it did not keep the spreads secret. Ahern is therefore distinguishable. AstraZeneca's second, related argument challenging the district court's merits analysis is that the district court erred in finding that the government and TPPs were locked into AWP-based reimbursement and could [not] move quickly or effectively to fix the problem. AstraZeneca argues that, even if true, this fact is not enough to show that the defendants caused [the plaintiffs] to act differently from the way [they] otherwise would have acted, as required under Chapter 93A. Tagliente, 949 F.2d at 7 (An act is `deceptive' under chapter 93A `if it could reasonably be found to have caused a person to act differently from the way he otherwise would have acted.' ( quoting Lowell Gas Co. v. Attorney Gen., 377 Mass. 37, 385 N.E.2d 240, 249 (1979); Purity Supreme, Inc. v. Attorney Gen., 380 Mass. 762, 407 N.E.2d 297 (1980))). Moreover, AstraZeneca argues that even if the district court applied the correct legal analysis, its underlying fact finding was inaccurate because neither the government nor the TPPs were at the mercy of the defendants, as the district court suggested. A fair assessment of the knowledge and equities as to both parties, AstraZeneca argues, reveals that AstraZeneca misled and was unfair to nobody, and therefore should not be subject to liability under Chapter 93A. We disagree that the district court erred at all, much less committed the clear error required to upset a factual finding, when it concluded that the TPPs were effectively locked into the AWP-based repayment system. Copious evidence before the district court documented the administrative difficulties of abandoning that payment system in favor of another, and even Dr. Gregory Bell, an expert who testified on behalf of the defendants below, acknowledged that competitive concerns impeded any single TPP's ability to migrate to new payment systems, testifying that an individual payor on its own is in a very difficult position to do this. See In re Pharm., 491 F.Supp.2d at 96 (Even Dr. Bell admitted that TPPs faced several significant impediments to quickly changing reimbursement practices.). The district court was therefore supported by the record evidence when it concluded that neither the TPPs nor the government could move quickly or effectively to fix the problem. Moreover, the district court adopted the finding of Dr. Meredith Rosenthal, an expert offered by the plaintiffs, who testified that class members paid more for drugs based on a false AWP than they would have if the defendants had reported a true AWP. Id. These findings are more than adequate to justify the district court's conclusions that, under the circumstances of this case, the fact that the TPPs have been slow to change their reimbursement systems does not negate causation, and that even after 2001, when the TPPs' knowledge about spreads was more comprehensive, the [defendants'] conduct was still egregious under the unfairness prong of Chapter 93A. The TPPs were both unaware of the full extent of the AWP inflation and unable to adapt to it quickly and effectively, as they undoubtedly would have liked to given that the inflation of AWPs caused them to pay more than they would have had the AWPs been accurately reported. That is sufficient under the circumstances to meet Chapter 93A's causation requirement. See Int'l Fid. Ins. Co., 443 N.E.2d at 1314 (requiring the plaintiff to show a causal connection between the deception and the loss and that the loss was foreseeable as a result of the deception). AstraZeneca's third argument challenging the district court's merits analysis is that the plaintiffs failed to prove actual damages, asserting that none of the named plaintiffs presented evidence of what they paid for Zoladex from 1997 through 2003, formulas they used to determine physician reimbursements for Zoladex, testimony as to their own individual expectations of the difference between Zoladex AWPs and average actual sales prices of Zoladex, or testimony as to how such expectations altered the reimbursement formulas to which they agreed with treating physicians or otherwise had any impact on their determinations of appropriate and competitive reimbursement levels for physicians. AstraZeneca further argues that this failure defeats not only the plaintiffs' Chapter 93A claim, but their very standing under Article III to bring the lawsuit in the first instance. See SBT Holdings, LLC v. Town of Westminster, 547 F.3d 28, 37 (1st Cir.2008) (A plaintiff must have Article III standing. To proceed, he or she must `adequately establish: (1) an injury in fact ...; (2) causation ...; and (3) redressability.' ( quoting Sprint Commc'ns Co. v. APCC Servs., Inc., ___ U.S. ___, 128 S.Ct. 2531, 2535, 171 L.Ed.2d 424 (2008)) (citation omitted)). As described above, however, the evidence presented by Dr. Hartman and Dr. Rosenthal belies AstraZeneca's claims about insufficient evidence of damages. That evidence included, inter alia, testimony from TPPs as to their understanding of the AWP benchmark and its relationship to actual acquisition costs, TPP contracts, industry reports and public literature, and expert testimony at trial. Dr. Hartman's findings were based on a methodology that the district court ruled was reliable and admissible, and resulted in calculations of the amount of actual, not speculative, damages incurred by the plaintiffs as a result of overpayments due to AstraZeneca's actions. [25] Dr. Rosenthal testified that had the AWPs not been inflated, the plaintiffs would not have paid as much as they did. And as the Supreme Court long ago recognized in the antitrust context, overpayment is a cognizable form of injury. See Reiter v. Sonotone Corp., 442 U.S. 330, 342, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979). [26] We have been presented with no reason to deviate from that approach here. For these reasons, we find AstraZeneca's challenges to the district court's merits analysis unpersuasive.