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

Heading: The District Court's Decision to Adopt Dr. Hartman's Approach

Text: In ruling Dr. Hartman's submissions reliable and admissible under Federal Rules of Evidence 702 and adopting Dr. Hartman's approach to liabilityincluding his baseline 30% spread to trigger potential liabilitythe district court addressed four chief objections to Dr. Hartman's submissions that were lodged by the defendants below, two of which merit discussion in the context of this appeal. See In re Pharm., 491 F.Supp.2d at 89-93. First, the district court rejected the defendants' position that payors' expectations about provider acquisition costs were unrelated to reimbursement rates. As evidence for this position, the defendants noted that payors did little to seek out actual cost data, chose not to negotiate reimbursement rates provider-by-provider, and failed to incorporate data about actual acquisition costs into the reimbursement rate when that data was available. The defendants also criticized Dr. Hartman for failing to survey payors to determine their actual expectations about spreads and how those expectations factored into reimbursement rates. In rejecting this position, the district court cited to record evidence indicating the expense and difficulty of obtaining and using actual cost data on a provider-by-provider basis. The court noted testimony from third-party payors that expectations played an important part in setting reimbursement methodologies. And the court cited the insurmountable barrier[s] to shifting away from AWP-based reimbursement, which included the difficulty of creating an alternative system, and the potential that changes would create bad incentives for providers. The district court therefore concluded that TPP knowledge about physician acquisition costs was material to the establishment of reimbursement rates. Second, the district court rejected the defendants' position that 30% was an inappropriate figure to use as the outer limit of third-party payors' expectation about the size of AWP spreads. Instead, the defendants argued, expectations about spreads would not be so uniform: for example, payors would expect spreads to increase (and prices to drop) in response to competition, as competitors jockeyed for market share. In response, the district court noted simply that there was no evidence that the TPPs had any knowledge of the huge spreads ... for the drugs on trial until the late 1990's. Ultimately, the district court adopted Dr. Hartman's methodology and his 30% limit, specifically noting that it had taken into account the defendants' challenges to the accuracy of Dr. Hartman's data. [19]