AAI Asks First Circuit to Preserve Pharma Antitrust Class Actions Targeting Generic Exclusion (In re Asacol Antitrust Litigation)

AAI filed an amicus brief in the First Circuit Court of Appeals warning that unreasonable class action standards threaten to harm competition and consumers in the critically important pharmaceutical sector.

In In re Asacol Antitrust Litig., a class of indirect purchasers challenged an alleged “product hopping” scheme whereby brand-drug manufacturer Warner Chilcott pulled an ulcerative colitis drug from the market just as its patent was set to expire, only to substitute a replacement, patented drug and thereby stave off generic entry that would have benefitted consumers.

After the district court certified a class, the First Circuit reversed. The court held that the plaintiffs could not satisfy the predominance requirement of Rule 23(b)(3), which requires a showing that questions common to the class will predominate over questions pertaining to individual class members during the trial. Because the class might include a small percentage of “brand loyalists” who would not have switched to a cheaper generic version of the drug (and therefore were uninjured by the alleged product hop), and the defendants stated that they intended to contest whether individual class members were injured, the Court believed individual questions would predominate at trial.

The AAI brief, which seeks panel rehearing and rehearing en banc, argues that the panel opinion defies Circuit precedent and common sense. In In re Nexium Antitrust Litig., where the court encountered the same “brand-loyalist” phenomenon in a pay-for-delay case, it certified a class that contained demonstrably fewer uninjured members. Moreover, because the plaintiffs sought to prove aggregate damages (which is standard in antitrust cases), the presence of uninjured class members has no bearing on the defendants’ liability exposure. Notwithstanding their self-interested statements to the contrary, defendants would have no reason to challenge an individual class member’s injuries at trial because doing so would not reduce their damages even if they won. In antitrust trials (including Nexium), defendants essentially never do.

The AAI brief argues that the panel opinion failed to heed the rule that it must make a prediction how the litigation is likely to play out at trial in deciding whether common or individual issues predominate. It also warns that, if not overturned, the panel opinion threatens to create a liability shield in the pharmaceutical sector, where the “brand-loyalist” phenomenon is relatively common. The result would be to drastically undermine deterrence and compensation in generic exclusion cases, including cases involving pay-for-delay, “REMS” program abuse, and other anticompetitive conduct that suppresses entry. Finally, the brief explains why asking government enforcers to pick up the slack misapprehends the critical role of private attorneys general in the federal and state enforcement regime and ignores practical enforcement realties.

The brief was written by AAI General Counsel Rick Brunell and AAI Associate General Counsel Randy Stutz.