AAI Asks Third Circuit to Remove Inappropriate Roadblocks to Pay-for-Delay Class Actions (In re Niaspan Antitrust Litigation)

AAI has submitted an amicus brief urging the Third Circuit Court of Appeals to overturn a district court ruling denying class certification to end-payer victims of an allegedly illegal reverse payment settlement on grounds that identifying class members would not be administratively feasible.

In In re Niaspan Antitrust Litigation, the plaintiffs are a proposed class of health insurers and health plans that pay for prescription drugs on behalf of patients.  They allege that the defendants, brand and generic manufacturers of the drug Niaspan, which is used to treat lipid disorders, entered an illegal pay-for-delay agreement, harming payors and patients.  The district court denied certification of the proposed class pursuant to the Third Circuit’s heightened “ascertainability” requirement, which requires an “administratively feasible mechanism” for identifying class members as well as an objective class definition.  Whereas all courts interpret Rule 23 to require an objective class definition, the Third Circuit’s administrative feasibility test is controversial and arguably grafts extra-legal requirements for class certification onto the requirements set forth in Rule 23.

As AAI chronicled in the most recent issue of its biannual Class Action Issues Update, each of the last six circuit courts to consider a heightened administrative feasibility requirement have rejected it, including the Second, Sixth, Seventh, Eighth, Ninth, and Eleventh Circuits.  Mindful of criticism from other circuits and the potential for inconsistency, the Third Circuit’s more recent ascertainability cases have softened the administrative feasibility requirement.  The district court’s decision in Niaspan, which was based entirely on administrative feasibility, put the issue squarely before the appellate court in an antitrust case.

The AAI brief argues that the Third Circuit’s administrative feasibility requirement has been evolving to focus on practical considerations, which is necessary for the court’s ascertainability rules to accord with the language of Rule 23.  Among other things, the Third Circuit’s recent cases show that classes are sufficiently ascertainable when class members are capable of being identified using data in combination with affidavits, which was true in this case.  Under a proper reading of the court’s standards, end-payor classes are very likely to be ascertainable in the pharmaceutical industry in particular, because a combination of legal and regulatory requirements, practical business needs, and financial incentives all ensure that rich data involving prescription drug purchases is collected and retained.  Moreover, sound policy reasons support the recognition of administrative feasibility to help combat the harm caused by pay-for-delay agreements, which has been a top priority of the federal government and leading health policy advocates.

The brief was written Berger Montague Shareholder and UC Hastings Research Professor Joshua Davis, with assistance from AAI Vice President of Legal Advocacy Randy Stutz.