How a Landmark Securities Case Helped Certify an Antitrust Class
ATTORNEY: MARK GOLDSTEIN
POMERANTZ MONITOR, MAY/JUNE 2015
Pomerantz currently acts as co-lead counsel for a class of third party payors and consumers in the antitrust action involving heartburn medication Nexium. The plaintiffs in this action allege that the branded dug company, AstraZeneca, and several generic drug makers violated antitrust laws by entering into agreements to delay entry of a generic version of Nexium. This type of case is often referred to as a pay-for-delay case where because the manufacturer of the brand name drug typically pays generic drug manufacturers to delay their entry to the market with a generic version of the brand drug. Such agreements have an obvious anti-competitive effect.
These cases have been a hot topic in the legal community because the Supreme Court recently reviewed these types of cases and established a standard for analysis of such agreements. In June, 2013, the Supreme Court, in FTC v. Actavis, ruled that such pay-to-delay arrangements can run afoul of antitrust laws under a rule of reason analysis. The Court held that if plaintiffs could show that the brand name manufacturer made a large and unjustified payment to the generic drug makers that could be a violation of the antitrust laws.
In late 2013, the District of Massachusetts granted plaintiffs’ motion for class certification of our Nexium case, finding that the “plaintiffs had adequately shown that (1) “prices [during the class period] for esomeprazole [the chemical name for Nexium] continued [to be] artificially high as a result of the defendants’ reverse payment agreements,” and (2) “that all class members have been exposed to purchasing or paying for [the drug] at a supracompetitive price.” The District Court also concluded that even though some members of the class did not suffer injury as a result of the alleged antitrust violation that was irrelevant because the vast majority of class members had been injured.
Defendant appealed the District Court’s class certification ruling to the United States First Circuit of Appeals on the sole ground that the class included members who were not injured by the agreements. Defendants specifically gave the example that some individual consumers would continue to purchase branded Nexium for the same price even after generic entry – so called brand loyalists. Defendants relied on the First Circuit’s previous decision in In re New Motor Vehicles Canadian Export Antitrust Litigation, arguing that to obtain class certification Plaintiffs must show that, “each class member was harmed by defendant’s practice.”
The First Circuit ultimately rejected that argument, concluding that “class certification is permissible even if the class includes a de minimis number of uninjured parties.” On the topic of the requirement that all class members be harmed the court stated, “[t]o the extent that New Motor Vehicles is read to impose such a requirement, it has been overruled by the Supreme Court’s Halliburton decision. But, in fact, New Motor Vehicles imposes no such requirement.
In Halliburton, the Supreme Court addressed the treatment of potentially uninjured class members. Halliburton was a landmark securities case that reviewed the presumption of reliance in securities cases. Halliburton found that a securities class can presume that the investors relied on defendant’s misrepresentation when deciding to purchase or sell a stock rather than prove direct reliance of defendant’s misrepresentations for each individual class member and defendants can rebut this presumption. The Supreme Court stated, “[w]hile [the rebuttal] has the effect of leaving individualized questions of reliance in the case, there is no reason to think that these questions will overwhelm common ones and render class certification inappropriate under Rule 23(b)(3).” As a result, the First Circuit in In re Nexium, found that because Halliburton “contemplated that a class with uninjured members could be certified if the presence of a de minimis number of uninjured members did not overwhelm the common issues for the class,” the Nexium class can also be certified despite a de minimis number of uninjured members.