In re: EpiPen Direct Purchaser Litigation

Background

Rochester Drug Co-Operative, Inc. and Dakota Drug, Inc., described in the opinion as drug wholesalers, alleged that Mylan Inc. and Mylan Specialty L.P., the EpiPen manufacturers, paid bribes and kickbacks to pharmacy benefit manager defendants. Plaintiffs alleged that the scheme helped Mylan maintain market share and raise EpiPen prices. They asserted a civil claim under the Racketeer Influenced and Corrupt Organizations Act and a claim against Mylan under section 2 of the Sherman Antitrust Act. They sought certification of a class consisting of entities and people in the United States and its territories who directly purchased specified EpiPen products from Mylan between January 1, 2013, and December 31, 2020.

Defendants opposed certification and moved under Federal Rule of Evidence 702 to exclude the opinions of plaintiffs’ class-certification expert, Hal J. Singer, Ph.D.

Class-certification standards

The court explained that plaintiffs had to affirmatively show compliance with Federal Rule of Civil Procedure 23. That required them to establish the Rule 23(a) requirements of numerosity, commonality, typicality, and adequate representation, along with the Rule 23(b)(3) requirements that common questions predominate and that a class action is superior to other methods of resolving the dispute.

Numerosity

The court held that plaintiffs had not shown that the proposed class was so numerous that joining all members in one case would be impractical. RICO and Sherman Act claims have four-year limitations periods. The court determined that the proposed class period could not begin before March 29, 2016, the date four years before plaintiffs filed the case. On the record presented, that reduced the possible class from 66 members to at most 46.

The court rejected defendants’ arguments that the number should be reduced further because some entities lacked an Article III injury or were organizational affiliates of other members. The potentially uninjured entities were removed when the class period was shortened, and separate business organizations could be counted separately because each allegedly purchased EpiPens from Mylan and suffered injury under plaintiffs’ theory.

Although 40 or more members may often be a significant number, the court declined to treat 40 as creating a burden-shifting presumption. The court emphasized that the proposed class was comparatively small, that many members had large individual claims, and that three wholesalers accounted for more than 90 percent of the claimed damages. The court concluded that plaintiffs had not shown that individual joinder was impractical.

Adequacy of representation

The court found that plaintiffs’ counsel were adequate but that Rochester and Dakota were not adequate representatives under Rule 23(a)(4). The record showed that AmerisourceBergen, Cardinal, and McKesson—the three largest absent wholesalers—received service fees tied to EpiPen’s wholesale price and also benefited from inventory appreciation when prices rose. The court determined that these benefits created a substantial conflict between those wholesalers and Rochester and Dakota, which claimed to have been harmed by the price increases.

The court rejected plaintiffs’ argument that the rules allowing direct purchasers to seek overcharge damages eliminated this conflict. It distinguished the right of a direct purchaser to recover damages from the separate question whether the proposed representatives could adequately represent class members with materially different economic interests.

The court rejected Mylan’s additional arguments that Dakota was inadequate because of its representatives’ knowledge of the case and that Rochester was inadequate because it was in bankruptcy. It found that those arguments did not establish inadequacy on the record presented. The court nevertheless concluded that the conflict involving class members who benefited from price increases independently defeated the adequacy requirement.

Predominance and causation

The court also held that plaintiffs had not shown that common questions predominated under Rule 23(b)(3). Causation was a shared element of both the RICO and antitrust claims, so plaintiffs needed to show that the connection between the alleged bribery-and-kickback scheme and class members’ injuries could be established with common evidence.

The court rejected plaintiffs’ attempt, made in their reply brief, to characterize the EpiPen price increases themselves as the alleged bribes. The operative complaint described the alleged bribes as Mylan’s payments to the pharmacy benefit managers, with the payments allegedly enabling or causing the price increases. Because Dr. Singer assumed that the inflated prices were part of the challenged conduct, rather than analyzing why prices increased, his opinions did not provide a class-wide method for proving causation. Plaintiffs identified no other evidence supplying that method. The court also noted other possible pricing factors, including individual agreements and separate allegations concerning delayed generic competition.

The court identified additional individualized issues involving contracts between some proposed class members and pharmacy benefit managers. Those contracts contained provisions concerning fiduciary duties, dispute resolution, forum selection, limitations of liability, and related matters. Resolving those issues would require individual attention and reduce the efficiencies of class treatment.

Disposition

Judge Eric C. Tostrud denied plaintiffs’ Corrected Motion for Class Certification because plaintiffs had not established numerosity, adequate representation, or predominance. The court denied defendants’ Motion to Exclude the Expert Opinions of Hal J. Singer, Ph.D., as moot because it denied class certification. The order did not decide the ultimate merits of plaintiffs’ RICO or Sherman Act claims.