In re HIV Antitrust Litigation

Background

The court had previously deferred two issues from Plaintiffs’ Motion in Limine No. 6, a pretrial motion seeking to limit evidence or arguments at trial. The issues concerned whether defendants could present a pass-on defense and whether they could argue against duplicative recovery by seeking an offset between damages awarded to direct and indirect purchasers.

The court stated that only the indirect purchasers—the EPPs, IHPPs, and United—had a stake in these issues, and used “Plaintiffs” in the order to refer to those indirect purchasers.

Pass-On Defense

A pass-on defense argues that a plaintiff shifted an alleged overcharge to someone else and therefore did not suffer the full claimed injury. Defendants argued that the indirect purchasers passed overcharges on through higher insurance premiums and should be questioned about their policies and procedures for setting premiums and passing on costs.

The court found persuasive the reasoning of other courts that insurance premiums are generally set by anticipating future projected costs, rather than by recovering amounts paid in the past. It also found no evidence that premiums were backward-looking or that defendants could reliably determine how prices for Truvada and Atripla affected the indirect purchasers’ premiums or financial condition. The court noted that the indirect purchasers reimburse prescriptions for thousands, or possibly tens of thousands, of drugs and dosages, and that defendants’ own expert did not appear to propose a specific damages adjustment based on the pass-on theory.

The court further concluded that testimony that prescription-drug costs were considered in setting premiums would not establish how much of any overcharge for Truvada and Atripla was passed on. Allowing the defense would require the jury to speculate about the amount to deduct from damages. The court therefore rejected defendants’ contention that they could assert a pass-on defense based on overcharges allegedly passed on through premiums.

Duplicative Recovery or Offset Defense

Defendants also argued that damages awarded to indirect purchasers should be reduced by damages awarded to direct purchasers for the same injury. Defendants identified 13 jurisdictions whose laws, they argued, either prohibit or limit potential damages to indirect purchasers when direct purchasers also seek damages. The court first rejected plaintiffs’ argument that defendants raised this issue too late, finding that defendants had timely presented it in their opposition to the motion in limine.

On the merits, plaintiffs argued that the cited state laws address duplicative recovery when both direct and indirect purchasers sue under state law—not when a direct purchaser sues under federal law and an indirect purchaser sues under state law. Plaintiffs also argued that allowing an offset in that situation could eliminate the recovery that the states’ indirect-purchaser laws were intended to provide.

The court agreed with plaintiffs’ position. It held that, absent a clear indication from a state statute, legislative history, or case law that duplicative recovery is barred even when a direct purchaser obtains full recovery under federal antitrust law, ambiguities would be resolved in favor of the indirect purchasers.

The court rejected defendants’ offset position under each of the 13 jurisdictions they cited:

- District of Columbia: The statute’s references to direct and indirect purchasers, transfer, and consolidation indicated that it addressed cases involving state-law claims, not a federal direct-purchaser recovery. - Hawaii: The statutory text and Hawaii’s decision to allow indirect-purchaser claims favored plaintiffs, including because the statute required indirect purchasers to receive the full measure of their compensatory damages. - Illinois: The statute was ambiguous and referred to transferring and consolidating actions, suggesting that it concerned direct and indirect purchasers suing under state law. - Maine: The cited decision required proof that an indirect purchaser actually suffered an overcharge but did not clearly support an offset for duplicative recovery. - Minnesota and South Dakota: The statutes referred to state-law suits and described duplicative recovery as an issue in a “subsequent action,” whereas the direct and indirect purchasers here were part of the same suit. - Nebraska: The statute’s reference to claims under specified state-law provisions, and to transferring and consolidating those claims, did not clearly show that it applied when direct purchasers sued under federal law. - New Mexico: The cited provision concerned a pass-on defense for state claims, not using direct-purchaser damages as an offset against indirect-purchaser damages. - New York: The statute’s references to state-law claims and transfer and consolidation, together with New York’s repeal of the rule barring indirect-purchaser suits, favored plaintiffs. - Rhode Island: Although the statutory language appeared broad, the provision authorizing suit in state court and Rhode Island’s repeal of the indirect-purchaser bar counseled against defendants’ interpretation. - Utah: Although Utah’s statute expressly referred to direct and indirect purchasers and damages paid to direct purchasers, the court found that plaintiffs’ interpretation gave full effect to the statute’s language. - Vermont: The statute applied to state antitrust claims and referred to transferring and consolidating related actions, so it did not authorize the proposed offset here. - Wisconsin: The decision defendants cited was from a trial court, addressed standing rather than damages, and did not provide a statutory basis for offsetting direct-purchaser damages against indirect-purchaser damages.

Disposition

Judge Edward M. Chen ordered that defendants could not assert the pass-on defense based on premiums. He also rejected defendants’ position that they could assert a duplicative-recovery defense by using direct purchasers’ damages as a set-off against indirect purchasers’ damages. The court did not address a separate due-process argument defendants raised for the first time at the pretrial conference.