In re EpiPen ERISA Litigation

Background

The plaintiffs sued CVS Caremark, Express Scripts, Optum, and Prime Therapeutics, which the opinion identifies as the nation’s four largest pharmacy benefit managers. The remaining claim arose under Section 404(a) of the Employee Retirement Income Security Act, which requires a fiduciary to act solely in the interest of a plan’s participants and beneficiaries.

The plaintiffs alleged that the pharmacy benefit managers negotiated rebates, discounts, and administrative fees with Mylan Pharmaceuticals and related entities concerning EpiPens. They claimed that the managers’ failure to provide individual EpiPen purchasers with the benefit of those payments contributed to higher list prices, deductibles, and coinsurance payments.

Four plaintiffs sought certification of four nationwide classes—one for each pharmacy benefit manager. The proposed classes included current or former participants in, or beneficiaries of, Employee Retirement Income Security Act plans who paid a deductible or coinsurance for an EpiPen processed through a plan for which the relevant manager received a rebate or other fee from Mylan.

Class-Certification Analysis

Federal Rule of Civil Procedure 23 requires a proposed class to satisfy several conditions, including sufficient size, common legal or factual questions, representative claims typical of the class, and representatives who will adequately protect the class’s interests. The court stated that failing any one of these requirements prevents certification.

The defendants did not dispute that the proposed classes were large enough. The court focused on commonality, meaning whether the claims depended on a common issue capable of classwide resolution.

The court held that the plaintiffs could not establish commonality for three parts of their claims:

- Fiduciary status: Whether a pharmacy benefit manager was acting as a fiduciary depended largely on the terms of each manager’s contract with each individual health plan. The plans differed in how they governed rebates, discounts, administrative fees, and the manager’s discretion. Some plans required all or part of the rebates to be passed to the plan, which could then use them to reduce premiums or prescription-drug costs for all participants. - Breach: Determining whether a manager breached a fiduciary duty would require examining each plan’s contract, the manager’s discretion, and whether its conduct conflicted with the plan’s expectations. The court also noted that using rebates to benefit all plan participants could raise questions about whether the interests of EpiPen purchasers differed from those of participants who did not purchase EpiPens. - Injury: The plaintiffs sought disgorgement—the return of profits allegedly retained improperly—instead of individual damages. The court held that determining which profits were inequitably retained would also require examining each plan’s contract and the percentage of rebates or fees passed through to the plan. Those contract-specific issues affected whether injury existed and the amount of any injury.

The court concluded that the plaintiffs had not shown that the proposed classes had common questions of law or fact and therefore denied class certification. The court expressly stated that it was not deciding the merits of the plaintiffs’ underlying claims as part of the class-certification analysis.

Expert-Witness Motions

The defendants moved to exclude testimony from Dr. Stephen W. Schondelmeyer and Dr. Stephan M. Levy. Because the experts’ testimony supported the class-certification motion, and the court found class certification inappropriate, the court treated the exclusion motions as moot. It denied both motions without prejudice, stating that the defendants could renew their challenges if the testimony would later be presented to a jury.

Disposition

Judge Paul A. Magnuson ordered that the plaintiffs’ motion for class certification was denied. He ordered that the defendants’ motions to exclude Dr. Schondelmeyer’s and Dr. Levy’s expert testimony were each denied without prejudice. The opinion notes that five plaintiffs remained listed in the case, but only four sought class certification; it also notes that Amy M. Khan was listed as an active party but was not discussed in the class-representative analysis.