In Re: MYLAN N.V. SECURITIES LITIGATION

Background

Plaintiffs brought a proposed securities class action against Mylan N.V. and several of its officers. They alleged that Mylan misclassified the EpiPen for purposes of the Medicaid Drug Rebate Program, used an anticompetitive rebate scheme involving pharmacy benefit managers, and participated in price-fixing and market-allocation schemes involving generic drugs. The Third Amended Complaint alleged price fixing involving 32 generic drugs and market allocation involving seven generic drugs, and added James Nesta as a defendant.

Mylan moved for partial dismissal under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint adequately states a legal claim. Plaintiffs moved for class certification. The court applied heightened pleading requirements for securities-fraud claims under Rule 9(b) and the Private Securities Litigation Reform Act.

Motion to Dismiss

EpiPen classification. The court allowed the Section 10(b) claims based on Mylan’s statements that its Medicaid rebate calculations carried a “risk of errors” to continue. Plaintiffs alleged that the statements were misleading because Mylan did not disclose that it knew, or recklessly failed to know, that it had misclassified the EpiPen. The court rejected Mylan’s argument that the 2019 Right Rebate Act showed that the governing statute had been ambiguous and therefore defeated allegations that Mylan knew about the misclassification or acted with intent to deceive. The court relied in part on allegations that the Centers for Medicare & Medicaid Services had repeatedly told Mylan that the EpiPen was misclassified.

EpiPen rebate scheme. The court also allowed the Section 10(b) claims concerning rebates paid to pharmacy benefit managers to continue. It held that plaintiffs adequately alleged that Mylan’s executives knew about pricing decisions and that Mylan used the rebate scheme to force Sanofi from the market and inflate the EpiPen’s price. The court further held that plaintiffs adequately alleged loss causation, meaning a connection between the alleged misconduct and investors’ economic losses, through allegations that Mylan’s stock fell after public criticism of the EpiPen’s high price and after the Federal Trade Commission announced an investigation.

Generic-drug price fixing and market allocation. The court dismissed the claims concerning 18 generic drugs because plaintiffs did not adequately plead the required evidence of an unlawful price-fixing or market-allocation agreement for those drugs and did not address Mylan’s arguments concerning most of them. The court rejected plaintiffs’ argument that inadequate allegations about individual drugs could be combined to support a broader claim involving virtually all of Mylan’s generic drugs.

The court allowed the Divalproex price-fixing allegations to continue. It maintained its earlier conclusion that plaintiffs had adequately alleged a price-fixing agreement. Although Mylan presented an FDA import alert concerning an import ban on facilities operated by Wockhardt, the court said the document did not mention Divalproex and could not establish the truth of the assertions Mylan made about the alleged supply shortage at the motion-to-dismiss stage.

Individual defendants. The court allowed the claims against James Nesta to continue. Plaintiffs alleged that Nesta participated in the anticompetitive scheme by submitting “cover bids” intended to create the false impression that they were competitive. The court held that this allegation adequately pleaded a deceptive act supporting scheme liability.

The court dismissed the market-allocation claims against Heather Bresch, Robert Coury, Paul Campbell, Kenneth Parks, and John Sheehan concerning Fenofibrate, Clonidine-TTS Patch, Tolterodine Extended Release, Capecitabine, Enalapril, and Valsartan HCTZ. Plaintiffs had not adequately connected those defendants to decisions about which markets or customers to target. The court also dismissed all claims against Rajiv Malik except the previously allowed Doxy DR market-allocation claims.

UBS report. The court allowed claims based on the UBS report to continue. Mylan argued that the report contained no new information and therefore was not a corrective disclosure, meaning a public disclosure that reveals or corrects information previously misstated or omitted. The court deferred the question of how strong the report’s corrective-disclosure evidence was until after discovery and held that the claims could proceed at this stage.

Class Certification

The court granted plaintiffs’ unopposed motion for class certification under Federal Rules of Civil Procedure 23(a) and 23(b)(3). The certified class consists of persons or entities that purchased common stock of Mylan N.V. or its predecessor, Mylan Inc., between February 21, 2012, and May 24, 2019, inclusive, subject to the exclusions stated in the order. The court appointed Menorah Mivtachim Insurance Ltd., Menorah Mivtachim Pensions and Gemel Ltd., Phoenix Insurance Company Ltd., and Meitav DS Provident Funds and Pension Ltd. as class representatives, and appointed Pomerantz LLP as class counsel.

Disposition

Judge J. Paul Oetken granted in part and denied in part defendants’ motion to partially dismiss the Third Amended Class Action Complaint. He granted plaintiffs’ motion for class certification and ordered defendants to answer the surviving claims within three weeks from the date of the order.