Federal Trade Commission v. Vyera Pharmaceuticals, LLC

Background

The Federal Trade Commission and seven States sued Vyera Pharmaceuticals, LLC, Phoenixus AG, Martin Shkreli, and Kevin Mulleady. The plaintiffs alleged violations of Sections 1 and 2 of the Sherman Act, Section 5(a) of the Federal Trade Commission Act, and various state statutes based on alleged efforts to block or delay generic competition for Daraprim.

The opinion addressed competing motions to exclude expert testimony under Federal Rule of Evidence 702, which governs when expert evidence is admissible. The defendants moved to exclude opinions from Professor C. Scott Hemphill, the plaintiffs’ economist. The plaintiffs moved to exclude portions of testimony from Dr. Anupam P. Jena, a defense expert who offered rebuttal testimony. A bench trial was scheduled to begin on December 14, 2021.

The defendants’ motion concerning Hemphill

The defendants challenged Hemphill’s opinions about causation, his framework for evaluating anticompetitive effects, and his calculation of excess profits. Hemphill relied on pricing and sales data, information about Vyera’s conduct and potential generic competitors, and economic analysis. He opined that FDA-approved pyrimethamine was the relevant product market, that Vyera had monopoly power from its acquisition of Daraprim until generic entry in March 2020, and that Vyera’s agreements impeded generic entry. He calculated alleged excess profits ranging from $52.1 million to $64.6 million under several hypothetical scenarios.

The court denied the defendants’ motion. It found that Hemphill’s causation opinions were within his expertise as an economist and were based on described events and economic analysis. Any tension between his trial and deposition testimony could be explored through cross-examination. The court also concluded that disputes about the economic literature supporting Hemphill’s framework, the degree of competitive effect, and his assumptions about generic entry generally concerned the weight of his testimony rather than its admissibility. The court further found that Hemphill was qualified to construct an excess-profit model, even though he was not offered as an expert on the Food and Drug Administration’s regulatory process.

The plaintiffs’ motion concerning Jena

The court granted the plaintiffs’ motion in part and struck several portions of Jena’s testimony. First, it struck Jena’s opinions that Vyera’s distribution and supplier agreements did not meaningfully impede generic competition. Jena did not provide economic analysis supporting those opinions, and the court found that he lacked expertise to testify about generic manufacturers’ operational decisions. The court stated that arguments supported by the evidence could instead be presented through witness testimony, cross-examination, or closing arguments.

Second, the court struck Jena’s analysis of insurance-claims data from the Optum Database. The database covered 3,401 patients diagnosed with toxoplasmosis between 2006 and the first quarter of 2017, but it excluded hospitalized patients and people without private insurance. The court found the database too unrepresentative to reliably support expert opinions or fact-finding, particularly because it showed no Daraprim use after the 2015 price increase even though nearly 300,000 Daraprim tablets were sold during the following twelve months.

The court denied the request to strike Jena’s testimony about state drug-substitution laws. It treated the plaintiffs’ objections largely as challenges to the testimony’s weight and explained that Jena offered the testimony as an economist discussing consumer behavior, not as an expert on state drug regulations. The court also struck Jena’s testimony about typical cost differences between branded and generic drug manufacturers under Rules 401 and 403 because Jena had acknowledged that those differences were not relevant to this case, where Vyera had not invested in developing Daraprim.

Disposition

The court denied the defendants’ October 20, 2021 motion to exclude Hemphill’s testimony. It granted in part the plaintiffs’ October 20, 2021 motion to exclude Jena’s testimony. The opinion ruled on the admissibility of expert evidence and did not decide the merits of the plaintiffs’ antitrust claims.