KPH Healthcare Services, Inc. v. Novartis Pharmaceuticals Corporation

Background

The order concerns all direct-purchaser class actions in the multidistrict antitrust litigation identified as In re: Novartis and Par Antitrust Litigation. The direct-purchaser plaintiffs included Drogueria Betances, LLC; Rochester Drug Co-Operative, Inc.; FWK Holdings, LLC; and KPH Healthcare Services, Inc., also known as Kinney Drugs, Inc. The defendants identified in the order were Novartis Pharmaceuticals Corporation and Novartis AG, collectively referred to as Novartis, and Par Pharmaceutical, Inc.

The proposed class covered all persons or entities in the United States, its territories, possessions, and Puerto Rico that purchased Exforge directly from Novartis or a generic version of Exforge directly from Par between September 21, 2012, and March 30, 2015. The order excluded Novartis, Par, certain related persons and entities, federal governmental entities, and specified retailer plaintiffs.

The order described common questions concerning whether Novartis and Par conspired to suppress generic competition, whether Par agreed to delay market entry, whether Novartis made a large reverse payment to Par, whether the conduct violated the antitrust rule of reason, and whether the conduct caused overcharge damages. These matters were described as allegations and proposed class-wide questions; the order did not resolve them.

Class Certification for Settlement

The court certified the proposed class solely in connection with the settlement. It found that the class was sufficiently numerous and geographically dispersed to make joining all members impracticable. It also found that the proposed common questions satisfied the commonality requirement, that the named plaintiffs’ claims were typical, and that the named plaintiffs would fairly and adequately protect the class’s interests.

Under the class-action rules, the court further found, solely for settlement purposes, that common questions predominated over individualized questions and that a class action was the superior method for resolving the claims. The court appointed the named plaintiffs as class representatives and Garwin Gerstein & Fisher LLP as lead counsel.

Preliminary Settlement Approval

The court found that it would likely be able to approve the settlement under the class-action settlement rules and preliminarily approved the settlement and its releases as fair, reasonable, and adequate, subject to class members’ opportunity to object and to the court’s later consideration at a final fairness hearing. The proposed settlement required Novartis to pay $126,850,000 into an escrow account for the class. In exchange, the settlement contemplated dismissal of the litigation between the direct-purchaser plaintiffs and Novartis and releases of certain claims against Novartis, as described in the settlement agreement.

The court stated that the settlement resulted from arm’s-length negotiations by experienced counsel after years of litigation and mediation. It found that the settlement fell within the range of potentially approvable settlements but expressly made further consideration necessary at the fairness hearing.

Notice, Administration, and Hearing

The court approved the proposed form and method of notice to class members and directed that notice be sent to entities that directly purchased Exforge or generic Exforge from Novartis or Par during the class period. Class members were given procedures to request exclusion or object to the settlement. The court appointed RG/2 Claims Administration as claims administrator and The First State Trust Company as escrow agent.

The court preliminarily approved the plan for allocating the settlement fund, subject to further consideration at the final fairness hearing. It also approved the settlement fund as a qualified settlement fund and retained continuing jurisdiction over issues involving its formation and administration.

The fairness hearing was scheduled to address final approval of the settlement, approval of the distribution plan, attorneys’ fees and expense reimbursement, possible service awards for the named plaintiffs, and entry of final judgment terminating the litigation between the direct-purchaser plaintiffs and Novartis. The order also stayed proceedings between those plaintiffs and Novartis until the court makes a final settlement decision and, if appropriate, enters final judgment.

Disposition and Limits of the Order

The court granted the unopposed motion for certification of a settlement class, appointment of class counsel, preliminary approval of the proposed settlement, approval of the notice plan, and approval of the proposed schedule for a fairness hearing. The order was not a final approval of the settlement and did not determine the merits of the antitrust allegations. It also stated that the order and settlement materials were not evidence of, or an admission or concession by Novartis regarding, the validity of any claim or Novartis’s liability.