Citations
- 331 F. Supp. 3d 152
Full opinion text
McMahon, C.J.:
Plaintiffs J.M. Smith Corporation d/b/a Smith Drug Company ("Smith") and Rochester Drug Co-Operative, Inc. ("RDC") (collectively, "Direct Purchaser Plaintiffs" or "Plaintiffs") commenced this antitrust suit on behalf of themselves and a putative class of similarly situated purchasers of Namenda. Plaintiffs allege that Defendants - Actavis PLC (now known as Allergan PLC), Forest Laboratories, LLC, Forest Laboratories, Inc., and Forest Laboratories Holdings Ltd. (collectively, "Forest" or "Defendants") - schemed to delay entry of generic versions of an Alzheimer's disease treatment by entering into collusive settlements with various generic drug companies and attempting a hard switch in violation of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 (2016).
Namenda ® ("Namenda") is a branded drug used to treat moderate to severe stages of Alzheimer's, a neurodegenerative brain disease that causes memory loss, among other symptoms. Forest had a license to market both Namenda IR (immediate release), a twice-daily drug, and Namenda XR (extended release), a once-daily drug, in the United States under U.S. Patent No. 5,061,703 (the "'703 Patent"). (Am. Compl. ¶ 2, Dkt. No. 29.)
Plaintiffs allege that Forest engaged in a two-part anticompetitive scheme to improperly block generic competition for Namenda IR by: (1) conspiring with manufacturers of generic versions of Namenda IR to drop their legal challenges to the '703 Patent and delay launch of generic versions of Namenda IR until an identical date three months after the expiration of the '703 Patent ; and (2) using this improperly obtained period of additional exclusivity to launch the successor branded product, Namenda XR, in order to force the conversion of the market from Namenda IR to the clinically equivalent Namenda XR (hereinafter the "hard switch") before market entry of the generic versions of Namenda IR. (See id. at ¶ 5.) Here, Plaintiffs allege that Defendants' illegal hard switch strategy included prematurely removing Namenda IR from the market before its patent expiration such that only Namenda XR would be available for purchase in the months before Forest faced generic competition for Namenda IR. Plaintiffs allege Defendants knew that, given the nature of Alzheimer's treatment, once a patient was on Namenda XR, there was a decreased likelihood that the patient would "reverse commute" back to a generic version of Namenda IR after cheaper generic versions of the drug became available.
Presently before the Court are two motions: Defendants' motion for summary judgment on all claims in Direct Purchaser Plaintiffs' First Amended Complaint (Dkt. No. 434) and Plaintiffs' motion to certify this as a class action. (Dkt. No. 400.) For the reasons set forth below, Defendants' motion for summary judgment is DENIED, and Plaintiffs' motion for class certification is GRANTED.
Additionally, Defendants have filed six separate motions to exclude the opinions and proposed testimony of Plaintiffs' experts (see Dkt. Nos. 437, 439, 441, 443, 445, 505), each of which is addressed below.
I. DAUBERT MOTIONS
Before I recount the facts, I must consider exactly what should and should not be part of the record on Defendants' motion for summary judgment. "If the expert testimony is excluded as inadmissible, the court must make the summary judgment determination without that evidence." Water Pollution Control Auth. of City of Norwalk v. Flowserve US Inc. , No. 3:14 Civ. 00549 (VLB), 2018 WL 1525709, at *5 (D. Conn. Mar. 28, 2018).
Defendants have moved to exclude the opinions and proposed testimony of: (1) Janet K. DeLeon (Dkt. No. 437); (2) Professor Einer Elhauge (Dkt. No. 439); (3) Dr. Russell Lamb (Dkt. No. 445); (4) Dr. Ernest Berndt and Dr. Russell Lamb regarding their use of forecast averages (Dkt. No. 441); (5) John R. Thomas, Esq. (Dkt. No. 505); and (6) George W. Johnston, Esq. (Dkt. No. 443).
The Daubert Standard
"On a summary judgment motion, the district court properly considers only evidence that would be admissible at trial." Nora Beverages, Inc. v. Perrier Grp. of Am., Inc. , 164 F.3d 736, 746 (2d Cir. 1998) (citing Raskin v. Wyatt Co. , 125 F.3d 55, 66 (2d Cir. 1997) ). Whether expert evidence should be admitted on a motion for summary judgment is a matter committed to the district court's "broad discretion." Yurman Design, Inc. v. PAJ, Inc. , 29 F. App'x 46, 48 (2d Cir. 2002) (internal citation and quotation marks omitted); see also Nora Beverages, Inc. , 164 F.3d at 746.
Under Rule 702 of the Federal Rules of Evidence, which codifies the standard for admissibility set forth by Daubert v. Merrell Dow Pharmaceuticals, Inc. , 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), the court's role is to determine whether the "expert" is qualified to testify as an expert. Rule 702 provides:
A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.
Fed. R. Evid. 702.
"The proponent of the expert testimony has the burden to establish the [ Rule 702 ] admissibility requirements, with the district court acting as a gatekeeper to ensure that the expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Novick v. AXA Network LLC , 714 F. App'x 22, 25 (2d Cir. 2017) (citing In re Pfizer Inc. Sec. Litig. , 819 F.3d 642, 658 (2d Cir. 2016) ) (internal citation omitted); see also United States v. Apple, Inc. , 791 F.3d 290, 335 n.24 (2d Cir. 2015) (citing United States v. Williams , 506 F.3d 151, 160 (2d Cir. 2007) ).
Though the Rule "embodies a liberal standard of admissibility," Nimely v. City of New York , 414 F.3d 381, 395 (2d Cir. 2005), "when an expert opinion is based on data, a methodology, or studies that are simply inadequate to support the conclusions reached, Daubert and Rule 702 mandate the exclusion of that unreliable opinion testimony." Cedar Petrochemicals, Inc. v. Dongbu Hannong Chem. Co. , 769 F.Supp.2d 269, 282 (S.D.N.Y. 2011) (internal citations omitted). "In Daubert , the United States Supreme Court confirmed that trial courts should serve as sentries, preventing juries from being overwhelmed by unsupportable speculation cloaked as expertise." Id. at 281-82.
Furthermore, the Second Circuit has held that to "warrant admissibility ... it is critical that an expert's analysis be reliable at every step." United States v. Morgan , 675 F. App'x 53, 55 (2d Cir. 2017), cert. denied , --- U.S. ----, 138 S.Ct. 176, 199 L.Ed.2d 103 (2017) (internal citation omitted). Of course, "the district court must focus on the principles and methodology employed by the expert, without regard to the conclusions the expert has reached or the district court's belief as to the correctness of those conclusions." Amorgianos v. Nat'l R.R. Passenger Corp. , 303 F.3d 256, 266 (2d Cir. 2002) (internal citation omitted). Nevertheless, as the Supreme Court has recognized,
conclusions and methodology are not entirely distinct from one another ... [N]othing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence that is connected to existing data only by the ipse dixit of the expert. A court may conclude that there is simply too great an analytical gap between the data and the opinion proffered.
Id. at 266 (citing Gen. Elec. Co. v. Joiner , 522 U.S. 136, 146, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997) ).
Moreover, "The standard to evaluate non-scientific expert testimony is whether the expert bases testimony upon professional studies or personal experience and employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field." Louisiana Wholesale Drug Co. v. Sanofi-Aventis , No. 07 Civ. 7343 (HB), 2008 WL 4580016, at *6 (S.D.N.Y. Oct. 14, 2008) (citing Kumho Tire Ltd. v. Carmichael , 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999) ).
1. Janet K. DeLeon
Defendants move to exclude the opinions and testimony of Plaintiffs' expert, Janet K. DeLeon. The motion is GRANTED.
Plaintiffs offer Ms. DeLeon as an expert in the process of developing and launching a generic drug. Plaintiffs offer two reports from Ms. DeLeon: (1) an initial report dated September 15, 2017 (Hamburger Decl. Ex. 10, Dkt. No. 438 ("DeLeon Rep.") ); and (2) a supplemental report dated October 23, 2017 (Id. at Ex. 11 ("DeLeon Supp. Rep.").) Ms. DeLeon was asked to answer the following question: whether there were any supply, equipment or manufacturing challenges that would have prevented five generic competitors - Amneal Pharmaceuticals, Dr. Reddy's Laboratories, Inc., Lupin Pharmaceuticals, Inc., Mylan Pharmaceuticals, Inc. ("Mylan"), and Sun Pharmaceutical Industries, Inc. - or Forest itself from launching a generic version of Namenda IR prior to July 2015. (See DeLeon Rep. ¶ 6.) Her answer is that there were none. She rests her opinion on "[her] educational background, [her] professional experience, [her] knowledge and understanding of pharmaceutical industry practices, [U.S. Food and Drug Administration ("FDA") ] regulations, guidelines, and enforcement policies, and publicly-available materials such as FDA MAPPs [Manual of Policies and Procedures] and Guidances." (Id. at ¶ 6.)
A. Qualifications
Ms. DeLeon's credentials certainly qualify her to offer an opinion on this question.
She has spent 30 years in the pharmaceutical industry, much of which was spent working on new drug launches, including specifically the launching of generics. She has sat on launch teams for 25 years. She has experience at Aventis as a liaison with external manufacturers of drug products and active ingredients, and she managed several applications to the FDA for approved products. At Beckloff, she helped companies develop new and generic drugs and get approval for them to go to market. Moreover, before starting her own pharmaceutical consultancy, Ms. DeLeon was Associate Director and then Director of Product Development at Cypress Pharmaceutical, Inc. and Hawthorn Pharmaceuticals, Inc. (together "Cypress") for seven years where she handled at least 12 separate drug launches. (Id. at ¶ 6.)
Her three decades of experience give her familiarity with both the drug launch process and with impediments to launch - including barriers to entry like supply, new technologies, or need for new equipment. In short, her credentials are impeccable.
B. Summary of Ms. DeLeon's Reports
Ms. DeLeon divides her analysis into three sections.
First, she explains, in considerable detail, the process for launching a new generic - a process with which she is intimately familiar - including the relevant regulatory and manufacturing background, and standard pharmaceutical industry practices employed in preparing for the launch of a new drug.
She then evaluates the extensive evidence derived during discovery about each generic's process leading up to the July 2015 launch of its generic Namenda IR. This revealed that each generic had followed precisely the launch process she outlined based on her own experience.
Finally, she opines - "based on her review of the evidence and [her] almost 30 years of pharmaceutical industry experience," - that nothing would have prevented the generic competitors from doing exactly the same thing as early as 2012. (Id. at ¶ 3.) She writes: "[I]n my opinion, there would have been no supply, equipment, or manufacturing challenges that would have prevented the Generics from launching their respective generic Namenda IR tablet products during that time period." (Id. at ¶ 23.) She continues, "I have seen no evidence in the record suggesting that Defendants could not have followed the same process and launched an authorized generic concurrently with the five Generics, if the Generics had a launch date any time between June 2012 and July 2015." (Id. at ¶ 28.)
In reaching her conclusions, Ms. DeLeon stressed that Namenda IR is categorized as a solid oral dose product, which is among the most common pharmaceutical products on the market; that immediate release tablets are among the easiest pharmaceutical products to manufacture; and that the supply of the active ingredient in Namenda IR (memantine hydrochloride) was readily available at all relevant times. (See id. at ¶ 3.)
Plaintiffs asked Ms. DeLeon to draft a supplemental report - in light of her review of additional documents and deposition testimony that became available after her initial report - in which her opinions and conclusions about the generics' and Forest's ability to launch generic Namenda IR in 2012 did not change. (See generally DeLeon Supp. Rep.)
C. Analysis: Motion to Exclude Ms. DeLeon's Reports
Defendants' principal argument is that Ms. DeLeon's conclusions are highly speculative. The Court agrees that her opinion is little more than expert "ipse dixit ." Gen. Elec. Co. v. Joiner , 522 U.S. 136, 145, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997). As discussed below, the problem lies in the way Ms. DeLeon derived her opinion. It adds nothing to the direct evidence that cannot be elicited from fact witnesses - nothing other than the use of Ms. DeLeon's impressive credentials to bolster the credibility of those witnesses impermissibly.
Ms. DeLeon did not review in-house documents or deposition testimony from any of the generics or Forest to support her conclusion that the generics and Forest could have launched Namenda IR in 2012. Instead, she relies solely on her review of documents and testimony regarding the actual product launches by these parties in 2015. Defendants cite to several portions of Ms. DeLeon's deposition testimony in which she admitted as much. (See Hamburger Decl. Ex. 25, Dkt. No. 438 ("DeLeon Dep. Tr.") at 91:2 - 11; 143:24 - 144:8.)
Of course, Ms. DeLeon has a perfectly sensible and credible explanation for the lack of contemporaneous evidence; she specifically opines that drug companies place a low priority on tasks related to a drug that they cannot manufacture for a few years, so it was no surprise that they did not engage in pre-launch activity three years before they were permitted, by the terms of the settlements, to enter the generic market. (See id. at ¶ 36.)
Lacking the kind of evidence she was able to connect to the 2015 launches, Ms. DeLeon relied on three things in order to reach her conclusion about the lack of barriers to entry in 2012: the companies had been able to effectuate a normal launch, without experiencing any disruption or challenge arising from supply, equipment or manufacturing issues, in July 2015; the companies were all major drug manufacturers with the capacity to have done exactly the same thing in earlier years; and a representative of each generic, testifying pursuant to Fed. R. Civ. P. 30(b)(6), had indicated under oath that his/her employer could in fact have undertaken the launch process for Namenda IR much sooner than it did.
According to Plaintiffs, Ms. DeLeon's conclusions are based on an application of her extensive experience in the pharmaceutical industry to the facts presented. However, Ms. DeLeon's experience is no substitute for "scientifically sound analysis." United States v. Apple Inc. , 952 F.Supp.2d 638, 694 (S.D.N.Y. 2013), aff'd , 791 F.3d 290 (2d Cir. 2015).
Ms. DeLeon could have obtained data, from the generics or elsewhere, about matters that might have impacted the generics' ability to enter the market earlier: matters like whether there were any problems with the supply of drug ingredients in earlier years; whether there were equipment failures or manufacturing issues at any of the generics in 2011-12 (issues that apparently did not exist in 2014-15); whether the manufacturing capacity at those companies was already being used to manufacture other drugs such that it could not readily have been converted to Namenda at that time; and about whether Namenda IR would have been prioritized over those other drugs had there been a business reason to consider diverting manufacturing capacity to Namenda during earlier years.
Had Ms. DeLeon reviewed data of the above sort, and concluded, based on her substantial experience, that the generics (or some of them) could have launched as much as three years earlier, it would certainly have been within her expertise to so opine. But simply saying, "They could do it in 2015, so they could have done it in 2012," without any analysis of the market and corporate conditions that might have impacted the generics' ability to launch generic Namenda in 2012, is a conclusion tethered to nothing whatever. This Court must exclude "unsupport[ed] speculation cloaked as expertise." Cedar Petrochemicals, Inc. v. Dongbu Hannong Chem. Co. , 769 F.Supp.2d 269, 281-82 (S.D.N.Y. 2011).
To the extent that Plaintiffs point to the testimony of the generics' 30(b)(6) witnesses - all of whom testified that they could have launched generic Namenda as early as 2013 (not 2012) - to undergird Ms. DeLeon's opinion, their reliance exposes another problem with Ms. DeLeon's proposed testimony. Those fact witnesses can be called to testify at trial. They can repeat their testimony that then respective employers could have entered the generic Namenda market earlier but for the settlement of the patent suit. And they can offer an explanation, grounded in the actual circumstances facing each individual generic, about why that was so. Plaintiffs can then argue that the patent settlements were anticompetitive, and the trier of fact can accept or reject that argument after evaluating the credibility of these witnesses.
"[T]he amended Rules of Evidence require that expert testimony be based on 'sufficient facts or data' and on 'reliable principles and methods' that the expert 'witness has applied reliably to the facts of the case.' " United States v. Dukagjini , 326 F.3d 45, 54 (2d Cir. 2003) (citing Fed. R. Evid. 702 ). Here, the only thing that Ms. DeLeon's "expert" opinion does is bolster the credibility of the 30(b)(6) witnesses - misleading the trier of fact into thinking that, if an "expert" like Ms. DeLeon accepts the testimony of the 30(b)(6) witnesses, so should it. That is not the province of an expert; indeed, it is an arrogation of the function of the trier of fact. See Amorgianos v. Nat'l R.R. Passenger Corp. , 303 F.3d 256, 266 (2d Cir. 2002). While Ms. DeLeon's experience might make her capable of assessing Defendants' adherence to "standard pharmaceutical industry practice," that experience does not transform her into an oracle. (DeLeon Dep. Tr. at 109:1 - 4.) Her opinions and testimony are inadmissible and will not be considered on the motion for summary judgment.
2. Professor Einer Elhauge
Defendants move to exclude the opinions and testimony of Plaintiffs' expert, Professor Einer Elhauge, who opines in support of Plaintiffs' theory that the reverse payment from Forest to Mylan delayed generic entry. In the professor's opinion, without a reverse payment to generic competitors, the generic competitors would have entered the market on November 2, 2012, approximately 26.3 months earlier than they did.
Plaintiffs offer Revised Expert Report of Professor Einer Elhauge dated September 20, 2017 (Hamburger Decl. Ex. 1, Dkt. No. 438 ("Elhauge Rep.").) Plaintiffs retained Professor Elhauge to address, among other things, what economic analysis reveals about Forest and Mylan's settlement of the Namenda IR patent litigation. He was asked to opine on: (a) whether an alleged reverse payment from Forest to Mylan delayed generic entry into the market; (b) what the settlement entry date would have been in a no-payment settlement; (c) whether a reverse payment was reasonably necessary and the least restrictive means to achieve a settlement between Forest and Mylan; and (d) whether there were any procompetitive justifications for the reverse payment. (See Elhauge Rep. ¶ 1.) Professor Elhauge was asked to model a but-for world "with no payment." (Hamburger Decl. Ex. 14, Dkt. No. 438 ("Elhauge Dep. Tr") at 80:11 - 17.)
A. Qualifications
Professor Elhauge is the Petrie Professor of Law at Harvard Law School, where he teaches and writes about the economic analysis of antitrust law, health policy, and various other subjects. (See Elhauge Rep. ¶ 3.) He has authored and co-authored several leading antitrust casebooks, and written articles on monopolization, bundled discounts, loyalty discounts, and reverse-payment settlements. (See id. ) Professor Elhauge has served as an expert on antitrust economics before Congress, arbitration panels, and foreign competition agencies. He has also testified as an expert witness on antitrust economics in dozens of federal cases. (See id. at ¶ 4.)
B. Summary of Professor Elhauge's Reports
Professor Elhauge begins by summarizing the settlement agreement, signed on July 21, 2010, between Forest and Mylan, which resulted in Mylan dropping its challenge to the Namenda IR patent. (See Elhauge Rep. ¶¶ 6 - 11.) He then estimates the parties' actual bargaining strength based on the settlement terms. (See id. at ¶¶ 28 - 33.) He uses this estimate - along with other factors, such as the two companies' profit projections and their expectations regarding the pending patent litigation - to predict what the generic entry date would have been in a no-payment settlement. (See id. ) Finally, Professor Elhauge considers how sensitive his analysis is to changes in the estimates of each parties' strengths (e.g. , patent strength, litigation costs, litigation end date, etc.). (See id. at ¶¶ 33 - 54.) He concludes that his finding - that the reverse payment caused a significant delay in entry of generic memantine hydrochloride into the market - is robust enough to hold true even given changes to these estimates. Finally, he posits that Defendants' risk aversion could not have justified the reverse payment. (See id. at ¶¶ 56 - 58.)
C. Analysis: Motion to Exclude Professor Elhauge's Reports
Defendants move to exclude the reports and testimony of Professor Elhauge's on three grounds.
First, Defendants argue that Professor Elhauge's opinions are at odds with the Supreme Court's decision in F.T.C. v. Actavis, Inc. , 570 U.S. 136, 133 S.Ct. 2223, 186 L.Ed.2d 343 (2013), because Professor Elhauge presumes that any payment from a patentee to a prospective generic, regardless of its size or the reasons for making it, causes anticompetitive delay. That, however, is a mischaracterization of Professor Elhauge's analysis.
The Supreme Court in Actavis specifically declined to hold that "reverse payment settlement agreements are presumptively unlawful." Actavis , 570 U.S. at 158, 133 S.Ct. 2223. It instructed courts reviewing such agreements to proceed by applying a "rule of reason" analysis to reverse payment agreements. Id. at 159, 133 S.Ct. 2223. Under this analysis, courts have to assess the payment's "size, its scale in relation to the payor's anticipated future litigation costs, its independence from other services for which it might represent payment, and the lack of any other convincing justification." Id. at 159, 133 S.Ct. 2223. Thus, only those reverse payments that are " 'large and unjustified' " violate the antitrust laws. Sergeants Benevolent Ass'n Health & Welfare Fund v. Acta Vis, PLC , No. 15 Civ. 6549 (CM), 2016 WL 4992690, at *13 (S.D.N.Y. Sept. 13, 2016) (quoting Actavis , 570 U.S. at 158, 133 S.Ct. 2223 ).
As an initial matter, Professor Elhauge explains in his report that "a reverse payment is large enough to anticompetitively delay entry whenever the payment amount exceeds the litigation costs the patent holder avoided by settling." (Elhauge Rep. ¶ 42.) He determines that the reverse payment from Forest to Mylan, which he estimates to be $30.9 million, was large enough to exceed Forest's avoided litigation costs (an estimated $3.5 million) and was thus potentially anticompetitive. (Id. at ¶ 11, 20.) Only after determining that the payment exceeded avoided litigation costs did Professor Elhauge proceed to use economic analysis to assess the degree of delay the reverse payment caused. This approach is fully consistent with Actavis .
Next, Defendants argue that Professor Elhauge's opinions are speculative, internally inconsistent, and contradicted by the evidence. The Court will not waste time on this, except to say that this part of their Daubert motion, "like so many such motions, is nothing more than a 'we do not agree with his opinion so it is junk science' motion, of the sort that causes this and many judges to view all Daubert motions with a certain degree of skepticism." Bank of New York Mellon Tr. Co., Nat'l Ass'n for Registered Certificate Holders of Morgan Stanley Capital I Inc. v. Morgan Stanley Mortg. Capital, Inc. , No. 11 Civ. 505 (CM), 2017 WL 733225, at *1 (S.D.N.Y. Feb. 10, 2017). Here, Defendants' disagreements with Plaintiffs' expert are appropriate subjects for cross-examination.
Lastly, Defendants argue that Professor Elhauge's opinions about when entry "would have" occurred improperly attempt to usurp the role of the jury. Defendants cite to United Food and Commercial Workers Local 1776 & Participating Employers Health and Welfare Fund v. Teikoku Pharma USA , 296 F.Supp.3d 1142, 1149 (N.D. Cal. 2017) (hereinafter "Lidoderm" ), in support. In that case, which also involved an alleged reverse payment settlement, Professor Elhauge similarly opined in support of plaintiffs' alternate causation theory that in the hypothetical but-for world, even without a reverse payment, the defendants would have agreed to a settlement allowing a competitor into the market a year earlier than they did. The defendants in L idoderm moved to exclude Professor Elhauge's economic model and but-for conclusions as unsound, difficult to understand, and not transparent. The court granted the motion in part, holding that "Elhauge may opine that in his view the parties would have been rationally motivated to agree to settlement allowing [a competitor] early entry by specific dates." Id. at 1149. The court then held that Elhauge could not "testify that the parties would have agreed to entry on a date certain, as that impinges on a determination left up to the jury." Id. So too here.
Professor Elhauge must qualify his opinions by testifying that "it would have been economically rational for both parties" to enter into a no-payment settlement in a but-for world by specific dates, not that they necessarily would have. (Opper Decl. Ex. 2, Dkt. No. 421 ("Elhauge Dep. Tr. II") at 225:18-227:18.) That ultimate issue is for the trier of fact to decide.
With that modification, Defendants' motion is DENIED.
3. Dr. Russell Lamb
Defendants move to exclude the opinions and testimony of Plaintiffs' expert, Dr. Russell Lamb, who opines on class certification and damages caused by Defendants' alleged anticompetitive conduct.
Plaintiffs offer Amended Expert Report of Dr. Russell Lamb dated September 20, 2017 (Hamburger Decl. Ex. 2, Dkt. No. 438 ( ("Lamb Rep.") ); and an Amended Expert Reply Report dated November 9, 2017 (Id. at Ex. 3 ("Lamb Reply Rep.") ) to correct for an error in his earlier reply report.
Dr. Lamb, an economist, was asked to analyze (1) whether the delay in generic entry impacted prices paid by proposed class members; (2) whether Defendants' allegedly unlawful hard switch impacted prices paid by proposed class members; (3) whether it is possible to establish, using economic analyses and evidence common to the proposed class as a whole, rather than specific to individual members, that proposed class members were injured by Defendants' alleged anticompetitive conduct under two separate but-for worlds (as described below); and (4) the amount of aggregate damages suffered by proposed class members as a result of the alleged misconduct under the two separate but-for worlds. (See Lamb Rep. ¶ 5.)
For the purposes of his report, Dr. Lamb conducted economic research on the market and prices paid for memantine hydrochloride by members of the proposed class and reviewed transaction-level data produced by Forest and several generic manufacturers. He also reviewed documents produced by various parties in this matter (including documents, expert reports and testimony from the previous action brought by the New York Attorney General), documents or filings presented before the FDA, as well as a variety of publicly-available documents including trade press and academic literature. (Id. at ¶ 12.)
A. Qualifications
Dr. Lamb, an expert in antitrust economics, has testified in U.S. district court on matters concerning antitrust liability, impact, and damages. For more than 20 years, Dr. Lamb has consulted on the economics of markets and prices. (Id. at ¶ 2.) Courts have relied upon his economic analyses of the market in certifying classes of direct purchasers and indirect purchasers in litigations involving allegations of anticompetitive conduct. (Id. at ¶ 3.) Additionally, he has been hired as an economic consultant to the World Bank and the Government of Peru, and has assisted on various economic consulting projects for private firms, government agencies, and law firms. (Id. )
He is the President of an economic consulting firm known as Monument Economics Group, based in Arlington, Virginia. The firm provides economic research and quantitative and statistical analysis to clients in the United States, Canada, and elsewhere internationally. (Id. at ¶ 1.) He also currently teaches "Law and Economics" at The George Washington University. (Id. )
B. Summary of Dr. Russell Lamb's Reports
Dr. Lamb's reports describe, in part, the relevant pharmaceutical regulatory framework, competitive effects of generic entry, background on the memantine hydrochloride market, and an analysis of the proposed class members. He emphasizes that "By September 2015, three months after generic entry, Forest had lost 89.9 [%] of Namenda IR sales to generic manufacturers" who were selling the drug at about a 95% price discount. (Lamb Rep. ¶ 81 - 82.) He notes that the "rapid substitution of generic memantine hydrochloride for branded Namenda IR, is consistent with the literature describing the effects of generic entry on prices and sales in pharmaceutical markets." (Id. at ¶ 83.)
By way of example, Dr. Lamb suggests that, as a result, proposed class members "who purchased Namenda IR at a price of $0.58 per tablet in July 2015, would have purchased the generic at aprice below $0.58 in July 2015 had generic competition started in 2012, rather than July 2015, because had generic competition started in 2012, the decline in generic prices that actually occurred after July 2015 would have occurred much earlier." (Id. at ¶ 85.)
Dr. Lamb analyzes "two but-for scenarios that Plaintiffs allege would have occurred in a world free of the Defendants' alleged misconduct" - a No Reverse Payment But-For World and a No Hard Switch But-For World. (Lamb Rep. ¶ 7.)
No Reverse Payment But-For World . Under the first scenario, Dr. Lamb considers damages arising from Forest's alleged reverse payment to Mylan (the "No Reverse Payment But-For World"). He assumes that had "Defendants not entered into an allegedly illegal agreement with Mylan, they still would have settled, but without a large reverse payment and with an entry date [in 2012 ] (rather than in 2015 as provided for in their ... agreement)." (Id. at ¶ 8.) Using an economic model, Dr. Lamb compares the actual price purchasers paid for memantine hydrochloride to the prices that would have prevailed but for Defendants' conduct, and compares the actual volumes of brand Namenda purchased to the volumes of Namenda that would have been purchased but for Defendants' conduct. (Id. at ¶ 127 - 42.)
He concludes that "all or nearly all proposed [c]lass members were impacted by Defendants' allegedly anticompetitive agreement with Mylan, assuming that generic entry was delayed and would have occurred earlier otherwise, in that they paid higher prices for brand-name Namenda IR, Namenda XR, and/or generic memantine hydrochloride than they otherwise would have had generic competition started sooner, because they would have purchased (or purchased more) generic memantine hydrochloride at prices below branded Namenda and would have purchased the generic at lower prices." (Id. at ¶ 13(a).)
No Hard Switch But-For World . Under the second scenario, Dr. Lamb considers damages suffered by direct purchasers of Namenda products arising solely from Forest's announcement of a hard switch from Namenda IR to Namenda XR (the "No Hard Switch But-For World"). To confirm his hypothesis that Forest's February 2014 discontinuation announcement had an impact on the market, Dr. Lamb conducted a statistical analysis called a "structural break test" to analyze conversion to Namenda XR using market share data from NSP. (See id. at ¶ 119.) He concludes that "there is a structural break in the Namenda XR conversion rate at the time the Hard Switch strategy was implemented beginning in February 2014," (id. ), which illustrates that the hard switch was effective in converting more Namenda IR prescriptions to Namenda XR than otherwise would have been the case. He goes on to analyze the case in which Defendants did not engage in their hard switch strategy (never announced that they would remove Namenda IR from the market) and no generic entry occurred prior to the actual date at which AB-rated generics for Namenda IR became available (i.e. , July 2015).
He concludes that "all or nearly all proposed [c]lass members who purchased at least Namenda IR and XR, or XR, were impacted by Defendants' anticompetitive [h]ard [s]witch strategy in that they paid higher prices for Namenda XR than they otherwise would have for generic memantine hydrochloride, and they would have purchased the less expensive generic (or more of it) in place of the more expensive branded Namenda." (Id. at ¶ 13(b).)
For purposes of class certification, Dr. Lamb finds that aggregate overcharge damages can be proven through classwide economic models using formulas and methodologies that do not require individualized analysis. (Id. at ¶ 121-61.) Where available, he uses transaction-level data produced by Forest and some of the generic manufacturers to calculate damages. He calculates the "aggregate, class-wide damages arising from Defendants' alleged misconduct under the two separate but-for worlds." (Id. at ¶ 13.) He estimates that "Total damages suffered by Proposed Class members are between $6.09 billion and $6.93 billion under the No-Reverse Payment But-For World, and between $776 million and $814 million under the No Hard Switch But-For World." (Id. )
C. Analysis: Motion to Exclude Dr. Lamb's Reports
An antitrust claim has three elements: (1) a violation of antitrust law; (2) injury and causation; and (3) damages. In re Visa Check/MasterMoney Antitrust Litig. , 280 F.3d 124, 136 (2d Cir. 2001). This portion of Defendants' motion centers on proof of the second element of an antitrust claim - commonly referred to as "antitrust injury" - which requires "an antitrust plaintiff [to] prove that its injury was, in fact, caused by the defendant's violation of the antitrust laws." US Airways, Inc. v. Sabre Holdings Corp. , No. 11 Civ. 2725 (LGS), 2017 WL 1064709, at *16 (S.D.N.Y. Mar. 21, 2017) (quoting U.S. Football League v. NFL , 842 F.2d 1335, 1377 (2d Cir. 1988) ).
Defendants move to exclude the reports and testimony of Dr. Lamb on three grounds.
First, Defendants argue that Dr. Lamb's structural break test does not prove antitrust injury. Defendants claim that Dr. Lamb's test fails because it utilizes market-wide data rather than purchaser-specific information, which approach fails to isolate and measure those patients who switched from Namenda IR to XR because of the February 2014 announcement from those patients who switched for other reasons. Stated otherwise, Defendants claim that Dr. Lamb's analysis understates the degree to which Namenda XR could have captured the market even without the hard switch strategy.
This argument is unpersuasive.
Dr. Lamb's conclusion that the hard switch announcement increased conversion to Namenda XR was based on a number of observations that are consistent with Plaintiffs' allegations. Plaintiffs allege "that as a result of Forest's dissatisfaction with the extent of conversion to Namenda XR for several months after its launch, Forest began to consider an option where it would discontinue or dramatically restrict the supply of Namenda IR several months before the availability of generic memantine hydrochloride in order to accomplish a 'forced switch' whereby physicians and patients would have little choice but to switch to Namenda XR." (Id. at ¶ 89.) In support of this theory, Dr. Lamb reviewed Forest's internal documents and forecasts confirming the company's formation and implementation of their strategy to reduce the level of competition from generic memantine hydrochloride products.
(See id. at ¶ 95.) Dr. Lamb relied on forecasts that contained both a "withdrawal" (or "hard switch") scenario and a "conventional" (or "soft switch") scenario, as well as internal high-level discussions of and reliance upon these forecasts to reach conclusions about what the conversion rate of Namenda IR to XR would have been absent initiation of the hard switch strategy. For example, Figure 6 entitled Forest Namenda Forecasts , is a copy of Forest's soft switch and hard switch projections which show that Namenda XR's share of the memantine hydrochloride market would be significantly higher under the hard switch strategy versus the soft switch strategy. (Id. ) Dr. Lamb also notes that:
In a May 2013 speech concerning the launch of Namenda XR, Mark Devlin of Forest stated: '[T]he core of our brand strategy with XR is to convert our existing 1R business to Namenda XR as fast as we can and also gain new starts for Namenda XR. We need to transition volume to XR to protect our Namenda revenue from generic penetration in 2015 when we lose IR patent exclusivity.' Mr. Devlin added that the 'better job we do moving business form IR to XR, the more Forest revenue we hopefully shelter from generic threats down the road,'
(Id. at ¶ 94.)
Furthermore, the evidence includes sworn statements from doctors stating that they stopped prescribing Namenda IR after the hard switch announcement. (See id. at ¶ 104.) Dr. Lamb concludes that the evidence demonstrates that Forest's intention to withdraw Namenda IR was to trigger wide-spread conversion to Namenda XR and that the February announcement was successful in starting to do so.
To confirm his hypothesis, Dr. Lamb conducted a regression analysis called a "structural break test" showing that Forest's implementation of its hard switch strategy would impact the market by increasing conversion to Namenda XR. He used actual sales data from IMS National Sales Perspectives ("NSP"). He concludes that "there is a structural break in the Namenda XR conversion rate at the time the Hard Switch strategy was implemented beginning in February 2014," (id. at ¶ 119), which illustrates that the hard switch was effective in converting more Namenda IR prescriptions to Namenda XR than otherwise would have been the case.
Defendants' complain that Dr. Lamb's structural break test fails because it does not isolate the cause of the February 2014 break. However, Dr. Lamb testified that the test was not designed to do so. He testified that "[the test] is not able to tease out where the source of the structural break comes from by itself. One has to implement it because one believes that there is some event which leads to a structural break... I had reason to believe that the hard switch strategy which began somewhat before February '14 and which included the announcement... would have an effect at that point. And that's why I chose that date." (Hamburger Decl. Ex. 19, Dkt. No. 438 ("Lamb Dep. Tr. I") at 96:2 - 19.)
In other words, Dr. Lamb's test demonstrates that there was a "structural break" in February 2014, which happened to be the date when the hard switch was announced. Correlation does not prove causation, but the coincidence in timing between the announcement and the structural break shown by the data is some evidence of causation in support of Plaintiffs' theory. Perhaps other things were happening in the market in February 2014, and Forest may go into them to undercut Dr. Lamb's data. Taken together with the other evidence analyzed by Dr. Lamb, the regression is designed to confirm a hypothesis that is itself based on other indicia. For the purposes of Daubert , Dr. Lamb's analysis passes muster. "At most, [Forest's] arguments concerning the assumptions in [Dr. Lamb's] analysis go to its weight, not admissibility of that testimony." Dial Corp. v. News Corp. , No. 13 Civ. 6802, 2016 WL 690868, at *4 (S.D.N.Y. Feb. 17, 2016).
Moreover, contrary to Defendants' argument, a plaintiff is only required to show that alleged illegal conduct is "a material cause of the [antitrust] injury; a plaintiff need not exhaust all possible alternative sources of injury in fulfilling his burden of proving compensable injury." Id. (quoting Zenith Radio Corp. v. Hazeltine Research, Inc. , 395 U.S. 100, 114 n.9, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969) ) (emphasis added). "[T]o prove a 'causal connection' between the defendant's unlawful conduct and the plaintiff's injury, the plaintiff need only 'demonstrate that [the defendant's] conduct was a substantial or materially contributing factor' in producing that injury." In re Publ'n Paper Antitrust Litig. , 690 F.3d 51, 66 (2d Cir. 2012) (quoting Litton Sys., Inc. v. AT & T Co. , 700 F.2d 785, 823 n.49 (2d Cir. 1983) ). Second Circuit precedent makes clear that in order to prove causation:
[P]laintiffs do not have to prove that the unlawful activity that the defendants allegedly engaged in was the sole cause of their injuries. Plaintiffs meet their burden if they show that the defendants' unlawful facts substantially contributed to their injuries, even though other facts may have contributed significantly. An antitrust plaintiff is not required to show that the defendants' acts were a greater cause of the injury than other factors. Plaintiffs need only show that their injury to some degree resulted from defendants' violation.
NFL , 842 F.2d at 1377 (emphasis in original).
Second, Defendants argue that Dr. Lamb improperly expanded the time period of alleged injury to include data from before the February 2014 Namenda IR discontinuation announcement and after the injunction on Namenda XR conversion.
Specifically, Defendants claim that his methodology improperly includes alleged injury from before the February 2014 announcement, in violation of this Court's earlier conclusion about the proper damages period. See Sergeants Benevolent Ass'n Health & Welfare Fund v. Actavis, PLC , Nos. 15 Civ. 6549, 15 Civ. 7488, 2016 WL 4992690, at *11 (S.D.N.Y. Sept. 13, 2016) ("According to the Second Circuit: The hard switch began on February 14, 2014 with the announcement of Defendants' intention to withdraw Namenda IR and was suspended in September 2014 when Defendants agreed to a "standstill" during the litigation proceedings.") (internal citation omitted).) In his report, Dr. Lamb cites documents demonstrating that, before the February 2014 announcement, Forest had already begun discussed its hard switch plan outside the company. (See Lamb Rep. ¶¶ 89, 102.)
Plaintiffs argue that Dr. Lamb included discussion of pre-February 2014 conduct in order to undercut Forest's theory - that increased conversion to Namenda XR after February 2014 was the result of better formulary placement for XR rather than the hard switch. (Lamb Reply Rep. ¶ 51; see also Lamb Rep. ¶¶ 89, 102; Berndt Rep. ¶ 56; Berndt Reply Rep. ¶ 29; PRSoF ¶ 373; PASoF ¶ 67 (collecting evidence of Forest's leveraging of withdrawal plan to achieve better formulary placement).) These opinions are admissible. Defendants' difference of opinion is fair ground for cross examination. Likewise are Dr. Lamb's opinions about any lasting impact the anticompetitive conduct had post-injunction.
Lastly, Defendants argue that the flaws in Dr. Lamb's "No Hard Switch" methodology make his No Reverse Payment methodology unreliable as well. For the reasons discussed above, this argument is without merit.
Defendants' motion is DENIED.
4. Forecast Averages from Dr. Russell Lamb and Dr. Ernst Berndt
Defendants move to exclude the opinions and testimony of Plaintiffs' experts, Dr. Russell Lamb and Dr. Ernst Berndt, regarding their use of forecast averages in their respective analyses. This motion is DENIED.
Dr. Berndt, a Professor in Applied Economics at the Sloan School of Management at the Massachusetts Institute of Technology, submitted: (1) an initial report dated September 15, 2017 (Hamburger Decl. Ex. 7, Dkt. No. 438 ("Berndt Rep.") ); (2) a reply expert report dated October 25, 2017 (Id. at Ex. 8 ("Bemdt Reply Rep.") ); and an amended reply expert report dated November 8, 2017 (Id. at Ex. 9 ("Berndt Am. Reply. Rep.") ). In his initial report, Dr. Berndt opines on (1) "whether it is reasonable as a matter of economics to conduct a damages analysis of the impact of Forest's announcement and conduct of a 'hard switch' marketing campaign ... based upon use of relevant Forest projections and forecasts" and if so, (2) "what objectively reasonable expected market share Namenda XR would have had if there had been no Hard Switch announcement and marketing campaign (as shown by Forest's reasonable forecasts)." (See Berndt Rep. ¶ 6.)
In his report, Dr. Lamb relies on Dr. Berndt's "opinion that these forecasts of the Namenda XR conversion rate are a reliable basis for an analysis of the incremental effect of the Hard Switch on the conversion from branded Namenda IR to branded Namenda XR." (Lamb Rep. ¶ 144.) Thus, Dr. Lamb factored Forest's forecasts into his damages analysis. Specifically, based on Forest's predictions of Namenda XR conversion absent the hard switch, he concluded that the "Namenda XR conversion rate would rate 30 percent in 18 months after Namenda XR entered the market absent the Hard Switch." (Id. at ¶ 150.) For purposes of his damages calculation, "The difference between the actual and but for Namenda XR conversion rates, multiplied by total market DOT [days of therapy] times the generic penetration rate, yields the amount of branded XR purchases that would have been generic Namenda IR purchases but for the Hard Switch. This volume multiplied by the difference in price between branded Namenda XR and generic Namenda IR then yields the amount of overcharges to the Hard Switch." (Id. at ¶ 13.)
A. Analysis: Motion to Exclude Dr. Berndt's and Dr. Lamb's Forecast Averages
Defendants' principal complaint is that the experts blindly adopt certain of Forest's forecasts without first scrutinizing them. However, a substantial portion of Dr. Lamb's report and the entirety of Dr. Berndt's report are dedicated to analyzing and evaluating Forest's forecasts for reliability.
That hardly renders their conclusions inadmissible.
Defendants advance three reasons why this testimony should not be admitted.
First, Defendants argue that Dr. Berndt and Dr. Lamb did not perform any economic analysis to determine what the conversion rate would have been in the but-for world.
Second, Defendants argue that neither of the doctors applied any expert methodology to average forecasts or to select which forecasts to include in their averages, and that as a result both doctors haphazardly selected forecasts for their averages.
Third, Defendants argue that neither doctor tested the forecasts to determine their reliability.
None of these arguments holds water.
In his report, Dr. Berndt undertook a robust analysis of the process by which Forest came to its forecasts and expectations for the conversion rate between Namenda IR and Namenda XR under a soft switch and a hard switch scenario. He closely studied the inputs into Forest's analysis, analyzed the evolution over time of that analysis, and Forest's internal and external use and reliance upon that analysis. In particular, Dr. Berndt considered that Forest had been in the market for many years, was very familiar with the dynamics between physicians, caregivers, patients, and the various health care entities involved in the treatment of Alzheimer's patients. (Berndt Rep. ¶ 40.)
Dr. Berndt considered that Forest had done a searching analysis of analogous situations in which pharmaceutical manufacturers had brought an extended release product into a market in which that company already had an immediate release product. (Id. at ¶ 41.)
Dr. Berndt considered that Forest surveyed physicians, caregivers, pharmacists and health care entities about the Namenda XR launch and conversion. (Id. at ¶ 26.)
Dr. Berndt considered that Forest specifically factored in the impact of a cost-conscious and critical segment of the market for Namenda Alzheimer's patients, Long Term Care. (Id. at ¶ 28.) Dr. Berndt considered that Forest's analysis evolved over time, including with the assistance of actual sales data after Namenda XR launched. (Id. at ¶ 51-55.)
Dr. Berndt also considered that Forest's executives valued these analyses as reliable and accurate as they used them when communicating their expectations about Namenda XR share in the soft switch scenario internally (including to Forest's Board of Directors) and externally to the investing community. (Id. at ¶ 32-38, 48-50.)
Thus, Dr. Berndt did not just assume, as Defendants argue, that Forest's estimates of a 30% conversion in a "soft switch" scenario were reliable (as found by Judge Sweet and adopted for purposes of the motion to dismiss by me). (See Dkt. No. 253 at 24 - 25 (citing New York v. Actavis, PLC (Namenda I ), No. 14 Civ. 7473, 2014 WL 7015198, at *28, 40-41 (S.D.N.Y. Dec. 11, 2014) ). Instead, Dr. Berndt applied his scholarship, knowledge, and experience from his many decades of studying the pharmaceutical industry. He analyzed the work that Forest put into its forecasting, as well as the extent to which Forest relied upon those forecasts in making business decisions and communicating with the investor community. He endeavored to determine that the forecasting effort was robust and reliable.
Dr. Berndt concludes that "the [internal] forecasts reviewed by Dr. Lamb [were] reliable," as they were based on Forest's own study of the Namenda market and analogous experiences of other drugs. (Id. at ¶ 40; see also Berndt Reply Rep. ¶¶ 4 - 20.) He further concludes that "[t]he appropriate 'but for' analysis in this case is one in which Forest makes no hard switch announcement of any kind, executes no communications campaign of any kind aimed at alerting patients ... and others of the impending withdrawal of Namenda IR, and makes no other effort of any kind to implement the hard switch." (Berndt Rep. ¶ 69.)
Likewise, Dr. Lamb independently reviewed and analyzed Forest's internal document and testimony regarding the soft-switch conversion rate. He did not blindly adopt Dr. Berndt's analysis. He factored in the fact that, "Forest used various analogues of drug franchises that had experienced conversion from an immediate release to an extended release product when forecasting the conversion rate from Namenda IR to XR." (Id. at ¶ 151.) He noted that Forest updated the Namenda XR conversion forecasts regularly, sometimes creating multiple forecasts in a few weeks. (See id. ) Using the forecast documents that were created after Namenda XR had entered the market and before the hard switch was implemented, Dr. Lamb averaged the forecasted soft switch Namenda IR to XR conversion rate for November 2014, 18 months after Namenda XR entered the market, and found the but-for conversion rate to be approximately 30 percent. (Id. at. ¶ 152; see also id. at Tbl. 3.) Contrary to Defendants' argument, Dr. Lamb did not "cherry-pick." He averaged multiple iterations of Forest's forecasts and came up with a 30% conversion rate. He then confirmed this number was reasonable based on its specific use in numerous company presentations, statements by company executives on earnings calls, and testimony by these executives. (See id. at ¶ 154.)
The use of Defendants' own forecasts to model a but-for world has been held to be a sound economic methodology. Indeed, it is commonly used in courts considering generic delay damages. See, e.g., King Drug Co. of Florence, Inc. v. Cephalon, Inc. , 309 F.R.D. 195, 212 (E.D. Pa. 2015), rev'd and remanded on other grounds, In re Modafinil Antitrust Litig. , 837 F.3d 238 (3d Cir. 2016). Defendants may not hide behind the fact that forecasts are predictions, and by their very nature incorporate some uncertainty - particularly given the controlling legal rule that a defendant may not benefit from any uncertainty concerning damages its own wrongful conduct has caused.
Defendants' complaint that Drs. Berndt and Lamb did not consider all forecasts from the relevant period before the hard switch conduct is of no moment to the admissibility of their testimony. This is a matter for cross-examination. If Forest contends that important forecasts were omitted from the experts' analysis, it can introduce them at trial.
The motion is DENIED.
5. Professor John R. Thomas, Esq.
Defendants move to exclude the opinions and testimony of Plaintiffs' expert, Professor John R. Thomas, Esq. Plaintiffs substituted Professor Thomas in place of their proposed expert, Deborah Jaskot, after this Court granted Teva Pharmaceutical USA, Inc.'s nonparty motion to disqualify Ms. Jaskot from serving as Plaintiffs' regulatory expert due to her conflicts as a former Teva executive. (See Dkt. No. 355.)
Plaintiffs offer a report from Professor Thomas dated November 14, 2017 (Johnson Decl. Ex. 1, Dkt. No. 506 (Expert Report of Professor John R. Thomas, Esq. ("Thomas Rep.") )-) Plaintiffs retained Professor Thomas to (1) provide testimony concerning the Drug Price Competition and Patent Term Restoration Act (the "Hatch-Waxman Act"), Pub. L. No. 98-417, 98 Stat. 1585, "and its 'grand bargain' between the competing interests of promoting the innovation of new drugs and promoting competition from generic drugs;" (2) "determine whether there would be any impediments to certain generic drug companies obtaining final approval from [the] FDA to sell their generic versions of Namenda at any point from April 17, 2011 through July 11, 2015;" and (3) "determine whether there would have been any impediments to Forest obtaining approval from [the] FDA to market an authorized generic version of Namenda from April 17, 2011 through July 11, 2015." (Thomas Rep. ¶¶ 3 - 5.)
A. Qualifications
Professor Thomas has taught courses on the Hatch-Waxman Act at Georgetown Law School since 2002, has written a textbook concerning the Hatch-Waxman Act, patent law, and pharmaceutical drugs, and has been qualified to opine on AND As in district court before. See, e.g., Apotex, Inc. v. Cephalon, Inc. , 06 Civ. 02768, 2011 U.S. Dist. LEXIS 154863 (E.D. Pa. Mar. 28, 2011). He possesses more than two decades of experience with respect to the Hatch-Waxman Act, including authoring and co-authoring numerous Congressional Research Service Reports. He was appointed and served as a Special Master in Hatch-Waxman litigation. (Id. at ¶ 15.)
He has taught hundreds of patent examiners principles of patent and evidence law as an instructor at the U.S. Patent and Trademark Office Patent Academy, and is admitted to both the patent bar (No. 40,389) and the bar of the state of Maryland. (Id. at ¶¶ 11 - 13.) Moreover, he has practiced patent law full-time as an associate attorney at Finnegan, Henderson, Farabow, Garrett & Dunner LLP in Washington, D.C. (Id. at ¶ 13.)
B. Summary of Professor John R. Thomas, Esq.'s Report
Professor Thomas divides his analysis into three sections.
First, he discusses the relevant regulatory background regarding drug approval under the Hatch-Waxman Act, including the FDA approval process for brand name and generic drugs generally, the FDA's orange book listing of approved drug products, along with the various marketing exclusivities made available by the Act.
Second, Professor Thomas gives background on the FDA approval of branded and generic Namenda, including the various generic challenges to Forest's Namenda patent, Forest's settlement of these challenges, and the generics' respective approval and launch timelines.
Third, Professor Thomas opines that based on his analysis of the available data, there were no regulatory impediments to the five generics seeking and obtaining final approval for their generic versions of Namenda on or after April 17, 2011.
C. Analysis: Motion to Exclude Professor John R. Thomas, Esq.'s Reports
Defendants move to exclude the reports and testimony of Professor Thomas on three grounds.
First, Defendants call certain portions of Professor Thomas's opinion irrelevant and prejudicial. For example, the professor writes, "When competitors within the pharmaceutical industry ... choose to bypass or subvert the legislative framework, they potentially engage in strategic behavior that defies the policy goals embodied in the Hatch-Waxman Act." (Thomas Rep. ¶ 30.) They argue that Professor Thomas implies that all Hatch-Waxman patent settlements are "suspect" or "inherently 'subvert' Congressional intent to make low-cost generic pharmaceuticals broadly available to the public." (Defs.' Mem. of Law at 1.) This argument lacks even a scintilla of merit. Defendants cannot point to a single instance where Professor Thomas actually offers such an opinion. As for what Defendants believe he "implied," their beliefs are of no moment. This basis for the motion to exclude is DENIED.
Second, Defendants argue that Professor Thomas should not be allowed to explain the Hatch-Waxman statutory scheme, its regulations, and how they relate to the generics and potential authorized generics in this case. According to Defendants, those explanations would constitute improper legal opinions. They are wrong.
While, "This circuit is in accord with other circuits in requiring exclusion of expert testimony that expresses a legal conclusion," Hygh v. Jacobs , 961 F.2d 359, 363 (2d Cir. 1992), "expert testimony is viewed as helpful in cases, like this one, involving complex statutes or issues outside of the general knowledge of the jury." United States v. Universal Rehab. Servs., Inc. , No. 94 Cr. 147, 1996 WL 297575, at *10 (E.D. Pa. May 31, 1996), aff'd sub nom. United States v. Universal Rehab. Servs. (PA), Inc. , 205 F.3d 657 (3d Cir. 2000). In his report, Professor Thomas explains the procedures under the complex law governing approvals of generic drugs, which is subject matter that is foreign to the average person. He does not provide "legal conclusions" or opine on whether Defendants violated the Act, but simply explains the mechanics of drug approval, which provides context that is likely to "assist the trier of fact." Fed. R. Evid. 702. I will not preclude this testimony. If Thomas's testimony strays beyond that into matters that are irrelevant or otherwise inadmissible, I will be the first to disallow it.
Finally, Defendants claim that Professor Thomas is not qualified to opine on Abbreviated New Drug Application ("ANDA") approval, since he has neither personally prepared nor filed an ANDA, has never communicated with the FDA regarding an ANDA, and has never worked within the FDA or any pharmaceutical company. That all may be true, but it is of no moment.