Generic Drug Price-Fixing MDL Fuels Worries For Defendants

The multidistrict litigation over alleged price-fixing of generic drugs recently consolidated in Pennsylvania’s Eastern District has the potential to emerge as one of the thorniest court fights in the country, and some observers have raised concerns that the numerous defendants could make it harder for individual companies to avoid getting more deeply embroiled in the litigation.

The Judicial Panel on Multidistrict Litigation in April sent 10 lawsuits accusing Mylan NV, Sandoz Inc. and other pharmaceutical companies of fixing prices on generic drugs to U.S. District Judge Cynthia Rufe and expanded the matter beyond the initial two drugs. The cases involve more than 20 defendants, including Par PharmaceuticalActavis Elizabeth LLC and Teva Pharmaceuticals USA Inc.

On Monday, following a telephone conference with lead counsel for both plaintiffs and defendants and the U.S. government, the judge ordered plaintiffs to file amended complaints by Aug. 15 and stayed all discovery in the case until Sept. 15, with the possibility of a further stay.

Judge Rufe’s experience with other MDLs involving pharmaceuticals undoubtedly helped with the panel’s decision to put her in charge. She recently presided over consolidated product liability suits involving GlaxoSmithKline’s Avandia and Pfizer‘s Zoloft.

“The generic pricing MDL that Judge Rufe has is among the most complex in the federal system right now and is maybe the most complex,” said Leiv Blad, co-chair of the antitrust and trade regulation practice at Lowenstein Sandler LLP, who represents defendant Lupin Pharmaceuticals. “She has to ferret out a lot of different cases, some of which are related, some of which are not; cases which deal with different drugs and different fact patterns. It takes a very experienced judge, a very competent judge, to handle these kind of matters.”

The initial motion to transfer only covered digoxin and doxycycline. But in a draft order issued by Judge Rufe last week, she listed 18 different drugs and established lead cases for each one. The U.S. Department of Justice has also been investigating conduct with regard to a broad range of generics and has filed felony charges against two leaders of Heritage Pharmaceuticals.

After the amended complaints Judge Rufe ordered on Monday come in, defendants will have the opportunity to file motions to dismiss, hoping to put an early end to the litigation.

That’s when things will get complicated, thanks to the atypical nature of this MDL. More commonly, the consolidation process is used to navigate the legal ramifications of a tragedy, such as the 2015 Amtrak derailment, in which several hundred suits filed by victims and their families were all consolidated in Philadelphia. All of these cases turned on proving Amtrak’s liability.

“Here, there are different drugs at issue, so proof in one case is not going to be the same as proof in another case. It may be similar, but it’s not going to be the same,” Blad said. “Even within a single case, proof by different plaintiffs as to liability is not going to be the same. So this overall action is by an order of magnitude more complex than the prototypical MDL action.”

Some compared it to the sprawling auto parts MDL, also involving price-fixing allegations, that is slowly being resolved in Detroit. That matter actually features a separate MDL for each auto part in question, consolidated under one umbrella MDL.

“It’s a creative and elegant solution to the biggest price-fixing case ever,” said Constantine Cannon LLP partner Ankur Kapoor. “To the extent that there are some legitimate claims of needing coordination among all generics, the auto parts solution could be a good one.”

The generic-drug makers are unlikely to want a repeat of the auto parts MDL, which has expanded in size and complexity in the five years since it was consolidated.

“My sense is that the auto parts case is one that grew over the years as discovery revealed more collusion,” said Rutgers Law School professor Michael Carrier. “This generics case could show similarities.”

Judge Rufe’s draft order outlining the docketing structure acknowledges that additional cases naming different pharmaceuticals could be transferred in at a later date. The fear of the case growing bigger during discovery raises the ante for defendants during motions to dismiss.

First, Judge Rufe will have to determine how she treats the motions. She could handle all of the separate motions simultaneously, but with 18 drugs and over 20 defendants, this approach will likely tie her up for months. That would counter the underlying purpose of consolidation, which is to speed litigation along by eliminating duplicative processes.

“The best approach is whatever makes it easier for the judge to digest all the briefing,” said Kapoor.

Alternatively, she could elect to group defendants whose purported conduct overlaps and treat their motions to dismiss in clusters. But such a move could also put Judge Rufe in a position to grant limited discovery in the case before she reaches the last clusters, with the goal of speeding matters along. That could also put the defendants in the trailing cases at a disadvantage.

“Any time the plaintiffs are allowed to take discovery in advance of decision on a motion to dismiss gives the plaintiffs more opportunity to get evidence to defeat that motion to dismiss,” Kapoor added, noting that they already face a low standard in showing the plausibility of a conspiracy.

Arnall Golden Gregory LLP partner Jeffrey Jacobowitz also noted the paucity of successful motions to dismiss in antitrust cases, although he said the U.S. Supreme Court‘s 2007 decision in Bell Atlantic Corp. v. Twombly had given defendants a greater prospect of prevailing. But he raised another concern for defendants.

“Limited discovery in an antitrust case is never very limited,” he said. “It can lead to more extensive discovery, and then you can end up with summary judgment motion.”

That adds to the many worries that defendants have in litigation that has been backed by the DOJ investigation and claims from 40 state attorneys general.

“The Republicans, who are now in control of the government, view collusion just as serious as Democrats do, and that’s not always the case in the antitrust sphere,” Carrier said. “The plaintiffs can piggyback on that government investigation. In short, these are very serious cases.”

The direct purchasers are represented by attorneys from NastLaw LLCKaplan Fox & Kilsheimer LLP, Nussbaum Law Group, Roberts Law Firm PAHagens Berman Sobol Shapiro LLP and Berger & Montague PC.

The indirect purchasers are represented by attorneys from Labaton Sucharow LLPFine Kaplan & Black RPCGoldman Scarlato & Penny PCHausfeld LLP, Lite Depalma Greenberg LLC, Hach Rose Schirripa & Cheverie LLPSarraf Gentile LLPLockridge Grindal Nauen PLLPBolognese & Associates LLC, Carson Lynch Ltd., Spector Roseman Kodroff & Willis PCFreed Kanner London & Millen LLC, Christian Sande LLC, Pomerantz LLPShepherd Finkelman Miller & Shah LLPBarrack Rodos & BacineSaveri & Saveri Inc., Hadsell Stormer & Renick LLPBonsignore Trial Lawyers PLLCSteyer Lowenthal Boodrookas Alvarez & Smith LLP, Law Offices of Marc Henzel, Robbins Geller Rudman & Dowd LLPLieff Cabraser Heimann & Bernstein LLP and Cavanagh & O’Hara.

Indirect resellers are represented by attorneys from Cuneo Gilbert & LaDuca LLPBarrett Law Group PA, Furth Salem Mason & Li LLP,  Law Offices of Francis O. Scarpulla and Neal & Harwell PLC.

The drug companies are represented by attorneys from Wilson Sonsini Goodrich & Rosati PCMcDermott Will & Emery LLPFox Rothschild LLPArnold & Porter Kaye Scholer LLPDechert LLPVenable LLPO’Melveny & Myers LLPKasowitz Benson Torres LLPGreenberg Traurig LLPMorgan Lewis & Bockius LLPPepper Hamilton LLP, Lowenstein Sandler LLP, Duane Morris LLP and Stevens & Lee.

The case is In re: Generic Pharmaceuticals Pricing Antitrust Litigation, case number 2:16-md-02724, in the U.S. District Court for the Eastern District of Pennsylvania.

–Additional reporting by Eric Kroh. Editing by Christine Chun and Philip Shea.

Update and correction: This article has been updated to include additional counsel for the generic drug companies, direct purchasers and indirect resellers, and corrected to remove the name of a firm that does not represent the indirect purchasers. 
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