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The Hospital Authority of Metropolitan Government of Nashville and Davidson County v. Momenta Pharmaceuticals, Inc.

United States District Court, M.D. Tennessee, Nashville Division

September 23, 2019

THE HOSPITAL AUTHORITY OF METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY, TENNESSEE, d/b/a NASHVILLE GENERAL HOSPITAL and AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES DISTRICT COUNCIL 37 HEALTH & SECURITY PLAN, Plaintiffs,
v.
MOMENTA PHARMACEUTICALS, INC. and SANDOZ INC., Defendants.

          MEMORANDUM OPINION

          WAVERLY D. CRENSHAW JR., CHIEF UNITED STATES DISTRICT JUDGE.

         Pending before the Court is Nashville General Hospital (“NGH”) and American Federation of State, County and Municipal Employees District Council 37 Health & Security Plan’s (“DC 37”) (collectively “Plaintiffs”) Renewed Motion for Class Certification and Appointment of Class Counsel. (Doc. No. 349.) Momenta Pharmaceuticals, Inc. (“Momenta”) and Sandoz Inc. (“Sandoz”) (collectively “Defendants”) have responded in opposition (Doc. No. 361) and also filed a Motion to Exclude the Report and Opinions of Plaintiffs’ Expert Dr. Russell L. Lamb (Doc. No. 360). Plaintiffs filed both a reply in support of their renewed class certification motion (Doc. No. 369) and a response to Defendants’ Motion to Exclude (Doc. No. 367). The Court held an evidentiary hearing on these motions on July 12, 2019. After the evidentiary hearing, the Court requested post-hearing briefs from the parties, which have been filed. (Doc. Nos. 384, 387.) At the Court’s count, there have been no fewer than seven briefs regarding class certification, one aborted evidentiary hearing, amendment of the class definition, and one full evidentiary hearing. Needless to say, these issues are ripe and ready to be decided. For the reasons that follow, the Court will deny Defendants’ Motion to Exclude the Report and Opinions of Plaintiffs Expert Dr. Russell L. Lamb and grant Plaintiffs’ Renewed Motion for Class Certification.

         A. Procedural Background[1]

         On October 14, 2015, NGH filed its initial complaint against the Defendants, alleging four separate counts under the Sherman Antitrust Act (“Sherman Act”). (Doc. No. 1.) NGH sought damages, as well as declaratory and injunctive relief. (Id. at 27.) NGH brought its claims on behalf of itself and a nationwide class of persons and entities, pursuant to the Class Action Fairness Act of 2005 (“CAFA”) and Fed.R.Civ.P. 23(a) and (b). (Id. at 6, 21.) As explained in more detail in Section B infra, the alleged Sherman Act violations centered on the role that Defendants played in a conspiracy to monopolize the production and distribution of enoxaparin, a generic version of the drug Lovenox®. (Id. at 4-23.)

         In response to the complaint, Defendants filed a motion to transfer the case to the District of Massachusetts and a Motion to Dismiss. (Doc. Nos. 65, 68.) Momenta additionally filed a separate Motion to Dismiss or Transfer for Improper Venue. (Doc. No. 62.) On September 29, 2016, Magistrate Judge Barbara Holmes entered a Report and Recommendation recommending that the motions be denied. (Doc. No. 114.) Defendants filed joint and separate objections to the Report and Recommendation. (Doc. Nos. 117, 119.) On March 21, 2017, the Court issued a Memorandum Opinion that adopted in part and declined to adopt in part the Report and Recommendation. (Doc. No. 134.) The Court dismissed NGH’s Sherman Act claims on the ground that NGH did not have standing to seek damages under the “indirect purchaser rule.” (Id. at 8-14.) However, NGH’s Sherman Act claims were permitted to proceed on declaratory and injunctive theories of relief. (Id. at 16.)

         Thereafter, NGH filed a motion for leave to file an amended complaint. (Doc. No. 140.) The amended complaint contained three primary changes: (1) the addition of DC 37 as a new representative plaintiff; (2) the addition of various state antitrust and consumer protection claims; and (3) the addition of new substantive allegations pertaining to Defendants’ alleged anticompetitive conduct. (Doc. No. 141 at 5.) Defendants filed a response in opposition. (Doc. No. 148.) Ultimately, Magistrate Judge Holmes granted Plaintiffs’ motion for leave to file an amended complaint, and Plaintiffs filed their amended complaint on December 21, 2017. (Doc. No. 191.) Defendants then filed three Motions to Dismiss under Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and (12)(b)(6). (Doc. Nos. 193, 195, 197.) The Court granted Defendants’ Rule 12(b)(1) motion, denied the Rule 12(b)(2) motion, and granted in part and denied in part the 12(b)(6) motion. (See Doc. No. 253.) The net result of these rulings was that Plaintiffs’ federal Sherman Act claims were dismissed but the majority of their state law antitrust claims were allowed to proceed. (See Doc. No. 254 at 1-2.) Defendants filed two Motions for Reconsideration of the Court’s Rule 12(b)(2) ruling, both of which were denied. (See Doc. Nos 257, 258, 275, 276.)

         The parties then proceeded to the class certification phase. After Plaintiffs’ initial Motion for Class Certification (Doc. No. 243) was fully briefed, the Court determined that an evidentiary hearing was necessary and set the hearing for May 13, 2019. (See Doc. No. 283.) At the conclusion of the first day of the evidentiary hearing, the Court inquired into the Plaintiffs’ objective criteria for identifying members of the class. (See Doc. No. 329 at 172.) In response to this line of inquiry, Plaintiffs returned the next day with an amended class definition that contained substantial changes. (Doc. No. 330 at 12.) In light of this development, the Court continued the evidentiary hearing, denied Plaintiffs’ initial Motion for Class Certification (Doc. No. 243) as moot, and allowed Plaintiffs leave to file a Motion to Amend the Class Definition (Doc. No. 318). Plaintiffs filed their Motion to Amend the Class Definition (Doc. No. 321), which the Court granted. (Doc. No. 340.) The parties then briefed the new class definition, the Court held another evidentiary hearing, and the matter is now ripe for disposition.

         B. Factual Background

         NGH is a metropolitan charity hospital that purchases certain drugs it administers, including the generic anticoagulant enoxaparin. (Doc. No. 191 at 6-7.) DC 37 is a non-profit health and welfare benefit plan covering public sector employees, retirees and their families. (Id.) Plaintiffs allege that they have, and will continue to, indirectly purchase or provide reimbursement for Lovenox® and enoxaparin. (Id. at 7-8.)

         The drug at issue, enoxaparin, is used in the prevention and treatment of deep vein thrombosis and in the treatment of heart attacks. (Id. at 10.) Sanofi-Aventis (“Aventis”), a non-party to this lawsuit, brought enoxaparin to market in the United States under the brand name Lovenox® and held a patent on the drug, which was subsequently held to be unenforceable in 2007. (Id. at 10-11.)

         However, Momenta is the assignee of a patent (the “886 Patent”) for a chemical process used to test the quality of enoxaparin (“Method <207>”). (Id. at 13.) In 2003, Momenta entered into a collaboration agreement (the “Collaboration Agreement”) with Sandoz, whereby Sandoz eventually began manufacturing and selling generic enoxaparin. (Id. at 11-14.) The Collaboration Agreement provided for profit-sharing between Momenta and Sandoz regarding Sandoz’s sales of its generic enoxaparin, so long as Defendants remained the sole source of generic enoxaparin in the United States. (Id. at 13.) Further, the Collaboration Agreement provided for Momenta to receive “milestone payments” if Sandoz remained the sole supplier of generic enoxaparin. (Id.) Essentially, the Collaboration Agreement provided Momenta with a powerful incentive to use whatever rights it had to prevent other parties from entering the generic enoxaparin market.

         By 2007, Aventis had requested that the United States Pharmacopeial Convention (“USP”) adopt criteria for enoxaparin that included a standardized test to assure that enoxaparin produced by drug companies in the United States met chemical criteria approved by the FDA.[2] (Id. at 16.) Aventis’s proposed method for testing enoxaparin was Method <207>. (Id.) At that time, Aventis had a pending patent application for Method <207>. (Id. at 17.) Defendants, who participated in the relevant USP review panel, objected to Aventis having a patent that covered a standardized USP test, contending that the test, once adopted, should be free for anyone to use. (Id.) After discussions with USP, Aventis agreed to abandon its patent application. (Id. at 18.) However, unbeknownst to the USP panel, Momenta had its own patent application pending-the 886 Patent-that, when granted, would give Momenta patent rights that could be asserted against third parties that used Method <207>. (Id. at 18-19.) In December 2009, the USP approved and adopted Method <207> as the standardized test to assure enoxaparin quality, and the 886 Patent was issued shortly thereafter. (Id. at 13, 19.) Plaintiffs allege that, had Defendants disclosed their own application for the 886 Patent, the USP would have either required Momenta to abandon its patent rights, as it did with Aventis, or chosen an alternative test that would not have been subject to patent protection. (Id. at 19.)

         Defendants became the first entities authorized by the FDA to produce generic enoxaparin. (Id. at 20.) Thereafter, Amphastar Pharmaceuticals, Inc. (“Amphastar”), a non-party to this case, received FDA approval to sell generic enoxaparin on September 19, 2011. (Id. at 21.) Upon approval, the FDA instructed Amphastar to use the USP compendium for enoxaparin, including Method <207>. (Id.) Two days later, Defendants sued Amphastar in the District of Massachusetts, contending that it was essentially illegal for Amphastar use Method <207> and produce generic enoxaparin because it could not do so without infringing on the 886 Patent. (Id.) After filing their complaint, Defendants obtained a temporary restraining order and preliminary injunction preventing Amphastar from selling enoxaparin. (Id. at 22.) However, the U.S. Court of Appeals for the Federal Circuit stayed the preliminary injunction in January 2012 and vacated it in August 2012. (Id.)

         Plaintiffs, in their Amended Complaint, assert that Defendants’ alleged anticompetitive activity violates numerous states’ antitrust, consumer protection, and unjust enrichment laws. (Doc. No. 193 at 35-73.) As explained above, Plaintiffs now seek class certification.

         C. Plaintiffs’ Renewed Motion for Class Certification

         Plaintiffs seek certification of the following class:

Hospitals, third-party payors, and people without insurance who indirectly purchased, paid for, and/or reimbursed some or all of the purchase price for, generic enoxaparin or Lovenox®, in Arizona, Arkansas, California, District of Columbia, Florida, Hawaii, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, South Dakota, Tennessee, Utah, Vermont, West Virginia, and Wisconsin, from September 21, 2011, through September 30, 2015 (the “Damages Class Period”), for the purpose of personal consumption by themselves, their families, or their members, employees, insureds, participants, patients, beneficiaries or anyone else.
With respect to third-party payors and people without insurance, the Damages Class only includes those, described above, who purchased, paid for, and/or reimbursed some or all of the purchase price for, generic enoxaparin or Lovenox® from a pharmacy.

         Excluded from the proposed Damages class are:

a. Defendants, their officers, directors, management, employees, subsidiaries, and affiliates;
b. Federal and state governmental agencies except for cities, towns, municipalities, counties or other municipal government entities, if otherwise qualified;
c. Payors that received 100% reimbursement on all transactions, such as fully insured health plans (i.e., plans that purchased insurance covering 100% of their reimbursement obligation to members); and
d. Judges assigned to this case and any members of their immediate families.

(Doc. No. 349 at 2-3.)

         D. Daubert Motion

         As a preliminary matter, Defendants argue that Dr. Lamb’s expert opinions should be excluded from consideration, pursuant to Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals., Inc., 509 U.S. 579 (1993), because: (1) he did not perform a reliable empirical analysis; (2) the lack of empirical analysis led Dr. Lamb to rely on assumptions and vague “economic literature”; and therefore; (3) his opinion is not based on sufficient facts or data. (Doc. Nos. 360, 363 at 9-11, 387 at 21-22.)

         Plaintiffs respond that the motion should be denied on the merits because Defendants have not met the standard to exclude Dr. Lamb’s testimony under Fed.R.Evid. 702 and Daubert. (Doc. No. 367 at 2.) Plaintiffs contend that Defendants’ arguments go to the weight of the evidence, rather than its admissibility. (Id.) Further, Plaintiffs note that the statistical regression analysis Defendants assert is missing is not necessary because the pharmaceutical industry is based on formulaic markups not individualized pricing schemes. (Id.)

         First, the Court notes that Defendants’ Daubert motion is subject to denial for non-compliance with the Court’s Local Rules. The Court’s Local Rules provide that “every motion that may require the resolution of an issue of law must be accompanied by a separately filed memorandum of law citing supporting authorities and, where allegations of fact are relied upon, affidavits, depositions, or other exhibits in support thereof.” LR 7.01(a)(2). Defendants have included their Daubert motion arguments in their response to Plaintiffs’ class certification motion (Doc. No. 363) and post-hearing brief (Doc. No. 401)-neither of which is a “separately filed memorandum” in support of their Daubert motion. Id. (emphasis added). Accordingly, Defendants’ Daubert motion may be denied based on its failure to comply with the Court’s Local Rules. See Grove v. Wells Fargo Fin. California, Inc., 606 F.3d 577, 582 (9th Cir. 2010) (holding that denial of a motion as the result of a failure to comply with local rules is well within a district court’s discretion).

         Nevertheless, Defendants’ Daubert motion also fails on the merits. Federal Rule of Evidence 702 governs the admissibility of an expert witness’ testimony at trial. Daubert, 509 U.S. at 589. Under Rule 702:

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.

         “[T]he trial judge has discretion in determining whether a proposed expert’s testimony is admissible based on whether the testimony is both relevant and reliable.” Palatka v. Savage Arms, Inc., 535 Fed.Appx. 448, 453 (6th Cir. 2013) (quotation omitted). The Court’s task is to assess “whether the reasoning or methodology underlying the testimony is scientifically valid and . . . whether that reasoning or methodology properly can be applied to the facts in issue.” Daubert, 509 U.S. at 592–93.

         The district court acts as the “gatekeeper” on opinion evidence, Gen. Elec. Co. v. Joiner, 522 U.S. 136, 142 (1997), and must exercise its gatekeeping function “with heightened care.” U.S. v. Cunningham, 679 F.3d 355, 380 (6th Cir. 2012) (quotation omitted). The Court will not exclude expert testimony “merely because the factual bases for an expert’s opinion are weak.” Andler v. Clear Channel Broad., Inc., 670 F.3d 717, 729 (6th Cir. 2012) (citations omitted). Indeed, rejection of expert testimony is the exception rather than the rule-the gatekeeping function established by Daubert was never “intended to serve as a replacement for the adversary system.” See Rose v. Matrixx Initiatives, Inc., No. 07-2404-JPM/tmp, 2009 WL 902311, at *7 (W.D. Tenn. 2009) (citing Fed.R.Evid. 702 advisory committee’s note).

         Rule 702 does not “require anything approaching absolute certainty.” Tamaraz v. Lincoln Elec. Co., 620 F.3d 665, 671–72 (6th Cir. 2010) (citing Daubert, 509 U.S. at 590). Under Daubert, experts are “permitted wide latitude in their opinions, including those not based on firsthand knowledge, so long as the expert’s opinion has a reliable basis in the knowledge and experience of the discipline.” Dilts v. United Grp. Servs., LLC, 500 Fed.Appx. 440, 445 (6th Cir. 2012) (quoting Daubert, 509 U.S. at 592) (internal quotation marks omitted). Expert testimony is reliable if it (1) is based on sufficient facts or data, (2) is grounded in reliable principles and methods, and (3) applies those principles and methods to the facts of the case in a reliable manner. Fed.R.Evid. 702. The Supreme Court in Daubert provided several non-exclusive factors for district courts to consider when evaluating the reliability of an opinion witness’s testimony. 509 U.S. at 592–94. However, not all Daubert factors apply in every case. Dilts, 500 Fed.Appx. at 445. In Kumho Tire Co. v. Carmichael, the Supreme Court explained that “the law grants a district court the same broad latitude when it decides how to determine reliability as it enjoys in respect to its ultimate reliability determination.” 526 U.S. 137, 141–42 (1999). When evaluating the reliability of non-scientific expert testimony, the district court may forgo these factors and focus on the reliability of the expert’s personal knowledge or experience. Thomas v. City of Chattanooga, 398 F.3d 426, 431– 32 (6th Cir. 2005). In this situation, the expert cannot ask a court simply to take his “word for it, ” but “‘must explain how that experience leads to the conclusion reached . . . and how that experience is reliably applied to the facts.’” Thomas, 398 F.3d at 432 (quoting Fed.R.Evid. 702 adv. comm. note).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Here, Dr. Lamb&rsquo;s opinions, reports, and testimony are based on sufficient facts and data such that his expert opinion meets the threshold standard established by Rule 702 and Daubert. Dr. Lamb&rsquo;s expert report: (1) summarized his qualifications, the allegations, and background information on the pharmaceutical industry and enoxaparin; (2) performed a &ldquo;back casting&rdquo; analysis that purported to show the overcharges putative class members incurred from Defendants&rsquo; alleged anticompetitive conduct and generic enoxaparin prices that would have manifested in a &ldquo;but for&rdquo; world absent Defendants&rsquo; activity; (3) surveyed the economic literature concerning the effects of inter-generic competition; and (4) measured potential class-wide damages. (Doc. No. 303-1 at 6-90.) Dr. Lamb relies on a host of materials in coming to his conclusions, including wholesale pharmaceutical data, Defendant&rsquo;s internal documents, and economic literature. (Id.) To the extent that Defendants argue that Dr. Lamb&rsquo;s analysis is insufficient in the absence of any statistical analysis, that argument goes to the weight afforded to his opinion, not its admissibility under Rule 702 and Daubert. Dr. Lamb’s expert testimony and report are reliable because: (1) it is based on sufficient facts and data (wholesale pharmaceutical data, Defendants’ internal documents, and the case record); (2) it is grounded in reliable principles and methods (back casting and deference to economic literature); and (3) applied reasonably to the facts of the case. Fed.R.Evid. 702. Perhaps Dr. Lamb’s expert opinion would have been more convincing with a ...


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