In re Modafinil Antitrust Litigation, 091316 FED3, 15-3475

Docket Nº:15-3475
Opinion Judge:SMITH, Circuit Judge.
Party Name:IN RE: MODAFINIL ANTITRUST LITIGATION Mylan Laboratories, Inc.; Mylan Pharmaceuticals Inc.; Ranbaxy Laboratories, Ltd; Ranbaxy Pharmaceuticals, Inc., Appellants
Attorney:Daniel Berger Daniel C. Simons David F. Sorensen Berger & Montague, Erin C. Burns Dianne M. Nast NastLaw, Russell A. Chorush Connelly Baker Wotring, Neill Wilson Clark Peter Kohn, Esq. Faruqi & Faruqi, Stuart E. Des Roches Andrew W. Kelly Chris Letter Odom & Des Roches, Bruce E. Gerstein [ARGUED]...
Judge Panel:Before: SMITH, JORDAN, and RENDELL, Circuit Judges RENDELL, Circuit Judge, concurring in part and dissenting in part.
Case Date:September 13, 2016
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit


Mylan Laboratories, Inc.; Mylan Pharmaceuticals Inc.; Ranbaxy Laboratories, Ltd; Ranbaxy Pharmaceuticals, Inc., Appellants

No. 15-3475

United States Court of Appeals, Third Circuit

September 13, 2016

Argued July 12, 2016

On Appeal from the United States District Court for the Eastern District of Pennsylvania District Court No. 2-06-cv-01797 District Judge: The Honorable Mitchell S. Goldberg

Daniel Berger Daniel C. Simons David F. Sorensen Berger & Montague, Erin C. Burns Dianne M. Nast NastLaw, Russell A. Chorush Connelly Baker Wotring, Neill Wilson Clark Peter Kohn, Esq. Faruqi & Faruqi, Stuart E. Des Roches Andrew W. Kelly Chris Letter Odom & Des Roches, Bruce E. Gerstein [ARGUED] Dan Litvin Joseph Opper Garwin Gerstein & Fisher Wall Street Plaza, Miranda Y. Jones Heim Payne & Chorush, Linda P. Nussbaum Nussbaum Law Group 570 Lexington Avenue, Counsel for Appellees

Evan R. Chesler David R. Marriott Rowan D. Wilson [ARGUED] Cravath Swaine & Moore, David L. Comerford Katherine M. Katchen Akin Gump Strauss Hauer & Feld, Catherine E. Creely Cohn & Marks, C. Fairley Spillman Akin Gump Strauss Hauer & Feld, J. Douglas Baldridge [ARGUED] Christopher K. Diamond Danielle R. Foley Molly Geissenhainer Venable, John J. O'Malley Anthony S. Volpe Volpe & Koenig, Erin C. Dougherty Lathrop B. Nelson, III Montgomery McCracken Walker & Rhoads, Katherine R. Katz Karen N. Walker Gregory L. Skidmore Kirkland & Ellis, James C. Burling Mark A. Ford WilmerHale, Frank R. Emmerich, Jr. Nancy J. Gellman John A. Guernsey Conrad O'Brien, Emily R. Whelan Whatley Kallas, Jeffrey B. Korn William H. Rooney Willkie, Farr & Gallagher, Joseph E. Wolfson Stevens & Lee, Counsel for Appellants

Anna T. Neill Scott E. Perwin Lauren C. Ravkind Kenny Nachwalter, !Moira E. Cain-Mannix Bernard D. Marcus Marcus & Shapira, Monica L. Rebuck Barry L. Refsin Hangley Aronchick Segal Pudlin & Schiller, Eugene P. Endress Matthew M. Holub Thomas J. Maas Brian Sodikoff Katten Muchin Roseman, James W. Matthews Foley & Lardner, Counsel for Amicus Appellee

Before: SMITH, JORDAN, and RENDELL, Circuit Judges


SMITH, Circuit Judge.

"The class action is an ingenious device for economizing on the expense of litigation and enabling small claims to be litigated. The two points are closely related. If every small claim had to be litigated separately, the vindication of small claims would be rare. The fixed costs of litigation make it impossible." Thorogood v. Sears, Roebuck and Co., 547 F.3d 742, 744 (7th Cir. 2008). But not every group of plaintiffs should be granted class action status, because "[t]he class action is an 'exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979)).

When thinking of a class action brought under Rule 23(b)(3), we typically think of a large aggregation of individuals (hundreds or even thousands), each with small claims. This case is quite different from that. Here, we are faced with a putative class of twenty-two large and sophisticated corporations, most of which have multi-million dollar claims, who wish to take advantage of the class action device. While we do not foreclose the possibility of class status in this case, or where the putative class is of similar composition, Plaintiffs have not met their burden of showing that the numerosity requirement of Rule 23(a)(1) has been satisfied. We now provide a framework for district courts to apply when conducting their numerosity analyses, and we will remand to the District Court to allow such an analysis in this case.


A. Regulatory Framework

The 1984 Drug Price Competition and Patent Term Restoration Act (the "Hatch-Waxman Act"), 98 Stat. 1585, as amended, provides a regulatory framework designed in part to (1) ensure that only rigorously tested drugs are marketed, (2) incentivize drug manufacturers to invest in new research and development, and (3) encourage generic entry into the marketplace. The Hatch-Waxman Act requires a drug manufacturer wishing to market a new brand-name drug to first submit a New Drug Application ("NDA") to the federal Food and Drug Administration ("FDA"), and then undergo a long, complex, and costly testing process. See 21 U.S.C. § 355(b)(1) (requiring, among other things, "full reports of investigations" into safety and effectiveness; "a full list of the articles used as components"; and a "full description" of how the drug is manufactured, processed, and packed); see also F.T.C. v. Actavis, Inc., 133 S.Ct. 2223, 2228-29 (2013) (describing the statutory framework). If this process is successful, the FDA will grant the drug manufacturer approval to market the brand-name drug. After this approval, a generic manufacturer can obtain similar approval by submitting an Abbreviated New Drug Application ("ANDA") that "shows that the generic drug has the same active ingredients as, and is biologically equivalent to, the brand-name drug." Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 132 S.Ct. 1670, 1676 (2012) (citing 21 U.S.C. §§ 355(j)(2)(A)(ii), (iv)). This way, a generic manufacturer is not required to undergo the same costly approval procedures to develop a drug that has already satisfied the FDA. Actavis, 133 S.Ct. at 2228 ("The Hatch-Waxman process, by allowing the generic to piggy-back on the pioneer's approval efforts, 'speed[s] the introduction of low-cost generic drugs to market, ' thereby furthering drug competition." (quoting Caraco, 132 S.Ct. at 1676)).

The FDA will not give final approval to produce a generic version of a drug that is entitled to non-patent exclusivity under the Hatch-Waxman Act, and it "cannot authorize a generic drug that would infringe a patent." Caraco, 132 S.Ct. at 1676. Thus, among other things, an ANDA's approval will depend on "the scope and duration of the patents covering the brand-name drug." Id. Brand manufacturers are required to include the patent number and expiration date of the patent that covers the drug or that covers a method of using that drug in their NDAs, which are then published by the FDA in the Orange Book, more formally known as the Approved Drug Products with Therapeutic Equivalence Evaluations. Id. (citing 21 U.S.C. § 355(b)(1) and 21 C.F.R. §§ 314.53(c)(2)(ii)(P)(3), (3) (2011)). Once a patent has been listed in the Orange Book, the generic manufacturer is free to file an ANDA if it can certify that its proposed generic drug will not actually violate the brand manufacturer's patents. Id. Under 21 U.S.C. § 355(j)(2)(A)(vii), there are four ways in which a generic manufacturer can make this certification: (I) that such patent information has not been filed,

(II) that such patent has expired,

(III) of the date on which such patent will expire, or

(IV)that such patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted.

An ANDA with a paragraph IV certification may only be filed after the expiration of the fourth year of the New Chemical Entity ("NCE") five-year exclusivity period.[1] 21 U.S.C. § 355(j)(5)(E)(ii). The "'paragraph IV' route[] automatically counts as patent infringement." Actavis, 133 S.Ct. at 2228 (citing 35 U.S.C. § 271(e)(2)(A)). As a result, this often "means provoking litigation" instituted by the brand manufacturer. Caraco, 132 S.Ct. at 1677.

If the brand manufacturer initiates a patent infringement suit, the FDA must withhold approval of the generic for at least 30 months while the parties litigate the validity or infringement of the patent. Actavis, 133 S.Ct. at 2228 (citing 21 U.S.C. § 355(j)(5)(B)(iii)). If the suit has concluded at the end of this 30-month period, then the FDA will follow the outcome of the litigation. Id. However, if the litigation is still proceeding, the FDA may give its approval to the generic drug manufacturer to begin marketing a generic version of the drug. Id. The generic manufacture then has the option to "launch at risk, " meaning that if the ongoing court proceeding ultimately determines that the patent was valid and infringed, the generic firm will be liable for lost profits despite the FDA's approval. C. Scott Hemphill, Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, 81 N.Y.U. L. Rev. 1553, 1609 (2006).

In order to incentivize a generic drug manufacturer to challenge weak patents, the Hatch-Waxman Act provides that the first generic manufacturer to file a paragraph IV certification will enjoy a 180-day exclusivity period. 21 U.S.C. § 355(j)(5)(B)(iv). This means that during this exclusivity period, "no other generic can compete with the brand-name drug, " Actavis, 133 S.Ct. at 2229, an opportunity that can be "'worth several hundred million dollars, '" to the first-filer, id. (quoting Hemphill, supra, at 1579).[2] It is during this generic exclusivity period that the "vast majority of potential profits for a generic drug manufacturer materialize." Id. (internal quotation marks omitted). That is because once the exclusivity period has expired other generic manufacturers are free to enter the market, bringing the price down to competitive levels. Importantly, this 180-day exclusivity period belongs only to the first generic manufacturer to file; if the first-filer forfeits its exclusivity rights, no other generic manufacturer is entitled to it. Id. (citing 21 U.S.C. § 355(j)(5)(D)).

B. Facts

In April 1997, the United States Patent and Trademark Office issued U.S. Patent No. 5, 618, 845 ("the ′845 patent") to Cephalon, Inc. ("Cephalon"), a pharmaceutical company. The ′845 patent claimed a specific...

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