In re EpiPen Marketing, Sales Practices & Antitrust Litig.

• Decision Date: 27 February 2020
• Docket Number: Case No. 17-md-2785-DDC-TJJ,MDL No: 2785
• Court: U.S. District Court — District of Kansas
• Parties: IN RE: EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices and Antitrust Litigation (This Document Applies to Consumer Class Cases)

IN RE: EpiPen (Epinephrine Injection, USP) Marketing,

Sales Practices and Antitrust Litigation

(This Document Applies to Consumer Class Cases)

MDL No: 2785

Case No. 17-md-2785-DDC-TJJ

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

February 27, 2020

MEMORANDUM AND ORDER

Class plaintiffs filed a motion for class certification (Doc. 1353), seeking to represent five classes of end-payors in the United States who paid or reimbursed others for some or all of the purchase price of branded or authorized generic EpiPens. Plaintiffs allege that the Mylan defendants (composed of Mylan N.V., Mylan Specialty, L.P., Mylan Pharmaceuticals, Inc., and Mylan's CEO Heather Bresch) as distributors of the EpiPen, and the Pfizer defendants (composed of Pfizer, Inc., King Pharmaceuticals, Inc., and Meridian Medical Technologies, Inc.) as manufacturers of the EpiPen, have maintained a monopoly over the epinephrine auto-injector ("EAI") market and its profitable revenues by devising an illegal scheme to monopolize the market for EAI devices. For the reasons explained below, the court grants the motion in part and denies it in part.

The Consolidated Class Action Complaint ("Class Complaint") (Doc. 60) asserts the collective claims of five consumer class cases transferred by the Judicial Panel on Multidistrict Litigation.¹ The Class Complaint asserts federal and state antitrust claims, federal RICO Actviolations, various state consumer protection law violations, and unjust enrichment claims. The Class Complaint asserts its claims against the two groups of defendants who either sell or manufacture the EpiPen, the Mylan defendants and the Pfizer defendants. When referring to both sets of defendants, this Order calls them, collectively, "defendants."

TABLE OF CONTENTS

I. Factual Background................................................................................5

II. Procedural History.................................................................................10

III. Legal Standard.....................................................................................13

IV. Discussion...........................................................................................15

A. Proposed Class Definitions.............................................................15

B. Proposed Class Exclusions.............................................................17

C. Class Certification Under Rule 23...................................................20

1. Ascertainability.................................................................20

2. Standing..........................................................................26

D. Rule 23(a) Requirement...............................................................27

1. Numerosity......................................................................27

2. Commonality....................................................................28

3. Typicality........................................................................30

a. Local 282................................................................31

b. Named Plaintiffs.......................................................36

4. Adequacy........................................................................40

E. Rule 23(b)(3) Requirements...........................................................44

1. Superiority.......................................................................44

2. Predominance...................................................................45

a. Individual Damages Issues..........................................47

b. Uninjured Class Members..........................................53

i. Collateral Source Doctrine.......................................54ii. The Presence of Uninjured Class Members...................58

(a) Legal Standard....................................59

(b) Prof. Rosenthal's Probability Analysis.......67

(c) Number of Uninjured Class Members........72

(d) Constitutional Considerations.................76

c. RICO......................................................................79

i. RICO Causation......................................................82

(a) Switch to 2-Pak..................................................84

(b) Delay of Generic Competition Through "Pay for Delay" Settlements..................................90

(c) Exclusive Dealing Contracts with PBMs..................95

ii. RICO Damages....................................................103

d. Antitrust.................................................................106

i. Market Power......................................................107

ii. Exclusive Dealing Arrangements..............................108

iii. Generic Delay......................................................111

e. Consumer Protection................................................115

f. Unjust Enrichment...................................................121

F. Rule 23(b)(2) Injunction Class.......................................................123

V. Class Definitions.................................................................................126

VI. Appointment of Class Counsel...............................................................127

VII. Notice..............................................................................................128

I. Factual Background²

The EpiPen is a portable EAI device used to administer epinephrine to treat an anaphylactic reaction to an allergen. In 2007, Mylan acquired the right to market and distribute the EpiPen. Pfizer supplies Mylan with 100% of its EpiPen supply through two wholly-owned subsidiaries—King Pharmaceuticals, Inc., and Meridian Medical Technologies, Inc.—who manufacture the epinephrine and hold the EpiPen patents. Since at least 2009, Mylan's market share of EAI devices in the United States EAI market has remained above 80%. And, since 2009, Mylan's market share consistently has exceeded 90%, and, in 2012, its share was almost 100%. During the same time—and while the cost of the EpiPen's dose of epinephrine has remained about $1—Mylan has raised the EpiPen's price by more than 600%. In 2007, Mylan priced the EpiPen at $100. By 2016, Mylan was charging more than $600. In 2015, Mylan announced that the EpiPen had reached $1 billion in annual sales for the second consecutive year—up from $200 million in 2007.

Mylan's Dealings with Pharmacy Benefit Managers (PBMs)

Pharmacy Benefit Managers ("PBMs") are third-party administrators of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. More specifically, PBMs administer a health coverage provider's prescription benefit program by developing the coverage provider's formulary (the list of prescription benefits included in the coverage at various pricing "tiers"), processing claims, creating a network of retail pharmacies who provide discounts in exchange for access to a provider's plan participants, and negotiatingwith drug manufacturers. A significant majority of patients with prescription drug insurance coverage receive their benefits through a third-party payor whose drug formulary is determined by a PBM. From 2013 to 2015, commercial third-party payors accounted for about 71% of the EAI drug device market in the United States. So, for a competitor to enter and compete vigorously in the EAI drug device market, it is imperative that the competitor access these third-party payors' drug formularies.

Between 2013 and 2015, Mylan significantly increased the EpiPen's price. Plaintiffs allege Mylan then used the additional profit margins to offer PBMs significantly higher rebates and percentage discounts if the PBM would provide exclusive or preferred placement for EpiPen on the PBM's drug formulary. In 2013, when Sanofi launched a rival EAI device—Auvi-Q—Mylan began taking steps to block Auvi-Q from drug formularies, plaintiffs contend. It did so by offering large rebates—30% or higher—to PBMs who controlled formularies for third-party payors and expressly conditioning those rebates on the PBMs: (a) granting the EpiPen exclusive position on the formulary; and (b) removing or severely restricting access to Auvi-Q. Adrenaclick, another rival EAI device, achieved a market share that ranged from 2% in 2013 to 8% in 2016. In 2014, CVS Caremark added Adrenaclick to its Formulary Drug Removals List, effectively eliminating a consumer or other end-payor's opportunity to purchase Adrenaclick as an alternative to the EpiPen. Plaintiffs contend Mylan knew that neither Adrenaclick nor Auvi-Q could raise prices to inflate their margins sufficiently to offer rebates or discounts similar to those Mylan was offering to PBMs.

Defendants' Pricing Scheme

Plaintiffs allege defendants implemented a pricing scheme that defrauded U.S. consumers into paying an inflated price for the EpiPen—one that climbed by more than 500%, in nine years.Plaintiffs assert that defendants' exclusionary pricing scheme deprives patients of a fair price for EAI devices—the price that would result from normal market forces. They describe the pricing scheme this way: Mylan, instead of lowering its prices to gain market share, bargains for market share by providing ever-larger rebates and other kickbacks to PBMs, conditioned on exclusive relationships with those PBMs. Mylan can place itself on the drug formularies by using its monopoly power to charge consumers higher prices for its product. It then can share these revenues with the PBMs (the ones who create the formularies) through substantially enhanced rebates conditioned on excluding insurance coverage for rival products. This conduct, in turn, inflates the prices that consumers pay for the EpiPen so that Mylan can preserve its net realized price and sales volumes. Plaintiffs contend that the net effect of this scheme harms both consumers and competitors alike.

Mylan primarily is a generics pharmaceutical company that makes low margins on...