Lipitor Ruling Raises Class Status Bar in Pay-for-Delay Cases

Sun Pharmaceutical Industries Ltd.'s win against claims that the company conspired to hinder the release of a generic cholesterol-reducing drug raises the standard for plaintiffs to win class status in pay-for-delay cases.

The denial of class certification to two groups of purchasers of the blockbuster Lipitor drug from Judge Peter G. Sheridan of the US District Court for the District of New Jersey in June reinforces the high bar plaintiffs counsel must clear in cases challenging patent litigation settlements that include payments from brand drug companies to keep generic brands off the market.

Defense attorneys are likely to cite this opinion in other pay-for-delay cases, especially given the high-profile nature of the Lipitor drug, said Ken Racowski, a partner with Holland & Knight who has defended companies in antitrust suits and class actions. The Lipitor ruling might apply, for example, to the ongoing antitrust litigation over the Thalomid drug, he said.

“This is a big case, a big opinion for a drug that everybody knows,” Racowski said of Lipitor. “Just in and of itself, that’s a great soundbite, that’s a great precedent for the defense.”

The standard was heightened in part through Sheridan’s finding that indirect buyers didn’t have a feasible method to determine who was qualified to be a class member and that direct purchasers, such as large wholesalers, failed to prove they couldn’t have brought their own lawsuit outside of a class action mechanism.

Sheridan’s conclusion that the plaintiffs couldn’t show an alleged anticompetitive settlement was the cause of any generic delay also added to the high bar for class certification.

The ruling also builds upon Third Circuit decisions that have incrementally raised the bar to achieve class status in pay-for-delay cases, including a 2020 decision to reverse certification for a group of direct purchasers of an epilepsy drug and a 2016 ruling in which the appellate court vacated a lower court’s class certification order in a narcolepsy medication case.

“Courts, especially in the Third Circuit, are being very rigorous,” said Devora W. Allon, a litigation partner for Kirkland & Ellis in New York and lead counsel for Sun. “They are not rubber-stamping classes.”

The Lipitor litigation centers on claims that Ranbaxy, a Sun subsidiary, and Pfizer’s 2008 patent litigation settlement prevented Ranbaxy’s generic version of Lipitor from launching until November 2011.

‘One-Two Punch’

The ruling delivers a “one-two punch” to the Sun plaintiffs who couldn’t satisfy two key major prerequisites for achieving class status—numerosity and ascertainability—said Christine Bartholomew, a law professor at the University at Buffalo focused on antitrust.

But plaintiffs in the Sun case failed to meet the numerosity standard, which requires them to prove that it would be unreasonable to expect the class members to sue on their own behalf. The judge said the proposed class of 63 direct purchaser plaintiffs had the means to bring their own suits outside of a class action vehicle.

Courts consider several factors to determine numerosity, including the financial resources of class members, geographical dispersion, and their ability to sue on their own.

“DPPs have failed to provide sufficient reasons by the preponderance of the evidence that judicial economy would be greatly served by the certification of this class,” Sheridan said.

The judge’s opinion gives that threshold requirement “very sharp teeth,” and makes it harder for other plaintiffs to aggregate similar claims, Bartholomew said.

“It creates uncertainty—what is going to be enough to satisfy numerosity?” Bartholomew said. “What you have is an opinion that ratchets up what it means to be numerous.”

Sheridan also determined the indirect buyer plaintiffs didn’t meet the ascertainability prerequisite that requires a mechanism for determining whether thousands of potential class members fell within the class definition.

That requirement is especially crucial because it isn’t always clear who should be compensated as part of a class given the multitude of parties involved in the prescription payment chain, including manufacturers, wholesalers, pharmacy benefit managers, and consumers.

Sheridan concluded the plaintiffs’ contention that data was available to determine who complies with the class definition wasn’t sufficient.

“The court said, ‘You have to show me today you have the methodology,’” said Allon of Kirkland & Ellis. “‘Showing me later is not good enough.’”

Proving Harm

The ruling also means proving causation—the tie between the alleged injured and alleged wrongdoing—remains a difficult hurdle for plaintiffs to overcome even if they succeed in creating a dispute of fact about the underlying conduct, said Ben Greenblum, a partner with Williams & Connolly LLP who specializes in pay-for-delay cases.

Sheridan ruled that the plaintiffs failed to show an alleged agreement between Pfizer and Sun caused any delay. Sun argued Ranbaxy’s manufacturing facilities in India faced significant regulatory challenges that prevented the Food and Drug Administration from reviewing and approving its generic Lipitor any sooner.

“It’s not enough to just say a pharmaceutical company engaged in anticompetitive conduct; plaintiffs have to show they were harmed as a result of that conduct,” Greenblum said. “You don’t have the right to get damages just because they did a settlement that you are challenging all these years later.”

The opinion can be used to shut down the argument that approval of generic drugs could have happened any faster, added Chris Holding, a partner in Goodwin’s antitrust and competition practice.

“This analysis is going to apply to a lot of cases,” Holding said. “The proof of harm is really central to these cases, and the plaintiffs have to come up with a viable theory.”

Sun Pharmaceuticals is represented by firms including Kirkland & Ellis. The plaintiffs are represented by firms including Carella Byrne Cecchi Brody & Agnello and Hagens Berman.

The case is In re Lipitor Antitrust Litig., D.N.J., No. 3:12-cv-2389.