Vista HealthPlan, Inc. v. Cephalon, Inc., (E.D. Pa. June 10, 2015);  In re Modafinil Litigation, (E.D. Pa. July 27, 2015)

In two antitrust class actions in the U.S. District Court for the Eastern District of Pennsylvania, the court denied class certification as to plaintiff consumers and third-party payors (such as health insurance plans), but granted class certification as to direct purchasers (such as drug wholesalers).  Vista HealthPlan, Inc. v. Cephalon, Inc., No. 2:06-cv-1833 (E.D. Pa. June 10, 2015) (Goldberg, D.J.) (denying class certification of plaintiff consumers and third-party payors); King Drug Co. of Florence, Inc. v. Cephalon, Inc., No. 06-cv-1797 (In re Modafinil Litigation) (E.D. Pa. July 27, 2015) (Goldberg, D.J.) (granting class certification of plaintiff direct purchasers).

In April 1997, the U.S. Patent and Trademark Office (USPTO) issued U.S. Patent No. 5,618,845 to Cephalon, Inc. for the modafinil formulation in Provigil®. In 2002, Cephalon was granted a re-issue patent on Provigil, U.S. Patent No. RE 37,516 (RE‘516 patent), which was scheduled to expire October 6, 2014. Cephalon received an additional six months of pediatric exclusivity on Provigil through April 6, 2015.

On December 24, 2002, four generic manufacturers were first filers of abbreviated new drug applications (ANDAs) for generic Provigil, all of which included Paragraph IV certifications that Cephalon’s patent was either invalid or not infringed. These first filers were Teva Pharmaceutical Industries, Ltd. and Teva Pharmaceuticals USA, Inc. (Teva); Ranbaxy Laboratories, Ltd. and Ranbaxy Pharmaceuticals, Inc. (Ranbaxy); Mylan Pharmaceuticals, Inc. and Mylan Laboratories, Inc. (Mylan), and Barr Laboratories, Inc. (Barr). Cephalon sued these generic defendants for patent infringement on March 28, 2003.

From 2005 to 2006, Cephalon entered into four reverse-payment settlements with the four generic defendants. The settlements allowed the generic defendants to launch their generic Provigil product on April 6, 2012, prior to the expiration of the RE‘516 patent. Cephalon agreed to pay the generic defendants a total of approximately $300 million.

Plaintiffs filed antitrust class actions against Cephalon and the generic defendants beginning 2006, which were consolidated as In re Modafinil Litigation. Plaintiffs alleged that these settlement agreements were anticompetitive reverse-payment settlement agreements that violate the antitrust laws. Plaintiffs also alleged that Cephalon violated the antitrust laws by procuring its Provigil patent by fraud on the PTO, and then enforcing said patent to keep competitors off of the market.

Plaintiffs sought class certification under Federal Rule of Civil Procedure 23(b)(3), which requires proof of, among other things, (1) questions of law or fact common to class members that predominate over any questions affecting only individual members; and (2) a class action that is superior to other available methods for fairly and efficiently adjudicating  the controversy.  These requirements are known as predominance and superiority.

In seeking class certification, Plaintiffs argued that but for the settlement agreements, the generic defendants would have launched their generic Provigil products at risk in June 2006, which would have lowered the cost of Provigil through generic competition and brought significant savings to plaintiffs. 

The court held that predominance was not established as to the consumers and third-party payors, but established as to the direct purchasers. The court held that the consumers and third-party payors failed to identify a means of distinguishing between injured and un-injured class members. Specifically, the consumers and third-party purchasers failed to offer a reliable methodology for identifying those persons who purchased Provigil or its generic equivalent from those persons who would be excluded from this class, such as brand loyalists and persons with flat co-pays. 

By contrast, the court held that the direct purchasers established predominance because all of these class members purchased Provigil directly from Cephalon or one of the generic defendants. “The alleged overcharge, or antitrust injury, occurred when Plaintiffs purchased Provigil from Cephalon at an artificially inflated price.”

The court also held that superiority was not established as to the consumers and third-party payors, but established as to the direct purchasers. As to the consumers and third-party payors, the court held that the variations in the 26 state un-just enrichment laws rendered the class litigation un-manageable. As to the direct purchasers, however, the court held that the putative class of direct purchasers established superiority because these 22 class members have identical claims, and, therefore, “a class action would achieve economies of time, effort, and expense without bringing about undesirable results.”