When pharmaceutical manufacturers develop a new branded drug to take to market, they are granted a period of exclusivity via patent to help recoup the massive costs of research and development. Upon expiration of this patent, generic manufacturers can enter the market with therapeutically equivalent products and compete with the brand. Prior to patent expiration, generic manufacturers may seek to enter the market early and litigate to challenge the validity of the branded manufacturer’s drug patent(s). In such cases, the companies may subsequently settle that patent litigation with various terms, including a specific entry date for the generic product and possibly a payment from the branded manufacturer to the generic manufacturer. However, these types of settlements may then later be the subject of so-called “pay-for-delay” litigation by direct purchasers and end payors for the drug at issue—alleging that the settlement improperly removed a competitor from the market and thereby led to higher prices.

End payor class action cases often bring forward a class of all insurance third-party payors and end consumer payors as the purportedly injured parties in a pay-for-delay matter. Plaintiffs in these cases allege they could have purchased the generic product for a lower price if a delay in generic entry did not occur. However, the wide variability of insurance and payment structures across providers in the United States creates a unique challenge in class certification and the allocation of potential damages in terms of accounting for and identifying uninjured class members – those who are not worse off than they would have been had the alleged conduct not occurred (i.e., the “but-for world”).

Some examples of potentially uninjured class members may, include:

  • Brand loyalists who would continue to purchase the brand name drug even after generic entry
  • Consumers whose co-payment is the same for both the generic and branded drug
  • Third-party payors on fully insured plans

During the class certification stage, plaintiffs’ experts often rely on aggregate, average claims data from third parties (such as IQVIA). This data displays only the average co-payments without identifiers for specific end consumer payors or transactions. As such, relevant information about behaviors and payments of individual class members such as whether they purchased brand or generic drugs or what an individual co-payment was for each transaction cannot be discerned from this data. At best, the plaintiffs’ experts can calculate an average copayment during a certain point in time for a group of end payors. But this methodology cannot be used to identify whether a specific end consumer payor suffered an overcharge because the averages mask individualized circumstances that would allow one to assess whether a class member was or was not injured. Courts have often concluded that issues with identifying uninjured class members should be addressed in the class certification stage of the case, although plaintiffs often suggest that these issues can be resolved with more granular claims data from the pharmacy benefit managers (PBMs) or pharmacies. Even so, transactional claims data from PBMs or pharmacies may still be insufficient for identifying those who are uninjured.

To determine whether someone was a brand loyalist, there needs to be data on that customer’s purchases both before and after the generic entered the market. If a customer only purchased the drug before the actual generic entry date but after the allegedly delayed entry date, there is no way to conclude whether they were injured and would have purchased the generic version at a lower price had it entered the market earlier in the ‘but-for’ world. The individual could have been a brand loyalist and would have continued to buy the branded drug regardless of when a generic came on the market, thus making them uninjured.

Those on insurance plans with flat co-payments are also uninjured since their plans are structured such that their out-of-pocket payment would be the same regardless of if they opted for the branded or generic version of the drug. The only way to identify customers in this category is to observe in the claims data their purchases of both the branded and generic versions of the drug under the same insurance plan, and that the co-payments were equal in these transactions. Some customers may purchase only the brand or only the generic and it could not be determined from the data whether their co-payments were the same for both products. Other consumers may have been on one insurance plan when they purchased the branded drug and then switched to another plan when they purchased the generic drug, preventing the experts from using only the copayments to identify flat co-payors as uninjured class members to exclude from the class.

Lastly, in our experience, not all PBM data have an identifier for third-party payors with fully insured plans (under which they would not have paid out of pocket for the generic or the branded drug). Barring an expert reviewing individual contract records to identify the status of each customer’s plan, which would be quite an individualized, inefficient, and costly endeavor, it is not possible to identify these uninjured parties, even with transactional-level claims data.

Plaintiff experts often rely on third-party aggregate data during the class certification process, which has been criticized due to its masking of individual variation in payments due to consumer behavior or negotiated insurance plans, making identification of members of the proposed class quite difficult. While transactional level claims data from PBMs or pharmacies helps to provide more insights into individual payments to clear up some of the ambiguity, there are still fundamental issues that can arise in determining uninjured consumers.