New England Carpenters Health Benefits Fund v. First Databank, Inc.

248 F.R.D. 363, 44 Employee Benefits Cas. (BNA) 1665, 2008 U.S. Dist. LEXIS 21175, 2008 WL 723774
CourtDistrict Court, D. Massachusetts
DecidedMarch 19, 2008
DocketCivil Action No. 05-11148-PBS
StatusPublished
Cited by6 cases

This text of 248 F.R.D. 363 (New England Carpenters Health Benefits Fund v. First Databank, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
New England Carpenters Health Benefits Fund v. First Databank, Inc., 248 F.R.D. 363, 44 Employee Benefits Cas. (BNA) 1665, 2008 U.S. Dist. LEXIS 21175, 2008 WL 723774 (D. Mass. 2008).

Opinion

MEMORANDUM AND ORDER

SARIS, District Judge.

INTRODUCTION

In this proposed national class action, Plaintiffs allege that First DataBank, Inc. and McKesson Corporation engaged in a racketeering enterprise (the “Scheme”) to fraudulently state the “average wholesale price” (“AWP”) for numerous prescription pharmaceuticals beginning in late 2001, in violation of 18 U.S.C. § 1964 and California state law. The Scheme allegedly jacked up the AWP by five percent for over 400 brand-name, self-administered drugs sold through retail pharmacies, including mail order (the “Marked Up Drugs”). This allegedly fraudulent price hike caused damages to consumers and 11,000 third party payors (“TPPs”) across the nation.

Plaintiffs move to certify nationwide classes of consumers and TPPs that purchased or made reimbursements for the Marked Up Drugs. McKesson1 vigorously [365]*365opposes. Both parties have filed an avalanche of submissions. Since the Court’s August 27, 2007 Memorandum and Order allowing-in-part Plaintiffs’ Motion for Class Certification, New England Carpenters Health Benefits Fund v. First DataBank, Inc., 244 F.R.D. 79 (D.Mass.2007) (“McKesson 7”), Plaintiffs have filed four briefs (Docket Nos. 319, 343, 376, 386) three expert declarations and a tutorial from its damages expert, Dr. Raymond Hartman (Docket Nos. 329 Ex. A, 346, 348, 378), three expert declarations and a tutorial from its industry expert, Kimberly McDonough (Docket Nos. 329 Ex. B, 347, 348, 380), and the declaration of an expert on the calculation of percentage-based co-pays, Donald C. Hoscheit (Docket No. 379), among other countless documents. Not to be outdone, McKesson has also filed four briefs (Docket Nos. 327, 363, 371, 395), three expert declarations from its damages expert, Dr. Robert D. Willig (Docket Nos. 326, 365, 373), an expert declaration from IMS data expert Darrell Philpot (Docket No. 328), the resubmission, as a tutorial, of an independent report prepared by Dr. Ernst Berndt for the related multidistrict litigation (Docket No. 366), expert declarations from industry experts James F. Smith and Arthur F. Shinn (Docket No. 372 Exs. 3 & 4), and numerous other declaration excerpts, deposition excerpts, charts, and other documents. (See, e.g., Docket Nos. 327 app. A, 329, 364). On top of all this, the parties had what the Court dubbed a “cat fight” over Plaintiffs’ motion for leave to file a reply to McKesson’s Response to the Court’s Inquiries at the November 13, 2007 hearing. (See Docket Nos. 381, 382, 383, 384, 385, & orders entered December 6, 2007).

After hearing, and a review of the extensive submissions, the motion is ALLOWED, but not to the full extent sought by Plaintiffs.

PROCEDURAL BACKGROUND

In its previous Memorandum and Order, the Court certified a class of consumers who, pursuant to a TPP plan, paid a percentage co-pay for the Marked Up Drugs (“Class 1,” or the “Co-Pay Class”) for a period covering August 1, 2001 to March 15, 2005.2 McKes-son I at 89.

The Court also found that Plaintiffs satisfied the requirements of Rule 23(a) with respect to a proposed class of TPPs (“Class 2,” or the “TPP Class”) for the same class period. Id. at 81, 84-85. The Court indicated it would certify the TPP Class for liability and equitable relief, but deferred making a decision on certification with respect to damages because the Plaintiffs failed to satisfy the predominance and superiority requirements of Rule 23(b)(3). Id. at 89.

With respect to predominance, the Court described the issue as follows:

McKesson’s better argument is that each TPP in the proposed class had unique contracts with its [Pharmacy Benefit Managers] for pharmaceuticals, and that these variations in how TPPs purchased and reimbursed for drugs would render any common inquiry into causation or damages fruitless. In the related multi-district litigation, plaintiffs’ expert Dr. Hartman testified that some TPPs employed “heat seeking missiles” in their contracts to automatically reduce their costs in the event that AWPs increased. Dr. Willig refers to these contracts as “self-adjusting” or “pass throughs.” According to defendant, for example, some plans have rebates which increased as AWP increased, or had reimbursement caps. Dr. Willig states that “the TPPs had a wide variety of mechanisms to protect themselves from an artificial rise in some AWP levels, and that individual TPPs used different means to counteract artificial rise in some AWP levels resulting from the alleged Scheme.” (Willig Exp. Report 5.)
[366]*366Other TPPs directly pushed back against the price increases by renegotiating their contracts with the PBMs. ESI testified that in renegotiating, amending, and renewing contracts, the FDB spread increases were important factors considered, and that other PBMs were acting in similar manner. As such, McKesson argues that some TPPs were able to recoup losses through aggressive pricing renegotiations, by obtaining additional discounts, increasing rebate pass-through provisions, lower dispensing fees, and changing to a reimbursement formula of (WAC + %) rather than an (AWP - %) benchmark.
Defendant’s expert, Dr. Willig, supported this position by stating that as AWPs rose the discounts off AWPs paid by TPPs increased over the class period. (Willig Exp. Report ¶ 48, ¶ 8.) Some TPPs shifted costs to consumers, increasing their co-pays. Still others did nothing, perhaps unaware of the AWP markup or contractually unable to mitigate the price increase. Due to all of these variables, McKesson argues that class certification is inappropriate here because issues of damages and causation are governed by substantially different contracts over the entire class period of 3.5 years, and plaintiffs would require an individualized calculation of damages for each TPP.

Id. at 86. The Court gave Plaintiffs the opportunity to address the Court’s predominance concerns by redefining the proposed class to include only TPPs which had contracts based on AWP before the start of the Scheme, and to exclude reimbursements for renegotiated contracts. See id. at 87.

With respect to the related issues of superiority and manageability, the Court found that the methodology proposed by Plaintiffs to determine aggregate damages for the TPP Class was inadequate because it did not sufficiently take into account individual TPP mitigation of damages through renegotiation of contract price terms with Pharmacy Benefit Managers (“PBMs”). Plaintiffs expert, Dr. Raymond Hartman, had calculated damages based on a “zero-knowledge — zero-mitigation” damages model, which would likely have resulted in a significant overstatement of damages if there were subsequent push-backs by the PBMs and/or TPPs in a way not captured by the model. Moreover, the Court was concerned that individualized trials or hearings on damages for those TPPs with renewed or renegotiated contracts would be unmanageable. The Court gave Plaintiffs’ expert the opportunity to submit an aggregate damage methodology alternative to address these concerns. Id. at 87-89.

McKesson sought leave to file an interlocutory appeal pursuant to Fed.R.Civ.P. 23

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Hatfield v. Tony Pirani
W.D. Arkansas, 2024
In re Nexium (Esomeprazole) Antitrust Litigation
296 F.R.D. 47 (D. Massachusetts, 2013)
Skilstaf, Inc. v. Cvs Caremark Corp.
669 F.3d 1005 (Ninth Circuit, 2012)
San Francisco Health Plan v. McKesson Corp.
767 F. Supp. 2d 263 (D. Massachusetts, 2011)
In RE McKESSON GOVERNMENTAL ENTITIES
767 F. Supp. 2d 263 (D. Massachusetts, 2011)

Cite This Page — Counsel Stack

Bluebook (online)
248 F.R.D. 363, 44 Employee Benefits Cas. (BNA) 1665, 2008 U.S. Dist. LEXIS 21175, 2008 WL 723774, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-england-carpenters-health-benefits-fund-v-first-databank-inc-mad-2008.