Drug Class Action Rejected Again

Class certification was denied -- again -- in litigation brought by plaintiffs who allege a drug maker misstated the likelihood of withdrawal symptoms in use of a prescription medication.  See Saavedra v. Eli Lilly & Co., No. 12-09366 (C.D. Calif., 7/21/15).

Plaintiffs originally moved to certify four classes under the state consumer fraud acts of Missouri, New York, Massachusetts and California. The court rejected those proposed classes, noting plaintiffs' "unusual" theory of injury and damages. Plaintiffs did not allege they suffered the alleged withdrawal effects, or that they were injured by being overcharged.  They asserted instead that they were harmed because they received a product that had less value than the class expected it to have.  They got a product with less utility, defined as the benefit consumers believe they will get by using the product.  This flawed model looked only to the demand side of the market because it focused on a refund tied to consumers out of pocket costs; yet, the prescription drug market is quintessentially inefficient and the relationship between price and value is "severed."  In turn, causation and injury could not be shown on a class-wide basis, and common issues did not predominate. 

Plaintiffs tried again, with a proposal to certify New York and Massachusetts classes. This effort, too, raised serious issue of predominance. Plaintiffs claimed to seek only the minimum statutory damages provided under the laws of the two states,  Thus, they sought to avoid the problems of their original damages model.  But plaintiffs still had to show that each class member was injured as a result of defendant's alleged misleading act -- that the act caused the loss.  Plaintiffs could only show that harm by alleging the acts caused them to pay the wrong price, too much, a price premium, for the drug;  this is either a variant on the rejected fraud-on-the-market theory or a theory that calls for a subjective individual inquiry into what each class member got and paid for.  Because the prescription drug market is not efficient (for example, it is complicated by the role of insurance and co-payments), plaintiffs cannot rely on price to show injury in this way.  Pricing affected different class members to varying degrees because of different health insurance and the different terms of benefits that can accompany it. Even if, under the new theory, plaintiffs did not need to quantify the subjective injury each felt to quantify damages, that didn't change the fact that plaintiffs would need to show that same thing to establish causation and fact of injury.  This could not be done on a class-wide basis.

Here, the class period spanned a decade and included class members who paid different prices for the drug and had different insurance. Different class members would have been affected to different degrees.  And use of a defendant's internal marketing or pricing documents wouldn't bridge the gap: the suggestion that a lower level of withdrawal symptoms might lead some consumers to pay more for a drug does not prove that a premium was actually charged, that the price charged was in excess of the drug's true value, or that prices negotiated with third-party payers were directly and fully passed on to the class.

So, again, the attempted showing of predominance failed.

 

State Supreme Court Reverses Class Certification on Predominance Grounds

The Alabama Supreme Court has recently reversed a lower court's certification of a class of third-party payers of health care services who complained about damages allegedly flowing from the recall of a drug from the market.  Wyeth, Inc. v. Blue Cross and Blue Shield of Alabama, 2010 WL 152123 (Ala. Jan. 15, 2010).

Defendant Wyeth voluntarily withdrew Duract from the market, notifying the public of its decision to do so through a press release.  As part of the process of withdrawing Duract from the market, Wyeth voluntarily instituted a customer refund program for customers who still had Duract capsules in their possession. The third-party payers sued Wyeth solely on a theory of unjust enrichment, alleging that their payment for the drug had conferred an inappropriate benefit on Wyeth in light of the withdrawal.

After a hearing on the class certification motion, the trial court entered an order certifying a nationwide class of TPPs who paid for the prescription drug Duract that was not used as of the date of its withdrawal from the market.  On appeal, the defendant argued that predominance of common issues had not been established, a requirement of Alabama Rule 23 analogous to FRCP 23 (b)(3).

As in many states, Alabama recognizes that unjust enrichment claims are particularly unsuitable for class treatment. Funliner of Alabama, L.L.C. v. Pickard, 873 So.2d 198, 211 (Ala.2003) (unjust enrichment claims based on allegations of mistake or fraud require an individualized inquiry into the state of mind of each plaintiff).  The trial court distinguished this body of law, finding that this particular enrichment claim was not based on fraud or mistake, but on the somehow different theory that “equity and good conscience” required the defendant to disgorge money that belongs to the plaintiff.

The court observed that Wyeth probably had the better of the argument on this, meaning that the trial court had fashioned on a distinction without a difference.  But the state high court did not need to resolve the unjust enrichment issue under Alabama law, because the plaintiffs sought a nationwide class. Regardless of what Alabama law was, there had been no adequate showing, either to the trial court or to the Supreme Court, that the laws of all (or even most of) the 49 other states would allow unjust enrichment claims to proceed on such a "good conscience" basis somehow distinct from a traditional claim. 

Even a cursory examination showed that variances exist in state common laws of unjust enrichment. The actual definition of unjust enrichment varies from state to state. Some states do not specify the misconduct necessary to proceed, while others require that the misconduct include dishonesty or fraud. See Clay v. American Tobacco Co., 188 F.R.D. 483, 501 (S.D.Ill.1999).

Accordingly, common issues could not predominate.  Certification was vacated.