Commonwealth v. Tap Pharm. Prods., Inc.

Commonwealth of Pennsylvania, Plaintiff v. TAP Pharmaceutical Products, Inc.; Abbott Laboratories; AstraZeneca PLC;AstraZeneca, Holdings, Inc.; AstraZeneca Pharmaceuticals LP; AstraZeneca LP;Bayer AG; Bayer Corporation; SmithKline Beecham Corporation d/b/a GlaxoSmithKline;Pfizer, Inc.; Pharmacia Corporation; Johnson & Johnson; Alza Corporation;Centocor, Inc.; Ethicon, Inc.; Janssen Pharmaceutical Products, L.P.; McNeil-PPC, Inc.;Ortho Biotech, Inc.; Ortho Biotech Products; L.P.; Ortho-McNeil Pharmaceutical, Inc;Amgen, Inc.; Immunex Corporation; Bristol-Myers Squibb Company; Baxter International Inc.;Baxter Healthcare Corporation; Immuno-U.S., Inc.; Aventis Pharmaceuticals, Inc.;Aventis Behring, L.L.C.; Hoechst Marion Roussel, Inc., Boehringer Ingelheim Corporation;Boehringer Ingelheim Pharmaceuticals, Inc.; Ben Venue Laboratories; Bedford Laboratories;Roxane Laboratories; Schering-Plough Corporation; Warrick Pharmaceuticals Corporation;Schering Sales Corporation; Dey, Inc., Defendants

No. 212 M.D. 2004

COMMONWEALTH COURT OF PENNSYLVANIA

Argued: May 9, 2011

August 31, 2011

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge HONORABLE ROBERT SIMPSON, Judge (P) HONORABLE BARRY F. FEUDALE, Senior Judge

OPINION BY JUDGE SIMPSON

OPINION re POST-TRIAL MOTIONS of the COMMONWEALTH of PENNSYLVANIA and JOHNSON & JOHNSON DEFENDANTS

TABLE OF CONTENTS

I. BACKGROUND ........................................................................... 5

A. Opening .............................................................................. 5

B. Parties ................................................................................ 8

1. Plaintiff Agencies ........................................................... 8

a. DPW/Pennsylvania Medicaid ..................................... 8

b. Department of Aging/PACE ..................................... 10

2. Johnson & Johnson Defendants ......................................... 12

C. Procedural History ................................................................ 16

II. FINDINGS AND CONCLUSIONS: INFLATED "PRICES" ................ 22

A. WAC and AWP - Generally ................................................... 22

B. AWP System and Confusion - Findings ...................................... 25

C. CPL Violation ..................................................................... 34

1. Tendency to Deceive ...................................................... 34

2. Materiality .................................................................. 35

3. "Government Knowledge" ............................................... 35

a. Generally ............................................................ 35

b. "Government Knowledge" - Other Findings .................. 36

(1) Radke Testimony .......................................... 36

(2) Other DPW Evidence ..................................... 38

(3) PACE Evidence ............................................ 43

c. "Government Knowledge" - Conclusions ...................... 46

4. Reliance/"Government Choice" ......................................... 46

a. Generally ............................................................ 46

b. "Government Choice" - Findings ............................... 48

5. Causation .................................................................... 50

6. Restoration Amounts ...................................................... 53

a. Generally ............................................................ 53

b. Rebates - Findings ................................................. 54

D. Negligent Misrepresentation .................................................... 56

E. Conspiracy ......................................................................... 58

III. FINDINGS AND CONCLUSIONS: MARKETING THE SPREAD ...... 60

A. Procrit® ........................................................................... 60

B. Remicade® ........................................................................ 64

C. Conclusions ....................................................................... 67

IV. J&J GLOBAL CHALLENGE: JUDICIAL ESTOPPEL ..................... 68

A. Contentions ........................................................................ 68

B. Analysis ............................................................................ 70

V. J&J GLOBAL CHALLENGE: NON-JUSTICIABLE POLITICAL QUESTION ................................................................................. 75

A. Contentions ......................................................................... 75

B. Analysis ............................................................................ 76

VI. J&J CHALLENGES TO CPL AWARDS ....................................... 84

A. Plaintiff Agencies Not Consumers ............................................. 84

1. Contentions ................................................................ 84

2. Analysis .................................................................... 84

B. Challenge to Meaning and Application of "AWP" .......................... 89

1. Contentions ................................................................ 89

2. Analysis .................................................................... 91

a. "Plain Meaning" Construction of AWP ........................ 91

b. Target Audience ................................................... 95

c. Sophisticated Parties .............................................. 95

d. Materiality ......................................................... 98

e. Causation of Harm ................................................. 98

C. Injunction Improper ............................................................ 100

1. Contentions ............................................................... 100

2. Injunction Moot .......................................................... 101

3. Injunction Unnecessary ................................................. 105

a. Contentions ....................................................... 105

b. Standard for Injunction Under CPL ........................... 106

c. Urgent Necessity ................................................. 110

4. First Amendment ......................................................... 119

D. Restoration Improper ........................................................... 122

1. Contentions ................................................................ 122

2. Analysis - Generally .................................................... 123

3. No Basis for Injunction ................................................. 124

4. J&J Not "Acquire" Funds .............................................. 124

5. No Evidence of "Overpayment" ....................................... 126

6. Challenge to Warren-Boulton's PBM Model ........................ 127

a. Contentions ....................................................... 127

b. Analysis - Generally ............................................. 128

c. Global Challenges to "But For" Methodology ............... 129

d. Real-World Factors .............................................. 130

e. Improper Inclusions .............................................. 131

7. Restoration Before 1997 ................................................ 131

a. Contentions ....................................................... 131

b. Waiver ............................................................. 132

E. Civil Penalties Improper ....................................................... 132

1. Contentions ............................................................... 132

2. Evidence of Willfulness ................................................. 134

3. Changes to NDCs ........................................................ 134

VII. COMMONWEALTH DEMAND FOR JNOV .............................. 136

A. Contentions ...................................................................... 136

B. Analysis ........................................................................... 138

1. Generally .................................................................. 138

2. Negligent Misrepresentation ........................................... 141

3. Civil Conspiracy ......................................................... 144

VIII. COMMONWEALTH DEMAND FOR NEW TRIAL ..................... 145

A. Contentions ...................................................................... 145

B. Analysis .......................................................................... 147

IX. COMMONWEALTH DEMAND FOR MODIFICATION ............... 150

A. Contentions ...................................................................... 150

B. Analysis .......................................................................... 152

X. CONCLUSION .................................................................... 156

I. BACKGROUND

A. Opening

This complex original jurisdiction action, which comes before a panel of this Court for a third time, involves the pricing of pharmaceuticals reimbursed by the Pennsylvania Department of Public Welfare (DPW), which administers Pennsylvania's Medicaid program, and by the Department of Aging, which administers the Pharmaceutical Assistance Contract for the Elderly (PACE) program, based on Average Wholesale Price (AWP) between 1991 and 2008.

In particular, the Commonwealth, through its Attorney General, filed suit against numerous pharmaceutical companies, including defendant Johnson & Johnson and several of its current or former subsidiary operating companies¹ (collectively, "Johnson & Johnson Defendants"), which, the Commonwealth claimed, engaged in improper conduct that caused DPW and PACE (collectively, "Plaintiff Agencies") to pay inflated prices for pharmaceuticals the defendant pharmaceutical companies manufactured, marketed and sold. Among other things, the Commonwealth alleged the defendant pharmaceutical companies, including Johnson & Johnson Defendants, reported, or contributed to the reporting of, inflated AWPs for certain branded drugs which are published in commercial publications. These inflated prices caused damages to DPW and PACE, which...