Commonwealth v. Tap Pharm. Prods., Inc.

36 A.3d 1112

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.

Commonwealth Court of Pennsylvania.

Argued May 9, 2011.Decided Aug. 31, 2011.

Donald E. Haviland, Jr., Philadelphia, and William O. Crutchlow, Edison, NJ, for plaintiff.

Allen. S. Loney, Jr., Philadelphia, Steven M. Edwards, New York, NY, and Michael C. Moore, Dallas, TX, for defendant Bristol–Myers Squibb.

Jack Mentzer Stover, Harrisburg, for defendants Bristol–Myers Squibb and Johnson & Johnson.BEFORE: LEADBETTER, President Judge, and SIMPSON, Judge (P), and FEUDALE, Senior Judge.

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

OPINION BY Judge SIMPSON.

+-----------------+
¦TABLE OF CONTENTS¦
+-----------------+

I.   BACKGROUND                                                         1121

     A.   Opening                                                       1121
     B.   Parties                                                       1122

          1.  Plaintiff Agencies                                        1122

              a.  DPW/Pennsylvania Medicaid                             1122
              b.  Department of Aging/PACE                              1123

          2.  Johnson & Johnson Defendants                              1124

     C.   Procedural History                                            1126

II.  FINDINGS AND CONCLUSIONS: INFLATED “PRICES''                       1129

     A.   WAC and AWP Generally                                         1129
     B.   AWP System and Confusion—Findings                             1130
     C.   CPL Violation                                                 1134

          1.  Tendency to Deceive                                       1134
          2.  Materiality                                               1134
          3.  ”Government Knowledge”                                    1134

              a.  Generally                                             1134
              b.  ”Government Knowledge”—Other Findings                 1135

                  (1) Radke Testimony                                   1135
                  (2) Other DPW Evidence                                1135

+---------------------------------------------------------------------------+
¦    ¦    ¦   ¦   ¦(3)¦PACE Evidence                                 ¦1138  ¦
+---------------------------------------------------------------------------+

              c.  ”Government Knowledge”—Conclusions                    1139

          4.  Reliance/”Government Choice”                              1139

              a.  Generally                                             1139
              b.  ”Government Choice”—Findings                          1140

          5.  Causation                                                 1141
          6.  Restoration Amounts                                       1142

              a.  Generally                                             1142
              b.  Rebates—Findings                                      1142

     D.   Negligent Misrepresentation                                   1143
     E.   Conspiracy                                                    1144

III. FINDINGS AND CONCLUSIONS: MARKETING THE SPREAD                     1145

     A.   Procrit®                                                      1145
     B.   Remicade®                                                     1147
     C.   Conclusions                                                   1148

+------------------------------------------------------------+
¦IV.¦J & J GLOBAL CHALLENGE: JUDICIAL ESTOPPEL         ¦1149 ¦
+------------------------------------------------------------+

     A.   Contentions                                                   1149
     B.   Analysis                                                      1150

V.   J & J GLOBAL CHALLENGE: NON–JUSTICIABLE POLITICAL QUESTION         1152

     A.   Contentions                                                   1152
     B.   Analysis                                                      1153

VI.  J & J CHALLENGES TO CPL AWARDS                                     1157

     A.   Plaintiff Agencies Not Consumers                              1157

          1.  Contentions                                               1157
          2.  Analysis                                                  1157

     B.   Challenge to Meaning and Application of ‘AWP'                 1159

          1.  Contention                                                1159
          2.  Analysis                                                  1160

+------------------------------------------------------+
¦   ¦   ¦  ¦a.¦”Plain Meaning” Construction of AWP¦1160¦
+---+---+--+--+-----------------------------------+----¦
¦   ¦   ¦  ¦b.¦Target Audience                    ¦1162¦
+---+---+--+--+-----------------------------------+----¦
¦   ¦   ¦  ¦c.¦Sophisticated Parties              ¦1162¦
+---+---+--+--+-----------------------------------+----¦
¦   ¦   ¦  ¦d.¦Materiality                        ¦1164¦
+---+---+--+--+-----------------------------------+----¦
¦   ¦   ¦  ¦e.¦Causation of Harm                  ¦1164¦
+------------------------------------------------------+

     C.   Injunction Improper                                           1164

          1.  Contentions                                               1164
          2.  Injunction Moot                                           1165
          3.  Injunction Unnecessary                                    1167

              a.  Contentions                                           1167
              b.  Standard for Injunction Under CPL                     1167
              c.  Urgent Necessity                                      1169

          4.  First Amendment                                           1173

     D.   Restoration Improper                                          1175

          1.  Contentions                                               1175
          2.  Analysis—Generally                                        1175
          3.  No Basis for Injunction                                   1176
          4.  J & J Not “Acquire” Funds                                 1176
          5.  No Evidence of “Overpayment”                              1176
          6.  Challenge to Warren–Boulton's PBM Model                   1177

              a.  Contentions                                           1177
              b.  Analysis Generally                                    1177
              c.  Global Challenges to “But For” Methodology            1178
              d.  Real–World Factors                                    1178
              e.  Improper Inclusions                                   1179

          7.  Restoration Before 1997                                   1179

              a.  Contentions                                           1179
              b.  Waiver                                                1179

     E.   Civil Penalties Improper                                      1179

          1.  Contentions                                               1179
          2.  Evidence of Willfulness                                   1180
          3.  Changes to NDCs                                           1180

+----------------------------------------------------------------------------+
¦VII.¦COMMONWEALTH DEMAND FOR JNOV                                   ¦1181   ¦
+----------------------------------------------------------------------------+

     A.   Contentions                                                   1181
     B.   Analysis                                                      1182

          1.  Generally                                                 1182
          2.  Negligent Misrepresentation                               1183
          3.  Civil Conspiracy                                          1184

VIII. COMMONWEALTH DEMAND FOR NEW TRIAL                                 1185

     A.   Contentions                                                   1185
     B.   Analysis                                                      1186

IX.  COMMONWEALTH DEMAND FOR MODIFICATION                               1187

     A.   Contentions                                                   1187
     B.   Analysis                                                      1188

X.   CONCLUSION                                                         1190

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 ...