In re Xyrem (Sodium Oxybate) Antitrust Litig.

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IN RE XYREM (SODIUM OXYBATE) ANTITRUST LITIGATION

No. 20-md-02966-RS

United States District Court, N.D. California

May 12, 2023

ORDER GRANTING CLASS CERTIFICATION, DENYING DAUBERT MOTION, AND GRANTING MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT

RICHARD SEEBORG CHIEF UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Plaintiffs in this multidistrict litigation have moved for certification of two classes: a damages class under Federal Rule of Civil Procedure 23(b)(3), and an injunctive relief class under Rule 23(b)(2). In addition to opposing class certification Defendants have filed a motion to exclude portions of Plaintiffs' expert testimony. Finally, Plaintiffs seek preliminary approval of a class settlement with two of the Defendant corporations. For the reasons discussed below, both proposed classes pass muster under Rule 23 and both will be certified, except as to Xywav prescriptions. Defendants' Daubert motion raises issues that go to the weight of Plaintiffs' expert testimony, rather than its admissibility, and that motion will therefore be denied. Finally, the proposed Settlement Class satisfies the criteria for preliminary approval under Rule 23(e), and that motion accordingly will be granted.

II. BACKGROUND

The factual background of this litigation has been thoroughly discussed in prior orders and need not be recounted at length here. See, e.g., Dkt. 138. To recap, Plaintiffs, a mix of insurers and individual consumers, aver violations of federal and state antitrust laws by Defendants, a group of pharmaceutical manufacturers, surrounding the alleged delay of a generic version of Xyrem, a narcolepsy drug. The current phase of litigation involves seven claims for relief. Claims 7-11 of the Consolidated Amended Class Action Complaint (“CAC”) each aver conspiracy and combination in restraint of trade under state law; Claim 12 avers monopolization and monopolistic scheme under state law; and Claim 17 seeks declaratory and injunctive relief for violations of the Sherman Act, 15 U.S.C. § 2.^[1]

For Claims 7-12, Plaintiffs (except Ruth Hollman) seek certification of the following class under Rule 23(b)(3) (“the Damages Class”):

All entities in the Class States^[2] that, for consumption by their members, employees, insureds, participants, or beneficiaries, and other than for resale, paid and/or provided reimbursement for some or all the purchase price for Xyrem and/or Xywav during the time from January 17, 2017, through and until the date of class certification.

Dkt. 353 (“Mot.”), at 1. The Class is composed of insurers, i.e., third-party payors (“TPPs”), rather than individual consumers. For Claim 17, Plaintiffs seek certification of the following class under Rule 23(b)(2) (“the Injunctive Relief Class”):

All individuals and entities in the United States that, for consumption by themselves, their families, or their members, employees, insureds, participants, or beneficiaries, and other than for resale, paid and/or provided reimbursement for some or all the purchase price for Xyrem and/or Xywav during the time from January 17, 2017, through and until the date of class certification.

Mot., at 2. Both Classes also exclude certain entities and individuals, including Defendants, federal and state governmental entities, and certain other insurers. See id. at 1-2. Plaintiffs also seek appointment as class representatives and for the appointment of Class Counsel under Rule 23.

In support of class certification, Plaintiffs offer expert reports from Dr. Rena Conti and Laura Craft. Dr. Conti's opening report primarily focuses on projecting a “generic conversion rate” for Xyrem - that is, the rate at which generic Xyrem would have supplanted brand Xyrem once generic competition began. From this, Dr. Conti calculates damages stemming from the alleged delayed entry of generic Xyrem, using the narcolepsy drug Provigil as a “yardstick” to “estimate what would have happened absent the alleged anticompetitive conduct.” Dkt. 352-24 (“Conti Rpt.”) ¶ 106. Ms. Craft's opening report, meanwhile, discusses the various data sources available to analyze Xyrem sales and prescriptions. For his part, Defendants' expert, Dr. James Hughes, critiques Dr. Conti's methodology and conclusions, and in general suggests that various unique features of Xyrem indicate there are potentially many uninjured class members. The reply reports from Dr. Conti and Ms. Craft respond to Dr. Hughes's critiques and, in turn, provide their own critiques of his analysis. Defendants have moved to exclude certain portions of Dr. Conti's and Ms. Craft's testimony under Rule 702 of the Federal Rules of Evidence.

On March 3, 2023, Plaintiffs, along with Defendants Amneal and Lupin, filed a motion for preliminary approval of class settlement. The settlement agreement generally releases all claims against Amneal and Lupin, in exchange for a settlement fund in the amount of $3.4 million to be used to support continued litigation against the remaining Defendants (namely, Jazz and Hikma). The Settlement Class definition largely overlaps with the Damages Class definition, though it contains both individual consumers and TPPs.

III. LEGAL STANDARD

A. Class Certification

Class actions are governed by Rule 23 of the Federal Rules of Civil Procedure. To obtain class certification, plaintiffs bear the burden of showing they have met each of the four requirements of Rule 23(a) and at least one subsection of Rule 23(b). Zinser v. Accufix Rsch. Inst., Inc., 253 F.3d 1180, 1186 (9th Cir.), amended by 273 F.3d 1266 (9th Cir. 2001). “A party seeking class certification must affirmatively demonstrate” compliance with Rule 23. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). Plaintiffs have the burden to establish the Rule 23 requirements by a preponderance of the evidence. Olean Wholesale Grocery Cooperative, Inc. v. Bumble Bee Foods LLC, 31 F.4th 651, 665 (9th Cir. 2022) (en banc).

Rule 23(a) permits a court to certify a class only if it is satisfied the following requirements are met: “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a). These requirements are commonly referred to as numerosity, commonality, typicality, and adequacy of representation, respectively. Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012).

If all four Rule 23(a) prerequisites are satisfied, plaintiffs must also “satisfy through evidentiary proof” at least one of the three subsections of Rule 23(b). Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013). Certification is appropriate under Rule 23(b)(2) “when a single injunction or declaratory judgment would provide relief to each member of the class,” rather than in a circumstance where each class member would be entitled to a unique injunction. Wal-Mart, 564 U.S. at 360. Under Rule 23(b)(3), plaintiffs must show that “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b)(3). Such common questions need only be capable of classwide resolution; plaintiffs are not required to show that “the evidence in fact establishes [they] would win at trial.” Olean, 31 F.4th at 667. Further, a court may not “decline to certify a class that will require determination of some individualized questions at trial, so long as such questions do not predominate over the common questions.” Id. at 668. If these showings have been made and the class is thus certified, the court must appoint class counsel, taking into account the counsel's experience, knowledge, resources, and familiarity with the case. Fed.R.Civ.P. 23(g).

B. Exclusion of Expert Testimony

Rule 702 of the Federal Rules of Evidence requires that a witness proffered as an expert by a party be qualified by “knowledge, skill, experience, training, or education.” Fed.R.Evid. 702. Under the test laid out in Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993), expert opinion testimony is reliable if it has a “basis in the knowledge and experience of [the relevant] discipline.” Id. at 592. The following factors, among others, are to be considered when evaluating whether an expert's proposed testimony is reliable: (1) “whether a theory or technique . . . can be (and has been) tested,” (2) “whether the theory or technique has been subjected to peer review and publication,” (3) the known or potential error rate of the particular scientific theory or technique, and (4) the degree to which the scientific technique or theory is accepted in a relevant scientific community. Id. at 593-94; see Kumho Tire Co. v. Carmichael, 526 U.S. 137, 151 (1999) (Daubert factors are not exhaustive).

Courts reviewing Daubert motions focus on the principles and methodology employed by the expert, not the conclusions the expert ultimately reaches. See Daubert, 509 U.S. at 595. As such, expert testimony may not be excluded simply because it is impeachable. Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc., 738 F.3d 960, 969 (9th Cir. 2013). Instead, “[v]igorous crossexamination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.” Daubert, 509 U.S. at 596.

C. Preliminary Approval of Class Settlement

Rule 23(e) provides a process for the approval of classes “proposed to be certified for the...