Antitrust Law Daily Wrap Up, ANTITRUST—D. N.J.: Class certification granted in Sanofi pediatric vaccine bundling dispute, (Oct 1, 2015)

By Linda O’Brien, J.D., LL.M.

The federal district court in Chicago has granted class certification to a group of pediatric physician practices in their suit against pharmaceutical manufacturer Sanofi Pasteur for allegedly using its monopoly power to create pricing bundles that inflated the prices of pediatric vaccines (Castro v. Sanofi Pasteur Inc., September 30, 2015, Arleo, M.).

Sanofi Pasteur develops, manufactures, and supplies pediatric vaccines for disease prevention and therapy. For many years, Sanofi had a 100 percent monopoly over the conjugate quadrivalent meningococcal vaccine (MCV4) market. Sanofi’s vaccine, Menactra, is administered to children to inoculate against certain strains of meningitis. Sanofi also had a dominant market share for other pediatric vaccines, including diphtheria, tetanus and pertussis, inactivated polio virus, and haemophilus influenza vaccines.

In 2009, competing pharmaceutical manufacturer Novartis planned to bring a competing MCV4 vaccine to market. Sanofi responded by bundling Menactra with its other pediatric vaccines and by substantially increasing its prices. Customers who purchased a certain percentage of all four pediatric vaccines from Sanofi received a loyalty discount. Three pediatric physician practices — Adriana Castro, M.D., P.A, Sugartown Pediatrics, LLC, and Marquez & Begochea, M.D., P.A. — filed suit in December 2011, alleging that the loyalty discount scheme foreclosed competition from the market for pediatric vaccines in violation of Section 2 of the Sherman Act.

Before the court was the plaintiffs’ motion to certify a class of those who purchased Menactra from Sanofi beginning from March 2010 and the defendant’s motion to exclude plaintiffs’ class experts.

Rule 23(a). The court first determined that the plaintiffs satisfied the requirements of Federal Rule of Civil Procedure 23(a). The members of the class were so numerous that joinder would be impracticable, there were questions of law or fact common to the class, the claims of the named representatives were typical of the claims of the class, and the named representatives would fairly and adequately protect the interests of the class.

Predominance. The court found that all of the significant questions of the case will turn on the defendant’s conduct and not on individual plaintiffs. Thus, common issues of fact and law predominated. One of the methods of proving monopoly power is to define a market and establish dominant market share, the court explained. The plaintiffs contended that Sanofi’s imposition and enforcement of the Menactra bundle violated antitrust laws, and they presented evidence to show monopoly power in the relevant markets, willful maintenance of monopoly power through the bundle, and foreclosure of Novartis from a large percentage of the MCV4 market.

According to the court, evidence of whether Sanofi had monopoly power due to its market share and willfully maintained that market power was common to the class. Exclusionary bundling can constitute willful maintenance under certain circumstances, especially if the seller leverages its monopoly power in one market to impair competition in another market. The plaintiffs presented evidence through internal Sanofi documents that the bundle was willfully exclusionary and intended to leverage its broad product line to create a significant barrier to competition by Novartis.

The plaintiffs’ evidence of Sanofi’s internal business records and the plaintiff’s expert analysis showed the foreclosure effects of Sanofi’s bundling and was common to the class. The plaintiffs’ theory as to antitrust impact —the price inflation occurred to substantially all class members —was also classwide. Finally, the plaintiffs’ presented common evidence that the Sanofi bundle suppressed competition. Specifically, the bundle divided the market into two groups: Sanofi loyal and non-loyal customers. The market division enabled Sanofi to avoid price competition by creating a significant gap in pricing between loyal and non-loyal customers and the inflated prices due to the bundle had a classwide effect.

Class experts. The court also determined that the plaintiffs’ expert’s testimony in support of the class certification should be admitted. The plaintiffs’ expert opined on five issues: (1) the relevant markets for Sanofi’s four pediatric vaccines; (2) the bundle’s lack of procompetitive effects; (3) the bundle’s division of the MCV4 market into loyal and non-loyal customers; (4) the market division’s inflation of prices to the whole class by disincentivizing between Sanofi and Novartis; and (5) the payment of inflated prices by the whole class as a result of the bundle.

In the court’s view, the plaintiffs’ expert was eminently qualified, his conclusions were reliable and supported with data analysis, and he provided defensible reasons for not using alternative various models in his analysis. Because there were no serious methodology flaws or clear lack of factual basis, the expert testimony should not be excluded, the court concluded.

The case is No. 11-7178.

Attorneys: Kelly Magnus Purcaro (Cohn Lifland Pearlman Herrman & Knopf, LLP) for Adriana Castro, M.D., P.A. James E. Cecchi (Carella Byrne Cecchi Olstein Brody & Agnello, PC) for Sugartown Pediatrics, LLC. John P. Barry (Proskauer Rose, LLP.) for Sanofi Pasteur Inc.

Companies: Adriana Castro, M.D., P.A; Sugartown Pediatrics, LLC; Marquez & Begochea, M.D., P.A.; Sanofi Pasteur Inc.

Cases: Antitrust NewJerseyNews