IP Law Daily, PATENT—D. Mass.: Settlements given final approval in generic drug delayed entry class actions against Ranbaxy, (Sep 26, 2022)

By Robert Margolis, J.D.

Given “enormity” of settlement funds that totaled close to $500 million, class counsel’s attorney fees pared from nearly 30 to 20 percent of settlement funds.

The federal district court in Boston has granted final approval of two settlements reached on the eve of trial between two groups of plaintiff classes and Ranbaxy, Inc. and Sun Pharmaceutical Industries Limited, in the consolidated class action lawsuit alleging that the defendants illegally delayed the market entry of three generic drugs. Under the terms of the two settlements, Ranbaxy agreed to pay $145 million into a fund for the End Payor Class of plaintiffs, and $340 million to a settlement fund for the Direct Payor Class of plaintiffs. Though attorneys for the respective classes sought fee awards of close to 30 percent, the court cited the “enormity” of the settlement funds to reduce the awards to 20 percent: $68,000,000 for End Payor Class counsel and $29,000,000 for Direct Payor Class counsel. The court also awarded reimbursement of more than $3.5 million in expenses, and $40,000 service awards for each of the two class representatives (In Re Ranbaxy Generic Drug Application Antitrust Litigation, September 19, 2022, Gorton, N.).

Ranbaxy manufactured pharmaceutical drugs under the brand names Diovan, Nexium, and Valcyte. The multi-district litigation involved five actions brought by two plaintiff groups, the “Direct Purchasers” (DPPs) and the “End Payors” (EPPs), against Ranbaxy and Sun Pharmaceuticals, alleging that they caused the delayed market entry of the generics Diovan, Valcyte, and Nexium. The EPPs class is comprised of health insurers and unions, as third-party payors, which provided health coverage to their members. The DPPs class included direct purchasers of the drugs. The five cases were consolidated in Massachusetts federal court. The two plaintiff groups separately alleged violations of state and federal antitrust law, RICO, and state consumer protection laws. The court had dismissed without prejudice end-payor claims for consumer protection violations under statutes in California, West Virginia, and Maine.

Settlement terms. The parties reached proposed settlement agreements in March of 2022, two weeks before trial was set to begin, and after years of litigation. The court granted preliminary approval of the settlements, which provides that Ranbaxy will pay $145 million into a settlement fund for the EPPs and $340 million into a settlement fund for the DPPs. Those funds, along with interest, will be used to pay various costs and expenses, including taxes, administrative costs related to providing notice to the classes and administering the settlement, costs and expenses incurred by counsel, and attorney fees the court approves. Upon final approval, the remainder of the settlement fund would be distributed to class members in accordance with allocation plans. The plaintiffs would then grant the defendants releases from liability.

Before the court were motions for final approval of the settlements and motions seeking attorney fees, litigation expenses, and service awards for class members.

Final approval. The court, borrowing from the Second Circuit a “holistic” approach to determining whether to approve the settlement, reviewed several factors to conclude that the settlement was a “fair, reasonable, and adequate” outcome to the litigation. In particular, the court cited the complexities of antitrust class action litigation, the lack of objections to the settlement, the fact that the settlement was reached in the late stages of litigation, and the risks of litigating through trial. The court also noted that the settlement figures are within the range of reasonableness when compared to antitrust generic drug delay case settlements, and the settlements were reached at arm’s length by “quality” counsel.

Attorney fees. Counsel for the DPPs sought attorney fees of $92,523,554 (representing 27.5 percent of the net fund for the DPPs, or a lodestar multiplier of 2.11 given the hours spent and billing rates of the attorneys). Counsel for the EPPs sought attorney fees of $40,600,000 (representing 28 percent of the net fund for the EPPs, or a lodestar multiplier of 2.94 given their hours and rates). In looking both at the percentages and the lodestar multipliers, the court deemed the requests to be too high. After reviewing the range of amounts awarded in class actions generally, generic entry delay antitrust cases in particular, and considering the “immensity” of the requested fees, the court held that counsel should be awarded 20 percent of the respective settlement funds. That totaled $68,000,000 for the DPPs’ counsel and $29,000,000 for the EPPs’ counsel, representing lodestar multipliers of 1.55 and 2.10 respectively.

The court began by discussing the ranges of percentages awarded to counsel in other class action litigation. Standard awards in the First Circuit range between 20 percent and 33 percent, so the percentages counsel sought in this case were within that range. The court itself typically approves attorney fees of 25 percent, but often reduces fees when deemed excessive. Lodestars typically are used as a cross-check on the attorney fees calculated under the percentage-of-fund method. Lodestar multipliers in the First Circuit most often range between one and 2.7. With that background, the court analyzed counsel’s request, noting that whatever method it uses, the fees awarded will be “immense.”

The court described its role as to “holistically” arrive a fair compensation given that the settlement fund is enormous and the legal services rendered were, in the court’s words, “relatively routine (albeit extensive).” The court noted that in other generic drug delayed entry cases that have settled, the “modal fraction” of the settlement fund awarded as attorney fees has been one-third, which is higher than the fraction that counsel sought in this case. But those cases involved far lower settlement amounts, so they were not perfect comparators for purposes of using a pure percentage-of-fund approach, according to the court. The court further noted that the lodestar multipliers for the other generic entry delay cases was much lower than that sought by counsel in this case, ranging from .60 to 2.35.

Finally, the court’s research revealed that fee percentages are lower when cases involve settlement funds between $250 and $500 million. The median percentage for those size settlements in 2006 and 2007 were 17.8 and 19.5 percent respectively.

In holding that the requested award of attorney fees should be reduced from the percentage amounts near 30 percent sought by counsel to 20 percent, the court also cited the fact that the case was brought after Ranbaxy had already entered into a civil settlement and criminal plea agreement with the federal government in 2013. Thus, while the case did involve some novel legal theories, the foundational allegations of wrongdoing were based on findings already known when the case was brought, thus lowering the financial risks typically involved in litigation of this scope.

The Case is No. 1:19-md-02878-NMG.

Attorneys: Alfred Luke Smith (Radice Law Firm, PC) for Meijer Inc. Linda P. Nussbaum (Nussbaum Law Group, PC) for Cesar Castillo, Inc. Anna Katherine Higgins (Pendley, Baudin & Coffin, LLP) for MSP Recovery Claims, Series LLC and MSPA Claims I LLC. Alexandra I. Russell (Kirkland & Ellis, LLP) for Sun Pharmaceutical Industries Ltd. and Ranbaxy, Inc.

Companies: Meijer, Inc.; Meijer Distribution, Inc.; Cesar Castillo, Inc.; MSP Recover Claims, Series LLC; MSPA Claims I LLC; Sun Pharmaceutical Industries Ltd.; Ranbaxy, Inc.

Cases: Patent MassachusettsNews