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Direct Purchaser Class v. Apotex Corp

United States District Court for the Southern District of Florida
May 15, 2017
2017 U.S. Dist. LEXIS 159585 (S.D. Fla. 2017)

Opinion

CASE NO. 16-62492-MC-ZLOCH

May 15, 2017, Decided. May 15, 2017, Entered on Docket

For Direct Purchaser Class Plaintiffs, Plaintiff: Jayne Arnold Goldstein, Shepherd Finkelman Miller & Shah LLP, Ft. Lauderdale, FL.

For Apotex Corp., Defendant: James W. Matthews, LEAD ATTORNEY, PRO HAC VICE, Foley & Lardner, LLP, Boston, MA; Joseph H. Jolly, LEAD ATTORNEY, PRO HAC VICE, Foley & Lardner, LLp, Boston, MA; Natalia Maria Salas, LEAD ATTORNEY, Foley & Lardner, LLP, Miami, FL.


THIS MATTER is before the Court upon the Direct Purchaser Class Plaintiffs' Motion To Compel Compliance With Non Party Subpoena Duces Tecum Served On Apotex Corp. (DE 1). The Court has carefully reviewed said Motion, the entire court file and is otherwise fully advised in the premises.

To spur innovation in medicine, federal law allows for the issuance of patents covering new prescription drugs. Such patents grant a limited period of exclusivity, in which the patent recipient is protected from competition by other drug companies. Once the period of exclusivity expires, competitors may seek approval from the Food and Drug Administration to sell generic versions of the prescription drug that use the same active ingredient. This system attempts to balance the incentives for development of new prescription drugs against consumers' interest in affordable medicine.

The instant Motion (DE 1) concerns a drug called Celebrex and its generic counterpart. Celebrex is a brand-name drug manufactured by Pfizer, Inc., which is used to treat conditions such as rheumatoid arthritis and osteoarthritis. The drug's generic form is called celecoxib. Pfizer, Inc., initially obtained two patents that covered the celicoxib compound, Celebrex: U.S. Patent Nos. 5,466,823 and 5,563,165. The exclusivity periods for these patents were set to expire on May 30, 2014.

Pfizer, Inc., also obtained a third patent on Celebrex—U.S. Patent No. 5,760,068 ("the '068 Patent")—but the United States Court of Appeals for the Federal Circuit ruled it invalid in 2008. Following the Federal Circuit's ruling, Pfizer, Inc., then sought and obtained a reissue patent, U.S. Patent No. RE44, 048 ("the '048 Reissue Patent"), which would have extended Pfizer, Inc.'s, exclusivity period to December 2, 2015.

After Pfizer, Inc., obtained the '068 Patent but before it obtained the '048 Reissue Patent, five companies submitted applications to the Food and Drug Administration for permission to sell generic celecoxib. Respondent Apotex Corp. was of those five companies. The same day that the U.S. Patent and Trademark Office issued the '048 Reissue Patent, Pfizer, Inc., sued each of those five companies. Pfizer, Inc., alleged that each company's generic celcoxib would infringe the '048 Reissue Patent. Pfizer, Inc., lost this lawsuit in the district court when the five companies succeeded in having the '048 Reissue Patent invalidated.

Despite their success in the district court, three of the five companies settled with Pfizer, Inc., to avoid further litigation. As part of their settlement, Pfizer, Inc., entered into license agreements with these three companies, which permitted them to begin selling generic celecoxib as of, at least, December 2014. Respondent Apotex Corp. held out, and the Federal Circuit ultimately affirmed the district court's invalidation of the '048 Reissue Patent.

In the fallout of this patent litigation, two companies that purchased Celebrex directly from Pfizer, Inc., brought a class action lawsuit against Pfizer, Inc., alleging violations of the Sherman Act. See American Sales Company, LLC v. Pfizer, Inc., et al, Case No. 14-00361, DE 1 (E.D. Va. July 1, 2014) ("the Antitrust Litigation"). These companies—plaintiffs in the Antitrust Litigation and Movants here—allege that Pfizer, Inc.'s, prosecution of the '048 Reissue Patent and the litigation to enforce it were a sham designed to suppress competition in the celecoxib market. Their theory is that Pfizer, Inc., fraudulently obtained and attempted to enforce the '048 Reissue Patent, thereby delaying the market entry of generic celcoxib. This allowed Pfizer, Inc., to sell Celebrex at supra-competitive prices to the detriment of direct purchasers of the drug in violation of § 2 of the Sherman Act.

In the course of the Antitrust Litigation, Movants issued a subpoena to non-party Respondent Apotex Corp. That subpoena seeks Respondent Apotex Corp.'s

[] sales data for generic Celebrex and/or authorized generic Celebrex in electronic format, at the transaction level, showing for each transaction from December 1, 2014 to the present the following:

a. Date (of invoice, credit memo, accrual, or other appropriate date);

b. Transaction type (sale, return, adjustment, reversal, free goods, chargeback, chargeback reversal, rebate, rebate reversal, etc.);

c. Customer name;

d. Bill-to customer address;

e. Ship-to customer address;

f. Dosage strength;

g. Package size;

h. NDC code;

i. Units (including the correct sign: positive or negative);

j. Dollar amount (including the correct sign: positive or negative);

k. If the transaction is a charge back, detail concerning the purchases in respect of which the chargeback is being paid or accrued, including the customer name, invoice date, package size, dosage strength, NDC code, units, dollar amount, and the contract price; and,

l. If the transaction is a rebate, explanation of the purchases in respect of which the rebate is being paid.

DE 1-2, at 5-6 (responsive documents will be referred to collectively as "sales data"). The subpoena also seeks a legend or dictionary of terms and codes used in Respondent Apotex Corp.'s sales data so that Movants can interpret it. Respondent Apotex Corp. objects to complying with the subpoena.

The scope of all discovery, including discovery by subpoena, is governed by Federal Rule of Civil Procedure 26. That Rule permits parties to "obtain discovery regarding any nonprivileged matter that is relevant to an party's claim or defense and proportional to the needs of the case." Fed. R. Civ. P. 26(b)(1). Within that scope, Federal Rule of Civil Procedure 45 requires subpoenaed parties to "produce designated documents, electronically stored information, or tangible things in that person's possession, custody, or control." Fed. R. Civ. P. 45(a)(1)(A)(iii). Federal Rule of Civil Procedure 45 also permits, and in some cases mandates, the Court to modify or quash a subpeona. The Court may modify the subpoena if it requires "disclosing a trade secret or other confidential research, development, or commercial information." Fed. R. Civ. P. 45(d)(3)(B)(i). There is, of course, "no absolute privilege for trade secrets and similar confidential information." Federal Open Mkt. Comm. v. Merrill, 443 U.S. 340, 362, 99 S. Ct. 2800, 61 L. Ed. 2d 587 (1979). A party resisting disclosure must "first establish that the information sought is a trade secret and then demonstrate that its disclosure might be harmful." Centurion Indus., Inc. v. Warren Steurer and Assocs., 665 F.2d 323, 325 (10th Cir. 1981). "If these requirements are met, the burden shifts to the party seeking discovery to establish that the disclosure of trade secrets is relevant and necessary to the action." Id. This Court's role ultimately is to "balance the need for the trade secrets against the claim of injury resulting from disclosure," and to exercise its "sound discretion to decide whether trade secrets are relevant and whether the need outweighs the harm of disclosure." Id. at 325-26.

Respondent Apotex Corp. has readily established that its sales data is trade secret information. Respondent Apotex Corp. is in the business of selling generic drug products. DE 9-1, Declaration of Jeff Hampton, ¶ 5. In that market, Respondent Apotex Corp. competes with brand equivalent and generic sellers of various drugs. Id. at ¶ 6. "Because generic drug products are homogenous products, a generic manufacturer has no meaningful way to distinguish its version of a product from another manufacturer's version of the identical product." Id. The primary manner of competition in this market, then, is product pricing, service, and supply. Id. This mode of competition prompts businesses such as Respondent Apotex Corp. to maintain confidentiality of their transaction prices. Id. at ¶ 8. Respondent Apotex Corp. thus considers its sales data highly confidential trade secret information, takes precautions to ensure that its sale prices are not disclosed publicly, and contracts with its customers to refrain from disclosing transaction prices. Id. at ¶¶ 14-16.

Because of the competitive nature of the generic drug market, and particularly the manner in which companies compete in it, Respondent Apotex Corp. believes that it would suffer great financial harm if it were forced to disclose its sales data to the parties in the Antitrust Litigation—its direct competitor (Pfizer, Inc.) and its customers (putative members of the plaintiff class). Id. at 17-20. Disclosure to those parties, according to Respondent Apotex Corp., would allow competitors to target Respondent Apotex Corp.'s customers and force it to charge lower and lower prices to remain competitive. Id.

For their part, Movants do not seriously dispute that the sales data they seek constitutes trade secret information. Movants all but concede this point by arguing that Respondent Apotex Corp.'s sales data would be subject the Amended Discovery Confidentiality Order (DE 1-3) ("Protective Order") in place in the Antitrust Litigation. See DE 1-1, at 8. But that Protective Order, by its terms, applies to "trade secrets, competitively sensitive technical, marketing, financial, sales, or other confidential and business information," information related to pricing (including but not limited to credits, discounts, returns, allowances, rebates, and chargebacks)," "transactional data," and other materials that contain particularly sensitive trade secrets." DE 1-3, at 4-5. The Court finds that Respondent Apotex Corp. has met its burden to establish that its sales data constitutes trade secret information within the ambit of Rule 45(d). And consistent with the presumption "that disclosure to a competitor is more harmful than disclosure to a noncompetitor," the Court finds that Respondent Apotex Corp. has carried its burden of establishing potential harm from disclosure of its sales data. American Standard, Inc. v. Pfizer, Inc., 828 F.2d 734, 741 (Fed. Cir. 1987).

The Protective Order is Docket Entry 87 in the Antitrust Litigation. See American Sales Company, LLC v. Pfizer, Inc., et al, Case No. 14-00361, DE 87 (E.D. Va. Apr. 6, 2016)

Movants contend that the sales data they seek is relevant to their claims in the Antitrust Litigation—a proposition Respondent Apotex Corp. disputes equivocally. Among other things, Movants argue that Respondent Apotex Corp.'s sales data is relevant to determining damages in the Antitrust Litigation. According to Movants, their economic experts can use data of this sort to construct a model of what prices would have been charged for celecoxib but for Pfizer, Inc.'s alleged anti-competitive conduct. By comparing this model to the actual prices charged, Movants can establish the amount of overcharges purchasers incurred.

Respondent Apotex Corp. responds by arguing that its sales data is "irrelevant," DE 9, at 1, but then repeatedly characterizes that data as "marginally relevant," DE 9, at 6, 9, 10, 13, and criticizes Movants for putting on a "weak showing of relevance," DE 9, at 6 & 10. Respondent Apotex Corp. correctly makes these concessions in light of the broad scope of discovery under Rule 26. The Court finds that Movants have made their threshold showing of relevance.

Movant next contends that—in light of the patent litigation that preceded the Antitrust Litigation—Respondent Apotex Corp.'s sales data possesses particular importance. Due to their settlements with Pfizer, Inc., several of Respondent Apotex Corp.'s competitors entered the generic celecoxib market burdened by a license agreement. According to Pfizer, Inc., some of those licenses may have been royalty-bearing, further burdening the entry cost for these companies. Respondent Apotex Corp.'s entrance was not burdened in the same way. As a result, Movants contend that Respondent Apotex Corp.'s sales data provides crucial information for establishing the true competitive price of celecoxib.

Respondent Apotex Corp. argues that there is no need for its sales data because other, more convenient data sources exist to substantiate Movants' claims in the Antitrust Litigation. Respondent Apotex Corp. contends that the best data point for purposes of establishing a true competitive price is marginal cost data, which Movants could obtain from the defendants in the Antitrust Litigation. To construct a price model, Respondent Apotex Corp. suggests that Movants' experts can rely on government data, historical models, or analysis of comparable markets. And to the extent that any company's celecoxib market entry was impacted by royalty-bearing license agreements, Respondent Apotex Corp. argues that royalty data from Pfizer, Inc., will prove more useful.

The Parties' respective positions each have considerable merit. It may well be true, as Respondent Apotex Corp. argues, that other data sources could prove useful to Movants. But that does not mean that there is no need for its sales data in the Antitrust Litigation. For example, isolated consideration of Pfizer, Inc.'s marginal cost data is unlikely to yield a true competitive price for celecoxib—just that company's profit margin. And inquiry into comparable generic drug markets is likely to spur the same concerns raised before this Court—just without the close nexus to the operative facts of the Antitrust Litigation. The litigation history preceding the instant Motion (DE 1) has placed Respondent Apotex Corp. in a unique relationship with the Antitrust Litigation. On balance, the Court concludes that Movants have demonstrated particular need for Respondent Apotex Corp.'s celecoxib sales data.

Having reached these conclusions, the Court must now consider whether the potential harm to Respondent Apotex Corp. is outweighed by Movants' need for disclosure. Courts faced with analogous situations typically favor limited disclosure. See e.g., Covey Oil v. Continental Oil Co., 340 F.2d 993 (10th Cir. 1965); Verisign, Inc. v. XYZ.com, LLC, Case No. 15-175, 2015 U.S. Dist. LEXIS 162772, 2015 WL 7960976 (D. Del. Dec. 4, 2015) (ordering production of confidential financial and sales information to competitor under "Attorney's Eyes Only" designation); Eureka Water Co. v. Nestle Waters North America, Inc., Case No. CIV-07-988-M, 2009 U.S. Dist. LEXIS 97679, 2009 WL 3415336 (W.D. Okla. Oct. 20, 2009) (restricting disclosure of competitor's pricing and sales terms to relevant geographic area and allowing disclosure only to parties' attorneys and experts). Covey Oil closely parallels this case. There, Continental Oil was accused of conspiring with various integrated oil companies to fix the wholesale and retail price of gasoline in violation of the Sherman Act and the Robinson-Patman Act. Covey Oil, 340 F.2d at 995. Continental Oil denied the charges and asserted good faith effort to meet competition as an affirmative defense. Id. In the course of litigation, Continental Oil issued subpoenas to some of its competitors seeking information about their wholesale and retail pricing and sale volume of gasoline. Id. at 997. The district court ordered production of that information, but with strict conditions. Id. at 999. Those conditions included making the information available only to counsel and independent certified public accountants for purposes of the case, forbidding use of the information for business or competitive purposes, and limiting the right to presence at depositions. Id. On appeal, the Tenth Circuit observed that, in the relevant market, "competition exists at the wholesale level." Id. 998. At the time, Continental Oil's competitors were supplied by the same integrated oil companies with which Continental Oil was accused of conspiring. Id. at 997. Continental Oil was losing its position in the relevant market and believed that this was due to its wholesale prices being above competitive levels; that competitive wholesale prices could not be deduced from observable retail prices; and that independent gas stations were being charged less for gasoline, including by Continental Oil's competitors, than Continental Oil was charging. Id. For these reasons, the Tenth Circuit concluded that the "wholesale price and volume of admitted competitors directly pertain to both the Sherman Act and the Robinson Patman Act charges and the defenses asserted against those charges." Id. The Tenth Circuit thus affirmed, noting that the district court had put in place "reasonable protective measures [] designed to minimize the effect on" Continental Oil's competitors. Id. at 999.

Before reaching the merits, the Covey Oil Court concluded that it had jurisdiction to hear the issues raised on appeal. 340 F.2d at 995-97. In FTC v. Alaska Land Leasing, Inc., the Tenth Circuit recognized that Covey Oil's jurisdictional holding had been indirectly overruled by United States v. Ryan, 402 U.S. 530, 91 S. Ct. 1580, 29 L. Ed. 2d 85 (1971). 778 F.2d 577, 578 (10th Cir. 1985). Covey Oil's analysis of the merits has not been overruled, and the Court find's the Tenth Circuit's reasoning persuasive.

Like the wholesale gasoline industry in Covey Oil, those in the generic drug business compete primarily through pricing. And just as in Covey Oil, Respondent Apotex Corp.'s sales data provides information necessary to an element of the claims in the Antitrust Litigation. "Inconvenience to third parties may be outweighed by the public interest in seeking the truth in every litigated case," and in this case, "the interests of justice require the enforcement of the subpoena." Id. The Court will therefore order compliance with Movants' subpoena, but subject to limitations like those in Covey Oil.

Respondent Apotex Corp.'s final concern is that the Protective Order in place in the Antitrust Litigation does not provide sufficient protection. Respondent Apotex Corp. contends that none of the parties in the Antitrust Litigation would have an interest in enforcing the Protective Order with respect to its sales data. The Court is not so pessimistic. The Court has carefully reviewed that Protective Order. See DE 1-3. In concert with the protections to be ordered herein, that Protective Order will provide sufficient protection of Respondent Apotex Corp.'s sales data. There is no reason to assume that the parties, through their lawyers, will not comply with this Court's order, or the Protective Order in the Antitrust Litigation.

The Court ends by echoing the Tenth Circuit's observations in Covey Oil:

The claimed trade secrets do not relate to processes, formulas, or methods, but rather to price, cost, and volume of sales. . . . No absolute privilege protects the information sought here from disclosure in discovery proceedings. The claim of irreparable competitive injury must be balanced against the need for the information in the preparation of the [case]. . . . Harm may result [from disclosure] but that harm will be a by-product of competition.

Covey Oil, 340 F.2d at 999.

Accordingly, after due consideration, it is

ORDERED AND ADJUDGED as follows:

1. Direct Purchaser Class Plaintiffs' Motion To Compel Compliance With Non Party Subpoena Duces Tecum Served On Apotex Corp. (DE 1) be and the same is hereby GRANTED;

2. By noon on Friday, June 9, 2017, Respondent Apotex Corp. shall furnish to Movants documents and electronically stored information responsive to Movants' Subpoena To Produce Documents, Information, Or Objects Or To Permit Inspection Of Premises In A Civil Action (DE 1-2), subject to the following restrictions:

a. All responsive documents and electronically stored information produced by Respondent Apotex Corp. shall be subject to the terms and conditions of the Amended Discovery Confidentiality Order (DE 1-3), entered by the United States District Court for the Eastern District of Virginia. See American Sales Company, LLC v. Pfizer, Inc., et al, Case No. 14-00361, DE 87 (E.D. Va. Apr. 6, 2016);

b. Respondent Apotex Corp. may designate all responsive documents and electronically stored information it produces as "Highly Confidential - Attorney's Eyes Only" pursuant to §§ 3(b)(ii) and 4 of the Amended Discovery Confidentiality Order (DE 1-3);

c. Movants may not use the provisions of § 7 of the Amended Discovery Confidentiality Order (DE 1-3) with respect to any documents or electronically stored information produce by Respondent Apotex Corp.;

d. Except for the persons mentioned in § 5(a)(iv) of the Amended Discovery Confidentiality Order (DE 1-3), Movants shall provide Respondent Apotex Corp. the name, address, and telephone number of each person to whom Movants have disclosed any documents or electronically stored information produced by Respondent Apotex Corp. within three days of the date on which Movants make that disclosure;

e. If any party to American Sales Company, LLC v. Pfizer, Inc., et al, Case No. 14-00361 (E.D. Va.), intends to use any documents or electronically stored information produced by Respondent Apotex Corp. at a deposition, in a court hearing, or at trial, Movants shall provide notice in writing to Respondent Apotex Corp. within ten days of that deposition, court hearing or trial;

f. Consistent with § 2(a) of the Amended Discovery Confidentiality Order (DE 1-3), documents and Apotex Corp. shall not be used for any business, commercial, or other competitive purpose;

3. The Clerk of the United States District Court for the Southern District of Florida is hereby DIRECTED to close the above-styled cause; and

4. To the extent not otherwise disposed of herein, all pending Motions are hereby DENIED as moot.

DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County, Florida, this 15th day of May, 2017.

/s/ William J. Zloch

WILLIAM J. ZLOCH

Sr. United States District Judge


Summaries of

Direct Purchaser Class v. Apotex Corp

United States District Court for the Southern District of Florida
May 15, 2017
2017 U.S. Dist. LEXIS 159585 (S.D. Fla. 2017)
Case details for

Direct Purchaser Class v. Apotex Corp

Case Details

Full title:DIRECT PURCHASER CLASS, PLAINTIFFS, Movants, vs. APOTEX CORP., Respondent…

Court:United States District Court for the Southern District of Florida

Date published: May 15, 2017

Citations

2017 U.S. Dist. LEXIS 159585 (S.D. Fla. 2017)