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A federal appeals court has approved a $44.5 million settlement of a consumer antitrust suit against DuPont Pharmaceuticals Co. that accused the manufacturer of issuing misleading statements about a generic anti-coagulant drug to protect sales of its drug Coumadin. In its 36-page opinion written by U.S. Circuit Judge Julio M. Fuentes, In re Warfarin Sodium Antitrust Litigation, a unanimous three-judge panel of the 3rd U.S. Circuit Court of Appeals rejected a series of objections that challenged the lower court’s decision to certify the case as a class action and to approve the settlement as fair. In the appeal, objectors argued that the class failed to satisfy the “commonality” and “predominance” requirements of Rule 23 because the class consisted of three types of plaintiffs — consumers who paid out-of-pocket for the drug; other consumers whose co-pay did not vary depending on the cost; and third-party payors, or TPPs. The objectors also argued that a nationwide class was untenable due to differences in the consumer laws of the 50 states, and that Rule 23′s “adequacy of representation” requirement was not met due to the existence of intra-class conflicts of interest which, they said, rendered class counsel unable to represent the interests of a single class. But the 3rd Circuit found that U.S. District Judge Sue L. Robinson of the District of Delaware properly considered and rejected all of the objections. According to court papers, warfarin sodium is an oral anti-coagulant sold in tablet form that is taken by more than 2 million Americans to treat blood-clotting disorders. DuPont has been the dominant manufacturer and supplier of warfarin sodium under the brand name Coumadin, recording sales of approximately $550 million and $464 million, respectively, in 1998 and 1999. Although DuPont’s Coumadin patent expired in 1962, Coumadin remained the only warfarin sodium product available until July 1997, when a generic version of the drug manufactured by Barr Laboratories Inc. was approved by the FDA. In a spate of lawsuits, consumers alleged that DuPont set out to avoid competition from Barr by disseminating false and misleading information about the safety and equivalence of the generic version.DuPont allegedly revised its promotional computer software system designed for health care practitioners monitoring patients using Coumadin to include warnings about switching to generic substitutes, and created a slide presentation for health care professionals claiming that the generic drug may not be the equivalent to Coumadin. The suit said DuPont also ran a publicity campaign claiming that Coumadin had tighter uniformity standards, issued a press release that said patients should receive additional blood tests if switched to generic warfarin sodium and accused Barr of focusing on producing a cheaper product to save money while DuPont focused on patient safety and education. The suits alleged that the misrepresentations led consumers, TPPs, and others to believe that Coumadin was superior to the generic equivalents, and caused millions of prescriptions to be filled with Coumadin that could have been filled with less expensive generic drugs. As evidence that DuPont’s misrepresentations and conduct had an anticompetitive effect, the plaintiffs pointed to the weak market penetration of generic warfarin sodium as compared to Coumadin. Generally, about 40 to 70 percent of prescriptions for drugs available from multiple sources are filled with less expensive generic products within one year of generic availability. But a year after Barr introduced its generic version, more than 75 percent of prescriptions for sodium warfarin were still filled with Coumadin, and DuPont continued to maintain a 67 percent market share up until the date the lawsuits were filed. Settlement negotiations began in March 2000 and continued for more than a year. Under the terms of the settlement, DuPont agreed to pay $44.5 million to settle the claims of all consumers and TPPs. Claims were filed by more than 48,000 consumers and more than 1,000 TPPs. In the final allocation, $4.3 million was set aside for consumers, and $10.8 million for attorney fees and expenses, leaving a $27.2 million fund for compensation of TPPs. About $2.2 million was spent on notice and administration. A total of 136 consumers and 10 TPPs had opted out of the proposed settlement while 11 individual consumers and consumer groups and two TPPs filed objections. In approving the settlement, Robinson concluded that all of the plaintiffs shared common questions of law and fact which predominated over any issues affecting only individual class members. Now the 3rd Circuit has agreed, noting that the U.S. Supreme Court has held that predominance “is a test readily met in certain cases alleging consumer fraud or violations of the antitrust laws.” Fuentes found that the Coumadin case “falls squarely into that category: plaintiffs have alleged that DuPont engaged in a broad-based campaign, in violation of federal and state consumer fraud and antitrust laws, to deceive consumers, TPPs, health care professionals and regulatory bodies into believing that generic warfarin sodium was not an equivalent alternative to Coumadin.” Such allegations, Fuentes said, “naturally raise several questions of law and fact common to the entire class and which predominate over any issues related to individual class members, including the unlawfulness of DuPont’s conduct under federal antitrust laws as well as state law, the causal linkage between DuPont’s conduct and the injury suffered by the class members, and the nature of the relief to which class members are entitled.” Fuentes, who was joined by Chief U.S. Circuit Judge Anthony J. Scirica and Circuit Judge D. Brooks Smith, found that individual issues of the plaintiffs are irrelevant in such a case. “Liability depends on the conduct of DuPont, and whether it conducted a nationwide campaign of misrepresentation and deception,” Fuentes wrote. “It does not depend on the conduct of individual class members.” Likewise, Fuentes said, “proof of liability does not depend on evidence that DuPont made deceptive communications to individual class members or of class members’ reliance on those communications; to the contrary, DuPont’s alleged deceptive conduct arose from a broad-based, national campaign conducted by and directed from corporate headquarters, and individual reliance on the misrepresentations was irrelevant to liability.” Fuentes also found that Robinson correctly rejected objections to certification of a single nationwide class due to variations in and inconsistencies between the state consumer fraud and antitrust laws of the 50 states. “When dealing with variations in state laws, the same concerns with regards to case manageability that arise with litigation classes are not present with settlement classes, and thus those variations are irrelevant to certification of a settlement class,” Fuentes wrote. One objector also complained that Robinson erred in certifying a single class that included both fixed co-pay consumers and out-of-pocket consumers because fixed co-pay consumers suffered no injury or did not suffer the same injury as out-of-pocket consumers. Fuentes disagreed, noting that the fixed co-pay consumers had “viable equitable and common law claims for unjust enrichment as well as claims for injunctive relief against DuPont.” As a result, Fuentes found that fixed co-pay consumers “suffered a cognizable injury as a result of DuPont’s allegedly unlawful conduct and posed the same risk to DuPont as did out-of-pocket consumers.” Several objectors opposed inclusion of TPPs in the class on the grounds that TPPs did not have standing to assert antitrust claims, or in the alternative that their claims were not as strong as those of the consumer plaintiffs. Fuentes disagreed, finding that “TPPs, like individual consumers, suffered direct economic harm when, as a result of DuPont’s alleged misrepresentations, they paid supracompetitive prices for Coumadin instead of purchasing lower-priced generic warfarin sodium.” And under the allocation plan, Fuentes noted, all of the consumers who filed claims will receive 100 percent of their recognized loss, while TPPs will receive only about 35 percent. “Had the TPPs or a subclass of consumers not been included in the settlement distribution, the settlement amount would have presumably been significantly smaller as DuPont would still have been vulnerable to claims from excluded purchasers. Consequently, we agree with the district court that the inclusion of TPPs … was not unfair to individual consumers,” Fuentes wrote.

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