(Photo: Wm. Burlingham)

A federal appeals court on Thursday probed a Boston federal judge’s certification of an antitrust class action challenging AstraZeneca PLC’s “pay for delay” settlements with three generic drug makers.

The U.S. Court of Appeals for the First Circuit heard oral argument in In re Nexium Antitrust Litigation over AstraZeneca’s settlements to delay competing generic gastrointestinal drugs.

The company’s settlements, a common industry practice, involved Ranbaxy Pharmaceuticals Inc., Teva Pharmaceuticals USA Inc. and Dr. Reddy’s Laboratories Inc.

The defendant companies have challenged U.S. District Judge William Young’s November class certification order because it followed a factual finding that “more than a de minimis number of class members suffered no injury.”

Young certified a class of millions of consumers and thousands of third-party payors, including health insurance companies. He noted that the generic drug delays and high Nexium prices did not injure some class members who took advantage of rebates, contract prices or brand-loyal purchasing benefits.

The companies’ opening brief argued that First Circuit and U.S. Supreme Court case law predicates class certification on harm to each class member. They also argued that the Constitution requires every federal plaintiff to show standing to sue.

The generic drug delay deals caused class members to pay inflated prices for Nexium because of “anticompetitive collusion among competitors,” the plaintiffs’ opening brief said. “This is not a made-up, lawyer-driven case; it is a real case seeking real relief from a reverse-payments scourge that is a real social problem.”

The plaintiffs cited First Circuit and Supreme Court precedents that a class could meet the requirement that common issues predominate even with a small number of uninjured class members.

Federal Circuit Judge Timothy Dyk sat by designation with First Circuit judges William Kayatta Jr. and Juan Torruella.

Kayatta asked the plaintiffs’ lawyer Kenneth Wexler of Chicago’s Wexler Wallace, “Where can we look in the record to see that when it comes time to allocate the aggregate recovery you will have a mechanism for identifying all those members who are not injured?”

Wexler acknowledged that a certain number of Nexium transactions during the class period didn’t involve any overcharge. The plaintiffs’ expert pegged that number at 5.8 percent, according to court papers.

Wexler also pointed to the plaintiffs’ expert’s calculation that 98.2 percent of purchases would have been for the generic drug after two years but for the “pay for delay” deals.

“It’s not our burden to prove everyone was injured at this stage,” Wexler said.

Defense lawyer Kannon Shanmugam, who leads the Supreme Court and appellate litigation practice at Williams & Connolly, argued that the plaintiffs’ expert’s aggregate-damages model does not allow for identification of class members who were injured and those who were not.

“There are simply some cases that are not suitable for class certification, precisely because it is impossible for plaintiffs to show that common issues predominate over individualized ones,” Shanmugam said.

Sheri Qualters can be contacted at squalters@alm.com.