United States District Court, S.D. New York
IN RE NAMENDA DIRECT PURCHASER ANTITRUST LITIGATION
E. Gerstein, Esq. Dan Litvin, Esq. Joseph Opper, Esq. Noah H.
Silverman, Esq. Kimberly M. Hennings, Esq. Garwin Gerstein
& Fisher, L.L.P.
Heather McDevitt, Esq. Jack Pace, Esq. Peter J. Carney, Esq.
Martin M. Toto, Esq. Kristen O'Shaughnessy, Esq. Ryan P.
Johnson, Esq. Michael E. Hamburger, Esq. Charles C. Moore,
Esq. White & Case LLP.
M. Gidley, Esq. White & Case LLP.
C. Adam, Esq. White & Case LLP.
MEMORANDUM AND ORDER
C. FRANCIS, IV UNITED STATES MAGISTRATE JUDGE
a putative class action asserting violations of antitrust law
by defendants Actavis plc (now known as Allergan plc) and
Forest Laboratories, LLC (together, "Forest") in
connection with the patented Alzheimer's drugs Namenda IR
and Namenda XR (brand names for memantine hydrochloride). The
plaintiffs, JM Smith Corp. and Rochester Drug Co-Operative,
Inc. (known in the motion papers as "DPPs, " an
abbreviation of "Direct Purchaser Plaintiffs") are
entities that purchased the relevant products directly from
Forest for resale to pharmacies. Forest has filed a motion to
compel the plaintiffs to produce so-called
"downstream" discovery, which is a general term for
data and other information related to the plaintiffs' own
distribution and sales. Specifically, it seeks information
regarding analyses of the profitability of the distribution
of brand name as opposed to generic medications, as well as
sales data. The motion is denied.
motion at issue is connected to allegations that Forest
violated Section 2 of the Sherman Act, 15 U.S.C. § 2,
when it engineered a scheme by which it would attempt to
force patients and physicians to switch from Namenda IR (a
medication that is taken twice each day) to Namenda XR (a
pharmacologically identical drug that is taken once each day)
"by effectively removing Namenda IR from the market
before its patent exclusivity period expired and a generic
substitute to the Namenda drugs became
available."Namenda III, 2016 WL 4992690, at
*1. Because, under FDA regulations, generic versions of
Namenda IR are not "therapeutically equivalent" to
brand name Namenda XR, "pharmacists are prohibited from
substituting generic IR for Namenda XR under most, if not
all, state drug substitution laws, " which give a
preference to generic drugs over brand name ones in order to
foster competition. Namenda II, 787 F.3d at 644-47.
Forest introduced Namenda XR into the market in July 2013
(approximately two years before Namenda IR's patent
exclusivity period ended), it adopted a number of strategies
to encourage physicians and patients to switch to Namenda XR,
such as promoting Namenda XR at the expense of Namenda IR and
making Namenda XR less expensive than Namenda IR.
Id. at 647-48. These efforts are known as "soft
switch" tactics. Id. at 648; Namenda
III, 2016 WL 4992690, at *4. In February 2014, however,
Forest began to engineer a "hard switch" by
announcing that Namenda IR would no longer be available after
August 15, 2014, a date that was later extended to fall 2014.
Namenda II, 787 F.3d at 648. This prompted an
antitrust action by the State of New York, which resulted in
a "standstill" -- beginning in September 2014 -- on
the plan to discontinue Namenda IR, and, on December 15,
2014, a preliminary injunction requiring Forest to continue
manufacturing Namenda IR. Id. at 648-50, 663. That,
in turn, inspired this litigation, which alleges that
Forest's anticompetitive conduct damaged the plaintiffs
by forcing them to pay for some patients' treatments at
brand name, rather than generic, prices because those
patients switched to Namenda XR before the preliminary
injunction was issued. Namenda III, 2016 WL 4992690,
23, 2017, Judge McMahon issued Namenda IV. In that
decision, she granted in part the plaintiffs' motion for
partial summary judgment, finding that "key facts"
as to Forest's violation of Section 2 of the Sherman Act
were previously litigated in the antitrust action brought by
the State of New York (which resulted in Namenda I
and Namenda II) and must be deemed established here.
Namenda IV, No. 15 Civ. 7488, slip op. at 18.
Forest is precluded from re-litigating the questions of (1)
whether it possessed monopoly power over the U.S. memantine
market up until the entry of generic competition; (2) whether
its February 2014 announcement of the upcoming
discontinuation of Namenda IR was coercive and
anticompetitive; and (3) whether Forest had any
non-pretextual procompetitive justification for its illegal
Id. at 33. However, Judge McMahon did not grant
summary judgment as to liability on the claim because the
previous litigation did not address "questions of
causation and injury, " that is, whether Forest's
illegal scheme was a materially contributing factor to the
plaintiffs' injuries. Id. at 33-34.
motion, submitted mere days before the Namenda IV
decision was filed, Forest requests documents from the
plaintiffs that concern their profits from the distribution
of the drugs at issue. Specifically, the six requests in
question seek (1) documents "concerning any analysis of
the profitability of distributing, and/or servicing the
distribution of" brand name pharmaceuticals and generic
pharmaceuticals, "including any financial modeling or
analyses" that the plaintiffs "conducted or
received, " whether or not they could be used for or
applied to Alzheimer's treatments (Direct Purchaser
Plaintiffs' Objection and Responses to Defendants'
First Request for Production of Documents ("Responses to
RFPs"), attached as Exh. 1 to Declaration of Michael E.
Hamburger dated May 17, 2017, at 29, 93-94 (Request Nos.
38-39, 144-45)); and (2) documents "concerning the
profitability of any of the putative class members'
distribution and/or servicing of sales of brand name
pharmaceuticals relative to their distribution and/or
servicing of generic versions of brand name pharmaceuticals,
" including documents related to the profitability of
the Namenda products relative to their generic versions.
(Responses to RFPs at 104 (Request Nos. 168-169).
plaintiffs contend that data regarding "downstream"
sales are "presumptively irrelevant" pursuant to
the Supreme Court's decisions in Hanover Shoe, Inc.
v. United Shoe Machinery Corp., 392 U.S. 481 (1968), and
Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977),
but note that, even so, they have agreed to produce certain
"downstream" materials in response to Forest's
other document requests. (Direct Purchaser Plaintiffs'
Memorandum in Opposition to Forest's Motion to Compel the
Production of Documents ("Pl. Memo.") at 1, 3-4, 4
n.6; Memorandum of Law in Support of Forest's Motion to
Compel the Production of Documents by the Direct Purchaser
Plaintiffs ("Def. Memo.") at 4) . Forest disagrees
with the plaintiffs' reading of Hanover Shoe and
Illinois Brick, and asserts that the requested
documents are relevant to the plaintiffs' liability case,
to class certification, and to "the so-called cost-plus
exception" to establishing damages. (Def. Memo, at
26(b)(1) allows discovery of
any nonprivileged matter that is relevant to any party's
claim or defense and proportional to the needs of the case,
considering the importance of the issues at stake in the
action, the amount in controversy, the parties' relative
access to relevant information, the parties' resources,
the importance of the discovery in resolving the issues, and
whether the burden or expense of the proposed discovery
outweighs its likely benefit.
Fed. R. Civ. P. 26(b)(1). This recently-amended rule is
intended to "encourage judges to be more aggressive in
identifying and discouraging discovery overuse" by
emphasizing the need to analyze proportionality before
ordering production of relevant information. Fed.R.Civ.P.
26(b)(1) advisory committee's note to 2015 amendment.
Relevance is still to be "construed broadly to encompass
any matter that bears on, or that reasonably could lead to
other matter that could bear on, " any party's claim
or defense. Oppenheimer Fund, Inc. v. Sanders, 437
U.S. 340, 351 (1978). The burden of demonstrating relevance
remains on the party seeking discovery, and the party
resisting discovery generally has the burden of showing undue
burden or expense. Fed.R.Civ.P. 26(b)(1) advisory
committee's note to 2015 amendment; see also
Fireman's Fund Insurance Co. v. Great American Insurance
Co. of New York, 284 F.R.D. 132, 135 (S.D.N.Y. 2012)
("Once relevance has been shown, it is up to the