Corcoran et al v. CVS Health Corporation

Northern District of California, cand-4:2015-cv-03504

Exhibit 28

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Exhibit 28 Joel W. Hay March 17, 2017 1 (Pages 1 to 4) Page 1 Page 2 THE UNITED STATES DISTRICT COURT 1 APPEARANCES: FOR THE NORTHERN DISTRICT OF CALIFORNIA 2 OAKLAND DIVISION STEIN MITCHELL CIPOLLONE BEATO & MISSNER LLP --- 3 BY: ROBERT B. GILMORE, ESQUIRE CHRISTOPHER CORCORAN, et: 1100 Connecticut Avenue NW al, on behalf of: 4 Suite 1100 themselves and all: Washington, DC 20036 others similarly: 5 (202)601-1589 situated,: rgilmore@steinmitchell.com: 6 Representing Plaintiffs. Plaintiffs,: Case No. 7 and: 15-CIV-03504-YGR 8 HAUSFELD v.: CLASS ACTION BY: MICHAELA SPERO, ESQUIRE: 9 1700 K Street NW CVS PHARMACY, INC.,: Suite 650 10 Washington, DC 20006: (202)540-7374 Defendant.: 11 mspero@hausfeld.com: 12 WILLIAMS & CONNOLLY LLP: BY: GRANT GEYERMAN, ESQUIRE;: 13 ANDREW C. WATTS, ESQUIRE: 725 Twelfth Street NW 14 Washington, DC 20005 (202)434-5495 --- 15 ggeyerman@wc.com March 17, 2017 awatts@wc.com --- 16 Representing Defendant. 17 Also Present: 18 Conway Barker, Videographer 19 Videotape deposition of JOEL W. 20 HAY, PhD, taken at 1700 K Street NW, Suite 21 650, Washington, DC 20006 at 9:12 a.m., before 22 Notary Public District of Columbia, Valerie D. 23 Owens, a Court Reporter. 24 25 Page 3 Page 4 1 --- 1 THE VIDEOGRAPHER: On the record INDEX 2 --- 2 at 9:12. 3 Testimony of: JOEL W. HAY PhD 3 This is the deposition of Dr. 4 Direct Examination by Mr. Geyerman 5 Cross-Examination by Mr. Gilmore 283 4 Hay in the matter of Corcoran, et al, versus 5 Redirect Examination by Mr. Geyerman 286 6 5 CVS Pharmacy Incorporated in the United States --- 6 District Court, Northern District of 7 DEFENDANT'S EXHIBITS --- 7 California, Oakland Division. This deposition 8 8 takes place at Hausfeld, 1700 K Street EXHIBIT DESCRIPTION PAGE 9 9 Northwest, Washington, DC, on March 17th, 307 Unredacted Version Rebuttal 10 declaration of Professor 10 2017. My name is Conway Barker. The court Joel W. Hay 5 11 reporter is Valerie Owens, both of us 11 308 Full Detail for Hay's Store 12 represent Stratos Legal. 12 00573 Document 196 13 Could counsel please introduce 13 309 Information About the Five CVS pharmacies 203 14 yourselves and state whom you represent. 14 310 Health Savings Pass 15 MR. GEYERMAN: Grant Geyerman 15 medication List From 16 and Andrew Watts from Williams & Connolly on October of 2010 229 16 17 behalf of the Defendant. 311 AAAWholesaleCompany Document 231 18 MR. GILMORE: Robert Gilmore 17 312 Paroxetine HCL 10MG Examples 242 19 with Stein Mitchell on behalf of Plaintiffs in 18 313 Assigning Agency Type to Third 20 the class. I'm joined by Michaela Spero of 19 Party Plan Codes 253 21 Hausfeld firm also on behalf of Plaintiffs in 20 --- PLAINTIFF'S EXHIBITS 22 the class. 21 --- 23 THE VIDEOGRAPHER: Would you 22 EXHIBIT DESCRIPTION PAGE 23 780 Transaction data from case 283 24 please swear in the witness and we can 24 25 proceed. 25 Stratos Legal Services 800-971-1127 Joel W. Hay March 17, 2017 23 (Pages 89 to 92) Page 89 Page 90 1 percentage of insured purchases for which you 1 declaration, right? 2 did not observe the submitted U&C as having 2 A. Yes, sir. 3 been paid by a cash customer in 2012, the 3 Q. And in your December 9th report, 4 formula would be to divide your 1.97 million 4 paragraph 39, which starts a review of Sev 5 figure from your October 3rd declaration by 5 Melkonian's testimony, you repeat the same 6 the total number of insured purchases at CVS 6 paragraph that is included in your October 3rd 7 in 2012. 7 declaration at paragraph 38, correct? 8 MR. GILMORE: Objection; form. 8 A. It looks to be similar. 9 THE WITNESS: You could do the 9 Q. It's verbatim, the same. Is it 10 calculation that way, if you wanted to answer 10 not? 11 that very narrow question. I don't consider 11 A. As far as I can see. 12 that very narrow question to be the only thing 12 Q. In the December 9th report 13 you need to know. 13 you've removed what was, however, paragraph 39 14 BY MR. GEYERMAN: 14 of the October 3rd declaration, correct? 15 Q. So can you -- keeping out your 15 A. Among other things. 16 original declaration, can you also get out 16 Q. Why was former paragraph 39 17 your December 9th expert report. 17 removed? 18 A. Okay. 18 A. Because I was making different 19 Q. Go to page ten of the expert 19 points. 20 report. Do you see a heading at the bottom 20 Q. And was the -- the new point 21 "The U&C Prices CVS Submitted -- Submits to 21 that was being made in the December 9th report 22 PBMs and TPPs are Inflated"? 22 the one percent fee screen damages model? 23 A. Yes. 23 A. Well, I certainly made the one 24 Q. That's the same heading that 24 percent fee screen model point in my December 25 appears on page ten of your October 3rd 25 9th report, but I considered the paragraph Page 91 Page 92 1 that I had before, you know, not something 1 true U&C price, unless you can show me that 2 that I needed to repeat in this report. 2 there was a, you know, like a typo or a cash 3 Q. Did you remove it because 3 register error, they put in the wrong number 4 paragraph 39 is inconsistent with the one 4 or something of that nature. But if they 5 percent fee screen analysis? 5 willingly sold the drug for $4, then it 6 A. No. I -- no. It's -- I don't 6 doesn't really matter how many times they sold 7 think it's inconsistent at all. I think it's 7 the drug for more than $4, either because of a 8 accurate, reliable and it's certainly not 8 price match or something else. They're 9 inconsistent. 9 willing to sell it at $4. So that's their 10 Q. You think it's corroborative of 10 revealed lowest net price that they're willing 11 the one percent fee screen analysis, that is 11 to sell. 12 paragraph 39 of the October 3rd declaration? 12 Q. In my hypothetical 99 13 A. I don't think it relates to the 13 transactions at $20, one transaction at $4, 14 one percent fee screen analysis. It's 14 would you agree with me that the most 15 certainly not a consistent and systematic 15 frequently charged price is the $20 price? 16 review of how the U&C that was submitted by 16 A. Without knowing more about 17 CVS relates to the true U&C which is the 17 what's involved in the hypothetical, I think 18 minimal and routine price. 18 it's just a mathematical tautology that if you 19 Q. Okay. Sir, if there are a 19 have 99 at 20 and only one at 4, that you have 20 hundred transactions, 99 occur at $20 and one 20 more at 20. 21 transaction occurs at $4, what's the routine 21 Q. And so $20 would be the most 22 and minimal price? 22 frequently charged price, correct? 23 A. If CVS shows that they're 23 A. I think that's a -- either a 24 willing to charge a price of $4 by transacting 24 mathematical or a statistical tautology. 25 the drug at $4, then that is, in my view, a 25 Q. So the answer to my question is Stratos Legal Services 800-971-1127 Joel W. Hay March 17, 2017 24 (Pages 93 to 96) Page 93 Page 94 1 yes? 1 hard earned dollars to CVS. 2 A. It is, but it's not relevant to 2 Q. So are you saying that the 3 how you calculate the true U&C. 3 answer to my question, what's the routine 4 Q. So in my hypothetical, 99 4 minimal price, is dependent on the individual 5 transactions at $20 and one transaction at $4, 5 circumstances of the person making the $4 6 if the test of usual and customary price is 6 purchase? 7 the most frequently charged price, the answer 7 MR. GILMORE: Objection to form. 8 is $20; but if the test of most frequently 8 THE WITNESS: No. What I -- 9 charged price is the routine and minimal 9 what said was I don't know all of the details 10 price, as you've explained today, the answer 10 of your hypothetical, but if -- if what you're 11 is 4. Would you agree? 11 telling me is in those hundred transactions, 12 A. Well, as a pharma -- I would not 12 CVS has revealed that they're willing to pay 13 agree because as a pharmaceutical economist, 13 or willing to charge and willing to transact 14 it's what a prudent buyer would purchase it 14 the drug for $4, then that's their true usual 15 at. And in your example, you know, there's no 15 and customary price. 16 reason to purchase the drug at $20 just 16 BY MR. GEYERMAN: 17 because you see a lot of transactions at $20. 17 Q. Even if their most frequently 18 You have to see what you're able to get the 18 charged price is $20? 19 drug for and that's what's consistent with 19 A. Well, CVS would love to charge 20 minimal pricing as expressed by these various 20 everybody more than their minimal price, but 21 PBM employees and other people. It's -- it's 21 that doesn't mean that those higher prices are 22 not -- you know, you don't hire the PBM to go 22 their minimal price. 23 out and get the sticker price. You hire the 23 Q. So let me -- let me add some 24 PBM to negotiate so that you don't pay your 24 details to the hypothetical and see if it 25 hard earned dollars to them and then overpay 25 changes your opinions. Page 95 Page 96 1 CVS's dispensing system is 1 everything that's going on. But this is 2 programmed to calculate a $20 retail price for 2 exactly why CVS and, by the way, other 3 a particular drug, in particular quantity, a 3 pharmacies like Kmart and perhaps others, you 4 particular pharmacy, on a particular day. A 4 know, need to be careful when they price match 5 hundred customers walk into the store with the 5 or price discount because as their own 6 prescription for that drug, in that quantity, 6 employees say and then presumably talk to 7 on that day. The dispensing system calculates 7 their own colleagues in -- in pharmacy, you 8 $20 for all of the customers. One of those 8 know, any time you provide such a price match, 9 customers happen to have to wait in line for 9 you're revealing a potentially lower U&C than 10 90 minutes for their prescription to be filled 10 your retail price. So it's -- it's well known 11 and so the pharmacist gives them a break on 11 in -- in this market and every other market 12 the price of their prescription and charges 12 that there are consequences to how you behave. 13 them $4, instead of $20. 13 And you would hope that these people, you 14 So you have 99 transactions at 14 know, understand these things. 15 CVS's $20 price that was calculated by its 15 BY MR. GEYERMAN: 16 dispensing system. You have one transaction 16 Q. Can I get an answer to my 17 at $4 because the customer accommodation has 17 question? Under my hypothetical, applying 18 been made. Under your definition of the 18 your definition of the routine and minimal 19 routine minimal price for what constitutes a 19 price, that definition of U&C, what is the 20 usual and customary price, what is the usual 20 pharmacy's usual and customary price for that 21 and customary price for that drug, in that 21 drug on that day, in that quantity, at that 22 quantity, on that day, in that pharmacy? 22 store? 23 MR. GILMORE: Objection to form. 23 MR. GILMORE: Objection to form. 24 THE WITNESS: Well, I don't 24 THE WITNESS: Well, I think CVS 25 think your hypothetical necessarily explains 25 revealed that for whatever reason, for Stratos Legal Services 800-971-1127 Joel W. Hay March 17, 2017 29 (Pages 113 to 116) Page 113 Page 114 1 having done a few of these depositions in the 1 discriminate against including, you know, by 2 past that I'm supposed to wait until counsel 2 race and ethnicity, religion, possibly some 3 has a chance to make an objection, so I was 3 of -- some of these other characteristics, 4 looking to see if counsel was going to do 4 gender. So there is a long history of 5 that. 5 litigation in this area. Nevertheless, as far 6 Q. Okay. So let me -- 6 as I know and certainly within my personal 7 MR. GILMORE: As many other 7 understanding there's certainly -- are no 8 witnesses have, including witnesses for CVS. 8 barriers for anybody to get into this program. 9 BY MR. GEYERMAN: 9 So all -- you know, so in that 10 Q. Let -- let me ask my question 10 sense it's not a -- a legitimate membership, 11 again. Would the HSP program had to have 11 as -- you know, as opposed to let's say there 12 categorically prohibited one of the types of 12 was a discount card for the pipefitter's 13 groups of people or imposed one of the types 13 union, so you get the discount, but in order 14 of conditions that appear in the last sentence 14 to get the discount, you have to be a member 15 of your paragraph 32 in order for the Health 15 of the pipefitter's union. And there are very 16 Savings Pass to not have been, quote, 16 specific requirements to get into the 17 available to everyone, end quote? 17 pipefitter's union that most members of the 18 MR. GILMORE: Objection to form. 18 general public would not qualify for. And 19 THE WITNESS: Well, to the 19 this didn't have anything like that. Any 20 extent you're asking me a legal question, I -- 20 member of the general public could get into 21 I can't answer it, because I'm not a lawyer. 21 this club. 22 I do know that there's been a lot of 22 BY MR. GEYERMAN: 23 litigation about the use of discount cards or 23 Q. Well, I want to talk about the 24 membership programs to, in fact, discriminate 24 -- your comment about there are no barriers to 25 against groups that it's not legal to 25 this program. It's your opinion that the Page 115 Page 116 1 membership fee was not a barrier to joining 1 A. Right. 2 this program. Is that fair? 2 Q. In the factual sense, do you 3 MR. GILMORE: Objection to form. 3 consider the enrollment fee to the Health 4 THE WITNESS: Well, it was a 4 Savings Pass program a barrier to entry? 5 nominal amount that wasn't always paid. And 5 A. Well, it's certainly not 6 so in that sense it was not a barrier and -- 6 something that would exclude any member of the 7 and, furthermore, you didn't even have to join 7 general public from accessing this program, 8 the program to get those prices. 8 because any member of the general public could 9 BY MR. GEYERMAN: 9 come up with this nominal amount of money. 10 Q. If you could just focus on the 10 Q. Well, if somebody didn't have 11 enrollment fee. That's what my question is 11 $10 or $15, depending on the time frame of the 12 about, sir. Do you or do not consider it a 12 HSP program and they couldn't pay the fee, 13 barrier to entering in the program? 13 wouldn't that be a barrier to entry to them? 14 MR. GILMORE: Objection to form. 14 A. It might be a situation where 15 THE WITNESS: It is a -- again, 15 CVS decides to accommodate them, by either 16 if you're -- if you're asking me a legal 16 swiping their own blank card, which happens 17 question, I can't answer it because I'm -- 17 all the time, or -- in some other way or 18 I'm -- you know, I'm not a lawyer. 18 giving them an offsetting coupon or perhaps 19 BY MR. GEYERMAN: 19 just waiving the fee. 20 Q. I'm following up on your 20 Q. Have you done a survey, sir, of 21 question that there were no barriers to entry. 21 the impact to consumers of the $10 or $15 22 A. Right. 22 enrollment fee? 23 Q. So you must have a view as to 23 A. Well, I've done the analysis 24 what constitutes a barrier to entry in the 24 that I've reported in my reports of the fee 25 factual sense. 25 and it's not always charged and it's not Stratos Legal Services 800-971-1127 Joel W. Hay March 17, 2017 30 (Pages 117 to 120) Page 117 Page 118 1 always paid. 1 Health Savings Pass program? Do you consider 2 Q. Did you perform a survey of 2 that a barrier to entry? 3 consumers to evaluate the significance of the 3 MR. GILMORE: Objection to form. 4 $10 and $15 enrollment fee for the HSP 4 THE WITNESS: You know, it 5 enrollment program? 5 depends on how often it's required and, you 6 A. I did not do a specific consumer 6 know, it's -- it may or may not be. It just 7 survey, no. 7 depends on -- on how burdensome it is and how 8 Q. Did you know that one was done 8 often it's done. 9 by an expert for CVS? 9 BY MR. GEYERMAN: 10 A. I am not specifically aware of 10 Q. Am I right if I'm -- I apologize 11 that. 11 if I asked you this before, but you have not 12 Q. Are you generally aware of it? 12 calculated the unique number of Health Savings 13 A. It doesn't surprise me. 13 Pass -- strike that. I think you might have 14 Q. But you -- is right now the 14 calculated the number of HSP members. 15 first you heard that that had happened? 15 Can you tell me the number of 16 A. Yes. 16 HSP members that you've concluded did not 17 Q. In terms of your opinion that 17 complete their enrollment form? 18 the enrollment fee is not a barrier to entry, 18 A. I don't think I had access to 19 would you be interested in seeing the results 19 that information. 20 of the survey performed by the expert? 20 Q. You haven't rendered an opinion 21 A. I'm always, you know, interested 21 on that? 22 in looking at additional information if it's 22 A. Not that -- no. I don't recall 23 made available. 23 having seen that data. 24 Q. What about the fact that you had 24 Q. What about the fact that there 25 to fill out an enrollment form to join the 25 was a -- a HIPAA waiver in connection with Page 119 Page 120 1 the -- joining the HSP program? Do you 1 I think I'm probably close. 2 consider that a barrier to entry? 2 MR. GILMORE: Okay. Why don't 3 MR. GILMORE: Objection; form. 3 we just go for a little bit. Are you okay 4 THE WITNESS: No. I mean, it 4 professor -- 5 depends on the context. It depends on what 5 THE WITNESS: Yeah, I'm fine. 6 the HIPAA waiver is requiring a patient to do. 6 MR. GILMORE: All right. 7 Typically, it doesn't require the patient to 7 BY MR. GEYERMAN: 8 do anything. 8 Q. Can you name for me the other 9 BY MR. GEYERMAN: 9 pharmacies that you're aware of that offer 10 Q. Well, it waives your rights to 10 generic drug membership programs? 11 not be solicited with your personal health 11 A. Certainly Kmart did -- or does. 12 information. If that's the -- if that's the 12 I'm not sure about the other ones, but I think 13 waiver, do you consider that a barrier to 13 there are a couple of more. 14 entry? 14 Q. Did Walgreens offer a generic 15 A. Not really, because most 15 drug membership program? 16 customers that are concerned about that 16 A. I don't specifically know. 17 probably wouldn't agree to the membership and 17 Q. Rite Aid? 18 most people that aren't concerned about it 18 A. I don't recall. 19 would. 19 Q. The only one that you can name 20 MR. GILMORE: Counsel, I think 20 is Kmart and CVS. 21 we've been going about an hour and it's 12:30 21 A. Well, I haven't looked into it. 22 or thereabout. If -- if you're switching to a 22 I -- I -- it wouldn't surprise me -- 23 new module, maybe now is a good time for lunch 23 Q. I'm not -- I'm not criticizing 24 or if you're finishing up a module -- 24 you for not knowing. I'm just trying to find 25 MR. GEYERMAN: Let me do -- I -- 25 out what you know about. Other than the Kmart Stratos Legal Services 800-971-1127