Corcoran et al v. CVS Health Corporation

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

Memorandum in Support of CVS MIL #6

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1 Enu Mainigi (admitted pro hac vice) Grant A. Geyerman (admitted pro hac vice) 2 WILLIAMS & CONNOLLY LLP 725 Twelfth Street, N.W. 3 Washington, DC 20005 4 Telephone: (202) 434-5000 Facsimile: (202) 434-5029 5 Edward W. Swanson (Cal. Bar No. 159859) 6 August Gugelmann (Cal. Bar No. 240544) 7 SWANSON & MCNAMARA LLP 300 Montgomery Street, Suite 1100 8 San Francisco, CA 94104 Telephone: (415) 477-3800 9 Facsimile: (415) 477-9010 10 Attorneys for Defendant CVS Pharmacy, Inc. 11 12 IN THE UNITED STATES DISTRICT COURT 13 FOR THE NORTHERN DISTRICT OF CALIFORNIA 14 OAKLAND DIVISION 15 16 Christopher Corcoran, et al., Case No. 15-cv-03504-YGR 17 Plaintiffs, CLASS ACTION 18 v. CVS'S MOTION IN LIMINE #6: 19 TO EXCLUDE DR. JOEL HAY'S CVS Pharmacy, Inc., MISLEADING CALCULATIONS 20 Date: May 13, 2020 21 Defendant. Time: 9:30 a.m. 22 Courtroom: 1 23 Judge: Hon. Yvonne Gonzalez Rogers 24 25 26 27 28 CVS MIL #6: TO EXCLUDE DR. JOEL CASE NO. 15-CV-03504-YGR HAY'S MISLEADING CALCULATIONS 1 Plaintiffs' expert, Dr. Joel Hay, proposes to offer multiple opinions at trial. Three of his 2 specific opinions should be excluded, under Evidence Rules 402, 403, and 702 because they depend 3 on irrelevant and misleading statistics. These opinions are: (1) "HSP prices themselves are the single 4 most common cash prices appearing in the transaction data as many as 52 times more than the next 5 most common cash prices"; (2) the "HSP program was broadly available to cash customers"; and 6 (3) the "HSP membership fee was nominal." Ex. 24 ¶¶ 10, 47 (Hay Expert Report) (Dec. 9, 2016); 7 Ex. 25 ¶¶ 20, 30–33 (Hay Rebuttal Report) (Jan. 27, 2017). 8 Opinion 1: "HSP prices are themselves the single most common cash prices appearing in 9 the transaction data as many as 52 times more than the next most common cash prices." This 10 opinion appears in Dr. Hay's report, although Plaintiffs apparently have disavowed it. See, e.g., 11 Corcoran v. CVS Health Corp., 2017 WL 3873709, at *10 (N.D. Cal. Sept. 5, 2017) ("Plaintiffs 12 contend that Dr. Hay does not, in fact, opine that U&C is defined as the 'most common price' 13 charged."). To the extent Plaintiffs seek to offer the opinion, the Court should exclude it. 14 The opinion is (a) irrelevant, because it does not matter to any disputed issue whether HSP 15 prices were the "most common" prices CVS charged, and (b) misleading, because (i) Dr. Hay 16 artificially limits his analysis to include only transactions where customers bought 90-day supplies of 17 the medication and (ii) when he speaks of "HSP prices," he includes every transaction where CVS 18 happened to charge the same price as the HSP price (e.g., $9.99), even if that price was charged 19 outside the HSP program. 20 (a) Plaintiffs claim that CVS violated state consumer protection laws by failing to submit HSP 21 prices as its U&C prices in violation of CVS's contracts with the five PBMs. None of the five PBM 22 contracts, however, defines U&C as the "most common" price. See Ex. 2 ¶ 9 (Lavin Decl.) (Nov, 18, 23 2016) ("[D]uring my [over 25 years] of negotiating scores of contracts with pharmacy companies, I 24 cannot recall any Caremark contract defining usual and customary by referring to the most frequent 25 price point charged over some prior period of time."). Nor does Dr. Hay contend that U&C should be 26 defined by reference to the "most common" price. On the contrary, Dr. Hay explicitly withdrew his 27 opinion (offered in support of Plaintiffs' first motion for class certification) that the "industry 28 CVS MIL #6: TO EXCLUDE DR. JOEL CASE NO. 15-CV-03504-YGR HAY'S MISLEADING STATISTICS 1 1 standard" for U&C pricing turned on whether it was "routinely paid."1 Whether HSP was the "most 2 common" price, therefore, is irrelevant to whether CVS should have reported HSP as U&C under the 3 PBMs' contracts, and Dr. Hay's opinion that "HSP prices" are the "most common" prices will not 4 assist the trier of fact in interpreting the PBM contracts. Fed. R. Evid. 402, 702. 5 (b) Dr. Hay's opinion that "HSP prices" are the "most common" prices is also inadmissible 6 under Rules 403 and 702 because it is misleading at best. Plaintiffs acknowledge that cash 7 transactions vastly outnumber HSP transactions – by a factor of more than 4.5-to-1.2 But Dr. Hay 8 manages to testify that HSP prices are the "most common" by manipulating the data, in two ways. 9 First, Dr. Hay does not compare all cash transactions to all HSP transactions in the same generic 10 medication. Rather, he compares only transactions where customers purchased a 90-day supply of the 11 medication. HSP purchases occur disproportionately at 90-day supplies, while cash transactions rarely 12 occur at 90-day supplies. See Ex. 26 at Fig. 18 (Brett Barlag Expert Report) (Dec. 9, 2016). Rules 403 13 and 702 forbid experts from cherry-picking data in this manner. See In re Live Concert Antitrust 14 Litig., 863 F. Supp. 2d 966, 988 (C.D. Cal. 2012) (exclusion because expert "impermissibly 15 predetermined the results of [his] analysis"); Reed Constr. Data Inc. v. McGraw-Hill Cos., 49 F. Supp. 16 3d 385, 400 (S.D.N.Y. 2014) ("When constructing a benchmark statistic, the regression analyst may 17 not 'cherry-pick' the time-frame or data points so as to make her conclusion stronger."). 18 Second, when Dr. Hay counts a transaction as occurring at the "HSP price," he does not limit 19 himself to HSP transactions. Rather, he counts every transaction where a customer paid an amount 20 equivalent to the HSP price ($9.99 or $11.99, depending on the time period3) as a transaction at the 21 "HSP price"—even if the customer who paid that price was not enrolled in the HSP program. See Ex. 22 25 ¶ 19 (Hay Rebuttal Report). It does not make sense to count those transactions as HSP 23 transactions—transactions that, under Plaintiffs' theory, should have been reported as U&C but were 24 1 Compare Ex. 27 ¶ 39 (Hay Decl.) (Oct. 3, 2016) with Ex. 24 ¶ 39 (Hay Report) (removing statement: 25 "For a pharmacy to submit U&C prices to TPPs and PBMs that are not routinely paid by cash 26 customers. . . is contrary to the industry standard of a U&C price and the concept of the U&C fee screen"). See also Ex. 28 at 92:12–93:3 (Hay Dep.) (Mar. 17, 2017) (testifying most common price is 27 "not relevant to how you calculate the true U&C"). 2 In CVS's data, as produced to Plaintiffs, cash transactions and HSP transactions are distinguished by 28 a different "Condor Code" assigned to the transaction—"1" for cash, and "26240" for HSP. 3 The standard HSP price was $9.99 (2008–2010) and eventually $11.99 (2011–end of program). CVS MIL #6: TO EXCLUDE DR. JOEL CASE NO. 15-CV-03504-YGR HAY'S MISLEADING STATISTICS 2 1 not—especially because, when CVS charged a non-HSP customer $9.99 or $11.99, CVS submitted 2 that same price as its U&C price to the PBMs. See Ex. 29 ¶¶ 41–46 (Barlag Rebuttal Report) (Jan. 27, 3 2017) (99.8% of the time CVS submitted a U&C price equal to or lower than $9.99 or $11.99 on 4 comparable prescriptions—i.e., same drug/quantity/store combination). "Neither Plaintiffs nor their 5 experts dispute that analysis," as the Court acknowledged previously. Corcoran v. CVS Health Corp., 6 2017 WL 3873709, at *10. 7 Dr. Hay's statistic, therefore, does not measure anything meaningful. Rather, his 8 characterization of these cash transactions as instances where CVS gave non-HSP members "HSP 9 pricing" is highly misleading, and any probative value of such testimony is substantially outweighed 10 by the needless delay, confusion, and unfair prejudice that will result if such testimony is admitted at 11 trial. See United States v. Hoac, 990 F.2d 1099, 1103 (9th Cir. 1993) (noting expert testimony 12 properly excluded where "probative value is substantially outweighed by the danger of unfair 13 prejudice, confusion of the issue, or undue delay"). 14 Opinion 2: "The HSP program was broadly available to cash customers." Dr. Hay would 15 testify that "3,143,393 cash customers. . . received the HSP price in non-HSP transactions." Ex. 25 ¶ 16 20 (Hay Rebuttal Report). This statistic represents the same definitional slight-of-hand that Dr. Hay 17 employs in Opinion No. 1: Dr. Hay has not identified 3,143,393 instances where CVS gave cash 18 customers the "HSP price"; he has identified 3,143,393 cash transactions where CVS collected either 19 $9.99 or $11.99 from a cash customer. Dr. Hay did not run any analyses to determine if CVS 20 submitted a different U&C on any of these 3,143,393 transactions, and the only evidence in the record 21 is, as noted above, when CVS charged a cash customer $9.99 or $11.99, on 99.8% of comparable 22 prescriptions, CVS submitted to PBMs a U&C price equal to or lower than $9.99 or $11.99. Ex. 29 ¶¶ 23 41–46 (Barlag Rebuttal Report). Rule 403 does not tolerate misleading testimony.4 24 Opinion No. 3: "The HSP membership fee was nominal." In United States ex rel. Garbe v. 25 Kmart Corp., the court characterized the fee in Kmart's membership program as "nominal." 824 F.3d 26 27 4 See, e.g., Recreational Dev. v. City of Phx., 220 F. Supp. 2d 1054, 1061 (D. Ariz. 2002), aff'd, 77 F. App'x 938 (9th Cir. 2013) ("[T]he Report includes statistical assertions that are not based on any 28 identifiable study design or even basic sampling techniques. The probative value of such evidence is far outweighed by its potential to mislead and confuse the factfinder."). CVS MIL #6: TO EXCLUDE DR. JOEL CASE NO. 15-CV-03504-YGR HAY'S MISLEADING STATISTICS 3 1 632, 643 (7th Cir. 2016). To make CVS's case appear analogous to Garbe, Dr. Hay has opined that 2 the HSP annual fee ($10 or $15) was "nominal." If the fee was "nominal," the argument goes, then it 3 does not meaningfully distinguish CVS's HSP members from CVS's cash customers, and thus HSP 4 members should be treated as cash customers for purposes of measuring U&C prices. 5 Dr. Hay's "opinion" lacks any basis other than his say-so. His report provides no citation, 6 calculation, or analysis to support his conclusion. Dr. Hay did not perform any survey to measure 7 consumer-perception of the fee as a barrier or disincentive to joining HSP. Ex. 28 at 117:2–7 (Hay 8 Dep.) (March 17, 2017) He did not review Plaintiffs' own testimony stating that a $10 or $15 fee is 9 significant to them and would be an important part of any decision as to whether to join a membership 10 program. He conducted no "but-for" analysis or calculation to determine whether people making 11 purchases outside the HSP program would have paid more or less for their prescriptions had they 12 made the same purchases after joining the HSP program and paying the fee. In short, the sum total Dr. 13 Hay has to say about the size or significance of the annual HSP membership fee is simply that it was 14 "nominal." Ex. 24 ¶ 42 (Hay Report). This "opinion" is inadmissible under Rule 702 as it is nothing 15 more than the ipse dixit of a litigation expert. 16 * * * 17 To the extent Plaintiffs oppose this Motion by citing the Ninth Circuit's decision, which 18 reversed the Court's prior Daubert ruling excluding Dr. Hay, any such argument would be misplaced. 19 In 2017, CVS moved this Court to exclude "two opinions" from Dr. Hay arguing they were 20 "unreliable" under Daubert and Rule 702—"namely his contention [1] that defendant's true U&C 21 price is the HSP program price and [2] Dr. Hay's damages calculation." Corcoran, 2017 WL 22 3873709, at *10. The Ninth Circuit did not consider, and Plaintiffs did not ask it to consider, the three 23 narrow opinions challenged here. In addition, Federal Rules of Evidence 402 and 403 played no role 24 in the Daubert order that was the subject of Plaintiffs' appeal. Further, for the avoidance of doubt, this 25 motion does not seek to bar Dr. Hay from opining on either issue the Ninth Circuit addressed. 26 For the foregoing reasons, the Court should enter an order precluding Dr. Hay from offering 27 the opinions: (1) "HSP prices are the single most common cash prices themselves appearing in the 28 transaction data as many as 52 times more than the next most common cash prices," (2) the "HSP program was broadly available to cash customers", and (3) the "HSP membership fee was nominal." CVS MIL #6: TO EXCLUDE DR. JOEL CASE NO. 15-CV-03504-YGR HAY'S MISLEADING STATISTICS 4 1 Dated: April 15, 2020 Respectfully submitted, 2 3 By: /s/ Grant A. Geyerman ______________ 4 Enu Mainigi (admitted pro hac vice) 5 Grant A. Geyerman (admitted pro hac vice) WILLIAMS & CONNOLLY LLP 6 725 Twelfth Street, N.W. Washington, DC 20005 7 Telephone: (202) 434-5000 8 Facsimile: (202) 434-5029 9 Edward W. Swanson (Cal. Bar No. 159859) 10 August Gugelmann (Cal. Bar No. 240544) 11 SWANSON & MCNAMARA LLP 300 Montgomery Street, Suite 1100 12 San Francisco, CA 94104 Telephone: (415) 477-3800 13 Facsimile: (415) 477-9010 14 Attorneys for Defendant CVS Pharmacy, Inc. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CVS MIL #6: TO EXCLUDE DR. JOEL CASE NO. 15-CV-03504-YGR HAY'S MISLEADING STATISTICS 5