Carl Washington et al v. CVS Pharmacy Inc.

ORDER by Judge Yvonne Gonzalez Rogers granting 271 Motion for Summary Judgment; granting in part 274 Motion to Certify Class; granting in part 287 Motion to Exclude Certain Opinions by Dr. Hay. Defendants to file a proposed judgment, approved as to form by all parties, within five business days of this Order.

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

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2 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 11 CHRISTOPHER CORCORAN, ET AL., CASE NO. 15-cv-03504-YGR 12 Plaintiffs, ORDER GRANTING IN PART PLAINTIFFS' Northern District of California United States District Court MOTION FOR CLASS CERTIFICATION; 13 vs. GRANTING IN PART DEFENDANTS' MOTION TO EXCLUDE CERTAIN OPINIONS BY DR. 14 CVS HEALTH, ET AL., HAY; GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT 15 Defendants. Re: Dkt. Nos. 271, 274, 287 16 17 Plaintiffs bring this putative class action against defendants alleging that they knowingly 18 overcharged millions of insured patients by submitting falsely inflated drug prices to pharmacy 19 benefit managers ("PBMs") and third-party payor insurance providers ("TPPs"), which resulted in 20 higher copayment obligations for plaintiffs. Specifically, plaintiffs raise claims under the laws of 21 eleven states: (i) each state's statutory laws proscribing unfair and deceptive acts and practices 22 ("UDAP"); and common law claims for (ii) fraud, (iii) negligent misrepresentation, and (iv) unjust 23 enrichment. 24 Now before the Court are the following motions: First, plaintiffs have filed a renewed 25 motion for class certification, significantly narrowing the classes and issues which they seek to 26 certify. Second, defendants move to exclude certain opinions from Dr. Hay, submitted in support 27 of plaintiffs' motion for class certification. And third, defendants' move for summary judgment 28 2 1 on all claims in this action arguing that plaintiffs have failed to demonstrate either any 2 misrepresentations or reliance, essential elements of their claims.1 3 Having carefully reviewed the pleadings, the papers submitted on each motion, the parties 4 oral arguments at the hearing held on July 18, 2017, and for the reasons set forth more fully below, 5 the Court ORDERS as follows: The Court GRANTS IN PART plaintiffs' motion for class 6 certification, certifying a California, Florida, Illinois, and Massachusetts class, but limited only to 7 the PBM that adjudicated each class representative's claim. The Court DENIES the motion to 8 certify a New York and Arizona class because the proposed class representatives fail to satisfy the 9 typicality requirement of Rule 23(a). The Court GRANTS IN PART defendants' motion to exclude 10 certain opinions by Dr. Hay and STRIKES Dr. Hay's opinion that CVS's Health Savings Pass 11 ("HSP") prices are the "Usual and Customary" ("U&C") prices as defined in CVS's contracts. 12 The Court GRANTS defendants' motion for summary judgment finding no triable issue of fact Northern District of California United States District Court 13 exists with regard to whether CVS misrepresented its U&C price to the PBMs. 14 I. BACKGROUND 15 Plaintiffs seek to certify eleven state classes composed of individuals who "have filled 16 prescriptions for generic drugs at CVS pharmacies using coverage provided by their [TPP] plans." 17 (Dkt. No. 101, Third Amended Complaint ("TAC") ¶ 10.) The following facts and allegations 18 relate to the instant motions: 19 CVS is a national retail pharmacy chain with over seven thousand pharmacies operating 20 under its trade name in the United States and Puerto Rico, managing more than one billion 21 prescriptions annually. (Id. at ¶ 4.) In 2014, CVS' retail pharmacy business generated more than 22 $67 billion in revenues, 70% of which came from prescription drugs. Since 2008, CVS has 23 1 24 The parties have also filed administrative motions to seal certain exhibits and portions thereof at Docket Numbers 272, 281, 286, 300, 302, and 314. The Court addresses each by 25 separate order, under the appropriate "compelling reasons" standard. See Kamakana v. City and Cty. of Honolulu, 447 F.3d 1172, 1178–80 (9th Cir. 2006) (holding that the moving party must 26 present "compelling reasons" to outweigh the public's interest in disclosure with regard to dispositive motions such as summary judgment); see also Aldapa v. Fowler Packing Co., Inc., No. 27 15-CV-420-DAD, 2017 WL 2546606, at *2 n.2 (E.D. Cal. June 13, 2017) (applying heightened "compelling reasons" standard to motions to seal connected with a motion for class certification 28 where the certification issues are "clearly more than tangentially related to the merits of the case" and where denial of the same "would almost certainly be dispositive of th[e] case"). 2 2 1 captured more than one third of total prescription growth in the United States. (Id.) 2 Approximately ninety percent of Americans—including plaintiffs— are enrolled in a private or 3 public health care plan that shares prescription drug costs. (Id. at ¶ 8.) Generally, when plan 4 participants fill a prescription under one of these TPP health care plans, the plan "pays a portion of 5 the cost, and the plan participant pays the remaining portion of the cost directly to the pharmacy in 6 the form of a copayment or copay." (Id.) Many TPPs typically contract with a PBM to administer 7 their prescription benefits with a pharmacy. 8 When a plan participant fills a prescription at CVS, the pharmacist generates a claim by 9 transmitting patient, prescription, and insurance information electronically to the customer's 10 insurer directly or the PBM. (Id. at ¶¶ 47–48.) The electronic CVS claims process utilizes 11 standardized data fields developed by the National Council for Prescription Drug Programs 12 ("NCPDP"), a standard-setting organization in the healthcare industry. (Id. at ¶¶ 50–51.) One Northern District of California United States District Court 13 data field on NCPDP's standard layout is Field No. 426-DQ, the U&C price. (Id. at ¶ 53.) The 14 U&C price is "generally defined as the cash price to the general public, which is the amount 15 charged [to] cash customers for the prescription, exclusive of sales tax or other amounts claimed." 16 (Id.) Under most of CVS's contracts with TPPs and PBMs, the copayment must generally be the 17 lower of the following: (a) the drug's average wholesale price as set by the industry; (b) a 18 maximum allowable cost determined by the pharmacy's contract with the PBM or TPP; or (c) the 19 U&C price. 20 In 2008, CVS introduced its HSP program. (Id. at ¶ 60.) The HSP program provides 21 discounted pricing on hundreds of generic prescription medications, including some of the most 22 commonly prescribed drugs for cardiovascular, allergy, and diabetes conditions, among others. 23 (Id. at ¶ 62.)2 Plaintiffs allege that the price charged by CVS under the HSP program for the HSP 24 generics was the true U&C price for those drugs. (Id. at ¶ 70.) However, CVS continued to 25 submit amounts higher than the HSP price for all HSP generics (rather than the HSP program 26 2 27 From November 9, 2008 through 2010, cash paying customers could join the HSP program for a $10 fee, and be entitled to $9.99 prices for a ninety-day supply of an HSP generic. 28 (Id. at ¶ 62.) Beginning in 2011, CVS raised the HSP enrollment fee to $15 a year and the cost of a ninety-day supply of an HSP generic rose to $11.99. (Id.) 3 2 1 price) as the U&C price to TPPs and PBMs. (Id. at ¶ 71.) As a result, in some instances, plaintiffs 2 allege they paid copayments that exceeded the HSP price or the "true U&C price." (Id. at ¶¶ 76, 3 80.) Defendants discontinued the HSP program on February 1, 2016. 4 II. LEGAL FRAMEWORK 5 A. Motion for Class Certification 6 Under Federal Rule of Civil Procedure 23(a), the Court may certify a class only where "(1) 7 the class is so numerous that joinder of all members is impracticable; (2) there are questions of law 8 or fact common to the class; (3) the claims or defenses of the representative parties are typical of 9 the claims or defenses of the class; and (4) the representative parties will fairly and adequately 10 protect the interests of the class." Fed. R. Civ. P. 23(a). Courts refer to these four requirements as 11 "numerosity, commonality, typicality[,] and adequacy of representation." Mazza v. Am. Honda 12 Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012). Northern District of California United States District Court 13 Once plaintiffs establish that the threshold requirements of Rule 23(a) are met, plaintiffs 14 must then show "through evidentiary proof" that a class is appropriate for certification under one 15 of the provisions in Rule 23(b). Comcast Corp. v. Behrend, 569 U.S. 27, 133 S. Ct. 1426, 1432 16 (2013). Here, plaintiffs seek certification under Rule 23(b)(3) only. 17 Rule 23(b)(3) requires plaintiffs to establish "that the questions of law or fact common to 18 class members predominate over any questions affecting only individual members, and that a class 19 action is superior to other available methods for fairly and efficiently adjudicating the 20 controversy." Fed. R. Civ. P. 23(b)(3). The predominance inquiry focuses on "whether proposed 21 classes are sufficiently cohesive to warrant adjudication by representation." Hanlon v. Chrysler 22 Corp., 150 F.3d 1011, 1022 (9th Cir. 1998) (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 23 591, 623 (1997)). 24 B. Motion to Exclude Expert Opinion 25 Rule 702 permits opinion testimony by an expert as long as the witness is qualified and 26 their opinion is relevant and reliable. Fed. R. Evid. 702. An expert witness may be qualified by 27 "knowledge, skill, experience, training, or education." Id. 28 4 2 1 At the class certification stage, courts analyze challenges to expert testimony under the 2 standards set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). See 3 Ellis, 657 F.3d at 982. "[A]t this early stage, robust gatekeeping of expert evidence is not 4 required; rather, the court should ask only if expert evidence is useful in evaluating whether class 5 certification requirements have been met." Culley v. Lincare Inc., No. 15-CV-00081-MCE-CMK, 6 2016 WL 4208567, at *1 (E.D. Cal. Aug. 10, 2016) (quoting Tait v. BSH Home Appliances Corp., 7 289 F.R.D. 466, 492–93 (C.D. Cal. 2012)). 8 The trial judge has discretion to determine reasonable measures of reliability. Kumho Tire 9 Co., Ltd. v. Carmichael, 526 U.S. 137, 153 (1999). The proponent of expert testimony has the 10 burden of proving admissibility in accordance with Rule 702. Fed. R. Evid. 702, Advisory 11 Committee Notes (2000 amendments). An expert should be permitted to testify if the proponent 12 demonstrates that: (1) the expert is qualified; (2) the evidence is relevant to the suit; and (3) the Northern District of California United States District Court 13 evidence is reliable. See Thompson v. Whirlpool Corp., No. 06-CV-1804-JCC, 2008 WL 14 2063549, at *3 (W.D. Wash. May 13, 2008) (citing Daubert, 509 U.S. at 589–94). 15 C. Motion for Summary Judgment 16 Summary judgment is appropriate when no genuine dispute as to any material fact exists 17 and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). A party 18 seeking summary judgment bears the initial burden of informing the court of the basis for its 19 motion, and of identifying those portions of the pleadings, depositions, discovery responses, and 20 affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. 21 Catrett, 477 U.S. 317, 323 (1986). Material facts are those that might affect the outcome of the 22 case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The "mere existence of some 23 alleged factual dispute between the parties will not defeat an otherwise properly supported motion 24 for summary judgment; the requirement is that there be no genuine issue of material fact." Id. at 25 247–48 (dispute as to a material fact is "genuine" if sufficient evidence exists for a reasonable jury 26 to return a verdict for the non-moving party) (emphases in original). 27 Where the moving party will have the burden of proof at trial, it must affirmatively 28 demonstrate that no reasonable trier of fact coul