IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
MYLAN PHARMACEUTICALS, INC., :
ROCHESTER DRUG CO-OPERATIVE, :
INC., MEIJER, INC., MEIJER :
DISTRIBUTION, INC., AMERICAN :
SALES COMPANY, LLC, WALGREEN :
CO., SAFEWAY INC., SUPERVALU :
INC., and HEB GROCERY CO. LP, et al., :
:
Plaintiffs, :
:
v. :
:
WARNER CHILCOTT PUBLIC :
LIMITED COMPANY, et al., :
:
Defendants. :
:
Civ. No. 12-3824
CONSOLIDATED
INDIRECT PURCHASER ACTION
DEFENDANT WARNER CHILCOTT’S REPLY MEMORANDUM IN SUPPORT OF
ITS MOTION TO EXCLUDE THE DECLARATION AND TESTIMONY OF GORDON
RAUSSER
PUBLIC REDACTED VERSION
Case 2:12-cv-03824-PD Document 389 Filed 07/26/13 Page 1 of 56
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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ......................................................................................................... iii
INTRODUCTION .......................................................................................................................... 1
ARGUMENT .................................................................................................................................. 4
I. IBEW Cannot Cure the Problems with Dr. Rausser’s Opinions
by Discussing Other Cases.................................................................................................. 4
A. Dr. Rausser’s Prior Testimony in Nexium Supports Exclusion .............................. 5
B. Other Cases Evaluating Dr. Rausser’s Opinions Support Exclusion ...................... 6
II. Dr. Rausser Cannot Hide the Fundamental Errors in His
Consumer Impact Analysis ............................................................................................... 11
A. Dr. Rausser’s Failure to Exclude From His Opinions Whole
Categories of Consumers that Now Have Been Excluded from
the Classes Shows That His Impact Opinion Was Improper ................................ 13
B. There Is No Valid Explanation for Dr. Rausser’s Failure to
Account for Brand Loyal Consumers, Free Samples, and Deductibles ................ 15
C. Dr. Rausser’s “Transaction” Based Approach
Contradicts Basic Economic Analysis .................................................................. 19
III. Dr. Rausser’s Third Party Payer Impact Analysis is Unreliable ....................................... 20
A. No Impact for Reimbursement of Prescriptions for
Brand Loyal Plan Members .................................................................................. 20
B. Dr. Rausser Ignored the Individualized Inquiry Required
to Determine Which Third Party Plans Were at Risk
and Thus Potentially Impacted.............................................................................. 21
C. Dr. Rausser Offers No Reasons for His Failure to Consider
Important Economic Factors ................................................................................. 22
IV. Rausser Has No Answer for the OptumHealth Data ........................................................ 24
A. Dr. Rausser’s Review Confirms Dr. Cremieux’s Findings ................................... 25
B. The OptumHealth Data Confirm That Prices Paid Are
Variable and Thus Require an Individualized Inquiry on Impact ......................... 26
V. Dr. Rausser’s Rebuttal Cannot Cure the Fundamental Problems
with His Sensitivity Analysis ............................................................................................ 28
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VI. IBEW Has No Answer for Dr. Rausser’s Failure to Investigate
Key Assumptions or Fit His Opinions to the Facts ........................................................... 33
A. No Facts Support Dr. Rausser’s Assumptions Regarding
Improvements to Doryx ........................................................................................ 34
B. Dr. Rausser Improperly Rejects Economic Facts
That Rebut His Misreading of Documents ........................................................... 39
C. No Facts Support Dr. Rausser’s Assumptions
Regarding Potential Generic Entry ....................................................................... 41
D. No Basis for “Overcharge” Assumptions as to Third Party Payers ...................... 46
VII. Dr. Rausser’s Model Departs from IBEW’s Product Hopping Theory ............................ 46
VIII. Dr. Rausser’s Fluid Recovery Damages Model Will Not Assist
the Trier of Fact and Fails under Daubert ........................................................................ 47
CONCLUSION ............................................................................................................................. 49
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TABLE OF AUTHORITIES
CASES PAGE(S)
Allen v. Dairy Farmers of America, Inc., 279 F.R.D. 257 (D. Vt. 2011) ........................................7
Allen v. Dairy Farmers of Am., Inc., No. 5:09-cv-230, 2012 WL 5844871
(D. Vt. Nov. 19, 2012) .....................................................................................................................7
Allied Orthopedic Appliances, Inc. v. Tyco Healthcare Group L.P.,
247 F.R.D. 156 (C.D. Cal. 2007) ..................................................................................................35
Bickerstaff v. Vassar College, 196 F.3d 435 (2d Cir. 1999) ................................................. passim
Blades v. Monsanto Co., 400 F. 3d 562 (8th Cir. 2005) ...............................................................13
Blomkest Fertilizer, Inc. v. Potash Corp. of Saskatchewan,
203 F.3d 1028 (8th Cir. 2000) .....................................................................................................7, 8
Citizens Fin. Grp., Inc. v. Citizens Nat. Bank of Evans City,
383 F.3d 110 (3d Cir. 2004) ..........................................................................................................12
Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013) .............................................................. passim
Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039 (8th Cir. 2000) ...............................20, 38
Cowden v. Parker & Assocs., Inc., No. 5:09-323,
2013 WL 2285163 (E.D. Ky. May 22, 2013) ................................................................................48
Daddio v. A.I. DuPont Hosp. for Children of the Nemours Found.,
650 F. Supp. 2d 387 (E.D. Pa. 2009) ..............................................................................................1
Elcock v. Kmart Corp., 233 F.3d 734 (3d Cir. 2000) ...................................................................29
Execu-Tech Bus. Sys., Inc. v. Appleton Papers Inc., 743 So.2d 19
(Fla Dist. Ct. App. 1999) ...............................................................................................................11
Freeland v. AT&T Corp., 238 F.R.D. 130 (S.D.N.Y. 2006) .........................................................22
Forrand v. Federal Exp. Corp., No. 08-1360, 2013 WL 1793951
(C.D. Cal. Apr. 25, 2013) .............................................................................................................48
G.E. v. Joiner, 522 U.S. 136 (1997) ..................................................................................21, 22, 46
Case 2:12-cv-03824-PD Document 389 Filed 07/26/13 Page 4 of 56
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Hilton v. Horcher GmbH, No. 03-6084-CV-SJ-GAF,
2004 WL 4056050 (W.D. Mo. Dec. 13, 2004) ..............................................................................12
In re Chocolate Confectionary Antitrust Litigation,
289 F.R.D. 200 (M.D. Pa. 2012) ...................................................................................................12
In re Flonase Antitrust Litigation, 284 F.R.D. 207 (E.D. Pa. 2012) ..................................9, 10, 14
In re High Fructose Corn Syrup Antitrust Litigation,
156 F. Supp. 2d 1017 (C.D. Ill. 2001) .............................................................................................8
In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651 (7th Cir. 2002) ............................8
In re Live Concert Antitrust Litig., 863 F. Supp. 2d 966 (C.D. Cal. 2012) ..................................12
In re Novatel Wireless Sec. Litig., 846 F. Supp. 2d 1104 (S.D. Cal. 2012) ..................................12
In re Pharm. Indus. Average Wholesale Price Litig.,
491 F. Supp. 2d 20 (D. Mass. 2007) .............................................................................................12
In re Paoli R.R. Yard PCB Litig., 35 F.3d 717 (3d Cir. 1994) .............................................. passim
In re Potash Antitrust Litigation, 954 F. Supp. 1334 (D. Minn. 1997) .......................................7, 8
In re Relafen, 221 F.R.D. 260 (D. Mass. 2004) ............................................................................10
In re Southeastern Milk Antitrust Litigation,
801 F. Supp. 2d 705 (E.D. Tenn. 2011) ...........................................................................................8
In re Terasozin Hydrochloride Antitrust Litigation,
220 F.R.D. 672 (S.D. Fla. 2004) ....................................................................................................23
L.A. Mem’l Coliseum Comm’n v. NFL, 791 F.2d 1356 (9th Cir. 1986) .......................................19
Malletier v. Dooney & Bourke, Inc., 525 F.Supp.2d 558 (S.D.N.Y. 2007) ..................................13
Martin v. Ford Motor Co., No. 10-2203,
2013 WL 3328231 (E.D. Pa. July 2, 2013) ...................................................................................48
Meadows v. Anchor Longwall & Rebuild, Inc.,
306 Fed. App’x 781 (3d Cir. 2009) ..................................................................................................1
Miller v. Pfizer, Inc., 356 F.3d 1326 (10th Cir. 2004) ..................................................................12
Oddi v. Ford Motor Co., 234 F.3d 136 (3d Cir. 2000) .......................................................... passim
Oxygenated Fuels Ass’n, Inc. v. Pataki, 293 F. Supp. 2d 170
(N.D.N.Y. 2003) ..............................................................................................................................7
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Schachar v. American Academy of Opthamology, Inc.,
870 F.2d 397 (7th Cir. 1989) ........................................................................................................40
Shannon v. Hobart, No. 09-5220,
2011 WL 442119 (E.D. Pa. Feb. 8, 2011) .......................................................................................1
Snodgrass v. Ford Motor Co., No. 96-1814 (JBS),
2002 WL 485688 (D.N.J. Mar. 28, 2002) .....................................................................................42
Teva Pharm. USA, Inc. v. Abbott Labs., 252 F.R.D. 213 (D. Del. 2008) ......................................18
Weiss v. AstraZeneca, No. BC323107 (Cal. Sup. 2008) .................................................................6
Weiss v. AstraZeneca Pharm., 2010 WL 3387220
(Cal. Ct. App. Aug. 30, 2010) .........................................................................................................5
Wolfe v. McNeil-PPC, Inc., Civil Action No. 07-348,
2011 WL 1673905 (E.D. Pa. May 4, 2011) ............................................................................36, 40
ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012) .................................................4, 20
Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., Inc.,
No. 99 C 4040, 2002 WL 398521 (N.D. Ill. Mar. 14, 2002),
rev’d on other grounds, 313 F.3d 385 (7th Cir. 2003) .................................................................13
RULES
Fed. R. Evid. 702 .......................................................................................................................4, 36
MISCELLANEOUS
Berndt, Ernst R., et al., “Authorized Generic Drugs, Price Competition,
and Consumers’ Welfare,” Health Affairs, 26, no. 3 (2007) .........................................................30
Federal Judicial Center, Manual on Scientific Evidence (Third) (2011) ......................................46
ABA Section of Antitrust Law, Proving Antitrust Damages:
Legal and Economic Issues (2D ED. 2010) ....................................................................................19
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INTRODUCTION
In its opening brief, Warner Chilcott explained why the expert declaration and testimony
submitted on behalf of International Brotherhood of Electrical Workers Local 38, Health and
Welfare Fund (“IBEW”) by Dr. Gordon Rausser, Ph.D. fell far short of the minimum standards
for admissibility and derivatively why class certification should be denied. Simply stated, Dr.
Rausser did not “employ[] . . . the same level of intellectual rigor that characterizes the practice
of an expert” in his field. Daddio v. A.I. DuPont Hosp. for Children of the Nemours Found., 650
F. Supp. 2d 387, 403 (E.D. Pa. 2009). Expert testimony that is not based on the methods and
procedures of the expert’s field and that is based on assumptions lacking foundation in the record
is not relevant or reliable and thus properly excluded. Meadows v. Anchor Longwall & Rebuild,
Inc., 306 Fed. App’x 781, 787 (3d Cir. 2009); In re Paoli R.R. Yard PCB Litig., 35 F.3d 717,
743–44 (3d Cir. 1994); Shannon v. Hobart, No. 09-5220, 2011 WL 442119, at *2–4 (E.D. Pa.
Feb. 8, 2011).
Dr. Rausser’s opinions suffer from numerous disqualifying failures: (1) He ignored key
economic facts that he in the past has asserted should be included when analyzing impact in this
kind of case. When these factors are considered, they demonstrate that impact cannot be shown
through common, formulaic proof. In fact, as Dr. Rausser admitted, substantial numbers of the
putative classes would not have been injured by the claimed delay in generic entry. Most
importantly, there is no common method for identifying such class members; (2) Rather than
concede the inherently individualized issues presented by the classes proposed here—issues
recognized by the K-Dur case and others as grounds to deny certification—Dr. Rausser asserted
that the individualized issues could be address in an undefined claims administration process; (3)
Dr. Rausser abdicated his role as an expert and accepted without analysis important assumptions
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that are unsupported by the evidence; and (4) Dr. Rausser failed to link his damages model to
IBEW’s liability theory, a basic requirement of economics testimony, and an approach precluded
by Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). These and other deficiencies require
rejection of Dr. Rausser’s opinions.
Apparently dissatisfied with Dr. Rausser’s original report (and related testimony), IBEW
filed a massive, 96-page “rebuttal” report from Dr. Rausser that is nothing more than a futile
effort to shore up Dr. Rausser’s deficient analysis.1 The rebuttal report, and IBEW’s Opposition,
only underscore why Dr. Rausser’s opinions are inadmissible, and why these classes should not
be certified.
First, IBEW argues that Dr. Rausser’s opinions are admissible because his opinions have
been admitted elsewhere. But IBEW cannot avoid the fact that Dr. Rausser’s opinions have been
rejected by multiple courts. And the key issue here, of course, is whether Dr. Rausser’s opinions
in this case pass muster, and they clearly do not.
Second, Dr. Rausser (and IBEW) now purports to redefine the classes to exclude tens of
thousands of consumers who he originally asserted should be included in the classes, until
confronted with the analysis of Warner Chilcott’s expert, Dr. Cremieux. Dr. Rausser grudgingly
concedes that this belated exclusion is “appropriate,” but he continues to quarrel with its
necessity for at least some of the newly excluded consumers. No matter. Dr. Rausser’s duty was
to examine the facts regarding coupons, brand loyal consumers, deductibles, etc. before reaching
his opinions, as he has done previously, not treat his original opinion as a first draft. But even
this attempt to define away the problem fails because it does not go far enough, and because Dr.
Rausser has no way to identify many of the class members he now purports to exclude—itself an
1 Dr. Rausser’s rebuttal report should be stricken for the reasons set forth in Warner Chilcott’s July 1 letter brief in
support of its motion to strike. ECF No. 343.
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individualized inquiry that makes certification inappropriate.
Third, contrary to IBEW’s contentions, Dr. Rausser’s flaws can hardly be labeled as
issues concerning the weight of his opinions. The problems are fundamental and destroy any
hope that his testimony might be admissible. For example, there is no valid explanation for Dr.
Rausser’s failure to account for brand loyal consumers, free samples, and other factors that show
that substantial additional categories of consumers and third party payers (“TPPs”) were not
impacted. Nor can Dr. Rausser walk away from the fact that he improperly applied his own
sensitivity analysis, and inexplicably chose to ignore prescription-level data. His selective and
incomplete work, which not surprisingly reached the wrong results, is irrelevant and unreliable.
Fourth, Dr. Rausser’s rebuttal, like his original report, proposes no valid, formulaic way
to identify and exclude any non-impacted class members, let alone the very substantial
categories that IBEW concedes must be excluded from the classes. IBEW offers no basis,
because there is none, for the Court to accept Dr. Rausser’s word that when he finally puts his
mind to it he will be able to create a formulaic methodology that will do the trick.
Fifth, IBEW claims that Dr. Rausser’s assumptions on key issues, such as the use of an
overcharge methodology, the timing and nature of generic entry in the “but-for” world, and the
presumed “immaterial improvements” to the Doryx product, are “reasonable.” But this argument
ignores the fact that Dr. Rausser never reality-checked these assumptions before issuing his
opinions—a critical and disqualifying departure from accepted economic principles and
methods—and that his assumptions are entirely unjustified (i.e., they do not “fit” the facts of the
case), based on evidence IBEW cannot refute.
Sixth, IBEW argues that this case is nothing like Comcast because IBEW presents only a
single “product hopping” theory of liability. This argument ignores the realities of IBEW’s
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claims, which all along had asserted that each product introduction was a distinct anticompetitive
act. Moreover, IBEW’s claim that Dr. Rausser’s model is sufficiently “flexible” to
accommodate virtually any factual scenario is untrue because it cannot account for the presence
of Doryx tablets in the “but-for” world, nor can it separate out harm from lawful conduct as
opposed to that caused by allegedly unlawful product “hops.”
Finally, Dr. Rausser persists in his view that at this stage he need only show how one
could calculate a pot of damages, with no methodology for how damages might be assigned to
individual class members. This “fluid recovery” approach flies in the face of Comcast, which
requires a proponent of certification to provide a methodology to show, or capable of showing,
how “individual damages” can be calculated using common evidence, and which requires a
damages model that is linked to the alleged unlawful conduct.
ARGUMENT
I. IBEW Cannot Cure the Problems with Dr. Rausser’s Opinions by Discussing Other
Cases
Expert opinions are evaluated on a case-by-case basis to determine whether in a
particular case the proposed expert applied reliable principles and methods in accordance with
the standards of his profession to the relevant facts so that his opinions can be said to be relevant
and reliable, and thus admissible. Fed. R. Evid. 702. Even if courts in unrelated cases deem an
expert’s testimony admissible, those determinations do not give the expert a free pass in later
cases. The court’s gatekeeping role pursuant to Rule 702 and Daubert must be applied
separately in each case. Where the expert does not meet the basic standards of his profession, or
abdicates his role as an expert to evaluate the facts, or does not fit his analysis to the facts of the
case, his testimony should be excluded. See, e.g., ZF Meritor, LLC v. Eaton Corp., 696 F.3d
254, 294 (3d Cir. 2012) (affirming exclusion of expert and explaining “the trial judge must
Case 2:12-cv-03824-PD Document 389 Filed 07/26/13 Page 10 of 56
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determine whether the testimony has a ‘reliable basis in the knowledge and experience of the
relevant discipline’”) (internal citations omitted).
IBEW seeks to buttress Dr. Rausser’s testimony by discussing instances in which his
opinions have been admitted. This argument, however, has the opposite effect, because it only
serves to highlight (1) the 180-degree turn Dr. Rausser has taken from his testimony in Nexium,
where he opposed class certification, and (2) the errors (repeated here) that caused other courts to
reject Dr. Rausser’s opinions.
A. Dr. Rausser’s Prior Testimony in Nexium Supports Exclusion
IBEW attempts to distinguish Dr. Rausser’s work in the Nexium2 litigation on the basis
that Nexium involved “two completely different drugs” (Nexium versus Prilosec and its generic
equivalents) and centered on allegedly false claims by the manufacturer that Nexium was a
superior product to Prilosec (and generic Prilosec). IPP Daubert Opp. at 25–26 (ECF No. 330).
According to IBEW, the Nexium “[p]laintiffs’ theory depended on individualized issues
concerning why each consumer took Nexium, and the degree to which they were influenced by
price, free samples, or other considerations.” Id. Dr. Rausser claims the case required a “very
specific form of analysis,” but never explains what that was. Rausser Reb. Decl. ¶ 13. Dr.
Rausser only asserts, again without explanation, that the Nexium litigation “is entirely unlike the
present case . . . in which it is reasonable to presume that a consumer who actually bought the
branded drug would have bought either the same brand or its less expensive generic equivalent
had one been available.” Id. ¶ 14.
These “distinctions” only serve to highlight why the principles and methodologies used
by Dr. Rausser in Nexium to determine prices paid and likelihood of impact apply to this case as
2 Weiss v. AstraZeneca Pharm., No. B215901, 2010 WL 3387220 (Cal. Ct. App. Aug. 30, 2010) and related cases.
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well to evaluate the exact same issues—prices paid and likelihood of impact. See Redacted
Declaration of Gordon Rausser, Ph.D., in support of Defs. Opp. to Pls.’ Mot. for Class Cert.,
Weiss v. AstraZeneca, No. BC323107 (Cal. Sup. 2008) (“Rausser Nexium Decl.”) (attached as
Ex. 11 to WC Class Cert. Opp. (Indirect) (ECF No. 234)). Just like in Nexium, the products at
issue here—Doryx tablets and generic Doryx capsules—would not be AB-rated substitutes, and
Dr. Rausser should have (but did not) evaluate whether in the but-for world a Doryx tablet
patient would have continued to take Doryx tablets or instead switched to Doryx capsules or
generic Doryx capsules. Those who would not have switched to generic capsules (brand loyal
users) suffered no impact and should have been excluded from the classes, as Dr. Rausser argued
in Nexium. See id. ¶¶ 90–97. Brand loyal users should not have been ignored, which is the
approach he followed here.3
For consumers who would have switched to generic capsules in the but-for world, the
actual price paid and the but-for price paid must be determined to evaluate whether impact could
be shown on a classwide basis using evidence common to the classes. Thus, as Dr. Rausser
argued in Nexium, because factors such as free goods, samples, and coupons (and others) affect
those prices, such factors should have been examined—not ignored—when evaluating impact.
The “distinctions” noted by IBEW have no impact on the procedures and methodologies that
should have been, but were not, undertaken by Dr. Rausser to asses impact in this case.
B. Other Cases Evaluating Dr. Rausser’s Opinions Support Exclusion
IBEW’s discussion of opinions that have criticized Dr. Rausser for failing to link his
opinions to the facts of a case shows why his opinions should be excluded here.
3 Dr. Rausser’s model cannot accommodate brand loyal users because it concededly ignores them. See infra Part
II.B. IBEW’s effort to dismiss brand loyal users as a non-issue fails because it rests on but-for world assumptions
(multiple generic entry in July 2006, no Doryx tablet product, no product improvements) that, as shown in Part VI.C
below, have no foundation in the record.
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IBEW does not, because it cannot, contest that the court in Allen v. Dairy Farmers of
America, Inc., 279 F.R.D. 257 (D. Vt. 2011) rejected Dr. Rausser’s analysis of common impact
as “fundamentally flawed”—and thus inadmissible—because he ignored important variables and
examined the wrong units of price comparison. Id. at 269. Instead, IBEW cites a later opinion in
that litigation in which the court accepted a revised and corrected analysis from Dr. Rausser that
addressed the court’s concerns.4 IPP Daubert Opp. at 22. Of course, this later opinion does not
remedy the fact that Dr. Rausser’s original opinion in that litigation was “fundamentally flawed”
for many of the reasons that apply here. See WC Daubert Mem. (Rausser) at 5 n.3 (ECF No.
236) (citing Allen). Similarly, regarding Oxygenated Fuels Ass’n, Inc. v. Pataki, 293 F. Supp. 2d
170 (N.D.N.Y. 2003), IBEW concedes that Dr. Rausser “did not have an adequate evidentiary
bases for his assumptions regarding a reduced supply of gasoline to New York.” IPP Daubert
Opp. at 23. Hence, the court’s holding after a bench trial that “plaintiff has not made its case
regarding the economic impacts,” 293 F. Supp. 2d at 182, even though not technically a ruling on
a Daubert challenge, supports Warner Chilcott’s point that courts have rejected Dr. Rausser’s
opinions where (as here) they are not linked to the actual facts of the case.
IBEW likewise does not contest that In re Potash Antitrust Litigation, 954 F. Supp. 1334
(D. Minn. 1997) rejected his opinions because in that case, Dr. Rausser failed to take into
account relevant market realities. As IBEW concedes, the Eighth Circuit en banc “determined
that Dr. Rausser’s opinion was unavailing” because his opinion failed to take into account the
facts of the case. IPP Daubert Opp. at 24–25 (citing Blomkest Fertilizer, Inc. v. Potash Corp. of
4 Even then, the court expressed concerns regarding Dr. Rausser’s credibility from his change in theories. Allen v.
Dairy Farmers of Am., Inc., No. 5:09-cv-230, 2012 WL 5844871, at *11 n.10 (D. Vt. Nov. 19, 2012) (“[The court]
remains concerned that Dr. Rausser’s damages theory has changed so appreciably in the course of class certification,
especially when Dr. Rausser claimed that prior units of comparison and regression models possessed the same
forceful explanatory power as the theory he currently espouses. . . . These concerns, however, implicate credibility
determinations that are not required for purposes of class certification.”).
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Saskatchewan, 203 F.3d 1028 (8th Cir. 2000)). IBEW’s spin on this rejection—that Potash was
a price fixing case and that “it was only a few pieces of evidence that were detrimental to the
acceptance” of Dr. Rausser’s opinion (id. at 25)—is irrelevant. The court in Potash rejected Dr.
Rausser’s testimony because he failed to consider marketplace facts that mattered to the issue at
hand, which is the same error he made here.
Warner Chilcott also cited In re Southeastern Milk Antitrust Litigation, 801 F. Supp. 2d
705 (E.D. Tenn. 2011) as another instance where Dr. Rausser’s testimony was criticized and
where a claim was dismissed in part because Dr. Rausser “ignored the commercial realities of the
market.” WC Daubert Mem. (Rausser) at 5 n.3. IBEW’s argument that other portions of his
opinions were not rejected does not diminish the point made by Warner Chilcott: courts have
rejected Dr. Rausser’s opinion in some instances because he ignored the pertinent facts of the
case, and he has made the same mistake here.
IBEW also incorrectly argues that Warner Chilcott’s reliance on In re High Fructose
Corn Syrup Antitrust Litigation, 156 F. Supp. 2d 1017 (C.D. Ill. 2001) is inappropriate because
the Seventh Circuit’s opinion “adopted” Dr. Rausser’s opinions in reversing the district court’s
decision. IPP Daubert Opp. at 21–22. This is not correct. The Seventh Circuit reversed based
on its own analysis of the underlying facts, not Dr. Rausser’s. See In re High Fructose Corn
Syrup Antitrust Litig., 295 F.3d 651, 655–56 (7th Cir. 2002). At no point did the Seventh Circuit
disagree with the district court’s criticisms of Dr. Rausser’s methods, much less “adopt” Dr.
Rausser’s opinions. See id. at 660 (brief mention that expert gave uncontested testimony
regarding market structure and performed a regression analysis).
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C. IBEW’s Reliance on In re Flonase Is Misplaced
IBEW relies heavily on the court’s treatment of Dr. Rausser’s opinion in In re Flonase
Antitrust Litigation, 284 F.R.D. 207 (E.D. Pa. 2012), but that decision helps Warner Chilcott, not
IBEW, and highlights Dr. Rausser’s improper reliance on unsupported assumptions and failure to
properly apply the procedures and methodologies of his profession. First, in Flonase, the court
only accepted Dr. Rausser’s use of national average price data because he also examined actual
price data for the ten states at issue and thus addressed some but not all of the court’s concern
that national average data would mask important price variability at the state level (the court
removed uninsured consumers from the class for this reason). 284 F.R.D. at 228, 230. Here, by
contrast, Dr. Rausser’s original report relied exclusively on national price data, and his rebuttal
report does not contain the state-specific analysis required by Flonase. See infra Part IV.A.
Moreover, an appropriate state-specific analysis shows that in this case, national pricing data
masks substantial price variability for the two states at issue. Id.
Second, Dr. Rausser’s work in Flonase relied on the type of real world data that he
improperly rejects here. For example, Dr. Rausser used the actual world generic penetration
rates for Flonase (88% after one month, 95% after a year, and 99% at the end of the class period)
to model a but-for world for that product.
.5 Dr. Cremieux, Warner Chilcott’s
economic expert, explained that using these real world data to infer the but-for world shows
substantial members of the putative classes were not injured. Cremieux Decl. ¶¶ 42–45
5
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(consumers receiving rebates and/or coupons), 47–50 (uninsured consumers), 72–75 (various
third party payers) (included with ECF No. 234).
Third, unlike the case in Flonase, Dr. Rausser’s sensitivity analysis in this case ignores
key variables and inputs that individually and collectively show no classwide impact. See infra
Part V. For example, Dr. Rausser should have, but did not, include the Doryx tablet product in
his but-for world. Id. He also should have, but did not, model generic-to-brand price ratios that
were likely to prevail in the but-for world. Id. In fact, Dr. Cremieux showed that Dr. Rausser’s
sensitivity analysis was not capable of testing for common impact, and that when the model was
adjusted for these and other factors, the analysis provided no support for Dr. Rausser’s
conclusion of common impact. See, e.g., Cremieux Decl. ¶ 76.
Fourth, the Flonase court excused Dr. Rausser’s inability to show injury to each class
member, explaining that “inability to show injury as to a few does not defeat class certification.”
284 F.R.D. at 227 (internal citations omitted). Here, by contrast, substantial numbers of
putative class members were not injured. See, e.g., supra Part II.B.
Lastly, in Flonase, Dr. Rausser actually demonstrated that the named plaintiffs suffered
injury. 284 F.R.D. at 227.
Tellingly, despite otherwise embracing Flonase, IBEW seeks to
distinguish it on this point. IPP Class Cert. Reply at 24 n.10 (ECF No. 331). IBEW claims
instead that it should be treated like the “pre-generic” purchasers in In re Relafen, 221 F.R.D.
260 (D. Mass. 2004), but those entities never purchased the brand or the generic after generic
entry, and the underlying claim included allegations that the brand price was inflated. Id. at 272.
Here, by contrast, IBEW purchased the brand but not the generic after generic entry (making it
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11
proper to infer it would have had the same experience in the but-for world), and IBEW does not
allege that the price of Doryx was inflated (Dr. Rausser’s assumes the price of Doryx would be
the same in the but-for world). Moreover, Relafan denied certification of the proposed Florida
indirect purchaser class, holding that the indirect plaintiffs did not make the stronger showing of
impact required by Florida law. Id. at 280–82 (quoting Execu-Tech Bus. Sys., Inc. v. Appleton
Papers Inc., 743 So. 2d 19, 21–22 (Fla Dist. Ct. App. 1999)) (holding that plaintiffs did not
“come forward with a methodology by which they would be able to show by generalized proof
that [the allegedly illegal acts] had impacted each class member individually”).
II. Dr. Rausser Cannot Hide the Fundamental Errors in His Consumer Impact
Analysis
Warner Chilcott’s opening brief exposed two fundamental—and disqualifying—errors in
Dr. Rausser’s impact analysis. First, Dr. Rausser failed to consider a variety of marketplace facts
that indisputably affected the prices paid by consumers, e.g., consumer / physician brand loyalty,
use of coupons and samples, widely varying co-pay structures, and patient deductibles in
insurance plans. A proper analysis of these factors revealed that seven categories of consumers,
consisting of tens of thousands of putative class members, were not impacted. WC Daubert
Mem. (Rausser) at II.a–b. Second, Dr. Rausser’s sensitivity analysis—the basis for his impact
opinion as to TPPs—included structural errors because it did not consider various market facts
(e.g., samples) that affected the price paid by TPPs, and was not reliably applied because several
factors were considered improperly. Id. at 19 n.9.
IBEW obtains no refuge by claiming that these disqualifications are “not resolvable” on a
Daubert challenge because they relate only to the weight, not the admissibility, of Dr. Rausser’s
opinions. Where, as here, the expert’s opinions do “not suffer from mere technical flaws, but
from fatal flaws,” a court “fulfill[s] its duty as a gatekeeper in excluding [such] evidence.”
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Citizens Fin. Grp., Inc. v. Citizens Nat. Bank of Evans City, 383 F.3d 110, 120–21 (3d Cir. 2004)
(finding plaintiff’s argument that the Court’s “critique” of its expert’s methodology should only
affect its evidentiary weight to be “unpersuasive” because the methodology used by plaintiff’s
expert was “fundamentally flawed”); see also Miller v. Pfizer, Inc., 356 F.3d 1326, 1335 (10th
Cir. 2004) (flawed foundation of expert opinions went to admissibility of testimony and not
merely to weight); In re Novatel Wireless Sec. Litig., 846 F. Supp. 2d 1104, 1108 (S.D. Cal.
2012) (loss causation expert excluded; “contention that this is a question of weight, not
admissibility, unpersuasive”); Hilton v. Horcher GmbH, No. 03-6084-CV-SJ-GAF, 2004 WL
4056050, at *6 (W.D. Mo. Dec. 13, 2004) (foundation of testimony was insufficient, which went
to admissibility of testimony and not simply to its weight). IBEW’s reliance on In re Chocolate
Confectionary Antitrust Litigation, 289 F.R.D. 200 (M.D. Pa. 2012) is misplaced because the
court there found that “the vast majority” of the factual findings used by the expert were
undisputed, and there was nothing “controversial or unique” in the expert’s opinion. Id. at 210,
210 n.13.6 Here, among other things, Dr. Rausser diverges from opinions he has offered in the
past, employs assumptions that have no factual support, and offers conclusions that do not fit the
facts.
IBEW’s related claim that Warner Chilcott is only complaining “because [Dr. Rausser]
did not adopt their interpretation of the evidence because he utilized data that is different than the
data used by Defendants’ own experts” is equally erroneous. IPP Daubert Opp. at 27. Court’s
routinely disqualify experts for failing to reliably apply accepted methodologies when they, for
6 IBEW’s other cases (IPP Daubert Opp. at 27 n.54) are similarly inapposite because they do not address situations
with the type of critical failures present here. See, e.g., In re Pharm. Indus. Average Wholesale Price Litig., 491 F.
Supp. 2d 20, 86 (D. Mass. 2007) (the sole failure of an economist to consider certain data if the expert explains her
choice of data goes to weight not admissibility) (emphasis added); In re Live Concert Antitrust Litig., 863 F. Supp.
2d 966, 973 (C.D. Cal. 2012) (“As a general matter, flaws in a proffered expert’s analysis typically go to the
weight, rather than the admissibility, of the expert’s testimony.”) (emphasis added).
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example, ignore key factors or rely on unfounded assumptions. See In re Paoli R.R. Yard PCB
Litig., 35 F.3d at 773 (expert’s calculation, based on inaccurate assumptions and ignoring inter-
laboratory comparison data, was unreliable under Daubert); see also Zapata Hermanos
Sucesores, S.A. v. Hearthside Baking Co., Inc., No. 99 C 4040, 2002 WL 398521, at *2 (N.D. Ill.
Mar. 14, 2002), rev’d on other grounds, 313 F.3d 385 (7th Cir. 2003) (holding expert was
unreliable where expert’s conclusions “proceeded from the expert’s commitment to a totally
false premise about the nature of the litigation. In the computer field such efforts, proceeding
from a mistaken assumption to a necessarily mistaken conclusion, long ago earned the sobriquet
‘GIGO’: Garbage in, Garbage out.”); Bickerstaff v. Vassar Coll., 196 F.3d 435, 449–50 (2d Cir.
1999) (affirming rejection of expert’s regression analysis because it did not account for major
variables or other possible alternatives); Malletier v. Dooney & Bourke, Inc., 525 F. Supp. 2d
558, 669 (S.D.N.Y. 2007) (rejecting expert’s regression analysis because there was no “credible
testimony from a knowledgeable witness that the obvious alternatives were considered, analyzed,
and ruled out”).7
A. Dr. Rausser’s Failure to Exclude From His Opinion Whole Categories of
Consumers that Now Have Been Excluded from the Classes Shows That His
Impact Opinion Was Improper under Daubert
Dr. Rausser’s testimony should be excluded because his methodology for assessing
impact was not reliable—he failed to consider critical facts (such as coupons) and not
surprisingly reached erroneous results. For example, Dr. Rausser previously testified that “if you
didn’t take [coupons] into account, you would miss the ultimate assessment of common impact,
7 Contrary to IBEW’s assertion (IPP Daubert Opp. at 28), Blades v. Monsanto Co., 400 F.3d 562 (8th Cir. 2005)
shows why Dr. Rausser’s testimony is inadmissible. In affirming the district court’s denial of certification, the court
specifically stated that the “plaintiffs presume class-wide impact without any consideration of whether the markets
or the alleged conspiracy at issue here actually operated in such a manner so as to justify that presumption. Dr.
Leitzinger [plaintiffs’ expert] assumes the answer to this critical issue and plaintiffs, in turn, have asked the Court to
rely on this conclusion as support for class certification.” Id. at 570.
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and miss accurately measuring damages.” Feb. 27, 2013 Trial Tr. at 192:3–5, In re Flonase, 284
F.R.D. 207 (Testimony of Dr. Rausser) (Ex. 23 to WC Class Cert. Opp. (Indirect)). Here,
uninsured and insured consumers received the benefit of approximately $350 million in
discounts and rebates from Doryx coupons. Dr. Rausser concedes that these coupons would not
be available in the but-for world, yet he excluded them from his analysis of impact.
Dr. Cremieux undertook the analysis that Dr. Rausser failed to do and found that tens of
thousands of uninsured consumers would have been worse off in the but-for world. Cremieux
Decl. ¶ 49. Dr. Cremieux’s results were similar for insured patients, where he found over
300,000 Doryx prescriptions for which the insured consumer paid zero out of pocket for her
prescription, and over 129,000 Doryx prescriptions for which the insured consumer paid $10 or
less out of pocket for her prescription. In each situation, there likely was no impact, because the
generic co-pay likely would have been higher than the real world out-of-pocket expense for
Doryx. Cremieux Decl. ¶ 45.
IBEW cannot “cure” Dr. Rausser’s error by redefining the classes to exclude insured and
uninsured patients who used coupons for all of their Doryx purchases.8 His task was to apply the
“intellectual rigor” of his profession and he did not do so. Moreover, Dr. Rausser still has not
provided a formulaic methodology for identifying the consumers (patients who used coupons for
all, not just some, of their Doryx purchases and flat co-pay payers) that IBEW now concedes
8 Dr. Rausser inexplicably continues to believe he did nothing wrong (despite his Nexium testimony), contending
that these consumers—who are now excluded from the classes—were impacted by the unlawful conduct. Rausser
Reb. Decl. ¶ 20 (“Although I disagree with Defendants’ arguments, the dispute can readily be avoided by excluding
certain patients using coupons from the class definition . . . .”). IBEW’s willingness to ignore its expert’s opinion
and exclude tens of thousands of consumers from the classes to “avoid a dispute with Warner Chilcott,” (IBEW
Motion to Strike Opp. Ltr., dated July 10, 2013, at 3) proves that there is an inherent and disqualifying conflict
between the interests of IBEW, a TPP that is unaffected by the exclusion, and consumers, who are affected. WC
Class Cert. Opp. (Indirect) at 3, 58–59.
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must be excluded.9 IBEW claims “Dr. Rausser describes how he adjusted his methodology to
account for the redefined class that excludes consumers who purchased Doryx with a coupon and
never purchased Doryx or generic doxycycline hyclate DR without a coupon.” IPP Daubert
Opp. at 31 n.59 (citing Rausser Reb. Decl. ¶¶ 21–23). (IBEW does not contend that Dr. Rausser
has offered a formulaic methodology for identifying the newly excluded flat co-pay consumers.)
But Dr. Rausser’s “adjustment” does no such thing and merely perpetuates his improper
“aggregate damages” approach. By removing all coupon transactions from the calculation of
damages, Dr. Rausser’s modified approach fails to consider the benefit received by members of
the revised classes that used coupons for some of their purchases. These benefits allowed a
substantial portion of the putative class to pay less for Doryx in the actual world than they would
have in IBEW’s but-for world. This underpayment needs to be netted against any overpayment
they may have made on non-coupon purchases to properly determine impact. See infra Part II.C.
Of course, proper netting of these transactions likely would show that a significant share of the
revised class was not impacted. Further, such an analysis would require individual inquiry
because the Warner Chilcott coupon data does not provide information on non-coupon
purchases.
B. There Is No Valid Explanation for Dr. Rausser’s Failure to Account for
Brand Loyal Consumers, Free Samples, and Deductibles
Dr. Cremieux identified critical factors Dr. Rausser should have, but did not, address in
his analysis. These errors render Dr. Rausser’s opinions unreliable and inadmissible. See, e.g.,
In re Paoli R.R. Yard PCB Litig., 35 F.3d at 773.
9 IBEW describes another category of “excluded” consumers—consumers who purchased generic Doryx only—but
such consumers were never part of the classes to begin with. See IPP Class Cert. Mem. at 2 (ECF No. 156)
(defining each of the three proposed classes as “[a]ll persons or entities . . . who reimbursed for, or indirectly
purchased, other than for resale, branded Doryx . . . .”) (emphasis added).
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Failure to account for the economic effect of free samples. Dr. Rausser opined in the
Nexium litigation that “the number of free samples received” was a necessary and appropriate
input to estimate damages for uninsured consumers in a class of this type, and he criticized the
plaintiffs’ expert for failing to consider the economic effect of samples. WC Daubert Mem.
(Rausser) at 11. This of course makes sense, because a free sample directly reduces the overall
price for a course of treatment. For example, if a patient requires 90 days of Doryx therapy, and
receives a free sample for 15 days, the patient’s cost is reduced because she only needs to pay for
75 days of therapy, with the remaining 15 days being free by virtue of the sample. In a but-for
world without the sample, the patient would be required to pay her portion of the entire 90 day
course of therapy. Thus, in a real economic sense, the free sample affects the price paid by the
consumer.
On rebuttal, Dr. Rausser asserts for the first time that “[f]ree samples are not purchased,
and Class members did not pay for them. Therefore, they fall outside the scope of the Class
definition and are not included in this analysis.” Rausser Reb. Decl. ¶ 71. If as suggested
elsewhere in his report, Dr. Rausser limits this exclusion to “recipients of only free samples” (id.
¶ 73), he of course has failed to address the point, which is that samples are no different than
coupons because they reduce the overall cost to a patient of a course of therapy. See Surrebuttal
Declaration of Pierre-Yves Cremieux (“Cremieux Sur. Decl.”) ¶ 31.10 Thus, like coupons,
samples must be factored into the overall price paid by a consumer for her Doryx therapy. See
id.
If instead Dr. Rausser contends free samples have no effect on the price paid by a patient
for a course of therapy, he offers no reason for this wholesale—and incorrect—change in
10 We are simultaneously seeking leave from the Court to file the Surrebuttal Declaration of Pierre-Yves Cremieux
in response to Dr. Rausser’s improper, 96-page rebuttal declaration.
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position from the Nexium litigation. In short, Dr. Rausser failed to consider a key factor
affecting price—and thus impact—that he previously admitted should be considered and that, in
this case, shows substantial numbers of consumers were not impacted. See Cremieux Decl. ¶ 46
(“tens of thousands of consumers” received free samples); see also In re Paoli R.R. Yard PCB
Litig., 35 F.3d at 773.
Failure to exclude brand loyal consumers. IBEW does not dispute that brand loyal
consumers suffered no impact because in the but-for world they would have stayed with the
brand and their acquisition price would not have decreased. Dr. Cremieux estimated that there
likely were over 47,500 brand loyal, insured consumers over the class period. Cremieux Decl. ¶
32. IBEW’s own data confirm the substantial percentage of brand loyal users.
11.
Dr. Rausser’s rebuttal (¶¶ 64–67) exposes the speculative, unscientific, and unreliable
nature of his analysis on this issue. First, he simply ignores the data from his own client, which
shows a high percentage of brand loyal users. Second, he compounds this error by misusing the
11 IBEW did not produce this data until June 27, 2013. See Email from W. Noss (Ex. 2).
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data used by Dr. Cremieux. For example, Dr. Rausser limits one analysis to 75 and 100 mg
Doryx tablets one year after generic entry, but ignores IBEW’s assertion (in reliance on him) that
Warner Chilcott “restrict[ed] sales of these formulations” after launch of the 150 mg strength of
Doryx tablets, IPP Daubert Opp. at 8, which of course makes the 75 mg and 100 mg tablet data
useless as an indicator of brand loyalty. See also id. at 9 (“Defendants ‘hopped’ to the 150 mg
tablet resulting in the generic 75 mg and 100 mg tablets making no noticeable mark on brand
sale.”); Cremieux Sur. Decl. ¶ 43. Even that result, which understates brand loyalty, would
extrapolate to almost 47,000 insured consumers, a fact Dr. Rausser ignores. Cremieux Sur. Decl.
¶ 42; Cremieux Decl. ¶ 32. Third, Dr. Rausser’s critique of the OptumHealth data showing
examples of brand loyalists that paid more for the brand after generic entry (Rausser Reb. Decl. ¶
65) likewise fails because he skews the analysis by using only a portion of the data and then
speculates why the results he finds in the data are incorrect. As Dr. Cremieux explains, to
determine the real causes of these changes would require an individualized inquiry. Cremieux
Decl. ¶ 31; Cremieux Sur. Decl. ¶¶ 44.
IBEW cannot escape Dr. Rausser’s failures by claiming that he “has presented a model
that can take into account those parties that are determined to be uninjured . . . and in any event,
the issue of determining which Class Members are brand loyalists relates to the quantum of
damages as does not preclude Class certification.” IPP Daubert Opp. at 29. Dr. Rausser
confirms that he did not provide a formulaic methodology to identify and exclude brand loyal
consumers; he rejected the need to do so. Rausser Reb. Decl. ¶ 73 (“The remaining category,
consumers who continued to buy the brand, are an insignificant percentage of the class and need
not be excluded.”). And IBEW’s citation to Teva Pharmaceuticals v. Abbott Labs. (Tricor), 252
F.R.D. 213 (D. Del. 2008) is inapposite because the court there applied a pre-Comcast analysis to
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allegations that brand loyal users would have been impacted because the brand price allegedly
would have been lower in the but-for world. Here, by contrast, the opposite is true.
C. Dr. Rausser’s “Transaction” Based Approach Contradicts Basic Economic
Analysis
Contrary to basic economics, Dr. Rausser’s rebuttal seems to take the position that impact
and damages for putative class members should be based on only a subset of prescription
transactions involving each proposed class member. For example, if an insured consumer’s
Doryx course of therapy included (1) a free sample, (2) a prescription for which a coupon was
used, and (3) a prescription for which no coupon was used, Dr. Rausser would apparently
exclude the first two transactions from the putative class—where the consumer suffered no
harm—but include the last one—where the consumer may have been harmed. Doing so allows
Dr. Rausser to claim “impact” as to all “transactions” included in the proposed class. This tactic,
which would improperly overstate the purported harm to class members, is contrary to the basic
approach of economics to the question of individual impact. See Cremieux Sur. Decl. ¶ 29;
ABA Section of Antitrust Law, Proving Antitrust Damages: Legal and Economic Issues, at 61
(2D ED. 2010) (citing L.A. Mem’l Coliseum Comm’n v. NFL, 791 F.2d 1356, 1366–73 (9th Cir.
1986)) (“Similarly, the but-for principle requires that the calculated differential between the but-
for and actual plaintiff incorporate benefits the plaintiff derived from the violation. By
definition, those benefits would not exist in the but-for world. If the quantification of the but-for
plaintiff is not adjusted to ensure that the offsetting benefits are accounted for, the differential
will be overstated, and the plaintiff will be overcompensated.”).
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III. Dr. Rausser’s Third Party Payer Impact Analysis is Unreliable and Must be
Excluded under Daubert
Dr. Rausser ignored facts in favor of sweeping conclusions in his impact “analysis” for
TPPs. See WC Class Cert. Opp. (Indirect) at III.C. Specifically, he ignored the following key
marketplace realities that any expert should have addressed, most of which he himself
emphasized in the Nexium case: brand loyal plan participants, risk sharing arrangements, pass on
through premium adjustments, reimbursement timing, deductibles, and prescription benefit
maximums. When considered, each factor shows why an individualized inquiry would be
required to determine impact. Dr. Rausser’s failure to apply the “intellectual rigor that
characterizes the practice of an expert” in the field of economics to these market realities
requires rejection of his opinions. ZF Meritor, 696 F.3d at 290 (quoting Concord Boat Corp. v.
Brunswick Corp., 207 F.3d 1039, 1057 (8th Cir. 2000)) (“In an antitrust case, an expert opinion
generally must ‘incorporate all aspects of the economic reality’ of the relevant market.”).
A. No Impact for Reimbursement of Prescriptions for Brand Loyal Plan
Members
Dr. Rausser does not dispute that TPPs are not impacted when they reimburse for
prescriptions of brand loyal plan members, because the cost to the third party payer for those
prescriptions in the but-for world would be the same (or higher) in the actual world. Dr.
Rausser’s failure to consider this factor, which requires a complex, plan-by-plan analysis,
renders his testimony unreliable and shows why class certification should be denied. See In re
Paoli R.R. Yard PCB Litig., 35 F.3d at 773 (district court did not err in concluding that expert’s
calculation, based on inaccurate assumptions and ignoring inter-laboratory comparison data, was
unreliable under Daubert); see also Comcast, 133 S. Ct. at 1433 (“a model purport[ed] to serve
as evidence of damages in [a] class action must measure only those damages attributable to that
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theory”). IBEW cannot remedy this fundamental problem by claiming that in a post hoc analysis
Dr. Rausser “determined that brand loyalists make up a minor portion of the proposed class” and
that “few brand loyalists actually would have benefitted from the delay in generic entry.” IPP
Daubert Opp. at 29 (citing Rausser Reb. Decl. ¶ 64). Dr. Cremieux estimated that there likely
were hundreds of TPPs that would have been uninjured because they only reimbursed brand
loyalists. Cremieux Decl. ¶ 73.
B. Dr. Rausser Ignored the Individualized Inquiry Required to Determine
Which Third Party Plans Were at Risk and Thus Potentially Impacted
Dr. Rausser acknowledges that determining whether an entity is ultimately responsible
for the cost of reimbursement is central to evaluating impact, but he admittedly provides no
methodology for undertaking this inquiry. WC Daubert Mem. (Rausser) at 17–18;
Even for the “fully insured health plans” that Dr. Rausser agrees
were not impacted and must be excluded from the class, Dr. Rausser provides no formulaic
methodology for identifying and removing such plans. WC Daubert Mem. (Rausser) at 18.
For plans that share only part of the risk of prescription drug costs, an individualized
inquiry would be required to identify and evaluate such plans to determine impact. Cremieux
Decl. ¶ 60; Rausser Nexium Decl. ¶ 98 (contractual relationships “are highly variable across
[third party payers]”). Rather than contest this point, IBEW claims “risk sharing” does not
impact the analysis (IPP Daubert Opp. at 12–13, n.22), but only cites Dr. Rausser’s say so for
this position, an approach routinely rejected by courts.12 See Oddi v. Ford Motor Co., 234 F.3d
136, 158 (3d Cir. 2000) (excluding expert who merely provided statements based on his
professional training; the experts “ipse dixit” does not withstand Daubert scrutiny); see also G.E.
12 As discussed below, Dr. Rausser’s sensitivity analysis does not solve this problem because risk sharing was not a
factor examined in that analysis.
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v. Joiner, 522 U.S. 136, 146 (1997) (“nothing in either Daubert or the Federal Rules of Evidence
requires a district court to admit opinion evidence that is connected to existing data only by the
ipse dixit of the expert. A court may conclude that there is simply too great an analytical gap
between the data and the opinion proffered.”). IBEW further claims that Dr. Rausser’s failure to
consider risk sharing and related factors is excusable because he “is not required to address every
possible variable—instead, he applied a well-established methodology that included variables
that he considered to be the most relevant to his determination of Class-wide common impact.”
IPP Daubert Opp. at 13 n. 22. But a failure to consider factors that matter warrants exclusion.
See, e.g., Bickerstaff, 196 F.3d at 449–50; see also Freeland v. AT&T Corp., 238 F.R.D. 130,
143–49 (S.D.N.Y. 2006) (holding plaintiff’s expert’s regression analysis was “so incomplete as
to be inadmissible as irrelevant” when expert excluded a quality variable without persuasive
explanation) (internal quotations omitted). Dr. Rausser’s unsupported dismissal of these factors
is even more egregious here because he elsewhere has asserted that they are critical for
examining impact in similar situations. Rausser Nexium Decl. ¶ 98.
C. Dr. Rausser Offers No Reasons for His Failure to Consider Important
Economic Factors Bearing on Class Certification
1. Dr. Rausser Failed to Consider Third Party Payer Pass On of
Prescription Drug Costs
Dr. Rausser’s failure to consider pass on of the alleged overcharge fatally undermines his
impact conclusion because any basic economic analysis of harm would include an analysis of
whether and to what extent a party was able to pass on the alleged overcharge. See WC Daubert
Mem. (Rausser) at ¶¶ 19–20 (citing cases discussing the premium setting process). If a third
party payer passed on any alleged “overcharge” through premiums charged to insured plan
members, then those TPPs would not be impacted. Evaluating pass on would require an
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23
individualized inquiry to determine whether and to what extent the pass on occurred. Id. IBEW
does not contest application of the pass on defense, nor does it contest the fact that Dr. Rausser
did not even attempt to analyze pass on. Instead, IBEW claims pass on is a “red herring”
because Dr. Rausser’s sensitivity analysis concluded that “virtually all third-party payers were
harmed by Defendants’ anti-competitive conduct.” IPP Daubert Opp. at 30 (citing Rausser Decl.
¶ 108). This assertion makes no sense, because Dr. Rausser’s sensitivity analysis did not
consider the issue of pass on. That is one of the many reasons why his sensitivity analysis—and
his impact opinion—are unreliable.
Moreover, IBEW's explanation regarding its own plan (contributions taken from union
members’ salary increases are what funds the increase in the plan’s prescription drug
expenditures) shows that union members, not IBEW, bear any alleged “overcharge,” but Dr.
Rausser ignores this pass on
13 Cremieux Decl. ¶ 70. IBEW does not (and cannot) show that TPPs
set premiums expecting a generic Doryx launch that was purportedly “delayed” by Warner
Chilcott. Nor does IBEW claim that TPPs set premiums expecting certain prices on Doryx by
actually paying higher (i.e., inflated) prices for Doryx because of alleged monopoly conduct.
IBEW’s excuses consequently provide no cover for Dr. Rausser’s failure to analyze this issue.
2. Failure to Address the Impact of Deductibles and Prescription Benefit
Maximums
Dr. Rausser concedes that he did not consider patient deductibles and prescription benefit
maximums in his sensitivity analysis, even though these factors affect the cost of a prescription
13 IBEW’s reference to In re Terasozin Hydrochloride Antitrust Litigation, 220 F.R.D. 672 (S.D. Fla. 2004) (IPP
Class Cert. Reply at 26) does not excuse this error because that case involved allegations that the price for the brand
name product was inflated resulting in an overcharge. Id. at 686–87. Dr. Rausser’s analysis here, however, assumes
no “inflation” of the price of Doryx. Instead, the “overcharge” allegedly flows from TPPs’ inability to take
advantage of assumed lower prices on a generic Doryx capsule (not tablet) product, a materially different situation.
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to a third party payer (deductibles shift some or all of the cost of a prescription to a consumer,
until the deductible is met). Cremieux Sur. Decl. ¶¶ 24–25. Dr. Rausser now claims he was
right to ignore deductibles, citing to OptumHealth data to conclude that only a minimal number
of consumers in any particular year will get to December (i.e., the end of the plan year) without
reaching the applicable deductible. Rausser Reb. Decl. ¶ 87. But, whether a third party plan is
injured depends on all of the transactions for which it reimburses, not just those in December,
and even a small number of prescriptions affected by a deductible can have a significant effect
on the impact analysis because, as IBEW’s own data show, third party plans may only reimburse
for a handful of Doryx prescriptions. See Cremieux Sur. Decl. ¶¶ 25–26 (61% of the plans in the
OptumHealth data reimbursed for at least one Doryx prescription that was at least partially paid
for by a consumer deductible).
Dr. Rausser’s statistics regarding out of pocket maximums, which potentially shift costs
from a consumer to a third party payer, are irrelevant because Dr. Cremieux does not discuss this
issue when evaluating Dr. Rausser’s sensitivity analysis. Instead, Dr. Cremieux explained the
implications of Dr. Rausser’s failure to address prescription benefit maximums, which
potentially shift costs in the opposite direction (from third party plans to consumers), and thus
must be assessed when considering whether a third party plan may avoid being injured on the
purchases made by a plan member during the class period. Cremieux Sur. Decl. ¶ 24; Cremieux
Decl. ¶ 68.
IV. Rausser Has No Answer for the OptumHealth Data Which Show Dr. Rausser Failed
to Apply Accepted Principles and Methods
Actual prescription-level data provides important marketplace information for evaluating
impact and damages in a case like this one. Dr. Rausser has used such data in the past to oppose
class certification because, as he explained, such data provides “individual transaction prices
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25
reveal[ing] meaningful differences” from average retail price data. Rausser Nexium Decl. ¶ 55.
Here, Dr. Rausser failed to look at prescription-level data,
Dr. Cremieux took the steps that
Dr. Rausser did not and analyzed a commonly used data set from OptumHealth that was
compiled from actual prescriptions paid by insurance companies—exactly the type of data Dr.
Rausser has relied on in the past.
A. Dr. Rausser’s Review Confirms the OptumHealth Data Are Reliable
Dr. Cremieux used the OptumHealth data set primarily to derive prices and
prescription/patient counts. The data showed that (1) Dr. Rausser’s use of national prices hid
important price variability across TPPs at the state level (Cremieux Decl. ¶¶ 102–03 & Exhibits
13.1–13.3); (2) in many instances, the price paid by TPPs for Doryx 100 mg tablets (before
considering the effect of manufacturer rebates or samples, which were available for Doryx but
would not be available for generic versions) was similar to, or even less than, prices paid for
generic versions, a finding nowhere accounted for in Dr. Rausser’s impact analysis (Cremieux
Decl. ¶ 74 & Exhibits 12.1–12.7); and (3) there are a number of examples of brand-loyal patients
who paid the same or more for the 100 mg brand product after generic entry when compared to
the amount paid before generic entry, suggesting that brand loyalists benefited from the alleged
delay (Cremieux Decl. ¶ 30). These data show that Dr. Rausser did not follow the principles and
methods in his field in reaching his opinions.
Dr. Rausser’s rebuttal seeks to divert attention from his failings by claiming that the
OptumHealth data set, which has been cited in over 180 peer-reviewed articles,14 included 14
14 Cremieux Sur. Decl. ¶ 10.
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types of “errors” purportedly impacting 34% of the records. Rausser Reb. Decl. ¶ 28–31. But
Dr. Rausser’s claim is a mirage because when he purports to “clean” the data set to “correct” for
these errors, he makes adjustments affecting less than 3% of the transactions in the database, the
rest of the supposed “errors” are ignored. This confirms that the OptumHealth data set is
actually very reliable. Cremieux Sur. Decl. ¶ 10. More importantly, Dr. Rausser (1) concedes
that Dr. Cremieux already addressed any so-called “errors” relevant to his analysis, Cremieux
Sur. Decl. ¶ 10; Rausser Reb. Decl. ¶ 29, and (2) does not claim that these “errors” impacted any
of Dr. Cremieux’s calculations, results, or opinions. Cremieux Sur. Decl. ¶¶ 11–14. In short, the
supposed “errors” in the data set are meaningless. Id.
B. The OptumHealth Data Confirm That Prices Paid Are Variable and Thus
Require an Individualized Inquiry on Impact
Dr. Rausser claims that the OptumHealth data show that there is little price variability,
but his new calculations do not measure anything relevant. Dr. Rausser calculates the non-mail
order total payment per pill (both consumer portion and third party payer portion) and shows that
this price does not vary by state for any particular third party payer. Rausser Reb. Decl. ¶ 45.
But, Dr. Rausser’s analysis is useless for looking at state-to-state variability, because it controls
for variation in prices across plans that Dr. Rausser’s proposed data source cannot control for.
Cremieux Sur. Decl. ¶ 39. Dr. Rausser does not dispute that agreements affecting TPP
reimbursement are highly variable.15 Thus, by presenting his new analysis on a plan-by-plan
basis, Dr. Rausser removes a significant amount of the variation in prices (i.e., the variation
between plans) and thus measures nothing relevant. Id. Dr. Cremieux presents the same
15 For example, agreements between TPPs and PBMs with respect to the share of rebates the PBM passes on to the
TPP vary. Agreements between TPPs and plan members likewise vary in terms of the cost sharing between the plan
and its members. Cremieux Sur. Decl. ¶ 38.
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analysis, but includes transactions for multiple companies, and shows substantial price
variability. Cremieux Sur. Decl. ¶¶ 37–39 & Exhibits 3.1–3.4.16
Dr. Rausser’s second analysis using OptumHealth data is equally irrelevant. He
calculated the total payment per pill for each purchase of 75 mg or 100 mg Doryx tablets and
their generic equivalents for each plan. His graphs separate brand from generic and mail order
from non-mail order. This analysis is irrelevant because (1) it does not exclude the amount paid
by the patient, which likely will vary depending on whether the brand or the generic drug is
reimbursed; (2) it looks myopically at a particular plan, but reimbursement rates vary from plan
to plan, and it is that variability among third party plans that matters; (3) it separates out mail
order and retail reimbursement, which adds nothing to the analysis because a plan typically uses
separate rates for each channel of distribution; and (4) it fails to include manufacturer rebates,
which would increase variability. Cremieux Sur. Decl. ¶ 38.
When Dr. Rausser’s analysis is corrected to analyze just the third party payment portion
of the reimbursement, it confirms Dr. Cremieux’s findings that the price paid by TPPs for Doryx
was similar to, or even less than, prices paid for generic Doryx. Cremieux Sur. Decl. ¶¶ 40–41
and Exhibits 4.1–4.2. Dr. Cremieux’s analysis finds examples of companies that actually had a
higher average price for the generic, not the brand, and the price ranges show that for each plan,
the price paid for the generic is not always less than the price paid for the brand. Id. This
analysis does not even consider the effect of rebates paid to TPPs by Warner Chilcott, which
would only add to the variability shown in the data. See id. These simple calculations show why
16
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individualized inquiry is necessary in this case, and why Dr. Rausser’s use of averages and total
prices is fundamentally flawed. See id. ¶¶ 39–41.
V. Dr. Rausser’s Rebuttal Report Cannot Cure the Fundamental Problems with His
Sensitivity Analysis
Warner Chilcott’s opening brief explained why Dr. Rausser’s sensitivity analysis—the
basis for his impact opinion regarding TPPs—was selective and incomplete and thus unreliable.
WC Daubert Mem. (Rausser) at 19 n.9. Dr. Rausser’s sensitivity analysis modeled various levels
of patient co-payments and manufacturer rebates and claimed that in all co-payment / rebate
scenarios, all TPPs would have been impacted. But Dr. Rausser did not reliably apply this
analytical tool, as he ignored a number of key variables in his analysis. See infra Part V.A. This
includes samples, which lower (as he has conceded elsewhere) the actual, effective price paid by
TPPs and which would not be available in the but-for world. More importantly, a critical part of
Dr. Rausser’s analysis was his assumptions regarding the but-for world (including the generic-to-
brand price ratio). Id. As Dr. Cremieux explained, however, running Dr. Rausser’s model with
different generic-to-brand price ratios taken from the article cited by Dr. Rausser (while holding
all else the same) drastically changes his results, and shows how this analysis provides no
support for Dr. Rausser’s conclusion of common impact. Cremieux Sur. Decl. ¶ 22 & Exhibit A;
Cremieux Decl. ¶ 65. Dr. Rausser’s sensitivity analysis thus did nothing to disprove Warner
Chilcott’s point that the third party payer impact analysis would require an individualized
inquiry.
In short, Dr. Rausser selected the most favorable data to use in his model, ignoring
variables that would drastically change his results. See Cremieux Sur. Decl. ¶ 22; Cremieux
Decl. ¶ 65. Because his selection of data used in his model is based on “subjective belief or
unsupported speculation” his opinion should be excluded under Daubert. Oddi, 234 F.3d at 155
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29
(quoting Elcock v. Kmart Corp., 233 F.3d 734, 745 (3d Cir. 2000)); see also Bickerstaff, 196
F.3d at 449–50.
A. The Sensitivity Analysis Actually Shows an Individual Inquiry Would Be
Required to Assess Impact
Dr. Rausser’s rebuttal does nothing to alter the conclusion that an individual inquiry is
necessary to assess impact.
Basic testing shows Dr. Rausser did not reliably use his own tool. Dr. Rausser claims Dr.
Cremieux used “unreasonable” generic-to-brand price ratios when he tested Dr. Rausser’s
assertions regarding his sensitivity analysis. Rausser Reb. Decl. ¶ 75. But, Dr. Rausser’s
fundamental contention is that his damages model can be adjusted to accommodate any change
in the assumptions used to generate the but-for world, including: (i) the generic entry date; (ii)
the quantity of Doryx and its generic equivalents that would have been sold each month
following such generic entry; (iii) the rate of conversion from brand to generic; (iv) the prices
charged for the brand and the generics; and (v) the amount paid for Doryx and its generic
equivalents in the actual world.17 It is hardly open to Dr. Rausser to complain about an analysis
that simply tests this assertion—and proves that it is wrong—with examples from articles and
documents relied on by Dr. Rausser.
Specifically, Dr. Cremieux altered—in Dr. Rausser’s supposedly “flexible” model—the
generic-to-brand price ratio in the but-for world (item iv in Dr. Rausser’s list) by using additional
data from an academic study relied upon by Dr. Rausser. Dr. Cremieux found that Dr. Rausser’s
conclusion that nearly all TPPs were harmed no longer held under these alternative
assumptions.18 Dr. Rausser’s only complaint, buried in a footnote, is that this normal testing of
17 Rausser Reb. Decl. ¶ 93.
18 Cremieux Decl. ¶ 75.
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his model was an “unwarranted modification” that was “completely unrealistic.”19 But, Dr.
Rausser provides no support for this reaction because there is none.
Indeed, Dr. Cremieux found that using alternative generic-to-brand price ratios from the
same article relied upon by Dr. Rausser changed the “conclusion” that all plans were harmed.
For example, leaving all else the same but using an alternative ratio from the academic study
cited by Dr. Rausser,20 his sensitivity model shows periods during the proposed class period
when plans are not damaged (damages are negative). Cremieux Sur. Decl. ¶ 22; Cremieux Decl.
¶ 65. Exhibit 2 of Dr. Cremieux’s Surrebuttal Declaration shows the estimated damages for all
44 companies in the OptumHealth data with at least one Doryx prescription between September
21, 2008 and Q1 2012 for a member residing in Florida. Dr. Cremieux found that 11 companies
(25.0%) would not be harmed, even if they had the other plan characteristics (rebates and co-
payment amounts) used by Dr. Rausser in his TPP “Sensitivity 1” analysis.21
It bears emphasizing that these are not isolated examples. While they reflect a particular
set of alternative assumptions about the generic-to-brand price ratio, holding all else in Dr.
Rausser’s sensitivity analysis constant, Dr. Cremieux has found similar results using academic
articles that contain results on generic-to-brand price ratios, as well as using the Hausman
declaration cited by Dr. Rausser. Cremieux Sur. Decl. ¶ 23, n.28.
Basic testing shows Dr. Rausser had no basis for his conclusion. Dr. Rausser complains
that another test that disproved the “flexibility” of his model—replacing his choice of a $30
generic co-pay with a $0 generic co-pay—is “unrealistic because the high-end brand co-pay
19 Rausser Reb. Decl. at 66 n.107.
20 Berndt, Ernst R., et al., “Authorized Generic Drugs, Price Competition, and Consumers’ Welfare,” Health Affairs,
26, no. 3 (2007): 790–799, at p. 793, Exhibit 1.
21 Whether or not the plans in the OptumHealth data have these particular rebate and co-payment provisions is
irrelevant to Dr. Cremieux’s critique because Dr. Rausser’s sensitivity is based on a “hypothetical” TPP.
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would not be coupled with the low-end generic co-pay in the same plan.”22 Dr. Rausser’s
response, however, ignores his own rationale for performing the sensitivity analysis, which was
to examine a “hypothetical ‘extreme case’ third party payer . . . [that] ha[s] a very high difference
between its brand and generic co-pays.” 23 Dr. Cremieux’s analysis thus was an appropriate—
indeed better—test because it used the greatest difference between brand and generic co-pays
considered by Dr. Rausser. Cremieux Sur. Decl. ¶ 17. Moreover, Dr. Rausser’s complaint
ignores the fact that IBEW itself utilized a “very high difference between its brand and generic
co-pays.”
.24 This difference, which Dr. Rausser
inexplicably ignores, is substantially greater than the one used to critique Dr. Rausser’s
sensitivity analysis.
B. Dr. Rausser’s Distortions Cannot Cure the Problems with His Opinions
Dr. Rausser claims that Dr. Cremieux used the wrong date range to re-calculate damages
using Dr. Rausser’s sensitivity analysis. But, Dr. Cremieux merely followed Dr. Rausser’s
approach. In his sensitivity analysis, when Dr. Rausser estimated damages for his “hypothetical
‘extreme case’ third party payer,” he used the period Q3 2006 to Q1 2013, which starts two years
22 Rausser Reb. Decl. ¶ 78.
23 Rausser Reb. Decl. ¶ 76.
24
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prior to the beginning of the class damages period.25 Thus, when explaining the problems with
Dr. Rausser’s sensitivity analysis, Dr. Cremieux naturally used the same date range as Dr.
Rausser, an approach Dr. Cremieux explained in his report. See, e.g., Cremieux Decl. Exhibits
10–11 (“Damages calculations begin in Q3 2006 per Dr. Rausser’s analysis.”).26
Most important, the date range used when exploring Dr. Rausser’s third party payer
analysis does not affect Dr. Cremieux’s fundamental criticisms or conclusions. Even if the
inputs and assumptions used to construct the hypothetical situation included in his critique of Dr.
Rausser’s sensitivity analysis were to be changed (including the dates used to estimate damages),
Dr. Cremieux’s conclusion that individualized inquiry would be necessary to determine injured
plans would remain. Id. ¶ 67. 27 Dr. Rausser cannot shift the spotlight away from the substantive
problems with his analysis by focusing on the trivial issue of the date range he chose for his
analysis.
Even though the distinction is set out clearly in Dr. Cremieux’s report, Dr. Rausser
suggests that Dr. Cremieux’s critiques of Dr. Rausser’s sensitivity analysis are Dr. Cremieux’s
affirmative analysis.28 That of course is not the case. Dr. Cremieux explained why Dr. Rausser
25 See, e.g., TPP sensitivity analysis.xlsx in Rausser backup (using Q3 2006 as starting date for damages calculations
in sensitivity analysis).
26 Dr. Rausser’s report claimed that different damages periods “may” eventually be used, and so the most
appropriate way to critique his work was to start from the damages period that he actually used in his TPP model.
See Rausser Decl. ¶ 8 (“Although the wrongful conduct alleged dates back as far as 2005, I [sic] that the damage
period may be limited to the four years immediately preceding the filing of the Complaint.”) (emphasis added).
27
28 IBEW incorrectly claims that “[t]he Cremieux Report uses class periods that begin over three years before the
actual class periods set forth in Plaintiff’s motion. This fundamental error fatally undermines the Cremieux Report’s
conclusions that certain third-party payers were not harmed during the class periods.” IPP Class Cert. Reply at 15;
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33
failed to test and prove common impact to TPPs by, among other things, examining Dr.
Rausser’s analysis.29 But Dr. Cremieux also undertook a separate, economically sound analysis
to support his conclusion that a substantial number of TPPs were in fact unharmed. Cremieux
Decl. § III.D (“Empirical Analysis of Injury to Third-Party Payers”).
Dr. Rausser cries foul over the statement in Dr. Cremieux’s report that 9 out of 52
companies in the OptumHealth data set “might not have been harmed,” claiming that the
condition “if they had the extreme-value rebates and co-pays used in his ‘corrected’ version of
my sensitivity analysis” was “misleadingly” omitted. Rausser Reb. Decl. ¶ 77 (citing Cremieux
Decl. ¶ 67). But, Dr. Cremieux described that “condition” in the very next sentence: “To be sure,
these calculations are based on the parameters assumed by Dr. Rausser in his analysis (and the
flawed assumptions underlying Dr. Rausser’s but-for world). The actual terms will vary from
plan to plan and will have to be individually analyzed.” Cremieux Decl. ¶ 67.
.30
VI. IBEW Has No Answer for Dr. Rausser’s Failure to Investigate Key Assumptions or
Fit His Opinions to the Facts
As Warner Chilcott’s opening brief explained, Dr. Rausser improperly built his opinions
on classwide impact and damages on assumptions that he made no attempt to verify, and
otherwise refused to let the facts get in the way of his theories. His upside down approach
see also Rausser Reb. Decl. ¶ 80 (“. . . so [Dr. Cremieux’s] analysis provides no evidence against common
impact.”).
29 See Cremieux Decl. ¶¶ 63–69;
30
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34
contradicts Rule 702, which requires an expert to apply recognized principles and methodologies
in a reliable way to the facts of the case. WC Daubert Mem. (Rausser) at 25 (citing cases). His
rebuttal repeats this improper approach.
A. No Facts Support Dr. Rausser’s Assumptions Regarding Improvements to
Doryx
Dr. Rausser rests his entire analysis on the assumption that Warner Chilcott engaged in
so-called “product hopping,” which in this case supposedly means that each change to Doryx
was an “immaterial modification.” He thus assumes away all product improvements in the but-
for world. Dr. Rausser—who admittedly is not a doctor, pharmacologist, scientist, or otherwise
qualified to evaluate the materiality of modifications to a prescription drug31—undertook no
steps to test this assumption. Had he done so, he would have seen it was invalid. An expert’s
opinions are not admissible when they are based on invalid assumptions. See In re Paoli R.R.
Yard PCB Litig., 35 F.3d at 773 (district court did not err in concluding that expert’s calculation,
based on inaccurate assumptions and ignoring inter-laboratory comparison data, was unreliable
under Daubert); see also WC Daubert Mem. (Rausser) at 24–25 (citing cases).
First, as Warner Chilcott’s opening brief explained, overwhelming evidence shows that
each Doryx change was an improvement. See WC Daubert Mem. (Rausser) at 29; see also WC
Class Cert. Opp. (Indirect) at II.C; see generally Webster Decl. (ECF No. 237). These facts
regarding increased safety, stability, response to competition, etc., are unrebutted. Although he
admitted that even the documents cited in his original report in fact discussed improvements to
Doryx (WC Daubert Mem. (Rausser) at 29), Dr. Rausser tries to summarily reject these
documents—
—as “pretextual” ( ), but that does
31 Rausser Reb. Decl. ¶¶ 112, 114.
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35
not qualify as economic analysis. See, e.g., Allied Orthopedic Appliances, Inc. v. Tyco
Healthcare Grp. L.P., 247 F.R.D. 156, 165–66 (C.D. Cal. 2007) (denying class certification
where, among other things, plaintiffs relied on Tyco strategy documents to establish the but-for
world, rather than conducting any meaningful market analysis).
Second, Dr. Rausser completely ignores the opinion of Dr. Guy Webster, an expert in
clinical dermatology, acne, and acne vulgaris. Webster Decl. ¶ 12. Dr. Webster’s declaration
shows that each new version of Doryx offered clear benefits to patients and doctors, benefits that
translated into substantial adoption of the new versions—even when lower cost generic copies
were available—and additional sales for Warner Chilcott. See generally id.; see also WC
Daubert Reply (Leitzinger) at Part V.A.
Moreover, Dr. Rausser cannot divert attention from the disqualifying flaws in his work
by misstating the opinions of Warner Chilcott’s expert, Dr. Jasti, who is a noted academic and
leading scientist in the area of drug delivery and novel dosage forms, and thus qualified to offer
opinions regarding pharmaceutical product modifications and related benefits to patients. Jasti
Decl. ¶¶ 1–6 & Exhibit A (ECF No. 238). Dr. Jasti opined that Doryx tablets provided greater
ease of administration, a reduction in side effects—
32—and
increased dissolution stability as compared to Doryx capsules. Jasti Decl. ¶¶ 13, 15, 56–74;
. In support of his opinions, Dr. Jasti cited peer-
reviewed scientific publications and internal pharmaceutical development documents.33 Jasti
Decl. Exhibits K–R.
32
33 IBEW does not challenge Dr. Jasti’s expertise or the admissibility of his opinions.
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36
Dr. Rausser is an economist with no relevant qualifications in Dr. Jasti’s fields of
expertise.34 Dr. Rausser’s commentary must be rejected for this reason alone. Fed. R. Evid. 702
(expert cannot offer opinion unless qualified “by knowledge, skill, experiences, training or
education”); see Wolfe v. McNeil-PPC, Inc., Civil Action No. 07-348, 2011 WL 1673905, at *11
(E.D. Pa. May 4, 2011) (holding that expert with “no expertise” in relevant area could not issue
an opinion on this issue as it was “beyond the scope of his qualifications”). In any event, Dr.
Rausser’s fumbling efforts actually underscore the fact that Dr. Jasti’s opinions are unrebutted.
35 Nor does Dr. Rausser dispute that
Dr. Jasti relied on published scientific studies of doxycycline—the active ingredient at issue in
this case—showing that esophageal ulceration is more frequent with capsules than tablets, in one
study by a factor of 22.36 Jasti Decl. ¶¶ 60–61 & Exhibits M–O. Dr. Rausser merely cites a
publication that he claims (without the benefit of any relevant expertise) shows a general
consumer preference for capsules over tablets using capsules filled with no drug at all, hardly a
34
also IBEW Motion to Strike Opp. Ltr. at 6 (“Dr. Rausser’s assessment of Dr. Jasti’s testimony
is not based on any asserted medical expertise.”).
35
36 Dr. Rausser’s claim that he is “aware” of no basis to conclude that Warner Chilcott “would have pursued the
tablet approval unless they could use it as a way to convert the market prior to generic capsule introduction”
(Rausser Reb. Decl. ¶ 115) simply ignores the mass of evidence in Warner Chilcott’s opposition to class
certification (see ECF No. 234 at 5–7), as well as documents he cites.
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37
relevant study.37 Rausser Reb. Decl. ¶ 111. Dr. Rausser also wrongly concludes that
publications reporting esophageal injuries relied on by Dr. Jasti pertained to “elderly” patients, a
population that Dr. Rausser asserts is “unrepresentative of the typical Doryx user.” Id. The
subjects in these studies, however, were not “elderly.” Their ages ranged from 16-31 years. Jasti
Decl. Exhibits M–O.
Dr. Rausser similarly displays his lack of expertise in his discussion of Dr. Jasti’s opinion
regarding improved dissolution stability. Dr. Rausser ignores the substantial evidence relied on
by Dr. Jasti and highlights a single development report that plots the results of a single
dissolution study.
Dr. Rausser’s related
conjecture—that the same tested drug pellets would have greater stability in a capsule than in a
tablet (the implication being dissolution stability was not in fact improved in tablets) due to the
effect of “moisture present in the tablet” on the drug flow in the component pellet (Rausser Reb.
Decl. ¶ 113)—also is easily ignored. Dr. Jasti’s Declaration addressed this exact point,
explaining that “given the nature of gelatin capsules, the adverse impact of moisture on
dissolution stability is even more likely to occur with capsules.” Jasti Decl. ¶ 93 (emphasis
added); 38
37 As noted below, the data in this case reveal a consumer preference for tablets. See infra p. 38.
38
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38
Lastly, Dr. Rausser’s claim (Rausser Reb. Decl. ¶ 114) that the pricing of Doryx—tablets
were introduced at the same prices as capsules, and 150 mg tablets were introduced at the same
price as two 75 mg tablets—shows that the product changes were not “improvements” fails
because it ignores the economic realities of the market. Cremieux Decl. ¶ 80–82. Dr. Rausser
does not dispute that when the follow-on Doryx products were launched, in each instance, the
products faced substantial, direct competition from Adoxa, Solodyn, and other products, but he
does not consider these critical factors. See, e.g., WC Class Cert. Opp. (Direct) at 17–18 (citing
evidence showing that “[m]any of the improvements to the Doryx product were in response to
improvements and changes made by branded competitors, including Adoxa and Solodyn”).
Courts reject expert opinions that ignore key marketplace facts. See, e.g., Concord Boat Corp.,
207 F.3d at 1056–57 (damages model was mere speculation because it was not grounded in the
economic reality of the market).
Had Dr. Rausser applied an economic analysis, he would have looked for preferences
revealed by actual marketplace behavior, and found that patients preferred Doryx tablets to
capsules, and preferred the 150 mg Doryx tablet to the 75 and 100 mg versions of Doryx and
generic Doryx, clear indications of product improvements.
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39
In short, Dr. Rausser has no basis for his “immaterial modification” assumption, which
collapses his entire analysis. WC Daubert Mem. at 31–32; see also WC Class Cert. Opp.
(Indirect) at Part III.C.2a.
B. Dr. Rausser Improperly Rejects Economic Facts That Rebut His Misreading
of Documents
Despite these incontestable facts regarding Warner Chilcott’s improvements to Doryx, in
particular the benefits (both commercial and medical) from bringing the tablet formulation of the
product to market, Dr. Rausser inexplicably continues with the contention that in the but-for
world the clock would have stopped and Warner Chilcott only would have sold 75 and 100 mg
capsules. Warner Chilcott’s motion and opposition to class certification explained why this
contention lacked any basis in reality. WC Daubert Mem. at Part IV.B; WC Class Cert. Opp. at
Part III.C.2.
Dr. Rausser’s rebuttal merely repeats the errors from his opening report. For example, he
cites carefully selected portions of a few Mayne documents that refer to the development of
Doryx tablets—which began in 1998—as an “anti-generic strategy.” See Rausser Decl. ¶ 34
(citing eight Mayne documents); IPP Class Cert. Reply at 31
). Dr. Rausser concludes that because some documents
contain the phrase “anti-generic strategy,” that phrase has only a single universal meaning and as
an economic matter the product offered only a “trivial” improvement and never would have been
launched. Of course, the fact that Defendants had a desire to stay ahead of generic competitors
( )39 reflects nothing
39
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more than lawful competition, and says nothing about whether the new Doryx products were
improvements over the old ones. See WC Opp. to IPP Class Cert. at 43; Schachar v. Am. Acad.
of Opthamology, Inc., 870 F.2d 397, 399–400 (7th Cir. 1989) (“Warfare among suppliers and
their different products is competition . . . Animosity, even if rephrased as ‘anticompetitive
intent,’ is not illegal without anticompetitive effects.”). Moreover, the very same documents
rebut Dr. Rausser’s assumption, because they discuss certain of the improvements to Doryx.40
And, as noted above, overwhelming evidence (which Dr. Rausser ignores) confirms the valid
reasons for the marketing of all the follow-on products.41 See supra VI.A. Courts routinely
reject experts who, like Dr. Rausser here, abandon expert analysis and rely on implausible
assumptions that lead to unscientific conclusions. See, e.g., Wolfe, 2011 WL 1673905, at *11.
As Warner Chilcott’s opening brief explained, Dr. Rausser was entitled to assume only a
world that removes what IBEW claims is illegal, that is to say, a world in which Warner Chilcott
40
41 Dr. Rausser discussion of other material is equally flawed. For example, his reliance on the Herendeen
declaration is misplaced (Rausser Reb. Decl. ¶ 107), because it evaluated a marketplace after Warner Chilcott
already had implemented the product improvements that IBEW claim would not have existed in the but-for world.
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41
introduces new versions of Doryx but also keeps the older versions on the market. WC Daubert
Mem. (Rausser) at 35. Dr. Rausser’s approach to impact and damages, however, does not
account for a but-for world where both Doryx capsules and tablets are on the market. Nor does it
account for the ‘161 patent, which Warner Chilcott would have commercialized in any but-for
world. WC Daubert Mem. (Rausser) at 31–32. An economic analysis that fails to consider such
critical market facts in the but-for world must be rejected. See Bickerstaff, 196 F.3d at 449–50;
In re Paoli R.R. Yard PCB Litig., 35 F.3d at 773.
C. No Facts Support Dr. Rausser’s Assumptions Regarding Potential Generic
Entry
Dr. Rausser does not contest the fact that he simply accepted IBEW’s representations and
assumed, without any foundation, that “multiple” generic capsules would have entered the
market in the but-for world, and that Warner Chilcott would have launched an authorized generic
in the but-for world. These assumptions, which are rebutted by facts and data, require exclusion
under Rule 702 and Daubert.
No Authorized Generic. Dr. Rausser now recognizes that Warner Chilcott as a matter of
contract had no authority to launch an authorized generic. Rausser Reb. Decl. ¶¶ 99–100. His
conjecture that the contract might have been renegotiated is baseless, as is his stubborn failure to
acknowledge the fact that in the actual world, where Doryx has faced AB-rated competition from
Mylan, Warner Chilcott has not launched an authorized generic, but instead most recently
extended its Doryx investment by launching a 200 mg strength of the product. Dr. Rausser’s
cherry picking of a few projections to try and buttress his original assumption42—and his
misrepresentation of Dr. Jasti’s testimony43—cannot stand in the face of these actual market facts
42 See WC Daubert Reply (Leitzinger) at V.B (discussing projections)
43
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42
to the contrary. See In re Paoli R.R. Yard PCB Litig., 35 F.3d at 773; see also Snodgrass v. Ford
Motor Co., No. 96-1814, 2002 WL 485688, at *12 (D.N.J. Mar. 28, 2002) (granting motion in
limine to exclude plaintiff’s expert’s testimony, which was based on incorrect assumptions and
on “subjective inclusion and exclusion of data [, which] suggest[s] that [the plaintiff’s expert]
manipulated the data to achieve a desired result.”).
No substantial generic competition. Dr. Rausser concedes that he assumed—but did not
take steps to verify—that multiple generic manufacturers would have been ready, willing, and
able to enter the market with a capsule product in July 2006. Rausser Reb. Decl. ¶ 96. IBEW
bears the burden of establishing the reasonableness of its assumptions and has failed to do so.
Comcast, 133 S. Ct. at 1438–39.
Further, the evidence showed that no other generic manufacturer would
have been able to enter the market any earlier than it did in the actual world. See WC Class Cert.
Opp. (Indirect) at Part III.C.2.c (“Dr. Rausser Wrongly Assumes that Multiple Generic
Competitors would be Ready, Willing and Able to Launch Generic Doryx Capsules in July
2006”); see also Jasti Decl. ¶¶ 75–125; WC Class Cert. Opp. (Direct) at Part III.C.2.
Dr. Rausser offers nothing in response.
But
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this fact helps Warner Chilcott, not Dr. Rausser,
These and other
unrebutted facts support Dr. Jasti’s conclusion that Doryx is “difficult” to manufacture. These
facts show conclusively that generic competition by 2006 or 2008 was not a plausible reality,
44
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even if Warner Chilcott had not withdrawn its capsule product from the market and had never
launched its tablet product.
Having provided no evidence to support his speculation that generic manufacturers
would have been ready, willing, and able to enter in 2006, Dr. Rausser resorts to misrepresenting
Dr. Jasti’s testimony and declaration, the admissibility of which IBEW does not challenge. See
Rausser Reb. Decl. ¶¶ 96–99, 109–13. Again, because he has no relevant qualifications, his
conjecture is inadmissible under Rule 702, and, not surprisingly, wrong.
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At bottom, Dr. Rausser only offers the conjecture that “[t]he fact that some [potential
generic manufacturers] fell away as the products they had targeted repeatedly disappeared before
their eyes is not surprising and is not indicative of what would have happened in the [but-for
world].” Rausser Reb. Decl. ¶ 96. He provides no citation for this speculation.
In short, Dr.
Rausser has no basis for his assumption that any generic would have entered any earlier in the
but-for world than they did in the actual world.
Citizen’s Petitions are concededly irrelevant. IBEW brazenly repeats another baseless
assumption by Dr. Rausser—that Defendants filed “sham” Citizen’s Petitions to “assist” with the
product “hops,” IPP Daubert Opp. at 8; see also id. at 6—but IBEW previously disclaimed this
assumption, stating specifically it was not arguing sham petitioning. WC Class Cert. Opp.
(Indirect) at 16 n.24.
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D. No Basis for “Overcharge” Assumption as to Third Party Payers
Warner Chilcott explained that Dr. Rausser’s reflexive use of an overcharge approach
does not comport with economic reality as to TPPs because, among other reasons, it makes little
sense as an economic matter to measure damages for TPPs based on the price difference between
two different products. WC Daubert Mem. (Rausser) at 25–30; Cremieux Decl. ¶ 100. Thus, Dr.
Rausser's discussion of consumer welfare and lost profits in the context of consumers is
irrelevant. See IPP Daubert Opp. at 34–35. Moreover, Dr. Rausser’s unexplained assertion (IPP
Daubert Opp. at 35) that TPPs “are not engaging in profit seeking behavior” when they pay a
pharmacy for reimbursing a prescription, “but rather [are] reimbursing a cost,” makes no sense.
IBEW does not dispute that insurers establish premiums based on past experience, (Cremieux
Decl. ¶ 70) and that they set premiums in order to make a profit.
“The first step in a damages study is the translation of the legal theory of the harmful
event into an analysis of the economic impact of that event.” Federal Judicial Center, MANUAL
ON SCIENTIFIC EVIDENCE (THIRD) at 432 (2011); WC Daubert Mem. (Rausser) at 26. Dr. Rausser
in essence skipped this step by assuming instead of determining that the economic reality of the
market required an overcharge approach for TPPs. WC Daubert Mem. (Rausser) at 25–30. Dr.
Rausser’s unexplained conclusions leave the Court with no connection between the facts and Dr.
Rausser’s methodology, which is built on an unsupported assumption. See Joiner, 522 U.S at
146; Oddi, 234 F.3d at 158.
VII. Dr. Rausser’s Model Departs from IBEW’s Product Hopping Theory
IBEW does not dispute that “any model supporting a plaintiff’s damages case must be
consistent with its liability case, particularly with respect to the alleged anticompetitive-effect of
the violation.” Comcast 133 S. Ct. at 1433. IBEW claims that Dr. Rausser’s approach matches
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its liability case because IBEW “has set forth one theory of liability: product hopping.” IPP
Daubert Opp. at 37. But this is just an illusion. Because IBEW’s own liability theory agrees that
the introduction of a new pharmaceutical product alone cannot be viewed as predatory, the
allegedly unlawful conduct here is the removal of prior formulations from the market, not the
launch of improved versions of Doryx. WC Daubert Mem. at 35.
Dr. Rausser’s model departs from this theory because it does not consider a marketplace
including the initial Doryx tablets, or any of the other follow on products, whether alone or in
combination. (As noted above, Dr. Rausser improperly assumes away all Doryx tablet products.
See infra p. 34). Dr. Rausser consequently cites no sources for an erosion or pricing model to
use in any scenarios involving Doryx tablets and nowhere explains how his damages model
could be used to address such scenarios. Dr. Rausser’s model simply is not designed to separate
out lawful conduct (launching different versions of Doryx) from allegedly unlawful conduct
(removing prior versions of Doryx from the market). Hence, it fails under Comcast.45
VIII. Dr. Rausser’s Aggregate, Fluid Recovery Damages Model Will Not Assist the Trier
of Fact and Must Be Rejected under Daubert
In response to the clear authority, including from this Court, cited in Warner Chilcott’s
opening memorandum concerning the impropriety of calculating only a “pot of damages” to be
sorted out later, IBEW continues to embrace its “fluid recovery” model. IBEW claims that Dr.
Rausser’s approach is appropriate because “exact damage calculations are not necessary at this
stage.” IPP Daubert Opp. at 37. Despite this assertion, IBEW assures the Court that Dr. Rausser
can do the job down the road by looking at some Warner Chilcott documents, getting a new data
set, and performing some different analyses. Id. at 38–39.
45 See also WC Daubert Reply (Leitzinger) at Part IV (discussing Plaintiffs inappropriate amendment to case theory
to survive Daubert challenge).
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But Comcast requires IBEW to come forward with a formulaic method to determine if
each class member in fact was injured, and to what extent, by the alleged conduct. Comcast, 133
S. Ct. at 1433 (requiring that “individual damages calculations” not “overwhelm issues common
to the class” and that “damages must be susceptible of measurement across the entire class”)
(emphasis added). Dr. Rausser’s model does not meet that standard, and IBEW (erroneously)
disclaims any obligation to do so. See IPP Daubert Opp. at 37–38. Recent cases applying
Comcast, however, confirm that a damages model that does not even attempt to show how
damages to class members could be determined is insufficient and inevitably would lead to the
“labyrinthine” individual damages calculations the Supreme Court warned about. See Martin v.
Ford Motor Co., No. 10-2203, 2013 WL 3328231, at *21–22 (E.D. Pa. July 2, 2013) (rejecting
plaintiff’s expert’s proposed damages model and denying certification for two of the proposed
classes because individual questions regarding calculation of damages prevented plaintiffs from
meeting predominance requirement); Cowden v. Parker & Assocs., Inc., No. 5:09-323, 2013 WL
2285163, at *6 (E.D. Ky. May 22, 2013) (relying on Comcast and denying certification because
damages calculation required individualized inquiries that overwhelmed common questions);
Forrand v. Fed. Express Corp., No. 08-1360, 2013 WL 1793951, at *5 (C.D. Cal. Apr. 25, 2013)
(denying class certification in light of Comcast because “the need for individualized fact
inquiries dominates the determination of liability and damage issues”).
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CONCLUSION
For the foregoing reasons and those set forth in Warner Chilcott’s opening memorandum,
this Court should exclude the proposed testimony and declarations of Dr. Rausser under Rule
702 and Daubert.
Dated July 11, 2013
By: /s/ J. Mark Gidley
J. Mark Gidley (admitted PHV)
Peter J. Carney (admitted PHV)
WHITE & CASE LLP
701 Thirteenth Street, NW
Washington, DC 20005-3807
Telephone No.: 202-626-3600
Fax No.: 202-639-9355
mgidley@whitecase.com
pcarney@whitecase.com
and
Michael J. Gallagher (admitted PHV)
Jack E. Pace III (admitted PHV)
WHITE & CASE LLP
1155 Avenue of the Americas
New York, New York 10036-2787
Telephone No.: 212-819-8200
Fax No.: 212-354-8113
jpace@whitecase.com
By: /s/ Edward D. Rogers
David H. Pittinsky
Edward D. Rogers
Evan W. Krick
BALLARD SPAHR LLP
1735 Market Street
Philadelphia, Pennsylvania 19103-7599
Telephone No.: 215-665-8500
Fax No.: 215-864-8999
pittinsky@ballardspahr.com
rogerse@ballardspahr.com
kricke@ballardspahr.com
Attorneys for Defendants Warner Chilcott
Public Limited Company, Warner Chilcott,
LLC, Warner Chilcott (US), LLC, and Warner
Chilcott Laboratories Ireland Ltd.
Case 2:12-cv-03824-PD Document 389 Filed 07/26/13 Page 55 of 56
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CERTIFICATE OF SERVICE
I, Jack E. Pace III, hereby certify that on July 11, 2013, I caused true and correct copies
of Defendant Warner Chilcott’s Reply in Support of Its Motion to Exclude the Declaration and
Testimony of Gordon Rausser to be served by electronic mail upon all counsel of record.
By: /s/ Jack E. Pace III
Jack E. Pace III
WHITE & CASE LLP
1155 Avenue of the Americas
New York, NY 10036-2787
Telephone No.: 212-819-8200
Fax No.: 212-354-8113
jpace@whitecase.com
8904206
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