Econometrics Expert Witness Opines on Pharmaceutical Antitrust Lawsuit

Case:

Nichols v. SmithKline Beecham Corp. United States District Court, E.D. Pennsylvania. January 29, 2003

Background:

In this class-action antitrust lawsuit, an econometrics expert witness was called to support a motion by the plaintiffs for class certification. Plaintiffs in this case were individuals who had paid the purchase price of Paxil for consumer use to defendant GlaxoSmithKline. The plaintiffs in this lawsuit alleged that the drug company excluded competition in the market for Paxil by discouraging the entrance of cheaper, generic alternatives into the market.

The defendants had allegedly used patent infringement litigation against generic manufacturers to delay competition, made intentional misrepresentations to the Patent and Trademark Office in order to obtain patents related to their product; and making intentional misrepresentations to the FDA which helped the company exclude competition by generic manufacturers.

Econometrics Expert Witness:

Plaintiff filed a motion to certify a class of persons who purchased Paxil for consumer use. To support its motion, it is presented a testimony of an econometrics expert witness to establish the existence of class-wide impact of Defendant’s alleged violations of Section 2 of the Sherman Antitrust Act. This expert provided complex econometric analysis of damages, and estimated the impact to all members of the potential class. At his deposition, the expert based his conclusions on economic literature. As well as the fact that the entry of generic competitors into the markets of other brand name drugs has resulted in similar litigation and economic effects. He also stated that he would need to have additional information obtained through merits discovery to determine whether Defendant would lower its price in response to generic entry into the market.

Daubert Challenge

The econometric expert’s testimony was challenged on several grounds, including the defendant’s argument that benchmark methodology for calculating aggregate damages is not reliable, because members of the proposed class may not have suffered any injuries.

The court examined whether the econometric expert identified a generally accepted methodology for determining impact applicable to the class. As well as whether this methodology uses evidence common to all class members, and if his opinion has probative value.

Court Analysis

The court denied defendant’s Daubert motion and found that the econometrics expert used a generally accepted methodology for calculating impact in antitrust suits, and that the expert proposed the use of evidence common to the class to determine impact and damages in the nature of overcharges or unjust enrichment on the class-wide basis. The court reasoned that the two benchmarks proposed by the expert for calculating damages in this case,

(1) a comparable market not affected by anticompetitive activity and

(2) the market in which the anticompetitive activity occurred in a period of time either before or after the effects of the conduct

are standard methods for proving damages in an antitrust case. Moreover, Plaintiffs are not required to have chosen one particular method for calculating damages, or a particular benchmark product, or to have determined the exact percentage of consumers who would have switched to generic drug, at this stage in the litigation.