By Caroline SimsonLaw360, New York (December 22, 2014, 1:26 PM ET) -- A California federal judge has denied class certification in a suit alleging that Eli Lilly & Co. downplayed the withdrawal risks of its antidepressant drug Cymbalta, saying that the plaintiffs’ damages model was flawed because of complicating factors in the prescription drug market.
The plaintiffs had proposed calculating classwide damages not for alleged personal injuries, but for injuries stemming from purchasing a product with less value than they had expected due to the alleged higher risks of withdrawal side effects. The damages model, advanced by plaintiffs’ expert Dr. Joel W. Hay, used a statistical technique utilizing survey data to determine how consumers value a product, or what the market would be willing to pay
From there, he could determine the relative value that consumers placed on a drug with a lower withdrawal risk, out of which he would determine a refund ratio.
But U.S. District Judge Stephen V. Wilson's Thursday order says the plaintiffs’ proposed damages model was flawed because complicating factors in the drug market “sever the relationship” between price and value.
Those factors include the fact that the prescription drug market is heavily regulated, and that insurance plans may pay anywhere from the full price of the drug to a percentage of its full cost, the judge said. As a result, the out-of-pocket cost paid by a consumer for a prescription drug is not a proxy for the drug’s value to the consumer, he said.
“Therefore, applying the refund ratio to class members’ out-of-pocket costs fails to tether the consumers’ relative valuations of product features to Cymbalta’s fair market value. Instead, it yields an arbitrary amount that is unrelated to the amount of harm incurred by individual class members,” Judge Wilson said.
He rejected Hay’s argument that applying the refund ratio to a consumer’s co-payment would yield an accurate approximation of the difference between the consumer’s subjective valuation of the drug as represented and the drug as actually received.
Hay’s model was also flawed because it didn’t take into consideration the demand side of the market equation, the judge said.
“The court has found no case holding that a consumer may recover based on consumers’ willingness to pay irrespective of what would happen in a functioning market (i.e. what could be called sellers’ willingness to sell),” Judge Wilson said.
Reached for comment on Monday, plaintiffs' attorney Brent Wisner of Baum Hedlund Aristei & Goldman PC said he and his clients disagreed with the ruling and that the intended to appeal it to the Ninth Circuit Court of Appeals.
The "unusual" theory on which the model was based alleged not that plaintiffs should receive damages for personal injuries, but because they purchased a product that Lilly represented to have a roughly 1 percent risk of withdrawal side effects. In fact, the suit said, the risk of side effects following withdrawal was closer to 44 percent, so the drug had less value than what they expected to receive.
The judge found that the plaintiffs’ argument was different from the usual ‘benefit-of-the-bargain’ claim, which relies on the amount that a willing buyer would pay and a willing seller would accept, in that they sought to prove they were injured by proving that each class member received a drug that the average consumer subjectively valued less. This “twist on the usual argument” caused “significant” problems, Judge Wilson said.
Evaluating whether the proposed class had common issues, the judge found that because the plaintiffs made their alleged injuries separate from price by alleging that the expected value would be more, regardless of what the consumer actually paid, the effect of Lilly’s alleged misstatements would differ widely between individuals. Moreover, whether a doctor would prescribe Cymbalta to a patient even with the withdrawal risks depended on the severity of that patient’s depression
The judge also denied certification of an issue class, saying it wouldn’t advance the resolution of the litigation because the damages model was flawed.
On Monday, an Eli Lilly spokeswoman said the company was pleased with Judge Wilson's "comprehensive" opinion.
The plaintiffs’ Oct. 2012 suit accuses Lilly of stating on the drug’s label that withdrawal symptoms occurred “at a rate greater than or equal to 1 percent and at a significantly higher rate in duloxetine [Cymbalta’s chemical name]-treated patients compared to those discontinuing from placebo,” when in fact, the risk of withdrawal systems is closer to 44 percent.
The suit brought claims under various consumer protection laws in California, Massachusetts, Missouri and New York.
Lilly is represented by Michael Imbroscio, Mark Lynch, and Phyllis Jones of Covington & Burling LLP.
The plaintiffs are represented by Michael Woerner of Keller Rohrback LLP; Michael Baum and Brent Wisner of Baum Hedlund Aristei & Goldman PC; and Harris Pogust and Matt Leckman of Pogust Braslow & Millrood LLC.
The case is Jennifer L. Saavedra v. Eli Lilly & Co., case number 2:12-cv-09366, in the U.S. District Court for the Central District of California.