Rochester Drug Co-Operative Inc. v. Braintree Laboratories Inc.

Filing 141

LETTER OPINION on discovery issue. Signed by Special Master B. Wilson Refearn on 6/15/11. (fms)

LAW OFFICES
DAVID G. CULLEY
SH E RRY RUGG] E RO FA I, I.ON
FRANCIS X.D. NARDO
JOHN J. KLUSMAN, JR.
DANIELLE K, YEARICK
DENNIS J. ML:NTON
SUSAN I,lST HAUSKE
ROBERT M, GREENBERG
W']LLIAM R. BAKER, JR.
CHMSTINE P. O'CONNOR

TYBOUT, REDFEARI\ & PBLL
750 SHIPYARD DRIVE
SUITE 4OO
P.O. BOX 2092
WILMINGTON. DELAWARE 19899.2092
[phone]
TELECOPIER

Jeffrey Goddess, Esquire
Rosenthal, Monhait & Goddess
919 Market Street, Suite 1401
P.O. Box 1070
Wilmington, DE 19899-1070
Re:

SAMH A. ROBERTS

JUL]E H. YEAGER

Of Courcel:
B-. WILSON REDFEARN

NCHARD

I,Y.

PELL

Writer's Direct Dial:
(302) 6s7-ss05
[e-mail]

658-401 8

June 15, 201

BNAN D. AHERN
NICHOI"4S M. KMYER
LAUREN C. MCCONNELI.
NATALIE L. PALLADINO

1

Frederick Cottrell, III, Esquire
Richards, Layton & Finger
One Rodney Square
920 North King Street
Wilmington, DE 19801

Rochester Drug Cooperative, et al v. Braintree Laboratories. Inc.
c.A. 07-142-SLR

Gentlemen:

Relative to the documents sought, the controlling issue is whether, when balancing the
probative value of the information requested against the cost and burden imposed upon the
Plaintiffs, the Defendant's discovery should be allowed. Having considered the papers submitted
by the parties as well as the arguments made before the Special Master, it is my decision that:

(1) Discovery concerning the Plaintiffs' purchase, chargeback and sales data is DENIED.
(Requests 1-5, 9-10);

(2)

Discovery concerning price setting decisions, price negotiations, product
comparisons and promotional material relating to oral laxative products is GRANTED.
(Requests 8, 11-13').

Opinion

Plaintiffs' lawsuit seeks treble damages under Section 2 of the Sherman Act. It is based
on allegations that Braintree Laboratories, Inc. ("Braintree") acquired an unlawful monopoly in
the polyethylene glycol 3350 ("PEG3350") laxative market through an invalid patent which was
improperly listed in the FDA "Orange Book" and then used to support a sham patent

I

Thi, letter was originally sent to the parties as a draft opinion, with the parties having the right to except to the
Special Master. Following receipt, the parties advised that they were accepting the Ruling and did not believe that
was necessary to file their submissions to the Special Master.
' Requests 6 andT have been withdrawn. Also, at Argument, Defendant affirmed that he was not seeking price
sheets, launch materials and communications of manufacturers regarding the delivery of generic MiraLAX.
Transcript of May 27 , 2011 at 19.

it

Jeffrey Goddess, Esquire
Frederick Cottrell, III, Esquire
June 15, 201 1
Page2

infringement case. According to the Plaintiffs, this conduct allowed Braintree to make illegal
profits by delaying the entry of generic versions of PEG3350 laxatives into the national market.
Consolidated Amended Class Action Complaint ("Compl.") flfl 7l-86 (D.I. 2l).

On October 14,2010, Braintree served its Requests for Production. These included
Requests I through 4, 9 and 10, pertaining to the Plaintiffs' purchase and sales data of
prescription, over-the-counter and generic MiraLAX, as well as other laxatives; and Requests 6,
7 and 11, pertaining to price setting decisions, price negotiations, promotional materials and
product comparisons. (See Defendont's Opening Brief, Exhibits A-C).
Plaintiffs generally objected to the Requests on burdensome and relevancy grounds.
Following their general objections, they did state that they would produce "transaction-level
electronic purchase and chargeback data in Excel format showing Plaintiffs' direct purchases of
MiraLAX from Braintree" and "purchases of generic versions of MiraLAX from December 23,
2003 through present." (See Defendant's Opening Brief, Exhibit F, and Responses to
Paragraphs 1-7). In response to Request No. 8, they also stated, that subject to its objections,
they would o'produce responsive communications to the extent they exist and are not already in
the possession of Defendants" (Defendant's'Opening Brief, Exhibit F, Response to Paragraph
8)

In the motion before me, Braintree argues that the unanswered discovery will lend
support to its defense in that it will help to demonstrate that Braintree did not have monopoly
power. Stated otherwise, Braintree maintains that Plaintiffs' own documents will provide proof
that the involved products do not represent a dominant share of the relevant market, (United
States v. Dentsply Int'|., lnc.,399 F.3d l8l, 187 (3d Cir.2005), most notably because of the
cross-elasticity of demand in the oral laxative industry. See, Tunis Bros v. Ford Motor Co., 952
F.2d,715,722 (3d Cir. 1991).
Accordingly, Braintree requests documentation relating to the volume and price of the
Plaintiffs' purchases and sales of MiraLAX (both prescription and over-the-counter), generic
MiraLAX and forty-four other laxatives to bolster its "market definition" arguments. In
addition, it seeks various documents relating to Plaintiffs' promotional and pricing strategies.
(Requests 8, 12-13), citing Brown Shoe Co. v. United States,370 U.S. 294 (1962); and In Re:
Wellbutrin XL Antitrust Lit., No. 2:08-CY-02431, D.I. 175 (E.D. Pa. Mar. 12,2010). Braintree
relies, in large part, on the affrdavit of its economic expert, Professor Ian Cockbum, to
substantiate its need for the requested documents. (See, Defendant's Opening Brief at 8).

While Braintree asserts that the Requests at issue are necessary and will not require
excessive document collection when taking into consideration the damages alleged and the issues
involved, the Plaintiffs object to the production, arguing that the data sought is cumulative and

burdensome. More particularly, they assert that the documents which Defendant seeks (1) would
not assist in any "relevant market" analysis in light of the fact that the products involved (or
addressed by the discovery) "account for less than one-half of lo/o of the historical purchases of
MiraLAX;" (2) the sales data for prescription MiraLAX, its generic equivalents and "a host of

Jeffrey Goddess, Esquire
Frederick Cottrell, III, Esquire
June 15.2011
Page

3

other products" have already been produced; and (3) the purchase, charge-back and sales data on
the 40 or so drugs subject to the discovery would require 200 separate searches for purchase
data, charge-back data, and sales data by each ofthe three representative Plaintiffs.

In support of their position, the Plaintiffs have each submitted an affidavit detailing

the
time its key personnel would have to expend to retrieve the requested documents (See Exhibits 3,
4 and 5 to Plaintiffs' Answering Brief). Plaintiffs also submit that the purchase and chargeback
data for Plaintiffs' purchases of MiraLAX and its generic equivalents has already been produced.

It is my initial finding that Braintree can validly argue the relevance of its Requests in
that they could provide information that bears on the involved market. (See, U.S. v. Dentsply
Intern, Inc.,2000WL 654286 (D. Del.).
In order to avoid production otherwise permissible under Rule 26(b)(l), the Plaintiffs
must then show that the burden or expense of production is disproportionate to its likely benefit
to the Defendant. In analyzing the arguments, the Court must consider the needs of the case, the
amount in controversy, the parties' resources, the importance of the issues, and the importance of
the requested discovery in resolving the issues. Fed. R. Civ. P.26(bX2)(CXiiD.
While the data sought from the Plaintiffs is probative of the involved product sales, it is
my conclusion that those materials are cumulative and, further, that it is unlikely that the
materials concerning these sales, etc., would, in any meaningful way, assist the Defendant in
proving that the involved product has a dominant share in the "relevant market"3 or, in fact,
provide much other than anecdotal evidence.a
Braintree already has a great deal of data. As Professor Cockburn notes in his affidavit,

for the Schwartz litigation he made a thorough review of both the IMS wholesale data for
prescription drugs, and the ACNielson retail data for OTC drugs.s According to paragraphs 5
and 6 of the affidavit, this permitted him to o'confirm" his economic analysis. In Dr. Cockbum's

report in Schwartz, he lists not only these two support references, but numerous others. (See,
Appendix B, Rebuttql Expert Report of Dr. Ian Cockburn). In reviewing his trial testimony, I
note that Dr. Cockburn did not need the requested data in order to reach the conclusion that
Braintree does not enjoy monopoly power. (See excerpts of trial testimony of Ian Cockburn in
Braintree v. Schwarz, February 1,2007, attached as Exhibit "A").
In my opinion, Professor Cockburn does not set out a sufficient need for these materials.
While he says that he wants to supplement his analysis, he never says that he requires these

'

Defendant argues that "all oral laxative products" make up the relevant product market. The geographical
market is the United States.
a
See also transcript of May 27,2011 at p.10 where Defendant maintains the discovery "could provide
gxamples of how specific price changes on laxatives effect the sales of other competing products in itself."
' This is industry-wide data accumulated and sold for the purpose of permitting recipients to analyze sales and
prices. The material included the Plaintiffs' sales and price information. Transcript of May 27,201I at pp.3638.

Jeffrey Goddess, Esquire
Frederick Cottrell, III, Esquire
June 15,2011
Page 4

materials to construct (or reconstruct) his analysis. Rather, his affidavit notes that his previously
authored report provides the necessary evidence of "strong price competition," suggesting only
that this requested discovery "may provide useful information...or provide confirmation of the
results of my previous economeffic analysis."6

It is noteworthy that paragraph 5 of Dr. Cockburn's affidavit concludes: o'In particular,
analysis..." (Cockburn Affidavit
'1T5). Stated otherwise, Dr. Cockburn believes that the new discovery will allow him to
o'supplement" his earlier opinions (based on the IMS Health and ACNielson data), where he was
criticized for mixing the IMS data with the ACNielson data. In their answering brief, Plaintiffs
state that this is anareathey do not intend to contest.
such data would allow me to respond to certain critiques of my

Finally, while there is certainly an argument that the Defendant should be entitled to put
together any sales data which shows price elasticity, its suggestion that it could profitably use
this particular data, which accounts for less than one-half of I%o of the overall sales in the
MiraLAX market, requires some scrutiny.7 That data, without more, is of doubtful value.s The
report of Dr. Cockburn details why the changes in price, while effected by competing products,
are dependent on a host of outside influences, including: (1) marketing; (2) diffusion of
information; (3) economic incentives; (4) demographic changes (Cockburn report 17.2); (5)
production costs (Cockburn report fl61); as well as the sales arrangements with Managed Care
Organizations ("MCOs") (Cockburn report n2D, Pharmaceutical Benefit Management
Companies ("PBMs") (Cockburn report fl30) and Medicaid payments (Cockburn report tf32).
Stated otherwise, based on the testimony of its own expert, the information which Braintree
seeks to gather is not likely to have any significant value without a detailed study regarding the
above items over time. (Cockburn report tf14). According to Dr. Cockburn, simple price
comparisons have limited value, especially if one takes into consideration the variations in
packaging. (Cockburn report flflI5, 16 and 62). While a detailed analysis could be done by
Braintree, it would be impractical and the results, because of sample size, are of doubtful
admissibility.
In the exercise of the discretion allowed to the Court, I am persuaded that compelling the
production of the volume and price data related to the Plaintiffs' purchase and sales in response
to the Defendant's requests would impose a burden on the Plaintiffs which is cumulative and
outweighed by any benefit Defendant might obtain. Fed. R. Civ. Pro 26(b)(2)(C); See also,
Mannington Mills v. Armstrong World Indus,, Inc. 206 F.R.D. 525, 529 (D.De1.2010). As
previously indicated, in addition to the fact that Dr. Cockburn already has much of this
information, the data which would be obtained from the plaintiffs constitutes so small a sample

" Cockbum Affidavit

!T5.

the 4llllll Status Conference at p.24,u well as Braintree's Answering Brief in Opposition
to Plaintiffs' Motion for Injunction at 4-5 wherein Defendant states that gross Braintree sales to Plaintiffs were
one-half of one percent, i.e., "minimal revenues."
o
Compare plaintiffs' market with that of McKesson, Cardinal Health &AmerisourceBerger, three wholesalers
(whose records have been subpoenaed) that control 90-95% of the markel Transcript of May 27,2011 at28.
7

See transcript of

Jeffrey Goddess, Esquire
Frederick Cottrell, III, Esquire
June 15, 201 1
Page 5

that it has questionable utility and thus, questionable admissibility.e

However, the promotional materials, pricing strategies, negotiations and the like relate to
the parties' decisions and admissions relative to the relevant market, and I will compel that
production (Requests 8, 11-13) as it relates to MiraLAX, generic MiraLAX and other laxatives,
to the extent that they reference MiraLAX and generic MiraLAX.l0 Srr, Brown Shoe,370 U.S.
at 325; In re. Wellbutrin XL Antitrust Litig., No. 2-08-Lu02431, DJ 175 (E.D. Pa. Mar. 12,
2010). With the discovery now limited to three requests, it is not so burdensome as to overcome
the Defendant's right to review materials that are calculated to lead to the discovery of

A '.\ i
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B. WILSON REDF
Special Master

,

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BWR:ma
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I acknowledge that in reaching this conclusion, I have been unable to find (and the parties have not provided)
definition for'oirrelevant market share size." Such issues must be resolved on a case-by-case basis. Maple
Flooring Manufacturing Assn. v. United States,268 U.S. 563, 579 (1925).
" Reference transcript of May 27,2011 at6-7,14-15, 24-25, forBraintree's expanded arguments, etc.
' ' The third area of discovery discussed by the Defendant in its briefs, which relates to the propriety of
purchases of the generic prescription version of MiraLAX, after the over-the-counter version was approved, is
not covered by the Requests at issue.
also, Transcript, May 27,2011 at 4-5.
a

^See

ROCHESTER V. BRAINTREE

-

Exhibit "A" to Letter Opinion dated June2,20ll

Excerpts from the transcript in the matter of Braintree Laboratories, Inc. v. Schwarz Pharma,
Inc., C.A. No. 08-00477,Unted States District Court for the District of Delaware; February l,
2007.

P.1208, line 3 through p.1209,line 17:
P.1208:

3

Q. What economic

4

relevant market?

5

A. We will typically

6

Q. And what does cross price elasticity

7

A. Cross price

8

a degree

9

changes in the rises of another product.

10

Q. What were the methods by which

l1

determines cross price elasticity of demand?

measures do you use in determining a

look at cross price elasticity.
mean?

elasticity is a quantitative measure

of

to which sales for one product are sensitive to

an economist

12 A. Occasionally, I think it can be clear from market
13

outcomes, you know, whether or not cross price elasticity

14

exists.

15

More frequently, economists will rely on

16

methods such as surveys of consumers or experiments

17

designed to reveal the degree to which products are

18

substitutes. And very frequently, economists will rely

19

upon econometric estimates of a demand model to obtain a

20

direct quantitative measure of cross price elasticity

EXHIBIT'A''

2l

parameter.

22

Q.

23

is?

Can you describe what an econometric demand model

24 A. Yes. An econometric
25

demand model is a tool used bv

economists to address this type of question, usually you

P.t209:

it

1

can think of

2

will

J

a

the consumption choice problem. That is to say, rely

4

upon economic theory to

5

relationships between demand for products and factors

6

which you could think of as affects go that demand.

7

Typically, these will be pricing, promotion behavior,

8

product attributes, behavior of competitors and so forth.

9

Having characterized that model in a

l0

theoretical sense, often that can be distilled down to some

ll

mathematical equations.

T2

You'll, then estimate the parameters in those

13

equations using statistical techniques and actual data or

T4

market outcomes.

15

Q. Did you estimate econometric

t6

case?

t7

A. Yes, I did.

as consisting of two

be a characterization of the

-

-

parts: The first

sometimes we call it

to develop some hypotheses or

demand model in this

EXHIBIT'A"

P.l2l4,lines

16 through 24:

16

Q. Did the market analysis of other than Braintree and

17

Schwarz

-

18 A. We focus on pricing in antitrust cases. I think
19

more generally economists recognize competition can take

20

the form of promoting along promotion or innovation. I

2l

thought it noteworthy that in terms of marketing,

22

producers of competing laxatives apparently recognize

23

Miralax

24

actions in this marketed go dimention.

P.l2l7,line

as a competitor and responded to them by taking

12 through P.1218, line 5:

P. t2t7:

12
13

possible to draw definitive conclusions about either

14

relevant markets or monopoly power based solely on

15

similarities or differences in prices?

16

A.

l7

Q. Why not?

18

A.

19

about these questions but, in and of themselves, I think

20

their value is very limited.

Q. As a general matter, Professor Cockbum, is it

No.

Prices per se can be informative to some degree

EXHIBIT'A''

2I

On the one hand, you have to understand what

22

its determining price is in differentiating product

23

markets, it's important to recognize that prices are

24

determined by a number of factors, one of which might

25

simply be differences in the way consumers value different

P.

t2l8:

I

characteristics of products.

2.

Beyond that, I think it's a very fundamental

a
J

point, is that antitrust analysis recognizes that prices

4

only have meaning for antitrust purposes when considered

5

relative to the true economic marginal cost of production.

P.1222,lines 1 through 25:

I
2

Q. Would you now take a look

3

report, which I believe is PTX-614? And we have a graphic

4

enhancement of

5

A. Yes. This displays

6
'

BY MS. MILLER:

these prices on a daily dose basis for most of the major

7

laxative products. What you can see, if you take a look

8

on the left, for example, there are four triangles above

9

Benefiber. That indicates I considered four different

10

prices of Benef,rber. I believe one of them is the orange

it on the

at Exhibit 6 to your

screen.

the results of computing all

EXHIBIT'A''

11

cream flavor, one is the sugar free, grit-free flavor.

I2

One is, if you like the plain vanilla fiber. Buried

13

within each of those data points, I've averaged across

t4

there the daily dose price, averaged across bottle size.

15

You can see, just considering Benefiber,

t6

there's a considerable range of prices in which these

T7

different versions of the product are sold.

18

I've done this, but for all of those, 24

t9

OTC products, and two or three prescription products.

20

I've circled the results of doing this calculation for

2l

Miralax.

22

reflects the retail price, which is directly comparable

23

to those of the OTC products. The other is the

24

wholesale rise price, which I've included in case that,s

25

helptul.

There are two data points there, one of which

P.1225,lines 23 through P.I226,line

l:

P.1225:

23
24

of the changes and the prices of laxative products during

25

the relevant period?

Q. Professor Cockburn, did you perform your own analysis

P. 1226:

I

A.

Yes. I did.

EXHIBIT'A''

P.1227,line

14 through

P.l228,line 25:

P. t227:

14

Q. Tuming now to your regression model,

15

to draw any definitive conclusions about the relevant

16

market in this case from the medical market and pricing

17

evidence you'vejust described?

are you able

18 A. Yes. The evidence that I talked about so far strongly
19

suggests to me as someone who studied the pharmaceutical

20

business for many years that

2l

highly competitive market consisting of all oral laxatives

22

sold in the United States.

23

Q. And what is the basis for

24

A. Well, I think, you know, to summarizethatthe

25

evidence indicates that there are many products which are

Miralax is one product in a

that?

medical

P,1228:
1

therapeutic substitutes, physicians can and do prescribe a

2

range of both OTC and prescription products.

a
J

at the very least, should be considered candidates

4

substitutes. The business documents we've discussed clearly

5

indicate to me market participants viewed themselves as a big

6

part of this larger market definition.

7

And then, finally, the pricing evidence, you

All of those,

EXHIBIT'A"

ofthe

8

know, which, as I said, I think it's typical to draw any

9

conclusions from per se, is nonetheless, in my view not

10

consistent with exercise of monopoly power by Miralax.

11

Q.

l2

demand model to determine the cross price elasticity

13

demand.

t4

A.

15

complex. There are many products, many things are going

T6

on at once. There are changes inprices, changes in

t7

promotion, entry and exit of products with different

18

characteristics. It's very difficult to make sense

r9

what has gone on and to understand and determine the

20

prices relying solely on a simplistic descriptive analysis.

2l

Circumstances such as these, economists

22

typically turn to econometric methods and a regression

23

model to attempt to isolate the impact of each of these

24

factors considered one by one, holding all the other ones

25

constant.

Please explain why you went on to do an econometric

of

The market for differentiated products are quite

EXHIBIT'A"

of