In 2014, a federal magistrate issued a preliminary injunction in a suit in which the State of New York alleged the pharmaceutical manufacturer (“Manufacturer “) attempted to effectuate a “hard switch” from a twice-daily drug that treats moderate-to-severe stages of Alzheimer’s disease to a pharmacologically identical drug only taken once a day.
The State alleged that Manufacturer attempted to remove the IR from the market before its patent exclusivity period expired and a generic substitute to the drug became available—allowing it to extend its monopoly over a leading treatment for Alzheimer’s disease through the end of the XR’s patent exclusivity period in 2029.
The preliminary injunction blocked Manufacturer from restricting access to the IR for the remainder of its patent exclusivity period.
Two related lawsuits were brought in by health plans that are direct and indirect purchasers of these drugs.
One complaint asserted state law claims against for monopolization, conspiracy to monopolize, unfair and deceptive trade practices, and unjust enrichment. No federal claims were alleged.
The second complaint was filed against Manufacturer on substantially the same grounds. While it didn’t name any of the Defendants, including Manufacturer, it pleaded substantially the same facts as the other pleading.
The second complaint asserts federal claims, rather than state law claims.
As part of the second action, Plaintiffs retained an expert on regulatory issues in the pharmaceutical industry, one who spent 23 years in Manufacturer’s Regulatory Affairs Department. Manufacturer objected to this.
Chief Judge Colleen McMahon wrote in her opinion that there’s “no bright line rule as to when a party’s expert should be disqualified due to disclosure of confidential information, and the Second Circuit has not set forth the precise test by which a district court should make the determination.”
Nonetheless, the judge explained that district courts in the Circuit have typically considered three elements in determining whether an expert should be disqualified due to his relationship with the adverse party:
- The existence or reasonable expectation of a confidential relationship between the movant and the expert
- Whether the movant in fact disclosed confidential information to the expert
- Some courts also consider whether the public has an interest in allowing or not allowing the expert to testify.
The burden is on the party seeking disqualification to establish these elements.
Here, Plaintiffs couldn’t dispute that Manufacturer and their pharmaceutical industry regulatory expert had a long-term confidential relationship.
Instead, they argued that the expert wasn’t exposed to confidential information relevant to this litigation, and, in any event, Manufacturer wouldn’t be prejudiced by her participation in this case.
Plaintiffs initially argued that the expert couldn’t have received confidential information relevant to this case because her employment ended before Manufacturer began its illegal hard switch and before it obtained exclusivity for the drug.
But the Chief Judge agreed with the Magistrate who correctly concluded that this was simply wrong: one of the central allegations in this case was that the named defendants colluded with Manufacturer (and other generic competitors) by entering into allegedly anticompetitive patent settlements well before the end of the expert’s employment in 2012.
Further, the expert was Manufacturer’s Vice President of U.S. Generic Regulatory Affairs at all times relevant to the events leading up to and during Defendants’ and Manufacturer’s execution of the settlement agreement at issue in this case.
Chief Judge McMahon wrote that “[i]t defies credulity to think that the expert, given the responsibilities of her role, was not privy to [Manufacturer’s] confidential information regarding [the] generic…”
Plaintiffs also argued that Manufacturer’s confidential information wasn’t relevant to the case due to the following:
- Manufacturer wasn’t a party to this litigation, and its interest wouldn’t be affected by this litigation
- Manufacturer’s product wasn’t at issue
- The expert wouldn’t opine about Manufacturer, its conduct, or its generic product. Chief Judge McMahon thought otherwise and held that it “matters not a whit” that Manufacturer wasn’t named as a defendant in the instant action because its conduct during the period when the expert was Manufacturer’s regulatory official is at issue in this case. It was also clear, the court said, that Manufacturer was a nonparty in the instant action “in name only.”
Plaintiffs insisted that they wouldn’t communicate or share the expert’s work with the plaintiffs in the other action.
But the Chief Judge said that those plaintiffs could obtain Manufacturer’s confidential information by attending a hearing in which the expert testifies, obtaining publicly filed deposition or affidavit testimony, or by reading an opinion by the court that cites to her testimony.
The Chief Judge also said she wouldn’t seal records in order to accommodate Plaintiffs’ desire to use the former Manufacturer employee as its expert, because “the First Amendment interest in a public record clearly trumps Plaintiffs’ interest in working with the expert.”
Plaintiffs also asserted that the expert agreed that she wouldn’t reveal confidential information about Manufacturer or its product that is relevant to the other action, but the judge said an expert can’t build a Chinese wall in his own mind, despite his best efforts to do so.
Chief Judge McMahon noted that although the Second Circuit hasn’t directly addressed the issue in the context of disqualification of counsel, it recently ruled that a nonparty’s motion for disqualification can be granted because of past disclosed confidences with counsel, particularly where allegations against that nonparty are at issue.
While the tests for disqualifying attorneys and expert witnesses are slightly different, federal court authority in both instances derives from the same duty to protect the integrity of the legal process.
Here, Manufacturer met its burden for disqualification by showing that the expert and Manufacturer had a confidential relationship, and that the expert received confidential information relevant to the instant action; thus, there can be no question that Manufacturer was at a “substantial risk of inadvertent disclosure,” regardless of whether it is technically a party to the instant action.
Additionally, public policy does not weigh against disqualifying the expert.
The Chief Judge said that Plaintiffs could easily retain a new expert in the field—one who didn’t work for a company that was a key witness in this case (and a defendant in the related action) for 20 years.
Manufacturer’s motion to disqualify the expert was granted.