Page 1
`
`CONCORDIA PHARMACEUTICALS, INC., Plaintiff, v. METHOD
`PHARMACEUTICALS, LLC, et al., Defendants.
`
`Civil Action No. 3:14CV00016
`
`UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
`VIRGINIA, CHARLOTTESVILLE DIVISION
`
`2016 U.S. Dist. LEXIS 50221
`
`April 13, 2016, Decided
`April 13, 2016, Filed
`
`PRIOR IDSTORY: Concordia Pharrns., Inc. v. Method
`Pharrns., LLC, 2015 US. Dist. LEXIS 151505 (W.D. Va.,
`Nov. 4, 2015)
`
`COUNSEL:
`[*l] For Concordia Pharmaceuticals Inc.,
`Plaintiff: Aaron L. Pereira, LEAD ATTORNEY,
`Buchanan Ingersoll & Rooney PC, New York, NY;
`Edward John Allera, LEAD ATTORNEY, PRO HAC
`VICE, Buchanan Ingersoll & Rooney, PC, Washington,
`DC; Laura K. Pitts, LEAD ATTORNEY, PRO HAC
`VICE, Buchanan Ingersoll & Rooney PC, Alexandria,
`VA; Theodore M. Sullivan, LEAD ATTORNEY, PRO
`HAC VICE, Buchanan Ingersoll & Rooney, PC,
`Washington, DC; Holly Beth Lance, Buchanan Ingersoll
`& Rooney PC, Alexandria, VA; Scott Lloyd Smith,
`Buchanan Ingersoll & Rooney PC, Alexandria, VA.
`
`For Method Pharmaceuticals, LLC, Defendant: David W.
`Thomas, LEAD ATTORNEY, Michie, Hamlett, Lowry,
`Rasmussen & Tweel, PLLC, Charlottesville, VA;
`Jennifer McVey Thomas, LEAD ATTORNEY, PRO
`HAC VICE, Hyman Phelps & McNamara, PC,
`Washington, DC; Karla Lynn Palmer, LEAD
`ATTORNEY, Hyman Phelps & McNamara, PC,
`Washington, DC; Brian J. Donato, Hyman Phelps &
`McNamara, PC, Washington, DC; Edward Kyle McNew,
`Michie, Hamlett, Lowry, Rasmussen & Tweel, PLLC,
`Charlottesville, VA; James Philip Ellison, PRO HAC
`VICE, Hyman Phelps & McNamara, PC, Washington,
`
`DC.
`
`For Winder Laboratories, LLC, Defendant: Joshua
`Counts Cumby, LEAD ATTORNEY, Venable LLP,
`Washington, [*2] DC.
`
`For Matthew Scott Tucker, Defendant: Edward Kyle
`McNew, Michie, Hamlett, Lowry, Rasmussen & Tweel,
`PLLC, Charlottesville, VA.
`
`For Steven Pressman, Defendant: Joshua Counts Cumby,
`LEAD ATTORNEY, Venable LLP, Washington, DC;
`Roger Anthony Colaizzi, LEAD ATTORNEY, Venable
`LLP, Washington, DC.
`
`JUDGES: Hon. Glen E. Conrad, Chief United States
`District Judge.
`
`OPINION BY: Glen E. Conrad
`
`OPINION
`
`MEMORANDUM OPINION
`
`In this action under the Lanham Act, the plaintiff,
`Concordia Pharmaceuticals, Inc. ("Concordia"), and the
`defendants, Method Pharmaceuticals, Inc. and Matthew
`Scott Tucker ( collectively, "Method"), have moved to
`
`JANSSEN EXHIBIT 2008
`Mylan v. Janssen IPR2016-01332
`
`

`

`2016 U.S. Dist. LEXIS 50221, *2
`
`Page 2
`
`exclude certain opinions offered by the opposing side's
`expert witnesses. The court held a hearing on the motions
`on March 3, 2016.1 This memorandum opinion sets forth
`the court's rulings on the parties' motions.
`
`During the March 3, 2016 hearing, the court
`also heard oral argument on the parties'
`cross-motions for summary judgment. On March
`29, 2016, Concordia's motion for summary
`judgment was denied, and Method's motion for
`summary judgment was granted in part and
`denied in part. The case is proceeding to trial
`solely on Concordia's claim under the Lanham
`Act.
`
`Background
`
`The facts of this case are outlined [*3] in detail in
`the court's memorandum opinion on the parties'
`cross-motions for summary judgment. Thus, only a brief
`summary follows here.
`
`In May of 2014, Concordia acquired the Donnatal®
`line
`of products
`("Donnatal")
`from
`PBM
`Pharmaceuticals, Inc. ("PBM"). Donnatal is a line of
`combination phenobarbital and belladonna alkaloid
`("PBA").products that is used as adjunctive therapy in the
`treatment of irritable bowel syndrome ("IBS") and acute
`enterocolitis. Donnatal is available by prescription in
`either tablet or elixir form.
`
`Donnatal was first introduced in the 1930s, before
`drug manufacturers were required to prove that drugs
`were both safe and effective in order to obtain approval
`by the Food and Drug Administration ("FDA"). Although
`Donnatal products have been approved for safety, the
`FDA has yet to determine their effectiveness.
`
`For over thirty years, Donnatal faced competition
`from generic PBA products that were pharmaceutically
`equivalent to Donnatal. Beginning in August of 2011,
`manufacturers of the generic versions began to take their
`products off the market. Once the inventories of
`previously manufactured generic products were
`eliminated, Donnatal was the only line of PBA products
`[*4] available for prescription.
`
`In 2013, Method began making plans to develop and
`market a new product that would be pharmaceutically
`equivalent to Donnatal. The new product was eventually
`named Me-PB-Hyos. Method reached out to Winder
`
`Laboratories, LLC ("Winder"), which had previously
`developed another product for Method, and expressed an
`interest in having Winder manufacture its Me-PBHyos
`products. Winder and Method agreed on the price that
`Winder would charge for supplying the products, and
`Method issued purchase orders for initial stability tests.
`
`In March of 2014, Method used publicly-available
`copies of the Donnatal product labels and package inserts
`as templates to create labels and inserts for the
`Me-PB-Hyos products. Method then proceeded to list the
`Me-PB-Hyos products with two pharmaceutical
`databases, Medi-Span and First Databank, which are used
`by members of the pharmaceutical industry to determine
`whether generic substitutes are available for brand name
`products. Method advised the databases that it intended to
`start marketing the Me-PB-Hyos products on June 1,
`2014. Based on the information provided by Method,
`which included the product labels and package inserts,
`the Me-PB-Hyos [*5] products were assigned the same
`Generic Product Identifier ("GPI") as Donnatal. The
`listings also indicated that the Me-PB-Hyos products
`would be available at a lower price.
`
`Ultimately, after this litigation ensued, Method
`halted its plans to market the Me-PBHyos products, and
`the products were never manufactured by Winder or any
`other company.
`In mid-October 2014, Medi-Span
`removed the listings for the Me-PB-Hyos products.
`Around the same time, First Databank moved its listings
`for the Me-PB-Hyos products from active listings to
`archived listings.
`
`After Method's Me-PB-Hyos products were listed
`with Medi-Span and First Databank, Donnatal
`prescriptions and unit sales declined. The parties dispute,
`however, whether the decline in prescriptions and unit
`sales was caused by the listings for the Me-PB-Hyos
`products.
`
`From January of 2012 to June 2014, the prices of
`Donnatal products increased by over 1,400%. This
`included a 100% increase that Concordia implemented
`after acquiring the rights to Donnatal from PBM. It is
`undisputed that Concordia's profits and profit margin for
`Donnatal tablets and elixir increased after Method's
`Me-PB-Hyos products were listed with the databases.
`However, Concordia [*6] claims that its profits would
`have been even higher if Method had not listed the
`Me-PB-Hyos products and, thus, that it experienced lost
`profits as a result of the listings.
`
`

`

`2016 U.S. Dist. LEXIS 50221, *6
`
`Page 3
`
`Procedural History
`
`PBM commenced this action against Method on
`April 29, 2014, asserting claims of false advertising and
`unfair competition under the Lanham Act and related
`claims under state law. Following a series of
`amendments, the case is now being pursued against
`Method and Tucker, Method's founder and president, by.
`Concordia.
`
`Following the completion of discovery, the parties
`filed cross-motions for summary judgment. On March 29,
`2016, Concordia's motion for summary judgment was
`denied and Method's motion for summary judgment was
`granted in part and denied in part. A jury trial on the
`remaining claims under the Lanham Act is scheduled to
`begin on April 18, 2016.
`
`The case is now before the court on the parties'
`motions to exclude opinions proffered by the opposing
`side's expert witnesses. Method seeks to exclude certain
`opinions of Dr. Brian Reisetter and Ivan Hofmann.
`Concordia seeks to exclude certain opinions of Dr.
`William Fassett and John Wills. Dr. Reisetter and Dr.
`Fassett are pharmacists who were retained [*7] to offer
`opinions regarding the database listings for Method's
`Me-PB-Hyos products. Hofmann and Wills are certified
`public accountants who were retained to offer opinions
`pertaining to damages.
`
`Standard of Review
`
`The admissibility of expert witness testimony is
`governed by Rule 702 of the Federal Rules of Evidence.
`The rule provides as follows:
`
`A witness who is qualified as an expert
`by knowledge, skill, experience, training,
`or education may testify in the form of an
`opinion or otherwise if:
`
`(a) the expert's scientific,
`technical,
`or
`other
`specialized knowledge will
`help the trier of fact to
`understand the evidence or
`to determine a fact in issue;
`
`(b) the testimony is
`based on sufficient facts or
`data;
`
`( c) the testimony is the
`product
`of
`reliable
`principles and methods;
`and
`
`( d) the expert has
`reliably
`applied
`the
`principles and methods to
`the facts of the case.
`
`Fed. R. Evid. 702.
`
`Under this rule, the district court acts as a gatekeeper
`to ensure that an expert's testimony "is not only relevant,
`but reliable." Daubert v. Merrell Dow Pharms., Inc., 509
`U.S. 579, 589, 113 S. Ct. 2786, 125 L. Ed. 2d 469 {I 993).
`"The rule 'requires that the [expert] testimony must be the
`product of reliable principles and methods that are
`reliably applied to the facts of the case."' United States v.
`Wilson, 484 F.3d 267, 274 (4th Cir. 2007) (quoting Fed.
`R. Evid. 702 advisory committee's note). In conducting its
`gatekeeping function, the [*8] court's primary goal is "to
`make certain that an expert, whether basing testimony
`upon professional studies or personal experience,
`employs in the courtroom the same level of intellectual
`rigor that characterizes the practice of an expert in the
`relevant field." Kumho Tire Co. v. Carmichael, 526 U.S.
`137, 152, 119 S. Ct. 1167, 143 L. Ed. 2d 238 (1999). The
`scope of the court's gatekeeping inquiry ultimately
`"depend[s] upon the particular expert testimony and facts
`of the case." EEOC v. Freeman, 778 F.3d 463, 466 (4th
`Cir. 2015) (citing Kumho, 526 U.S. at 150).
`
`The party proffering the expert testimony has the
`burden of establishing its
`admissibility by a
`preponderance of the evidence. Daubert, 509 U.S. at 593
`n.10; see also Cooper v. Smith & Nephew, Inc., 259 F.3d
`194, 199 (4th Cir. 2001). In deciding whether a party has
`sustained its burden, the court must focus on the
`principles and methodology employed by the expert
`rather than the expert's ultimate conclusions. Daubert,
`509 U.S. at 595. As the Supreme Court has recognized,
`however, "conclusions and methodology are not entirely
`distinct from one another." General Elec. Co. v. Joiner,
`522 U.S. 136, 146, 118 S. Ct. 512, 139 L. Ed. 2d 508
`(1997). Neither Daubert nor Rule 702 requires the court
`"to admit opinion evidence that is connected to existing
`data only by the ipse dixit of the expert." Id. Instead, the
`
`

`

`2016 U.S. Dist. LEXIS 50221, *8
`
`Page 4
`
`court "may conclude that there is simply too great an
`analytical gap between the data and the opinion
`proffered," and accordingly choose to exclude the
`opinion. Id.
`
`Of course, "the court need not determ ine [*9] that
`expert testimony a litigant seeks to offer into evidence is
`irrefutable or certainly correct." United States v.
`Moreland, 437 F.3d 424, 431 (4th Cir. 2006). "As with
`all other admissible evidence, expert testimony is subject
`to being tested by ' [ v ]igorous cross-examination,
`presentation of contrary evidence, and careful instruction
`on the burden of proof.' Id. (quoting Daubert, 509 U.S. at
`596). However, because "expert witnesses have the
`potential to be both powerful and quite misleading," the
`court must ensure that any all expert testimony is both
`relevant and reliable. Cooper, 259 F. 3d at 199 (internal
`citations and quotation marks omitted).
`
`Discussion
`
`I. Dr. Reisetter
`
`Concordia retained Dr. Brian Reisetter to offer
`opinions on the market impact and industry consequences
`of Method's submissions to Medi-Span and First
`Databank. Dr. Reisetter is a licensed pharmacist with a
`doctorate in pharmacy administration, who also works as
`a consultant for the pharmaceutical and medical
`industries. He has performed extensive research
`concerning the effects of pharmaceutical database listings
`on the perceptions and behavior of pharmacists and
`doctors. In the instant action, Dr. Reisetter has offered the
`opinion that Method's efforts to list its Me-PB-Hyos
`products with Medi-Span and First Databank "caused
`[* l O] the marketplace to believe that there was an actual
`'generic' or pharmaceutical equivalent for Donnatal
`appropriate for substitution," and that this "set off a series
`of inevitable downstream events in the marketplace that
`adversely affected the number of prescriptions for
`Donnatal filled and units sold, despite no such product
`being available." Reisetter Rep. ~ 1.
`
`In moving to exclude Dr. Reisetter's opinions on the
`market impact and industry consequences of Method's
`submissions to the pharmaceutical databases, Method
`questions the reliability and relevance of his opinions.
`Specifically, Method argues that Dr. Reisetter was not
`provided with full information regarding "availability
`issues" that were experienced with Donnatal products;
`that Dr. Reisetter improperly utilized Prozac as an
`
`example to explain how generic substitution occurs when
`a generic drug is linked to a brand drug in a pharmacy
`software system based on the products' GPI code; and
`that Dr. Reisetter improperly relied upon surveys
`conducted in other cases in forming his opinions in the
`instant case.
`
`Having considered the parties' arguments, the court
`concludes that none of the issues identified by Method
`warrants the [* 11] exclusion of Dr. Reisetter's testimony.
`To the extent Method faults Dr. Reisetter for not
`considering certain discrete "availability issues" that it
`identified during discovery, such as emails indicating that
`some pharmacies had incorrect or outdated National Drug
`Code ("NDC") numbers for Donnatal products, there is
`no indication that these issues were raised during Dr.
`Reisetter's deposition or considered by Method's own
`experts in rendering their opinions. While the availability
`issues identified by Method could arguably affect the
`weight accorded to Dr. Reisetter's testimony, the court is
`unable to conclude that they render his testimony
`inadmissible. Instead, these issues, and any effect that
`they may have on Dr. Reisetter's opinions, can be
`adequately addressed on cross-examination.
`
`The court also declines to preclude Dr. Reisetter
`from using Prozac to illustrate how generic substitution
`commonly occurs in the pharmaceutical industry. In his
`report, Dr. Reisetter did not suggest that Prozac and
`Donnatal are similarly situated drugs. Instead, he merely
`used Prozac as an example to explain how generic
`substitution occurs when a generic drug is linked to a
`brand drug in a pharmacy [* 12] software system based
`on the information contained in the pharmaceutical
`database listings. Method correctly points out that Prozac
`and the generic versions of fluoxetine are distinguishable
`from the products at issue in this case on a number of
`grounds. However, the court ultimately agrees with
`Concordia that these distinctions go to the weight of Dr.
`Reisetter's testimony regarding generic substitution rather
`than its admissibility.
`
`Finally, the fact that Dr. Reisetter based his opinions,
`at least in part, on surveys performed in connection with
`other cases or research projects does not justify excluding
`Dr. Reisetter's testimony. While the court may ultimately
`limit the extent to which Dr. Reisetter is permitted to
`reference specific responses to survey questions, the court
`will permit him to offer opinion testimony based on the
`results of the prior surveys. See Fed. R. Evid. 703 ("If
`
`

`

`2016 U.S. Dist. LEXIS 50221, *12
`
`Page 5
`
`experts in the particular field would reasonably rely on
`those kinds of facts or data in forming an opinion on the
`subject, they need not be admissible for the opinion to be
`admitted."). The defendants remain free to cross-examine
`Dr. Reisetter about the particular questions posed in his
`prior surveys, the specific [* 13] populations of
`pharmacists surveyed, and the conclusions that he
`ultimately reached. The defendants are also free to point
`out that Dr. Reisetter's opinions are not based on
`quantitative or qualitative research employed to
`determine actual market behavior in response to the
`particular database listings at issue in this case. However,
`the court will not preclude Dr. Reisetter from offering
`opinions informed by surveys conducted in previous
`cases.2
`
`2 Because the prior surveys conducted by Dr.
`Reisetter did not account for the actual allegations
`in this case, Method correctly points out that the
`survey results would not support a false
`advertising claim based on a theory of implied
`falsity. See PBM Prods., LLC v. Mead Johnson &
`Co., 639 F.3d 111, 122 (4th Cir. 2011) ("Because
`the surveys failed to account for the actual
`allegations in the case, they failed to provide the
`required evidence of [implied]
`falsity.").
`Nonetheless, this does not render Dr. Reisetter's
`opimons
`inadmissible.
`Concordia's
`false
`advertising claim does not turn on proof of
`implied falsity. Instead, Concordia maintains that
`Method made literally false statements regarding
`its Me-PB-Hyos products. Moreover, as other
`courts have previously recognized, an expert's
`"data and testimony need not [* 14] prove the
`plaintiffs' case by themselves; they must merely
`constitute one piece of the puzzle that the
`plaintiffs endeavor to assemble before the jury."
`City of Tuscaloosa v. Harcros Chems.,Inc., 158
`F.3d 548, 564-65 (11th Cir. 1998).
`
`For these reasons, Method's motion to exclude the
`opinions and testimony of Dr. Reisetter will be denied.
`
`II. Dr. Fassett
`
`Method retained Dr. William Fassett to review the
`reports from Concordia's experts, and to offer his own
`opinions regarding market conditions applicable to the
`sale of Donnatal products and the effect of the database
`listings for Method's Me-PB-Hyos products. Dr. Fassett
`has been a licensed pharmacist for over 45 years and is a
`
`professor emeritus of pharmacotheraphy at Washington
`State University. His career has involved the traditional
`practice of pharmacy, as well as pharmaceutical sales and
`marketing, pharmacy management,
`and advising
`formulary committees with respect to drug coverage
`decisions. Dr. Fassett also sits on the editorial board of
`several peer-reviewed publications related to pharmacy
`and the pharmaceutical industry, and has authored
`peer-reviewed publications relating to drug use review,
`product selection, and computer applications in the
`pharmaceutical industry.
`
`Concordia seeks to exclude three opinions [* 15]
`expressed in Dr. Fassett's expert report. The first opinion
`challenged by Concordia pertains to drug price increases.
`In his report, Dr. Fassett opined that price increases are
`not uncommon in the pharmaceutical industry; that the
`ultimate reactions of pharmacists and prescribers to price
`increases are generally consistent; and that he would
`expect formularies to eventually exclude Donnatal, and
`prescriptions for Donnatal to ultimately decrease, in
`response to increased prices. Dr. Fassett cited the
`prescription pain reliever Vivomo as an example of this
`principle in operation. Vivomo, like Donnatal, currently
`has no generic equivalent. According to Dr. Fassett's
`report, the manufacturer increased the price of Vivomo
`by over 600%, beginning on January 1, 2014. Subsequent
`to the price increases, Vivomo experienced increased
`sales dollars, fewer prescriptions and unit sales, exclusion
`from formularies, and substitution, "all of which,"
`according to Dr. Fassett, "would be expected with
`Donnatal." Fassett Rep.~ 91.
`
`The second opinion challenged by Concordia is Dr.
`Fassett's opinion that a class review may have affected
`the formulary status of Donnatal. In his report, Dr. Fassett
`explained [* 16] that "low-claim-volume products like
`Donnatal (with an average of between 7,000 and 12,000
`prescriptions per month) may 'fly below the radar' for a
`period of time until the level of expenditure becomes
`significant enough to warrant analysis, or until the
`formulary committee conducts a review of the entire
`therapeutic class." Fassett Rep. ~ 45. During his
`deposition, Dr. Fassett further noted that the entry of new
`drug products into the therapeutic class could trigger a
`class review that potentially affects the formulary status
`of any or all drugs within the class.
`
`The final opinion challenged by Concordia is Dr.
`Fassett's opinion that he "would not expect a significant
`
`

`

`2016 U.S. Dist. LEXIS 50221, *16
`
`Page 6
`
`degree of loyalty to Donnatal among prescribers or
`pharmacists." Fassett Rep. ,r 84. Because generic versions
`of Donnatal were commercially available for over 30
`years, Dr. Fassett reasoned that "pharmacists and other
`participants in the market for prescription drugs would
`have stopped thinking of Donnatal as a brand drug and
`instead considered it a generic or multi-source product."
`Id. ,r 84.
`
`Concordia seeks to exclude all three of these
`opinions offered by Dr. Fassett on the ground that they
`are based on mere speculation. [* 17] Having thoroughly
`reviewed Dr. Fassett's report and the applicable portions
`of his deposition, the court is unpersauded. It is clear
`from the record that Dr. Fassett's opinions are derived
`from his decades of experience as a pharmacist, during
`which he dispensed Donnatal and its generic competitors;
`his extensive experience working with formulary
`committees; and his specialized knowledge of how
`formulary committees make coverage determinations.
`
`The fact that the opinions at issue are based, in large
`measure, on Dr. Fassett's personal experience does not
`preclude him from offering the opinions. "[T]he test of
`Rule 702 expressly contemplates that an expert may be
`qualified on the basis of experience." Wilson, 484 F.3d at
`274 (quoting Fed. R. Evid. 702 advisory committee's
`note). When an expert relies primarily on his own
`experience to render an expert opinion, the court must
`require the witness to "explain how [his] experience leads
`to the conclusion reached, why [his] experience is a
`sufficient basis for the opinion, and how [his] experience
`is reliably applied to the facts." Id.
`
`Based on the current record, there is substantial
`reason to believe that Dr. Fassett will be able to establish
`a sufficient basis for each of the opinions challenged
`[* 18] by Concordia. Any perceived weaknesses in the
`evidentiary support for Dr. Fassett's opinions can be
`appropriately
`addressed
`on
`cross-examination.
`Accordingly, Concordia's motion to exclude Dr. Fassett's
`opinions will be denied.
`
`III. Hofmann
`
`Concordia retained I van Hofmann to analyze and
`quantify the financial damages Concordia experienced as
`a result of the pharmaceutical database listings for
`Method's Me-PBHyos products. Hofmann concluded that
`Donnatal prescriptions and sales would have been higher
`"but for" the listings. Hofmann Rep. ,r 79. He calculated
`
`lost profit damages based on lost Donnatal prescriptions
`and lost unit sales of Donnatal products. Hofmann
`ultimately opined that Concordia experienced "no less
`than $29.4 million" in lost profits from June 2014 to June
`2015 "due to the listing of Me-PB-Hyos" in the
`pharmaceutical databases. Hofmann Rep. ,r 81.
`
`After carefully considering Hofmann's report and the
`portions of his deposition testimony provided by the
`parties, the court concludes that Hofmann's opinion
`regarding the amount of lost profit damages incurred by
`Concordia must be excluded. Specifically, the court finds
`that Concordia has failed to establish that Hofmann's lost
`[* 19] profit calculations were "the product of reliable
`principles and methods" that were "reliably applied" to
`the particular facts of this case. Wilson, 484 F.3d at 274.
`The methodology employed by Hofmann in reaching his
`conclusions failed to take into account numerous market
`factors that could have affected Donnatal sales and
`prescriptions, and was based on selectively chosen data
`and unsupported assumptions.
`
`For instance, Hofmann concluded that the listings for
`Method's Me-PB-Hyos products, which were never
`manufactured or sold, were the sole cause of the
`reduction in Donnatal prescriptions and sales from June
`2014 to June 2015, and that the significant increases in
`the prices of Donnatal products played no role in the
`decline.
`In determining that Donnatal prescription
`volume is "generally unaffected by price increases,"
`Hofmann purportedly considered whether "historical
`price increases"
`resulted in decreased Donnatal
`prescriptions. Hofmann Rep. ,r,r 48-55. However, he
`limited his analysis to two price increases in 2012, which
`were implemented at a time when existing inventories of
`competing generic products were being eliminated from
`the market. Hofmann completely disregarded a price
`increase that was implemented [*20] in December of
`2013, which was followed by a reduction in prescription
`volume and unit sales. The timing of this particular price
`increase is particularly relevant, since it occurred after
`generic PBA products had been removed from the
`market, but before Method's products were listed with the
`pharmaceutical databases. Nonetheless, it was not
`addressed in Hoffman's analysis of historical price
`increases. Concordia has failed to prove that the selective
`analysis employed by Hofmann in evaluating the effect of
`increased prices was predicated on a scientifically sound
`or reliable methodology.
`
`

`

`•
`
`2016 U.S. Dist. LEXIS 50221, *20
`
`Page 7
`
`Additionally, in calculating lost profits, Hofmann
`failed to consider numerous other market factors that
`could have contributed to the decline in Donnatal sales
`and prescriptions. For instance, in 2013 and 2014, after
`the price of Donnatal was significantly increased and
`generic versions were no longer available, Donnatal was
`removed from certain health plan formularies. These
`formulary changes were not addressed in Hofmann's
`report. Nor was the impact of newer drugs available for
`the treatment of IBS, which, unlike Donnatal, have been
`approved for effectiveness by the FDA. Likewise,
`Hofmann did not [*21] consider whether sales of
`Donnatal were affected by marketing initiatives or
`pricing strategies utilized by competitors in the IBS
`market. Instead, aside from discussing select price
`increases, Hofmann's report is devoid of any discussion
`of other factors that could have contributed to the lost
`profits that Concordia allegedly experienced during the
`time period at issue.
`
`The court is convinced that this methodological flaw
`also renders Hofmann's lost profit calculations unreliable.
`See, e.g., MyGallons LLC v. U.S. Bancorp, 521 F. App'x
`297, 307 (4th Cir. 2013) (holding that the district court
`abused its discretion in allowing testimony by a damages
`expert that did not rest on "the requisite 'reliable
`foundation' that was required for such testimony," and
`emphasizing that the expert's projections "ignored
`business realities and relied on sheer speculation");
`Pharmanetics, Inc. v. Aventis Pharms., Inc., 182 F. App'x
`267, 271 (4th Cir. 2006) (affirming the district court's
`decision to exclude expert testimony on lost sales, where
`the expert assumed that only the defendant's actions
`caused the plaintiffs losses and failed to consider other
`factors that would have caused lost sales); MicroStrategy
`Inc. v. Business Objects, S.A., 429 F.3d 1344, 1355 (Fed.
`Cir. 2005) ( emphasizing that district courts have "the
`responsibility to exclude an expert opinion that overlooks
`factors that render the testimony unreliable and/or [*22]
`speculative"). Even if these other market factors "may not
`have made a difference in the ultimate outcome of his
`analysis," Hofmann's failure to consider them, or to offer
`an explanation for his failure, creates "enough of a doubt
`as to the overall reliability of [his] opinions as to render
`them inadmissible." Smithers v. C&G Custom Module
`Hauling, 172 F. Supp. 2d 765, 771 (E.D. Va. 2000).
`
`The reliability of Hofmann's lost profits calculations
`is further undermined by the fact that they were based on
`assumptions unsupported by the record. For instance,
`
`Hofmann assumed that the database listings for Method's
`products had the same effect on the sales of Donnatal
`tablets and elixir. However, this assumption is contrary to
`the very evidence on which Hofmann relied. In his report,
`Hofmann cited extensively to a declaration executed by
`Aaron Hullett, a sales director for Concordia, in which
`Hullett noted that unit sales of Donnatal tablets decreased
`dramatically after Me-PB-Hyos was
`listed with
`Medi-Span and First Databank. While Hullett went on to
`note that Donnatal is also available as an elixir, he did not
`attempt to attribute the decline in elixir sales to the
`presence of Me-PB-Hyos in the pharmaceutical
`databases. Instead, Hullett acknowledged that "the
`majority [*23] of [elixir] sales are to hospitals, which
`generally do not rely on drug databases for purchasing in
`the same manner as pharmacists." Hullett Dec. 11, 2014
`Deel. ~ 9 ( emphasis added).
`
`Even though Hullett expressly recognized that the
`database listings for Me-PB-Hyos would have had a
`lesser impact on the sales of Donnatal elixir, Hofmann
`nonetheless included 100% of the decline in sales of
`sixteen ounce bottles of Donnatal elixir in his damages
`calculation. See Hofmann Rep. 31-32 (attributing 17,190
`lost unit sales of elixir to Method). The court agrees with
`Method that Hofmann's failure to account for the
`distinction recognized by Hullett further undermines the
`reliability of Hofmann's lost profit calculations, as does
`his failure to address the fact that sales of Donnatal
`tablets and elixir followed the same trajectory during the
`period of alleged harm. See Tyger Constr. Co. v.
`Pensacola Constr. Co., 29 F.3d 137, 142 (4th Cir. 1994)
`( emphasizing that " [ a ]n expert's opinion as to damages
`must be causally related to the alleged harm" and "should
`be excluded when it is based on assumptions which are
`speculative and are not supported by the record").
`
`For these and other reasons cited by Method, the
`court will exclude Hofmann's opinion that Concordia
`suffered "no less [*24] than $29.4 million" in lost profits
`from June 2014 through June 2015 "due to the listing of
`Me-PB-Hyos" in the pharmaceutical databases. Hofmann
`Rep. ~ 81. To the extent Concordia argues that Method's
`criticisms of Hofmann's report go more to the weight of
`his expert testimony than its admissibility, the court
`disagrees. Concordia has simply not met its burden of
`showing that Hofmann's lost profits calculations rest
`upon a sufficient factual basis and a reliable application
`of established principles and methods. Accordingly, his
`opinion as to the total amount of lost profit damages
`
`

`

`2016 U.S. Dist. LEXIS 50221, *24
`
`Page 8
`
`incurred by Concordia must be excluded under Rule 702,
`Daubert, and its progeny.3
`
`3 As the court noted in ruling on the parties'
`cross-motions for summary judgment, the court's
`decision to limit the opinions offered by Hofmann
`does not necessarily preclude him from testifying
`altogether. His specialized knowledge could still
`assist the jury in other ways, and Concordia may
`present objective data and elicit other factual
`testimony from Hofmann to support its claim for
`damages.
`
`IV. Wills
`
`Method retained John Wills as a rebuttal damages
`expert. Wills did not attempt to offer his own opinion
`regarding the amount of damages [*25] suffered by
`Concordia. Instead, he evaluated Hofmann's report and
`ultimately opined that the lost profit damages compiled
`by Mr. Hofmann "are speculative and inconsistent with
`the facts in this case." Wills Rep. 2.
`
`In light of the court's decision to exclude Hofmann's
`opinion on the amount of lost profit damages incurred by
`Concordia, it appears that Wills' rebuttal opinions are no
`longer relevant and that his attendance at trial may be
`
`unnecessary. Accordingly, the motion to exclude Wills'
`rebuttal opinions will be dismissed without prejudice.
`Should Method ultimately elect to call Wills as a witness
`and elicit expert opinions from him, the court will revisit
`the admissi