Insurance Expert Relies on Economic Theories and Market Research in Pharmaceutical Dispute

    Zach Barreto

    Written by
    — Updated on June 22, 2021

    Insurance Expert Relies on Economic Theories and Market Research in Pharmaceutical Dispute

    Court: United States District Court for the Eastern District of Pennsylvania
    Jurisdiction: Federal
    Case Name: Blue Cross Blue Shield Ass’n v. GlaxoSmithKline LLC
    Citation: 2019 U.S. Dist. LEXIS 168107

    A group of health insurance firms alleges they purchased improperly manufactured pharmaceutical drugs. They retain an insurance expert to opine on damages. But the defendant says the expert made legal conclusions and failed to explain her economic rationale for damages.

    The court says otherwise. It explains the expert provided admissible evidence and methodology as the basis for her opinions. The defense failed to demonstrate how the expert’s testimony was unreasonable. Here, the court says the opposition only questioned the weight of the expert’s testimony—not its admissibility.

    Facts

    In this case, 38 private health insurance firms comprised the plaintiff group. The plaintiffs bought billions of dollars worth of adulterated pharmaceutical drugs from the defendant, a large pharmaceutical company. The plaintiffs asserted they purchased the drugs under false pretenses. They claimed the defendant misrepresented the pharmaceuticals as being manufactured in compliance with the FDA’s Good Manufacturing Practices. The plaintiffs alleged that the drugs had no worth. Further, the plaintiffs said if they knew the truth, they would not have made this purchase. The plaintiffs retained an insurance expert witness to testify on damages.

    The Plaintiffs’ Insurance Expert Witness

    The plaintiffs’ insurance expert witness was an associate professor at Questrom School of Business at Boston University. Additionally, she was an economist at the Center for Drug Evaluation and Research with the FDA. She based her analysis on the prescription drugs market and price in the United States. The insurance expert opined that drugs manufactured outside of the FDA’s guidance have no economic value. Applying the economic theory of supply and demand, the expert opined that there could be no valid supply curve to determine economic value. She reasoned this was because the FDA forbids the selling of adulterated products.

    The insurance expert witness also determined that, since the defendant produced and sold non-compliant medications, the plaintiffs were charged for illegal goods of no economic value. As a result, the expert estimated the cumulative damages for all plaintiffs to be $2.82 billion. Further, she calculated the actual damages for each plaintiff to be between $3.3 million and $483.7 million.

    The defendant sought to exclude the plaintiff’s insurance expert witness’s testimony on four grounds. Firstly, the defendant claimed the expert impermissibly based her testimony on the legal interpretation of the FDA. Secondly, they argued the expert didn’t provide a credible economic rationale for her opinion. Thirdly, the defendants claimed she inappropriately regurgitated the plaintiffs’ claims. And fourthly, they asserted the expert failed to account for the rebates the plaintiffs obtained for their purchase.

    Discussion

    The court first noted that the expert’s opinion did not give rise to an impermissible legal inference. It observed that the insurance expert based her opinions on FDA regulations and her own previous experience working with pharmaceutical companies. The court also noted that the expert relied on textbooks, peer-reviewed journal articles, industry studies, and generally accepted economic theories of supply and demand. Thus, the court found her opinions to be reliable. The court believed the defense’s claims of her report being speculative and conclusory affected the weight of her testimony and not its admissibility.

    The court also addressed the defendant’s claim that the expert simply repeated the plaintiffs’ claims. Here, the court explained it did not see the justification to exclude. Further, in response to claims of uncredible economic theory, the court again didn’t see the justification. The court explained this argument was also focused on the credibility and weight of the opinion, not on the admissibility.

    Finally, the court explained that the expert’s damages calculation of damages was not invalid. The defendant pointed out the expert had not included rebates and argued the amount should be lower. But the court stated this was not grounds for exclusion. Instead, it demonstrated a question of the fact that the jury must resolve. This issue required the determination of credibility and a comparison of the methodology of each expert.

    Ruling

    The court denied the defendant’s motion to exclude the insurance expert witness’s testimony.

    Key Takeaways for Experts

    This case demonstrates the importance of providing your full rationale and sources as an expert. The opposition will often try to poke holes in your testimony. But with peer-reviewed publications and industry-accepted literature as your rationale, you’ll avoid admissibility issues.

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