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Dr. Reddy’s Laboratories Settles on Eve of Trial – Agrees to Cooperate with Plaintiffs

Much has happened since our last post on the Nexium “pay for delay” class action lawsuit. Jury selection began in the District of Massachusetts on Monday, October 20, 2014. The day prior, one of the generic drug makers, Dr. Reddy’s Laboratories (“DRL”), settled with the plaintiffs and agreed to cooperate in plaintiffs’ case against AstraZeneca, Teva Pharmaceutical Industries, and Ranbaxy Inc.

Plaintiffs’ primary claim is that AstraZeneca made an Actavis-type large payment to Ranbaxy, Teva, and DRL to keep their generic drugs off the market. Thus, plaintiffs argue, they were forced to pay higher prices for Nexium.

Prior to the settlement, Judge Young made an evidentiary ruling that limits plaintiffs’ plans for their case-in-chief. He quashed a subpoena from the plaintiffs seeking to require Covington & Burling LLP partner, Timothy Hester, to give live trial testimony. The plaintiffs sought Mr. Hester’s testimony because allegedly he “was at the center of a small team of AstraZeneca negotiators who negotiated, evaluated, and authorized the challenged agreements on behalf of AstraZeneca.” Defendants argued plaintiffs had failed to show “good cause” that the live testimony was necessary when they had a four-hour prerecorded deposition of Mr. Hester taken last year.

In a post-settlement evidentiary ruling, Judge Young further curtailed plaintiffs’ case-in-chief and granted defendants’ motion to exclude as hearsay the statements made by Ranbaxy’s former CEO to news reporters. Plaintiffs had listed as trial exhibits several news articles reporting that former CEO Malvinder Singh had said, “The combined revenue potential for Ranbaxy out of the settlements reached with AstraZeneca is at $1.25-1.5 billion between now and 2014.” Judge Young not only granted defendants’ motion in limine to exclude those articles, but said he would not accept any expert’s opinion based in whole or part on that statement.

Both evidentiary rulings may prove a substantial setback to plaintiffs’ case because plaintiffs had relied on those statements in their complaints and briefs as well as in their expert reports. DRL’s testimony, however, may be able to replace the testimony and evidence now excluded from the plaintiffs’ case.