In Re Pharm. Industry Average Wholesale Price Lit.

United States Court of Appeals
For the First Circuit

No. 08-1056

IN RE PHARMACEUTICAL INDUSTRY AVERAGE
WHOLESALE PRICE LITIGATION

BLUE CROSS BLUE SHIELD OF MASSACHUSETTS, et al.,

Plaintiffs, Appellees,

v.

ASTRAZENECA PHARMACEUTICALS LP,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Patti B. Saris, U.S. District Judge]

Before

Howard, Circuit Judge,
Zobel* and Lisi,** District Judges.

Mark E. Haddad, with whom Nitin Reddy, Carter G. Phillips,
Sidley Austin LLP, D. Scott Wise, Michael S. Flynn, Kimberley D.
Harris, Davis Polk & Wardwell, Donald R. Ware, Sarah Cooleybeck and
Foley Hoag LLP, were on brief for appellant.
Steve W. Berman, with whom Sean R. Matt, Hagens Berman Sobol
Shapiro LLP, Jeffrey Kodroff, John A. Macoretta, Spector, Roseman

*
Of the district of Massachusetts, sitting by designation.
**
Of the District of Rhode Island, sitting by designation.
& Kodroff, P.C., Marc H. Edelson, Hoffman & Edelson, Thomas M.
Sobol, Edward Notargiacomo, Hagens Berman Sobol Shapiro LLP,
Kenneth A. Wexler, Jennifer Fountain Connolly and Wexler Toriseva
Wallace LLP, were on brief for appellants.
Gregory G. Katsas, Assistant Attorney General, Michael J.
Sullivan, United States Attorney, Michael S. Raab and Eric Fleisig-
Greene, Attorneys, Appellate Staff, Civil Division, United States
Department of Justice, on brief for amicus curiae United States in
partial support of appellees and in partial support of affirmance.

September 23, 2009
 HOWARD, Circuit Judge. AstraZeneca Pharmaceuticals LP

("AstraZeneca") appeals from the judgment of the district court,

entered after a lengthy bench trial, of liability for unfair and

deceptive business practices in violation of Massachusetts General

Laws Chapter 93A ("Chapter 93A"). In re Pharm. Indus. Average

Wholesale Price Litig., 491 F. Supp. 2d 20 (D. Mass. 2007). The

district court found that AstraZeneca had caused the publication of

false and inflated average wholesale prices ("AWPs"), a price used

as a benchmark for various reimbursement plans, for its physician-

administered drug Zoladex (goserelin acetate), thereby creating a

windfall for the appellant's physician customers and causing injury

to the government, insurers, and patients who were forced to pay

inflated prices. AstraZeneca now brings a panoply of challenges to

the district court's reasoning and result. Discerning no material

factual or legal infirmity in the district court's disposition of

the case, we affirm.

I. BACKGROUND

A. The Plaintiffs' Claims

This appeal arises out of a nationwide, multi-district

class action involving the pricing of physician-administered drugs

that were reimbursed by Medicare, private insurers, and patients'

coinsurance payments. The challenged drug prices were those based

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on AWP from 1991 through 2003.1 The plaintiffs alleged in the

district court that certain pharmaceutical companies, including

AstraZeneca, violated Massachusetts' consumer protection statute by

reporting AWPs that did not reflect the physicians' actual

acquisition cost, or anything close to it, and thereby led the

plaintiffs to overpay.

The core of the plaintiffs' claim is that the published

AWPs for the drugs at issue did not reflect the discounts and

rebates that the drug manufacturers offered to physician providers.

Because AWPs were published in commercial publications (Red Book,

Medispan, and First DataBank) and used as the predominant benchmark

for calculating reimbursement, insurance, and coinsurance payments,

the class plaintiffs alleged that inflating AWPs over the actual

acquisition cost created a "spread" between the benchmark for the

providers' reimbursement and the actual acquisition costs that the

providers incurred.2 This allowed the providers to buy the drug at

a secret, lower price while being reimbursed for it at a public,

1
While the plaintiffs relevant to this appeal originally
complained of conduct dating as far back as 1991, the district
court found that the statute of limitations barred all claims
before December 1997. In re Pharm., 491 F. Supp. 2d at 31-32.
That ruling is not challenged in this appeal.
2
Claims against Medispan and First DataBank, which are not
part of this appeal, are fully described elsewhere. See Nat'l
Ass'n of Chain Drug Stores v. New England Health Benefits Fund,
Nos. 09-1577, 1578, 1579, 1580, ___ F.3d ___, 2009 WL 2824867 (1st
Cir. Sept. 3, 2009); New England Carpenters Health Benefits Fund
v. First DataBank, Inc., 244 F.R.D. 79 (D. Mass. 2007).

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higher price, thereby creating a windfall each time a provider

administered one of the drugs at issue. The plaintiffs further

alleged that the defendant pharmaceutical companies then "marketed

the spread" -- that is, advertised the potential windfall to

providers -- in an attempt to increase the market share of their

drugs over the competition. Motivating the plaintiffs' complaints,

of course, is the fact that an increase to the AWPs directly

resulted in an increase to the payments the plaintiffs were

required to make in the form of reimbursement, insurance, or

coinsurance. According to the district court's "representative"

examples, markups to AWPs were significant and unpredictable,

ranging from 27.0% to 1131.7%, depending on the drug and the year.

The plaintiffs' claims against AstraZeneca, discussed in

detail below, relate to just one drug: Zoladex, an injectable,

physician-administered drug that is primarily used to treat

prostate cancer. Throughout the class period, Zoladex was a

single-source drug -- that is, it did not face competition from a

generic version of the same drug -- although it did face direct

therapeutic competition from TAP Pharmaceuticals' product Lupron

(leuprolide), which was also an injectable physician-administered

drug.

B. Procedural History

The multidistrict litigation of which this case is a part

is comprised of nearly one hundred cases involving AWP brought

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against more than forty pharmaceutical defendants. The cases

include the consumer and third-party payor class action lawsuit at

issue here as well as lawsuits brought by several states, counties,

and cities, and at least one qui tam lawsuit brought under the

False Claims Act, 31 U.S.C. § 3729 et seq.

To manage this sprawling litigation, in March 2004 the

district court structured the master consolidated class action into

two separate tracks of defendants for purposes of class

certification, summary judgment and trial. AstraZeneca was

separated into "Track 1," the first of these groups to proceed

through trial (and the only track at issue here). See In re Pharm.

Industry Average Wholesale Price Litig., 230 F.R.D. 61, 65 n.1 (D.

Mass. 2005).

In January 2006, the district court then certified three

classes: (1) a nationwide class of Medicare beneficiaries who made

co-payments for Medicare Part B drugs ("Class 1");3 (2) a

Massachusetts class of third-party payors that provided MediGap

insurance which reimbursed Medicare beneficiaries for their co-

payments for Medicare Part B drugs ("Class 2");4 and (3) a

3
The claims of Class 1 are not at issue in this appeal.
4
"Class 2: Third-Party Payor MediGap Supplemental Insurance
Class" is defined as:

All Third-Party Payors who made
reimbursements for drugs purchased in
Massachusetts, or who made reimbursements for
drugs and have their principal place of

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Massachusetts class of customers and third-party payors that made

payments based on AWP for (non-Medicare Part B) physician-

administered drugs ("Class 3").5 See In re Pharm. Indus. Average

Wholesale Price Litig., 233 F.R.D. 229, 230-31 (D. Mass. 2006).

business in Massachusetts, based on AWP for a
Medicare Part B covered Subject Drug that was
manufactured by AstraZeneca (AstraZeneca, PLC,
Zeneca, Inc., AstraZeneca Pharmaceuticals
L.P., and AstraZeneca U.S.) . . . .

In re Pharm. Indus. Average Wholesale Price Litig., 233 F.R.D. 229,
231 (D. Mass. 2006).

5
"Class 3: Consumer and Third-Party Payor Class for Medicare
Part B Drugs Outside of the Medicare Context" is defined as:

All natural persons who made or who
incurred an obligation enforceable at the time
of judgment to make a payment for purchases in
Massachusetts, all Third-Party Payors who made
reimbursements based on contracts expressly
using AWP as a pricing standard for purchases
in Massachusetts, and all Third-Party Payors
who made reimbursements based on contracts
expressly using AWP as a pricing standard and
have their principal place of business in
Massachusetts, for a physician-administered
Subject Drug that was manufactured by
AstraZeneca (AstraZeneca, PLC, Zeneca, Inc.,
AstraZeneca Pharmaceuticals L.P., and
AstraZeneca U.S.) . . . . Included within
this Class are natural persons who paid
coinsurance ( i.e., co-payments proportional
to the reimbursed amount) for a Subject Drug
purchased in Massachusetts, where such
coinsurance was based upon use of AWP as a
pricing standard. Excluded from this Class
are any payments or reimbursements for generic
drugs that are based on [Maximum Allowable
Cost] and not AWP.

In re Pharm., 233 F.R.D. at 231.

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 Prior to trial on the claims against the Track 1

defendants, the district court entertained cross-motions for

summary judgment arguing the meaning of the term "average wholesale

price" in the Medicare statute, 42 U.S.C. § 1395u(o) (1998). In

November 2006, the district court construed the statutory term to

mean "the average price at which wholesalers sell drugs to their

customers, including physicians and pharmacies," and including

discounts and rebates. In re Pharm. Indus. Average Wholesale Price

Litig., 460 F. Supp. 2d 277, 278, 288 (D. Mass. 2006).

In June 2007, after a twenty-day bench trial including

nearly forty witnesses and hundreds of documents and deposition

transcripts, the district court issued a lengthy order finding

AstraZeneca liable under Chapter 93A for the claims brought by the

Class 2 and Class 3 plaintiffs. In re Pharm., 491 F. Supp. 2d at

31. The court found that:

AstraZeneca acted unfairly and
deceptively by causing the publication of
false and inflated average wholesale prices
for Zoladex which grossly exceeded actual
physician acquisition costs by as much as 169%
and then marketing these mega-spreads between
the physician's acquisition costs and the AWP
reimbursement benchmark in order to induce
doctors to buy its drug based on the drug's
profitability [rather than its therapeutic
benefits]. The spread on Zoladex exceeded
100% from 1998 forward.

Id. The district court then awarded aggregate, class-wide damages

to both Class 2 and Class 3. Id. In a later order, the district

court found that AstraZeneca's conduct as to Class 2 was knowing

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and willful, and awarded multiple damages; it declined, however, to

make the same finding as to Class 3. In re Pharm. Indus. Average

Wholesale Price Litigation, 520 F. Supp. 2d 267, 272, 273 (D. Mass.

2007).6 The award against AstraZeneca (including prejudgment

interest through August 1, 2007) reached nearly $13,000,000.

AstraZeneca appeals.

II. STANDARDS OF REVIEW

"When a district court conducts a bench trial, its legal

determinations engender de novo review." United States v. 15

Bosworth Street, 236 F.3d 50, 53 (1st Cir. 2001); see also Ahern v.

Scholz, 85 F.3d 774, 798 (1st Cir. 1996). This includes questions

of statutory interpretation, Gen. Motors Corp. v. Darling's, 444

F.3d 98, 107 (1st Cir. 2006), and determinations about the

sufficiency of the evidence in a bench trial, 15 Bosworth Street,

236 F.3d at 53.

In contrast, findings of fact made after a bench trial

are reviewed for clear error. Williams v. Poulos, 11 F.3d 271, 278

(1st Cir. 1993); Fed. R. Civ. P. 52(a)(6). "In other words, we

6
While the district court was authorized to treble the damages
as to Class 2 based on a finding that the conduct was knowing or
willful, Mass. Gen. Laws ch. 93A, § 9(3A), it elected instead only
to double the damages in recognition of the fact that "AstraZeneca
was not the first to start the unlawful spread-marketing," and that
AstraZeneca "tried to alleviate the impact of its conduct by
providing free drugs to consumers, and initiating alternative
methods for selling drugs . . . through a program [not pegged to
AWP], which unfortunately turned out to be unsuccessful." In re
Pharm., 520 F. Supp. 2d at 272.

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will give such findings effect unless, after carefully reading the

record and according due deference to the trial court's superior

ability to judge credibility, we form a strong, unyielding belief

that a mistake has been made." Williams, 11 F.3d at 278 (internal

quotation marks omitted); see also 15 Bosworth Street, 236 F.3d at

53 ("This deference comports with common sense: a judge, sitting

jury-waived, has the opportunity to see and hear the witnesses at

first hand and to immerse himself in the nuances of the proof.

Consequently, the appellate process ought to respect the trial

judge's superior 'feel' for the case and his enhanced ability to

weigh and evaluate conflicting evidence." (citing Anderson v. City

of Bessemer City, 470 U.S. 564, 574-75 (1985))).

"A ruling that conduct violates Chapter 93A is a legal,

not a factual, determination. Although whether a particular set of

acts, in their factual setting, is unfair or deceptive is a

question of fact, the boundaries of what may qualify for

consideration as a Chapter 93A violation is a question of law."

Incase Inc. v. Timex Corp., 488 F.3d 46, 56-57 (1st Cir. 2007)

(internal quotation marks and citations omitted).

Other standards of review applicable to specific issues

in AstraZeneca's appeal are set forth in the discussions that

follow.

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III. THE DISTRICT COURT'S DEFINITION OF "AVERAGE WHOLESALE PRICE"

AstraZeneca's initial challenge is to the district

court's definition of "average wholesale price" as that term is

used in the Balanced Budget Act of 1997, Pub. L. No. 105-33, 111

Stat. 251 (the "BBA"). According to AstraZeneca, the district

court erred in concluding that the term should be interpreted in

accordance with the alleged "plain meaning" of those words, which

the district court determined to be the average of actual wholesale

prices paid by providers, net of discounts and rebates.

AstraZeneca argues that the plain meaning analysis was

inappropriate because, inside the pharmaceutical industry, the term

had long referred to the list prices in the industry publications

-- such as Red Book, Medispan, and First DataBank -- and not actual

transaction prices. Congress and the relevant regulators were

aware of that industry usage and, AstraZeneca argues, they adopted

it for purposes of the BBA; and AstraZeneca therefore should not be

subject to liability for conduct consistent with the federal

Medicare scheme. We disagree.

A. The History of "Average Wholesale Price" in the BBA

Congress created Medicare Part B in 1965 to establish a

supplemental medical insurance program for senior and disabled

citizens. See 42 U.S.C. §§ 1395j-1395w-4. The Secretary of the

Department of Health and Human Services ("DHHS") oversees the

program, and the Centers for Medicare and Medicaid Services

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("CMS"), formerly known as the Health Care Financing Administration

("HCFA"), administers it. See id. Among its services, Medicare

Part B provides insurance for physician services, for which it has

historically paid a "reasonable charge" limited to the lowest of

the physician's actual charge, the physician's customary charge, or

the prevailing charge in the relevant locality for similar

services. See 42 U.S.C. §§ 1395l(a), 1395u(b); 42 C.F.R. §§

405.500 et seq. For covered prescription or physician-administered

drugs, Medicare Part B reimburses providers for up to eighty

percent of the allowable cost, and the program's beneficiary pays

the remaining twenty percent as a co-payment. See 42 U.S.C. §

1395l; Montana v. Abbot Labs., 266 F. Supp. 2d 250, 252 (D. Mass.

2003).

The term "average wholesale price" has not always

featured in the Medicare Part B repayment lexicon. Prior to 1991,

the standard for Medicare reimbursement was the "reasonable charge"

of the covered services rendered. See 42 U.S.C. §§ 1395l,

1395u(o). In 1991, the Secretary of DHHS promulgated a new rule

"set[ting] forth a fee schedule for payment for physicians'

services" that incorporated the term "average wholesale price."

Medicare Program; Fee Schedule for Physicians' Services, 56 Fed.

Reg. 59,502, 59,502 (Nov. 25, 1991) (final rule). Notably, five

months earlier, AWP was not part of the Secretary's proposed rule:

although the Secretary believed that "ultimately there should be a

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national fee schedule" for reimbursement, he concluded that "the

large number of different drugs and the myriad . . . dosage levels"

made such a schedule impractical. Medicare Program; Fee Schedule

for Physicians' Services, 56 Fed. Reg. 25,792, 25,800 (June 5,

1991) (proposed rule). The Secretary's proposed rule therefore

settled instead on continuing the "reasonable charge" regime that

was already in place, proposing to reimburse at a rate of "85

percent of the national wholesale price." Id. The Secretary

proposed that reimbursement level because "the Red Book and other

wholesale price guides substantially overstate the true cost of the

drugs" by failing to reflect "an average discount of 15.9 percent

off the published wholesale price." Id. After receiving "a great

many comments" on the proposed rule pointing out that, for

providers, "many drugs could be purchased for considerably less

than 85 percent of AWP . . . while others were not discounted," and

that individual physicians often paid more for drugs than did

pharmacies or large practices, the Secretary modified the proposed

policy. 56 Fed. Reg. at 59,524-59,525. The final promulgated

rule, effective January 1, 1992, stated:

(b) Methodology. Payment for a drug
described in paragraph (a) of this section is
based on the lower of the estimated acquisition
cost or the national average wholesale price of
the drug. The estimated acquisition cost is
determined based on surveys of the actual
invoice prices paid for the drug. In
calculating the estimated acquisition cost of
a drug, the carrier may consider factors such
as inventory, waste, and spoilage.

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 (c) Multiple-Source drugs. For multiple-
source drugs, payment is based on the lower of
the estimated acquisition cost described in
paragraph (b) of this section or the wholesale
price that, for this purpose, is defined as the
median price for all sources of the generic
form of the drug.

56 Fed. Reg. at 59,621 (promulgating 42 C.F.R. § 405.517 (1992))

(emphasis added). In promulgating the rule, the Secretary added

that, to determine the estimated acquisition cost, "[c]arriers

could survey a sample of the physicians who furnish the drugs to

obtain cost information," or, "[a]s an alternative, carriers could

request that physicians periodically provide cost information when

they submit claims for payment for the drugs."7 Id. at 59,525.

The reimbursement scheme was augmented again by the BBA,

prompted in part by concerns that the "average wholesale price" was

little more than a sticker price bearing little resemblance to the

actual acquisition costs of the reimbursed drugs. For instance,

the Senate Committee on Finance heard testimony from the Secretary

of DHHS that "the AWP is not the average price actually charged by

wholesalers to their customers . . . [r]ather, it is a 'sticker'

price set by drug manufacturers and published in several commercial

7
The United States, appearing as amicus curiae, notes that the
part of this regulation requiring individual carriers to estimate
the actual acquisition costs of covered drugs, and to base drug
payments on the lower of the resulting estimate or the average
wholesale price for each drug, was never implemented due to the
Office of Management and Budget's concerns about the associated
paperwork and reporting burdens.

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catalogs." President's Fiscal Year 1998 Budget Proposal for

Medicare, Medicaid, and Welfare: Hearing Before the S. Comm. on

Finance, 105th Cong. 265 (1997) (statement of Donna E. Shalala,

Secretary of Health and Human Services); see In re Pharm., 460 F.

Supp. 2d at 280-81. Similarly, a report from the House of

Representatives Committee on the Budget noted that "over the past

several years," Medicare had been reimbursing certain drugs at

rates far above providers' actual acquisition costs, sometimes

nearly 1000 percent higher. H.R. Rep. No. 105-149, at § 10616

(1997); see In re Pharm., 460 F. Supp. 2d at 281. The committee

therefore stated its intention that the Secretary of DHHS, "in

determining the average wholesale price, should take into

consideration commercially available information including such

information as may be published or reported in various commercial

reporting services." H.R. Rep. No. 105-149, at § 10616; see In re

Pharm., 460 F. Supp. 2d at 281.

Based on these concerns, the BBA amended the relevant

Medicare statute to state that "the amount payable for the drug or

biological is equal to 95 percent of the average wholesale price."

42 U.S.C. §§ 1395u(o) (West 1998) (emphasis added). The BBA also

directed the Secretary of DHHS to "study the effect on the average

wholesale price of drugs and biologicals" of the statutory change,

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and to report its findings to separate House and Senate committees.

42 U.S.C. § 4556(c) (West 1998).8

Roughly a year later, the DHHS regulations were amended

to reflect the new statutory provision. See Medicare Program;

Revisions to Payment Policies and Adjustments to the Relative Value

Units Under the Physician Fee Schedule for Calendar Year 1999, 63

Fed. Reg. 58,814, 58,905 (Nov. 2, 1998) (codified as 42 C.F.R. §

405.517 (1999)). In the process, HCFA noted that "the law does not

define the term 'average wholesale price,'" but nonetheless

interpreted the term for regulatory purposes to require that, "when

there is an array of charges, the median is an appropriate measure

of central tendency." Id. at 58,849.

As for the DHHS's study on the effect of the statutory

change, the results were delivered to Congress in 1999. The

Secretary included a history of Medicare drug reimbursement noting

that "[f]or the past 13 years, the Office of Inspector General . .

. has issued a series of reports that consistently show a finding

that the Medicare program overpays for the drugs . . . it covers."

It further noted that DHHS's attempt to fix the problem -- a

proposal in the 1997 budget to base payment on the lower of the

billed charge or the actual acquisition cost for the relevant drug

8
The House of Representatives Committee on the Budget had
also stated that it "will monitor AWPs to ensure that this
provision does not simply result in a 5% increase in AWPs." H.R.
Rep. No. 105-149, at § 10616; see In re Pharm., 460 F. Supp. 2d at
281.

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-- had been "rejected in favor of the current rule, which is to pay

based on the lower of the billed charge, or 95 percent of the AWP."

Rep. to Cong., The Average Wholesale Price for Drugs Covered Under

Medicare, DHHS 1-2 (1999); In re Pharm., 460 F. Supp. 2d at 281-82.

The BBA and the resulting regulations stayed in effect

until 2003, when Congress enacted the Medicare Prescription Drug,

Improvement, and Modernization Act of 2003, Pub. L. No. 108-173,

117 Stat. 2066 ("2003 Act"), but the issue of Medicare

reimbursement remained an active issue both in Congress and at DHHS

throughout that time. In 2000, DHHS announced its intention to

abandon AWP as a reimbursement baseline in favor of an alternative

set of price lists, thereby provoking a letter from two Senators

reminding the agency that "Congress [had] instructed [D]HHS to base

Medicare reimbursement . . . on 95 percent of the 'average

wholesale price,' or AWP, a term widely understood and indeed

defined by [D]HHS manuals to reference amounts reflected in

specified publications." See Letter from Sen. Christopher Bond and

Sen. John Ashcroft to Donna E. Shalala, Secretary of Health and

Human Services (Aug. 3, 2000); In re Pharm., 460 F. Supp. 2d at

282. Later that year, Congress passed an act requiring DHHS to

study the difference between acquisition costs and AWP, and in the

meantime, avoid actions that would "directly or indirectly decrease

the rates of reimbursement . . . under the current medicare payment

methodology . . . ." Medicare, Medicaid, and SCHIP Benefits

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Improvement and Protection Act of 2000, Pub. L. 106-554, § 429(c),

114 Stat. 2763.

In 2001, while testifying before Congress about his

concern that Medicare beneficiaries and taxpayers were paying "far

more than the 'average' price that we believe the law intended them

to pay," the Administrator of CMS stated, "The AWP is intended to

represent the average price at which wholesalers sell drugs to

their customers, which include physicians and pharmacies. . . .

This Committee, CMS, the [DHHS] Inspector General (IG), and others

have long recognized the shortcomings of AWP as a way for Medicare

to reimburse for drugs." Medicare Drug Reimbursements: A Broken

System for Patients and Taxpayers: Joint Hearing Before the

Subcommittee on Health and the Subcommittee on Oversight and

Investigations of the House Commission on Energy and Commerce,

107th Cong. 87-88 (2001) (prepared statement of Thomas Scully,

Administrator, CMS); see In re Pharm., 460 F. Supp. 2d at 282.

This testimony prompted a question from the chairman of the

committee that largely echoes the gravamen of the plaintiffs'

complaint in this class action: "Why on earth do we have a system

that requires a Medicare beneficiary to pay 20 percent as a copay

of an artificial price?" Medicare Drug Reimbursements: A Broken

System for Patients and Taxpayers, 107th Cong. at 95; In re Pharm.,

460 F. Supp. 2d at 282.

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 Finally, in 2003, the DHHS Inspector General issued a

"voluntary compliance" program for the health care industry that

stated, "Where appropriate, manufacturers' reported prices should

accurately take into account price reductions, cash discounts, free

goods contingent on a purchase agreement, rebates, up-front

payments, coupons, goods in kind, free or reduced-price services,

grants, or other price concessions or similar benefits offered to

some or all purchasers." OIG Compliance Program Guidance for

Pharmaceutical Manufacturers, 68 Fed. Reg. 23,731-01, 23,733-27,734

(May 5, 2003).

The term "average wholesale price" was eventually phased

out of the Medicare reimbursement scheme by the 2003 Act, which

stipulated that reimbursements for drugs furnished on or after

January 1, 2005 would be based on either a competitive acquisition

program or an average sales price, a term defined to include all

discounts and rebates. See 42 U.S.C. §§ 1395u(o), 1395w-3, 1395w-

3a, 1395w-3b (2006). Although the 2003 Act retained the term

"average wholesale price" in the interim, the House Committee on

Ways and Means issued a report explaining its understanding of AWP

in more detail, stating, "The term 'AWP' is not defined in statute

or regulation, but generally, AWP is intended to represent the

average price used by wholesalers to sell drugs to their

customers." It continued:

AWPs are not grounded in any real market
transaction, and do not reflect the actual

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 price paid by purchasers. Congress has long
recognized AWP is a list price and not a
measure of actual prices. Congress is now
able to adopt an alternative basis for payment
that will more accurately reflect actual
acquisition costs for physicians. This will
ensure that Medicare no longer bases its
payments on prices that do not reflect prices
otherwise available through market incentives
and transactions.

H.R. Rep. No. 108-178, pt. 2, at 194, 197-98 (2003); In re Pharm.,

460 F. Supp. 2d at 283.

B. The district court's decision of November 2, 2006

In arriving at its plain meaning interpretation of the

term "average wholesale price," see In re Pharm., 460 F. Supp. 2d

277 (D. Mass. 2006), the district court first addressed the

question of whether the term should be interpreted based on its

plain meaning, or whether it is instead a term of art. See U.S. v.

Lachman, 387 F.3d 42, 53 (1st Cir. 2004) ("[T]here are instances

where a statutory or regulatory term is a technical term of art,

defined more appropriately by reference to a particular industry

usage than by the usual tools of statutory construction."). Noting

that "a term must have an established and settled meaning to

constitute a term of art," the district court canvassed the BBA's

legislative history to conclude that "the weight of [this] history

reflects congressional intent to have the AWP moored to actual

wholesale pricing," not to the prices listed in the industry

publications. In so doing, the district court emphasized

Congress's various expressions of "consternation" over its

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"awareness . . . that the pharmaceutical industry was overstating

AWPs for some drugs in the industry publications," and that

therefore "the AWP, as reported, was not a reasonable charge" for

the relevant drugs. It also emphasized the committee report

recommending that Congress order DHHS to take into account

"commercially available information" including, but not limited to,

published AWPs, and to monitor the effects of the new reimbursement

standards to ensure that they were not circumvented by an

offsetting increase in the published AWPs. The district court

further concluded that, despite the existence of "some evidence"

suggesting that the term "average wholesale price" may have had a

settled meaning, "there is also evidence to the contrary," and

therefore the defendants had not carried their burden to show that

the term qualified as a term of art. The district court added that

this conclusion was further merited given that the defendants’

suggested meaning -- to quote the district court's paraphrase,

"that AWP is a term of art for whatever benchmark was placed in

industry publications" -- would lead to absurd results, among them,

"DHHS and Congress would be surrendering all control over Medicare

fiscal responsibility by anchoring Medicare reimbursement to a

metric that is wholly dictated by the pharmaceutical industry."

The district court therefore proceeded with a plain

meaning construction of "average wholesale price," citing

dictionary definitions to arrive at its conclusion that the term

-21-
"include[s] discounts and rebates." In so doing, the district

court relied heavily on what it inferred to be the policy behind

the 1991 reimbursement regulations directing Medicare to reimburse

the lower of the "estimated acquisition cost," based on surveys of

actual acquisition prices, or the "national average wholesale

price." That policy, the district court concluded, was "that the

government gets the benefit of rebates and discounts" by paying the

lower of those two rates. Finally, the district court noted that,

by 2003, the term "average wholesale price" had become a term of

art, finding that by that point "Congress clearly did understand

AWP was different than average sales price and was not reflective

of actual prices in the marketplace."

C. Legal Standards

We review a district court's statutory construction de

novo. Me. People's Alliance & Natural Res. Def. Council v.

Mallinckrodt, Inc. 471 F.3d 277, 286-87 (1st Cir. 2006); Gen.

Motors Corp., 444 F.3d at 107. "The Supreme Court has repeatedly

emphasized the importance of the plain meaning rule, stating that

if the language of a statute or regulation has a plain and ordinary

meaning, courts need look no further and should apply the

regulation as it is written." Textron, Inc. v. Comm'r, 336 F.3d

26, 31 (1st Cir. 2003). This is not to say, of course, that we

always defer to plain language, but the circumstances under which

we look behind plain language are extremely limited, usually

-22-
confined to those "rare cases [in which] the literal application of

a statute will produce a result demonstrably at odds with the

intentions of the drafters, and those intentions must be

controlling" Griffin v. Oceanic Contractors, Inc., 458 U.S. 564,

571 (1982), or where the plain meaning will result in an absurd

outcome, Textron, 336 F.3d at 31 (citing Sullivan v. CIA, 992 F.2d

1249, 1252 (1st Cir. 1993)). Additionally, "where a statutory or

regulatory term is a technical term of art, defined more

appropriately by reference to a particular industry usage than by

the usual tools of statutory construction," we will employ that

industry usage. Lachman, 387 F.3d at 53. But "this canon of

construction requires the disputed term to actually be a technical

term of art." Id. Finally, where a statute is ambiguous, we turn

to the legislative history to determine Congress's intent. Gen.

Motors Corp., 444 F.3d at 108.

D. Discussion

AstraZeneca argues that the district court made two

significant errors. First, it asserts that the district court

erred in holding that "average wholesale price" lacked an

established and settled meaning and was not a term of art.

According to AstraZeneca, the legislative history and legal context

of the term clearly shows an established meaning: it referred to

the prices published in the industry publications, which were known

to exclude discounts. Whatever uncertainty there may have been

-23-
about the term's meaning, the argument continues, was not enough to

justify the district court's conclusion that AWP was not a term of

art. Second, AstraZeneca argues that the district court's "plain

meaning" construction failed to account for the BBA's statutory

context and history. Once the district court concluded that there

was no settled meaning of the term "average wholesale price," its

recourse should have been to the statute's legislative history and

context, not to an alleged "plain meaning," particularly where that

meaning is contrary to congressional intent.

For support, AstraZeneca focuses on four aspects of the

BBA's legislative history and legal context. First, it notes that

when HCFA first adopted the term "AWP" in its 1991 regulations,

that phrase already existed in the industry publications, where it

was used to describe list prices that did not reflect discounts

available in the marketplace. It further notes that during the

rulemaking process, HCFA explicitly referenced the published AWPs,

and even advised Medicare carriers to obtain payment information

from those industry publications.

Second, and taking issue with the district court's

conclusion to the contrary, AstraZeneca argues that Congress was

referring to the AWPs in industry publications when it passed the

BBA in 1997. AstraZeneca relies on the reference to the AWPs

"reported by the manufacturer[s]" contained in the congressional

report accompanying the BBA. See H.R. Rep. No. 105-149, at 1398.

-24-
It also relies on DHHS's failed effort during the 1997 budget

process to change the basis for payment from AWP to providers'

acquisition cost, which was rejected by Congress in favor of the

approach adopted in the BBA. See Rep. to Cong., The Average

Wholesale Price for Drugs Covered Under Medicare, DHHS 1-2 (1999);

In re Pharm., 460 F. Supp. 2d at 281-82.

Third, AstraZeneca argues that the district court's

ruling conflicts with HCFA's own interpretation of the BBA as

expressed, for example, in regulations directing that payment would

be based on 95% of the national AWP as reflected in sources such as

the industry publications even though those amounts were typically

higher than the actual acquisition costs.

Fourth, AstraZeneca argues that the district court's

definition of AWP is inconsistent with subsequent congressional

actions demonstrating that Congress understood and intended that

the statutory AWP standard was a reference to the industry

publications, not to an average of actual transaction costs.

Specifically, AstraZeneca points to the Medicare, Medicaid, and

SCHIP Balanced Budget Refinement Act of 1999, which provided for

"additional payments" to some providers above the fee schedule

amounts set by HCFA, see Pub. L. No. 106-113, 113 Stat. 1501, the

refusal in 2000 to institute a new, alternative price list that

reflected discounts, and the passage of the 2003 Act, which again

used the term AWP, and which was issued with the Inspector

-25-
General's report acknowledging that AWP is not a measure of actual

prices and does not reflect the discounts that manufacturers and

wholesalers customarily offer to providers.

We find these arguments unpersuasive. As an initial

matter, it is a stretch to point to this legislative history and

statutory context for the proposition that AWP was a term of art in

the BBA referring to the prices appearing in the industry

publications. The letter from two Senators discussed above

notwithstanding, Congress at no point adopted such a definition

explicitly. On the contrary, both the DHHS regulation promulgated

in 1991, which we assume Congress was aware of in 1997, and the BBA

itself referred to the "average wholesale price" without reference

to the industry publications.

Moreover, if the history discussed above demonstrates

anything, it is that the precise meaning of "average wholesale

price" was unsettled. In 1991, DHHS was concerned enough about the

elastic definition of the term to specify an alternative metric --

estimated acquisition cost -- against which carriers were required

to double-check claims based on AWP, a clear effort to ensure that

Medicare and its beneficiaries would not be overcharged. When

Congress reviewed this scheme in 1997, committees of both the

Senate and the House heard testimony expressing concern over the

possibility that AWP was merely a sticker price. This testimony

appears to have struck home with at least the House committee,

-26-
which in expressing its intent to instruct DHHS to study the

divergence between AWP and actual acquisition costs, suggested that

DHHS "take into consideration" the industry publications. Were the

prices reported in the industry publications themselves the very

definition of AWP, as AstraZeneca suggests, then such an

instruction would not only be unnecessary, it would be inscrutable.

Finally, in interpreting the BBA and promulgating related

regulations, none of the regulatory agencies explicitly adopted the

purported technical meaning of AWP advanced by AstraZeneca. On the

contrary, in 1998, HCFA noted that "the law does not define the

term," and it directed that the proper definition when there is "an

array of charges" should be the "median" charge, not whatever

charge is listed in the industry publications. Similarly, in 1999,

DHHS described its reimbursement approach as paying "based on the

lower of the billed charge, or 95 percent of AWP" without any

reference to the publications. And in 2001, the Administrator of

CMS testified that AWP is the "average price at which wholesalers

sell drugs to their customers," not the price as listed in the

industry publications. Given these statements expressing

uncertainty as to the meaning of AWP, and given the trial

testimony, discussed in detail below, showing that the Class 2 and

Class 3 plaintiffs were unaware of the size and extent of the

spreads created by AWP inflation, AstraZeneca's contention that the

BBA incorporated a technical term of art is not persuasive. See

-27-
Lachman, 387 F.3d at 53. The district court thus did not err in

refusing to treat the term AWP in the BBA as a term of art.9

AstraZeneca's claim that the district court's

construction failed to take into account the history and context of

the BBA is also unpersuasive. This is not to say that

AstraZeneca's arguments about congressional intent entirely lack

force. On the contrary, AstraZeneca paints a fair picture of

Congress and DHHS attempting to grasp and respond to the

complicated billing practices of the pharmaceutical industry, and

the conclusion AstraZeneca draws -- that Congress and DHHS

intentionally adopted a definition of AWP about which they had

concerns -- is enticing. But in drawing this conclusion,

AstraZeneca has significantly understated Congress's unwavering

commitment to the overarching policy that Medicare reimbursement

should be reasonable and reflective of acquisition costs. This

policy is evident in the "reasonable charge" regime explicitly in

place prior to 1991, and contained in DHHS's proposed rule in 1991.

It can be inferred from the final 1991 rule, which fleshed out what

a "reasonable charge" is by directing reimbursement based on the

9
We also share the district court's concern that Congress
"could not have intended AWP to be a term of art for whatever price
the industry chose to put in the industry publications," for that
would "give the pharmaceutical industry free reign over drug
pricing," and permit the industry to post AWPs "without any
connection to prices in the market." This "absurd outcome"
provides an additional, independent reason to reject AstraZeneca's
purported technical definition. See Textron, 336 F.3d at 31.

-28-
lower of the national average wholesale price or the estimated

acquisition cost, and which encouraged carriers to gather actual

transaction data from physicians to ensure that these reimbursement

bases reflected actual acquisition costs. The policy can also be

seen in the repeated efforts during the late 1990's by DHHS to

solve the problem of AWP becoming a sticker price subject to

manipulation, and in Congress's repeatedly-demonstrated concern

over this problem, as evidenced by its instructions, given on

multiple occasions, for DHHS to monitor the apparent divergence of

the AWP from acquisition costs. It is true, of course, that on

some occasions during the relevant period, Congress appears to have

been more reluctant than DHHS to abolish the role of AWP as a basis

for Medicare reimbursement, and it is also true that various

members of Congress at times expressed their views that the term

AWP referred specifically to the prices reported in the industry

publications. But for each of these historical details there

exists a counterpoint in the record: an act of Congress

demonstrating reluctance about the continued use of AWP, or another

member of Congress expressing an opposing view.

On balance, we read the legislative history and statutory

context to be one of slow adaptation to shadowy industry practices,

not ratification of them. Congress's awareness of and response to

the divergence of AWP from actual acquisition costs during the

1990's was an evolving one: the concerns expressed in 1991 and

-29-
studied in the late 1990's were finally addressed in 2003 (with

solutions implemented in 2005). But throughout this period, there

existed an unwavering commitment to the idea that Medicare and its

beneficiaries should not be subject to overpayments, including

those caused by prices reported in industry publications that

failed to reflect acquisition costs. The legislative history and

statutory context simply do not support the proposition that

Congress was supportive of, or even acquiescent in, a scheme

whereby the AWP represented a sticker price bearing no relation to

actual acquisition costs, thereby leaving Medicare and its

beneficiaries to pay vast multiples above what physicians paid for

the drugs in question.10

10
In its amicus brief, the United States argues that "[t]he
phrase 'average wholesale price' . . . does not grant the
pharmaceutical industry unfettered discretion to report drug prices
that bear no relation to products' actual prices." The government
takes the position that, "[s]ince its inception, Medicare Part B
reimbursement has been based on the principle that providers may
recover only a reasonable charge for their services or drugs. The
introduction of average wholesale price into the Medicare lexicon
. . . did not alter this basic tenet of the program. . . . [B]oth
the text of the statute and the regulation on which it was based
show a clear intent that average wholesale price, like any other
metric for reimbursement under Medicare, reflect the actual price
of the product that program beneficiaries receive." In response to
AstraZeneca's argument that Congress had acquiesced in the practice
of creating mega-spreads, the government notes that "[t]he notion
that Congress intended to grant manufacturers unfettered discretion
to adopt spreads exceeding 150%, and cabin the problem by reducing
reimbursement rates by five percent [when it passed the BBA], is
difficult to fathom," and observes, "[t]hat . . . opportunities for
abuse exist in the Medicare statute does not mean that Congress has
authorized them." We agree.

-30-
 Finally, we note that we need not decide whether the

district court's ultimate "plain meaning" analysis of "average

wholesale price" was correct, for the district court did not rely

on this specific definition as a trigger for liability under

Chapter 93A. As explained in detail below, it rooted its ultimate

liability finding not in the fact that spreads violated the "plain

meaning" of "average wholesale price," but instead in the fact

that, inter alia, the spreads exceeded industry expectations. See

In re Pharm., 491 F. Supp. 2d at 32; see also id. at 97 ("What

Congress understood and intended AWP to mean is not the same as

what the industry understood. . . . Because information about the

20 to 25 percent spread was widespread in the industry, a violation

of the Medicare statute by publishing an 'AWP' that was not a true

average of wholesale prices does not trigger per se liability under

Chapter 93A."). Nor has AstraZeneca argued that the BBA shielded

the company's conduct from liability as an "exempted transaction"

under Chapter 93A. See Mass. Gen. Laws ch. 93A, § 3 ("Nothing in

this chapter shall apply to transactions or actions otherwise

permitted under laws as administered by any regulatory board or

officer acting under statutory authority of the commonwealth or of

the United States. For the purpose of this section, the burden of

proving exemptions from the provisions of this chapter shall be

upon the person claiming the exemptions."). Thus, for purposes of

this appeal, it is unnecessary to decide whether the term "average

-31-
wholesale price" admits of no spreads at all, as the district court

appears to have concluded in its November 2006 order, or whether

instead it admits of modest spreads (such as those created by

prompt-pay discounts or formulaic markups from other published

prices): whatever the correct interpretation of "average wholesale

price" in the BBA, it in no way countenanced spreads in excess of

the industry expectations discussed below. The relevance of the

district court's interpretive order to this appeal is therefore not

its precise definition of the term "average wholesale price," but

instead its rejection of AstraZeneca's position that, under the

BBA, that term referred to prices published in the industry

publications which were known to exclude substantial discounts --

a rejection with which we entirely agree.

IV. PREEMPTION

AstraZeneca next argues that the district court's finding

of liability under state law conflicts with and is preempted by

federal law, and is thus invalid under the Supremacy Clause of the

United States Constitution. U.S. Const. art VI, cl. 2.

AstraZeneca has identified four different bases for this argument,

but the thrust of each argument is the same: the choices made by

Congress in enacting the complex set of Medicare statutes and in

choosing the metrics by which Medicare Part B would compute and

reimburse claims leave no room for additional state law regulation

addressing the facts at issue here. For the reasons that follow,

-32-
we disagree, concluding instead that, in the circumstances of this

case, Chapter 93A neither conflicts with nor is preempted by

federal law.

A. The District Court's Ruling

In May 2003, the district court held that the appellees'

claims under state consumer protection statutes are not preempted

by federal law. In re Pharm. Indus. Average Wholesale Price

Litig., 263 F. Supp. 2d 172, 186-93 (D. Mass. 2003). Addressing

the question of whether Congress had preempted state regulation by

legislating in an area traditionally regulated by the states, the

district court found "no evidence of a clear and manifest intent to

preempt the entire field of state regulation of fraudulent medical

billing practices" and "no legislative intent to preempt [state]

supervision of the compensation of a person providing health

services." It therefore held that "claims based on state consumer

protection statutes that allege such practices are not preempted."

Next, the district court held that the state law claims did not

conflict with or stand as an obstacle to the Medicare program,

finding that "[t]he maintenance of these consumer protection claims

against the defendants will not actually conflict with the

operation of the federal program," nor will they "require state

courts to construe complex federal regulations," and opining that

Supreme Court oversight of the state courts' application of federal

law would suffice to ensure uniformity across jurisdictions.

-33-
Finally, addressing the question of whether allowing state court

consumer protection actions, rather than insisting on

administrative remedies, would conflict with CMS's responsibility

to police fraud consistent with the Administration's judgment and

objectives, the district court noted that "CMS does not make

discretionary judgment[s] with respect to the statutorily defined

Medicare Part B reimbursement rates, and does not approve the AWPs.

Therefore, the decision of the pharmaceutical companies, not an

agency action, is alleged to cause plaintiffs' harm," and "the

Medicare statute does not preempt the state causes of action."

B. Legal Standards

"The ultimate determination whether federal law preempts

[state law] presents a legal question subject to plenary review."

Philip Morris Inc. v. Harshbarger, 122 F.3d 58, 62 (1st Cir. 1997)

(citing United States v. R.I. Insurers' Insolvency Fund, 80 F.3d

616, 619 (1st Cir. 1996)).

"A fundamental principle of the Constitution is that

Congress has the power to preempt state law." Crosby v. Nat'l

Foreign Trade Council 530 U.S. 363, 372 (2000) (citing U.S. Const.

art. VI, cl. 2; Gibbons v. Ogden, 9 Wheat. 1, 211 (1824); Savage v.

Jones, 225 U.S. 501, 533 (1912); California v. ARC America Corp.,

490 U.S. 93, 101 (1989)). It has long been the case that "[o]ur

'sole task' . . . is to determine the intent of Congress," Mass.

Med. Soc'y v. Dukakis, 815 F.2d 790, 791 (1st Cir. 1987) (Breyer,

-34-
J.) (quoting Cal. Fed. Sav. & Loan Assoc. v. Guerra, 479 U.S. 272,

280 (1987)), and in so doing we have been mindful that "Congress

does not cavalierly pre-empt state-law causes of action,"

Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996). Indeed, the

Supreme Court recently reaffirmed these longstanding principles in

Wyeth v. Levine, a case decided during the pendency of this appeal,

when it described the "two cornerstones of our pre-emption

jurisprudence":

First, the purpose of Congress is the ultimate
touchstone in every pre-emption case. Second,
in all pre-emption cases, and particularly in
those in which Congress has legislated in a
field which the States have traditionally
occupied, we start with the assumption that
the historic police powers of the States were
not to be superseded by the Federal Act unless
that was the clear and manifest purpose of
Congress.

129 S. Ct. 1187, 1194-95 (2009) (citations, quotation marks, and

alterations omitted).

The clear and manifest purpose of Congress is most

readily ascertainable when Congress includes an explicit preemption

provision in an act. But such provisions are not required for a

finding of preemption: implied federal preemption may be found

where federal regulation of a field is pervasive, or where state

regulation of the field would interfere with Congress's objectives.

See Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248 (1984); Rice v.

Sante Fe Elevator Corp., 331 U.S. 218, 230 (1947). We have in the

-35-
past sketched numerous ways in which Congress may preempt state

law:

Congress might show that it intends to preempt
state law by explicitly withdrawing the power
of states to regulate within certain fields.
Or, Congress might implicitly withdraw the
states' power to regulate by creating a
regulatory system so pervasive and complex
that it leaves no room for the states to
regulate. Congress might also enact a law
such that compliance with both federal and
state regulations is a physical impossibility,
in which case the state statute must yield.
Finally, . . . even in the absence of a direct
conflict, a state law violates the supremacy
clause when it stands as an obstacle to the
accomplishment and execution of the full
purposes and objectives of Congress.

Mass. Med. Soc'y, 815 F.2d at 791 (citations and quotation marks

omitted). However Congress states or implies its intent to

preempt, our preemption analysis invariably returns to those two

cornerstones: Congress's purpose, and where it legislates in a

field which the States have traditionally occupied, Congress's

clear and manifest intent to preempt state law. Wyeth, 129 S. Ct.

at 1194-95.

C. Discussion

AstraZeneca makes no argument that the application of

Chapter 93A in this case has been explicitly preempted by Congress,

or that compliance with both federal and state regulations is a

physical impossibility. Instead, AstraZeneca argues that the

federal Medicare statute leaves no room for state regulation, and

alternatively, that Chapter 93A obstructs and undermines the

-36-
complex and carefully balanced federal Medicare reimbursement

scheme. AstraZeneca makes these arguments in four forms, which we

discuss in turn.

1. Congress's Careful Balancing of Policy Objectives

First, AstraZeneca argues that invoking state consumer

protection laws to find liability for not reflecting discounts and

rebates in the reported AWPs undermines Congress's decision to use

the published AWPs as the basis for reimbursement under Medicare

Part B. Such a finding of liability would, says the appellant,

impose through state law what Congress itself rejected, namely, a

cost-based reimbursement system.

This argument lacks merit for a number of reasons, not

the least of which is the argument's reliance on the untenable

interpretation of Congress's policy objectives discussed above. As

we explained in the previous section, the legislative history and

statutory context surrounding the Medicare program and the BBA does

not support the assertion that Congress approved a reimbursement

system by which pharmaceutical companies could be reimbursed at any

rate they saw fit to have published as the AWP in industry

publications, while simultaneously offering substantial discounts

and rebates in the marketplace. On the contrary, throughout the

time periods relevant to this appeal, Congress expressed its

concern about Medicare overpayment when confronted with indications

of such a practice, and it ordered studies of, and ultimately

-37-
retreated from, the use of AWP as a reimbursement benchmark. A

state consumer protection law that covers as severe a form of price

manipulation as this cannot be said to be contrary to Congress's

intent in establishing and administering the Medicare program.

This is especially so given that, as explained below, Chapter 93A

was relied upon to check only the most pronounced cases of AWP

inflation -- spreads that exceeded 30% -- and therefore were not

used to impose the cost-based reimbursement system that AstraZeneca

decries.

Moreover, it is telling that Congress did not go so far

as to enact an express preemption provision at any time during the

more than forty-year history of Medicare. See Wyeth, 129 S. Ct. at

1200 ("If Congress thought state-law suits posed an obstacle to its

objectives, it surely would have enacted an express pre-emption

provision at some point during the [Food, Drug, and Cosmetic Act's]

70-year history."). On the contrary, there can be no question that

Congress was aware of the existence of state law liability schemes

so ubiquitous as common law fraud and consumer protection statutes.

See Penn. Med. Soc'y v. Marconis, 942 F.2d 842, 850 (3d Cir. 1991)

("[W]hen Congress remains silent regarding the preemptive effect of

its legislation on state laws it knows to be in existence at the

time of such legislation's passing, Congress has failed to evince

the requisite clear and manifest purpose to supersede those state

laws." (citing Cal. Fed. Sav. & Loan Assoc., 479 U.S. at 287-88)).

-38-
 In fact, far from demonstrating Congress's intent to

preempt state law consumer protection statutes, the Medicare

statute reserves a regulatory role to the states that arguably

includes some of the compensation aspects of this appeal, and in

any event demonstrates Congress's intent to minimize federal

intrusion into the area of provider compensation. See 42 U.S.C. §

1395 ("Nothing in this subchapter shall be construed to authorize

any Federal officer or employee to exercise any supervision or

control over the practice of medicine or the manner in which

medical services are provided, or over the . . . compensation of

any officer or employee of any institution, agency, or person

providing health services; or to exercise any supervision or

control over the administration or operation of any such

institution, agency, or person."); see also Mass. Med. Soc'y, 815

F.2d at 791 (describing § 1395 as "explicitly stating the . . .

intent to minimize federal intrusion" into the related "field of

fee regulation of medical services for the elderly").

If anything, we are inclined to conclude that the

opposite proposition is true: that Congress relied on the

existence of state consumer protection and fraud statutes to combat

severely manipulative pricing schemes resulting in overpayments by

Medicare and its beneficiaries. At the least, this conclusion is

implied by the fact that, for all of the Medicare statute's anti-

fraud provisions, and despite Congress's and HCFA's ongoing concern

-39-
about the practice, the text of the Medicare statute does not

provide an express remedy for practices like AWP inflation. It

therefore appears that the state law cause of action at issue aids

federal law rather than hinders it. But we need not go so far as

to draw this conclusion; that Congress did not express or imply its

intent to preempt state law is enough to defeat AstraZeneca's

argument.

2. Exhaustion of Administrative Remedies

Second, AstraZeneca argues that the Chapter 93A claims of

the Class 2 plaintiffs conflict with the mandatory administrative

remedies specified in the Medicare statute for plaintiffs wishing

to challenge Medicare determinations as to the approval and proper

amount of Part B drug reimbursements.11 AstraZeneca interprets the

mandatory nature of these administrative remedies as evidence of a

federal policy that federal determinations may not be called into

question in any other forum. By turning to state law, AstraZeneca

argues, the Class 2 plaintiffs have done just that.

This argument misstates the issue. Rather than

challenging the approval and proper amount of Medicare Part B drug

11
AstraZeneca makes this argument through reference to the
appellate brief of Bristol-Myers Squibb Company, the Defendant-
Appellant in the related case of In re Pharmaceutical Industry
Average Wholesale Price Litigation, No. 08-1055 (1st Cir., filed
Jan. 10, 2008). See Fed. R. App. P. 28(i). After hearing
consolidated oral arguments in both cases, consideration of 08-1055
was stayed pending settlement negotiations, and it remains stayed
today.

-40-
reimbursements, as AstraZeneca characterizes it, the Class 2

plaintiffs challenge the practice of publishing inflated AWPs.

This is how the district court described the claims, In re Pharm.,

491 F. Supp. 2d at 29, and given that the Class 2 plaintiffs do not

challenge any aspect of the Medicare statute, its related

regulations, or the specific agency decisions made pursuant to

those laws, we think it is the better description.12

It is true, of course, that the chain of events by which

the Class 2 plaintiffs suffered damages ran through the Medicare

program, but that fact alone does not establish that the Medicare

program is itself the basis of the lawsuit for purposes of

determining whether the Class 2 plaintiffs were required to exhaust

administrative remedies. See, e.g., Gully v. First Nat'l Bank, 299

U.S. 109, 115 (1936) ("Not every question of federal law emerging

in a suit is proof that a federal law is the basis of the suit.").

No such requirement applied in this case challenging AstraZeneca's

business practices as unfair and deceptive under state law.

3. HCFA's Authority to Police Fraud

Third, and relying on Buckman Company v. Plaintiffs'

Legal Committee, 531 U.S. 341 (2001), AstraZeneca argues that the

12
42 U.S.C. § 405(h) is not to the contrary. That section
states in relevant part that "[n]o action against the United
States, the Commissioner of Social Security, or any officer or
employee thereof shall be brought under section 1331 or 1346 of
Title 28 to recover on any claim arising under this subchapter."
42 U.S.C. § 405(h). The Class 2 plaintiffs' action names none of
these entities.

-41-
Class 2 plaintiffs' state law claims fail because they conflict

with the Medicare statute, which empowers HCFA with broad authority

to investigate and punish Medicare fraud.13 HCFA's jurisdiction to

police fraud itself must be protected, the argument runs, because

only that agency can properly balance the need for enforcement with

the need to protect difficult and often competing policy

objectives, including adequately compensating physicians for Part

B drugs and their administration, as well as guarding against

excessive Medicare payments.

There is nothing inherently objectionable about the

premise that a federal agency like HCFA is better positioned than

a private plaintiff to balance the competing policy objectives of

the program it administers, or the premise that, at times, the

agency should take the laboring oar in combating fraud. But

Buckman is not so broad as to sanction the conclusion that, simply

because the deceptive practices at issue in this case depended on

the structure of the Medicare program, it was therefore HCFA's

exclusive dominion to combat them. On the contrary, Buckman

addressed a more narrow scenario: the plaintiffs in that case

employed a "fraud-on-the-agency" theory to attempt to create

derivative standing for their own suits, which were based in state

13
This argument, too, is made through reference to the
appellate brief of Bristol-Myers Squibb Company, the Defendant-
Appellant in the related case of In re Pharmaceutical Industry
Average Wholesale Price Litigation, No. 08-1055 (1st Cir., filed
Jan. 10, 2008).

-42-
law but which sought remedies for fraudulent misrepresentations

made to the Food and Drug Administration ("FDA") during the

approval process for certain medical devices. 531 U.S. at 343,

348. In finding implied preemption, the Buckman court emphasized

that, "were plaintiffs to maintain their fraud-on-the-agency claims

here, they would not be relying on traditional state tort law which

had predated the federal enactments in question[] [relating to

various information that must be submitted to obtain the FDA's

approval for a medical device]. On the contrary, the existence of

. . . federal enactments is a critical element in their case." Id.

at 353. It also emphasized its concern that "disclosures to the

FDA, although deemed appropriate by the Administration, [would]

later be judged insufficient in state court," thereby creating "an

incentive to submit a deluge of information that the Administration

neither wants nor needs, resulting in additional burdens on the

FDA[]." Id. at 351.

In comparison, this case involves neither

misrepresentations made directly to HCFA nor any concerns similar

to the administrative efficiency concerns noted by the Buckman

court. Perhaps more conclusively, unlike Buckman, this case cannot

be said to involve disclosures that are fairly understood as to

have been "deemed appropriate by the Administration." At issue

here is a state law remedy for deceptive practices by a

manufacturer against its customers. It is certainly true that the

-43-
deception touched on a federal agency, but policing deceptive

conduct is nonetheless a traditional area of state concern giving

rise to a remedial scheme that is separate and distinct from, and

predates, the federal law in question.14 At most, the state

consumer protection laws at issue here operate in tandem with the

anti-fraud provisions of the Medicare statute, but this alone is

not enough to require a finding of implied preemption. See

Buckman, 531 U.S. at 352-53 (citing Medtronic, 518 U.S. at 481).

4. Field Preemption

Fourth and finally, AstraZeneca argues that the federal

Medicare scheme so completely occupies the field of Medicare

payment determinations as to preclude supplemental state regulation

of the amount that Medicare should pay on Part B drug claims.15

According to AstraZeneca, the district court made two errors.

First, it erred by misidentifying the "field" at issue as medical

fee regulation or state regulation of fraudulent medical billing

practices, rather than as the proper determination of the amount of

14
We note that the regulation of medicine and its associated
costs also "seems by tradition to be one of state concern." Mass.
Med. Soc'y, 815 F.2d at 791. We also note that this court rejected
arguments that the Medicare statute is a "comprehensive scheme"
meant to displace common law remedies for collecting overpayments
in United States v. Lahey Clinic Hosp., Inc., 399 F3d. 1, 17 (1st
Cir. 2005).
15
Again, AstraZeneca makes this argument through reference to
the appellate brief of Bristol-Myers Squibb Company, the Defendant-
Appellant in the related case of In re Pharmaceutical Industry
Average Wholesale Price Litigation, No. 08-1055 (1st Cir., filed
Jan. 10, 2008).

-44-
Medicare claims. AstraZeneca maintains that because states have no

traditional state regulatory presence in that latter area, and

because the federal interest in the field is significant and

exclusive, the Class 2 plaintiffs' state law claims challenging the

amount paid on Medicare claims are preempted. Second, and

relatedly, AstraZeneca argues that the district court wrongly

employed a presumption against preemption despite the history of

federal regulatory presence in the area of Medicare payment

determinations.

As already explained above, however, we disagree with

AstraZeneca's characterization of the plaintiffs' claims: fairly

interpreted, those claims do not challenge the approval or proper

amount of Part B drug reimbursements, but rather the practice of

publishing inflated AWPs; the claims are targeted at the conduct of

pharmaceutical manufacturers, not the government; and the

plaintiffs' complaints sound not in federal law, but in state

consumer protection law. As such, the district court's

characterization of the "field" is decidedly more appropriate to

the inquiry than AstraZeneca's proposals, both of which

inaccurately construe the plaintiffs' claims as claims against

Medicare. With the claims properly described, it is obvious that

states do in fact have a traditional regulatory presence in the

field, and the federal interest, while arguably significant, is not

exclusive. Finally, the mere presence of a federal interest does

-45-
not preclude the application of the presumption against preemption.

As the Supreme Court recently clarified, the presumption against

preemption applies in any field in which there is a history of

state law regulation, even if there is also a history of federal

regulation. Wyeth, 129 S. Ct. at 1195 n.3 ("The presumption . . .

accounts for the historic presence of state law but does not rely

on the absence of federal regulation.").

V. THE DISTRICT COURT'S "SPEED LIMIT"

AstraZeneca next takes aim at the district court's

approach to finding liability under Chapter 93A, by which the court

defined the spread between the published AWP and the actual

acquisition costs that the government and the industry expected,

and then used that expectation to define a limit to the spread for

a particular drug in a particular year, beyond which liability for

unfair and deceptive business practices would attach.16 This limit

was referred to as the "speed limit" and, alternatively, the

"expectations yardstick"; spreads that exceeded the speed limit

were referred to as "mega-spreads."

A. Dr. Hartman's Approach

In developing this approach and setting the speed limit,

the district court relied heavily on the submissions of the

16
Specifically, the district court held that exceeding the
defined limit was unfair and deceptive until 2001, but only unfair
thereafter, since "the cat was out of the bag, and the mega-spreads
[had become] widely known." In re Pharm., 491 F. Supp. 2d at 95.

-46-
plaintiffs' expert, Dr. Raymond S. Hartman, a healthcare economist

specializing in microeconomics and econometrics, with a focus on

healthcare economics. Dr. Hartman's testimony concluded that the

difference between the published AWP and the provider's acquisition

cost for Zoladex (and other drugs) exceeded the expectations of

Class 3 plaintiffs. To reach that conclusion, Dr. Hartman began

with the analytic assumptions that the Class 3 plaintiffs were

aware of some amount of discounting from the published AWP by drug

manufacturers in their pricing to providers (i.e., a spread between

the published AWP and the actual acquisition cost), and that

because of this awareness, the third-party payors reimbursed for

drugs at a rate some percentage lower than AWP.

According to Dr. Hartman, however, calibrating the proper

reduction to AWP was tricky: the third-party payors would want to

allow physicians to "cover their costs and perhaps earn a

'reasonable margin,'" but not allow them to reap an "'egregious

profit.'" He noted, however, that because it was practically

impossible for the Class 3 plaintiffs to determine the actual

amount of AWP inflation -- the cost of gathering this data was

"prohibitive" -- third-party payors were forced to estimate what

discount to apply to the AWPs for purposes of reimbursement. These

estimates, Dr. Hartman continued,

would be the rule of thumb that [TPPs] would
use when bargaining with providers. If
manufacturers then secretly increased spreads
such that reimbursement rates negotiated by

-47-
 TPPs with the expectation of [allowing for a
reasonable margin] led in reality to
"egregious" overcharges and profits
unbeknownst to TPPs, . . . it would seem that
those secret spreads constitute fraud injuring
the Class members.

Dr. Hartman therefore testified that the key to defining a

liability trigger in this case was to understand whether the Class

3 plaintiffs expected spreads as large as those at issue in this

case, or whether those spreads so far exceeded TPP expectations as

to constitute fraud.

To determine the Class 3 plaintiffs' expectations of the

average spread between AWP and acquisition cost, Dr. Hartman used

three different approaches. First, he examined the actual pricing

history of a sample of single-source drugs that did not face

competition. This inquiry was focused on understanding what spread

was necessary to ensure that the providers would earn a reasonable

profit when market-share considerations, and therefore AWP

inflation, were not at issue. He found that this baseline spread

was somewhere between 18%-27%, depending on the publication source

for the AWP, and he thus chose 30% as his baseline spread "[t]o be

conservative."17 Therefore, Dr. Hartman concluded, spreads

exceeding that baseline of 30% -- whether because of a raised AWP,

a lowered actual acquisition cost due to rebates or discounts, or

17
As the district court pointed out, Dr. Hartman's "spread" is
calculated as a discount off of the average sales price, not off of
the AWP; other publications refer to the "spread" as a discount off
of AWP. See In re Pharm., 491 F. Supp. 2d at 87 n.61.

-48-
both -- indicated that the manufacturer had increased the spread on

the drug in question beyond the amount necessary to ensure a

reasonable margin for providers, presumably to manipulate market

share. Dr. Hartman concluded that this 30% speed limit should

trigger potential liability for fraud.18

Dr. Hartman's second method for determining the

expectations of Class 3 plaintiffs was to review publically

available government, academic, and popular studies of physician-

assisted drugs concerning the relationship between AWP and actual

acquisition cost for branded and generic physician-administered

drugs. Dr. Hartman's review found that Class 3 plaintiffs

reasonably anticipated spreads of 11% to 25%, well within his

"conservative" 30% trigger for potential liability.

Finally, Dr. Hartman determined the expectations of Class

3 plaintiffs by examining the contracts between third-party payors

and providers for evidence of what the parties expected the spread

between AWP and actual acquisition cost to be. It was his position

that the contract prices reflected information in the marketplace

about provider costs. Dr. Hartman's review concluded that the

reimbursement rates found in these contracts ranged from 16% below

18
Notably, Dr. Harman's submissions assumed a 30% baseline
spread for single-source drugs during periods where the drugs were
without competition, and also for the six months after the first
launch of a generic substitute. After six months of generic
competition, he assumed that the competitive dynamics of the
marketplace would control pricing.

-49-
to 15% above AWP, although the "better informed" third-party

providers expected spreads on the order of a "20 to 25 percent

markup above acquisition cost." Noting his belief that the results

of his review of contracts were consistent with available

literature and with Medicare reimbursement rates over the relevant

time periods, Dr. Hartman concluded that the contracts showed that

Class 3 plaintiffs generally believed that spreads ranged somewhere

between 0% - 25%, which again fell well within his "conservative"

30% trigger for potential liability.

B. The District Court's Decision to Adopt Dr. Hartman's
Approach

In ruling Dr. Hartman's submissions reliable and

admissible under Federal Rules of Evidence 702 and adopting Dr.

Hartman's approach to liability -- including his baseline 30%

spread to trigger potential liability -- the district court

addressed four chief objections to Dr. Hartman's submissions that

were lodged by the defendants below, two of which merit discussion

in the context of this appeal. See In re Pharm., 491 F. Supp. 2d

at 89-93.

First, the district court rejected the defendants'

position that payors' expectations about provider acquisition costs

were unrelated to reimbursement rates. As evidence for this

position, the defendants noted that payors did little to seek out

actual cost data, chose not to negotiate reimbursement rates

provider-by-provider, and failed to incorporate data about actual

-50-
acquisition costs into the reimbursement rate when that data was

available. The defendants also criticized Dr. Hartman for failing

to survey payors to determine their actual expectations about

spreads and how those expectations factored into reimbursement

rates. In rejecting this position, the district court cited to

record evidence indicating the expense and difficulty of obtaining

and using actual cost data on a provider-by-provider basis. The

court noted testimony from third-party payors that expectations

played an important part in setting reimbursement methodologies.

And the court cited the "insurmountable barrier[s]" to shifting

away from AWP-based reimbursement, which included the difficulty of

creating an alternative system, and the potential that changes

would create bad incentives for providers. The district court

therefore concluded that "TPP knowledge about physician acquisition

costs was material to the establishment of reimbursement rates."

Second, the district court rejected the defendants'

position that 30% was an inappropriate figure to use as the outer

limit of third-party payors' expectation about the size of AWP

spreads. Instead, the defendants argued, expectations about

spreads would not be so uniform: for example, payors would expect

spreads to increase (and prices to drop) in response to

competition, as competitors jockeyed for market share. In

response, the district court noted simply that there was "no

-51-
evidence" that the TPPs had "any knowledge" of the "huge spreads .

. . for the drugs on trial until the late 1990's."

Ultimately, the district court adopted Dr. Hartman's

methodology and his 30% limit, specifically noting that it had

taken into account the defendants' challenges to the accuracy of

Dr. Hartman's data.19

C. AstraZeneca's Challenge

AstraZeneca makes only a passing challenge to the

district court's decision to admit Dr. Hartman's expert testimony

under Daubert v. Merrell Dow Pharm., 509 U.S. 579 (1993), and thus

it has waived this objection on appeal. See United States v.

Zannino, 895 F.2d 1, 17 (1st Cir. 1990) ("[I]ssues adverted to in

a perfunctory manor, unaccompanied by some effort at developed

argumentation, are deemed waived."). Instead, AstraZeneca focuses

its objections on the district court's decision to credit Dr.

Hartman's testimony, and on the legal propriety of the district

court's decision to adopt the 30% "speed limit" as a trigger for

potential liability.

"The finder of fact's determinations of credibility, and

of the weight of the evidence in general, are not disturbed on

appeal except for clear error." Mitchell v. United States, 141

19
The district court applied the 30% limit to both Class 2 and
Class 3, rejecting the plaintiffs' position that, as to Class 2,
any spread between AWP and actual acquisition costs was per se
unlawful. See In re Pharm., 491 F. Supp. 2d at 97.

-52-
F.3d 8, 17 (1st Cir. 1998). To find a clear error, we must be left

with "the definite and firm conviction that a mistake has been

made." Id. (citing Anderson, 470 U.S. at 573). In the context of

an expert's testimony that has been credited by the trier of fact,

finding clear error requires that we find the testimony "inherently

implausible, internally inconsistent, or critically impeached."

Id. (citing Keller v. United States, 38 F.3d 16, 25 (1st Cir.

1994)).

Hoping to demonstrate the district court's clear error in

adopting Dr. Hartman's methodology and his 30% speed limit,

AstraZeneca attacks the evidentiary basis for Dr. Hartman's

conclusions and points up a number of alleged methodological flaws.

It first argues that Dr. Hartman's conclusions were implausible.

It points to "extensive evidence" from TPP witnesses suggesting

that the TPPs viewed AWP as having no predictable relationship to

acquisition costs, and that some TPP witnesses were aware of

spreads exceeding 30%. It further argues that some TPP's had

themselves purchased drugs from manufacturers at discounted prices,

and it asserts that Dr. Hartman "did not account for the actual

knowledge and expectations of class members." Dr. Hartman's

evidence, AstraZeneca concludes, is therefore inadequate to support

the district court's decision to credit his submissions and adopt

his methodology and 30% potential liability trigger.

-53-
 The testimony that AstraZeneca relies on suggests that

some third-party payors may have doubted the wisdom of pegging

reimbursement rates to AWP, or that some may have known of

instances of significant spreads, but it is not one-sided enough to

call the district court's weighing of the evidence into question

under the clear error standard of review that we must apply.

Mitchell, 141 F.3d at 17. As an initial matter, some of the

testimony cited by AstraZeneca to demonstrate TPP knowledge of

increased spreads is contradicted by the testimony of other

representatives from the same organization, and occasionally by

other portions of testimony from the same representative. For

instance, whereas AstraZeneca correctly notes that John Killion of

Blue Cross Blue Shield of Massachusetts ("BCBS-MA") referred to AWP

as an "artificial price," the appellant omits the fact that this

comment was made in a speculative manner ("I think there were

discussions internally within the company in regards to AWP and

people referring to AWP as . . . an artificial price") and with

regard to another TPP, Tufts Health Plan, not BCBS-MA. Nor does

AstraZeneca mention that Mr. Killion also stated that he did not

understand how AWP was calculated or how it related to the actual

prices that were paid by physicians for physician-administered

drugs. Other witnesses from BCBS-MA who were more familiar with

physician-administered drugs testified to their belief that AWP was

an actual average, or at least an accurate pricing signal. And

-54-
while BCBS-MA may have purchased some drugs at steeply discounted

prices, these purchases were made through subsidiaries that were

sold in 1997, just two years after BCBS-MA instituted AWP-based

pricing. In re Pharm., 491 F. Supp. 2d at 48. Moreover, in those

two years, the subsidiaries did not share detailed pricing

information for their purchases with their parent. Id.

Additionally, the record contains ample evidence, some of which is

recited in the district court's opinion, that third-party payors

depended on the AWP as a reliable indicator of actual acquisition

costs. See In re Pharm., 491 F. Supp. 2d at 135-36. Finally,

testimony at trial from the fund administrator at plaintiff

Pipefitters Local 537 ("Pipefitters") demonstrated that Pipefitters

believed AWP to be an actual average of prices, and testimony from

Plaintiff Sheet Metal Workers National Health Fund's third-party

administrator, Southern Benefits Administrators, Inc., indicated

that the administrator itself shared that belief. Thus, we cannot

say that the record evidence is inconsistent with the district

court's decision to credit Dr. Hartman's submissions. See Fed.

Refinance Co., Inc. v. Klock, 352 F.3d 16, 29 (1st Cir. 2003)

(noting that a trial court, sitting as factfinder, is "free to

choose between the two versions of the truth and draw appropriate

inferences" (citing Anderson, 470 U.S. at 574; Keyes v. Sec'y of

the Navy, 853 F.2d 1016, 1020 (1st Cir. 1988))).

-55-
 Nor are we persuaded by AstraZeneca's argument that Dr.

Hartman's methodology inadequately accounted for the effects of

generic competition, which AstraZeneca argues would, as a matter of

common sense, lead industry participants to expect a larger spread.

Far from abandoning common sense, Dr. Hartman's methodology was

grounded in it: he began with the fair assumption, consistent with

the record evidence, that third-party payors expected a spread

large enough to ensure a "reasonable margin" for providers, but not

so large as to allow them to earn "egregious profits." This

assumption is beyond cavil. Then, to determine where that line was

likely to have been drawn, he focused on breakthrough innovator

drugs, which because they were "uniquely efficacious," did not

depend on deep provider margins to maintain their market share.

See Home Placement Serv., Inc. v. Providence Journal Co., 819 F.2d

1199, 1205-06 (1st Cir. 1987) (noting, in the antitrust context,

that the proper approach to measure damages is "with reference to

the performance of . . . closely comparable firms in the same

industry that, unburdened by the proscribed anticompetitive

activity, successfully managed to earn profits"). His study

indicated that 30% provided a "conservative" estimate of the

expected spread for those drugs. Of course, the introduction of

generic competition undoubtedly introduces new market share

considerations, creating incentives for manufacturers to inflate

AWPs to deepen provider margins for their drugs. But the existence

-56-
of these incentives does not prove that third-party payors

acquiesced in, or expected the manufacturers' creation of, mega-

spreads leading to egregious provider profits. The contrary

suggestion strike us as being akin to arguing that, because car

owners and mechanics have strong incentives to overstate the costs

of repairs and then share in insurers' overpayments, the insurers

who overpay have acquiesced in the scheme or should expect to be

defrauded on a widespread basis. And even if third-party payors

might have had reason to expect increased spreads when generic

competition entered the market, significant portions of the record

evidence demonstrate that TPPs in fact believed AWP to be

reflective of acquisition costs. On balance, any infirmities in

Dr. Hartman's handling of generic competition were insufficient to

render clearly erroneous the district court's decision to credit

his analysis. See Mitchell, 141 F.3d at 17.

AstraZeneca's attempt to demonstrate the internal

inconsistency of Dr. Hartman's submissions is no more successful.

To support the claim, AstraZeneca argues that Dr. Hartman's use of

the "revealed preferences method," which looked to the contracts

between TPPs and providers for evidence of TPPs' expectations

regarding acquisition costs, was inconsistent with both the

"extensive evidence" at trial showing that TPPs knowingly permitted

doctors to earn a profit on the drugs at issue, and with Dr.

Hartman's own data showing that some TPPs were willing to pay

-57-
fifteen percent above AWP. As noted by the district court, the

defendants below did "not challenge[] the revealed preferences

method as unreliable," In re Pharm., 491 F. Supp. 2d at 88, and

consequently this argument is waived on appeal. Campos-Orrego v.

Rivera, 175 F.3d 89, 95 (1st Cir. 1999) ("We have reiterated, with

a regularity bordering on the echolalic, that a party's failure to

advance an issue in the nisi prius court ordinarily bars

consideration of that issue on appellate review.").

In any event, as to the matter of the evidence showing

that TPPs permitted some spread, it is enough to say that the issue

at trial was not the existence of a spread, but the extent of it,

and that the evidence presented generally supported Dr. Hartman's

identification of a 30% speed limit as a conservative estimate of

the outer limit of TPPs' expectations. And as to the matter of Dr.

Hartman's own data showing that TPPs occasionally paid 15% above

AWP, it is significant that Dr. Hartman specifically considered

this data in his report and found that the above-AWP payments were

typically made by less-informed TPPs who believed that AWP was an

actual average, whereas the "better informed" TPPs expected spreads

on the order of 20-25%, or in other words, within the 30% speed

limit. See In re Pharm., 491 F. Supp. 2d at 88 & n.64. We see

nothing "so internally inconsistent or implausible on its face"

about these findings that a "reasonable factfinder would not credit

-58-
it," see Anderson, 470 U.S. at 575, and therefore we discern no

clear error warranting reversal.20

Finally, we reject AstraZeneca's argument that the

district court's decision to adopt a 30% trigger for potential

liability was inconsistent with its own ruling that there was no

basis for imposing per se liability under Chapter 93A, and

therefore constituted an error of law. On the contrary, the 30%

trigger represents not a per se threshold for liability based on

the violation of a separate legal duty, but instead, as is clear

from the intensely factual nature of Dr. Hartman's report and the

district court's June 2007 order, constitutes a specific factual

conclusion about what conduct in this case would trigger potential

liability under Chapter 93A as to these plaintiffs based on the

TPPs' actual commercial expectations.

In short, Dr. Hartman's testimony was admissible and the

district court was entitled to rely on it: it was plainly

plausible and internally consistent, and it was not critically

impeached. See Mitchell,141 F.3d at 17. It was also consistent

with testimony suggesting that TPPs and their administrators were

20
AstraZeneca's challenge to Dr. Hartman's own documentary
evidence, which contained passing references to mega-spreads dating
back as far as 1992, also fails. Dr. Hartman was not engaged in an
inquiry into the size of actual spreads, but instead into payors'
understanding of the size of those spreads. That there were some
observations in the public literature referring to mega-spreads
during the relevant time period does not alone suffice to put the
lie to the payors' testimony at trial, or to demonstrate a serious
internal inconsistency in Dr. Hartman's submissions.

-59-
unaware of the extent of mega-spreads and, on occasion, even

believed AWP to be an actual average of prices. See id.; Fed.

Refinance Co., Inc., 352 F.3d at 29. We therefore conclude that

the evidence before the district court was sufficient to permit the

court to adopt Dr. Hartman's finding that the outer limit of TPPs'

expectations for a reasonable spread was 30%, and consequently for

the court to use that figure as a trigger for potential liability

under Chapter 93A.

VI. THE MERITS

AstraZeneca also challenges the district court's merits

analysis under Chapter 93A. For the reasons that follow, those

challenges are unpersuasive.

A. Legal Standards

A ruling on what conduct violates Massachusetts' consumer

protection statute, Chapter 93A, is a legal determination,

reviewable under a de novo standard. Incase Inc., 488 F.3d at 56.

However, the question of "whether a particular set of acts, in

their factual setting, is unfair or deceptive is a question of

fact," id. at 57 (quotation omitted), and we will only disturb the

district court's findings of fact if they are clearly erroneous,

Williams, 11 F.3d at 278. A factual finding is clearly erroneous

"when although there is evidence to support it, the reviewing court

on the entire evidence is left with the definite and firm

conviction that a mistake has been committed." Anderson, 470 U.S.

-60-
at 573; see also Dedham Water Co., Inc. v. Cumberland Farms Dairy,

Inc., 972 F.2d 453, 457 (1st Cir. 1992) (requiring the reviewing

court to have "a strong, unyielding belief that a mistake has been

made" before setting aside a factual finding). Mixed questions of

fact and law are also subject to the "clearly erroneous" standard,

unless the district court's findings are premised on a mistaken

view of the applicable law, in which case our review is de novo.

Juno SRL v. S/V Endeavour, 58 F.3d 1, 4 (1st Cir. 1995).

Chapter 93A, prohibits "unfair or deceptive acts or

practices in the conduct of any trade or commerce." Mass. Gen.

Laws ch. 93A, §2. It provides for a private cause of action to any

"person" who, inter alia, "has been injured by another person's use

or employment of any method, act or practice declared to be

unlawful by section two," id. § 9, or "[a]ny person who engages in

the conduct of any trade or commerce" who, inter alia, "suffers any

loss of money or property, real or personal, as a result of the use

or employment by another person who engages in any trade or

commerce of an unfair method of competition or an unfair or

deceptive act or practice declared unlawful by section two," id. §

11. "To prove such a claim, it is neither necessary nor sufficient

that a particular act or practice violate common or statutory law."

Mass. Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 552 F.3d

47, 69 (1st Cir. 2009) (citing Kattar v. Demoulas, 739 N.E.2d 246,

257 (Mass. 2000)). Instead, Massachusetts courts "evaluate unfair

-61-
and deceptive trade practice claims based on the circumstances of

each case," leaving "the determination of what constitutes an

unfair trade practice to the finder of fact." Id.

That is not to say, of course, that the factfinder is

entirely unguided when assessing whether conduct is unfair or

deceptive. An act or practice is "unfair" if it is "within at

least the penumbra of some common-law, statutory or other

established concept of unfairness," is "immoral, unethical,

oppressive, or unscrupulous," and "causes substantial injury to

consumers (or competitors or other businessmen)." Id. (quoting

Mass. Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 412 F.3d

215, 243 (1st Cir. 2005)); see also PMP Assocs., Inc. v. Globe

Newspaper Co., 321 N.E.2d 915, 917 (Mass. 1975). The "crucial

factors" in an unfairness inquiry are "the nature of [the]

challenged conduct and on the purpose and effect of that conduct."

Mass. Employers Ins. Exch. v. Propac-Mass, Inc., 648 N.E.2d 435,

438 (Mass. 1995) (citing PMP Assocs., Inc., 321 N.E.2d 915).

An act or practice is "deceptive" if it has the "capacity

or tendency" to deceive. Abruzzi Foods, Inc. v. Pasta & Cheese,

Inc., 986 F.2d 605, 605 (1st Cir. 1993). The plaintiff need not

necessarily prove actual reliance on a misrepresentation; rather,

the plaintiff must prove "a causal connection between the deception

and the loss and that the loss was foreseeable as a result of the

deception." Int'l Fid. Ins. Co. v. Wilson, 443 N.E.2d 1308, 1314

-62-
(Mass. 1983); see also Fraser Eng'g Co., Inc. v. Desmond, 524

N.E.2d 110, 113 (Mass. App. Ct. 1988) ("Nor is proof of actual

reliance on a misrepresentation required so long as the evidence

warrants a finding of a causal relationship between the

misrepresentation and the injury to the plaintiff.").

It should also be noted that Chapter 93A does not attach

liability for all of the unseemly business practices justly loathed

by consumers and business professionals. Instead, at least between

commercial entities, "the objectionable conduct must attain a level

of rascality that would raise an eyebrow of someone inured to the

rough and tumble of the world of commerce," Mass. School of Law at

Andover, Inc. v. American Bar Ass'n, 142 F.3d 26, 41-42 (1st Cir.

1998) (quoting Levings v. Forbes & Wallace, Inc., 396 N.E.2d 149,

153 (Mass. App. Ct. 1979)); that is to say, "the defendant's

conduct must be not only wrong, but also egregiously wrong," id. at

41.

Finally, while adherence to industry standard or custom

is one factor that can support a finding of no liability under

Chapter 93A, see, e.g., James L. Miniter Ins. Agency, Inc. v. Ohio

Indem. Co., 112 F.3d 1240, 1251 (1st Cir. 1997), the existence of

an industry-wide practice does not itself constitute a complete

defense to a Chapter 93A claim, see Commonwealth v. DeCotis, 316

N.E.2d 748, 753 (Mass. 1974).

-63-
 B. The District Court's Findings

1. The District Court's Approach to Liability

In its order applying these standards to the evidence

adduced at trial, the district court identified three "salient

factors" on which it focused its inquiry into whether the conduct

complained of was unfair or deceptive. In re Pharm., 491 F. Supp.

2d at 101-02.

First, the district court inquired into whether the

spreads for Zoladex exceeded 30%.21 In assessing this factor, which

the district court described as "the most important inquiry" for

purposes of finding liability, the court focused on the "extent and

duration of the spreads" to assess whether they were "egregious."

Second, the district court looked to AstraZeneca's

"history of creating the spread." To do so, the court inquired

whether the appellant took an active hand in increasing the AWP, as

opposed to increasing the spread solely by offering discounts and

rebates. The district court interpreted increases to the AWP as

evidence of unethical conduct because raising the AWP imposed costs

on the payors and patients but not on the pharmaceutical

manufacturer. The district court also examined the "legitimacy of

the list price from which the markup is derived," attempting to

distinguish between list prices at which substantial sales were

21
As explained above, 30% represented the court's
"conservative" estimate of the outer limit of payors' expectations
for spreads during the relevant time period.

-64-
made, and those that were created only to increase the AWP. And

the district court interpreted evidence of AWP increases made in

response to Congress's change in reimbursement rates as evidence of

unethical conduct.

Third, the district court looked to evidence of

"proactive scheme[s] to market the spread to doctors by encouraging

them to purchase drugs because of their profitability [to the

providers] rather than their therapeutic qualities," citing OIG

Compliance Program Guidance for Pharmaceutical Manufacturers, 68

Fed. Reg. 23,731-01, 23,737 (May 5, 2003), for examples of these

schemes including "sales representatives promoting the spread as a

reason to purchase the product."

After rehearsing these three factors, the district court

specifically noted that the liability inquiry would nonetheless

depend on the "particular circumstances of each manufacturer and

each drug for each year," and that "no single factor is necessarily

determinative."

Specific challenges to the district court's approach will

be addressed below; suffice it to say here that this framework fits

comfortably within the legal requirement to "evaluate unfair and

deceptive trade practice claims based on the circumstances of each

case." Mass. Eye & Ear Infirmary, 552 F.3d at 69 (citing

Kattar,739 N.E.2d at 257).

-65-
 2. The District Court's Fact Findings

The district court made a series of fact findings as to

AstraZeneca. See In re Pharm., 491 F. Supp. 2d at 50-54. It noted

that AstraZeneca was the manufacturer of Zoladex, and that at all

relevant times, Zoladex was a single-source drug, although it

competed directly with TAP Pharmaceuticals' Lupron.

The district court further found that, throughout the

class period, AstraZeneca provided a suggested AWP for Zoladex to

industry publications (First DataBank and Red Book). The court

found that although the industry publications actually published

the AWP, it was AstraZeneca that effectively controlled the

published price. AstraZeneca also provided the "Wholesale

Acquisition Cost" ("WAC") for Zoladex, which was another list price

for Zoladex (and, during the class period, also not reflective of

actual aquisition costs, see id. at 40, 52, 53); the AWP for

Zoladex remained a constant 25% above the WAC.

According to the district court, AstraZeneca's pricing

strategy for Zoladex was largely driven by its competition with

Lupron, and therefore both the AWP and the WAC for Zoladex remained

lower than the corresponding prices for Lupron. The average annual

price increases also stayed low, averaging just 2.6%, and for some

time the price increases even stayed below the rate of inflation.

This pricing strategy seemed viable, but it nonetheless backfired

because the AWP-based reimbursement system created financial

-66-
incentives for physicians to choose higher priced products for

Medicare customers. Therefore, from 1990 to 1993, when AstraZeneca

sold Zoladex at WAC (minus a 2% prompt pay discount) and kept the

corresponding AWP beneath that of Lupron, Zoladex was unable to

increase its market share vis-à-vis Lupron as providers sought to

reap the spread on Lupron, which was also 25% at the time, but

which because of Lupron's higher price resulted in more income for

providers.

By 1995, AstraZeneca decided to change the focus of its

pricing strategy away from being the low-cost drug, and instead

focus on creating the largest possible "total return to practice."

The mechanism for doing so, according to a "pricing strategy" memo

quoted by the district court, was to "widen[] the margin between

the published price and the acquisition cost . . . through several

pricing manipulations: 1) Increase the AWP[,] 2) Decrease the

acquisition cost relative to the AWP, or 3) Both 1 and 2. . . .

[I]t is recommended that we exercise option #3 . . . ."

AstraZeneca thus began offering discounts to physicians while

continuing to increase the WAC and AWP: in 1995, the spread

between the AWP and the actual selling price for Zoladex exceeded

40%, and by 2002 it was more than 140%. During this time period,

the district court found, AstraZeneca also began using this pricing

scheme to market Zoladex to providers, using letters and sales

calls designed to show the "return to practice," that is, the

-67-
profits providers could realize by taking advantage of Zoladex's

inflated AWP under the AWP-based reimbursement system.

The district court explicitly found that AstraZeneca

"knew that its AWP was a fictitious and artificial number . . . but

felt no need to correct its reported price because it was standard

industry practice to leave the AWP at 25 percent above WAC." It

also believed that it was saving money for Medicare and its

patients by creating incentives for providers to choose the lower-

priced Zoladex over the higher-priced Lupron, leaving Alan

Milbauer, AstraZeneca's Vice President of Public Affairs, to remark

at trial, "I actually felt good about that."22

This is not to say that AstraZeneca was entirely

unconcerned about risks associated with its spread marketing -- the

district court noted, for example, internal memoranda discussed the

"risk from a regulatory/legal/public relations perspective" and the

possibility that "HCFA may see through this strategy" -- but the

company deemed those risks "unlikely," and it believed that it

could justify its pricing scheme to the public based on "1)

increased manufacturing costs, 2) no increase in realized revenue

per unit [to AstraZeneca] over the last two years, and 3) [a

22
We note that AstraZeneca's choice to judge its conduct
relative to that of TAP Pharmaceuticals was ill-considered, given
that TAP Pharmaceuticals later pled guilty to conspiring to violate
the Prescription Drug Marketing Act based on conduct during this
time period that included, inter alia, inflating AWP to market the
spread. See In re Pharm., 491 F. Supp. 2d at 52 n.34.

-68-
constant published] price . . . that is $112.50 less [than the

corresponding price for Lupron]." AstraZeneca therefore continued

to market the spread, lobbied against the 1998 Medicare legislation

which reduced reimbursement from 100% of AWP to 95% of AWP, and

when that legislation passed, it increased the price of Zoladex

6.9% to "compensate[] the customer [that is, the provider] for this

5% plus provide[] an additional improvement in return to

practice."23

3. The District Court's Liability Findings

Analyzing these facts under the three-criteria approach

to liability outlined above, the district court found that

AstraZeneca acted unfairly and deceptively by
causing the publication of false and inflated
average wholesale prices for Zoladex which
grossly exceeded actual physician acquisition
costs by as much as 169% and then marketing
these mega-spreads between the physician's
acquisition costs and the AWP reimbursement
benchmark in order to induce doctors to buy
its drug based on the drug's profitability.

In re Pharm., 491 F. Supp. 2d at 31; see also id. at 102-03.

Specifically, the district court found that the spreads for Zoladex

exceeded the 30% speed limit every year from 1996 through 2002,

showing that "the extent and duration of the [inflated] spreads

were significant." It further found that from 1996 through 1999,

23
The district court noted that AstraZeneca also set up
alternative reimbursement programs that didn't rely on AWP and that
therefore eliminated the providers' incentive to choose higher-
priced drugs. These programs were ultimately unsuccessful and/or
cancelled due to the company's fears of a backlash from providers.

-69-
AstraZeneca raised both the WAC and the corresponding AWP for

Zoladex despite decreasing the actual sales price, thus ensuring

that beneficiaries' and TPPs' costs increased even though

providers' costs dropped. The district court noted that

AstraZeneca raised the AWP to counteract Medicare's reduced

reimbursement rate in 1998, and finally, it found that

AstraZeneca's efforts to promote the "return to practice" available

to providers who prescribed Zoladex constituted active marketing of

the drug based on profitability rather than therapeutic benefits.

For these reasons, the district court "easily" found that

AstraZeneca's "actions were unfair to consumers and TPPs under

Chapter 93A. Accordingly, [it found] liability for Zoladex during

the years 1998-2002."

C. AstraZeneca's Challenges

AstraZeneca mounts three challenges to the district

court's merits analysis, two of which we discussed extensively

above and will therefore only touch upon again here.24

First, AstraZeneca argues that by 1997, TPPs "knew, or

should have known, that AWP was a benchmark price that had no

necessary relationship to actual average sales prices, net of

discounts." This knowledge, AstraZeneca asserts, "defeats

Plaintiffs' claims of deception." We discussed the TPPs' knowledge

24
As noted above, AstraZeneca has not argued that its conduct
was shielded from liability as an "exempted transaction" under
Chapter 93A. See Mass. Gen. Laws ch. 93A, § 3.

-70-
of AWP inflation in detail when discussing AstraZeneca's preemption

challenge, above, and need not repeat that discussion here.

Suffice it to say that we are unpersuaded by the record evidence

that the TPPs' knowledge of systematic AWP inflation was sufficient

to insulate AstraZeneca from Chapter 93A liability for its

practices of reporting one, inflated price for reimbursement

purposes while charging another, discounted price to providers, and

for using the difference between these prices as a lever for

increasing the market share for Zoladex.

We also note that Tagliente v. Himmer, 949 F.2d 1 (1st

Cir. 1991), the case relied upon by AstraZeneca for the proposition

that a Chapter 93A plaintiff's knowledge of the extent of a

potentially-deceptive business practice is immaterial if that

plaintiff has any knowledge of the practice at all, cannot bear the

weight of that proposition. In that case involving a

misrepresentation relating to the presence of water and wetlands on

a piece of property, we explicitly noted that the relevant facts

"could have been easily verified." Id. at 7. In contrast, the

district court in this case found that the costs of acquiring and

acting upon the information necessary to understand the full extent

of the AWP inflation were "prohibitive." In re Pharm., 491 F.

Supp. 2d at 86.

Nor is Ahern v. Scholz, 85 F.3d 774 (1st Cir. 1996),

contrary to the district court's liability finding. That case

-71-
involved a dispute over royalties earned by a songwriter; the

songwriter claimed that certain deductions taken by his manager

violated Chapter 93A. Id. at 778-79. In assessing the deductions

under Chapter 93A, we found that although they were "commercially

unreasonable," the manager's level of rascality was not sufficient

to rise to the level of a violation of Chapter 93A. Id. at 799-

800. Central to that holding was the fact that the producer "did

not seek to conceal the nature of the deductions: he laid them out

[in a written statement itemizing the royalties and deductions] in

varying levels of detail." Id. at 799. AstraZeneca thus cites

Ahern for the proposition that it should be released from liability

under Chapter 93A because it "did not seek to conceal" the

discounts available for Zoladex, but rather "reported them

accurately to HCFA via Medicaid, and to TPPs through a program

AstraZeneca designed to allow TPPs to benefit from them." This

argument mirrors those made below in which AstraZeneca maintained

that it had disclosed accurate pricing data by "report[ing] an

accurate average manufacturer's price ('AMP'), a close proxy for

[the providers' actual acquisition costs], to CMS for purposes of

Medicaid," and that it had "discussed the spreads with TPPs" in the

context of an alternative reimbursement system. In re Pharm., 491

F. Supp. 2d at 102-03. The district court, however, considered and

rejected these arguments, finding that "AMP data is confidential

information that is unavailable to TPPs or consumers." It also

-72-
rejected a similar argument relating to prices AstraZeneca provided

to another private pharmaceutical data provider, IMS Health,

finding that those prices "did not provide a clear representation

of the spreads on Zoladex." The district court also noted that,

even though "some data regarding the acquisition costs of Zoladex

was leaking into the public domain, this did not mitigate the

unfairness of using a grossly inflated AWP" because "TPPs faced

significant structural impediments to changing the reimbursement

system for a single drug," and "Medicare reimbursement was

statutorily based on AWP, so TPPs were stuck paying for Zoladex

based on the inflated AWP provided by AstraZeneca." We find no

clear error in these findings of the district court, which are

sufficient to undercut AstraZeneca's contention that it did not

keep the spreads secret. Ahern is therefore distinguishable.

AstraZeneca's second, related argument challenging the

district court's merits analysis is that the district court erred

in finding that the government and TPPs were "locked" into AWP-

based reimbursement and "could [not] move quickly or effectively to

fix the problem." AstraZeneca argues that, even if true, this fact

is not enough to show that the defendants "caused [the plaintiffs]

to act differently from the way [they] otherwise would have acted,"

as required under Chapter 93A. Tagliente, 949 F.2d at 7 ("An act

is 'deceptive' under chapter 93A 'if it could reasonably be found

to have caused a person to act differently from the way he

-73-
otherwise would have acted.'" (quoting Lowell Gas Co. v. Attorney

Gen., 385 N.E.2d 240, 249 (Mass. 1979); Purity Supreme, Inc. v.

Attorney Gen., 407 N.E.2d 297 (Mass. 1980))). Moreover,

AstraZeneca argues that even if the district court applied the

correct legal analysis, its underlying fact finding was inaccurate

because neither the government nor the TPPs were "at the mercy" of

the defendants, as the district court suggested. A fair assessment

of the knowledge and equities as to both parties, AstraZeneca

argues, reveals that AstraZeneca misled and was unfair to nobody,

and therefore should not be subject to liability under Chapter 93A.

We disagree that the district court erred at all, much

less committed the clear error required to upset a factual finding,

when it concluded that the TPPs were effectively locked into the

AWP-based repayment system. Copious evidence before the district

court documented the administrative difficulties of abandoning that

payment system in favor of another, and even Dr. Gregory Bell, an

expert who testified on behalf of the defendants below,

acknowledged that competitive concerns impeded any single TPP's

ability to migrate to new payment systems, testifying that "an

individual payor on its own is in a very difficult position to do

this." See In re Pharm., 491 F. Supp. 2d at 96 ("Even Dr. Bell

admitted that TPPs faced several significant impediments to quickly

changing reimbursement practices."). The district court was

therefore supported by the record evidence when it concluded that

-74-
"neither the TPPs nor the government could move quickly or

effectively to fix the problem." Moreover, the district court

adopted the finding of Dr. Meredith Rosenthal, an expert offered by

the plaintiffs, who testified that class members paid more for

drugs based on a false AWP than they would have if the defendants

had reported a true AWP. Id. These findings are more than

adequate to justify the district court's conclusions that, under

the circumstances of this case, "the fact that the TPPs have been

slow to change their reimbursement systems does not negate

causation," and that even after 2001, when the TPPs' knowledge

about spreads was more comprehensive, "the [defendants'] conduct

was still egregious under the unfairness prong of Chapter 93A."

The TPPs were both unaware of the full extent of the AWP inflation

and unable to adapt to it "quickly and effectively," as they

undoubtedly would have liked to given that the inflation of AWPs

caused them to pay more than they would have had the AWPs been

accurately reported. That is sufficient under the circumstances to

meet Chapter 93A's causation requirement. See Int'l Fid. Ins. Co.,

443 N.E.2d at 1314 (requiring the plaintiff to show a "causal

connection between the deception and the loss and that the loss was

foreseeable as a result of the deception").

AstraZeneca's third argument challenging the district

court's merits analysis is that the plaintiffs failed to prove

actual damages, asserting that none of the named plaintiffs

-75-
presented "evidence of what they paid for Zoladex from 1997 through

2003," "formulas they used to determine physician reimbursements

for Zoladex," "testimony as to their own individual expectations of

the difference between Zoladex AWPs and average actual sales prices

of Zoladex," or testimony as to "how such expectations altered the

reimbursement formulas to which they agreed with treating

physicians" or otherwise "had any impact on their determinations of

appropriate and competitive reimbursement levels for physicians."

AstraZeneca further argues that this failure defeats not only the

plaintiffs' Chapter 93A claim, but their very standing under

Article III to bring the lawsuit in the first instance. See SBT

Holdings, LLC v. Town of Westminster, 547 F.3d 28, 37 (1st Cir.

2008) ("A plaintiff must have Article III standing. To proceed, he

or she must 'adequately establish: (1) an injury in fact . . . ;

(2) causation . . . ; and (3) redressability.'" (quoting Sprint

Commc'ns Co. v. APCC Servs., Inc., 128 S. Ct. 2531, 2535 (2008))

(citation omitted)).

As described above, however, the evidence presented by

Dr. Hartman and Dr. Rosenthal belies AstraZeneca's claims about

insufficient evidence of damages. That evidence included, inter

alia, testimony from TPPs as to their understanding of the AWP

benchmark and its relationship to actual acquisition costs, TPP

contracts, industry reports and public literature, and expert

testimony at trial. Dr. Hartman's findings were based on a

-76-
methodology that the district court ruled was reliable and

admissible, and resulted in calculations of the amount of actual,

not speculative, damages incurred by the plaintiffs as a result of

overpayments due to AstraZeneca's actions.25 Dr. Rosenthal

testified that had the AWPs not been inflated, the plaintiffs would

not have paid as much as they did. And as the Supreme Court long

ago recognized in the antitrust context, overpayment is a

cognizable form of injury. See Reiter v. Sonotone Corp., 442 U.S.

330, 342 (1979).26 We have been presented with no reason to deviate

from that approach here.

For these reasons, we find AstraZeneca's challenges to

the district court's merits analysis unpersuasive.

25
Additional challenges to the district court's damages rulings
are discussed below.
26
AstraZeneca further argues that its practice of inflating the
AWP and marketing the spread to practitioners resulted in a net
benefit to plaintiffs because Zoladex was at all times the lower-
cost alternative to its competitor, Lupron. The district court
dismissed this argument by concluding that "one fraud does not
excuse another," In re Pharm., 491 F. Supp. 2d at 103, and we
agree. AstraZeneca's better course would have been to blow the
whistle on TAP's scheme; it should not now be relieved, in whole or
in part, from the damages it caused simply because when it engaged
in the same scheme, it may have left money on the table by pricing
Zoladex lower than Lupron. As Dr. Hartman put it in his December
16, 2006 rebuttal testimony, "[I]t makes no economic sense when
evaluating the consequences of fraud and abuse to characterize . .
. the lesser harm perpetuated by one wrongdoer as a 'savings'
[simply] because the victim would have suffered a greater harm by
the other wrongdoer."

-77-
VII. CLASS-WIDE JUDGMENT

The final issue presented by this appeal is whether the

district court erred in entering a class-wide judgment, a decision

that AstraZeneca argues impermissibly abridged its substantive

rights and violated due process by depriving AstraZeneca of its

opportunity to raise individual defenses against each class member.

See Amchem Prods. Co. v. Windsor, 521 U.S. 591, 612-13 (1997)

(citing the Rules Enabling Act, 28 U.S.C. § 2072(b) for the

proposition that Fed. R. Civ. P. 23 may not be used to "abridge,

enlarge or modify any substantive right").

AstraZeneca mounts three specific challenges on this

score: first, that the district court erred in extending its

judgment under § 9 of Chapter 93A to TPPs whose proper avenue for

relief was § 11, a section to which the plaintiffs allegedly did

not prove themselves entitled; second, that the class-wide judgment

denied the company its opportunity to litigate individualized

issues of knowledge, causation, and injury as to absent class

members; and third, that the district court's aggregate damages

calculation overlooked the individualized circumstances of absent

class members. We discuss each argument in turn, but we find none

persuasive.

A. Section 9 vs. Section 11

AstraZeneca's first challenge to the class-wide judgment

is its claim that the district court erred in allowing the TPPs to

-78-
advance their claims under § 9 rather than requiring them to make

proof under § 11. As the district court properly noted, at least

as to "business" claims, § 9 and § 11 of Chapter 93A are "mutually

exclusive and plaintiffs' claims can proceed under only one

section." See Mass. Gen. Laws ch. 93A, § 9 ("Any person, other

than a person entitled to bring action under section eleven of this

chapter . . . may bring an action . . . ." (emphasis added));

Cont'l Ins. Co. v. Bahnan, 216 F.3d 150, 156 (1st Cir. 2000) ("By

their terms, however, [§ 9 and § 11] of chapter 93A . . . are

mutually exclusive."); Frullo v. Landerberger, 814 N.E.2d 1105,

1112 (Mass. Ct. App. 2004) ("A business claim cannot be asserted

under § 9."). Whereas "§ 9 affords a private remedy to the

individual consumer who suffers a loss as a result of the use of an

unfair or deceptive act or practice," § 11 grants a cause of action

to "[a]ny person engaged in the conduct of any trade or commerce,"

which the Massachusetts Supreme Judicial Court ("SJC") has

interpreted to mean persons "acting in a business context."

Lantner v. Carson, 373 N.E.2d 973, 976 (Mass. 1978).27

Calling the distinction between § 9 and § 11 "as clear as

mud," the district court cited Linkage Corporation v. Trustees of

Boston University, 679 N.E.2d 191, 209 (Mass. 1997), for the

27
The statutory definition of "person" includes "natural
persons, corporations, trusts, partnerships, incorporated or
unincorporated associations, and any other legal entity." Mass.
Gen. Laws ch. 93a, §1(a).

-79-
proposition that "[i]n most circumstances, a charitable institution

will not be engaged in trade or commerce when it undertakes

activities in furtherance of its core mission," and distinguished

that situation from one where a non-profit organization "is merely

engaged in the customary business necessary to meet its charitable

purpose," see Trs. of Boston Univ. v. ASM Commc'ns, Inc., 33 F.

Supp. 2d 66, 77 (D. Mass. 1998). It then turned to the

individualized circumstances of this case to guide its inquiry into

whether the plaintiffs are entitled to sue under § 9, see Begelfer

v. Najarian, 409 N.E.2d 167, 176 ("[B]usiness context must be

determined from the circumstances of each case."), and specifically

focused on the nature of the transaction, the character of the

parties involved, and whether the transaction is motivated by

business or personal reasons, see Linkage Corp., 679 N.E.2d at 207

(citing Begelfer, 409 N.E.2d at 191).

As to plaintiff BCBS-MA, the district court found that in

its conduct relevant to its claims in this case, BCBS-MA was "a

non-profit organization acting pursuant to its legislative

mandate," engaged in "a key part of its core mission," and "not

motivated by the desire to make money," and therefore is eligible

to "bring [its] claims under § 9 of Chapter 93A." Without

significant explanation, the district court extended this

-80-
conclusion, "[a] fortiori," to all "Taft-Hartley funds,"28 and also

to the other class-member TPPs. In a footnote, the district court

added, "After reviewing the relevant law, plaintiffs also satisfy

the requirements necessary to bring an action under § 11. Given

the finding that § 9 is appropriate, I decline to fully address

those issues."29 In re Pharm., 491 F. Supp. 2d at 82 n.53.

On appeal, AstraZeneca trifurcates its challenge. It

first argues that the named plaintiffs should not be allowed to

avail themselves of § 9 because, although they are non-profit

entities, each was acting in a business context and thus brings a

business claim better suited for § 11. It next argues that, even

if the named plaintiffs could proceed under § 9, the district court

made no fact findings sufficient to extend the same conclusion to

the for-profit TPP class members. Finally, AstraZeneca argues that

the district court's alternative holding that "plaintiffs also

satisfy the requirements necessary to bring an action under § 11"

was both inadequately explained and wrong, and thus cannot render

the errors as to § 9 harmless. We need not reach the first two of

these challenges because we reject the third: even assuming,

28
"A Taft-Hartley fund provides health and welfare benefits for
union members. The fund, pursuant to federal law, is 'administered
jointly by employer-designated trustees and union-designated
trustees.'" In re Pharm., 491 F. Supp. 2d at 49 n.29 (quoting Levy
v. Local Union No. 810, 20 F.3d 516, 517-18 (2d Cir. 1994)).
29
We note that the question of whether the TPPs met the
requirements of § 11 was extensively briefed to the district court.

-81-
arguendo, that the district court erred in allowing the plaintiffs

to proceed under § 9, we agree with the district court that the

TPPs have satisfied the requirements necessary to bring an action

under § 11.

With regard to § 11, AstraZeneca argues that the TPPs

failed to establish "that its monetary loss arises from a business

transaction between the plaintiff and defendant," stressing that

the TPPs and AstraZeneca were not in privity with each other on any

of the payments at issue. However, Massachusetts appellate courts

have counseled that, in a fraud suit under § 11 where "the parties

are engaged in more than a minor or insignificant business

relationship," such privity is not required. Standard Register Co.

v. Bolton-Emerson, Inc., 649 N.E.2d 791, 795 (Mass. App. Ct. 1995)

("[P]rivity is not required to maintain a nonwarranty-based action

under 93A, i.e., one based on fraud, so long as the parties are

engaged in more than a minor or insignificant business

relationship." (citing Mongeau v. Boutelle, 407 N.E.2d 352 (Mass.

App. Ct. 1980))).30 What, specifically, constitutes a "minor or

30
Szalla v. Locke, 657 N.E.2d 1267 (Mass. 1995), is not to the
contrary. Szalla involved a claim under Chapter 93A that arose out
of a failed business venture. Noting that "[i]t is well
established that disputes between parties in the same venture do
not fall within the scope of . . . § 11," and finding that "[t]he
defendant was not purchasing the plaintiff's services," but rather
"[t]he defendant and the plaintiff made a private arrangement to
form a business together," the SJC held that "[t]he association
between the plaintiff and the defendant . . . is not the kind of
commercial transaction regulated by the statute." Id. at 1269-70.

-82-
insignificant business relationship" has not been fully fleshed out

in the Massachusetts courts, but it has been described as requiring

that "there must exist some commercial relationship between the

parties or the plaintiffs must demonstrate that the defendants'

actions interfered with trade or commerce." Spencer v. Doyle, 733

N.E.2d 1082, 1087 (2000). For purposes of our § 11 analysis, that

the relationship between AstraZeneca and the TPPs meets the

standard articulated in Spencer is obvious.

Additionally, Massachusetts case law offers ample support

for allowing the plaintiffs to proceed under § 11 despite the lack

of strict privity with AstraZeneca. For instance, in Standard

Register, two defendants who "fraudulently negotiated and induced

the . . . contract with Standard Register and orchestrated the

misrepresentation regarding the progress of the project," but who

were not in privity with the plaintiffs, were sued under § 11. 649

N.E.2d at 795. Similarly, in First Enterprises, Ltd. v. Cooper,

680 N.E.2d 1163 (Mass. 1997), the SJC discussed, with approval and

in the context of a § 11 claim, a case in which a buyer of goods

sued attorneys despite the fact that the attorneys were not party

to the relevant transaction because the attorneys had "injected

themselves" into the trade and commerce of the buyer and seller.

Id. at 1165-66 (discussing Kirkland Constr. Co. v. James, 658

N.E.2d 699 (Mass. App. Ct. 1995), and concluding that the defendant

in First Enterprises "did not, as did the attorneys in Kirkland,

-83-
supra, inject himself into trade or commerce" (internal quotation

marks omitted)).

We see no meaningful distinction to be drawn between

these cases and the case at bar. For years, AstraZeneca

manipulated a pricing scheme by repeatedly making

misrepresentations about the cost of Zoladex that it knew would

increase the amount the plaintiffs would have to pay. That scheme

exploited the TPPs, who believed the AWPs reflected actual

acquisition costs, lacked information about the extent of the

deceptive practices, were unable to adapt, and were among the

obvious and foreseeable victims. AstraZeneca thus unquestionably

orchestrated the scheme at the cost of the TPPs, and in so doing,

effectively determined the amount of money the TPPs would overpay

to their counterparties for Zoladex. That the fraud passed through

third parties along the way does not reduce or undo the influence

AstraZeneca wielded over the plaintiffs' transactions, an influence

so great as to make AstraZeneca and the plaintiffs a kind of

functional counterparties. See Leardi v. Brown, 474 N.E.2d 1094,

1101 (Mass. 1985) ("Technicalities are not to be read into the

statute in such a way as to impede the accomplishments of

substantial justice."); see also Ameripride Linen & Apparel Svcs.,

Inc. v. Eat Well, Inc., 836 N.E.2d 1116, 1122 (Mass. App. Ct. 2005)

(same). Thus, and mindful of the duration and extent of the unfair

and deceptive practices, the ongoing business relationship between

-84-
AstraZeneca and the TPPs cannot be said to be minor or

insignificant.

AstraZeneca also argues that the plaintiffs may not avail

themselves of § 11 because AstraZeneca's conduct did not occur

"primarily and substantially within" Massachusetts. See Kuwaiti

Danish Computer Co. v. Digital Equip. Corp., 781 N.E.2d 787, 797

(Mass. 2003) ("[A] a judge should . . . determine whether the

center of gravity of the circumstances that give rise to the [§ 11]

claim is primarily and substantially within the Commonwealth.").

Whether this test has been met is a question of law subject to

plenary review, id., but it is also a "fact intensive" inquiry that

is "unique to each case," and "[s]ignificant factors . . . for one

case may be nonexistent in another," id. at 798. In all events,

however, the focus of the inquiry should be on "the purpose and

scope" of Chapter 93A. Id. at 799.

Under these standards, we agree with the district court's

finding that the plaintiffs may proceed under § 11. It is true, of

course, that Delaware is AstraZeneca's principal place of business,

that its conduct was directed nationwide, and that none of the

pricing compendia at issue were located in Massachusetts. That

does not mean, however, that AstraZeneca is correct to assert that

its conduct "had no connection to Massachusetts," for it is clear

from the district court's findings that AstraZeneca's conduct

directly, and by design, affected physicians in Massachusetts and

-85-
caused financial injury to payors in Massachusetts. It is also

true that the definitions of Class 2 and Class 3 are limited to

plaintiffs with a substantial connection to Massachusetts.

Moreover, the purpose of Chapter 93A to "encourage more equitable

behavior in the marketplace and impose liability on persons seeking

to profit from unfair practices" is undoubtedly consistent with

allowing a § 11 claim under the circumstances. Arthur D. Little,

Inc. v. Dooyang Corp., 147 F.3d 47, 55 (1st Cir. 1998) (quoting

Linkage Corp., 679 N.E.2d at 208). Especially in light of the

burden of proof on this issue, which rests with AstraZeneca, see

Kuwaiti Danish Computer Co., 781 N.E.2d at 797 (citing Mass. Gen.

Laws ch. 93A, § 11), we agree with the district court that the TPPs

have satisfied this requirement of § 11.

Finally, AstraZeneca's complaint that the district

court's explanation for its § 11 finding was inadequate is

unavailing. The district court's finding as to § 11 is explicit,

and even if it weren't, we are empowered to affirm the district

court based on any grounds apparent in the record. See Peguero-

Moronta v. Santiago, 464 F.3d 29, 34 (1st Cir. 2006); United States

v. Podolsky, 158 F.3d 12, 16 (1st Cir. 1998) ("[A]n appellate

court, faced with the task of reviewing an inscrutable order, may

either remand for a fuller exposition or act, without remanding, if

a reasonable basis supporting the order is made manifest on the

record.").

-86-
 We will therefore not disturb the district court's

finding that the TPPs may avail themselves of § 11; the district

court's errors regarding § 9, if any, were harmless.

B. Absent Class Members

The gravamen of AstraZeneca's second challenge to the

class-wide judgment is its contention that the district court erred

in addressing only the knowledge of the named class

representatives, particularly BCBS-MA, when examining the TPPs'

knowledge and expectations as to AWP inflation. Pointing to the

"fact-specific" nature of the district court's analysis of the

class representatives' knowledge and expectations, AstraZeneca

argues that the district court should also have analyzed -- and

permitted discovery and inquiry by AstraZeneca into -- the

knowledge and expectations of absent class members, who AstraZeneca

maintains may have had more knowledge than BCBS-MA did of Zoladex

pricing. After all, the argument runs, even if BCBS-MA lacked

sufficient knowledge of AWP inflation and Zoladex pricing,31 there

is reason to believe that other, absent class members could have

had more refined knowledge and expectations than the class

representatives did, for at least some of the absent class members

were large and sophisticated TPPs who had been directly offered

31
In the section of its brief attacking the class-wide
judgment, AstraZeneca again assails the district court's findings
as to BCBS-MA's knowledge and expectations regarding AWP inflation
and Zoladex pricing. As we rejected those arguments above, we need
not do so again here.

-87-
discounts on Zoladex by AstraZeneca through various cost-reduction

programs. Thus, AstraZeneca argues that because the actual

knowledge and expectations of the absent class members was never

established, the district court "excused [them] from having to

establish each element of their Chapter 93A claims," thereby

"den[ying] AstraZeneca its right to defend itself."

This argument, of course, is a familiar one in the

context of class action lawsuits. It is beyond question that,

under some circumstances, constitutional principles prohibit a

court from relying on proof relating to the class representatives

to make class-wide findings. But it is equally obvious that class-

action litigation often requires the district court to extrapolate

from the class representatives to the entire class; for example,

the district court employed just this kind of analysis without

objection in this very case when it applied the "discovery rule" to

determine when the statute of limitations should cut off the

plaintiffs' claims, but did not make specific findings as to each

class member, In re Pharm., 491 F. Supp. 2d at 75-80. See also

Hansberry v. Lee, 311 U.S. 32, 42-43 (1940) ("It is familiar

doctrine of the federal courts that members of a class not present

as parties to the litigation may be bound by the judgment where

they are in fact adequately represented by parties who are present,

or where they actually participate in the conduct of the litigation

in which members of the class are present as parties, or where the

-88-
interest of the members of the class, some of whom are present as

parties, is joint, or where for any other reason the relationship

between the parties present and those who are absent is such as

legally to entitle the former to stand in judgment for the latter."

(citations omitted)). The district court in this case determined

that the class was adequately represented when it certified the

class, and it carefully examined the representatives' knowledge and

expectations as to spreads. As a general matter, this is precisely

the kind of analysis that Rule 23 was designed to permit, and it

would quickly undermine the class-action mechanism were we to find

that a district court presiding over a class action lawsuit errs

every time it allows for proof in the aggregate.

More specifically, the district court's aggregate

determination as to knowledge and expectations was permissible and

appropriate for two reasons. First, AstraZeneca and the other

Track 1 defendants were allowed ample opportunity to depose TPPs

prior to trial -- in all, these defendants deposed roughly fifty

TPPs, and multiple representatives from many of those. Despite

this extensive discovery, AstraZeneca marshals no specific evidence

on appeal to suggest that absent class member TPPs had knowledge or

expectations that differed substantially from class representative

BCBS-MA.

Instead, AstraZeneca states, without record citation,

that "many other payers" were as sophisticated as BCBS-MA, and that

-89-
unnamed TPPs who "fully understood that AWPs were not predictably

related to acquisition costs or who understood the pricing of

Zoladex itself were permitted to recover." Yet the portions of the

record to which AstraZeneca cites to raise the specter of

individualized differences in knowledge and expectations among the

class members in fact demonstrate the class members' similarities,

for the record citations contain evidence that the class-member

TPPs were offered the same opportunities to take advantage of

discounts and rebates that BCBS-MA was offered. If these portions

of the record suggest anything, it is that, contrary to

AstraZeneca's position, BCBS-MA was a good proxy for the class

members' knowledge and expectations.32

Second, the district court's conclusions about industry

knowledge and expectations were based on a careful analysis of the

class representatives and on expert testimony that was properly

admitted, and therefore it did not exhibit any of the evils paraded

in AstraZeneca's brief with references to cases such as Broussard

v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 343 (4th

32
Moreover, the testimony from the roughly fifty TPPs appears
to have been enough to allow defendants' expert Dr. Eric M. Gaier
to form opinions about aggregate TPP knowledge: under the
subheading "TPPs are typically knowledgeable and sophisticated," he
used observations about the largest TPPs, including BCBS-MA, to
extrapolate imputed knowledge and expectations of smaller TPPs.
That defendants' own expert managed to reach conclusions by the
same method that AstraZeneca now claims was improper due to
individualized circumstances must, as a matter of common sense,
cast doubt on the plausibility of AstraZeneca's position.

-90-
Cir. 1998) (reliance on a fictitious, composite plaintiff "divorced

from any actual proof of damages" whereas North Carolina law

required "reasonable certainty" about lost profits awards), Western

Electric Company v. Stern, 544 F.2d 1196 (3d Cir. 1976) (unduly

limited discovery), and Cimino v. Raymark Inustries, Inc., 151 F.3d

297 (5th Cir. 1998) (extrapolating damages from personal injuries

and death from a set of sample cases).

Nor are we persuaded that this case has individualized

circumstances similar to those at issue in McLaughlin v. American

Tobacco Co., 522 F.3d 215 (2d Cir. 2008), where the Second Circuit

cast doubt on the use of common proof to establish reliance and

causation among a class of smokers who had purchased "light"

cigarettes over a thirty-seven year period. In that case, the

Second Circuit expressed its concern that the class-member

consumers may have chosen the product for a variety of reasons,

such as personal preference, unrelated to the alleged

misrepresentations implied in the term "light." Id. at 225-26

("[E]ach plaintiff in this case could have elected to purchase

light cigarettes for any number of reasons, including a preference

for the taste and a feeling that smoking Lights was 'cool.'").

Here, however, we harbor no such concerns about intractably payor-

specific issues. The evidence in the record relating to the

knowledge and expectations about AWP inflation and Zoladex pricing

among TPPs is voluminous, and as noted above, the portions of the

-91-
record cited by AstraZeneca as cause for concern contain strikingly

consistent evidence as to each of the TPPs. We thus are not

persuaded that the evidence of variation across the class members

as to their knowledge and expectations about AWP inflation and

Zoladex pricing demonstrates the existence of significant

individualized issues in the first place, much less variations so

significant as to raise concerns of a constitutional dimension.

C. Aggregate Damages

AstraZeneca's third challenge to the entry of a class-

wide judgment is that the district court awarded aggregate damages

"without any individualized determination of damages as to a single

class member (including the named plaintiffs)," thereby violating

AstraZeneca's "fundamental right" to defend against each class

member's claim of injury and damages. In support of its argument

that a "rough estimate" of damages is insufficient, AstraZeneca

cites In re New Motor Vehicles Canadian Export Antitrust

Litigation, 522 F.3d 6, 28 (1st Cir. 2008), and McLaughlin, 522

F.3d 215, for the proposition that the plaintiffs should have been

required to prove that each class member was harmed by

AstraZeneca's pricing practices. Requiring such proof, the company

argues, ensures that AstraZeneca will pay damages reflective of its

actual liability.

As to whether the plaintiffs adequately proved the class

members' claims of injury, AstraZeneca once again takes aim at Dr.

-92-
Hartman's methodology, arguing that the approach he used to set the

30% liability speed limit failed to take into account the

individualized circumstances of the class members. Little more

need be said about Dr. Hartman's liability analysis or the district

court's decision to adopt it. Suffice it to say that the

methodology used to develop the 30% "speed limit" that triggered

potential liability, which included an examination of TPPs'

(including class representative BCBS-MA's) testimony, data, and

contracts, sufficiently incorporated individualized information

about the class members to support the district court's decision to

adopt it for the entire class.33

AstraZeneca's criticisms of Dr. Hartman's damages

calculation, however, merit further discussion. AstraZeneca

alleges that Dr. Hartman's calculation fails to account for five

factors: i) that fourteen Massachusetts TPPs and 23,000 consumers

opted out of the class; ii) that those persons with flat co-

payments were defined out of the class; iii) that some TPPs did not

always reimburse based on AWP during the class period; iv) that

some physicians did not bill patients for the co-payments; and v)

that some physicians did not collect the co-payments that were

billed. AstraZeneca asks us to review the district court's damages

33
Additionally, at oral argument, plaintiffs' counsel
represented to the court, without objection, that the district
court will conduct further proceedings ("[t]he actual prove-up") to
allow specific class members to "make their claim."

-93-
methodology for a violation of the company's due process rights,

and of Federal Rule of Civil Procedure 23.

The use of aggregate damages calculations is well

established in federal court and implied by the very existence of

the class action mechanism itself. See, e.g., 3 Herbert B. Newberg

& Alba Conte, Newberg on Class Actions § 10.5, at 483-86 (4th ed.

2002) ("Aggregate computation of class monetary relief is lawful

and proper. Courts have not required absolute precision as to

damages . . . . Challenges that such aggregate proof affects

substantive law and otherwise violates the defendant's due process

or jury trial rights to contest each member's claim individually,

will not withstand analysis. . . . Just as an adverse decision

against the class in the defendant's favor will be binding against

the entire class in the aggregate without any rights of individual

class members to litigate the common issues individually, so, too,

an aggregate monetary liability award for the class will be binding

on the defendant without offending due process." (footnotes

omitted)). There is nothing about this case to suggest a contrary

conclusion. Thus, to the extent that AstraZeneca argues that the

district court's decision to use an aggregate damages methodology

violated Rule 23 or the company's due process rights, AstraZeneca's

challenge fails in the starting gate.

To the extent that AstraZeneca's arguments instead go to

the question of whether Dr. Hartman's methodology was sufficiently

-94-
reliable, see Daubert, 509 U.S. at 597, we review the district

court's ruling for an abuse of discretion, see Gen. Elec. Co. v.

Joiner, 522 U.S. 136, 141-43 (1997), but we find none here. To

begin, we note that none of AstraZeneca's first three purported

errors in Dr. Hartman's damages calculations is severe enough to

suggest that the district court abused its discretion in relying on

it. As to the various parties who opted out of the class action,

the number of opt-outs was a small fraction of the number of

notices mailed: according to a signed declaration from the Notice

and Administration Manager of Complete Claim Solutions, LLC, which

was appointed as the Litigation Administrator below, nearly 45,000

notices were mailed to TPPs, and nearly 950,000 notices were mailed

to consumers. In the scope of a gargantuan mailing effort such as

this, the number of opt-outs, while large, clearly represents a

very small percentage of the class. Even assuming arguendo that

Dr. Hartman's analysis did indeed fail to account for parties who

opted out, any imprecision that resulted was likely to be small.

And if there is a more specific reason that the particular parties

who opted out might have had a disproportionate effect on the

damages calculation, AstraZeneca has waived that argument by

failing to advance it. Zannino, 895 F.2d at 17.

Similarly, we are unable to ascertain from AstraZeneca's

brief (or from the record) how Dr. Hartman's alleged failure to

take into account persons who paid a flat co-payment could have

-95-
affected the reliability of his damages calculation. If

AstraZeneca intends to suggest that Dr. Hartman erroneously

calculated damages for these persons, who were defined out of both

Class 2 and Class 3, its brief is far too opaque on the nature of

the alleged error or its impact on the ultimate damages calculation

for us to credit it. That argument, too, is waived. Id.

As to AstraZeneca's claim that some TPPs did not always

reimburse based on AWP, the district court found to the contrary

when it stated, "Throughout this period (and until today), [AWP]

has also been the pricing benchmark used by most TPPS in

Massachusetts and the nation." The evidence on this point may have

been mixed, as AstraZeneca has argued, but not so mixed as to

render either the district court's fact finding or its reliance

upon Dr. Hartman's damages calculation legally infirm.

Finally, AstraZeneca's two remaining challenges -- that

some physicians did not bill patients for co-payments, and that

some physicians did not collect the co-payments that were billed --

are also insufficient to prove an abuse of the district court's

discretion. AstraZeneca provides no argument explaining how many

co-payments went unbilled or uncollected, or what impact the

resulting imprecision would have on the ultimate damages

calculation. Nor does AstraZeneca address the fact that the

definition for Class 3 injuries includes both actual outlays of

cash and legally enforceable debts, which the co-payments, even if

-96-
uncharged and uncollected, undoubtedly were. In fact, the only

citation AstraZeneca offers in support of these last two challenges

is to the district court's statements that doctors "could not

always collect the entire co-payment from those patients who were

unable to pay" and that "some doctors did not charge Medicare

beneficiaries who could not afford the coinsurance payment." These

statements are hardly specific enough to show that the district

court abused its discretion in imposing aggregate damages. If

anything, they show that the district court was mindful of

potential imprecision in the aggregate damages methodology when it

imposed its award, yet decided that the imprecision, if any, was

negligible. But that is neither here nor there; AstraZeneca simply

has not offered sufficiently developed argumentation on this point

to avoid waiver. See Zannino, 895 F.2d at 17.34

VIII. CONCLUSION

At bottom, the district court's findings are justified.

The evidence supported a finding that AstraZeneca unfairly and

deceptively published an artificial average wholesale price for

Zoladex that gave no indication of the actual, substantial

discounts and rebates it was providing in the market. This conduct

by the appellant was contrary to Congress's intent in designing the

Medicare program, and it clearly transgressed the expectations of

34
As to other arguments raised in AstraZeneca's briefs but not
discussed explicitly above, we have considered them carefully and
find they lack merit.

-97-
the marketplace. The scheme to maximize the divergence of the AWP

from actual acquisition cost exploited consumers and the third

party payors, who did not understand the systematic and extreme

nature of the spreads until it was too late, and who were locked

into AWP as a benchmark for reimbursement; each of these plaintiffs

overpaid for Zoladex. That AstraZeneca also used the scheme to

attempt to induce physicians, who stood to profit from the

difference between their acquisition cost and the AWP-based

reimbursement cost, to prescribe the drug to make a profit rather

than based on therapeutic concerns underscores the serious nature

of the company's conduct. This is precisely the kind of scheme

that Chapter 93A was meant to address, and its use to impose

liability here is consistent with the Constitution, with federal

and state law, and with the goals, purposes, and design of the

Medicare program.

We conclude that the district court made the rulings

underpinning this result without committing material legal error,

abusing its discretionary power, or making clear errors in its fact

finding. Consequently, the rulings of the district court are

AFFIRMED.

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