Today, the Supreme Court rejected arguments by the prescription drug industry that having their labels approved by the Food and Drug Administration should be a shield from state law tort liability.In a rousing victory for consumers of prescription drugs, the Supreme Court rendered a decision preserving consumer rights to access the courts when injured physically or financially by prescription drugs.
In the case Wyeth v. Levine, the Court ruled 6 to 3 that the FDA’s approval of a drug label does not preempt consumer’s rights to sue the manufacturer for their failure to warn of knows risks associated with the drug.
The lawsuit was brought by Diane Levine, a musician from Vermont who while suffering from a migraine was given the anti-nausea drug Phenergan. Her physician’s assistant did so in a manner that caused the drug to contact her arteries, which caused gangrene and resulted in the loss of her arm. Ms. Levine sued and settled with her doctor. She also sued the drug’s Manufacturer, Wyeth. In its defense, Wyeth argued that the FDA’s approval of the label under federal law preempted Ms. Levine’s rights under state law, but lost. After a 5-day trial, a Vermont jury concluded that the drug maker did not adequately warn of the known risks of gangrene associated with the use of the drug, and awarded Ms. Levine $7.4 million.
After losing in appeals all the way up to Vermont’s Supreme Court, Phenergran’s manufacturer, Wyeth appealed to the U.S. Supreme Court. The Court accepted the case, and addressed the issue
whether federal law preempts Levine’s claim that Phenergan’s label did not contain an adequate warning about using the IV-push method of administration.
In today’s decision, the Court decided that there was no preemption, and found in favor of Ms. Levine.
The Court first noted that it was not impossible for the drug maker to comply with both state law and federal requirements in preparing the drug’s label.The court concluded that the drug maker could have added warnings to the label at any time to reflect the risks of gangrene that had occurred to over twenty people since the labeling was approved by FDA. Wyeth had incorrectly argued that the federal regulations prohibited their changes to the label, because they must have been based on “newly acquired information….”The Court countered that Wyeth was incorrect, and that they could have added warnings to reflect the 19 amputations that had arisen from Phenergan’s use before Ms. Levine’s case.
The Court also concluded that Wyeth suffered from a “more fundamental misunderstanding” about the duty to warn consumers of the risks of prescription drugs.The Court noted that
Wyeth suggests that the FDA, rather than the manufacturer, bears primary responsibility for drug labeling. Yet through many amendments to the FDCA and to FDA regulations, it has remained a central premise of federal drug regulation that the manufacturer bears responsibility for the content of its label at all times. It is charged both with crafting an adequate label and with ensuring that its warnings remain adequate as long as the drug is on the market.
Wyth also argued that the Ms. Levine’s lawsuit should be preempted because it interferes with “Congress’s purpose to entrust an expert agency to make drug labeling decisions that strike a balance between competing objectives.” The Court rejected this argument as being both out of line with the intent of Congress, and as based on “an overbroad view of agency’s power to pre-empt state law.”
On the first point, the Court notes that “[i]f Congress thought state-law suits posed an obstacle to its objectives, it surely would have enacted an express preemption provision at some point during the FDCA’s 70-year history” like it did with a 1976 amendment allowing “express pre-emption … for medical devices….”
The Court also spoke to the FDA’s role in the preemption debate, especially it’s position in favor preemption announced in the preamble to the 2006 regulations that redesigned the format and content requirements for prescription drugs.The Court also assessed how much weight to give an agency position that “state law is an obstacle to achieving its statutory objectives….” The Court found that in cases lacking express authority by Congress, the deference given to an agency “depends on its thoroughness, consistency, and persuasiveness.”Based on this, the Court decided that FDA’s position “does not merit deference.”
First, the Court pointed out a glaring procedural lapse by FDA in adopting the position that their regulations and approval of drug label preempts state law. In proposing the draft rule in 2000, the FDA had stated that the rule would “not contain policies that have federalism implications or that preempt State law.”
Despite this, FDA adopted a position in favor of preemption upon publishing the final rule in 2006. FDA did so “without offering States or other interested parties notice or opportunity for comment….” As a consequence, the Supreme concluded that “[t]he agency’s views on state law are inherently suspect in light of this procedural failure.”
The Court also noted that the FDA position on preemption “is at odds with … Congress’s purposes, and it reverses the FDA’s own longstanding position….” The Court summarized the history of FDA’s relationship to state law, noting that
the FDA traditionally regarded state law as a complementary form of drug regulation. The FDA has limited resources to monitor the 11,000 drugs on the market,and manufacturers have superior access to information about their drugs, especially in the postmarketing phase as new risks emerge.
The Court also stated that
State tort suits uncover unknown drug hazards and provide incentives for drug manufacturers to disclose safety risks promptly. They also serve a distinct compensatory function that may motivate injured persons to come forward with information. Failure-to-warn actions, in particular, lend force to the FDCA’s premise that manufacturers, not the FDA, bear primary responsibility for their drug labeling at all times. Thus, the FDA long maintained that state law offers an additional, and important, layer of consumer protection that complements FDA regulation.12 The agency’s 2006 preamble represents a dramatic change in position.
We recognize this decision as an important victory for consumers, and we applaud the Court for this decision.
We hope to post more details on this decision, and its potential impact on our other lawsuits, soon.
It’s being widely reported this morning (See, for example, the WSJ article here and the AP article here) that Pfizer (NYSE:PFE) has agreed to settle the bulk of the lawsuits against it related to the increased risk of heart attacks and strokes from the painkillers Celebrex and Bextra.
The $894 Million settlement includes $745 million to settle 90% of the personal injury suits brought by patients who were allegedly physically injured by the drugs, $60 million to resolve primarily Bextra suits brought by Attorneys General in 33 states and the District of Columbia, and $89 million to settle suits brought by consumers and “third party payors” who alleged that they defrauded by Pfizer’s marketing and failure to disclose the risks of the drugs into paying for them when they otherwise would not have.
Even after the increased risks of Celebrex, Vioxx and Bextra became common knowledge, Pfizer kept Celebrex on the market, and even resumed TV ads for it, running an unusually long ad which extensively described the drug’s risks, but sought to downplay the risks by claiming that all NSAIDS (the class of drugs Celebrex is in) carry the same risks. Here is the ad:
At the time of this entry, no further details about the settlement were available, and the settlement itself had apparently not been filed in Court (Pfizer’s press release described the settlement as “Agreements in Principle”)
As we’ve previously reported on the PAL blog, GlaxoSmithKline agreed to pay $40 million to settle a national class action lawsuit brought against it on behalf of “third party payors” (health plans, union benefit funds and others). The case alleged that GlaxoSmithKline (NYSE:GSK) defrauded third party payors by failing to disclose the increased risk of suicidal thoughts and behavior among children and adolescents taking the prescription antidepressants Paxil® and Paxil CR®.
On September 30, the U.S. District Court for the District of Minnesota held a “Final Approval” hearing in the case. Lawyers for the plaintiffs, defendant and objectors all made presentations to the Court about why the settlement is “fair, reasonable and adequate” and why it should be approved. The Court issued its order granting final approval to the settlement shortly after the hearing ended.
Now that the settlement has received Final Approval, payments can be made to Third Party Payors that paid for Paxil for pediatric patients between 1998 and 2004. The deadline to submit claims forms is December 12, 2008. A letter will go out shortly to 42,000 third party payors that had previously received a notice by mail of the settlement. The letter will apprise them of the changes to the settlement that the objectors were able to negotiate, and let them know about changes to the claims form. As of this writing, the claims form had not yet been updated on the settlement website – www.pediatricpaxiltppsettlement.com. We urge third party payors to check back soon at pediatricpaxiltppsettlement.com to see if the new form has been posted, or to call the Settlement Administrator at 1-800-396-5655.
The studies examined whether Neurontin was effective for conditions other than epilepsy. As the NY Times article describes,
Pfizer’s tactics included delaying the publication of studies that had found no evidence the drug worked for some other disorders, “spinning” negative data to place it in a more positive light, and bundling negative findings with positive studies to neutralize the results, according to written reports by the experts, who analyzed the documents at the request of the plaintiffs’ lawyers.
Neurontin has been an extraordinarily profitable drug for Pfizer, and most of the prescriptions written for it were not for epilepsy, but were “off-label” (prescribed for a use not approved by the FDA). In 2004, Pfizer paid $430 million to settle a criminal and civil case brought by federal prosecutors that charged that Warner-Lambert, which Pfizer acquired in 2000, had illegally promoted Neurontin for “off label” purposes in the 90s.
That $430 million settlement reimbursed state and federal health care programs (like Medicaid) that had paid for off-label prescriptions of Neurontin, but did not compensate consumers or “third party payors” (health plans, union benefit funds and others) that had also paid for such prescriptions. A number of class action lawsuits were brought against Pfizer, and they were consolidated in the U.S. District Court for the District of Massachusetts. The ongoing lawsuit is In re Neurontin Marketing and Sales Practices Litigation, MDL #1629, Docket #04-10981.
That case has been pending for several years, with the parties exchanging documents and arguing before the Court about whether a national class of consumers and third party payors can be “certified,” which is the prerequisite to the case going forward as a class action.
The documents that were recently released were part of “expert reports” submitted by the lawyers for the plaintiffs in the case. The reports both contain and analyze documents from Pfizer about its alleged illegal offlabel promotion of Neurontin.
Now that the reports and documents have been filed with the Court, they are a matter of public record. We here at Prescription Access Litigation subscribe to the maxim that “sunlight is the best disinfectant.” We are posting these reports and documents in their entirety so that the public can see them for themselves. They paint an interesting picture.
Note: There is a separate class action lawsuit in Calfornia state court against Pfizer for the same alleged off-label marketing of Neurontin in California, brought by several members of Prescription Access Litigation’s coalition. To read more about that suit, and the underlying allegations (which are the same as in the Massachusetts case), go here.
In 2003, Abbott Laboratories (NYSE:ABT) raised the price of its HIV/AIDS drug Norvir (ritonavir) by 400% overnight. Norvir is used in combination with other “protease inhibitors,” (PIs) and it “boosts” the effectiveness of the PI it’s used with. Abbott also makes a combination pill called Kaletra that includes both Norvir and its own PI – when they raised the price of Norvir, they didn’t raise the price of Kaletra.
Prescription Access Litigation coalition member SEIU Health and Welfare Fund filed a national class action lawsuit against Abbott. The lawsuit claimed that Abbott violated federal anti-trust laws, alleging that Abbott raised Norvir’s price in order to boost sales of Kaletra, at the expense of competing PI drugs that require Norvir as a booster. In a nutshell, the lawsuit argued that Abbott tried to “leverage” its patent-protected monopoly over Norvir into a monopoly over the market for protease inhibitors.
As we’ve discussed before, Abbott has fought throughout the litigation to keep documents regarding the price increase of Norvir sealed. Abbott’s lawyers recently argued that a set of documents that they wanted shielded from public view contain “highly confidential information related to … how Abbott analyzes, views and makes strategic business decisions in the HIV pharmaceutical market.” [Order, p2.
But after a Judge recently ordered some of the documents unsealed (a copy of the Judge’s order is here) it became clear why Abbott wanted to keep what was in these documents hidden from public view.
First, these documents revealed Abbott’s disregard of how a price increase would affect HIV/AIDS patients. An email from Abbott executive Jesus Leal shows three strategies that Abbott considered to drive up sales of Kaletra, despite the potential interference with patients’ existing or future treatment regimens.
One strategy was to sell Norvir in three ways: as an ingredient in Kaletra, as a separate pill priced at five times its former price, or at the original price in a liquid form that Abbott executives admit tasted “like someone else’s vomit.” Given that many protease inhibitors have nausea as a possible side effect, even considering a strategy that would force the many HIV patients who could not afford a five-fold price increase resort to taking the foul-tasting liquid Norvir is reprehensible.
Another strategy considered was to stop selling Norvir altogether, and offer only Kaletra. But switching to Kaletra is not medically appropriate for many HIV/AIDS patients, because they eventually have to change to different PI drugs as the virus mutates and becomes resistant. A premature switch to Kaletra would deprive patients of a treatment option that they would otherwise have held in reserve until absolutely necessary.
Further, one side effect of Kaletra is hyperlipidemia (high cholesterol), which leads to higher risks of heart attack and stroke. Thus Kaletra may be less appropriate for some HIV patients than other treatments which combine Norvir(ritonavir) and other PI drugs as necessary.
Abbott considered – and eventually adopted -- a third strategy – continue selling Kaletra, but increase Norvir’s price to five times its former price. Since this time, Kaletra sales have grown significantly, from $400 million in 2003, to between $682 and $900 million in 2004, and $1.14 billion in 2006.
Exhibit 18 also reveals that Abbott planned to argue that their price increase was necessary because it was “no longer feasible for Abbott to provide a production line of Norvir capsules at the current price.” Abbott executives speculated that a price increase had a notable weakness - the company would face “exposure on price if forced to open books.” They were right. Their own released documents show that it was profit motivations and market factors, not ‘feasibility’ that caused Abbott’s unconscionable 400% price increase of the widely needed drug Norvir.
It is apparent from these documents that patient and consumer concerns were secondary to, if not absent from, Abbott’s financial considerations. One released document [Exhibit 39] has a chart summarizing a proposed slide presentation on the price increase. Not surprisingly, the one slide summary labeled “Public Relations and Activist Slide” has no summary at all, just a question mark “(?).” This shows that Abbott knew that it would be lambasted by activists for its unconscionable price increase, and that there was no good response to this criticism.
The only remorse or reservation shown in these documents was a comment by Abbott’s Vice President of Global Pharmaceutical Development, John M. Leonard, M.D. He responded to Abbott’s proposals to limit access to Norvir “I think we are on the right (but uncomfortable) track.” [Exhibit 28] ‘Uncomfortable’ is a gross understatement given that the price hike Abbott was proposing increased the annual cost of Norvir for an uninsured patient from $1,300 to $6,600 a year.
The true purpose of the price increase demonstrated: Boost Kaletra sales
The documents also showed that Abbott quintupled the price of Norvir in response to the declining market share of Kaletra relative to protease inhibitors made by competitors. Kaletra sold almost $400 million in 2003 but new PI drugs having fewer side-effects made by other drug companies threatened Kaletra’s future sales.
One slide summary in Exhibit 28 shows that Abbott knowingly increased Norvir’s price in order to push the cost of using a competing drug Reyataz to a “significantly higher price.” This, Abbott speculated, would create “formulary pressures” i.e. pressures on insurers to cover Kaletra instead of Reyataz, or to increase the co-payment that consumers would have to pay for Reyataz.
Another slide summary showed that Abbott saw the treatment improvements from Reyataz not as a boon to HIV/AIDS treatment and to patients, but as a form of unfair gain by their competitor Bristol-Meyers-Squibb (BMS) at the expense of Abbott. Ironically, Abbott didn’t consider raising its price by 400% to be unfair gain at the expense of HIV/AIDS patients.
These released documents don’t reveal much about Abbott’s price hike that wasn’t already known (see, for instance, an article that originally ran in the Wall Street Journal here) but they do reinforce how coldly calculating Abbott was in considering how best to put profits before HIV/AIDS patients.
Abbott recently submitted a Motion for Summary Judgment to the Court hearing the Norvir class action. If this motion is denied, a trial in the case is currently scheduled for August 2008.
Readers, what do you think of the released documents? Do they change your opinion of Abbott? Or just reinforce it? Please post your thoughts in the comments.
And by the way, here are links to all the documents the Court agreed to unseal:
Cephalon is alleged to have paid off four generic drug companies to keep more affordable generic versions of Provigil off the market. PAL member AFSCME District Council 37 Health & Security Plan joined a nationwide class action lawsuit in Eastern Pennsylvania against Cephalon and the four generic companies (Teva, Ranbaxy, Barr and Mylan) on behalf of a nationwide class of consumers, health plans and other “third party payors.”
The Federal Trade Commission also sued Cephalon back in February, in the U.S. District Court for the District of Columbia. Yesterday, the Judge hearing that case ordered that the FTC’s case be transferred to the Eastern District of Pennsylvania, where the class action lawsuit is pending.
In ordering the transfer, the Judge in the FTC case primarily relied on the conclusion that having the FTC case and the class action before the same Judge would avoid “inconsistent judgments.” As Judge John D. Bates wrote in his opinion:
The most compelling point in Cephalon’s favor is the risk of inconsistent judgments that would arise if this case is not transferred. Although there are some differences between the private parties’ claims against Cephalon and the government’s case — namely that the private litigants must demonstrate antitrust injury and prove damages — at the core the two matters involve identical issues of fact and law. Hence, absent transfer to the Eastern District of Pennsylvania, Cephalon would be forced simultaneously to litigate two cases in two different courts arising out of precisely the same conduct. That obviously presents a serious risk of inconsistent judgments. If this Court, for instance, were to find that reverse-payment settlements are lawful while the district court in Pennsylvania reached the opposite result, or vice versa, Cephalon would face a classic case of conflicting judgments. That is exactly the sort of inconsistent result that transfer can ameliorate.
The Judge then went on to accuse the FTC of “forum shopping,” and of in fact looking to create inconsistent judgments so as to increase the likelihood that the Supreme Court would accept a case and determine once and for all whether reverse payment settlements violate the antitrust laws. As the Judge wrote:
Indeed, the FTC would likely be content if this case did result in inconsistent judgments. That is because, as Cephalon points out, the Commission is rather openly shopping for a circuit split on the issue of reverse-payment Hatch-Waxman settlements, and all the better if the FTC could potentially arrange for two courts of appeals — the Third and D.C. Circuits — to decide that question in the context of what is essentially the same case. To be sure, the Commission is free to exercise its prosecutorial judgment to pursue a strategy that it believes will ultimately result in Supreme Court review. But it strikes this Court as both odd and unreasonable to do so at the expense of exposing a single defendant (engaged in a single course of conduct) to conflicting judgments in order to advance the agency’s enforcement goals. The danger, and burden, of inconsistent judgments against one defendant based on the same events, in short, outweighs whatever legitimate interest the FTC may have in achieving that result for strategic reasons.
In 2006, the Supreme Court refused to hear an appeal in a case the FTC brought against Schering-Plough, challenging a payoff of a generic drug maker that had sought to bring a generic version of Schering’s K-Dur to market. Similarly, the Supreme Court had also refused to hear an appeal of a class action originally brought in federal court in New York, challenging a generics payoff concerning the prescription drug for breast cancer, Tamoxifen.
These two refusals by the Supreme Court to address the issue of whether a brand-name drug company paying off a generic drug company not to bring a generic to market violates the federal antitrust laws left the question open. Since that time, there has been a resurgence of such payoffs, resulting in consumers being deprived of less expensive generic drugs.
We at Prescription Access Litigation remain committed to challenging such deals and exposing them for the crude, anti-consumer payoffs that they are. It’s unclear what effect the transfer of the FTC’s case to Pennsylvania will have. Stay tuned.
In December 2003, Abbott Laboratories (NYSE: ABT) decided to increase the price of its HIV/AIDS drug Norvir (ritonavir) by 400%. PAL member Service Employees International Union Health & Welfare Fund filed a class action lawsuit against Abbott in October 2004, alleging that the price increase violated the antitrust laws.
Norvir is a “protease inhibitor” (PI) that is commonly used as part of AIDS “drug cocktails” (combinations of prescription drugs working together). Norvir is very important because it “boosts” the effects of other PIs taken by HIV/AIDS patients. Abbott, by increasing the cost of Norvir by 400%, effectively forced HIV/AIDS patients to pay significantly more for their life-saving drug regimens. (The Wall Street Journal did an excellent story in Jan. 2007 laying out the history of the price increase, “Inside Abbott’s tactics to protect AIDS drug“)
Abbott faced a firestorm of criticism for this outrageous price increase — there were shareholder resolutions, protests at Abbott headquarters, a boycott by hundreds of physicians, Attorney General investigations, numerous newspaper editorials lambasting the move, etc. But Abbott refused to even consider reducing the price. The only significant challenge to Abbott’s conduct is the lawsuit brought by SEIU Health and Welfare Fund and two patients.
The lawsuit has overcome significant hurdles (the Court denied Abbott’s motion to dismiss and motion for Summary Judgment, and certified the case as a class action), and the trial is scheduled to begin this summer. Abbott has again filed a motion for Summary Judgment. Such motions are filed with the Court after the parties have completed discovery (exchange of documents, depositions of witnesses and experts) but before the trial. Abbott is essentially asking the Judge to rule in its favor, arguing that based on the evidence, there’s no way a reasonable jury could find in favor of the plaintiffs.
Both Abbott and the plaintiffs have filed numerous documents with their Summary Judgment motions, and now Abbott is asking the Court to “seal” many of those documents, i.e. make them not available to the public. The motions and papers concerning Abbott’s request are here, here and here.
Why does Abbott want to keep these documents a secret and out of public view?
One of Abbott’s lawyers submitted a declaration to the Court giving the reasons:
“5. It is my understanding that the portions that have been redacted reflect, in general, Abbott’s strategic thinking and views related to pricing, public relations, marketing, research and development, market positioning, promotional activities, market segmentation, strategic brainstorming, long-range planning, sales, and lifecycle management of its pharmaceutical products that are not shared with the public or widely disseminated even within Abbott. It is my understanding that this information is kept in the highest confidence even within Abbott and is not intended to be disseminated to the general public or Abbott’s competitors.”
It seems to me that “Abbott’s strategic thinking and views related to pricing, public relations, marketing, research and development, market positioning, promotional activities, market segmentation,” etc are all of great public interest, particularly given that they concern a drug that is essential to fighting the significant public health crisis that is HIV/AIDS.
The fact that such information “is not intended to be disseminated to the general public” of course doesn’t mean that it shouldn’t be. In fact, it may even be all the more reason it should be. In fact, the plaintiffs quoted a Court opinion from an unrelated case in their original filing on this issue:
“Indeed, common sense tells us that the greater the motivation a corporation has to shield its operations, the greater the public’s need to know.” [In re Lifescan, Inc. Consumer Litigation, No. C 98 20321 JF, 1999 U.S. Dist. LEXIS 9894, at ** 7-8 (N.D. Cal. June 23, 1999)]
But let’s read on…
“6. In addition, it is my understanding that many of the Exhibits, from which these redactions are made, contain information that could be confusing, misleading, or incomplete if taken out of context or without the proper background information. Therefore, some of the information redacted, in addition to being competitively sensitive, could be used to mislead the public and be perceived in a way that was never intended by the author or the deponent. Public dissemination of this information could substantially harm Abbott’s good will, standing, and relationships that it has created with the HIV/AIDS community.” [emphasis mine]
Of course, one has to ask, what good will, standing, and relationships with the HIV/AIDS community is Abbott talking about? Abbott managed to alienate virtually the entire HIV/AIDS community by raising Norvir’s price, and then further by threatening to withhold all new medicines from Thailand if Thailand’s government issued a compulsory license for the HIV/AIDS drug Kaletra (a pill that, incidentally contains Norvir, and which the Norvir price hike was intended to increase US sales of). [A compulsory license would have allowed Thailand to break the patent on Kaletra in Thailand and import a less costly generic version]
And how could Abbott think that trying to keep these documents from public view would improve its relationship with the HIV/AIDS community? It’s likely that many of the documents would just rehash what’s already publicly known about Abbott’s reprehensible price increase. Sometimes trying to keep documents secret does more harm to a company’s reputation than the documents themselves would have. Nothing arouses suspicion more than the question “What are they trying to hide?” So Abbott may have, as the expression goes, cut off its nose to spite its face with this move.
Abbott’s attorney then goes on to give “justifications” for why particular Exhibits should be sealed, all beginning with the phrase “It is my understanding that…”
The lawyers for SEIU and the class filed a response to Abbott’s attorneys arguments, which is here. They point out that:
To have documents sealed, Abbott has to “overcome a strong presumption of access by showing that ‘compelling reasons supported by specific factual findings . . . outweigh the general history of access and the public policies favoring disclosure.’” Pintos v. Pac. Creditors Ass’n, 504 F.3d 792, 802 (9th Cir. 2007).
“The declaration Abbott has filed in support of its sealing request… fails to satisfy Abbott’s burden…[T]he declaration is not based on the personal knowledge of Abbott’s counsel…For the most part, the declaration merely asserts [Abbott's counsel's] “understanding” of the general subject matter of the redacted portions of the documents Abbott proposes that the Court permanently seal, and presents no actual evidence.”
The “Declaration offers little in the way of facts; rather, it is replete with unsubstantiated, conclusory statements and hypothetical assertions, as well as argument… Abbott has not even attempted to make the sort of particularized showing mandated by the applicable standards.
And finally, “much of the information in the documents has already been made public, the documents are mostly four to six years old and therefore especially undeserving of being shielded and there is a particularly strong interest here in allowing public access to the materials at issue given that the subject matter of the litigation ‘involves matters of significant public concern.’”
So we ask you, dear readers, what do you think? Did Abbott do more harm than good in trying to seal these documents? Post your thoughts in the comments.
To receive udpates about the Norvir case, fill out the form located here.
For information about the Norvir case, including copies of court documents, go here.
PAL members AFSCME District Council 37 Health and Security Plan and New England Carpenters Benefits Fund filed a class action lawsuit against First Databank Inc. and McKesson Corporation (NYSE: MCK) in 2005, alleging that the two companies conspired to add an arbitrary 5% to Average Wholesale Prices of hundreds of prescriptions that were published in First Databank’s drug pricing guides. We’ve covered the case extensively on the PAL blog (archived posts here) and much more information about the case, including court documents, can be found on our website here.
In October 2006, we announced that First Databank had agreed to settle the case against them. McKesson Corporation, one of the three largest pharmaceutical wholesalers in the country, did not agree to settle, and has aggressively fought to get rid of the case ever since. McKesson, a company that is virtually unknown to consumers, is the 18th largest company on the Fortune 500 list, with over $88 Billion in annual gross revenues, with over $750 Million in 2007 profits. They are larger than numerous other corporations that are household words, including Procter & Gamble, AT&T, Boeing, Sears, Pfizer, Target, Dell and Dow Chemical.
Last week, Judge Patti B. Saris of the U.S. District Court for the District of Massachusetts, ordered that the case against McKesson can proceed as a national class action. She certified two national classes: (copy of the Order is here.
Consumer Co-Pay Class “The Court certifies the following class for a period beginning August 1, 2001 and ending on May 15, 2005 for all purposes:
Class 1, Consumer Purchasers: All individual persons who paid, or incurred a debt enforceable at the time of judgment in this case to pay, a percentage co-payment for the Marked Up Drugs during the Class Period based on AWP, pursuant to a plan, which in turn reimbursed the cost of brand-name pharmaceutical drugs based on AWP. The Marked Up Drugs include all of the drugs identified in Exhibit A to the Third Amended Complaint and consist of certain brand-name drugs only.”
Third Party Payor Class: “The Court also certifies the following class for a period beginning August 1, 2001 and ending on December 31, 2003 for the purpose of damages, and for a period beginning August 1, 2001 and ending on May 15, 2005 for purposes of liability and equitable relief:
Class 2, Third-Party Payors: All third-party payors (1) the pharmaceutical payments of which were based on AWP during the Class Period; (2) that made reimbursements for drugs based on an AWP that was marked up from 20 to 25% during the term of its contract with its PBM or with another entity involved in drug reimbursement; and (3) that used First DataBank or Medispan for determining the AWP of the marked up drugs. The Marked
Up Drugs are all drugs identified in Exhibit A and consist of brand-name drugs only.”
Hagens Berman Sobol Shapiro, the law firm that is lead plaintiffs counsel in the case, in its press release said that the case “could become the largest class action in the United States, potentially totaling $7 billion in damages for consumers and third-party payers.
The press release also said “damages on behalf of consumers could total from $200 to $800 million and damages on behalf of third-party payers will exceed $5 billion.”
The Judge’s certification of the case as a national class action is enormously important. It allows the case to proceed on behalf of millions of consumers and tens of thousands of health plans, union benefit funds, self-insured employers and other “third party payors.”
The case, and the facts that have come to light as a result, shines further light on the complete lack of accuracy and accountability in how drugs are priced and paid for in the United States. The Average Wholesale Price system handsomely rewards and virtually invites fraud, and is in dire need of replacement. This lawsuit has the potential to compensate the millions of consumers and health plans who were overcharged as a result of McKesson’s and First Databank’s alleged fraud.
Last week, the plaintiffs and First Databank also filed an Amendment Settlement with the Court, attempting to address concerns that Judge Saris raised at the January 2008 “final approval” hearing for the First Databank settlement. Copies of the revised settlement documents are available here. The Judge’s order certifying the classes can be found here.
To receive udpates about the McKesson case, the First databank settlement and other prescription drug pricing and marketing lawsuits and settlements, fill out the form located here.
For information about the settlement with First Databank and also with Medispan, Inc., go here.
The state of Alaska is suing Eli Lilly (NYSE:LLY) for failing to disclose health risks (like diabetes and weight gain) allegedly associated with Lilly’s hugely profitable “atypical antipsychotic” drug Zyprexa. Last week, attorneys for the state rested their case, at which point the lawyers for Eli Lilly asked the Judge to dismiss the case, saying that the matter was one for the Food and Drug Administration, and not for individual states.
The Judge disagreed, and refused to dismiss the case, offering an opinion from the bench as to the FDA’s ability to police drug safety. Here’s how the Anchorage Daily News described it:
Without lawsuits like the one the State of Alaska brought against Lilly, claims that drugs cause health problems “might well go unaddressed,” Anchorage Superior Court Judge Mark Rindner said from the bench this week.
The jury was out of the room. The state had just rested. Lilly asked the judge to issue an immediate verdict in its favor, a routine step at that point in a trial.
Rindner was reacting to an assertion by Lilly lawyer George Lehner that drug regulation is a matter for the federal Food and Drug Administration, not any state. Alaska’s Unfair Trade Practices and Consumer Protection Act shouldn’t apply to drugs, Lehner told the judge.
Rindner disagreed. Evidence presented by the state over the past two weeks established that the FDA “isn’t capable of policing this matter,” he said.
This isn’t the first time that a Judge addressing allegedly illegal Zyprexa marketing by Eli Lilly has dismissed the notion that the FDA was adequate to ensure that Zyprexa was safe and properly marketed. As we reported back in June 2007, U.S. District Court Judge Jack Weinstein, soundly rejected this notion in refusing to dismiss a class action lawsuit brought by consumers and health plans (including PAL coalition member Sergeants Benevolent Association Health and Welfare Fund. That case alleges that Eli Lilly illegally and improperly promoted Zyprexa for “off-label” uses, that is, uses that the FDA has not approved as safe and effective. In his ruling (available here), Judge Weinstein said:
“Under the present organization of the pharmaceutical industry, the official federal Food and Drug Administration (FDA), and the plaintiffs’ bar, the courts are arguably in the strongest position to effectively enforce appropriate standards protecting the public from fraudulent merchandising of drugs.” (Opinion, pp. 3-4)
And he went on…
“Allowing this and like suits to proceed may or may not increase the cost of pharmaceuticals and the efficacy of medical treatment in this country. It does, however, furnish backstop protection against under-regulated potentially dangerous activity by a market where caveat emptor largely rules.” (Opinion, p. 12)
What happens in the Alaska case will be closely watched, as 9 other states have similar lawsuits against Eli Lilly. A potentially incriminating email in which a Lilly vice president appears to advocate marketing Zyprexa for off-label purchases was revealed in the Alaska trial several weeks ago, the New York Times reported on March 14, 2008 (Lilly E-Mail Discussed Off-Label Drug Use). As Alex Berenson of the Times reported:
In the message, Dr. Lechleiter, who was then the company’s executive vice president for pharmaceutical products, noted to other Lilly officials that company representatives were already promoting Strattera, a second Lilly psychiatric drug, to pediatricians and child psychiatrists. The representatives could also discuss Zyprexa with such doctors, he said.
“The fact we are now talking to child psychs and peds and others about Strattera means that we must seize the opportunity to expand our work with Zyprexa in this same child-adolescent population,” Dr. Lechleiter wrote in the message. He also encouraged Lilly to get data on the use of Zyprexa in treating “disruptive kids” in order to increase the drug’s sales.
The Judge in the Alaska case refused to admit the email into evidence in the trial because that case does not concern off-label use. The email, however, is likely to be an issue in the off-label cases, such as the one before Judge Weinstein. In that case, Judge Weinstein will hear from both sides this week on a motion to certify the case as a national class action. These “class certification” motions are a vitally important stage in a class action case, as they determine whether or not the defendant (here, Eli Lilly) will face the claims of potentially millions of individuals and thousands of health plans.
These two Judges have acknowledged what by now is common knowledge: the FDA lacks both the resources (money, staff) and the political will to hold drug companies accountable and to force them to disclose safety risks associated with hugely profitable drugs. In the face of the FDA’s abdication of its core mission, the Courts are a vital safety net to ensure that drug companies cannot rip off and injure consumers with impunity. In the past few years, vital information about dangerous drugs has come to light only through litigation (for more on this, see “The Role of Litigation in Defining Drug Risks,” Journal of the American Medical Association, 2007; 297: 308-311)
To receive updates about the national Zyprexa class action that PAL members are involved in, as well as about other class actions concerning illegal marketing and pricing tactics by drug companies, fill out the form here. To learn more about the Zyprexa class action, go here.
The title of this post is one of the many questions that came to mind when I read yesterday’s New York Times story, Cutting Dosage of Costly Drug Spurs a Debate. The article describes the cost of Cerezyme, a drug made by Genzyme (GENZ). As the Times reports:
“The drug in question, Cerezyme, is used to treat a rare inherited enzyme deficiency called Gaucher disease. Some experts say that for most patients, as little as one-fourth the standard top dose would work, saving the health care system more than $200,000 a year per Gaucher patient.”
This raises many questions related to how we pay for very expensive drugs, particularly for rare diseases. Of course, one question is how much should a drug like Cerezyme cost? On the one hand, it’s understandable that a drug that is used by a very small group of patients is going to cost more. But at what point does “costing more” become “exploiting patients who have no other options?”
“With Cerezyme, which is made by Genzyme, the profits are sizable. Gaucher disease, which can have complications like ruined joints, is rare; only about 1,500 people in the United States are on the drug and about 5,000 worldwide. Sales of Cerezyme totaled $1.1 billion last year, making it a blockbuster by industry standards.”
Blockbuster drugs are typically taken by hundreds of thousands, and often millions of people. For a blockbuster drug to have a patient pool of just 1,500 people is incredible.
So how much should Cerezyme cost? Genentech says:
“The company says it needs the high price to make a sustainable business of serving such a small number of patients and to pay for research on new products. Genzyme also says it provides the drug free, if necessary, so that no one goes without the product because of its cost.”
Obviously, the amounts vary by company, and the study was of the industry as a whole, not particular companies. So it’s likely that Genzyme doesn’t spend twice as much on marketing as on R&D. Even so, the “R&D card” is a notoriously self-justifying but impossible-to-measure reason for high drug prices. How much is it fair to increase a drug’s price for alleged future R&D? At what point does a drug company sacrifice the financial well-being (and ability to afford the medication) of current patients on the altar of some uncertain and unknown set of future patients?
Then there’s the most interesting question:
What is the public entitled to when our tax dollars helped a drug get developed in the first place?
The article says:
“But critics say the company’s development costs were minimal, because the early work on the treatment was done by the National Institutes of Health, which gave Genzyme a contract to manufacture it. And analysts estimate the current cost of manufacturing the drug to be only about 10 percent of its price.”
There’s a federal law that’s at the heart of this question: The Bayh-Dole Act. This Act allows recipients of government research funding to retain the title to, and file a patent on, an invention that was discovered or created with that government funding. The Act was passed because it was felt that government-financed innovations that would benefit the public were sitting on the shelves at universities and research institutes, because the inventors could not patent and market those inventions.
But there’s a never-used provision of the Bayh-Dole Act that seeks to protect the public’s investment in such inventions, including drugs: The so-called “March-in Rights” (35 USC 203). This allows the government agency that gave the funding (in this case, the National Institutes of Health) the right to “march-in,” ignore the patent, and license the invention to, say, a generic drug maker, if doing so is “necessary to alleviate health or safety needs which are not reasonably satisfied” by the holder of the patent and if the patent holder is not making the invention “available to the public on reasonable terms” [35 USC 201(f)].
Does charging $300,000 a year for Cerezyme qualify? Or, for that matter, does anything? A consumer group, Essential Inventions, submitted two petitions to the NIH in 2004, asking them to “march in” and permit generic versions of two drugs, Xalatan (for glaucoma) and Norvir (an HIV/AIDS) drug, because the price being charged for those drugs was so high. The NIH denied both petitions, saying that “available to the public on reasonable terms” doesn’t mean at a price that the public can afford.
(In the case of Norvir, the manufacturer. Abbott Laboratories (ABT), had unilaterally quadrupled the price of the drug in December 2003. Members of Prescription Access Litigation sued Abbott over the price increase, alleging that it violated antitrust law. The lawsuit survived a motion to dismiss, was certified as a national class action, and is pending in the U.S. District Court for the District of Northern California. More info on that lawsuit is here.)
So the question remains, for a drug like Cerezyme, how high a price is too high? More importantly, if the price is too high, is there anything that we, the public, can do, especially when our taxes help discover the drug in the first place?