We’ve frequently reported here on the Prescription Access Litigation (PAL) blog about the class action lawsuit brought by PAL coalition member SEIU Health & Welfare Fund and others against Abbott Laboratories [NYSE:ABT], challenging Abbott’s December 2003 price increase of 400% on its HIV/AIDS drug, Norvir. That lawsuit alleged that Abbott’s price-hike was intended to increase the sales and market share of another Abbott HIV/AIDS drug, Kaletra.

We’re pleased to announce that SEIU Health & Welfare Fund, the two individual plaintiffs in the class action and Abbott agreed to a proposed settlement of the case on August 13, 2008. Abbott has agreed to pay between $10 Million and $27.5 Million, depending on court rulings to come, to settle the nationwide claims by consumers who were overcharged for the medicine.

There have been a number of important decisions by the Court to date that have set the stage for this settlement. On June 11, 2007, the Court certified the case as a nationwide class action. On May 16, 2008 the Court issued a ruling that was a partial victory for the plaintiffs and a partial victory for Abbott. The Court held that Abbott could not claim a patent that it holds on Norvir as a defense to the plaintiffs’ claims (the partial win for the plaintiffs). However, the Court also dismissed the plaintiffs’ claims for “unjust enrichment.” These claims alleged that Abbott was “unjustly enriched” by its allegedly illegal Norvir price hike.

What’s important about this dismissal is that these common law unjust enrichment claims were the only nationwide claims for monetary damages (as opposed to claims for “injunctive relief,” that is, for changes in company practices) in the case. When the Court dismissed these claims, the only claims for damages that remained in the case were under California state law. Thus, in a nutshell, after the Court’s May 16 order, the case for monetary damages was narrowed to cover just consumers and health plans in California.

Abbott had asked the Court to allow an “interlocutory appeal.” This means, basically, that Abbott asked the District Court to ask the 9th Circuit Court of Appeals to make a decision on a particular question of antitrust law that Abbott felt could determine the outcome of the case. The Court refused, since the trial was at that point only three months away.

The proposed settlement attempts to get the Court of Appeals to resolve this and several other legal issues, and to tie the amount of the settlement to the decisions of the Court of Appeals. Abbott and the plaintiffs will ask the court hearing the case (the federal District Court for the Northern District of California) to allow them to appeal three legal issues to the 9th Circuit immediately. These legal issues are ones that have been essential to the plaintiff’s success so far, and which Abbott would likely appeal if the plaintiffs were to win at trial.

There are several different forms the settlement could take, depending on how this appeal goes:

• If the District court ”certifies” all three questions up to the Ninth Circuit for appeal, and the Ninth Circuit accepts at least two of them, Abbott will pay a non-refundable $10 Million in to a settlement fund. That $10M (and possibly more – see below) would eventually be distributed to 13 different non-profit organizations that benefit people with HIV/AIDS. (See a list of those organizations here).
• How much Abbott would have to pay beyond the initial $10M depends on how the 9th Circuit rules on the appeals questions:
  • If Abbott wins the appeal of any of the three questions before the Ninth Circuit, then it doesn’t pay anything beyond the initial $10M.
  • If the plaintiffs win on all the questions before the 9th Circuit, then Abbott must contribute another $17.5 Million to the settlement fund.
  • If the 9th Circuit “remands” (sends back) the case to the District Court for any reason (such as asking the District Court to make findings of fact), then Abbott must contribute only $4.375 Million more to the settlement fund.

In a nutshell, Abbott will ultimately pay between $10M and $27.5M. After the attorneys’ fees and expenses are paid (approximately 1/3 of the total), here is how the rest of the settlement will be divided:

• If Abbott wins any one of the questions before the Ninth Circuit, then the $10M, reduced to $6-7 M after costs and attorneys’ fees, will be distributed equally to all the cy pres recipients on the list above.
• If, however, the court remands any question, or if the Plantiffs win all the questions, then the settlement amount ($14.3M or $27.5M respectively, before legal costs and fees, or between $9.6 and $18.4M after) will be divided, with
  • 70% of it (between $6.7M and $12.8M approximately) going to the 13 organizations described above, and
  • 30% (between $2.9M and $5.5M approximately) going to consumers and TPPs in California)

Confusing? Yes. But the settlement is a creative resolution of the lawsuit. It takes into account the different possible outcomes to a trial and inevitable appeal, and essentially adjusts the amount of the settlement accordingly.

The Court has scheduled a hearing for August 19 on whether to grant “preliminary approval” to the Settlement. If it does grant that approval, notice will be published to alert members of the class about the proposed settlement. Consumers and TPPs that paid for Norvir will have the option of opting out of the settlement (if they want to pursue their own individual lawsuits against Abbott), objecting to the terms of the settlement, and, if they are located in California, filing claims forms to receive a portion of the settlement proceeds. The Court will schedule a Final Approval hearing for several months from now. After that hearing, the Court will decide whether to grant Final Approval to the settlement. If it does grant that approval, and after any appeals, the money in the settlement will be distributed as described above.

To see a copy of the settlement, go here.

Other resources:

• A summary of the lawsuit challenging Abbott’s price hike of Norvir
• Earlier PAL blog entries on the plaintiff’s successful class certification, Abbott’s attempt to keep damaging documents from public view, or the plaintiff’s anti-trust claims.

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.