The lawsuit alleged that GlaxoSmithKline (NYSE:GSK) defrauded health plans, union benefit funds and other “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®.
The three union benefit funds objected to a number of provisions in the settlement, including an extremely burdensome, if not impossible, process to file claims for a refund of 40% Paxil expenditures. The objectors argued that this process would have unfairly favored larger health plans that have easy access to diagnosis information related to individual prescriptions. Without this information, only a 15% refund was possible. Other terms of the settlement that these funds objected to included limitations on class members’ rights to object to the settlement, opt out of it, speak at the fairness hearing, or appeal approval of the settlement.
The objectors were able to negotiate significant changes to the settlement that addressed their primary concerns regarding fairness and burdensome claims filing:
In order to ensure that the settlement funds go first and foremost to health plans and union funds that paid for pediatric Paxil prescriptions, the revised settlement caps any cy pres award to a maximum of $1 million. Previously, any funds in the settlement that went unclaimed would be distributed a one or more organizations addressing children’s mental health issues.
Cy pres awards are frequently granted by Courts when there are unclaimed funds left in a class action settlement. Such awards are supposed to benefit class members who did not file claims. However, the cy pres award in this settlement will not go to benefit the health plans that paid for Paxil, but rather to children’s mental health organizations. While those organizations no doubt do invaluable work, the benefit to the class members here is indirect at best.
Class members’ claims will be calculated in two “stages.” In the first stage, class members that are able to document individual prescriptions that were for Major Depressive Disorder will get refunds of 40% for those prescriptions. All other prescriptions will be refunded at 15%. In the second stage, the remaining settlement funds (after the $1 million cy pres award) will be distributed to all class members who file claims, based on their proportions of the total Paxil purchases claimed by all class members.
Class members will not be required to include rebates and discounts in their calculations of the net cost of each prescription. The objectors had argued that it would be impossible for many, if not most, class members to make the calculation with rebates and discounts included. This is because in most cases, manufacturers give rebates to a health for all of their purchases of all of that company’s drugs – it’s not possible to separate what rebates were for Paxil, for instance, as opposed to for another GlaxoSmithKline drug.
Lastly, the revised settlement gets rid of the provisions that attempted to limit the rights of class members to opt out or appeal the approval of the settlement.
Because these changes addressed their most pressing concerns, the objectors withdrew their objection. The objectors and PAL thus now support the revised settlement and will argue in favor of the Court approving it at the Final Approval hearing scheduled for September 30, 2008 in the U.S. District Court in Minneapolis, Minnesota.
The objection by PAL’s members underscores the important role that PAL plays in monitoring pharmaceutical class action settlements to ensure that they adequately protect the rights of consumers and smaller third party payors, health plans and union funds. To find out more about PAL’s coalition of consumer advocates and union benefit funds, and how to join, click here.
How to file a claim for reimbursement from the settlement:
Any private insurers, employee welfare benefit plans, union health and welfare funds, employer-sponsored health plans, and other third-party payors (“TPPs”) that reimbursed, purchased, or paid for Paxil® (in both tablet and suspended form) and Paxil CR® prescribed to persons under 18 years of age, from January 1, 1998 through December 31, 2004 are eligible to submit claims forms for payment from the settlement. The deadline to submit claims for payment from the settlement is December 12, 2008.
Drug companies are required by federal law to extend discounts that they give to health plans, hospitals and other private purchasers to Medicaid and other government health care programs. This is based on the idea that government programs should get as good a deal as any private purchaser.
There’s a complicated system to set the maximum price that can be charged to state Medicaid programs, community health centers and other health facilities serving uninsured and underserved patients. This system relies on so-called “best price” information that drug companies are required to provide to the Center for Medicare and Medicaid Services (CMS). CMS is the federal agency that runs both Medicare and Medicaid.
But this system only works as it should when drug companies accurately and honestly report to CMS the prices they’ve given to different purchasers. If a drug companies conceals a discount it offered to a private entity, then states and the federal government end up paying more than they are legally supposed to. There have been numerous lawsuits brought against drug companies for failing to report accurate “best prices,” resulting in hundreds of millions of dollars in settlements. (Taxpayers Against Fraud’s website describes many of these)
But until recently, only states or the federal government itself could go after drug companies for “best price fraud.” Community health centers, certain hospitals, and other providers couldn’t enforce their rights to similar ‘best price’ discounts under a federal law known as “340B,” until recently.
In August 2005, Santa Clara County (California) filed a lawsuit against a group of pharmaceutical companies on behalf of 340B-covered entities. Santa Clara County operates seven hospitals or health clinics which are “covered entities” under 340B, meaning they are entitled to the discounts that are based on “best price” calculations. This lawsuit was in response to reports issued in March 2003 and June of 2004 by the Office of Inspector General (OIG) of the Department of Health and Human Services. These reports documented that 340B entities were being significantly overcharged for a wide range of drugs. A 2006 OIG report, for instance, estimated that 340B entities overpaid $3.9 million in a single month (June 2005).
Santa Clara County’s case was dismissed, in part because the federal Court hearing the case held that 340B entities didn’t have the right to sue to enforce the contracts that drug companies enter into with CMS, called Pharmaceutical Pricing Agreements (“PPA”).
Normally, only the parties that make a contract have the right to enforce its terms in court. But the exception to this rule is called “third party beneficiary.” Parties can create a contract for the benefit of a third person or entity who’s not one of the parties signing the contract. A good example is life insurance – let’s say Jack buys a life insurance policy (which is a contract) from Acme Insurance, and lists Jill as the person who will receive the proceeds in the event of his death. If Acme refused to pay her upon Jack’s death, Jill could sue Acme as the third party beneficiary of the contract.
Similarly, Santa Clara County had argued that their county hospitals and health centers, as 340B entities, were the third party beneficiaries of the PPAs. The District Court disagreed, and dismissed the case. But on August 27, 2008, the Ninth Circuit Court of Appeals ruled that the County and other 340B entities are the ‘intended beneficiaries’ of both the contract and the federal law that sets the prices, so Santa Clara County could sue to enforce the PPA contract. This of course is not the end of the saga – the lawsuit now returns to the District Court, where it will pick up where it left off.
There’s a particular irony about this lawsuit. Members of Prescription Access Litigation have brought a number of class action lawsuits alleging fraud in the Average Wholesale Price (AWP) system (see here and here). Most private insurers and pharmacies purchase drugs from drug companies and wholesalers based on AWPs, which are self-reported by drug companies but not subject to any government oversight.
By contrast, the data that drug prices paid by Medicaid and 340B entities are based on are reported to CMS and are subject to audit and enforcement. Yet, as the OIG’s reports have amply demonstrated, no one’s minding the store — the federal government is not adequately monitoring whether or not drug companies are reporting accurate price information. While there have been hundreds of millions of dollars in settlements with drug companies for reporting false “best prices,” these cases are most likely the tip of the iceberg.
The price information reported to CMS is confidential, presumably on the notion that it’s a “trade secret” or that revealing information on discounts would help companies’ competitors. Since there’s no transparency, it’s essential that the agencies charged by Congress with policing the system actually do so. Otherwise, the only avenue to recover overpayments requires 340B entities, like Santa Clara County, to sue years after the fact. And even if Santa Clara County’s suit is successful, or settles, the drug companies accused in the complaint have held on to many millions of dollars in improper overcharges for years, depriving health systems that care for some of neediest members of society of much needed funds.
The LA Times ran an article today (Legal fight over drug liability law) on Wyeth v. Levine, the case being heard by the U.S. Supreme Court this fall that could very easily slam the Courthouse doors on consumers who have been injured by drug companies’ failing to warn them of risks from prescription drugs.
As we reported recently (PAL joins “friend of the Court” brief in Supreme Court preemption case), Prescription Access Litigation joined a “friend of the Court” (amicus curiae) brief, arguing that the Supreme Court should find in favor of Diana Levine, and hold that state court lawsuits arguing that drug companies failed to warn consumers about prescription drug risks should not be barred on the grounds that the FDA’s authority “preempts” them. To see other posts from this blog on preemption, go here.
The LA Times article starts out by saying it’s going to answer this question:
If you experience a serious reaction that you suspect may be linked to a medication you took, what can you do now, and how would a ruling in favor of the drug companies change that? We asked some consumer healthcare advocates.
After describing how patients and their doctors can file a report to the FDA about a serious reaction that they believe was caused by a prescription drug (at www.fda.gov/medwatch, it begins to describe what’s at stake in the case before the Supreme Court.
But rather than focus on how this would really impact patients, much of the balance of the article focuses on how a change in the law in favor of drug companies would affect lawyers’ willingness to bring cases against them. Of course, whether or not a lawyer would bring such a case determines whether or not the consumer can seek redress for their injuries. But the article places way too much emphasis on this, such as in this section:
Because plaintiffs’ lawyers foot the bills on product-liability cases — working for a slice of the award — they take cases they think they can win.
“If you take the most likely cause of action away, the calculations for the plaintiff’s lawyer become much more dire,” says Gary Marchant, professor of emerging technologies, law and ethics at Arizona State University. “It will change the dynamics of which cases are brought. Only the much stronger, the real sure-win kind of cases will be brought. The iffy ones will become financially unviable.”
Personal-injury lawyers hope the ruling goes toward the plaintiff. “Pharmaceutical drugs right now are probably the hottest area of liability,” Marchant says. The pharmaceutical industry and the Bush administration believe the excess of product liability cases must be reined in, Wolfman says.
While much of this true, it’s not the point. If Wyeth is successful in this case, consumers will have no ability to hold drug companies accountable in court when they are injured by a prescription drug and when the drug company failed to warn them about a risk that was known, but not disclosed. Given how much the FDA has demonstrated its inability and unwillingness to really monitor the activities of the drugs and drug companies they regulate, this should frighten every one who ever puts a pill in their mouth.
In addition to compensating consumers who’ve been injured or even killed by inadequate warnings on drugs, lawsuits against drug companies for “failure to warn” act as a deterrent – the threat of someday being held accountable in court discourages a drug company from keeping a risk secret. The FDA’s powers are limited — yes, it can force a drug off the market, but it can do next to nothing for the people who’ve been injured while the drug was on the market — such as the tens of thousands of people whose heart attacks were caused by Vioxx.
And lawsuits such as these often bring critical and previously hidden information to light. A great article in the Journal of the American Medical Association, The Role of Litigation in Defining Drug Risks, discusses this, and gives examples in which previously unknown information about drugs came to light only as a result of litigation, including cases on the drugs Vioxx, Zyprexa, Paxil, Bextra, Baycol, Rezulin, and others.
In sum, press reports on the Wyeth v. Levine case need to focus on the very serious impacts that a ruling in favor of drug companies would have on patients and consumers. In an environment in which the FDA is reluctant to use its already limited powers to police drug companies and hold them accountable, litigation plays an essential role. If state court lawsuits on failure to warn are preempted by the Supreme Court, the public will suffer, and the public’s confidence in the safety of drugs will suffer as well.
Second Annual Evidence-based CAM for Cancer Advocates
January 8-10, 2009 * West Palm Beach, FL
Palm Beach Airport Hilton
Surveys and studies show that 60-80% of people with cancer are either interested in, or using, complementary and alternative (CAM) approaches. And while the oncology community response to patient interest is growing, it continues to lag far behind the need.
The Second Annual Evidence-based CAM for Cancer Advocates Conference, sponsored by The Annie Appleseed Project, brings together advocates from many communities, as well as those with information on studies in CAM to strategize, network, and more, that would greatly benefit those with cancer.
This two and one-half-day education conference, held in West Palm Beach, FL, will focus on a multi-disciplinary approach, and will address issues such as nutrition, dietary supplements, mind-body-spirit relaxation techniques, exercise, hands-on therapies and much more.
The many conference speakers include:
Ann E. Fonfa, Patient Advocate, The Annie Appleseed Project
Keith Block, MD, Integrative oncologist, Block Medical Center, Evanston, IL
Charles Simone, M.MS., M.D., founder of Simone Protective Cancer Center, Lawrencville, NJ, author
Lynne Farrow, Patient Advocate, AMAZON Group and Breast Cancer Choices Iodine Investigation Project
Ralph W. Moss, author, editor of Cancer Decisions
Tina Kaczor, ND, FABNO, President, Oncology Association of Naturopathic Physicians
Susan Silberstein, Ph.D.,Exec Director, Center for Advancement in Cancer Education – national speaker on Nutrition
Alicia Sirkin, B.F.R.P.The Sirkin Creative Living Center, LLC,Bach Foundation Registered Practitioner,Quantum Emotional Clearing Cert. Pract.
Georgia M. Decker, APRN-BC
We have exhibit tables too, and a conference journal that accepts advertising.
Spaces are limited, so for more information including hotel reservations (October) and conference registration NOW OPEN visit:
Back in March, we reported that 11 defendants in the massive In re Pharmaceutical Industry Average Wholesale Price Litigation case had agreed to settle the case against them for $125 million (11 drug companies settle AWP allegations for $125 Million“). The Court hearing the case granted “preliminary approval” to that settlement this Summer, and now notices are being sent out to certain people on Medicare, published in a number of newspapers and magazines, and even being broadcast on TV (you might have seen these ads if you were watching MSNBC during the conventions).
The case alleged that several dozen drug companies illegally inflated the price of prescription drugs that are administered in doctor’s offices (i.e. usually through injections or IVs). Consumers who paid a percentage co-payment for any of these approximately 200 drugs (see here for the list) are eligible to submit claims forms to get a reimbursement from the settlement. Claims forms must be postmarked or received by January 31, 2009. The drugs are primarily for the treatment of different types of cancer, HIV, allergies, infections, inflammation, pain, gastrointestinal problems and lung and blood issues.
Consumers who are eligible to receive payments from the settlement include both people on Medicare Part B (who received a yellow post card in the mail) and people not on Medicare (who need to file a claim form that can be downloaded from the settlement website or requested by calling 877-465-8136.
Details of the settlement, how to file claims, how to exclude yourself, etc, can be found at AWPTrack2settlement.com or by calling 877-465-8136.
A reader of this blog recently wrote to us here at Prescription Access Litigation and reported that the Cephalon (Nasdaq:CEPH) had closed its Patient Assistance Program for Provigil, its prescription drug for Narcolepsy and other sleep disorders.
Why would Cephalon deprive uninsured and low-income patients access to this drug?
When my health insurance dropped Provigil from their formulary in 2007, my Provigil copay jumped from $50/month to $234/month in addition to a $500 brand name deductible and my $130 monthly premium…Desperate to find a way to get my medicine so I wouldn’t end up on welfare, I called Cephalon’s PROVIGIL Assistance Program and requested financial assistance. I was still willing to pay part of the costs, but I hoped they could give me some sort of rebate. Cephalon told me that because I had some form of insurance I didn’t qualify for any assistance, regardless of how high my co-payment is or my financial situation.
They told me that if I was uninsured they would pay up to $500 per month (which is the retail cost of a month supply for me). They actually suggested I drop my insurance plan. It seems strange (not to mention unethical) that they would rather I drop my insurance so they could give me $500/month instead of just helping me with a portion of my $234 co-pay…
I actually considered listening to them and dropping my insurance so I could get free medication, but that ultimately wasn’t an option because I have other health conditions and my pre-existing conditions would make it unlikely I could obtain new insurance in the future.
So Cephalon had some pretty stringent limitations in place to begin with on its Patient Assistance Program: If a patient had any insurance, even if that insurance wouldn’t cover Provigil at all, Cephalon wouldn’t help them. We heard from quite a few patients after we posted Jessica’s story who described being in the same situation. And then recently a reader alerted us to the fact that Cephalon had closed its Provigil assistance program for the rest of the year. Apparently, they closed it quite some time ago – the Brass and Ivory blog posted a link to Jessica’s story, and a commenter there reported back in June that the program was “full.” We called the Provigil assistance line and they confirmed that the program is indeed closed for the rest of the year.
Now, some may argue that Cephalon is not required to provide free drugs to anyone, and that it’s up to them to determine how much help to provide. While that’s true, it’s not the full picture. Cephalon has taken numerous active steps to deprive patients of affordable Provigil. For instance they’ve kept a more affordable generic version of Provigil off the market.
Cephalon filed patent infringement lawsuits against generic drug companies that tried to bring a less expensive generic version to market. Then Cephalon paid them off, to the tune of more than $130 million, not to sell generic versions of Provigil until 2011 at the earliest. PAL member AFSCME District Council 37 Health & Security Plan is a plaintiff in a national class action lawsuit challenging these payoffs.
Cephalon’s CEO, Frank Baldino, got $13.5 million in compensation last year. This is much more than CEOs at other, much larger, drug companies earned last year, including Pfizer and Bristol Myers Squibb.
Provigil is clearly a money maker for Cephalon, approaching the magic $1 billion “blockbuster” market. Provigil has one the one hand deprived consumers of a more affordable generic and on the other hand told uninsured patients seeking assistance that they’re out of luck halfway through the year. (Note: Cephalon only said that the program is closed to new patients – it’s not clear whether patients who got on the program before it closed are helped through the year, or whether their help was cut off as well)
One can’t help but wonder if the Patient Assistance Program’s closure has anything to do with the anticipated introduction next year of Nuvigil, a “successor drug” to Provigil. Nuvigil (armodafinil) is the “single isomer” formulation of Provigil (modafinil), which means that Nuvigil is just one half of the molecule that gives Provigil its kick.
Introducing these single-isomer versions of drugs is a common tactic used by drug companies when they are facing generic competition: chop off one-half of the molecule, and aggressively market it as a “new” drug, regardless of whether it’s more effective or not. This is what Astra-Zeneca did when Prilosec’s patent was set to expire — Nexium is the single-isomer version of Prilosec. But it’s no more effective — just much more expensive. Cephalon’s timing is early, since the deals it cut with generic drug makers will keep a generic version of Provigil off the market until 2012. But when Cephalon submitted its application to the FDA for approval of Nuvigil, it was likely not clear how soon a generic Provigil would come on the market.
And the market for drugs like Provigil and Nuvigil is growing — although just approved for conditions like Narcolepsy, obstructive sleep apnea and shift-work sleep disorder, they’re being widely used “off label” for other purposes — such as by people who want to stay awake and increase their productivity over long hours. The San Jose Mercury News ran a story this week, “Pill that boosts productivity gaining favor in Silicon Valley”. Some choice snippets from that article:
The practice appears to have gotten at least a foothold in Silicon Valley, especially with Provigil…Provigil seems to be gaining favor among workers here, according to TechCrunch founder and influential Internet commentator Michael Arrington. In a blog posting titled “How many Silicon Valley startup executives are hopped up on Provigil?” Arrington declared in July that “I’ve spoken with one executive who says he uses it regularly to work 20-hour days, and the buzz lately is that it’s the ‘entrepreneur’s drug of choice’ around Silicon Valley.”
It’s not clear whether Cephalon is claiming that Nuvigil is an improvement over Provigil. Nuvigil’s FDA approved label’s only reference to this just says that Nuvigil is the “longer-lived enantiomer
of modafinil.” Single-isomer formulations are seldom significant improvements over the whole molecule, but are virtually always much more expensive and heavily promoted as though they are the next new wonder drug. It’s not uncommon for companies to begin winding down the marketing efforts behind an old drug when a new drug is on the horizon.
Cephalon’s clinical program will evaluate the use of NUVIGIL as a treatment for serious medical conditions such as bipolar depression, cognition associated with schizophrenia, excessive sleepiness in medical conditions such as Parkinson’s disease, and fatigue in patients who are being treated for cancer. The company currently plans a commercial launch of NUVIGIL once additional clinical data has been amassed.
“The approval of NUVIGIL allows us to preserve our current leadership position in the area of wakefulness,” said Frank Baldino, Jr., Ph.D., Chairman and CEO, Cephalon. “More importantly, we now have a longer-term opportunity to further characterize the utility of this compound beyond wakefulness.” NUVIGIL is protected by a U.S. patent expiring in 2023.
One possibility, then, is that Cephalon is winding down its patient assistance program for Provigil in anticipation of a push on Nuvigil. Even though assistance programs typically provide people drugs for free or very cheaply, they can still serve a marketing purpose. Some of those uninsured patients will eventually get insurance or get on a public program like Medicaid or Medicare. If they’re already taking your more expensive and newer drug because they’re on your patient assistance program, then they’re likely to remain on that drug once they have insurance that will actually pay for it, and thus generate revenue for the company. It’s a similar logic to drug samples in the doctor’s office — the cost of the samples is an investment in future prescriptions.
But that’s awfully cynical. Could a company that has paid off generic drug makers to deprive consumers of a more affordable version of a drug that’s a necessity for many people with narcolepsy, that closes its patient assistance program halfway through the year, and that suggests to patients that drop their insurance in order to get on a patient assistance program, be that cynical? Surely not.