Alabama To Pharma: You Have 30 Days To Settle
39 CommentsBy Ed Silverman // July 4th, 2008 // 11:25 am
The state is offering 69 drugmakers sued over alleged Medicaid price fixing 30 days to reach a settlement before taking further legal action, Reuters reports. In other words, pay up or else!
“The defendants will have a 30-day window in which to make an acceptable settlement offer. After that time, there will be no further settlement negotiations by the state,” Jere Beasley, a lawyer for the state, told a news conference. Alabama wants $1 billion in compensatory damages and $3 billion in punitive damages.
Alabama Attorney General Troy King said he had sent letters to the drugmakers telling them that settling the case now would minimize the expense of litigation, according to documents given to journalists by his office.
Alabama first sued more than 70 drugmakers in 2005, claiming they overcharged the state’s Medicaid program, which provides healthcare for disabled and elderly patients as well as others. This week, the state won $114 million from Glaxo and Novartis, although both say they will appeal.
Sam
I would not of given them 30 days!
Paul G
What kind of ultimatum is that?
Let things go to court and be appealed all the way up.
This smells like blackmail
Nathan
This is rather off-topic here, but here it goes:
I read an article by a financial group yesterday about the state of the pharma industry. There were some interesting statistics. There were 65,000 US lawsuits filed against pharma companies between 2002-2007. That’s more than ANY other industry. Unlike the UK, in the US the innocent party has to pay their own legal (defense) fees. How much money do you think it costs to defend ourselves against 65,000 lawsuits?? Granted, some of these are legitimate. I also didn’t realize that people generally pay NOTHING to bring a lawsuit against pharma companies. Most lawyers will argue your case for free provided that you give them 30-40% of any settlement you get.
Justice, I was almost won over to your side on the preemption issue. But this upset me. We have a system set up that ENCOURAGES frivolous lawsuits. Preemption: We may sink with you, but we will surely sink without you. Godspeed preemption!
Nathan
BTW, a class-action lawsuit counts as ONE in the above analysis. Thus, collectively, there are far more than 65,000 individuals that are sued pharma in 2002-7. Preemption may not be the BEST answer to those problems, but it lease it is AN answer.
Chris
In contingency fee cases, although legal fees are covered, the client typically remains responsible for the payment of all costs of the case, including expert witness fees, filing fees, travel costs and other hard costs associated with the case, regardless of the outcome. These costs can be substantial.
Dr. Sal Giorgianni
The Consequences of The Toxic Public Image and Public Policy Environments on Innovation are Horrific.
One of the disturbing aspects to this litigious legal environment and the toxic public image environment is that it seems this is all creating a snowball effect to yet further vilify the industry. The public is reeling now at the gas-pump because of inappropriately hostile media coverage (sorry Ed.) and political-expediency driven decision making two decades earlier. As the same sensationalistic and off-balance media swirl and demagogy continues to pummel pharmaceutical and biotech industry the same fate will befall the public in 2028.
Those who long for better and safer medicines and alternatives to suit individual needs, do you truly believe that any of this rhetoric has helped? The real abuses are always ferreted out and addressed. They have been by the scientific and regulatory process for dozens of years; and that is a good thing and should continue. The Boogey-Men and Boogey-Women that have been created create an environment that does not allow for a fair and sound debate, review and correction. I fear it has had just the opposite effect. Good scientists are leaving industry, funding for the most innovative and the most expensive and risky discovery and development is drying up and distribution of unregulated medicines produced in unregulated or under-regulated facilities from countries where we would not want to drink the water are seeping into our distribution system.
Innovation has already been chilled and investment capitol, which is in large part driven by psychology, has dried up; the danger signs are already in place. I am glad I will likely not be around when this all peaks but I weep for my children and my children’s children.
Justice in MI
Hey Nathan - As far as facts and figures, you can find pretty much whatever you need. You cite some that come directly from “the other side” and, of course, will create an air of crisis. The reality is that the number, costs, and awards of lawsuits - in pharma and elsewhere - have actually been going the other way. The stats you cite were “blipped” by Vioxx, and thus are misleading about the trends.
In any case, you didn’t answer the important question you raised. How much _does_ it cost pharma to defend suits? How much does the industry actually pay out (to their own lawyers as well as in settlements and the rare actually fine)? Where does that figure into the “cost of doing business” for the industry in general.
The figures you cite - as I recall - come from one of the briefs in the Levine case. (I don’t recall who issued them initially - most likely the Manhattan Institute that publishes the lurid, “Trial Lawyers, Inc.”)
In any case, costs and rights are not easy to balance, particularly when, as you note, given the very legitimate cases.
The reality is that, thanks to tort reform legislation, class actions are becoming extremely rare in the U.S.. There are other steps (including “loser pays” proposals) and limits on lawyer percentages that are part of the debate.
One always has to look at the big picture - rights, public health, econ impact, etc..
Frankly, I would have been amazed (though pleased) if you did not support preemption. It takes work for _all_ of us (including self) to step out of the position we’re in. A lot of my lawyer friends do not agree with my own views, which would shield companies if there was no clear evidence of serious negligence (up to and including fraud).
Be careful what you wish for.
Justice in MI
Dr Sal writes - “The real abuses are always ferreted out and addressed. They have been by the scientific and regulatory process for dozens of years; and that is a good thing and should continue. The Boogey-Men and Boogey-Women that have been created create an environment that does not allow for a fair and sound debate, review and correction.”
I mostly agree with this and the rest of what Sal writes. The one quibble is the fact that sometimes the real abuses are not always addressed. Thalidomide - as important as it was culturally and politically - did not bring a single criminal penalty to its manufactuer. None. There are other such examples.
I do _not_ think, as I’ve said many times, that the answer is to polarize into Bogeypeople - Constant Gardner versus King of Torts. Really, trying to move beyond that toxicity has been the whole point of my being here.
So I think we have to accept successes and imperfections all around - in industry, politics, the FDA, tort system, etc. There will be abuses and there will be outstanding contributions. The policy issues are how to achieve the best balance of the good things we all wish for - innovation, _reasonable_ safety, justice, etc..
Preemption is a good single example here. I have never claimed the tort system was the answer to our problems or was not without serious flaws. Just the opposite. But overall I think its work, _along_ with FDA, are better than throwing either one entirely away. That is, more incremental reform on the systems we have now are better than turning what are serious problems into absolute nightmares.
That’s why my own position is actually the conservative one on this issue.
Jane
Nathan,
The US consumes more medications than any other country. We also have a right to sue should we be harmed because of the medication we’ve taken. More people are willing to consume medications knowing they have legal recourse should something go wrong. I believe that we take medication so freely because we know, that should we be harmed by it, we can seek legal remedy. Take the legal remedy away and I doubt very much people will be so willing to take a lot of the medications on the market today, let alone new medications coming to market. Preemption will bring an entirely new meaning to risk/benefit when the consumer is left with all risks.
Justice in MI
I’m having trouble tracking down the study that Nathan cites. Can anyone help? I also recall reading it (and, yeah, being “impressed” by the ways things were getting counted).
One of the things I don’t recall is how many of what is being counted are pharma v. pharma lawsuits - patent issues, etc. In general, product liability and patent-related suits have, indeed, grown.
Re: Carol, my own view is that companies ought not be held accountable if there were not reasonable things they could/should have done to prevent dangers. I disagree with some among lawyers who feel that liability should prevail regardless.
Knowing a number of people who have been injured by drugs in Michigan, where preemption has prevailed for thirteen years, I also don’t think their having “legal remedy” - if they did - would in the slightest balance the damage and losses they’ve endured. Most just don’t want to feel like disposable people. The few thousand dollars they would each get if there were successful suits is more symbolic than practical.
I do think that preemption is a flashing Direct to Consumer Ad that says, in bold, and about the industry as a whole:
YOU CAN’T TRUST US TO BE HONEST. THAT’S WHY WE NEED THIS!
That is a vicious lie from my perspective. There are a small number of bad actors who should be held accountable, but not the great majority. But this bad brush tars the whole field. Grotesque.
Dianne
Nathan: We have a system that protects against frivolous lawsuits. So why not let freedom ring?
“Many tort reformers want to prevent lawsuits over products that the Federal government approved. They argue that any product that meets government safety standards can’t be unsafe or defective. If we were to assume that was true – a big assumption – at least one problem remains: Corporate executives have been known to lie or conceal information to get products approved by the government. Often, the only way their illegal actions are revealed is through product liability lawsuits.
There are two legal mechanisms that quickly and inexpensively resolve frivolous lawsuits. The truly frivolous lawsuits are often “thrown out of court” when the defendant files a motion to dismiss. If that fails, a defendant may still file a motion for summary judgment, which requires the plaintiff to present actual evidence that he or she “has a case” and that there are no laws that prevent the plaintiff from winning.
Motions for summary judgment are decided by judges – not juries - so any lawsuit that makes it past a summary judgment has some merit. Motions to dismiss and motions for summary judgment quickly and inexpensively weed out lawsuits that don’t have any merit. And often, a plaintiff on the losing end of either motion is ordered by the court to pay the defendant’s legal fees, thus discouraging people from filing frivolous suits in the first place.” http://www.corpreform.com/questions_answers/index.html
Laurie
“I also didn’t realize that people generally pay NOTHING to bring a lawsuit against pharma companies. Most lawyers will argue your case for free provided that you give them 30-40% of any settlement you get.”
This contingency option has been around for decades, I’m surprised that you didn’t know this. It is a critical option for those who don’t have the funds to lay out for attorneys fees. If this option is gone, then the ability to sue becomes available only to the financially well heeled. Not a fair option, in my opinion.
Justice in MI
Extremely important points, Dianne and Laurie. Thank you for bringing them in.
I believe the study that Nathan refers to is the one described in an L.A. Times article that can be accessed at:
http://articles.latimes.com/2006/jun/27/business/fi-drugs27
What’s interesting is that, while the article sounds like a “tort reform” piece at the start, it ends with discussion of the ways changes in pharma marketing and emphases (”blockbusters” for chronic conditions, DTC, etc.) have stimulated increasing litigation.
As Dianne said, let freedom ring (for everyone)!
Dr. Sal Giorgianni
Justice.
Thalidomide? Come now, good sir. That is like bringing The Tuskegee Incident up. (which was a US Government project by-the-by)
Lisa Van S
Dr. Sal,
Ouch,.. That was pretty cheeky…
Justice in MI
Dr. Sal, Sir - I have a much longer list, so we don’t have to worry (in that regard) about Tuskeegee.
The bit I took issue was: “The real abuses are always ferreted out and addressed.”
Kinda obvious question: How could you possibly know?
Nathan
Justice,
The report I cite is entitled “The Continuing Evolution of the Pharmaceutical Industry: Career Challenges and Opportunities” by Regent Atlantic Capital. It was paper copy, I have no e-link.
The point of the article was not about product liability lawsuits — it was just a summary of the challenges facing the industry over the coming decade. The conclusion of the report was rather ominous: Pharma as we know it is a dying industry. Companies will continue to make drugs, but more and more of the R&D risk with be borne by startup ventures. More and more of the both the profit and the jobs will be overseas.
Anyway, in my opinion, if somebody is going to sue, they must be willing to have some balls and put their money where their mouth is. Our current system encourages a “lottery” like approach to lawsuits. Just find a lawyer who will take your case for free and then hope that you’ll hit the jackpot when the company settles. If you loose, no big deal. The company picks up the defense tab. What a scam.
Nathan
Actually, it’s even worse than I thought. I found some stats from 2005. Here’s the number of lawsuits filed against various industries:
1) Pharma: 17,027
2) Manufacturing: 3,236
3) Chemicals: 2,875
4) Construction: 2,717
5) Financial Services: 2,636
6) Insurance: 1,926
Are you telling me that more people were injured (emotionally and/or physically) by pharmaceutical companies than by all manufacturing, chemical, construction, financial, and insurance companies COMBINED?? This is way out of hand.
Another way to look at it: 65,000 lawsuits over a 5 year period. What are the legal fees for defending yourself against such a lawsuit? Let’s take a VERY conservative estimate of $100,000 per lawsuit. That comes to $6.5 BILLION just in defense fees — not including payouts.
Preemption may be a bad answer — but it’s better than no answer. Does anyone see any viable tort reform on the horizon? “Tort-reform” has been talked about for at least a decade. I don’t see anything happening with it. Viva preemption!
(Although I suspect it will be a very short-lived victory since congress will quickly create new rules specifically allowing drug lawsuits)
Justice in MI
Thanks for the reference, Nathan. As Dianne summarizes above, getting to court is more complicated than finding a contingency-fee lawyer. But the comeback will be that some judges are also preside over “judicial hellholes,” as they say at the Manhattan Institute.
Personally, if there was somehow a way to have a system (as some countries do) in which “loser pays” - and yet protect the rights of people who do have important and solid cases - I would favor it.
Laurie
“Actually, it’s even worse than I thought. I found some stats from 2005. Here’s the number of lawsuits filed against various industries:
1) Pharma: 17,027
2) Manufacturing: 3,236
3) Chemicals: 2,875
4) Construction: 2,717
5) Financial Services: 2,636
6) Insurance: 1,926″
What I find interesting is that the oversight/regulation of others on that list is very intense. OSHA, SEC, fire,labor etc…. so they are constantly being inspected and cited for any potential problems, which I’m sure prevents alot of injuries.
Sorry, can’t say the same for the FDA.
Justice in MI
Statistics, statistics…According to the study and its summary in the LA Times (linked above):
“More than 71,000 drug lawsuits have been filed in federal courts since 2001 and untold others in state courts. Such suits now account for more than a third of all product liability filings in federal courts, outnumbering asbestos, tobacco and auto safety claims by a widening margin since 2002, according to a new analysis conducted by legal research firm Thomson West for the Los Angeles Times.”
So one-third of product liability suits from 2001-06. The explain the peak in 2005 because of a combination of an unraveling of a fenphen settlement deal and Vioxx.
There have been significant changes in tort law, especially re: class actions and punitive damages.
I don’t know what are “reasonable” numbers in any case. What other specific product that had the _potential_ of doing harm was used by as many people as Vioxx? Somewhere, there is a relationship between litigation and product use, as well as the potential of the product to do harm (as well as good).
According to the defense lawyers, preemption in the drug arena will be very hard to undo by any Congressional action (because of the different kind of law on which it is based). So you will almost certainly get your wish. And then we can only see what happens.
Paul G
Ed, your picture on this article says it all.
Blackmail.
Justice in MI
For Sal (if he reads this) - I must say I had some “poster’s remorse” after my counter-punch to your Tuskegee thing. As someone who often puts himself “above the fray” - and perhaps you are, in some respects - I experienced your response to me as, well, what Lisa called “cheeky,” what I experienced as pretentious. But I may well not get the lilts behind the way you use “good sir,” or I may not follow what it means when someone “goes Shakespearian” to express their “cheekiness.” So we can leave it at that.
The serious issue is that, indeed, I really don’t think “serious abuses are always ferreted out and addressed.” People get away with murder all the time - as individuals, as corporations (not specifically talking pharma), and certainly as governments (I’ve spent the last thirty years teaching and writing about genocide). The Tuskegee example is actually right to the point. By the time it was “ferreted out” - because of an accidental “leak” - forty years had gone by. It could very easily have gone on forever. Either way, whatever was “addressed” by that time was of relatively little use to the victims.
But the core point of my initial response was that the flaws (with sometimes murderous actions) of individuals, industries, and governments are precisely why creating good policy, and finding the right balance of forces, is so critical. And that is also why I was, and remain, entirely with you that demonizing and counter-demonizing gets us nowhere toward sorting through what the best policies may be. In my view, we will never “ferret out and address” a good deal that, ideally, should be. So the goal is to do as well as we can. That takes deliberation of the most serious kind.
For Nathan - I have also read (as we no doubt all have) about the future of the industry. The question is - if the roof is leaking, and threatening to collapse, how much help is building a moat? Maybe it will help dry things out. Maybe you end up both with a caved-in roof and a flooded basement.
Just A Thought
“I also didn’t realize that people generally pay NOTHING to bring a lawsuit against pharma companies. Most lawyers will argue your case for free provided that you give them 30-40% of any settlement you get.”
This irritated me until I started dancing in this arena a little and realized how hard it is for lawyers to gather the information at their own expense and then put together a group of clients. Sick clients, in this instance, who may not feel well enough to contribute. Grieving clients. Some who have moved on to other medications and have recovered after long periods of illness, just needing to get back to business as usual if they can. Some who’s doctors are unwilling to contribute if it means they may have to testify. It’s scary for the clients to pursue cases against a huge corporation.
If the lawyers lose they get nothing and lose for their contributions. For that reason it’s not likely they are going to take on frivolous cases. They are perfectly aware that they are facing a huge bank of attorneys. They have to educate themselves to face those with all of the information. Seriously doubt it’s an easy job. We all need the option to move if we dare. The industry is wrong sometimes and it’s not as simple as to accept that your quality of life has been altered to a great degree.
I am not anti-big business. They provide jobs and therefore tax dollars for the government to operate. The FDA has been known to blow it a time or two as well. As long as one dose studies are acceptable, as long as things get by without review, until the regulators are prepared to regulate without prejudice, we do need the tools to keep them in check.
Just A Thought
The big shame is that it is a personal responsibility when we have regulators who should do this on our behalf. Does the FDA ever tell pharma to make it right for their damaged consumers? Because I would far prefer that.
Dr. Sal Giorgianni
Justice. I am humbled by the notion that you would have taken extra time and thought through my analogy to the exact point why I brought such an emotionally charged topic up. This mess was discovered and dealt with. It took time but I continue to believe in the essential goodness of the overwhelming majority of people that eventually drives them to do the right thing.
I will graciously accept your point about my assertion in the absolute. So I will accept a friendly amendment. I do believe that the majority of serious abuses are ferreted out and addressed. I do believe that. Yes, people do get away with bad things and sometimes they go undetected or swept under a rug by those who know about it because of their perception of some higher purpose being served. I cannot prove it with statistics it is something that I believe to be true.
Justice in MI
Thanks, Sal. All is well.
To Just a Thought - The FDA has no authority to compensate victims injured by drugs, whatever the reason (guilty, not guilty, whatever).
Indeed, it is the current FDA (under the current President) that has been pushing for preemption - and thus the loss of the right to bring suit under any circumstances (including fraud committed against FDA itself).
The one partial exception is that, if someone can prove they were injured by a _mandatory_ vaccination, there is the program that can provide some compensation. Even this is limited, however, to a relatively small number of vaccinations. And people remain free to refuse whatever offered compensation and bring suit against the vaccine manufacturer if they choose.
Thus, it is an error to assert - as one sometimes hears - that there is preemption in the arena of vaccines.
Bottom line - with FDA preempiton, no more lawsuits against pharma, pretty much regardless. (Well, except those companies bring against each other over patent issues and the like.)
Lisa Van S
Nathan,
Are you a Scientist, or a Pharma Retort Reporter. You must love your job, you get to play with the computer all day and get paid for it, Pretty Cushy!!
Nathan
Lisa, working on July 4th weekend? Actually, I have been slowly going through a big stack of chemistry papers all weekend…
I agree, however: I spend entirely too much time on this website! I’ve become a pharmalot junky! Maybe one of these day’s I’ll try to kick the habit. None-the-less, it’s fun to hear a side of the story that I seldom hear in the security gated research facility that I spend 7:30-5 every day.
Justice in MI
WARNING
People who leave Pharmalot abruptly have been known to experience “discontinuation syndrome.” Sometimes, they fall into the delusion of being Egyptian cats of uncertain gender. Although rare, some - in a moment of madness - become trial lawyers (although that rarely lasts for more than four hours).
All blogs have dangers. And the road to hell is paved with the blog-i-logically improbable.
Jack2
There’s another problem here…
Whatever law(s) these companies supposedly broke *probably* has to do with marketing or billing - and not safety data. The regulations in this area are unbelievably grey, and companies simply don’t know if they will win. The people at the company might have known the law and behaved in a way they thought complied with the law, but you don’t know how the jury will rule. If the jury rules against you, then the company can lose their ability to deal with the government. If that happened to a pharma company for a long enough time and to a sufficient extent, they may as well close the doors. So in that way the states really have the companies by the *alls.
From the company’s perspective it’s settle or go to court and either 1) win and pay only legal feeds or 2) lose and pay legal fees + money + LOSE THE ABILITY TO CONTRACT WITH THE GOVERNMENT.
From Alabama’s perspective it’s settle or we’ll sue you. If you settle we get cash, if we sue you we risk getting nothing, but we know you risk oh so much more.
This seems like a problem to me.
pharma PR hack
There isn’t anything grey about it - you can only charge a percentage markup from the lowest price you give ANYONE for Medicaid. To determine what that is - you have several forms which take into account the discount you give Express Scripts, the discounts you give hospital chains, the discounts you give the blues, etc. The problem is that pharma has always looked to the US being a cash cow versus the regulated pricing in other countries. Medicaid is a big buyer so maybe this really low price we gave to Aetna to shore up states where we were losing market share and move up a tier, we’ll we won’t actually divulge that one. It was a one-time price deal and falls under a loophole. Well, lo and behold, Aetna wants to administer a Medicaid plan in it actually divulges that for you as a selling point for how their PBMs negotiate. Aetna wins the Medicaid contract and the AGs office begins to look back at how much they pay for your drugs, why Aetna gets a better deal, they go back a few years, tack on administrative fees and next thing you know it is a multi-million dollar lawsuit.
There isn’t any grey about it. The problem is that pharma treats the states like it does the FDA. Picking and choosing what it discloses. These guys though don’t play by pharmas rules and don’t care who your lobbyist is, you don’t have enough investment in their individual states to matter, they pay for pharma; Overall, the states are hungry, need revenue and they don’t really have any hesitation about suing. It is really pretty black and white.
harpy
JIM - you can download the paper Nathan referenced here.
Nathan
Thanks Harpy - it’s a great article for anyone interested in the challenges facing our industry. Interestingly, they don’t even mention preemption. Maybe it’s too much of a “wild-card” at the moment.
Justice in MI
Thanks for here, too, Harpy. And thanks to Chris2 and “Hack” for reminding us that the original piece apparently had to do with price-fixing issues and thus irrelevant to preemption. As Nathan noted up thread, “off topic,” but that’s not unusual for us!
Justice in MI
But since we’ve been off topic, pharma PR hack writes:
“The problem is that pharma treats the states like it does the FDA. Picking and choosing what it discloses.”
“Hack” or others - do you see the FDAAA, or any other proposed regulatory changes, making any difference in this regard? _Is_ there a regulatory “fix” short of a Stalinist-sized FDA?
Jack2
There’s a lot grey about it. A sale aid or other marketing material needs to stay on label. But it gets grey since they don’t simply reproduce the PI.
Everyone gets a different contract (government or otherwise). Do you (the payor) want to pay more for higher doses or a flat rate? How big of a rebate can you live with? Do you want a rebate that kicks in after a certain number of units more, or do you want a rebate from script 1. It’s complicated.
I’m not saying nothing illegal is ever done, and I’m sure sometimes it’s done intentionally. But even if you don’t think you’ve (you the company) done anything wrong, the risk that a jury will think so is so great you might want to settle rather than risk the unknown.
pharma PR hack
Jack 2 –
Yes, everyone has a different payor contract but it all has to be disclosed and the Medicaid price is set by law with a formula based on the lowest price ANYONE pays for a drug and a rebate match. It isn’t really truly rocket science. If you don’t disclose lower rates that people pay, and the AG finds out then you get tagged for Medicaid fraud — just the same as those individuals who bill Medicaid for fictious items. The difference is that before there wasn’t such interconnectivity and when pharma said this is the AWP - everyone took it as gospel. Now the government looks and in the case of state goes after money.
Atlex
Pharma PR Hack,
i don’t think you understand this case. It is not about “best price” or charges fromt he manufacturer to the state. Itis about setting artificial Avderage Wholesale Prices (which is a ficticious number) and then selling products at very low prices to pharmacies (via wholesalers). This provides large margins to pharmacies, making them very happy and encouraging them to push specific brands. Of course, since state Medicaid reimbursement to pharmacies was (is) based on AWP and not actual wholesale acquisition cost (WAC), in the state’s view, it ends up reimbursing the pharmacies at too high a rate. Currently, thereis a move afoot, through regulation, to change reimbursement such that it is based on Average Manufacturer Price (AMP); however the pharmacy (not pharmaceutical) industry is fighting it since it would lower their reimbursement.
Atlex