CONSUMER PROTECTION

Lynch v. National Prescription Administrators
No. 03 Civ. 1303 (GBD) (S.D.N.Y.)

SRK is lead counsel for the Health and Welfare Fund and the Retiree Health and Welfare Fund of the New York City Patrolmen’s Benevolent Association in a class action against their former pharmaceutical benefits managers for breach of fiduciary duty, alleging that the managers retained for themselves rebates, fees and other compensation they received from drug manufacturers which should have been passed on to the PBA Funds. The case has recently been consolidated with other similar claims in the Eastern District of Missouri. SRK is part of the plaintiffs’ steering committee.

In re Pharmaceutical Industry Average Wholesale Price Litigation
MDL No. 1453 (D. Mass.)

The Firm filed some of the earliest cases alleging wrongdoing by pharmaceutical companies through their use of average wholesale price (AWP) and other techniques to artificially and unlawfully increase the price of drugs. The Judicial Panel on Multidistrict Litigation Issued an Order consolidating all of the cases before Judge Saris in the District of Massachusetts. In re Immunex Corp. Average Wholesale Price Litigation, MDL No. 1456, 201 F. Supp.2d 1378 (J.P.M.L. April 30, 2002).

The consolidated complaint in AWP alleges several unlawful schemes. First, it alleges the same scheme to manipulate AWP for hundreds of drugs using the same techniques present in Lupron.Second, the complaint alleges that the drug companies encouraged pharmaceutical benefit managers to favor their drugs over competitors by creating larger spreads between the AWP and the true price ultimately paid for the drugs, partly by providing rebates or other disguised payments to lower the PBM’s net costs. Third, plaintiffs allege an antitrust claim involving the Together Rx program, a drug discount card offered to consumers in 2002. The defendants announced that anyone with the Together Rx card would receive a discount on their prescription drugs of at least 15 percent off AWP. However, plaintiffs allege that the defendants conspired with each other to, and actually did, raise the AWP spreads on many of their drugs just prior to offering the Together RX discounts, so that the promised discounts were generally illusory.

As a co-lead counsel, the Firm participates in determining all aspects of litigation strategy. In addition, the Firm is in charge of the prosecution of the case against Johnson & Johnson — one of five cases placed on the fast track by the Court for resolution. As part of its work in the overall case, the Firm has taken or defended 30-40 depositions and reviewed over 500,000 pages of documents.

In decisions dated May 13, 2003 and February 26, 2004, the court denied in large part defendants’ motions to dismiss and allowed the case to go forward. A motion for class certification is pending.

In re Managed Care Litigation
MDL No. 1334 (S.D. Fla.)

This consolidated action, in which SRK is one of the court appointed lead counsel, stems from a series of lawsuits filed in both state and federal court by physicians and medical associations against many of the nation’s largest for-profit health insurers arising from conduct involving issues dating back to 1990. Specifically, the plaintiffs, representing a class of over 700,000 physicians nationwide, allege that the defendant HMOs have systematically breached the terms of their contracts with physicians and have engaged in illegal policies and deceptive practices that have resulted in the physicians being systematically denied compensation for services rendered. Plaintiffs allege that this pattern of behavior constitutes a violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”).

Two of the defendants in this action have settled. Final approval of the settlement between the nationwide class of physicians and defendant CIGNA, valued in excess of $500 million, was granted on April 22, 2004. A similar settlement valued in excess of $400 million with defendant Aetna was approved by the Court on November 6, 2003. These settlements also bring sweeping changes to the health care industry and involve improvements to physician-related business practices and provide for the establishment of an independent foundation dedicated to improving the quality of health care in America.

More about the Settlement and filing a claim.

In re Lupron Marketing and Sales Practices Litigation
C.A. No. 01-10861 (D. Mass.)

The theory that pharmaceutical companies were defrauding consumers and third-party payors through the use of the Average Wholesale Price (“AWP”) originated in the investigation of Firm partner Jeffrey Kodroff. Having participated in earlier cases involving health-care pricing, Mr. Kodroff began investigating the industry pricing mechanisms used by manufacturers in setting reimbursement rates for pharmaceutical products. Based on Mr. Kodroff’s detailed investigation over the course of a year, the Firm filed the first civil action seeking damages as a result of the sales and marketing practices involved in the drug Lupron. Porter v. TAP Pharmaceuticals, Inc., C.A. No. 01-10861 (D. Mass.) (filed May 18, 2001). All of the subsequent federal cases on Lupron were derived from this complaint, and were eventually consolidated in the District in Massachusetts.

The consolidated complaint alleged in essence, that TAP Pharmaceuticals and its two partners, Abbott and Takeda reported to the public and to the federal government an AWP that is in fact substantially above the actual prices charged in the regular course of business. The difference between the AWP and the prices actually charged to medical providers is known in the industry as “the spread”. A drug company competes with others by creating a larger spread, thus inducing the medical provider to use its drug. The scheme is premised on the fact that the government and third party payors reimburse for the cost of the Lupron based on the AWP.

Since Medicare reimbursements are based on the AWP, a substantial target of the defendants’ scheme is the federal government. Medicare normally pays 80% of the cost of covered drugs, and calculates its payment based on the AWP. However, individual patients and third party payors who pay for some or all of the remaining 20% of the drug cost are also damaged by the unlawfully inflated price. In Lupron, the fraudulent scheme also extended to additional incentives to doctors such as “honorariums”, undisclosed discounts, and provision of free samples which some doctors then billed. In 2001, TAP pled guilty to federal charges of fraudulent pricing of Lupron and agreed to pay $875 million to state and federal governments in fines.

The Firm actively participated in the litigation as one of the co-lead counsel. Plaintiffs counsel took or defended approximately 30 depositions, and reviewed approximately 500,000 pages of documents. They briefed and defeated a motion to dismiss, and had fully briefed the motion for class certification. They also had to deal with a series of complex issues involving federal/state comity resulting from the prosecution of state claims by a separate law firm not part of the MDL consolidated proceedings. Through diligent work by SRK and others, the case recently settled for $150 million to be paid to a nationwide class of purchasers. By Order dated November 24, 2004, the Court preliminarily approved the settlement. On May 12, 2005, the court granted final approval to the settlement.

Class Period: January 1, 1985 – March 31, 2005

In re Neurontin Marketing and Sales Practices Litigation
MDL No. 1629 (D. Mass.)

SRK represents an employee benefit fund and filed one of the first cases asserting fraud and RICO claims against Pfizer. The complaint alleges that Defendant knowingly marketed the prescription drug Neurontin for uses that were not approved by the Food and Drug Administration (“FDA”) and for which Neurontin was not, in fact, effective. This fraudulent marketing scheme was accomplished through a variety of means including: payment of illegal kickbacks to physicians who prescribed large amounts of Neurontin; the formation of a network of “medical liaisons” who were in fact only sales representatives; illegal direct solicitation of doctors to prescribe the drug for non-approved uses; making false statements to doctors about the drug’s safety and effectiveness; active avoidance of FDA requirements in order to avoid Medicaid and Medicare price restrictions; and payment or offering of gratuities to employees to procure their silence about the scheme. In 2004, defendant agreed to pay some $430 million in criminal fines and civil damages to state and federal governments.

The purchaser civil cases have all been consolidated in federal court in Boston.

Twin Cities Bakery Workers Health and Welfare Fund v. Biovail (“Tiazac”)
C.A. No. 01-2197 (D. D.C.)

SRK filed a class action in the United States District Court for the District of Columbia concerning Biovail Corporation’s illegal acquisition of a patent for Tiazac, and its wrongful listing of the patent with the U.S. Food and Drug Administration. Each of these actions served to block bioequivalent generic versions of the drug from competing.

Kleinman v. Merck & Co., Inc.
Docket No. ATL-L-7894-04-MT (N.J. Super. L.)

SRK brought this class action in New Jersey Superior Court on behalf of all persons who paid some or all of the purchase price for the prescription drug Vioxx, a popular painkiller used by arthritis patients. Merck knew that Vioxx posed serious cardiovascular risks to patients, but uniformly represented to doctors and consumers that the drug posed no such danger. SRK’s complaint seeks economic damages only under the New Jersey Consumer Fraud Act. It does not seek damages for anyone who suffered personal injuries. SRK is lead counsel for individual “end user” consumers. SRK is also working with lawyers who have brought class actions in federal court, which have now been consolidated in the U.S. District Court of the Eastern District of Louisiana.