This is our initial blog post from Eric Alexander, a partner here at Reed Smith. We hope we can corral him into more regular contributions, but we have to keep from him just how much of a hassle regular blogging can be until we have him lassoed in. So don’t you go telling him.
As a first time blogger, a brief introduction is in order. I have neither a nickname that borders on copyright infringement – BeckstLaw or something like that – nor did I devote enough attention to television dramas and literature assigned to college sophomores to turn every legal analysis into biting social commentary. I also do not have the habit of referring to myself with plural pronouns. However, I have been representing drug companies in product liability cases for more than fifteen years and device companies for about half as long. Over the years, I have formed some strong views about the laws – as written and as applied- governing such cases. So, when we were asked – see, attempting the plural thing – to author a guest blog entry, we used our fingers on our keyboard to type this up for our readers.
We find Caldwell v. Janssen Pharmaceutical, Inc., 2012 La. App. Lexis 1099 (La. App. Aug. 31, 2012), strangely lacking in detail and analysis, particularly for an appeal of a $330 million judgment. The case is one of many actions by or on behalf of various states against the makers of Risperdal, a prescription medication indicated primarily for the treatment of schizophrenia. Indeed, a similar case in Pennsylvania resulted in a non-suit at trial (no causation as a matter of law) that was affirmed on appeal. But in the Caldwell opinion, you will not find what that drug is used for in the opinion. You actually will not find the word “Risperdal” in the text of the opinion – it is the last word in an earlier footnote explaining what DDMAC stands for – until the 11th page of the slip opinion (*16 on Lexis). More about that later, but the case is about allegedly misleading statements in the marketing of the drug and false claims to the Louisiana medical assistance program funds. After the court had already determined that there was sufficient evidence presented at trial to support the verdict, the reader learns for the first time that the alleged misleading statements concerned drug “safety” (as opposed to its efficacy, price, color, smell, etc.); this comes up when the court is affirming that exclusion of expert testimony that the defendant “did not misrepresent Risperdal’s safety and that Louisiana doctors were not misled by the ‘dear doctor’ letters.” What was the safety issue? The opinion never says. What did the defendant actually say about that unknown issue and why was that representation misleading in light of the information known at the time about the issue? The opinion never says. It does quote the trial court’s oblique reference to “subsequent scientific developments” in affirming exclusion of certain “scientific evidence.” It does not quote any portion of any communication by the defendant about the drug at all.
How can there be an opinion affirming a $330 million award – $257 million penalty, $70 million attorney fees, and $3 million costs, exclusive of interest – about how a manufacturer marketed a prescription drug without such basic information presented right up front, or anywhere? When the Louisiana AG, who is the plaintiff here, issued a press release about the opinion, he had no trouble saying the suit was for “serious misrepresentations regarding Risperdal’s link to diabetes in order to obtain funds from Louisiana’s Medicaid program.” Diabetes is not mentioned in the opinion, though. When you look at the current drug label, in PLR format, you see that information on the risk of diabetes is about half-way through the Warnings and Precautions section. When you run a search on PubMed for “risperidone diabetes,” you get 231 hits for articles over the last 14 years. So, there surely there was plenty of possible evidence about what was known about the risk of diabetes with Risperdal at the relevant time from which to judge whether what the defendant said about it was misleading. The opinion says “a plethora of evidence” was presented to the jury over the course of what it described as a five day trial. Setting aside how you fit a plethora of evidence into a five trial days (especially if openings and closings were included in those days) and whether the court meant to say there was too much evidence presented – which is what plethora really means – the absence of any discussion of what seems like the most relevant evidence makes us suspicious. While the court says “[t]he resolutions of the myriad issues in this case are primarily fact driven,” the opinion is devoid of fact, notwithstanding the repeated incantation of the phrase “[a]fter carefully reviewing the record” before overruling each assignment of error. The determination that the plaintiff’s closing argument did not violate due process by “appeal[ing] to prejudices against out of state corporations” without quoting any portion of the closing itself is particularly mind-numbing.
That brings us to the core issue that the appellate court was supposed to be deciding: does the Louisiana Medical Assistance Programs Integrity Law (MAPIL) really provide that the state, represented by outside plaintiff lawyers from Texas, can get per-violation penalties for 35,542 violations for misrepresentations about the safety of a drug without ever having to prove any actual damages were sustained by the state’s medical assistance programs? The trial court, of course, had found that it did. Keep in mind that MAPIL is not a general consumer fraud or unfair trade practices statute, like the one that these same plaintiff lawyers used when worked with the South Carolina AG in another suit over Risperdal marketing. Its name does not hide the ball – it is about making sure people do not defraud the state’s medical assistance programs. In analyzing whether MAPIL could be transformed to a general consumer fraud statute and the requirement that “No action shall be brought under this Section unless the amount of alleged actual damages is one thousand dollars or more” could be ignored, the court endorsed the proposition that the “fundamental question in all cases of statutory interpretation is legislative intent and the ascertainment of the reason or reasons that prompted the Legislature to enact the law.” You would not know it from the opinion, but MAPIL, 437.2, says it was enacted “to combat and prevent fraud and abuse committed by some health care providers participating in the Medical Assistance Programs and by other persons and to negate the adverse effects such activities have on fiscal and programmatic integrity.” The rest of MAPIL reinforces the conclusion that any proceeding under MAPIL has to involve actual damages to MAP. For instance, 437.5 says the AG has to make sure that any settlement covers the “estimated loss sustained by the Medical Assistance Programs” and 438.6 says “actual damages” are calculated based on payments made by the Medical Assistance Programs. We could go on − the Pennsylvania appellate court certainly did, holding that a Risperdal’s manufacturer was not a “provider” under a similar state statute. Commonwealth v. Ortho-McNeil-Janssen Pharms., ___ A.3d ___, 2012 WL 3030512, at *6 (Pa. Commw. July 26, 2012).
The appellate court in Caldwell did not actually decide the correct way to interpret MAPIL, applying only an abuse of discretion standard to the trial court’s interpretation. The trial court, in turn, based its interpretation on a bit of legerdemain by a West Virginia trial court in its own case with an AG seeking damages over marketing of another prescription drug, holding that each time “false or misleading promotional materials than concern health [is used] such promotional materials in and of [themselves] cause harm and injury.” Not only is that complete nonsense, it also came from a case brought under a Consumer Protection Act. Louisiana has its own Unfair Trade Practices and Consumer Protection Law, which is very different from the MAPIL under which Louisiana went after Risperdal. If the appellate court was going to endorse the trial court’s look to West Virginia’s consumer fraud law, it might have bothered to check on whether that law was still good. If it had checked this esteemed blog (like any court ever does that), it would have seen that White v. Wyeth, 705 S.E.2d 828 (W. Va. 2010), had determined that the West Virginia consumer protection act “does not extend to prescription drug purchases” and does require reliance.
Maybe a de novo review of the law, like you usually get on an appeal involving statutory interpretation, would have caught this minor detail. Like the mysterious absence of pertinent facts in the opinion, the facile acceptance of an illogical statement in an irrelevant case as a basis for an unwarranted extension of the law at issue makes us uncomfortable.
We would like to think that the trial judge and appellate judges, Louisiana state employees, were not influenced in their decisions by the prospect of $260 million potentially coming to the state coffers at a time when Louisiana’s total debt was steadily climbing to more than $65 billion. We have been around several courts in economically depressed parts of the country – a client GC once called them “economic redistribution centers” – in cases involving one, many, or an entire state’s worth of individuals who claimed physical and/or economic injuries from their use of a prescription drug made by a big out-of-state company. The dynamic in those cases was well explained (and noted here) in the concurrence in State ex rel Johnson & Johnson v. Karl, 647 S.E.2d 899 (W. Va. 2007), the infamous decision in which − you guessed it − West Virginia became the only state to reject the learned intermediary doctrine:
Suppose Patient John Doe visits his small-town West Virginia doctor. Further suppose he is prescribed a drug by his doctor that causes him serious injury. Suppose that the drug is one that is heavily advertised. Patient Doe then sues his West Virginia doctor and the drug manufacturer for the injury caused by the drug. If this Court were to adopt the learned intermediary doctrine, the West Virginia doctor would remain in the lawsuit, but the drug manufacturer would not remain in the suit and would not be liable for damages if the drug manufacturer could show that it warned the doctor of the risks of injury associated with the drug. Thus, a small-town West Virginia doctor would become solely responsible for the injury to Patient Doe while an out-of-state multi-million dollar drug manufacturer is off the hook . . . . This result simply would be unfair.
647 S.E.2d at 917 (Maynard, J. concurring). In other words, it was fair to take their money because they have plenty and aren’t from around here.
Previously, at least, in such jurisdictions, the plaintiffs were claiming that the defendant’s drug had excessive risks, that those risks were not warned of sufficiently, and that they suffered injuries as a result. In those cases, what the risks and warnings were and whether the risks had manifested themselves in legally compensable injuries was openly argued in motions and trials. The judges presiding over those cases may have gotten campaign contributions from the plaintiff lawyers, hunted with them, or generally recognized that a recovery to people residing in or near the county where the case was pending might be a boon to the local economy. However, the judges in those cases did not draw their official paycheck from the same entity that employed plaintiffs’ counsel and the juries always had to find some causal relationship between the actions of the manufacturer – like failing to use an adequate warning about some risk – and tangible harm suffered by plaintiffs before damages could be tallied and awarded. Caldwell required no proof of harm or causation. It allowed a determination of whether a communication about a prescription drug was “misleading” without even admitting evidence of whether the recipients of such communications, the doctors who might prescribe the drug to patients who might have the cost of their drugs paid for by the state Medical Assistance Programs, were ever “mislead.” It allowed recovery of fines for each of 35,542 violations – brushing aside that MAPIL does not require such multiplication – without any requirement that the plaintiff show that a single prescription was paid for by the state Medical Assistance Programs because a doctor saw a misleading statement on Risperdal. Now, we know that this is not a negligence claim, but we learned in law school that Judge (later Justice) Cardozo took care of negligence in the air in Palsgraf in 1928. We hope he would have drawn the same lines had any damages awarded to the Palsgraf plaintiff been payable to retirement fund for the New York Court of Appeals. We also hope that the next court to take a look at Caldwell will pay better attention to the law and evidence used to punish the defendant here – although none of the $330 million tally was for “punitive damages” if you believe the labels.