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Skin in the game.  Horse in the race.  Dog in the hunt.  Whatever “it” is – we don’t have “it” in today’s case.  Ansley v. Banner Health Care is a suit brought by plaintiffs who had received damages awards for injuries that required treatment at various hospitals seeking to enjoin those hospitals from enforcing liens against those tort recoveries. 2019 WL 1121374 (Ariz. Ct. Apps. Mar. 12, 2019).  If any pharmaceutical or medical device companies were involved in the original tort claims, their role is over by the time Ansley gets teed up.  But just because we don’t have a seat at the table, doesn’t mean we aren’t interested in what’s being discussed.  Phantom damages.

We’ve written before about the concept of “phantom damages” – plaintiffs seeking recovery for the face value of health care provider bills when they (or their insurers) in fact got huge discounts.  Courts are actually divided on the issue and cases generally go one of three ways — actual payment only; let it all in; billed amount only.  We are fairly enamored of the actual payment only method of computing recovery of medical expenses.  Anything else provides a windfall to plaintiffs.  And that’s really where we have chum in the water.  There should be no windfall in the first place.  Plaintiffs should only recover what they (or their insurers) actually paid out of pocket.

But, in Ansley, we are in a horses already out of the barn situation.  Only, we can’t get the horses back.  We just have to watch the neighboring ranchers fight over who’s going to get them.  Arizona was identified in our earlier post as one of the states allowing plaintiffs to recover this windfall.  Lopez v. Safeway Stores, Inc., 129 P.3d 487, 495 (Ariz. App. 2006) (“plaintiffs are entitled to claim and recover the full amount of reasonable medical expenses charged, based on the reasonable value of medical services rendered, including amounts written off from the bills pursuant to contractual rate reductions”).  So the hospitals tried to collect this windfall for themselves through liens on plaintiffs’ tort recoveries for the face value of their discounted bills.

Each plaintiff was a member of the Arizona Health Care Cost Containment System (“AHCCCS”), Arizona’s Medicaid insurance provider.  Each hospital contracted with AHCCCS agreeing to accept certain rates for hospital care provided to AHCCCS members that was less than the hospitals would charge non-AHCCCS patients.  The hospitals wanted plaintiffs to reimburse them for the difference – the balance – between what they already received from AHCCCS and the face value of the services they provided.  Talk about a windfall.  Absent the underlying tort recovery, the hospitals would have to live with the contractual deal they struck.  But, since there was a tort recovery, the hospitals want to recover the full cost that they were never entitled to.

The court decided the plaintiffs get to keep the windfall.  In a bizarre twist, plaintiffs won by asserting, of all things, federal preemption.  The hospitals based their liens on two state court statutes that (1) allow a health-care provider to file a lien for its “customary” charges against a patient’s tort recovery and (2) allow a hospital to “collect any unpaid portion of its bill from other third-party payors.”  Id. at *1.  However, federal law governs the relationship between state Medicaid agencies and the hospitals they contract with.   Pursuant to 42 C.F.R. § 447.15, “a state may contract only with providers that agree to ‘accept, as payment in full, the amounts paid by the agency plus any deductible, coinsurance or copayment required by the plan to be paid by the individual.’”  Id. at *3.  This is a case of conflict preemption.  Despite state law providing a means to record a lien for recovery of a patient’s tort damages, federal law states that “[b]ecause the patient does not owe the hospital the balance between what AHCCCS has paid the hospital and the hospital’s customary rate, the hospital may not collect that balance by imposing a lien on the patient’s property.”  Id. at *4.

The court also ruled that the plaintiffs were third-party beneficiaries of the contracts between the hospitals and AHCCCS.  Id. at *10-12.  And there were rulings about the scope of the injunction and attorneys’ fees.  But, those rulings are even more remote to our primary areas of interest.

To quote Alexander Hamilton – actually Lin-Manuel Miranda – “When you got skin in the game, you stay in the game.”  We may not have had any skin on the line in this one, but we’re determined to stay in the game because the game – phantom damages – needs to change.

 

We know that most of our clients, manufacturers of prescription medical products (for purposes of this post), if they have insurance at all, have coverage that is subject to large self-insured retentions (“SIRs”). While the Blog doesn’t usually follow insurance matters, the decision discussed in this guest post is very good news for insureds with SIRs, and appears to be a matter of first impression. Thus, we invited David Weiss, Cristina Shea, and Connor O’Carroll from Reed Smith’s Insurance Recovery Group (who were writing the case up anyway) to provide this guest post. If this case starts a trend, pharmaceutical and medical device insureds (like many other insureds) will be much better off.

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In Deere & Co. v. Allstate Ins. Co., ___ Cal. Rptr.3d ___, 2019 WL 912151 (Cal. Ct. App. Feb. 25, 2019), a California Court of Appeal recently held that an insured’s SIR was considered part of the policy’s underlying limit of liability, and thus only had to be satisfied once.  SIRs are similar to deductibles, in that they represent a sum of money that the insured must pay before it is able to access its coverage.  The insurers’ rejected position in Deere was that the SIR had to be satisfied again and again to access each layer of excess insurance.  This case represents another example of the California appellate courts shooting down insurance companies’ attempts to overreach.  Deere is only binding in California, so insurance companies will continue to argue for multiple SIRS in other states to avoid providing the coverage they contracted to provide.  Policyholders must always be vigilant.

This particular dispute arose over insurance coverage for several asbestos personal injury claims made against manufacturer Deere & Company (“Deere”) arising from products it manufactured from 1958 through 1986.  For that period of time, Deere had coverage in place via a series of first-layer umbrella policies (providing primary coverage) for personal injury claims; above which were several layers of excess insurance that provided additional coverage.  In all, 49 policies were at issue representing $200 million in contracted for coverage.  Every one of Deere’s its first-layer umbrella polices required it to pay an SIR before the coverage would be available.  Deere’s excess policies “followed form” to the first-layer policies, except for the excess policies’ different limits of liability.

The excess insurers argued that “follow form” meant that their higher-layer excess coverage was also conditioned on Deere paying an additional SIR before each level of their excess coverage attached.  Thus, the excess insurers sought to treat Deere effectively as an underlying self-insurer or else to treat its SIR for the underlying policies as “insurance” that must be exhausted a second time to invoke coverage, even though Deere had already paid the full SIR to trigger the first-layer policies.  At trial, the excess insurers’ position prevailed.  The trial court reasoned that, although the SIR was not “limits of liability,” it could be considered a part of the underlying limit of liability such that it necessitated repayment to reach excess coverage.

The appellate court reversed.  It found the trial court’s reasoning “enigmatic.”  Instead, it held that SIRs are not insurance, but “the antithesis of insurance” because the essence of insurance is shifting risk away from the insured.  Further, after rejecting the trial court’s articulation of the issue, the reframed issue became:  to determine whether coverage under Deere’s higher-layer excess polices was triggered after the aggregate underlying limits have been satisfied—without Deere paying additional SIRs for all subsequent claims submitted.  The appellate court answered affirmatively.

Assum[ing] that a certain first-layer policy provides coverage to Deere in excess of $5,000 (SIR) and up to $200,000, with a $20,000 per occurrence limit; the second layer would kick in once the $200,000 had been expended.  Assume further, that numerous claims have been lodged against Deere.  For each claim, Deere pays $5,000, with the first layer paying $20,000 per occurrence.  After 10 claims, the first layer’s $200,000 aggregate limit would be exhausted, and the aggregate limits of the higher excess policies would be triggered.  The issue is whether for the eleventh claim Deere must pay another $5,000 before the higher levels are triggered.  The answer to this question is no.

Deere, 2019 WL 912151, at *8.

The appellate court reasoned that when Deere paid its SIR, it triggered coverage for its first-layer polices’ coverage.  The triggering event for the excess layers was not Deere’s payment of any SIR, but rather exhaustion of the first-layer policies.  The Court of Appeal held that, although the excess policies followed form to the first-layer policies, the excess policies had different limits of liability.  The court ruled that SIRs are written in terms of limits of liability, and therefore, they are not encompassed by the follow form provisions in the excess policies.  Deere cited analogous precedent from California and elsewhere in reaching this result, but none of these other cases involved excess insurance.  Thus, Deere appears to be a matter of first impression as to the type of insurance most commonly held by prescription medical product manufacturers.

In sum, Deere reaffirms that there is no basis in insurance contracts or insurance law to conclude that an insured’s SIR obligations survive the exhaustion of its first-layer of coverage to be incorporated into higher-layer policies.  Every company with an SIR and excess insurance stands to benefit from this decision by the Court of Appeal.

Today, Reed Smith is hosting a client roundtable in London, “Identifying and Mitigating Risk in a Changing Global Economy,” for life sciences clients.  In light of that, we thought it would be a good idea to have a blogpost that’s relevant to what’s hot in the UK.  Well, there’s nothing hotter on that side of the Pond right now than the increasingly shambollixed up approach to Brexit.  One thing we were wondering about, over here, is whether a crash out Brexit would at least get rid of, in the UK anyway, a couple of extremely unfavorable decisions from the European Court of Justice that we’d blogged about earlier.  We didn’t know, so we asked Simon Greer, a Reed Smith lawyer in our London office if he knew the answer.  He did, and below is his response.  As always our guest posters deserve all of the credit (and any blame) for their posts.

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The timing and implications of Brexit in the UK are currently one of life’s great unknowns. The latest position is that Theresa May’s latest proposed Brexit deal will be voted on by MPs in Parliament by 12 March 2019. However, the Prime Minister has also indicated that if her latest deal is rejected, MPs will be offered two separate votes shortly thereafter:

  1. Whether or not MPs would support a ‘no-deal’ Brexit, meaning that the UK would only leave without a deal on 29 March 2019 if there was consent from the House of Commons for a ‘no-deal’ Brexit; and
  2. If the prospect of a ‘no-deal’ Brexit on 29 March 2019 is rejected by MPs, they will then be given a vote by 14 March 2019 as to whether the UK should request an extension to the 2 year Article 50 process, thereby delaying the UK’s withdrawal to a date beyond 29 March 2019 (the length of such a delay is, as yet, unknown).

In the pharmaceutical industry, the impact of a potential ‘no-deal’ Brexit on 29 March 2019 on the precedential value of the decisions of the Court of Justice of the European Union (“CJEU”), will be of significant interest. This is because the CJEU’s recent decisions in the pharmaceutical sector have had a significant impact on the law in the UK, adverse to pharmaceutical companies, two examples of which we have discussed in previous blog posts:

Causation or No Causation, That Is the Question.

Bad News from Europe for Makers of Life-Saving Medical Devices

So, would a ‘no-deal’ Brexit effectively re-set the clock and eliminate the consequences of CJEU’s decisions in the UK made prior to Brexit?  The answer, unfortunately, is: no, so a ‘no deal’ Brexit would not even have this silver lining.

Whilst Theresa May on 17 January 2017 stated that: “we will take back control of our laws and bring an end to the jurisdiction of the European Court of Justice in Britain. Leaving the European Union will mean that our laws will be made in Westminster, Edinburgh, Cardiff and Belfast.  And those laws will be interpreted by judges not in Luxembourg but in courts across this country.  Because we will not have truly left the European Union if we are not in control of our own laws”, that rhetoric was hollow.  Her comments were in fact forward looking only, rather than applying to adverse CJEU decisions made prior to Brexit.

This is clear from the provisions of the EU (Withdrawal) Act 2018 (“the Act”).

In terms of CJEU decisions made after Brexit, the courts of the UK will no longer be bound by them but they will still be permitted to have regard to [Ed. Note – that’s British English for ‘follow’] them, if they are relevant to an issue that is before them. Sections 6(1) and (2) of the EU (Withdrawal) Act 2018 provide:

6 Interpretation of retained EU law

(1) A court or tribunal—

(a) is not bound by any principles laid down, or any decisions made, on or after exit day by the European Court, and

(b) cannot refer any matter to the European Court on or after exit day.

(2) Subject to this and subsections (3) to (6), a court or tribunal may have regard to anything done on or after exit day by the European Court, another EU entity or the EU so far as it is relevant to any matter before the court or tribunal.

As for CJEU decisions made before Brexit, these will form part of what is described as ‘retained’ EU law under the Act. The treatment of retained EU law after Brexit in the UK is explained in sections 6(3) to (6) of the Act (set out below). In short, whilst the Supreme Court in the UK and Scotland’s High Court of Justiciary (the supreme criminal court in Scotland) are not bound by any decisions of the CJEU made prior to Brexit, all other courts in the UK will be bound by CJEU decisions made prior to Brexit:

(3) Any question as to the validity, meaning or effect of any retained EU law is to be decided, so far as that law is unmodified on or after exit day and so far as they are relevant to it—

(a) in accordance with any retained case law and any retained general principles of EU law, and

(b) having regard (among other things) to the limits, immediately before exit day, of EU competences.

(4) But—

(a) the Supreme Court is not bound by any retained EU case law,

(b) the High Court of Justiciary is not bound by any retained EU case law when—

(i) sitting as a court of appeal otherwise than in relation to a compatibility issue (within the meaning given by section 288ZA(2) of the Criminal Procedure (Scotland) Act 1995) or a devolution issue (within the meaning given by paragraph 1 of Schedule 6 to the Scotland Act 1998), or

(ii) sitting on a reference under section 123(1) of the Criminal Procedure (Scotland) Act 1995, and

(c) no court or tribunal is bound by any retained domestic case law that it would not otherwise be bound by.

(5) In deciding whether to depart from any retained EU case law, the Supreme Court or the High Court of Justiciary must apply the same test as it would apply in deciding whether to depart from its own case law.

(6) Subsection (3) does not prevent the validity, meaning or effect of any retained EU law which has been modified on or after exit day from being decided as provided for in that subsection if doing so is consistent with the intention of the modifications.

In summary, pharmaceutical companies need to be mindful of the fact that existing CJEU decisions made prior to Brexit, even if it is a ‘no-deal’ Brexit, will be binding on courts in the UK, unless those decisions come before the Supreme Court and are overruled by a new, post-Brexit decision of the Supreme Court, which would then take primacy in the UK over the prior CJEU decision.

Last week, in Timbs v. Indiana, ___ S. Ct. ___, 2019 WL 691578 (U.S. Feb. 20, 2019), the Court unanimously held that the Excessive Fines Clause of the U.S. Constitution’s Eighth Amendment applies to the states:

Under the Eighth Amendment, “[e]xcessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” Taken together, these Clauses place “parallel limitations” on “the power of those entrusted with the criminal-law function of government.” Directly at issue here is the phrase “nor excessive fines imposed,” which limits the government’s power to extract payments, whether in cash or in kind, as punishment for some offense. The Fourteenth Amendment, we hold, incorporates this protection.

Id. at *3 (citations and quotation marks omitted).

The historical and logical case for concluding that the Fourteenth Amendment incorporates the Excessive Fines Clause is overwhelming. Protection against excessive punitive economic sanctions secured by the Clause is, to repeat, both fundamental to our scheme of ordered liberty” and “deeply rooted in this Nation’s history and tradition.

Id. at *5 (citation and quotation marks omitted).

So why should readers of the DDLaw Blog care?  After all prescription medical product liability litigation is a far cry from Timbs, which involved whether a state can, through civil forfeiture, seize property worth four times what the maximum criminal fine could be.

We think, as the Court stated, “it makes sense to scrutinize governmental action more closely when the State stands to benefit.”  Id. at *4 (citation and quotation marks omitted).  We’ve complained several times before about states farming out claims against our clients to contingent fee lawyers who also “stand to benefit” if they can convince courts and juries to agree to expansive readings of consumer protection and other statutes and impose the same fine 10,000 times over for a single instance of purportedly “illegal” off-label promotion (to take one example). Interpreting such statutes to impose huge multiples of the maximum possible fine for the same conduct by treating every recipient of a message as a separate statutory violation seems to us to be the epitome of an “excessive fine” that bears strict scrutiny because “fines are a source of revenue, while other forms of punishment cost a State money.”  Id. at *4 (citation and quotation marks omitted).

Indeed, we specifically mentioned a discussion of the Excessive Fines Clause in In re Zyprexa Products Liability Litigation, 671 F. Supp.2d 397, 462-63 (E.D.N.Y. 2009), as a possible defense to an Attorney General action.  Another such case, State v. Ortho-McNeil-Janssen Pharmaceuticals, Inc., 777 S.E.2d 176 (S.C. 2015), made our “bottom ten” list in 2015.  In that case, the state recovered a verdict of $327 million (later somewhat reduced), representing thousands of letters, sample packs, and detailing visits, counted separately, because the FDA ordered a “correction” of a Dear Healthcare Provider letter.  Id. at 203 (“[t]he State argued, and the trial court agreed, that the distribution of each sample box containing the deceptive labeling, each DDL, and each follow-up sales call to the DDL . . . constituted a separate SCUTPA violation”).  The South Carolina Supreme Court rejected an excessive fines argument, but the argument at that point was supported only by cases over 50 years old.  Id. at 205.  Perhaps having a new, unanimous, definitive Supreme Court incorporation of the clause will convince lower courts to treat this part of the constitution with more respect.

After all, if a civil seizure around four times the maximum criminal fine plausible implicates the Excessive Fines Clause, then the kind of artificially inflated, contingent-fee-driven litigation that our clients have had to put up with certainly should.

At minimum, something to watch, and perhaps plead as a defense.

 

We’ve written several times (here, for example) about the Biomaterials Access Assurance Act (BAAA), 21 U.S.C. section 1604 et seq., and how it issues a get-out-of-litigation-free card to suppliers of raw materials and components. Today’s case, Connell v. Lima Corp. et al., 2019 WL 403855 (D. Idaho Jan. 30, 2019), supplies another illustration of the BAAA’s power. The plaintiffs sued for injuries after a hip prosthesis fractured. The defendants initially included the manufacturer and a supplier of component parts. The plaintiffs settled with the manufacturer and then directed their fire at the supplier. Big mistake. The remaining defendant moved for summary judgment, arguing that because all it had done was supply the stem and neck parts of the manufacturer’s hip system, all claims against it were preempted by the BAAA.

The plaintiff attempted to evade this rather clear preemption by recharacterizing the parts supplier as the actual manufacturer, and the (now-settled-out) manufacturer as a mere distributor. But, as John Adams said, facts are stubborn things. The actual, settled-out manufacturer had submitted the 510(k) application to the FDA, listing itself as the manufacturer of the “hip system,” which was made up of component parts. Moreover, the settled-out manufacturer – not the component parts supplier – had its name on the front of the IFU and the surgical technique brochure. The Supply Agreement between the manufacturer and the parts supplier also shed light on who was what. Importantly, when the settled-out manufacturer had received the component parts from the defendant supplier, those parts were not yet ready for implantation into a human being.

The plaintiffs’ product liability claims would not have been pre-empted by the BAAA if the remaining defendant acted (1) as manufacturer of the implant; (2) as seller of the implant; or (3) furnished raw materials or component parts for the implant that failed to meet applicable contractual requirements or specifications. But the answer was No, No, and No. The court considered whether there might be some basis to treat the parts supplier as a manufacturer of the implant. Under the BAAA, this exclusion applies only in three situations: first, if the parts supplier registered or was required to register with the Secretary of Health and Human Services and included or was required to include the implant on a list of devices filed with the Secretary; second, if the parts supplier was subject to a declaration issued by the Secretary that stated the company was required to so register and list the implant but filed to do so; and third, if the supplier was related by common ownership or control to the manufacturer. Again, three strikes and the plaintiffs were out. and that meant that the supplier defendant was out of the case. BAAA preemption applied and the parts supplier was dismissed.

What’s done is done. No turning back. You can’t go home. Unreviewable play. No breakfast balls. All simple phrases, all meaning the same thing—finality.

The law certainly knows something about finality. That was made clear once again in Juday v. Merck & Co. (In re Zostavax (Zoster Vaccine Live) Prods. Liab. Litig.), 2018 U.S. Dist. LEXIS 212086 (E.D. Pa. Dec. 21, 2018). In Juday, plaintiffs brought a product liability suit against Merck based on an alleged allergic reaction after receiving Merck’s shingles vaccine. Merck moved for summary judgment. The trial court granted Merck’s motion, holding that plaintiffs’ claims were time-barred. The appellate court agreed. The fat lady was singing.

Apparently, the plaintiffs didn’t hear her. They went back to the trial court and filed a motion under FRCP 60(b) to vacate the judgment and restart the litigation. They wanted a do-over.

They gave two reasons.

First, they argued that there had been a significant change in circumstances after the court entered its judgment. Specifically, the Judicial Panel on Multi-District Litigation had ordered the formation of an MDL to address claims against Merck regarding its shingles vaccine. Relying on language in FRCP 60(b)(5), plaintiffs argued that the existence of the newly-minted MDL meant that it was “no longer equitable” to “prospectively” apply the pre-MDL judgment against plaintiffs. Rather than attack this questionable reasoning, the court simply noted that its summary judgment order, unlike an injunction or consent decree, had no “prospective” effect whatsoever. It just dismissed plaintiffs’ case:

The judgment entered against the plaintiffs in effect simply dismissed their case. The judgment ended the action and imposed no future obligations on any of the parties. There is nothing prospective or ongoing about it.

Second, Plaintiffs argued that their previous lawyer took no depositions and propounded no discovery before Merck filed its summary judgment motion, and that these failures were extraordinary circumstances that warrant vacating the judgment against plaintiffs. The judge disagreed, noting that, while courts have invoked FRCP 60(b) to vacate judgments for counsel inadequacy, those courts did so based on much more egregious circumstances. In one decision, for instance, a court vacated a judgment under FRCP 60(b) because the party’s lawyer actually failed to respond at all to a summary judgment motion. In fact, he failed to file responsive pleadings in 51 other cases. This failure to respond to the very motion that ended the litigation, along with similar failures in 51 other cases, was sufficient to constitute extraordinary circumstances

Here, on the other hand, the plaintiffs’ lawyer did in fact oppose Merck’s summary judgment motion. He just lost. The court held that this was much less an extraordinary circumstance and much more a case of, as he called it, “buyers’ remorse.” Unfortunately for plaintiffs, however, all sales are final.

Last week Bexis published a Legal Backgrounder for the Washington Legal Foundation, entitled “Recent Rulings Establish New Beachheads For Preemption In Drug And Device Product Liability Litigation.”  It discusses several 2018 prescription medical product liability preemption rulings and what they portend for future litigation concerning the most powerful defense that our clients have.  If you’re interested, you can read it here.

We’ve blogged a number of times about the Dormant Commerce Clause (“DCC”) as an additional basis for bolstering both preemption and Due Process arguments.  Here’s another prescription drug-based example.

The state of New York decided to impose a special tax on opioid manufacturers to finance various responses to the so-called “opioid epidemic.”  The tax came in the form of an “a $600 million ‘stewardship fund.’”  Healthcare Distribution Alliance v. Zucker, ___ F. Supp.3d ___, 2018 WL 6651682 (S.D.N.Y. Dec. 19, 2018).  There was a problem with that, however.  What happens with business taxes?  They get passed along (like tort verdicts do) in the form of higher retail prices based on increased costs of doing business.  So the New York legislature, to paraphrase Dr. Seuss, “got an idea.  An awful idea.  They got a wonderful, awful idea.”  No, they didn’t steal Christmas, but they decided to prohibit the manufacturers subject to the tax from passing it along to consumers:

In the provision defining stewardship payments, the [New York statute] states, “No licensee shall pass the cost of their ratable share amount to a purchaser, including the ultimate user of the opioid, or such licensee shall be subject to penalties pursuant to subdivision ten of this section.”  Later, in the penalties provision, the Act notes that “[w]here the ratable share, or any portion thereof, has been passed on to a purchaser by a licensee, the commissioner may impose a penalty not to exceed one million dollars per incident.”

Id. at *3 (quoting N.Y. Pub. Health Law §§3323(2), 3323(10)(c)).

New York, however, is only one state.  The taxed manufacturers, by contrast, sell their products nationwide, as authorized by those products’ multiple FDA approvals.  New York has no power, and the statute had no mechanism, to enforce the prohibition against passing along the cost of “ratable shares” of tax liability in any place other than New York.

Enter the DCC.  What New York did, whether by intent or default, was to pass a tax, to the benefit of in-state “opioid stewardship” programs that would inevitably be paid for solely by opioid consumers in other states, as to whom the statute’s no-pass-through prohibition did not operate.

That arrangement, the court in Healthcare Distribution held, is a burden on interstate commerce that is unconstitutional under the DCC.  First, neither New York, nor any other state, can enact extraterritorial burdens on interstate commerce:

The absolute constitutional prohibition on state regulation of commerce occurring beyond the state’s borders is clear. . . . A statute that directly controls commerce occurring wholly outside the boundaries of a State exceeds the inherent limits of the enacting State’s authority and is invalid regardless of whether the statute’s extraterritorial reach was intended by the legislature. The Constitution is concerned with the maintenance of a national market for interstate commerce. Therefore, even if a statute may not in explicit terms seek to regulate interstate commerce, it can do so nonetheless by its practical effect and design.

Id. at *16 (citations and quotation marks omitted).  Second, states may not discriminate against interstate commerce – such as by imposing taxes that exempt in-state commerce:

The Dormant Commerce Clause also contains an antidiscrimination principle. . . .  [S]tates are aware of the obvious constitutional problems of tariffs. . . .  Instead, the cases are filled with state laws that aspire to reap some of the benefits of tariffs by other means. . . .  [The DCC] examin[es] whether the challenged action shifts the costs of regulation onto other states, permitting in-state lawmakers to avoid the costs of their political decisions. If a regulation unambiguously discriminates in its effect, it almost always is invalid per se.

Id. (citations and quotation marks omitted)

Imposing burdens solely on interstate commerce is precisely what New York’s tax on opioids – combined with the no-pass-through provision limited to New York – did:

[When the statute’s] provisions are given their clearest meaning, the Dormant Commerce Clause violation is clear.  An opioid manufacturer based in Maine that wished to pass on the surcharge it paid on New York transactions by selling opioids at a markup to a pharmacy in New Mexico could face a million-dollar penalty from New York State.  While the statute may not in explicit terms seek to regulate interstate commerce, that it does so nonetheless by its practical effect and design” is abundantly clear.

Id. at *17 (citation and quotation marks omitted).  That’s the regulatory part.  If, however, the statute were construed not to apply to interstate commerce so as to avoid the Scylla of extraterritoriality, it falls directly into the Charybdis of discrimination:

If the [New York statutory] pass-through prohibition applies only to in-state purchasers, New York would clearly reap some of the benefits of tariffs by other means.  New York opioid customers would be protected from any price increases in their purchases, and New York would receive a source of funding subsidized by the out-of-state purchasers of opioids. . . .  [O]ut-of-state drug purchasers, with no representation in New York’s legislature or executive, would bear the cost of New York’s policy program.  This shifting of burdens and benefits is antithetical to the idea of intra-national free trade and demonstrates why the Dormant Commerce Cause exists, i.e., to prohibit discrimination as to “any part of the stream of commerce − from wholesaler to retailer to consumer.

Id. (citations and quotation marks omitted).

There were a lot of other issues that the court in Healthcare Distribution had to plow through between page *3 and *16, but they were all ultimately invalid procedural roadblocks thrown up by New York in order to protect the unconstitutional windfall it was attempting to confer upon itself (and its citizens) at the expense of the rest of the country – justiciability, the Tax Injunction Act, tax comity, abstention, ripeness, and standing.  If any of those interest you, be our guest.  We’re satisfied with the unconstitutionality of state attempts to tax interstate commerce in prescription drugs.

Over the past few weeks, our loyal readers have descended into “The Lows” and then climbed to “The Highs” with us as we reviewed the 10 worst and 10 best cases of 2018.

If you found yourself wanting more information on these cases and their impact – perhaps with a side of CLE credit – we’re pleased to announce that five of your bloggers (Bexis, Eric Alexander, Steven Boranian, Steve McConnell, and Rachel Weil) will be presenting a free 90-minute webinar on “The good, the bad and the ugly: The best and worst drug/medical device decisions of 2018” on Wednesday, January 16 at 12 p.m. EST.

This webinar is presumptively approved for 1.5 general CLE credit in California, Illinois, New Jersey, Pennsylvania, Texas and West Virginia. For lawyers licensed in New York, this course is eligible for 1.5 credit under New York’s Approved Jurisdiction Policy.

The program is free and open to anyone interested in tuning in, but you do have to sign up, which you can do here.

This guest post is from long-time friend of the blog Bill Childs, from Bowman & Brooke, who also wishes to thank Elizabeth Haley for research assistance.  It’s a reworking of a piece on bogus scholarly literature that Bill previously published here.  We thought it was both good and relevant enough that we approached Bill with a request to re-run it as a guest post on the Blog, and he graciously accepted.  As always, our guest bloggers are 100% responsible for the content of their posts (and here that disclaimer also extends to B&B and its clients), and deserve all the credit (and any blame).

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The Daubert court, in interpreting Rule 702 of the Federal Rules of Evidence, laid out various non-exclusive criteria for consideration in evaluating proposed scientific evidence, one of them peer review. As the Court put it:  “The fact of publication (or lack thereof) in a peer reviewed journal…will be a relevant, though not dispositive, consideration in assessing the scientific validity of a particular technique or methodology on which an opinion is premised.”  Daubert v. Merrell Dow Pharms., 509 U.S. 579, 594 (1993).  Peer review, or the absence thereof, was mentioned repeatedly by the New Jersey Supreme Court in endorsing Daubert in the recent decision in In re: Accutane Litigation, 191 A.3d 560, 586, 592, 594 (N.J. 2018).  Among other things, the Court noted that the plaintiffs’ expert had not submitted “his ideas…for peer review or publication,” considering that failure to be a strike against his methodology. Id. at 572.

Compared to other Daubert factors (or those described in the subsequent comments to Rule 702), the presence or absence of peer review may seem more binary than other factors − i.e., easier for a court to evaluate − it’s either there or it’s not, it seems.  Not so, either in the traditional sense of peer review or the changing world of things that now get called peer review.  Given this perceived simplicity, though, it frequently gets less attention than it deserves.  Litigants should think about peer review as being more complex than it appears, and in some specific contexts, additional exploration − whether through discovery into your adversaries’ experts, or early investigation of your own potential experts − may make sense.

Daubert vs. Predator

One fascinating consequence of this consideration of peer review in the Daubert context is the potential for experts publishing litigation-related work in what are called “predatory journals” (sometimes also called “vanity publications).”  See Kouassi v. W. Illinois Univ., 2015 WL 2406947, at *10-11 (C.D. Ill. May 19, 2015); Jeffrey Beall, “Predatory Publishing Is Just One of the Consequences of Gold Open Access,” 26 Learned Pub’g 79-84 (2013); John Bohannon, “Who’s Afraid of Peer Review?” 342 Science 60-65 (Oct 4, 2013).

Predatory journals, like the eponymous Predator in the 1987 film and its 2018 reboot, camouflage themselves.  They make themselves look not like the Central American jungle background, but like legitimate medical or scientific journals.  Their publishers’ websites generally look like legitimate publishers’ websites (if sloppy at times), their PDFs look like “real articles,” and their submission process might even look normal.  They’ll even claim to have peer review and editorial boards and all the rest of what you expect from journals.  Like the Predator, they even try to manipulate their editorial voices to sound like real journals.

These journals are, however, just aping the façades of real journals.  They typically do not have legitimate peer review processes − or possibly any review processes at all.  Frequently, if an author pays the exorbitant fees, the submitted article will get published.

Myriad examples exist revealing such journals as frauds.  My favorite is probably the publication of a case report of “uromysitisis” an entirely fictional condition − first referenced in Seinfeld as a condition from which Jerry claims to suffer after being arrested for public urination − by the purported journal Urology & Nephrology Open Access Journal.  The author of the intentionally nonsensical article − not a urologist, nor a medical doctor at all − wrote about his experience here. After that article’s exposure as an obvious fake, and something that even the most casual of reviewers should have rejected, the article was removed, but the “journal” is still up and publishing on the MedCrave site, described, a bit awkwardly, as “an internationally peer-reviewed open access journal with a strong motto to promote information regarding the improvements and advances in the fields of urology, nephrology and research.”  A few years earlier, a computer scientist published an article consisting solely of the phrase “Get me off your [obscenity] mailing list,” with related graphs, repeated for eight pages.  That journal remains in existence as well.

Such journals are largely set up to entrap new (and naïve) scholars who are under tremendous pressure to publish for promotion and tenure purposes − but they also can provide an opportunity for dubious expert witnesses to get something published they can cite as “peer reviewed,” especially as courts more and more often note the presence or absence of peer review.  It isn’t news to many litigation experts that having peer review for some of their more outlandish assertions can increase the odds of their testimony being admitted.  If an expert in fact has published in a predatory journal (and it can be shown that the expert knew or should have known about that fact), that fact should count against the admissibility of the testimony.

Given the camouflage, it is fortunate that there are resources and strategies that can help identify such publications.  Retraction Watch, published by the Center for Scientific Integrity and headed by science writer Adam Marcus and physician and writer Ivan Oransky (full disclosure: Ivan and I are friends, based in large part on our shared love for power pop like Fountains of Wayne and western Massachusetts bands like Gentle Hen.  He should not be blamed for my Predator references) while not focused solely (or even largely) on predatory journals, is an accessible look at the world of retractions “as a window into the scientific process.”  They keep an eye out for interesting developments in the world of predatory journals, and scientific publications generally, and their coverage is what made me suspicious when, in one of my cases, an adversary’s expert’s article was published by a MedCrave journal (home to the Seinfeld article).  Retraction Watch’s coverage of that article led to what I assume will be the only time in my career I had the chance to ask a Ph.D./M.D. if he was familiar with Seinfeld and if the show is, in fact, fiction, based on him publishing − and in fact being listed as an editor of − another MedCrave journal.

There is also a list of suspected predatory journals archived at Beall’s List.  The appearance of a journal on that list is not conclusive evidence that it is predatory, but it is enough to raise questions.  The removal of a journal from the Directory of Open Access Journals for “editorial misconduct” or “not adhering to best practices” (see list, here) is another giveaway.  The Loyola Law School’s “Journal Evaluation Tool” can also provide a useful rubric, accessible to non-scientifically-trained lawyers, for evaluating whether a journal is likely legitimate or not. And your own experts can likely provide feedback to you about journals.

Most experts will not have published in predatory journals.  But it is still worth the time to explore the question, especially about pivotal articles on which the experts are relying − whether the expert is your adversary’s or your own.  Even if the publication offer was innocently accepted (i.e., even if the author did not realize she was publishing in a predatory journal), the lack of rigor in evaluating the article by the publisher should at a minimum eliminate any weight given to the peer review factor. And if an author has intentionally published in such a journal, that should be the equivalent of an intentionally false statement in a C.V.

Not All Peer Review Is the Same

Of course, these relatively new faux journals are not the only way experts get published.  Consider the most traditional form of peer review, where editors of a journal have outside reviewers, usually with their identities screened from the authors, evaluate the quality and originality of the work, confirming that the methodologies presented appear legitimate and that the conclusions reached are reasonable based on what’s described.  Given that those goals line up nicely with the goals of a Daubert analysis, it is sensible indeed for a court to look at that as a potential indicator of reliability − indeed, that’s why peer review is a factor in the first place.

But even if a proffered expert testifies to having followed a methodology that matches something in a peer-reviewed publication, it is often worth at least a few deposition questions about the review process and a line in your subpoena duces tecum requesting copies of any materials the author has received relating to the review, or to attempt some third party discovery on the journals in question − though some courts may limit or refuse that discovery.  See, e.g., In re Bextra & Celebrex Mktg. Sales Practices & Prod. Liab. Litig., 2008 WL 859207 (D. Mass. March 31, 2008) (granting protective order for non-party medical journal publisher, expressing concerns about a chilling effect).  The propriety of allowing such discovery is beyond the scope of this article, but I addressed it in more detail in The Overlapping Magisteria of Law and Science: When Litigation and Science Collide, 85 Neb. L. Rev. 643 (2007).

If you get peer review notes, it’s possible you’ll find that a reviewer recommended the removal of a conclusion that the expert is now presenting, or that the reviewer warned against a particular inference from what is in the article.  Making it even easier, some journals, traditional and, more often, “open access,” are now posting their reviewers’ comments online.  Even if you do not find anything relevant, most experts will readily concede that peer review reflects at most an “approval” of the overall approach and is not a guarantee of correctness as to conclusions.  And sometimes you’ll be able to establish that the study in question was based on flawed data or that the work done for litigation did not, in fact, use the same methodology as that in the publication.  See, e.g., In re Mirena IUS Levonorgestrel-Related Prods. Liab. Litig., ___ F. Supp.3d ___, 2018 WL 5276431, at *11-13, *28, *34, 37-38, *50-51 (S.D.N.Y. Oct. 24, 2018) (rejecting expert’s reliance on “repudiated” open access journal article by author that did not disclose retention as a plaintiff’s litigation expert); In re Viagra Prods. Liab. Litig., 658 F. Supp. 2d 936, 945 (D. Minn. 2009) (reversing an initial denial of defendants’ Daubert motion after learning of flaws in underlying data and processing, noting that “Peer review and publication mean little if a study is not based on accurate underlying data.”); Palazzolo v. Hoffman La Roche, Inc., No. A-3789-07T3, 2010 WL 363834, at *5 (N.J. Super. App. Div. Feb. 3, 2010) (finding no abuse of discretion in excluding an expert’s conclusion based on conclusion that the expert did not in fact use the methodology claimed to have used in the underlying peer-reviewed study).

Sometimes, even in a more traditional context, the peer review that was performed was not what was likely pictured by the Daubert court, particularly when the work at issue is outside the so-called “hard sciences.”  In a publicized example, the review of a history-oriented book about the lead and vinyl chloride industries, authored by frequent plaintiffs’ experts and published by the University of California, involved reviewers known to − and in some cases recommended by − at least one of the authors . See 85 Neb. L.R. at 660-63 (describing this situation; original book website was removed).  Whether or not that review was adequate for the academic purpose, it was materially different from, say, the reviewers of a double-blind clinical trial, and the facts surrounding it seem plainly relevant to how much weight a court should give it under Rule 702 and Daubert.  Without that discovery, the court may well not have learned about what “peer review” meant in that context.

Consider also the scenario where an expert says that their methodology has gone through peer review but the article has not yet been published.  Again, it may be worth pursuing more details, especially if the expert seems likely to cite to that review in defending their position.  If it has not yet been accepted for publication, consider requesting a copy of the comments the expert received from the reviewers. If those comments are provided, they may be helpful; if their production is refused, the fact of that review should be rejected as a basis for admissibility.

What To Watch Out For

Fundamentally, the important thing is to look through your and your adversaries’ experts’ C.V.s with care, especially as to articles that are directly on point with the issue you’re addressing.  It is not enough to think about what the articles say, and it also is not enough to think to yourself, “Well, that sounds like a legitimate journal.”  Look at the publishers’ site; look for hints in the article itself; and do some searches.  Ask a few questions of the expert about author fees and what the peer review entailed and throw in a document request to see if there is something worth exploring further.  And if you are dealing with a situation with what you think is a predatory journal, be ready to teach a judge about what that means; as of this writing, no court has referenced “predatory journals” in a reported Daubert decision.