Third-Party Payer

Subscribe to Third-Party Payer
Photo of Bexis

Here is another guest post, one expressly not emanating from the Dechert side of the blog. Rather it is written by Reed Smith’s Elizabeth Graham Minerd.  As always with our guest posts, she is entitled to all the credit from her shared wisdom, as well as any blame.  So, without further ado:

***********
I recently had a partner ask me:  Will the court consider our client’s actions (not in any FDA safe harbor) to be off-label promotion—i.e., were their actions “promotional” in nature even though they were not advertising the product for off-label uses.  After extensive research, I returned to him more or less empty-handed.  I explained the arguments for and against our client’s actions being considered “promotion” of off-label uses, but I could not provide a definitive answer because there was simply no case law on point.
Over the last several years, there have been numerous cases discussing the legal ramifications of promoting drugs or medical devices for off-label uses from seemingly every angle. Indeed, this blog has a handy tag “Off-Label Use” that discusses many of these cases. But this basic question—what counts as off-label promotion?—has largely gone unanswered.  Recently, however, the Court in United States ex rel. King v. Solvay S.A., 2016 U.S. Dist. LEXIS 14804 (Feb. 8, 2016 S.D. Tex.), laid out a few examples of what is not off-label promotion.
Photo of Eric Alexander

Our occasional claims of dyspepsia may be attributed to various things.  Professional witnesses offering personal opinions from the stand, juries deciding based on emotion and bias, plaintiff lawyers being sleazy, and judges writing decisions driven by a predetermined result or just bad reasoning come to mind. Sometimes, we recognize that our discomfort stems, at least in part, from the subject matter of a case extending past the reasonable, yet wide and knowingly self-inflated, bounds of our expertise.  Among our hundreds of posts, more than a handful touch on Drug & Device Law in that they (1) involve cases with our clients’ products far from product liability or (2) involve issues we see in our cases being presented in very different types of cases.  While we may throw in some caveats about how we are treading beyond our usual bailiwick, we still offer our views and perhaps even a somewhat blind rant.  Here we are again—personally, this blogger has skipped the last three weeks for trial preparation and denouement—with a decision in a case that is far afield in some respects, but just does not feel right in about every respect.

The decision of the First Circuit in In re Nexium Antitrust Litig., Nos. 14-1521, 14-1522, 2015 U.S. App. LEXIS 968 (1st Cir. Jan. 21, 2015), affirming a class certification order from the District of Massachusetts is not too surprising if you just consider the courts involved and the name of a drug in the case caption. If you add that, broadly categorized, this is a third party payor case, then our view that the decision does not make much sense is even less surprising.  The allegation in the case, though, is something we find fairly novel and decidedly weird.  Plaintiffs are “union health and welfare funds that reimburse plan members for prescription drugs”—that is, a type of third party payor—and they claimed that the defendant branded manufacturer of a particular heartburn drug and three putative manufacturers of a generic form of the drug conspired to overcharge for the branded drug when they entered into settlements over patent infringement suits that paid the putative generic manufacturers to not try to get their ANDA approvals and sell their own versions for about six more years.  Are you with us so far?  Not being able to sue under federal antitrust laws because the Supreme Court says indirect purchasers are too remote to have a cognizable injury, the plaintiffs sued under state antitrust laws—adopted by half the union specifically to provide a claim not available under federal law—and state consumer protection laws.  They sued in one federal court (the E.D. Pa.) and the case was moved to another by the JPML. They sought a class on behalf of everybody in the U.S. or its territories who paid (or will have paid) any money for the drug, including generic versions not yet on the market, for their own use or use by anybody else.  With our caveat about the limits of our expertise, this lead in makes us start wondering about subject matter jurisdiction, personal jurisdiction post-Bauman (especially with the foreign defendants), how third party payors could be class reps for patients who bought their own drugs or for people who bought drugs for their relative, how a court-approved consent judgment could be considered anti-competitive behavior without running afoul of Noerr-Pennington doctrine,  and how there was not some preemption issue in basing state law liability on an assumption that FDA would have approved one to three ANDAs even if there were no patent issues.  Then we took a deep breath and realized that the Nexium decision did
not address any of that stuff.  It did note, however, that the defendants had already won a jury verdict at trial this past December, but “[t]his, of course, does not moot the case here given the possibility of further proceedings.”  Then we went back to bellyaching about what else was wrong with the basic premise of this case.  Then we had a drink.  And we don’t mean an antacid.Continue Reading Indigestion Inducing Treatment of Class Certification Requirements

Photo of Eric Alexander

As Bexis demonstrated yesterday, we can have strongly held views.  When we do, we are not always subtle about letting our readers know what those views are.  When a rant builds, it can pour like an avalanche coming down a mountain—with more vinegar than cinnamon or sugar.  When we read In re Actiq Sales and Marketing Practices Litigation, No. 07-4492, 2014 U.S. Dist. LEXIS 984411 (E.D. Pa. July 21, 2014), we felt the rant coming on.  The case involves Daubert in a case with outsourced
representation and collective causation evidence related to alleged off-label promotion of a prescription drug, so a few things we care about were brewing.

But it is now the first day of August and a tropical vacation is looming.  School for the kids and other rituals signaling the transition from summer to fall will be here soon.  Thus, we resolved to keep this post somewhat calm despite a bad result, questionable analysis, and a fundamental misunderstanding of the relationship between FDA regulation of drug companies and what doctors do with their own patients.  Rest assured, though, that we would have many more snarky comments about the opinion if not for our resolve to stay “chill,” as much as we ever do.Continue Reading Assuming What You Are Trying to Prove in A Third-Party Payor Case

Photo of Bexis

Today we have this guest post from Reed Smith‘s Andrew Stillufsen about a recent defense win in a third party payer (or is it”payor”?) case here in the Eastern District of Pennsylvania.  We hope you find it as interesting as we did.  As usual all credit and/or blame belong to the guest poster.

*************

Travelers Indemnity Co. v. Cephalon, Inc., is a third party payor case where plaintiffs – workers compensation insurers – claimed that they were injured by paying for prescriptions for defendant drug company’s  pain medications which were written as a result of its alleged off-label marketing of the drug.  2014 U.S. Dist. Lexis 95075 (E.D. Pa. July 14, 2014).  SPOILER ALERT:  as with similar cases, even after extensive discovery and an amended complaint, plaintiffs still failed to allege facts sufficient to establish standing or to support any of their fraud claims.  Motion to dismiss granted.

Before the court could address plaintiffs’ substantive claims, it first had to determine whether the allegations were sufficient to establish standing.    To establish standing, the plaintiff must show that they suffered a cognizable injury. Id. at *16-18.   “The contours of the injury-in-fact requirement, while not precisely defined, are very generous, requiring only that the claimant allege some specific, identifiable trifle of injury.”  Id. at *17.  (citations and internal quotations omitted).  Under the now-familiar TwIqbal analysis, plaintiffs failed to allege sufficient facts to show even a mere “trifle.”

In this case, plaintiffs essentially alleged two theories of injury.  First, they claimed they were injured because “they did not get what they paid for,” as plaintiffs paid for drugs that were not safe or effective due to defendant’s alleged fraudulent off-label marketing.  Second, but for the alleged off-label marketing, plaintiffs  claimed they were injured when they paid for more expensive drugs when less-expensive drugs were available.  Id. at *18-19.Continue Reading Guest Post – Another Third Party Payor Case Is Shown The Door

Photo of Bexis

This post is not from the Dechert side of the blog, as Dechert handled the successful appeal of the case being discussed.

We haven’t really covered “Average Wholesale Price” (“AWP”) litigation very much because, while it is typically brought against pharmaceutical defendants, it’s about as far from product liability litigation as, say anti-trust or securities law.  But it’s hard to ignore when a state supreme court blows out such claims (as here).  It’s even harder to ignore when the state supreme court in question is ours.  So here’s what the Pennsylvania Supreme Court recently did to an AWP
“verdict.”

Briefly, and at the risk of oversimplification, “average wholesale price” is a term used to describe a much-tinkered-with basis for determining how much manufacturers may charge governmental purchasers of drugs used in public programs.  Governmental plaintiffs claim that drug manufacturers manipulated the AWP to overcharge them.  Manufacturer defendants counter that AWP is a misnomer, and was not intended or calculated to be as limited as the governmental plaintiffs claim.  Manufacturers also point out, with lots of evidence to back them up, that governmental units were at all times well aware of
what the drawbacks and complexities of what AWP quotation did (or did not) mean.  There are many other issues in AWP litigation, but these are the biggies.

First of all, we wish to point out that the trial result in Pennsylvania was not really a verdict.  In Commonwealth v. TAP Pharmaceuticals (Bristol Myers Squibb Appeal), No. 85 MAP 2011, slip op. (Pa. June 16, 2014), the jury had the good sense to enter a defense verdict on all the claims submitted to it.  Id. at 16.  However, Pennsylvania’s consumer protection statute is quirky, and does not provide for a jury trial.  So the trial judge got snookered.

Second, before we get accused of affording this decision too much significance, yes we know that it’s styled as an “opinion in support of reversal” by an evenly divided (3-3) court.  However, all six sitting justices agreed entirely with the rationale reversing the lower courts.  The only disagreement was that the OAJC would have dismissed the case outright and entered judgment n.o.v., whereas the concurring opinion – not an opinion in support of affirmance – wanted a remand.  So as not to have the bizarre result of a 3-3 split resulting in an affirmance by operation of law of a decision that nobody thought should stand, the OAJC gave in as to that outcome.  OAJC at 23.Continue Reading Pennsylvania Supreme Court Blows Out AWP Verdict

Photo of Bexis

The following post is exclusively the work of the Reed Smith side of the blog.

Sometimes the smallest, least significant type of lawsuit can illustrate cracks in the edifice of the largest, most consequential litigation.  So, in our opinion, it is with Neurontin.  In this version of the story, the role of “Mack” is played by Herricks v. Pickaway Correctional Institute, 2013 WL 4804983 (S.D. Ohio Sept. 9, 2013).  That’s prisoner litigation − mostly convicts with nothing better to do with their time than try to sue their jailers.  The great majority of these cases get the back of the judicial hand.  There aren’t many litigation genres of less significance than that.

Playing the role of “Yertle” is the First Circuit’s circuit-splitting trilogy, Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc., 712 F.3d 21 (1st Cir. 2013), Aetna, Inc. v. Pfizer, Inc., 712 F.3d 51 (1st Cir. 2013), and Harden Manufacturing Corp. v. Pfizer, Inc., 712 F.3d 60 (1st Cir. 2013) – all of which also travel under the heading, In re Neurontin Marketing and Sales Practices Litigation.  Not so coincidentally, the defendants filed a petition for certiorari in the Neurontin trilogy the other day.  Big cases – high courts.

The Neurontin cert. petition didn’t cite Herricks, of course, but we think that what went on in Herricks is as good an illustration as any why the First Circuit got it spectacularly and loudly wrong when it allowed the plaintiffs in the Neurontin trilogy to proceed with what amounts to an aggregate trial by formula that deprives the defendants of contesting the individual merits of any of the thousands – heck, millions – of individual claims at issue.  Can you say “due process violation”?

First, Herricks.  Prisoner plaintiffs can’t sue prison doctors for ordinary malpractice, at least not in federal court, where most of these cases seem to end up.  Instead, they must meet a higher constitutional (Eighth Amendment) standard of “deliberate indifference.”  Needless to say, most prisoner cases can’t meet that standard.  But the inmate-plaintiff in Herricks did.  What did the court (actually, a magistrate) find could meet that standard?

The prison doctor’s refusal to treat the plaintiff-prisoner off-label with Neurontin.Continue Reading On Litigation, Great and Small

Photo of Bexis

Third party payer plaintiffs (mostly insurance companies and union welfare funds in unholy alliance with plaintiff lawyers), have not been doing very well with their economic loss claims against (mostly) pharmaceutical companies – at least outside the rogue First Circuit − as anyone following our TPP topic posts can attest. So they’ve tried something new,…

Photo of John Sullivan

We’re a bit too tired from going late into the evening watching the Oscars to say much of anything pithy today.  We’ll just complain.  Argo was a very good movie.  But Best Picture good?  Maybe, but maybe not.  It’s certainly not as shaky as last year’s pick, The Artist.  Cute and different doesn’t mean best.  Does anyone remember Crash winning best picture for 2005?  How the heck did that happen?  That might not even have been a good movie, no less best.  And Shakespeare In Love?  How does its victory over Saving Private Ryan look in retrospect?

Against these historic mistakes, the selection of Argo isn’t bad.  As we said, it really was a good movie.  A historically based movie is unquestionably good when it can get your teen-aged son to look at you with wide eyes during the last 20 minutes and say, “Man, this is intense.”  Its selection as Best Picture also created a second, “hey, can you believe Ben Affleck just won an Oscar” moment.  Those are always fun.  He’s gotten pretty good at making movies.  The Town was a good one too.  So we’re really not complaining about Argo.

This is more about Django Unchained.  We knew it never had a chance to win.  Quentin Tarantino makes unusual movies.  They’re loaded with violence, cursing and one odd circumstance piled on top of or backed into another.  And Tarantino himself sometimes comes off as a know-it-all when it comes to cinema.  But, man, what a move that was.  It must have been incredibly difficult to craft a movie about such a painful part of our history and yet have it at once be action-packed, terrifying, funny, exhausting, exhilarating, realistic, cartoonish, unpredictable and wonderfully predictable – and then to wrap it all up in a spaghetti western.  Who would even think to do such a thing, no less accomplish it?  For those of you who saw it, wasn’t it great to cheer Django on as he whipped the heck out of his former slave master?  We bet you’d never thought you’d get that experience at a movie.  Or wasn’t it a surreal movie-going moment to laugh along with the entire crowd as the KKK members complained about the guy who improperly cut the eye holes into their hoods?  And then be thrilled when Django shoots the KKK leader, Big Daddy (Don Johnson), off his horse.  Tarantino doesn’t make the type of movie that gets selected as Best Picture.  The Academy seems more comfortable throwing him a Best Screenplay award from time to time instead.  But you’ll likely never see another movie like that one again.  And you’ll definitely see more Argos.  Maybe Django Unchained should have been picked.

Who knows?  McConnell thinks a lot about these things and sees all the Best Picture nominees.  He’ll probably straighten this all out on Wednesday.

Now for your entertainment . . . . a third-party-payer case called Employer Teamsters-Local Nos. 175/505 Health and Welfare Trust Fund v. Bristol Myers Squibb Co., No. 2013 U.S. Dist. LEXIS 21589 (S.D. W.Va. Jan. 29, 2013).  As cases go, if you like courts dismissing plaintiffs’ claims for all sorts of reasons, this one should keep your attention.Continue Reading A Solid Decision Dismissing Third Party Payer Claims — And a Mundane Oscar Decision

Photo of Bexis

We’ve chronicled many times the largely unsuccessful attempts of third-party payers (in unholy alliance with plaintiffs’ lawyers) to sue derivatively over alleged off-label promotion of prescription drugs and medical devices.  Basically, these insurers, having already set their premiums and recovered for their expenses, take “free shots” at trying to get money back for what are…

Drug & Device Resources

Bexis’ Book

FDA-regulated products now account for an estimated one-fifth of overall economic activity in the U.S. They have also been the focus of a litigation explosion. This timely guide covers all aspects of litigation involving drugs, medical devices, vaccines and other FDA-regulated prescription products.
Learn More About This Book