Consumer Fraud

Subscribe to Consumer Fraud via RSS
Photo of Eric Alexander

In third party payor litigation over prescription medical products, we have often marveled at the causation arguments that plaintiffs have offered and the willingness of some courts to accept collective proof over what really should involve individualized proof. Like here, here and here. (This same dynamic plays out when governmental entities seek reimbursement for such products too.) Usually, though, the plaintiffs allege that the manufacturer’s fraud—under whatever particular statutes or headings it is pursued—was unknown to them during the time for which they seek damages for amounts paid for the product and that the damages stopped once they found out. In Teamsters Local 237 Welfare Fund v. Astrazeneca Pharms. LP, No. 415, 2015, 2016 Del. LEXIS 236 (Del. Apr. 12, 2016), the plaintiff payors were undone by their concession that they knew about the alleged fraud and kept paying for the drug at issue anyway. Based on its self-described common sense analysis, the Delaware Supreme Court affirmed the dismissal for lack of causation without weighing in on the Superior Court’s rejection of causation where individual physicians made individual decisions about what to prescribe. This is a good result, but we are concerned about the implications for the practices of payors who seem increasingly interested in signing up with contingency fee lawyers to sue medical product manufacturers. (In case you were wondering, that was a teaser, designed to get you to read all the way to the end of the post.)

The basic facts are that the plaintiff filed a purported nationwide class action on behalf of third-party payors in Delaware state court in 2004, alleging that the defendant violated state consumer fraud laws by falsely marketing Nexium as being more effective than Prilosec, an older product with allegedly one-half of the same active ingredient per dose. Adding some facts omitted in the opinion, the initial NDA for Prilosec had been approved in 1989 (under the name Losec) and lost exclusivity in 2001, around which time FDA approved the NDA for Nexium, which had an enantiomer (here, the left hand chiral image) of the Prilosec’s active ingredient as its active ingredient. The indications for both drugs were expanded through the years, with Prilosec going over-the-counter in 2015. These drugs together accounted for a large chunk of the prescriptions written for heartburn, gastroesophageal reflux disease, and related complaints. Plaintiffs claimed that the development of Nexium and the marketing campaign after its introduction were designed to get the defendant paid a high price for its newer branded product instead of money going to pay for cheaper generic versions of the older product. They claimed they had been harmed by paying for the Nexium prescribed by physicians for the patients participating in their plans. The same group of lawyers apparently filed other “essentially identical class actions” with different sets of named plaintiffs, including one in Delaware federal court that resulted in the dismissal of a New York consumer fraud claim. Ignoring some history and details much like the plaintiffs ignored the marketing for Prilosec over the last fifteen years and the difference between a racemic mixture and an enantiomer, the Delaware state court action woke up from a long slumber in 2014 with its second amended complaint asserting the same claims the federal court had disposed of a few years before.

The Superior Court first determined that the law of New York, where the named plaintiffs were based, applied instead of the law of Delaware, where the defendant was based, or the laws of thirteen other states. Id. at *9. The court found that plaintiffs had not alleged the causation required for a consumer fraud claim: the “purported chain of causation that runs from the allegedly deceptive advertisements that may have influenced the decisions of individual doctors to prescribe a drug to their patients to causally affect the payer unions in this case is simply too attenuated,” as the doctors would be “presumed to go beyond advertising medium and use their independent knowledge in making medical decisions.” Id. at **9-10. We certainly like this reasoning, which would apply to a bunch of these cases. We also like that the court did not give plaintiffs a fourth chance to frame a complaint that stated a claim.Continue Reading TPPs Fail to Put Their Money Where Their (Litigation) Mouth Is and Lose

Photo of Steven Boranian

Two of our favorite themes in the drug and device world intersected a few weeks ago in the Third Circuit—class actions and “no injury” lawsuits.  We don’t see many drug and device class actions these days, which we view as one of the more notable accomplishments of the drug and device defense bar over the last 20 years.  In fact, it is difficult to understand why anyone ever thought that personal injury class actions would be a good idea in the first place.  Personal injury cases are different—everything from the patients, to the doctors, to the information available, to the products used, and the injuries alleged.  Those facts leave you with a Hobson’s choice:  Either you take all the individual factors into account, in which case you have defeated the whole point of a class action; or you gloss over it all and pretend everyone is the same, which violates the rules and is downright unfair to everyone involved.  Either way, class actions don’t work.

“No injury” lawsuits are similarly vexing.  They generally come in two forms—medical monitoring lawsuits, where the plaintiff has experienced no drug or device complication but wants the defendant to pay for future medical care anyway, and lawsuits alleging only some form of economic loss. At the risk of oversimplifying, we generally view these cases with a “no harm, no foul” attitude.  It particularly grabs our attention when “no injury” claims are brought as class actions.  You might call it a mashup of bad ideas, which adds up to a really bad idea.  Sort of like Kim Kardashian marrying Kanye West.  Or Donald Trump using Twitter.  Or the upcoming Superman v. Batman movie.  (Actually, that would be two good ideas adding up to a really bad idea, but we digress.)Continue Reading Third Circuit Shuts Down “No Injury” Pharma Class Action

Photo of Eric Alexander

This being the week of Thanksgiving, we would be remiss to fail to weave in something about the great American (or ‘merican) holiday of giving thanks, eating turkey, watching football, and pondering the influence of the Pilgrims on our culture (beyond the obvious lasting fashion impact).  In the past, we offered our readers a “fun” word search for food and drink terms in a post on express preemption.  (Yes, the terms “fun” and “express preemption” are rarely linked in a single sentence, although “Today was no fun because I had to write a brief on express preemption” has probably been uttered.) We have offered other posts at this time of year that featured food to different degrees, like this and this.  We have talked about reasons for being thankful, how football analogizes to law, and even how shopping has become a big part of this particular holiday.  Surely, we have given our readers many reasons to ponder deeply on important issues in their lives.  Why is stuffing called dressing in the South?  Why did some combination of the Civil War, Restoration, and carpetbaggers not force a gastro-linguistic solidarity?  Do elementary school depictions of Native Americans (f/k/a Indians; a/k/a indigenous peoples of North America, pre-Colombians, Amerinds, descendants of those who migrated across Beringia) send the right message?  Should second graders learn about smallpox blankets?  Was the choking risk with that third plate of food, after more than a few adult beverages, an acceptable one?  We would like to think that we have contributed to such meaningful introspection with our purportedly clever posts during this week every year since the blog started being purportedly clever.

This year, we highlight a truly American tradition:  trying to make as much money as possible by suing a deep pocket defendant with as little proof as possible.  Recently, this has often involved combining three things.  First, use remedial federal or state statutes that are really for another purpose entirely, but allow for big damages and even fines (e.g., the False Claims Act was enacted against war profiteering, RICO was enacted to combat organized crime).  Second, seek to proceed on behalf of a class and/or some subset of the “public” to maximize the claims at issue.  Third, use only generalized proof of injury, causation, and damages, which is required for a class but does not require a class.  We could add in piggybacking on an issue with a product that has gotten attention because of other litigation or regulatory actions and outsource the work to contingency lawyers.  Such cases have been the subject of many posts, often addressing how generalized proof of causation makes no sense in the context of drugs prescribed to specific patients by specific doctors based on, hopefully, individualized clinical judgment.  High on the list of opinions that got it wrong are Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc., 712 F.3d 21 (1st Cir. 2013), and the rest of the First Circuit’s Neurontin trilogy, which took the top spot in our list of worst decisions of 2013. High on the list of opinions that got it right is the Second Circuit’s Zyprexa decision, UFCW Local 1776 & Participating Health & Welfare Fund v. Eli Lilly & Co., 620 F.3d 121 (2d Cir. 2010), which took home best decision in 2010 by reversing the second worst decision of 2008.  The Second Circuit’s in Sergeants Benevolent Assoc. Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, No. 14-2319-cv, 2015 U.S. App. LEXIS 19797 (2d Cir. Nov. 13, 2015), adds to the weight of the good cases rejecting the misuse of generalized proof of causation by affirming class certification denial and summary judgment in a RICO (and state consumer protection) case over the antibiotic Ketek.Continue Reading Largely Thankful For The Second Circuit Striking A Blow Against Generalized Proof of Causation

Photo of Eric Alexander

We have posted many times about cases where a manufacturer of a regulated product is sued over alleged violations of a state consumer protection or deceptive trade practices act because of something allegedly amiss in the product’s name, labeling, advertising, or sales practices.  We know that drug and device manufacturers like the ones we represent can spend resources dealing with state attorneys general over the threat that such suits will be brought.  We cannot recall seeing, let alone posting on, a case where the manufacturer sued the state attorney general because its threat of suit—relayed to major retailers, who stopped selling the product—allegedly hurt its business and constitutional rights.  There would seem to be lots of reasons why an action like this might not be taken by a company that wants to keep doing business in the particular state for other products it manufacturers.  But if you are a one product, dietary supplement company and your presumably large market in Texas disappeared after letters went out based on a determination by the Texas AG’s office, not by a court, then you might be the one to bring suit preemptively.  That is what happened in NiGen Biotech, L.L.C., v. Paxton, No. 14-10923, 2015 U.S. App. LEXIS 17223 (5th Cir. Sept. 30, 2015).

The unusual posture of the case—in comparison to those we usually handle or read—means that it delves into constitutional issues that we knew better back when we clerked and the docket was sprinkled with cases against state actors.  The ones brought by prisoners are remembered more for their unique fact patterns and brand of advocacy than for the constitutional principles they implicated.  NiGen, likewise, holds our interest not because its treatment of sovereign immunity, federal question jurisdiction, and standing has direct implications for the sort of cases that normally fill our posts.  Rather, it shows that a manufacturer can go on the offensive against a state AG who probably thought it could do just about whatever it wanted prior to bringing its own suit.  It is not that we think the manufacturer NiGen is right on the underlying issue of whether the product’s label was deceptive, which touches on some complex constitutional issues, especially since Amarin has come down since this case started.Continue Reading Going on Offense against State Deceptive Trade Practices AG Actions

Photo of Bexis

Here is a guest post on an interesting case.  It’s the first decision that we’re aware of in which a 3D printed medical device (or any 3D printed product) has been the subject of litigation that involves product liability principles.  This post is submitted by Matt Jacobson of Reed Smith, who is particularly interested in 3D printing issues.   As always our guest blogger gets all the credit, and any blame, for the analysis that follows.

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

October 21, 2015, the day Marty McFly, Doc, and their flux capacitor-charged Delorean arrived in the future.  The future was filed with flat screen TVs, self-lacing shoes, flying cars, cold fusion, Pepsi Perfect, and, of course, hover boards.  While the future is only a week away now, in the 1980s, when Back to the Future, Part II hit movie theaters, it seemed like a long way off.   However, a surprising amount of Back to the Future tech and non-tech (the Cubs are in the playoffs after all) are now part of our everyday lives—flying cars and cold fusion, not so much.  One thing, the movie did not predict was 3D printing.  3D printing is turning science fiction into reality, and as the technology continues to develop, we may soon realize the future really is here.

This blog is not a stranger to 3D printing, as we have posted about it here, here, and here.  But as the writers of Back to the Future could not actually predict the future, neither can we predict how courts will handle 3D printed medical devices.   A glimpse into that future may be found in Buckley v. Align Technology, Inc., No. 5:13-cv-02812-EJD, 2015 U.S. Dist. LEXIS 133388 (N.D. Cal. Sept 29, 2015)—which, as far as we can find, is the first even semi-product liability case dealing with a 3D printed product.Continue Reading Guest Post – First Contact – 3D Printing Meets the Learned Intermediary Rule

Photo of Eric Alexander

When Jame Gumb urged his captive to put lotion on her skin, he was not concerned with improving its firmness.   While Buffalo Bill from “Silence of the Lambs” may not be who most would think about when reading Franz v. Beiersdorf, Inc., No. 14cv2241-LAB (RBB), 2015 U.S. Dist. LEXIS 102784 (S.D. Cal. Aug. 5, 2015), the serial killer with an obsession for skin did come to our mind.   Franz involves a purported class action over a lotion that allegedly violated consumer protection laws by how its labeling represented its ability to firm skin and allegedly violated California unfair competition law in being marketed without an approved NDA by FDA.   The defendant’s motion to dismiss made a few arguments, but we are most interested in the argument that primary jurisdiction requires dismissal or stay of the unfair competition claim.

If you were to peruse our primary jurisdiction posts, you might notice the cases typically involve federal claims that are not subject to preemption (as state law claims may be).   We have posted before on California courts evaluating preemption in the context of consumer protection and unfair competitions claims for sunscreens.  Other than the timing of when sunscreen and skin lotion typically get applied—and the absence of an obvious serial killer reference for the former—at first blush, the products seem similar enough that we might have expected preemption to be the argument raised against the state law claims in Franz.  It probably should not have been a surprise that FDA treats some skin lotions as cosmetics and others as drugs—whereas sunscreens are regulated as cosmetics—so the regulatory framework is different.   Without digging too deeply, however, it still seems like an allegation that the defendant should be liable under state law for selling a product in violation of the FDCA—without FDA coming to that same conclusion—walks right into the sort of preemption articulated in Buckman.Continue Reading Putting A Lotion Claim In The Primary Jurisdiction Basket

Photo of Stephen McConnell

On this date in 1896 the Dutch completed the harbor at IJmuiden.  (That capital J is not a mistake.  The I and J go together as a digraph, and they form a ligature that effectively makes up a single letter in the Dutch language.)  The IJmuiden harbor has an interesting history.  It connects Amsterdam to the North Sea via canals.  After the Germans invaded the Netherlands in 1940, the Dutch Royal family left the country from IJmuiden.  The Germans then used the IJmuiden harbor to house their torpedo boats and midget submarines.  After D-Day, the Allies bombed IJmuiden.  The American Air Force employed various weapons to penetrate the German concrete bunkers, including rocket-powered Disney bombs.  The bombs were named after war propaganda efforts by the Disney Studio.  Today IJmuiden harbor welcomes cruise ships.  It is a safe harbor.

(Yes, that is a rather long and pointless windup to get to our safe harbor case, but we are busily planning our Benelux Summer vacation, so you’ll have to excuse the travelogue/history.)

In the past we have had several opportunities to discuss state consumer protection laws containing “safe harbor” provisions that bar suits over conduct that was authorized, approved, or permitted by governmental agencies. Applying these safe harbor provisions, courts have dismissed consumer protection claims that attacked FDA-approved actions (usually labeling) after finding that the challenged conduct had the imprimatur of an agency.  One example was the DePriest case in the Arkansas Supreme Court.  The plaintiff in that case claimed that the defendant fraudulently marketed Nexium as better than older drugs that – allegedly – did essentially the same thing. The case was styled as an economic-loss-only class action.  The Arkansas Supreme Court threw the case out and we blogged about it here in 2009.Continue Reading Consumer Food Fraud Claim Sinks in Arkansas Safe Harbor

Photo of Eric Alexander

While some of us are naturally jacked up—have you seen Bexis in short sleeves?—others turn to supplements to build up their beach bodies.  We are not talking about the injectables favored by 1970s East German Olympians or 1980s NFL draft flops.  And certainly not the supplements advertised on late night television as more targeted enhancers. …

Photo of Bexis

Allowing plaintiffs to pursue claims under consumer protection statutes in prescription medical product liability litigation is trying to pound a square peg into a ham sandwich.  It doesn’t fit, and the combination isn’t very appetizing.  FDA regulated manufacturers of prescription medical products aren’t snake-oil salesmen, payday lenders, reverse mortgage peddlers, or participants in some other “relatively common cash and credit transactions in which [consumers] engage on a regular basis.”  West Virginia ex rel. McGraw v. Bear, Stearns & Co., 618 S.E.2d 582, 587 (W. Va. 2005).  These statutes almost universally exempt government regulated activity, and instead of personal injuries consumer protection statutes typically allow recovery of non-tort damages such as monetary loss, attorney fees and multiple damages.

That’s one reason we were particularly pleased with the non-preemption part of the recent decision in Otis-Wisher v. Medtronic, Inc., ___ F. Appx. ___, 2015 WL 3557011 (2d Cir. June 9, 2015) (blogged about here), that dismissed the Vermont consumer protection act claims:

[T]he Vermont Consumer Protection Act . . . defines a “consumer” as a “person who purchases, leases, contracts for, or otherwise agrees to pay consideration for goods or services . . . for his or her use or benefit or the use or benefit of a member of his or her household.”  Plaintiff did not constitute a “consumer” under the statute because she did not, for her personal use, purchase [the product], which in any event is not available for consumer purchase, but rather was prescribed the medical device by her doctor. Though Vermont has apparently not addressed this issue in the specific context of medical devices, the District Court’s ruling here is consistent with that of courts in other jurisdictions interpreting similar consumer protection laws.

Id. at *2 (emphasis added).Continue Reading No Prescription For Consumer Protection

Photo of Bexis

On May 26, 2015, the Solicitor General’s office responded to the United States Supreme Court’s Oct. 14, 2014 invitation for the government’s views on the certiorari petition filed in Athena Cosmetics, Inc. v. Allergan, Inc., No. 13-1379.  The brief is on Westlaw at 2015 WL 2457643, and is also referenced (although not yet with…

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