[Pharm-policy] LA Times on class action suits against pharma firms

[love@cptech.org]

http://www.latimes.com/news/front/20010609/t000047991.html

Saturday, June 9, 2001


Drug Makers: New Targets of Class-Action Lawsuits 


By DENISE GELLENE, Times Staff Writer

     Class-action lawyers, many of them veterans of the tobacco wars,
have set their sights on a lucrative new target: the pharmaceutical
industry. 
     Drug makers in recent weeks have been hit with lawsuits accusing
them of blocking cheaper generic versions of lifesaving medications. The
suits assert that drug makers used loopholes in the law to stymie
competition and unfairly inflate prices of drugs used to treat cancer,
heart conditions and other serious maladies. 
     Working in tandem with plaintiffs' attorneys are activist state
attorneys general, a combination that helped extract billions of dollars
in settlements from cigarette makers. So far, government lawyers have
announced one lawsuit, but say other filings are likely. 

    [snip]

     Analysts believe the pharmaceutical business can withstand the
legal onslaught. It is a hugely successful global industry with vast
economic resources. But in painting the industry as manipulative and
greedy, the suits are fueling demand for reforms with a deeper impact on
drug makers. 
     At least 17 states, including California, have passed or are
considering laws that would mandate lower prices for Medicare
recipients. A Vermont law lost a legal challenge Friday, but similar
legislation in Maine prevailed in court. 
     Beyond that, Congress is weighing legislation that would close
loopholes in a 1984 law known as Hatch-Waxman. Many of the recent
plaintiffs' suits claim pharmaceutical firms abused provisions of the
law to extend their patents and prevent competition. 
     The industry has responded to the assault with a lobbying and
public relations effort that includes TV ads touting the industry as a
producer of vital medicines. It maintains price regulation is
unwarranted. 
     The Pharmaceutical Research and Manufacturers of America said
overall drug prices rose 3.9% last year. Spending was up by 14.9%, the
industry said, because Americans are using more medications that, while
costly, help them avoid expensive hospital stays. It argues that, while
spending is up, prescription drugs account for only 8% of health care
expenditures. That figure is up from 5.5% a decade ago. 
 
   [snip]

     The latest salvo in the drug wars came this week, as 29 consumer
groups accused Schering-Plough and two other drug makers in court of
conspiring to prop up the price of potassium supplement K-Dur20. The
companies denied the allegations, which previously surfaced in a Federal
Trade Commission complaint lodged against them. 
     Schering-Plough said it would fight the FTC charges and
class-action lawsuits. Schering-Plough spokesman William O'Donnell said
the pacts were legal and actually facilitated the launch of generic
versions of K-Dur20 before Schering-Plough's patent expires in 2006. 
     The consumer organizations are part of a Boston-based coalition
called the Prescription Action Litigation Project (PAL), which has filed
two other drug-pricing suits. Two law firms representing the coalition
shared in the $637.5 million in fees awarded nine firms that
participated in the California tobacco cases. 
     They are San Francisco-based Lieff, Cabraser, Heimann & Bernstein,
which represented 21 California cities and counties; and New York-based
Milberg, Weiss, Bershad, Hynes & Lerach, lead counsel in Cordova vs.
Liggett, a major private case. A third firm representing the coalition,
St. Louis-based Carey & Danis, is a Milberg, Weiss spinoff. 
     Racing them to court is a second consumer coalition known as Stop
Patient Abuse Now, or SPAN. It is represented by Washington-based Cohen,
Milstein, Housfeld & Toll, which sat out the tobacco wars but
participated in such high-profile cases as 1997's $176.1-million sex
discrimination settlement from Texaco. 
     The 35-member SPAN group is suing Bristol-Myers Squibb for
allegedly manipulating the price of anti-anxiety medication BuSpar. The
PAL group has filed suits making similar allegations, which
Bristol-Myers said it will fight. 
     The two consumer camps maintain they aren't rivals. But they are
pursuing different strategies that could trigger a showdown between
attorneys. 
     PAL's attorneys primarily are filing their suits in state courts
that allow triple damages in so-called indirect payer litigation.
California is among the states that do so. Consumers fall into that
category because they do not buy drugs directly from manufacturers. 
     SPAN is using federal court, where antitrust laws also allow triple
damage claims. Lieff, Cabraser attorney Eric Fastiff contends that state
courts treat consumer cases more favorably than federal courts. But
Daniel Small of Cohen, Milstein maintains SPAN's case is solid. 
     His strategy is a bet that BuSpar cases, including PAL's, will be
consolidated for pretrial purposes in federal court. A transfer to
Washington, where Cohen, Milstein has two BuSpar cases filed--the second
on behalf of a health insurer--could give the local firm an edge. 
     The stakes are huge. Class-action lawyers typically shoulder the
costs of suits and, if victorious, may get as much as a third of any
award. A lead attorney garners a larger chunk of prestige--and fees. 
     But consumer organizations represent only one front in the
multi-pronged legal assault on the pharmaceutical industry. Companies at
every point in the distribution chain are taking aim at drug makers.
Suits filed over the blood pressure medication Cardizem CD offer clues
as to how the drug wars will shape up. 
     Those suits allege that Aventis SA and Andrx conspired to block
introduction of a low-cost generic, allegations each drug maker denies.
Plaintiffs include health insurers Aetna and Blue Cross of Wisconsin,
Albertson's and distributors Bergen Brunswig and McKesson. 
     The cases, filed in courts around the country, are being
consolidated for pretrial purposes in federal court in Detroit.
Attorneys general in 14 states, including California, also have fielded
suits, seeking damages of $100 million. 
     Class-action attorneys privately acknowledge that FTC
investigations have provided fodder for litigation. Besides K-Dur20, the
FTC investigated pricing of Cardizem CD and the hypertension drug
Hytrin, also a subject of private suits. Cases involving Hytrin and
Cardizem CD have been settled, and no drug maker admitted wrongdoing.
The agency recently announced additional investigations involving as
many as 30 brand-name drug makers and 60 generic firms, likely grist for
civil complaints. 
     But plaintiffs' attorneys maintain they've also done their own
digging. Sobol, a partner with Lieff, Cabraser, said his client, PAL, is
preparing to file as many as half a dozen suits based on its research.
That should give his clients a leg up in the litigation frenzy to come. 
     "It is now just a free-for-all. No one is unwilling to fire the
next volley," said Michael E. Criden of Hanzman Criden Chaykin &
Rollnick, which, along with Cohen, Milstein, represents HIP Health Plan
of Florida in drug-pricing suits. "You are going to see a flood of
actions." 

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