Fight, Don't Settle, Class-Action Lawsuits

Dec 01, 2004

Marc Scheineson
In recent years, the steady stream of lawsuits against pharma has taken a new twist. In addition to the myriad individual claims from adverse drug reactions, pharma companies now are dealing with class action lawsuits, many based on the premise of mass consumer fraud. Companies have been accused of failing to disclose unfavorable clinical trial results and misleading the public with false advertising. Here, Marc Scheineson, former FDA associate commission for legislative affairs, discusses the validity of this legal trend and its potential ramifications for the industry.

PharmExec: Do you think these lawsuits will prevail in courts? Should the industry be worried? Scheineson: Parties are bringing such lawsuits for the first time. The most visible one was brought by Elliott Spitzer, the New York state attorney general, against Glaxo (for Paxil), claiming unpublished studies that FDA did not deem relevant to include in labeling constituted some kind of violation of the state consumer protection laws, if they weren't disclosed. Glaxo settled that case for a couple million dollars and did not contest the claim. I think many companies settle cases rather than assert their First Amendment commercial free speech rights. And that only serves to perpetuates more lawsuits.

Is it an economic decision—cheaper to settle than fight? Yes, it is. These are publicly traded companies with stock prices and mergers in the works, acquisitions that could be jeopardized, and disclosures that they have to make in their 10k and security documents. But Glaxo would probably have won that case if it had stayed in it. By settling, that gives cues to plaintiff lawyers and to other classes of plaintiffs that "Hey, $2 million may not be a lot to pharma, but it certainly is a lot to me. I'll organize these kinds of suits, too."

What is FDA's role in this? Competitors are a little dissatisfied with FDA's action, or lack thereof. There have been very few warning letters and notice of violation letters, and a vacuum has been created that other entities are jumping into. What can companies do now if they feel that competitors are increasing their market share based on false or misleading advertising or labeling? They used to be able to file a complaint with FDA and, like clockwork, there would be a warning letter or some kind of inspection or investigation from FDA. But those have virtually stopped.

Why did that happen? It is either FDA's interpretation of what is false or misleading has become exceptionally narrow, or the centers have stopped initiating compliance letters. Those letters all have to be reviewed by the Office of Chief Counsel, which has become bottlenecked and has required lots and lots of supporting information, which centers may not have time to accumulate. I don't know if it's a question of being understaffed or just not choosing to spend the time that it would take to get a letter cleared by the Office of Chief Counsel.

Do you think these lawsuits will affect the way the industry markets products? Will companies pull back to avoid this type of exposure? That's a tough question. Some companies will choose to fight it out, either by themselves or through interveners like the Washington Legal Foundation and other industry-funded entities. If they win those cases, then the suits will become fewer. And some companies will pay nominal sums, sometimes making the evaluation that an aggressive marketing campaign is more valuable than what the settlement might cost.

Some recent reports say DTC campaigns aren't as effective as they used to be. Will that play into these decisions? I have seen no evidence, no definitive studies, that have shown effectiveness is decreasing. I have seen lots of studies, submitted to FDA and others, showing that it works and that by actually including negative information (which is required under guidance) consumers view the positive message as having more legitimacy and credibility. These are very sophisticated companies that do extensive ROI analyses. These are huge costs. They certainly would not continue to market products if they were not getting that return on investment.

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