Pharma's Day in Court

The court cases, settlements, and other legal proceedings that are shaping the environment in which the industry operates
Jul 01, 2008
By Pharmaceutical Executive Editors

In the early morning cold of mid-January, members of the European Commission were poised for a cross-continental raid on the biggest pharmaceutical companies in the world. These dawn raids hit GlaxoSmithKline, Pfizer, and AstraZeneca, among others, with regulators intent on proving that the companies were engaged in price fixing and misusing patent rights. Strangely enough, the EC didn't have any evidence of these charges, or any wrongdoing whatsoever. Rather, the raids were prompted by a general sense that the market was broken. Competition in pharmaceutical markets, according to EC claims, didn't seem to be working. Drugs were too expensive, and not enough new ones were coming to market.

"This all reflects a very aggressive attitude by the Commission against the industry which is unprecedented," says David Roberts, former global head of intellectual property at GlaxoSmithKline, now chairman of the consultancy Stratagem IPM. "Expect anti-competition action to follow."

These are lively times for pharma. Governments are pushing back hard against the cost of healthcare, partly by putting the industry under a microscope. Generics companies are going after patents with a variety of new strategies. Tort lawyers are busily hunting for the next Vioxx, while consumer groups are on the prowl against marketing and advertising techniques they feel are misleading.

In short, pharma's finding itself in the courtroom pretty often these days. To date, some interesting trends have emerged:
  • The US government has shown increasing finesse with leveraging the qui tam provision of the False Claims Act, and now has a pipeline of whistle blowers' testimonies to fuel a generation of lawsuits against the industry.
  • The Feds have shown the states how to go after Big Pharma in a number of different areas, specifically in Medicare and Medicaid fraud. Meanwhile, the lines are being redrawn in the area of product liability and states' powers.
  • The effects of court decisions are reaching well beyond the compliance officer's jurisdiction, and are having meaningful impact throughout the rest of the industry, particularly in medical marketing.

There also seems to be no ceiling to charges over off-label promotion. Lilly recently paid $1 billion—the largest sum ever—to settle the investigation surrounding the off-label promotion of its bipolar and schizophrenia drug, Zyprexa.

But there's more to prosecutions and lawsuits than fines and settlements. Some of the most interesting legal cases facing pharma these days could actually change the playing field. With that in mind, here's a look at some of the most important pharma-related legal cases of the past year or so.

Preemption: Who Can Sue?

The US Constitution states that the laws of the United States shall be the supreme law of the land. When federal and state laws conflict, what the federal government says, goes. If this concept—called preemption—holds true in the realm of pharmaceutical regulation, FDA's decisions should trump the states. If FDA says a drug is safe, the states shouldn't be able to rule that it's dangerous. If FDA approves a drug's labeling, a state court shouldn't be able to hold a pharma company liable for failure to warn of a side effect.

So how thoroughly does preemption protect drug and device companies? The question has been before the Supreme Court twice in 2008, with another important case expected to be heard this fall. "This is the most active the Supreme Court has been on the topic of preemption probably ever," says Mark Hermann, partner at Jones Day and coauthor of the popular "Drug & Device Law Blog."

In February, the Supreme Court heard Riegel v. Medtronic, which involved a patient who was injured when a Medtronic balloon catheter burst during an angioplasty procedure. Five days later, the Court heard Warner-Lambert v. Kent, a case brought by a group of Michigan citizens who say they were injured by Rezulin (troglitazone), a diabetes drug that was withdrawn from the market in 2000 because of liver toxicity.

Both cases dealt with the issue of whether state courts and juries had the power to resolve negligence claims for damages, or if the FDA's decision to approve a drug or device, through powers granted by Congress, preempted them. "At the base of the preemption argument in Riegel is a premarket FDA approval process, which is a very stringent, well-considered process," says Caitlin Halligan, a former Solicitor General of New York State and now a partner with Weil, Gotshal & Manges. "Where you have decisions by FDA based on a less stringent review process, that's where you may see continued litigation over whether state laws can be enforced."

In Riegel, the justices voted 8-to-1 in favor of preemption. But that was a device-related case involving premarket approval, and there is specific language in the Medical Device Amendments of 1976 establishing preemption. Closer to home is Warner-Lambert—but once again, the case has limited applicability. Michigan, where the case was first brought, is one of a handful of states that have laws granting FDA-approved drugs protections against liability suits, except when the approval was obtained by fraud. In Warner-Lambert v. Kent, the plaintiffs charged that the company concealed data about Rezulin's toxicity when it submitted the drug to FDA for approval. With Chief Justice John Roberts recusing himself, the Court split 4-4, affirming the decision of the lower court, which had ruled that the suit could go forward.

The case to watch is Wyeth v. Levine, which goes before the Supreme Court this fall. In this case, a musician named Diane Levine was administered Wyeth's anti-nausea drug Phenergan (promethazine) by IV push. Somehow, the drug came into contact with arterial blood (something the label warns against); Levine's arm turned gangrenous and had to be amputated.

The Phenergan label not only warns against the dangers of injecting into the artery, it urges "extreme caution" to prevent this outcome when the drug is given by IV push. The plaintiffs argued that the label should have prohibited IV push injection. Wyeth argued that FDA's authority over labeling prevented them from doing so, and that the suit was preempted. The Vermont Supreme Court rejected the claim, and the case now awaits review by the US Supreme Court.

It's a case that potentially offers companies a broad shield against product liability suits. "If the court in Wyeth finds that state court actions are preempted, it would set a new base line by taking a wide range of tort claims off the table," says Halligan. "That's a powerful tool for industry in terms of predicting and containing its litigation exposure."

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