Fight, Don't Settle, Class-Action Lawsuits - Pharmaceutical Executive

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Fight, Don't Settle, Class-Action Lawsuits


Pharmaceutical Executive


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visible one was brought by Elliott Spitzer, the New York state attorney general, against Glaxo (for Paxil), claiming unpublished studies that FDA did not deem relevant to include in labeling constituted some kind of violation of the state consumer protection laws, if they weren't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.

If a consumer lawsuit claims that labeling is false and misleading, and FDA approved the labeling, doesn't that make FDA somewhat responsible for the false advertising?You would think that FDA would stick up for its jurisdiction and authority. If courts are second-guessing what is false and misleading, when Congress has expressly given that responsibility to FDA, you would think the agency would intervene with some kind of amicus curiae brief or some willingness to testify or participate. [An amicus curiae brief is a "friend of the court" filing in which an agency like FDA can intervene and deliver its point of view, which is intended to be preemptive.] But the one time we saw FDA try to intervene with amicus briefs was in some California cases. I think one was a Paxil case in which consumer groups were trying to get additional labeling that exceeded what FDA had approved. Dan Troy filed an amicus brief, and members of Congress went after him aggressively, saying, "You are a shill for industry," and "These were former clients of your law firm." Congress ignored the fact that FDA was trying to argue preemption to preserve its jurisdiction and eliminate the burden on interstate commerce and having separate labels in every jurisdiction.

On the question of accountability, do consumers have a legitimate complaint against pharma advertising if their doctor, who prescribed the medicine for them, thought it was the right thing to do? I haven't seen any accusations that doctors are prescribing drugs to patients that don't need them. I have seen some statistics in Prevention magazine and others that show if a patient is a candidate for a drug and there are several competing drugs available, the drug the patient asks for gets prescribed. But I think you would have to agree that doctors have the obligation to counsel their patients correctly. It's hard to believe that a doctor would be persuaded by a patient who saw a commercial if that patient either didn't need the drug or if a more effective drug was available. That's malpractice.

There used to be a defense called the "learned intermediary." It still exists even in the face of direct-to-consumer advertising because the patient cannot get the drug without the doctor being the intermediary. That line, so far, has been preserved.

Will companies shy away from developing me-too products because they are more susceptible to "false advertising" lawsuits? Not really. I think lawsuits are bad publicity and expensive nuisances, but what drives a drug to production, even a me-too drug, are market forces and economics that are 100 times stronger. And lawsuits have become, regrettably, a cost of doing business. What they will do, and have done, is increase drug prices because the cost of defending these claims is passed on to consumers through higher drug prices.

Doesn't DTC advertising also affect drug prices? There is absolutely no evidence that the cost of advertising has had any effect on drug prices. Those are separate budgets that have to justify themselves through return on investment through selling more products. It's simplistic to think that you can increase drug prices based on those advertisements. If anything, the more drugs you sell, the lower your prices can be. Yet, one of the prime reasons that prices can be 30, 40, or 50 percent higher here in the United States is not just that other countries have managed-healthcare systems, but the cost of litigation here, which is totally unique to our wonderful, free-market system.

So DTC advertising is here to stay regardless of class action lawsuits against it? Clearly, we are in a direct-to-consumer revolution. The country has been built on the premise that consumers should have as much information as they can possibly get. Baby boomers, especially, want that information. As long as the information is truthful and balanced, most every regulator and government entity that has looked at direct-to-consumer advertising has supported it. So it would be a shame if harassing lawsuits that have no basis—in fact that are maybe even provoked by competitors that are being disadvantaged in the marketplace—cause a pullback in the communications that consumers are receiving. If compliance lawyers are allowed to sue freely without any limitations on damages, then certainly pharmaceutical companies should be allowed to advertise freely as long as their advertisements are truthful and not misleading.

Marc Scheineson is a former FDA associate commissioner for legislative affairs and now heads the food and drug law practice at Alston & Bird in Washington. He is the author of dozens of articles on FDA regulations and legislation, and he provides inhouse training for FDA’s drug reviewers and regulatory officials. Scheineson is also cochair of the American Bar Association’s task force on FDA reform. He earned his LLM degree from Georgetown University Law Center and his BA and JD degrees from the University of Cincinnati and its College of Law.

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