On June 3, 2009, the House Judiciary Courts and Competition Policy Subcommittee will hold a hearing, "Pay to Delay: Are Patent Settlements That Delay Generic Drug Market Entry Anticompetitive?", sure to interest all prescription drug manufacturers. No witness list is posted yet.
This post was written by Kevin G. Lohman.
On May 26, 2009, the U.S. Supreme Court denied a petition for writ of certiorari to review a decision from the Supreme Court of Tennessee that upheld an award of punitive damages for over $13 million dollars, which amounted to a 5.35-to-1 ratio of punitive damages to actual damages. See DaimlerChrysler Corp. v. Flax, NO. 08-1010, 2009 WL 357533, (2009). ProductLiability.com deserves recognition for flagging this decision.
The case arose out of a motor vehicle accident in June 2001, which resulted in the death of an eight-month-old baby. Plaintiffs, the parents of decedent, filed suit alleging wrongful death and negligent infliction of emotional distress (NIED) against the other driver involved in the accident and against DaimlerChrysler Corp., who was the manufacture of plaintiffs’ 1998 Dodge Caravan. The jury assigned fault evenly against the defendant driver (for speeding) and DaimlerChrysler Corp. (for defective design of the car seats), and awarded plaintiffs $5 million dollars in compensatory damages for their wrongful death claim, and $2.5 million damages for their NIED claim. During the second phase of the trial, evidence was presented that DaimlerChrysler Corp. was aware of the defective design of their car seats, they failed to warn customers, they hid evidence of the of the defective design, and they continued to market the Caravan as a vehicle that put safety first. The jury awarded punitive damages against DaimlerChrysler Corp. in the amount of $65.5 million for the wrongful death claim, and $32.5 million for the NIED claim. The trial judge remitted the punitive damages down to $13,367,345.00 for the wrongful death claim and $6,632,655.00 for NIED.
On appeal, the Tennessee Court of Appeals reversed, holding that there was insufficient evidence to award any damages pertaining to the NIED claim. Further, the court held that there was not clear and convincing evidence that DaimlerChrysler Corp. acted recklessly or intentionally in order to warrant punitive damages, and struck the entire punitive damage award.
On further appeal, the Supreme Court of Tennessee affirmed the court of appeal’s holding pertaining to the NIED. However, they reversed the portion of decision pertaining to punitive damages. Holding that there was in fact sufficient evidence to support a finding of punitive damages, the court reviewed whether the size of the punitive damages award is excessive in violation of the due process standards set out by the United States Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996) and State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003). Specifically, the court relied on the first two guideposts set out in Gore and Campbell (the reprehensibility of the defendant’s conduct; and the ratio between the punitive damage award and the compensatory damages).
With regard to the first guidepost, the court noted that the evidence in this case “clearly demonstrates that [DaimlerChrysler Corp.’s] conduct was reprehensible.” As to the second guidepost, the court noted that the punitive-to-compensatory ratio was 5.35-to-1 and acknowledged the language of the Supreme Court decisions in Gore (suggesting that a ratio of greater than 4-to-1 approaches the outer limits of constitutionality) and Campbell (suggesting that a ratio of 1-to-1 may be all that is permissible in cases where compensatory damages are “substantial”). However, the court also noted that in Campbell the Supreme Court declined to adopt a fixed mathematical formula to determine the appropriateness of punitive damages and stated that “the precise award in any case, of course, must be based upon the facts and circumstances of defendant’s conduct and the harm to the plaintiff.” The Tennessee court held that “In light of the first two guideposts, we believe that a ratio of 1 to 5.35 would be warranted in this case,” noting that the evidence pertaining to the defendant’s conduct demonstrated their conduct was reprehensible and the harm to the plaintiffs in this case was tragic (the death of an eight-month-old baby).
Interestingly, the Tennessee court chose not to acknowledge the Supreme Court’s most recent punitive damage decision from Exxon Shipping Co. v. Baker, ___ U.S. ___, ___, 128 S. Ct. 2605 (2008), which was decided one month prior and established a 1-to-1 ratio between punitive and compensatory damages under federal maritime law and contained implications for applying the 1-to-1 ratio to limit punitive damages in state court actions. (The Exxon decision is discussed in this prior post). Despite the fact that Supreme Court of Tennessee did not acknowledge Exxon, the United States Supreme Court denied DaimlerChrysler’s petition for writ of certiorari.
The FDA has issued final guidance regarding formal meetings between FDA and sponsors or applicants relating to the development and review of drug or biological drug products by the Center for Drug Evaluation and Research and the Center for Biologics Evaluation and Research (note that the guidance does not apply to abbreviated new drug applications). Specifically, the guidance discusses the principles of good meeting management practices and describes standardized procedures for requesting, preparing, scheduling, conducting, and documenting formal meetings. The document supersedes the guidance entitled “Formal Meetings With Sponsors and Applicants for PDUFA Products” published in February 2000.
On May 27, 2009, the Food and Drug Administration (FDA) published a notice soliciting comments on a draft guidance document entitled “Presenting Risk Information in Prescription Drug and Medical Device Promotion.” The draft guidance proposes to use a “reasonable consumer” standard, similar to the Federal Trade Commission's standard, for assessing whether advertisements are misleading, a standard FDA already applies to labels on food and dietary supplements. In the draft guidance, FDA discusses the factors the agency would consider when evaluating prescription drug and restricted device promotional materials directed at healthcare professionals and consumers. The factors include: consistent and appropriate use of language, use of signals, framing of risk information, and the hierarchy of risk information. FDA also states that the agency will review content for both quantity of risk information, as well as materiality and comprehensiveness. Finally, FDA provides extensive factors it considers when evaluating the format of promotional materials. Comments should be submitted by August 25, 2009; for information on submitting comments, click here.
This post was written by Scot T. Hasselman, Andrew C. Bernasconi and Nathan Fennessy.
On May 20, 2009, the President signed into law the Fraud Enforcement and Recovery Act of 2009 (“FERA”), which will implement significant changes to the federal False Claims Act (“FCA”). The amendments to the FCA will significantly expand the scope of FCA liability, provide for new investigative tools, and make it easier for qui tam relators to bring and maintain FCA suits on behalf of the government.
The House and Senate both passed the bill with overwhelming majorities before the President signed FERA into law. While the new law is primarily targeted at potential fraud involving recipients of economic stimulus funds in the financial services industry, it also includes some very significant changes to the liability provisions of the federal False Claims Act affecting members of the health care industry. To read Reed Smith's full alert, please click here.
Continue Reading...The White House Press Office just released a Memorandum for the Heads of Executive Departments and Agencies re Preemption. Regarding actions by the executive branch intended to preempt state law, it directs:
1. Heads of departments and agencies should not include in regulatory preambles statements that the department or agency intends to preempt State law through the regulation except where preemption provisions are also included in the codified regulation.
2. Heads of departments and agencies should not include preemption provisions in codified regulations except where such provisions would be justified under legal principles governing preemption, including the principles outlined in Executive Order 13132.
3. Heads of departments and agencies should review regulations issued within the past 10 years that contain statements in regulatory preambles or codified provisions intended by the department or agency to preempt State law, in order to decide whether such statements or provisions are justified under applicable legal principles governing preemption. Where the head of a department or agency determines that a regulatory statement of preemption or codified regulatory provision cannot be so justified, the head of that department or agency should initiate appropriate action, which may include amendment of the relevant regulation.
Yesterday, May 18th, the United States Supreme Court issued Ashcroft, Former Attorney General v. Iqbal, and confirmed the pleading standards it announced in Bell Atlantic Corp. V. Twombly, 550 U. S. 544 (2007), an anti-trust case. Although Ashcroft also dealt with other significant legal issues, it is quite possible that its broadest impact will come from its pronouncements regarding pleading standards in federal court.
As Ashcroft explains:
Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. [Twombly, 550 U.S. at 555] (Although for the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true, we “are not bound to accept as true a legal conclusion couched as a factual allegation” (internal quotation marks omitted)). Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id., at 556. Determining whether a complaint states a plausible claim for relief will, as theCourt of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. 490 F. 3d, at 157–158. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not “show[n]”—“that the pleader is entitled to relief.” Fed. Rule Civ. Proc. 8(a)(2)."
Slip Op. at 14-15.
Formulaic recitations of the elements of a cause of action do not suffice. Slip Op. at 17. Legal conclusions in a complaint -- an allegation that an agreement was "unlawful" is one example; that a drug or device manufacturer "violated FDA regulations" would be another -- are not entitled to an assumption of truth when a defendant moves to dismiss. Slip Op. at 16. In other words, Ashcroft is a nice addition to any federal court defendant's arsenal.
This post was written by Keith Yandell and Lisa Baird.
This morning, May 18, 2009, the California Supreme Court issued its ruling in In re Tobacco II Cases, a case that will shape how parties litigate California Unfair Competition Law (“UCL”) claims. At issue was the viability of UCL actions that seek to certify a class despite the fact that not all putative plaintiffs suffered injury as a result of a defendant’s allegedly unfair practice. Since California’s infamous UCL (also known as Bus. & Prof. Code, § 17200 et seq.) is often used to add broad “consumer fraud” claims to product liability lawsuits against the life sciences industry (as well as many other industries), the outcome of In re Tobacco II garnered substantial attention.
Questions Presented
(1) In order to bring a class action under the UCL, as amended by Proposition 64, must every member of a proposed class action have suffered “injury in fact,” or is it sufficient that only the class representative comply with that requirement?
(2) In a class action based on a manufacturer’s alleged misrepresentation of a product, must every member of the class have actually relied on the manufacturer’s representations?
Background of the Case
The gravemen of the plaintiffs’ Complaint was that defendant tobacco manufacturers and researchers engaged in a decades-long conspiracy to conceal the health effects and addictiveness of cigarettes and, in so doing, made numerous false and misleading statements to consumers.
The Court of Appeal unanimously affirmed the trial Court’s holding that every class member must have suffered injury in order to maintain a class action under the UCL.
The California Supreme Court Ruling
The Court answered the above questions as follows:
(1) “[S]tanding requirements are applicable only to the class representatives, and not all absent class members.” In re Tobacco II Cases, slip Op. at p. 2 (Cal. May 18, 2009).
The Court also repeated the “likely to deceive” standard, and concluded “the language of section 17203 with respect to those entitled to restitution — to restore to any person in interest any money or property, real or personal, which may have been acquired” (italics added) by means of the unfair practice — is patently less stringent than the standing requirement for the class representative — “any person who has suffered injury in fact and has lost money or property as a result of the unfair competition.” (§ 17204, italics added.) .
(2) “[A] class representative proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions.” A class representative, however, need not plead or prove that they actually relied on a particular advertisement or statement when the unfair practice is a fraudulent advertising campaign. Id.
As to whether class representatives actually have standing, the court did conclude that Prop. 64 “imposes an actual reliance requirement on plaintiffs prosecuting a private enforcement action under the UCL’s fraud prong. This conclusion, however, is the beginning, not the end, of the analysis of what a plaintiff must plead and prove under the fraud prong of the UCL. . . .While a plaintiff must show that the misrepresentation was an immediate cause of the injury-producing conduct, the plaintiff need not demonstrate it was the only cause. ‘It is not . . . necessary that [the plaintiff’s] reliance upon the truth of the fraudulent misrepresentation be the sole or even the predominant or decisive factor influencing his conduct. . . . It is enough that the representation has played a substantial part, and so had been a substantial factor, in influencing his decision.’ [Citation.] [¶] Moreover, a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material. . . .Nor does a plaintiff need to demonstrate individualized reliance on specific misrepresentations to satisfy the reliance requirement.” Id. at p. 31.
Additional Materials
The opinion is available at the judicial branch website and copies are available at the Supreme Court Clerk’s Office.
For a summary of the oral argument in this matter, please see "California Supreme Court Hears Landmark Consumer Fraud Case".
The lower Court’s ruling is available here.
This post was written by Judith L. Harris and Amy S. Mushahwar.
As previously reported, the Federal Communications Commission ("FCC") proposes to allot spectrum and adopt service and technical rules for new implanted medical devices that would expand the use of functional electric stimulation to restore sensation, mobility and function to paralyzed limbs and organs. As an update to this report, yesterday the FCC published the Notice of Proposed Rulemaking ("Notice") regarding implanted neuromuscular simulators in the Federal Register and released the comments dates. Comments are due August 11, 2009 and replies are due on September 10, 2009.
Continue Reading...CMS is preparing to re-launch its controversial competitive bidding program for Medicare suppliers of certain types of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). Under competitive bidding, only suppliers who are successful bidders will be eligible to furnish certain categories of DMEPOS to Medicare beneficiaries in certain geographic areas (with very limited exception). Under competitive bidding, successful bidders will be paid based on the median of the winning suppliers’ bids for each of the selected items in the region, rather than the Medicare fee schedule or supplier bid amount. This will be CMS’s second attempt to institute DMEPOS competitive bidding, after the first round of bidding was blocked by Congress last year because of widespread concerns about how the program was implemented. Reed Smith’s Life Sciences Health Industry Alert, “CMS Prepares to Re-Launch Medicare DMEPOS Competitive Bidding—Tips for Potential Bidders,” highlights seven steps suppliers can take now to prepare for the coming bidding period based on the lessons learned during the first round of bidding.
Washington Legal Foundation's latest Legal Backgrounder, the "Logic of Michigan's 'FDA Defense' Survives Recent Supreme Court Ruling", authored by Thomas J. Foley, explains why the Wyeth v. Levine, 129 S.Ct. 1187 (2009) ruling does not support a rationale to overturn Michigan law that provides a defense against drug product liability suits where the manufacturer obtained FDA approval.
On May 12, 2009 the Subcommittee on Health, of the Committee on Energy and Commerce, House of Representatives, held a hearing on H.R. 1346, the "Medical Device Safety Act of 2009". If passed, it would overturn the Supreme Court decision, Riegel v. Medtronic, Inc., 128 S.Ct. 999 (2008), which held that under the express preemption clause of the Medical Devices Amendment of 1976 (MDA), the federal requirements created by the premarket approval process for Class III devices preempted state law tort claims that added or differed from the federal requirements. This hearing comes at the heels of public and media scrutiny of this decision, including last year's House Committee on Oversight and Government Reform preemption hearing held May 14, 2008 and the Senate Judiciary Committee's preemption hearing held June 11, 2008.
Before the invited panel of witnesses spoke, numerous members of the subcommittee provided opening remarks, which reflected the division among those who argued that the Supreme Court's analysis in Riegel departed from the legislative intent of the MDA, and those who agreed that the pending legislation would prevent innovation and access to medical devices that are life-saving. Arguments against the bill also noted that moving against preemption would otherwise place safety concerns in the hands of juries across the country, instead of on the FDA's safety and efficacy evaluations. Some focus was also placed on the FDA's effectiveness in policing the manufacturers, with several congress members such as Representative John Dingell, MI and Henry Waxman, CA arguing that the FDA has not been able to identify and take action on defective products, therefore calling into question their effectiveness in ensuring safety, while other congress members such as Representatives Steve Buyer, IN and Michael Burgess, TX argued that if the FDA is underfunded and without resources, the Committee should focus on the FDA, not on tort reform.
Most of the invited witnesses were repeat appearances from last year's hearing. David Vladeck, J.D., Professor of Law, Georgetown University Law Center presented his case in support of the bill, and repeated his concerns about the Riegel court's alleged deviation from congressional intent as reflected in legislative history. He also argued that manufacturers brought the express preemption defense to fore and that it was a more recent phenomena since the mid 1990s, after the Cipollone v. Liggett Group, Inc., 505 U.S. 504, 517, 112 S.Ct. 2608, 2618 (1992) decision.
William H. Maisel, M.D., M.P.H., Director, Medical Device Safety Institute, Department of Medicine, Beth Israel Deaconess Medical Center, Boston also testified, as both a practicing cardiologist and as a consultant and advisory committee member for the FDA. He provided anecdotal background with what he represented as an example of a man who was implanted with a St. Jude pacemaker that allegedly was subjected to a recall and resulted in additional surgical procedures. In making this example, Dr. Maisel argued that the self-interest of companies are at odds with the congressional goal of ensuring public safety. Gregory Curfman, M.D., Executive Editor, New England Journal of Medicine also echoed similar sentiments, and discounted the arguments made about innovation and safety for consumers being mutually exclusive.
Richard Cooper of the law firm Williams & Connolly LLP provided a big-picture review of what it would mean to have 50 state juries take the place of the FDA and seasoned clinicians when determining what constitutes a "defect" meriting liability. Mr. Cooper also emphasized that innovation would be hampered should preemption be denied to medical device companies, noting how many smaller companies that are focused on under-served areas of practice would be litigated out of their market share.
Bridget Robb of Pennsylvania and Michael Kinsley of Washington both presented anecdotal history with medical devices. Ms. Robb testified about her experience with a cardiac lead that she claimed unnecessarily shocked her and caused grievous subsequent emotional and physical injury, while Mr. Kinsley presented his story of how deep brain stimulation and other implanted medical devices has allowed him to lead a productive life despite a Parkinson's Disease diagnosis. Both presented different takes on the limits of how much risk a patient should face when balanced with the potential benefits offered by their medical devices.
Prior to the hearing, the Energy & Commerce Committee also published a letter asking the FDA to reexamine its decision to approve a medical device called the "collagen scaffold" that is used to reinforce and repair the meniscus, which is a natural cushion in the knee. This letter, as addressed to the FDA Principal Deputy Commissioner, seeks reexamination of the approval decision that the authors argue was made over the objection of FDA scientists.
For more information, please see the previous post "Will The May 12 Hearing On The "Medical Device Safety Act of 2009" Recognize The Costs Of Eliminating Preemption?"
On May 11, 2009, Senate Finance Committee Chairman Max Baucus (D‐Mont.) and Ranking Member Chuck Grassley (R‐Iowa) released their policy options for expanding health care coverage, including options for designing a government-run public health insurance plan. Members are scheduled to meet to discuss these options on May 14, and public comments will be accepted on the options through May 22, 2009. An overview of the document is reprinted after the jump. This is the second of three options papers scheduled for release by the Committee, with the third options paper on financing health care reform planned for release before a May 20 meeting of Finance Committee members.
For the full post, please see our sister blog, HealthIndustryWashingtonWatch.com.
The House Committee on Energy and Commerce's Subcommittee on Health will hold a hearing on Tuesday, May 12, 2009, at 2:00 p.m. regarding a bill to overturn medical device preemption (H.R. 1346 /S. 540), called the "The Medical Device Safety Act of 2009.” Although the hearing is not yet listed on the Subcomittee's website, hearing materials should become available here. (If you are interested, video and transcripts also are available from last year's lopsided House Committee on Oversight and Government Reform preemption hearing held May 14, 2008 and the Senate Judiciary Committee's preemption hearing held June 11, 2008.)
Those in the industry will find H.R.1346/ S. 540 ironically named, as patient access to critical new devices and public health would suffer if this bill passes. These ill effects are detailed in a new economics study, “The Economic Impact of Eliminating Federal Preemption for Medical Devices on Patients, Innovation and Jobs” by Ernst Berndt, PhD, and Mark Trusheim of the Massachusetts Institute of Technology’s Sloan School of Management. As the authors state in the executive summary to their article,
"Eliminating preemption protection for medical devices—as some currently advocate—will impact:
1. Patient access and public health
2. Medical technology innovation rates
3. Industry employment
4. Government expenses as a healthcare payer, regulator and judicial funder
The results from eliminating preemption are likely broad and generally negative across this host of categories."
The article is thoughtful and well worth reading.
On May 8, 2009, HHS published an advance notice of proposed rulemaking seeking comments on whether the HHS should amend its regulations on the responsibility of applicants for promoting objectivity in research for which Public Health Service (PHS) funding is sought. Specifically, HHS is considering whether to revise current regulations to provide a more rigorous approach to investigator disclosure, management of conflicts, and federal oversight. The notice invites comments on a range of related issues, including: the scope of the regulation and disclosure of interests; the definition of a “significant financial interest”; identification and management of conflicts; how to assure institutional compliance; reporting on conflicts of interest; and standards regarding institutional conflict of interest. Comments will be accepted until July 7, 2009.
This post was written by Scot T. Hasselman, Andrew C. Bernasconi, and Nathan R. Fennessy.
On April 28, both the U.S. Senate and the U.S. House of Representatives took steps that would provide sweeping changes to the federal False Claims Act ("FCA"). The bills would significantly expand the scope of FCA liability while at the same time make it easier for qui tam relators to bring and maintain FCA suits on behalf of the government.
In short, the bills are answers to a DOJ and relator’s counsel "wish list" that would eliminate 20 years of hard-fought defense jurisprudence. In addition, the House bill, for example, would eliminate the public disclosure jurisdictional bar and defense, which could allow a sworn federal agent to utilize information obtained in the course of official investigations to file FCA lawsuits as a relator, and to receive a portion of any financial recovery. The House bill would also eliminate any basic pleading standards by relators and allow relators’s attorneys to file fishing expeditions without any substantive basis of allegation.
For additional information, please see Reed Smith's full alert.
Over the centuries, many have sought better opportunities in the United States. For the last few years, tort plaintiffs have been among them. Companies in many industries have been the target of lawsuits filed by plaintiffs who live outside the United States, over injuries that also allegedly occurred elsewhere, whether because of perceived advantages in substantive law within the United States, or access to procedural devices in U.S. courts that are not widely available in the rest of the world (such as the class action device).
In a May 1 opinion by Judge Posner filed in two consolidated appeals, Abad v. Bayer Corp. and Pastor v. Bridgestone/Firestone North American Tire, LLC, the Seventh Circuit affirmed dismissal of two cases on grounds of forum non conveniens. In both cases, the plaintiffs are Argentine citizens who live in Argentina and allegedly were injured there, but filed product liability lawsuits against American manufacturers in U.S. district courts. Under the familiar forum non conveniens doctrine, the district courts had weighed various factors and concluded in both cases that Argentina was better-suited to decide plaintiffs' lawsuits -- Abad being a 600-plaintiff class action in which hemophiliacs contended they contracted the AIDS virus from the defendant's clotting factor, and Pastor an auto accident rollover case involving allegedly defective tires.
Continue Reading...This post was written by Carol Loepere.
On April 30, 2009 the Federal Trade Commission (FTC) issued a News Release announcing that it is granting industries under the FTC's jurisdiction an additional 3 months to develop and implement their identity theft prevention programs as required under the FTC's so-called Identify Theft Red Flag Rule. The FTC also stated that that some entities, particularly those that are small, non-traditional creditors, would benefit from the availability of a template Red Flags program in developing their programs. The Commission staff intends to publish such a template for low-risk entities shortly. The FTC said that the extension, coupled with the release of the template, should be sufficient to enable low-risk entities to prepare their programs without undue burden. The announcement of the extension is also available at www.ftc.gov.
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