The Consumer Fraud/Commercial Litigation Section of the firm which is managed by Dee Miles, Section Head and a member of the firm’s Board of Directors, has been very busy during 2014. The section is currently investigating and/or litigating the following cases:
The firm handles a wide array of cases dealing with the pharmaceutical industry. These cases include AWP, unapproved drugs, Zoloft, and Granuflo.
Our firm has represented the States of Alabama, Alaska, Hawaii, Kansas, Louisiana, Mississippi, South Carolina and Utah in a series of cases against pharmaceutical companies, known as the Average Wholesale Price (AWP) litigation. We have completed these cases in the States of Hawaii, Alaska, Alabama, Louisiana and Kansas and we are nearing completion of the litigation in Mississippi and Utah. These States alleged that pharmaceutical companies falsified pricing information, causing state Medicaid agencies to grossly overpay for prescription drugs. The Manufacturers’ false and inflated AWPs (average wholesale prices) caused pharmacies to shop for drugs that offered the highest reimbursement from the State. The inflated AWPs in turn provided higher sales revenue, volume and market share for the drug companies, and created dramatically steeper costs for the States. Juries have returned more than $600 million in verdicts for the States of Alabama, Mississippi, Kentucky, Wisconsin, Missouri and Massachusetts. Meanwhile, our firm has obtained verdicts of more than $450 million and settled with many companies in all eight states for approximately $1 billion. The Beasley Allen lawyers litigating these cases are: Dee Miles, Roman Shaul, Clay Barnett and Alison Hawthorne.
Lawyers: Dee Miles, Roman Shaul, Clay Barnett and Alison Hawthorne
Primary Staff Contacts: Beth Warren and Jessica Stapp
During the AWP case in Louisiana, the State discovered that its data-processing firm, Molina, was allegedly not utilizing the correct reimbursement rate in processing payments to pharmacies. Instead of the computer system automatically calculating reimbursements with the state-approved formulary, Molina programmers apparently input the wrong data points resulting in overpayments. Our firm represents the State in seeking to recoup those overpayments from the party that caused them, in this case allegedly, Molina.
Lawyers: Dee Miles, Roman Shaul, and Alison Hawthorne
Primary Staff Contacts: Beth Warren and Jessica Stapp
In order for a state to reimburse pharmacies for dispensing drugs to state Medicaid beneficiaries, those drugs must be U.S. Food and Drug Administration (FDA)-approved. By manipulating the system, pharmaceutical manufacturers have apparently been able to sneak certain drugs that have not been FDA-approved into the state Medicaid reimbursement program without alerting anyone. States have reimbursed pharmacies for dispensing these drugs, unaware that they were not FDA approved and, therefore, ineligible for reimbursement. At this time, our firm only represents the State of Louisiana in this litigation, which is seeking to recover Medicaid reimbursements for these ineligible drugs, but other States may file as well.
Lawyers: Dee Miles, Lance Gould, and Alison Hawthorne
Primary Staff Contacts: Holly Busler and Jessica Stapp
Zoloft is FDA-approved to treat various levels of depression, anxiety, and a few other disorders. For approval, the FDA requires only two (2) controlled clinical trials that produce statistically significant efficacy results, even if every other trial produced negative efficacy results. A statistically significant result means that the observed effect was not the result of chance while clinical significance means that the use of the drug over the placebo is meaningful enough to make a difference in the patient. Of course, the more studies that are completed, the more likely it is that two will show a positive clinical effect. It appears Pfizer submitted six trials and of those six, only two suggested that Zoloft had a minor positive impact. Early studies actually showed that the placebo effect – an improvement that has nothing to do with the medication, but is attributed to the patient’s belief that the drug is working – was more effective than the drug itself.
This was especially troubling with patients that suffered mild to moderate depression. Although the FDA ultimately approved Zoloft, it did so with reservations. Aware of the efficacy issues, especially with regard to mild and moderate depression, Pfizer allegedly undertook a massive marketing campaign that included ghost-writing, mass publishing of positive results, and putting a positive “spin” on negative studies. Our complaint alleges that these actions by Pfizer were unfair, deceptive, and appear to violate state consumer protection laws. We further allege that physicians and consumers, along with the State of Louisiana, would have utilized other medications were it not for Pfizer’s actions. On behalf of the State of Louisiana, we are seeking to recover damages the State suffered for reimbursements made for Zoloft that the State would not have made had the manufacturer acted appropriately. In pursuit of those damages, the State seeks recovery under the state’s unfair trade practices act, fraud, negligent misrepresentation, unjust enrichment, and a unique claim to Louisiana, redhibition.
Lawyers: Dee Miles, Lance Gould, Alison Hawthorne and Leslie Pescia
GranuFlo is a dialysate product used in the hemodialysis process. It appears that several years ago Fresenius, the manufacturer of GranuFlo, realized that through a natural biological process, its product created a significantly increased risk of cardiac distress and death when not administered in a different dosage than every other dialysate product on the market. Instead of warning clinics, physicians, consumers, and the states, Fresenius allegedly kept quiet about the risk. Once the risk came to the FDA’s attention, Fresenius notified its own clinics, but it appears not those owned and operated by non-Fresenius companies, to adjust their dosage. Eventually, the true risk information became public. There are several cases filed against Fresenius alleging that the Defendant’s actions caused injuries to individual users. Our firm is representing numerous individual cases, but those cases are being handled by our Mass Tort section (Frank Woodson and Andy Birchfield). In addition, our Consumer Fraud section is representing the State of Louisiana in seeking to recover for the reimbursements the State made and damages it suffered because of the claims submitted to the state’s Medicaid office for this apparent substandard product and Fresenius’ alleged failure, through its marketing to physicians, clinics, and citizens, to inform its customers of the proper dosage requirements.
Lawyers: Dee Miles, Lance Gould, Alison Hawthorne and Rebecca Gilliland
Pay For Delay
Our firm has been researching a developing area of law for a little more than a year that deals with the intersection of Antitrust law and Patent law. The cases have gained attention in the last two years because of the United States Supreme Court’s reversal last year of an Eleventh Circuit decision. The FDA regulates and approves drugs for marketing and sale for human use. When a generic drug manufacturer seeks FDA approval for a new generic version of an already approved brand drug, the generic manufacturer has to certify that the generic either will not infringe on any patents for the brand, or that those patents are invalid. Inevitably, the brand manufacturer objects to the certification and sues the generic for patent infringement. The two manufacturers almost always settle. As part of that settlement, the generic manufacturer typically agrees not to enter the market for that drug for a certain time period.
That agreement, as an agreement not to compete and to extend a monopoly to the brand manufacturer, is in violation of federal and state antitrust laws. Without competition, the prices for the brand drug remain high – well above what the market would dictate absent the agreement between the two manufacturers. As a result, citizens, pharmacies, state Medicaid agencies, and insurance companies have all been paying grossly inflated prices for brand pharmaceuticals when they could and would have purchased generic drugs at much lower prices. The firm has been working with several states to develop a case to recover the damages suffered as a result of those fraudulently and illegally increased pharmaceutical prices. At this time, we are moving forward in preparation for filing claims for one or more states.
Lawyers: Dee Miles, Roman Shaul, Alison Hawthorne, Rebecca Gilliland and Leslie Pescia
Our firm’s class action practice continues to rapidly grow. We have cases filed all over the country ranging from consumer fraud, Antitrust, employment abuses, ERISA (Employment Retirement and Income Security Act) to product liability and nuisance cases. This area of the law continues to grow due to the corporate abuses occurring in the business world. Oftentimes the class action is the most efficient legal vehicle to rectify a large scale “wrong” because while corporate abuse may have caused someone or a business harm, the harm is small, yet widespread. Some say a class is appropriate when “nobody gets ‘hit’ for much, but everybody does get ‘hit.’” Well, the “hits” keep coming and the class action cases continue to be filed.
While arbitration clauses have had some limited impact on class action filing, it has not proved to be the effective deterrent corporate America had hoped for. This is mainly due to the courts finally recognizing that arbitration was never intended to be utilized in consumer contracts. It was designed for complex business transactions involving sophisticated parties in specialized areas of business. However, corporations have abused the use of arbitration clauses to frustrate consumer resistance to their fraudulent practices; thus, it has resulted in a profit-making measure for corporate America.
Just because a consumer contract has an arbitration clause, that doesn’t mean a class action on the abusive corporate conduct is barred. There may be ways around the arbitration clause and a lawyer familiar with the ever-changing law on this issue can make that determination. Lance Gould, Archie Grubb, Alison Hawthorne and Andrew Brashier, lawyers in the section, are well versed in this area of the law. We review many potential class actions daily and welcome the opportunity to review more.
For example, the firm is pursuing a class action for California citizens who claim they were deceived into believing that Johnson and Johnson’s talc-based products were safe and purchased those products for feminine genital hygiene use. Some recent studies have demonstrated a significantly increased risk of ovarian cancer for women who use talc-containing products for genital hygiene. The complaint alleges that Johnson and Johnson has been aware of the risk, or should have been for years, yet the company continues to market its products as safe for daily use. These citizens would not have purchased the baby powder and other talc products had they known of the increased risk of ovarian cancer. Because of Johnson and Johnson’s marketing, they claim they believed they were purchasing and using a safe product. Our firm represents these citizens in an effort to recover the money they spent on these alleged cancer-causing products that they would not have spent absent Johnson and Johnson’s marketing.
Lawyers: Dee Miles, Lance Gould and Alison Hawthorne
Oil and Gas
The firm also recently filed a class-action complaint against XTO Energy, Inc. in Arkansas. The case involves royalties owed to landowners for the sale of natural gas. The landowners allege they signed leases with XTO granting it the right to drill and produce natural gas and constituents. In exchange, XTO was to pay the landowners royalties as a share of the production income. The Plaintiffs claim instead of selling the gas in arms-length transactions on the open market, XTO sells to affiliates at grossly inadequate prices. Landowners’ royalty payments are calculated off that first sale. The XTO affiliate or related entity that first purchased the gas then sells the products at market price. XTO allegedly keeps the difference between what it would have paid in royalties to the landowners had those first sales been made at market price and the fraudulently low royalties it actually did pay the landowners. We are proud to represent the class of landowners and to assist in seeking to recover the money those class member landowners would have received had XTO properly sold the natural gas on the market.
Lawyers: Lance Gould, Archie Grubb, Alison Hawthorne, and Andrew Brashier
Primary Staff Contact: Holly Busler, Jessica Stapp, and Whitney Gagnon
In the first of two Blue Cross Blue Shield (“BCBS”) cases the firm is pursuing, the firm deals with an alleged breach of contract between the insurance giant and dentists. Reimbursements to dentists should, according to the contracts, be neither excessively high nor excessively low. Yet, the Alabama dentists contend that BCBS breached their contracts with them and reimbursed for dental services at excessively low rates. They further contend that BCBS fails to regularly review the single fee schedule used for dental reimbursement as it agreed to do in the contracts. We are working with two other law firms, McCallum, Hoaglund, Cook & Irby, LLP and McCallum, Methvin & Terrell, P.C., as well as our Alabama dentists in an attempt to correct the BCBS fee schedule and recover the amounts that these dentists should have actually received for the services they provided.
Lawyers: Dee Miles, Alison Hawthorne and Leslie Pescia
Primary Staff Contact: Jessica Stapp
The consumer fraud section is also involved in the lawsuits against General Motors (GM) for its conduct relating to the ignition switch defect. Unlike claims for personal injury and death, which the firm is also handling in our Product Liability section managed by Cole Portis, we have filed seven separate class actions in different states that are now pending before Federal Judge Jesse M. Furman in the Multi-District Litigation case in federal Southern District Court of New York in New York City. The class action fraud claims are seeking only economic losses as a result of the diminished value of the automobiles as a result of the ignition switch defect, a loss incurred by owners of the now admitted defective GM vehicles.
Lawyers: Dee Miles and Archie Grubb
Primary Staff Contact: Michelle Shaw
Our firm has recently filed a California class action against the company that manufacturers First Alert Smoke Detectors, also known as ionization smoke alarms. The thrust of the class allegations, filed in federal district court in California, claims that ionization smoke detectors fail to perform their sole and intended purpose as an early fire detection warning. When compared to photoelectric smoke detectors, ionization smoke detectors may take as long as 30 minutes or longer to sound an alarm of a slow smoldering fire, the most common household fire. Simply, ionization smoke detectors do not alert home occupants of a fire until the buildup of toxic fumes, gases and smoke inhalation is to the point of a life-threatening stage. Despite knowledge by the Defendants, they continue to sell ionization smoke detectors as an adequate and affective fire safety detection system and they are found in about 90 percent of households.
Our firm has filed at least one class action against First Alert, and is investigating other companies that allegedly conducted themselves in the same wrongful and reckless manner. We are also involved in an international case containing the same allegations, but different manufacturers.
Lawyers: Dee Miles, Lance Gould and Archie Grubb
Primary Staff Contact: Holly Busler and Whitney Gagnon
Lawyers in the Section continue to investigate and litigate antitrust cases. Antitrust law is the law of business competition. Society is better off if buyers and sellers act independently, not in concert. Antitrust law focuses on the promotion of competition through restraints on monopoly and cartel behavior. Typical cases involve attempts to monopolize, price fixing, exclusive distributorships, refusals to deal, tying arrangements, and mergers and acquisitions. Antitrust is a growing area of litigation, as corporations increasingly tend to “cross the line” as they seek to gain advantage in this tough economy. The firm is currently involved in antitrust litigation involving several pharmaceutical companies, Blue Cross Blue Shield, and manufacturers of electronic capacitors.
Pay for Delay
As mentioned above, Beasley Allen has been researching a developing area of law related to pay for delay schemes. As a result of the illegal agreements between brand and generic pharmaceutical manufacturers, citizens, pharmacies, wholesalers, the states, and other insurers all paid grossly inflated prices for brand drugs when they otherwise would have paid reduced prices for generics. The firm has been working with several states to develop a case to recover the damages suffered as a result of those fraudulently and illegally increased pharmaceutical prices.
Blue Cross Blue Shield
Lawyers at Beasley Allen are currently involved in an antitrust case dealing with Blue Cross Blue Shield’s alleged illegal actions. The BCBS case involves the insurance providers’ alleged agreement not to compete with each other. BCBS has separate companies that cover different geographical regions of the country. Those individual companies appear to have agreed amongst themselves to stay out of other geographic regions. For example, BCBS of Alabama and BCBS of Mississippi appear to have agreed to not compete with each other for providers (hospitals and physicians) or subscribers (individual and group policyholders). Normally, competition in a certain area drives costs down with each company trying to be the lowest available. Absent competition, the companies were able to set prices for both reimbursement and premiums at any price they chose. This very important case is in the discovery phase in federal court in Birmingham, Ala., before Judge David Proctor.
The electronic capacitor litigation involves an alleged price-fixing scheme. Capacitors are, generally, tiny but are in nearly every electronic device on the market. Apparently the manufacturers agreed amongst themselves to only sell their products at a certain price, one that is above what normal market conditions would dictate. Their actions caught the attention of several United States and foreign agencies, including the Department of Justice, which are investigating the illegal agreements. Our firm, along with other national firms we are working with, moved quickly to recover damages for those directly injured by the price fixing scheme. This case is currently pending in in the federal district court in San Francisco, Calif.
Lawyers: Dee Miles and Rebecca Gilliland
A qui tam action involves a private party, called a “whistleblower” or “relator,” who asserts claims on behalf of the government. Although the government is considered the real (named) Plaintiff, if the action is successful, the relator receives a share of the award. Most qui tam actions are brought under the federal False Claims Act (“FCA”), 31 U.S.C. § 3729, et seq., although many States have adopted their own false claims acts. The successful results speak for themselves – more than $34 billion in recoveries since 1986 – and that tells us a powerful story. Our firm is currently involved in a number of these qui tam cases throughout the country.
Qui tam actions typically begin with an employee witnessing his/her employer defrauding the government. The employee may later consult with an attorney on another matter, but convey their knowledge of false information being given to the government. Attorneys need to be on the lookout for such information and recognize potential claims.
It takes vigilance and courage for these private individuals, most commonly referred to as “whistleblowers,” to report fraudulent activity; but without them, the vast majority of fraud against our government would go undetected. Recognizing the perils faced by whistleblowers, legislators have passed laws protecting individuals who take a stand against fraud. 31 U.S.C. § 3730 prohibits discrimination and retaliation against whistleblowers and imposes strict penalties, including double back pay with interest, on violators.
Additionally, if a qui tam action is successful, the whistleblower receives between 10- 30 percent of the government’s recovery. Damages under the FCA include penalties and “three times the amount of damages which the Government sustains” due to the fraud. 31 U.S.C. § 3729(a)(1)(G). In short, the law protects and rewards whistleblowers for their instrumental role in exposing and prosecuting fraud. Lawyers in our firm have waged war against corporate fraud for more than 30 years and would welcome the opportunity to assist with any qui tam actions that any of our readers may have.
One such case currently being pursued by our firm that is now out from under seal involves the failure of United States Investigations Services LLC (“USIS”) to perform quality-control reviews when investigating backgrounds of potential U.S. Office of Personnel Management employees. For example, USIS vetted former CIA employee and NSA contractor Edward Snowden before he famously leaked documents. It also vetted Aaron Alexis, who shot 12 people to death at the Washington Navy Yard recently. The complaint alleges that the company used an internal program to automatically release background checks prior to their completion to increase profits; USIS is paid monthly for completed background checks, so those incomplete checks were non-billable. Instead of completing the work, the whistleblower alleges, USIS automatically cleared the background checks in order to submit claims for payment.
The section has many more qui tam cases filed, but because of the statutorily required confidential filing of these cases under seal, we are not able to describe the other cases we are pursuing in courts all over this country. Nonetheless, we look forward to continuing to expand this area of practice in our firm.
Lawyers: Dee Miles, Lance Gould, Larry Golston, Archie Grubb, Clay Barnett and Andrew Brashier
Primary Staff Contact: Holly Busler
We have been handling FLSA (Fair Labor Standards Act) cases for many years. FLSA cases range from mischaracterizing an employee as a “manager” to avoid having to pay overtime wages, to employers having employees “work off the clock” to save on labor cost, but both are violations of the law under the FLSA. We continue to file many such cases.
Lawyers: Lance Gould and Roman Shaul
Primary Staff Contact: Holly Busler
Equal Pay/Race Discrimination/Age Discrimination
Several lawyers in the Section also handle other employment cases involving discrimination due to gender, race, age, culture and other factors. We recently settled several cases involving these issues and hopefully bettered the work environment for many others.
Lawyers: Larry Golston and Lance Gould
Primary Staff Contact: Holly Busler
Lawyers in the Section will also continue to review general business litigation matters as well as virtually any corporate misconduct case. The Section has been fortunate to experience success in the areas described above and the lawyers and staff maintain their commitment to providing a voice to victims of corporate wrongdoing with the best legal talent providing the best possible service to our clients. Dee Miles, the Section Head, has put together a tremendously talented group of lawyers and support staff. We have been blessed.
Consumer litigation covers a very broad spectrum and is evolving almost monthly. As you saw from ongoing projects being pursued by our firm, it’s a very important area of litigation. The following are a number of events, of interest.
Obtain Current Recall, Food And Product Safety Information
Consumers should be able to depend on manufacturers, distributors and retailers of products, medicines and food to take the proper steps to make sure their products are safe for use. All of us expect products to be safely designed, be well made and to work the way they are supposed to without causing us harm. Likewise, we confidently purchase groceries or dine out without worrying very much about food safety. However, as is evidenced by the Recalls section in this very publication, all too often our expectations are not met. Products enter the stream of commerce that are both defective and dangerous.
As a result, it is a good idea to take matters into your own hands and keep up with the latest news on recalls and safety alerts. In today’s modern age, this information is pretty easy to find. You can even subscribe to some websites and alerts on your computer or your smartphone.
A good resource for all types of recalls is located at www.Recalls.gov. This website is produced by the Consumer Product Safety Commission (CPSC) a federal regulatory agency, as a public service. This site compiles and provides information about food recalls and alerts, consumer products, motor vehicles and boats, medicine, cosmetics, public health issues, and environmental products. It is a “one-stop shop” for recall and safety information.
Recalls.gov draws information from other government agencies including the U.S. Department of Agriculture (USDA), U.S. Food and Drug Administration (FDA), Centers for Disease Control and Prevention (CDC), the Environmental Protection Agency (EPA), the National Highway Traffic Safety Administration (NHTSA), the U.S. Coast Guard (USCG) and the U.S. Department of Health and Human Services (HHS).
There are individual websites under the umbrella of Recalls.gov, which you can subscribe to if you are especially interested in one area. For example, www.foodsafety.gov provides the latest information on all food recalls and alerts as well as food illness outbreaks. The site also provides helpful tips you can follow to help ensure food safety, information about food poisoning, and the latest news involving food safety concerns. Here are more links to directly access individual recall and safety alert websites:
Most of these websites have links so you can connect with these agencies on social media by following them on Twitter or “friending” them on Facebook. You can also subscribe to the website’s RSS feed or download an app for your smart phone that will send you the latest government recalls and alerts. You may also be able to sign up for email alerts from many of these agencies that will keep you informed of the latest news.
The CPSC also operates a toll-free Consumer Hotline at 800-638-2772 (TTY 301-595-7054) where you can call to get product safety information and report unsafe products. The hotline operates from 8 a.m.-5:30 p.m. ET, and you can leave a message any time. Likewise, you can call the FDA at 1-888-INFO-FDA (1-888-463-6332).
It’s very important to become knowledgeable about the availability of safety information. The experiences our lawyers have had in litigation make us realize that there is a need to stay informed, to the extent possible, on ways to insure your own personal safety. Take a look at the sites listed above and stay informed. These are good place to start.
Sources: NHTSA, CPSC, Recalls.gov, Foodsafety.gov, FDA, USDA, CDC, HHS
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