Recent Trends In Class Action And Aggregate Litigation In The Life Sciences Industry

INTRODUCTION

For the last several years, the life sciences industry has been fertile ground for class action and aggregate litigation. Developments in this area have driven several trends, including state consumer fraud claims, securities class actions, antitrust class actions, and aggregate litigation brought by private healthcare insurers and state attorneys general. These recent trends have been driven, in part, by legislative and doctrinal developments. For example, in 2005—based on legislative findings of abuse in class action practice in state courts—Congress enacted the Class Action Fairness Act (CAFA), permitting defendants to remove to federal court putative class actions that previously may have been subject to less stringent standards in state court. In Standard Fire Insurance Co. v. Knowles,1 the U.S. Supreme Court held that a plaintiff's stipulation that he would not accept more than $5 million in damages could not be used to avoid CAFA's amount in controversy requirement. In other words, a class representative may not agree to seek less money to try to keep a case in state court.

Recent U.S. Supreme Court decisions have also significantly shaped class action practice. The Supreme Court's decision in Wal-Mart Stores, Inc. v. Dukes2 established that claims for individual money damages may be certified under Federal Rule of Civil Procedure (FRCP) 23(b)(2) in only limited circumstances, and the Court's decision also announced a more restrictive view of the meaning of a "common question" under FRCP 23(a). Most recently, in Comcast Corp. v. Behrend,3 the Court held that plaintiffs seeking class certification in antitrust cases must tie their theory of harm and damages to their liability theory, and, in appropriate circumstances, individual questions of damages can predominate over liability issues common to the class.

These developments have likely played a role in shaping the kinds of class actions that companies in the life sciences industry are seeing today. For example, personal injury class actions and other kinds of mass torts are now largely viewed as inappropriate for class treatment and often must confront motions to strike the class claims from the complaint at the outset of the case. Claims requiring plaintiffs to prove reliance on alleged conduct also face significant obstacles to class certification. After the Dukes decision, in particular, these obstacles seem to have resulted in an increase in consumer fraud actions brought by individuals, healthcare insurers, and state attorneys general. The recent developments also may explain the increase in proposed class actions in the securities and antitrust arenas. These trends as well as some considerations for minimizing risk in such litigation are discussed in further detail below.

CLASS ACTION LITIGATION TRENDS

Products Liability Claims

Individualized questions of causation and damages have driven the vast majority of courts to refuse class action treatment in products liability actions in the pharmaceutical and medical device arenas.4 In response to these developments, plaintiffs bringing personal injury claims have attempted to create multidistrict litigation proceedings and serial litigation to "aggregate" claims of individual plaintiffs in lieu of a class action. In short, plaintiffs are bringing mass actions instead of class actions.5 Still, many consumers and third-party payors pursue class actions seeking solely economic losses.

Third-Party Payor Claims

A recent wave of third-party payor litigants sued the pharmaceutical and medical device industries, seeking to recover alleged economic losses arising from their payments for pharmaceutical medicines or medical devices and, in some cases, payments to treat personal injuries. The third-party payors included private insurers and states as Medicaid payors. These third-party payors advanced claims for breach of warranty, violation of consumer protection statutes, violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act,6 common law fraud, and unjust enrichment. The claims have proven vulnerable to attack for lack of injury and lack of a direct causal link between the supposed injury and the challenged conduct. For example, in Ironworkers Local Union 68 v. AstraZeneca Pharmaceuticals, LP,7 the U.S. Court of Appeals for the Eleventh Circuit affirmed the dismissal of claims by a consumer and third-party payors suing under RICO and various state laws to recover payments for off-label prescriptions of a medicine where an allegedly cheaper substitute medicine was available. The court stated the following:

In light of physicians' exercise of professional judgment, a patient suffers no economic injury merely by being prescribed and paying for a more expensive drug; instead, the prescription additionally must have been unnecessary or inappropriate according to sound medical practice— i.e., the drug was either ineffective or unsafe for the prescribed use. This is true even when the physician's decision to prescribe the more expensive drug in lieu of a cheaper alternative is the product of fraud. To allow recovery based purely on the fact that the prescription was comparatively more expensive than an alternative drug—but otherwise safe and effective—would mean that physicians owe their patients a professional duty to consider a drug's price when making a prescription decision. No such duty exists.8

Similarly, in Pennsylvania Employees Benefit Trust Fund v. AstraZeneca Pharmaceuticals LP,9 a third-party payor sued for breach of express warranty and unjust enrichment, claiming that "it was duped into expending millions of dollars in reimbursements for . . . prescriptions issued for medically unnecessary uses" and forced to pay for treatment of personal injuries allegedly caused by those prescriptions.10 The claims were dismissed for failure to establish causation between the alleged damages and the challenged conduct. The plaintiff's request for recovery of treatment costs required "onerous individualized inquiries into the specifics of each patient's medical history and the circumstances of each patient's alleged injury."11 And, because the alleged warranties reached the third-party payor "only by way of a treating physician's prescription pad, if at all," they could not have formed the basis of a bargain between the payor and AstraZeneca, as is required under state law.12 A payor "cannot simply rely on the prescription pads of physicians or claims for reimbursement from pharmacies as a means by which express warranties [a]re conveyed."13 This is, in essence, the learned intermediary doctrine: Where a claim requires "'proof of justifiable reliance and causation, . . . such requirements cannot be present when the defendant is a pharmaceutical company that did not sell its product directly to the patient.' The same reasoning extends to manufacturers of prescription medical devices."14 Other recent opinions provide a solid foundation for defending similar claims.15

Consumer Protection Act Claims

Plaintiffs bringing Consumer Protection Act (CPA) causes of action aim to focus the courts' attention on an alleged common course of action by the defendant. As a result, the heightened requirements for class certification established by Dukes may, in some cases, be more easily avoided by class claims under states' CPAs. For example, the plaintiff in Delarosa v. Boiron, Inc. made CPA claims in an apparent effort to avoid the Dukes requirements.16 In that case, the plaintiff alleged that the defendant falsely marketed a homeopathic cold remedy that allegedly had no beneficial effect on cold...