State Law Claims Against Generic Drug Manufacturer Cannot Escape Mensing Preemption in 7th Circuit

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Despite a myriad of decisions permitting state-law claims to proceed against generic drug manufacturers following the U.S. Supreme Court’s decision in PLIVA, Inc. v. Mensing, 131 S. Ct. 2567 (2011) (see our prior posts here), one plaintiff’s recent attempt to run around the federal preemption doctrine was swiftly rejected by the Seventh Circuit in Houston v. United States of America, et al., No. 15-2411 (7th Cir. Feb. 3, 2016).

The plaintiff, Michael Houston, developed Stevens-Johnson-Syndrome, a serious skin disorder, after taking allopurinol, a prescription drug used to treat gout. Houston brought tort claims in state court against the federally funded health clinic where he was treated, the physician’s assistant who prescribed allopurinol, and the generic manufacturer of the drug, Qualitest.  The United States substituted itself as defendant in place of the federal healthcare providers, removed the case to federal court, and moved to dismiss for failure to exhaust administrative remedies.  Qualitest also moved to dismiss on the grounds that Houston’s state tort claims were preempted by federal drug regulations that impose an “ongoing duty of sameness” on generic drug manufacturers to mirror the chemical design and labeling of their brand-name counterparts. See 21 U.S.C. § 355(j)(2)(A)(ii)-(v).  The district court granted all defendants’ motions, dismissing the case with prejudice, and the Seventh Circuit affirmed.

To escape the duty of sameness, Houston offered three arguments, none of which the court found persuasive. First, he argued that his state-law claims did not necessarily require Qualitest to change allopurinol’s design or label.  Order at 6.  The court dismissed this argument as “self-defeating,” because the lawsuit in fact alleged that under state law, Qualitest should have labeled or designed the drug differently.  By plaintiff’s logic, the only way Qualitest could avoid liability would be to exit the generic market altogether, which, according to the court, “is precisely the outcome that the duty of sameness and Mensing’s preemption principle are designed to prevent.” Id. Houston’s claims for defective design, negligence, consumer fraud, battery, and breach of express and implied warranties were held preempted under the same reasoning. Id.

Second, Houston relied on a line of Supreme Court cases that involved deceptive advertising claims against cigarette and pesticide makers to argue that his claims should survive preemption. See Order at 6 (citing Altria Gropu, Inc. v. Good, 555 U.S. 70 (2008); Bates v. Dow Agrosciences, LLC, 544 U.S. 431 (2005); Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992)).  The court quickly rejected this argument as well based on the distinction that, in contrast to Houston’s claims, the claims in those cases did not require manufacturers to violate any federal duty. Order at 7.

Finally, Houston argued that Mensing and its successor Mutual Pharmaceutical Co., Inc. v. Bartlett, 133 S. Ct 2466 (2013) should not apply because his claims arose after the passage of the Food and Drug Administration Amendments Act of 2007, Pub. L. No. 110-85, 121 Stat. 823 (2007).  Specifically, Houston urged that those amendments give the FDA authority to negotiate changes in drug labeling with generic-drug manufacturers.  The court noted that although the Supreme Court reserved ruling on the effect of that legislation through a footnote in the Mensing decision, the amendments nonetheless “forbid a generic-drug maker from violating the duty of sameness without FDA permission.” Order at 7.  On the issue of FDA “permission” to deviate from this duty, the court noted that “nothing in the amendments or other laws requires a manufacturer to seek that permission, the receipt of which would be speculative anyway.” Id.

The court also upheld the district court’s denial of Houston’s request to add claims against the manufacturer of the brand-name version of allopurionol on statute of limitations grounds. Citing examples of conflicting authority in the Northern District of Illinois, Sixth Circuit, and Fourth Circuit, the court nonetheless declined to “take sides” on the question of whether a consumer of a generic drug may sue the brand-name manufacturer. Id.

In the world of post-Mensing generic preemption cases, I would characterize this one as pretty clear cut.  Safe to say Houston is not among those plaintiffs who have crafted theories original enough to convince a court to allow their state-law claims against generic drug manufacturers to proceed despite the preemption principle (for instance, on “failure-to-update” theories).  Of the three theories Houston advanced to defeat preemption, his argument based on the FDA Amendments Act of 2007 might have gained the most traction, particularly in light of Mensing’s punting on the impact of that legislation, but the court still dismissed it with minimal discussion.  A stronger approach likely would have been to try his luck asserting (timely) claims against the brand manufacturer, potentially forcing the Seventh Circuit to come down on one side of that contested question.  For now, that question will sit unanswered for another day while the Mensing preemption principle enjoys this decided victory.

 

Fourth Circuit Affirms Dismissal of FCA Suit Based On Public Disclosure Bar

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Last week, the Fourth Circuit affirmed the dismissal of a qui tam action based on the pre-2010 version of the False Claims Act’s (“FCA”) public disclosure bar. Ten years ago, Mark Radcliffe, a former district sales manager for Purdue Pharma, filed a qui tam action under the FCA against Purdue.  Specifically, he alleged that Purdue marketed OxyContin as having a falsely overinflated potency as compared to one of the company’s older pain drugs, MS Contin.  Mr. Radcliffe claimed that by doing this, Purdue deceived physicians into prescribing, and the federal government into paying, for OxyContin instead of the less costly drug, MS Contin.  In 2010, the action was dismissed based on a release that Mr. Radcliffe executed upon accepting a severance package from Purdue after it restructured its workforce.

Less than two months after the Supreme Court denied Mr. Radcliffe’s petition for cert., his wife, along with a former Purdue employee, decided to file the instant qui tam action against Purdue asserting nearly identical allegations as those brought by Mr. Radcliffe. Notably, counsel in the instant action also represented Mr. Radcliffe throughout his qui tam suit.

While the district court found that the Relators did not base their allegations on a personal review of the documents filed in Mr. Radcliffe’s suit, it nevertheless found that the fraudulent scheme alleged came from the attorney, who simply used his own knowledge developed during Mr. Radcliffe’s action, as well as the documents provided by Mr. Radcliffe. The district court dismissed the Relators’ complaint, holding that the allegations were based on the claims from Mr. Radcliffe’s action and therefore, the public disclosure bar stripped the court of subject matter jurisdiction.  The Relators appealed to the Fourth Circuit.

The FCA provides a cause of action “against anyone who knowingly presents to the government a false or fraudulent claim for payment or approval.”  To fulfill this objective, the FCA permits qui tam actions in certain circumstances, which “provide cash bounties…to private citizens who successfully bring suit against those who defraud the federal government.” One barrier to this, however, is the “public disclosure bar.”  And, even though Congress amended the public disclosure bar in 2010, the Court held that given that the allegations asserted were between 1996 and 2005, the pre-2010 version applied.  This pre-2010 version stated: “No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations….unless…the person bringing the action is an original source of the information.”

Notably, the Fourth Circuit emphasized that it interpreted the phrase “based upon” differently than its sister circuits. While other circuits read the phrase to bar claims that are “substantially similar to” or “supported by” publicly disclosed information, the Fourth Circuit interprets it to bar actions “only where the relator has actually derived from a public disclosure the allegations upon which the action is based.”  Thus, the issue before the Fourth Circuit was whether the Relators could get around the public disclosure bar when their allegations, although not directly stemming from the docket entries in Mr. Radcliffe’s lawsuit, were nevertheless derived from facts their attorney learned while representing him and preparing the public filings for his suit.  Relying on applicable precedent, the Fourth Circuit held that the district court correctly dismissed the Relators’ action.

Specifically, Purdue argued that the Relators’ action was a “quintessential parasitic action” because it provided no new information, but instead merely copied the substance of Mr. Radcliffe’s prior action. The Relators, however, claimed that the FCA is meant to encourage actions in which qui tam plaintiffs learned of fraud second-hand.  The Fourth Circuit agreed with Purdue, however, emphasizing that “Congress did not invite a free-for-all for aspiring relators salivating over the FCA’s qui tam reward provision.”

In affirming the district court, the Fourth Circuit emphasized that the Relators did not independently discover the facts underlying their allegations.  Instead, the Relators’ knowledge came from their attorney’s involvement in Mr. Radcliffe’s qui tam action.  The Fourth Circuit further highlighted that this result was consistent with the purpose of the public disclosure bar.

 

 

New Year, New Changes to the FRCP

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Happy 2016!  In addition to (hopefully) bringing good cheer, the new year will see federal courts shaping the contours of recently enacted changes to the Federal Rules of Civil Procedure.  The amendments, which went into effect on December 1, largely relate to the bane — or, depending on your point of view, bread and butter — of litigation: discovery.   This post does not provide an exhaustive discussion of the changes; instead, it provides a brief overview of two salient revisions.

Revisions to Rule 26(b)(1)

The Rule now reads:

Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

The notable change here, as relates to the impact on electronic discovery, is the addition of a section on how discovery needs to be proportional to the needs of a case, and the deletion of language that essentially invited intense focus on how relevant information was stored, as opposed to the substance of that information.  Although prior versions of Rule 26 provided that discovery cannot be overly burdensome, and indeed invited a case-by-case analysis of burdens and benefits given the size of case, the explosion of e-mail, instant messaging, and texts (among other forms of electronic communications) rendered limiting language a nullity.  Under the prior iteration of the Rules, it was not uncommon in cases involving corporate defendants for discovery to get bogged down in the minutiae of technical e-discovery issues.  Although the revisions likely will not eliminate the focus on e-discovery minutiae, they are aimed at re-centering the focus of litigation where it should be: on the substantive merits.  2016 will tell what courts interpret “proportional” to mean.

Revisions to Rule 37(e)

The Rule now reads:

Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1)         upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2)         only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A)         presume that the lost information was unfavorable to the party;

(B)         instruct the jury that it may or must presume the information was unfavorable to the party; or

(C)         dismiss the action or enter a default judgment.

As with the change to Rule 26, this revision was made because of e-discovery practice. Corporate defendants commonly have standard data retention policies that automatically delete old data.  Under the prior version of the Rules, these policies often became flash points over whether documents, information and data were spoliated.  The amendment gives litigants the benefit of the doubt by requiring an affirmative showing of intent to deprive before punitive sanctions can be imposed.

Against the backdrop of these changes, one thing is for certain: even with the addition of proportionality language, and even given the requirement that an affirmative negative intent be proven before the imposition of punitive sanctions, e-discovery will continue to be a major focus of civil litigation under the Federal Rules.  We will closely follow the courts as they interpret the newly-revised Federal Rules, and how those interpretations impact federal practice.

Driverless Cars To Get a Multi-Billion Dollar Boost

Here at Weil’s Product Liability Monitor, we’ve been keeping a close eye on developments relating to driverless – or “autonomous” – cars.  For a couple of recent posts, see here and here.  It’s an exciting area to follow since the technology has the potential to save lives, reduce traffic, and lessen environmental impacts–notRead the full article →