Current Lawsuits

FAQ

Q: What is the Prescription Access Litigation Project?

A: Community Catalyst created the Prescription Access Litigation Project ("PAL") in 2001 to make prescription drugs more affordable for consumers by using class action litigation and public education to bring an end to illegal pharmaceutical price inflation. Prescription drug prices in the United States are the highest in the world and have become a significant barrier to increasing access to health care in the United States. Given the drug industry's powerful legislative lobby, PAL chose the courts as a value-added, relatively level playing field through which the industry's inflationary practices can be stopped.

PAL has grown quickly and now is a diverse coalition of over 100 organizations, including state-based groups representing 35 states and the District of Columbia as well as several national organizations. The class action firms Hagens Berman, LLP, Goodkind Labaton Rudoff & Sucharow LLP and Zwerling, Schachter & Zwerling, LLP act as counsel in PAL's litigation efforts. Additionally, the AARP's litigation arm, AARP Foundation Litigation, serves as co-counsel on several cases.

Q: What are the legal public policy outcomes PAL hopes to achieve?

A: Class actions lawsuits are designed to advance important legal and public policy goals. They are often the only way to remedy injustices committed by powerful, multi-million dollar corporations and institutions. As stated by former United States Supreme Court Justice William O. Douglas, "The class action is one of the few legal remedies the small claimant has against those who command the status quo."

The goal of PAL's class action lawsuits is to force pharmaceutical companies to end the unfair and illegitimate practices they use to abuse their monopoly power and keep prices high. One anticipated favorable outcome is that generic drug makers will be able to come to market without interference from the brand name. Generic drugs are typically priced at 30-80% below the brand name drug.

The longer-term goal is to put a halt to drug company practices that keep the cost of drugs high. The lawsuits will move the issue of access to prescription drugs to the forefront of the public eye. Historically, class action lawsuits have been a vehicle to encourage legislative leaders to take action on a particular policy issue. It is our hope that the actions of the PAL initiative will persuade state and Congressional legislative leaders to address the high price of prescription drugs and the problems many people experience in obtaining needed medications.

Q: What is the legal basis PAL is using to bring a lawsuit against pharmaceutical companies?

A: PAL's cases challenge a variety of illegal practices that are regularly committed by pharmaceutical industry players. Because the high cost of drugs is attributable largely to the pharmaceutical industry's illegal marketing and pricing practices, these lawsuits, which seek to bring an end to these practices, have great potential to change industry behavior and in turn increase consumer access to vital drugs. PAL has already had an impact on behavior and will continue to monitor and combat illicit activities which harm American consumers who are forced to pay unfair prices. Some of the practices PAL is challenging are detailed below.

Anti-Competitive Practices
New drugs are subject to multi-year patent protections during which no other manufacturer can sell an equivalent drug. Brand name drug manufacturers often try to extend these patents beyond their legal limit, called evergreening, because of the huge profit margins they generate by keeping less expensive (typically 30-70% cheaper) generics off the market. PAL and its partners have already successfully reached a settlement in the Augmentin, BuSpar and Relafen cases.  PAL's case on Neurontin is an additional example of this type of practice. Drug manufacturers have also entered into illicit anti-competitive agreements. In some instances, brand name makers pay off potential generic competitors to stay off the market. These sorts of anticompetitive agreements are challenged in the PAL cases on Cipro, K-Dur and Tamoxifen.

Improper Drug Promotions
The pharmaceutical industry spends nearly 40% of its revenues on the promotion of drugs, and its expenditure on direct-to-consumer advertising increased almost 200% from 1989 to 2001.  The pharmaceutical industry appears to be endlessly inventive when it comes to marketing and selling its products. A number of pharmaceutical companies promote 'off-label' usage (those outside of specific indications approved by the FDA) of certain drugs. In so doing, they are circumventing FDA safety and efficacy regulations requiring them to test and seek approval for each use. These off-label promotion efforts include making payments to doctors to place their names on articles paid for by the companies (and not written by the doctors), to listen to presentations about the unapproved uses of drugs (framed as 'consultations' to the companies by the doctors) and to reward those who actively prescribed a particular drug. PAL currently has cases pending around the off-label promotions of Estratest and Neurontin (the Neurontin II case). In these companies' efforts to seek 'easy revenue' by creating a need for a particular drug that has not even been approved to address certain conditions, the consumer is often unaware that the new medications that they have been prescribed are not necessarily the most appropriate therapy.   PAL"s recent case around Nexium represents a new front in our challenge to improper drug company promotions, claiming that the maker of the drug provided inaccurate and incomplete information to physicians and consumers about its benefits. 

Price Manipulation
Drug manufacturers manipulate and inflate drug prices through use of the "Average Wholesale Price." This price, called AWP, is sometimes referred to as "Ain't what's paid," because drug manufacturers typically provide extremely inflated figures rather than an average wholesale price. These inaccurate price lists are then used as the basis for sales to most large buyers, including Medicaid and Medicare, to generate extreme profits. For examples see the Lupron (recently settled) and the AWP megacase.  Pharmacy benefit managers (PBMs) were created to save money for prescription drug buyers.  PBMs negotiate prices with drug manufacturers. Unfortunately, they typically do so in secret and only return a portion of the savings to the consumer. PAL has filed suit against the nation's four largest PBMs in order to challenge this practice and require them to comply with their fiduciary duty to consumers.

Price Gouging
The drug industry has virtually unlimited control over the price of their drugs.  PAL believes that there must be some limit to this control, particularly when it comes to critical life-saving drugs for HIV/AIDS patients.  In its case around Norvir, PAL challenges a 400% price increase under state consumer protection statutes, saying that the price hike amounts to unfair price-gouging.

Q: What distinguishes the PAL Project from other class action litigation efforts against pharmaceutical companies?

A: PAL has been created to represent consumer interests and is driven by consumer groups, senior citizen organizations and other public health advocates. In addition, it holds tremendous promise for achieving significant policy improvements in prescription drug costs.

The PAL class action complaints have specifically been crafted to represent public interests. Relief and remedies will look different than those sought in other legal actions against drug companies, because of a concern for these public interests - equity and monetary proceeds for the greater good will are primary considerations. PAL's approach to winning the class action lawsuits will be fundamentally different from other lawsuits, and hopefully, the outcome of the cases will be fundamentally different, as well - with an eye towards achieving significant changes in how drug companies conduct themselves in the future.

Q: What is a class action lawsuit?

A: A class action lawsuit is a lawsuit where a person, a small group of persons, or an organization represents a larger group of people or organizations that have common issues of fact or law in bringing a suit for harm or wrong done. A class action permits a representative or representatives to sue for a class of persons when the issues in dispute are common to all members of the class and the persons affected are so numerous as to make it impracticable to bring them all before court. There are several reasons why class action suits might be initiated. The impetus for filing class action suits against pharmaceutical companies is that health care providers and consumers are paying inflated prices for drugs due to anti-competitive activities of the massive billion-dollar drug industry.

Q: What would plaintiffs expect to gain by being involved in the lawsuit?

A: The plaintiffs' motivation for becoming involved in the class action lawsuit will primarily come from the desire to be involved in a worthy cause, namely making prescription drugs more accessible. A small financial award may result from successful litigation based on the cost difference between what the plaintiff paid out-of-pocket for the brand name drug as opposed to the lower-cost generic drug, during the specific time period of complaint addressed in the lawsuit.

Q: Why focus on prescription drugs and the pharmaceutical industry?

A: Prescription drugs are the most widely used form of health care in the United States. Virtually every American needs, has used, or will use prescription drugs in their lifetime. The vast majority of Americans report they take prescription drugs (91%), and more than half (54%) say they do so on a regular basis. Yet, a large portion of Americans does not have prescription drug coverage through their health insurance plan: 38 percent of the elderly and 23 percent of those under the age of 65 do not have any coverage for prescription drugs. Sixteen percent of the elderly and 29 percent of the population as a whole have said that they have not filled a prescription because of the cost.

One-quarter (25%) report they have gone without other things to purchase medicines for themselves or their families, and ten percent (10%) say they have given up basic necessities, such as food, to pay for prescription drugs. More than 1 in 10 (14%) Americans say that it is a "serious problem" to pay for the prescription medicines needed for either themselves or their families.

The cost of prescription drugs has skyrocketed in the past ten years. While overall medical inflation slowed to approximately five percent by the mid-nineties, prescription drug inflation grew to between 13 and 17 percent each year from 1995 to 1999. One of the main sources of this growth in spending on prescription drugs is the increased cost of prescription drugs. In 1999, the average cost per day for drug therapy was $2.97, whereas before 1995 it was $1.09. In addition, the pharmaceutical industry is the most profitable in the world with margins on average higher than Fortune 500 companies. While other countries regulate the prices that drug companies can charge for particular drugs, the United States does very little price regulation. Further, certain federal public policies have led to the creation of a monopoly in several classes of drugs. The existence of a monopoly means that there is little competition and very high prices.

Brand name drug manufacturers enjoy patent protection for twenty years during which the prices they charge for drugs are extremely high. At the end of the patent period, generic manufacturers are free to come on the market. When generics enter the market, they usually price their product 30 to 80 percent below the brand name product, thereby giving consumers a cheaper alternative.

Q: What is Hatch-Waxman?

A: In 1984, Congress passed the Drug Price Competition and Patent Term Restoration Act - known as the Hatch-Waxman Act, after its co-sponsors. The Hatch-Waxman Act was intended to foster competition between companies that produce brand-name drugs and companies that produce generics. One of the ways in which this is accomplished is by allowing generics to prove bioequivalence to the brand name drug. In other words, bioequivalence data was assumed to be an effective surrogate for safety and efficacy.

Q: How Have Brand Name Manufacturers "Stalled" Market Entry for Generics?

A: In other ways, however, the Act reduces competition between companies that produce brand name drugs and companies that produce generics. For example, the Act allows the patent holder of a brand-name drug to bring a patent-infringement suit against an applicant for an Abbreviated New Drug Application (ANDA) - essentially allowing the brand-name pharmaceutical company the right to automatically file a suit against a generic drug manufacturer who files for approval of the generic. If such a suit is filed, the FDA is forbidden from approving the ANDA for 30 months or until the litigation is completed (whichever occurs sooner). This is commonly referred to as the "30-month stay."

Additionally, the first company to file an ANDA with the FDA is provided the exclusive right to market its generic drug for 180 days. The FDA cannot approve any other similar generic until the 180-day period expires. This is commonly referred to as the "180-day marketing exclusivity" provision.

It appears in light of recent history, that the 30-month stay and the 180-day marketing exclusivity provisions have diminished competition and facilitated the ability of brand name manufacturers to sue and delay the entry of generic competitors. It appears that some brand name pharmaceutical companies have filed one suit after another to prevent the generics from coming to market. In conjunction with filing suits, another strategy used by some brand name drug manufacturers to prevent generics from coming to market is to settle the lawsuits by entering into anticompetitive agreements with the generic competitors. The purpose of these settlements is to delay generic entry - the parties agree to an out-of-court settlement whereby the brand-name company pays the generic manufacturer millions of dollars to halt entry into the market for a specific time period.