State v. Ortho-Mcneil-Janssen Pharms., Inc., Appellate Case No. 2012-206987

CourtUnited States State Supreme Court of South Carolina
Decision Date25 February 2015
Docket NumberOpinion No. 27502,Appellate Case No. 2012-206987
PartiesState of South Carolina ex. rel. Alan Wilson, in his capacity as Attorney General of the State of South Carolina, Respondent, v. Ortho-McNeil-Janssen Pharmaceuticals, Inc., f/k/a Janssen Pharmaceutical, Inc., and/or Janssen, L.P., and Johnson & Johnson, Inc., Defendants, of whom Ortho-McNeil-Janssen Pharmaceuticals, Inc. is the Appellant.
ORDER

This matter comes before the Court on the petition of Appellant Ortho-McNeil-Janssen Pharmaceuticals, Inc., for rehearing of this Court's opinion in State ex rel. Wilson v. Ortho-McNeil-Janssen Pharmaceuticals, Inc., Op. No. 27502 (S.C. Sup. Ct. filed Feb. 25, 2015). We grant the petition, dispense with further briefing, and file a substituted opinion, which is attached to this order.1 While Appellant persists in pursuing issues not preserved for appellate review, we find it necessary to issue a substitute opinion to correct a mathematical calculation and to clarify that the unfair trade practices judgment against Appellant is supported by federal law,including the federal "tendency to deceive" standard, and thus, complies with S.C. Code Ann. § 39-5-20(b) (1985).

IT IS SO ORDERED.

s/ Jean H. ToalC.J.

s/ Costa M. Pleicones J.

s/ Donald W. Beatty J.

s/ John W. Kittredge J.

s/ Kaye G. Hearn J.

Columbia, South Carolina

July 8, 2015

Appeal from Spartanburg County

Roger L. Couch, Circuit Court Judge

AFFIRMED IN PART, REVERSED IN PART AND REMANDED

Steven W. Hamm and Steven J. Pugh, both of Richardson, Plowden & Robinson, PA, of Columbia, C. Mitchell Brown, William C. Wood, Jr., A. Mattison Bogan and Miles E. Coleman, all of Nelson MullinsRiley & Scarborough, LLP, of Columbia, Edward M. Posner and Chanda A. Miller, both of Drinker Biddle & Reath, of Philadelphia, Pennsylvania, for Appellant.

John B. White, Jr., and Donald C. Coggins, Jr., both of Harrison, White, Smith & Coggins, PC, of Spartanburg, John S. Simmons, of Simmons Law Firm, LLC, of Columbia, Attorney General Alan M. Wilson, Deputy Attorney General Robert D. Cook and Assistant Deputy Attorney General Clyde H. Jones, Jr., all of Columbia, Fletcher V. Trammell, Robert W. Cowan, and Elizabeth W. Dwyer, all of Bailey Peavy Bailey, of Houston Texas, for Respondent.

Gray T. Culbreath and Laura W. Jordan, both of Gallivan White & Boyd, P.A., of Columbia, for Amici Curiae, The South Carolina Chamber of Commerce, South Carolina Business and Industry Political Education Committee and The South Carolina Manufacturer's Alliance.

JUSTICE KITTREDGE:

Appellant Ortho-McNeil-Janssen Pharmaceuticals (Janssen) is a pharmaceutical company that manufactures the antipsychotic drug Risperdal. Risperdal is among a class of drugs prescribed primarily for the treatment of schizophrenia. The Attorney General of South Carolina believed that Janssen had violated the South Carolina Unfair Trade Practices Act (SCUTPA)2 by engaging in unfair methods of competition by willfully failing to disclose known risks and side effects associated with Risperdal.

On January 24, 2007, the State and Janssen entered into a tolling agreement concerning the statute of limitations. SCUTPA has a three-year statute of limitations, as section 39-5-150 of the South Carolina Code provides that "[n]o action may be brought under this article more than three years after discovery of the unlawful conduct which is the subject of the suit." The State filed its Complaint on April 23, 2007, seeking statutory civil penalties against Janssen on two claims. The first claim arose from the content of the written material furnishedby Janssen since 1994 with each Risperdal prescription, the so-called labeling claim. The second claim centered on alleged false information contained in a November 2003 Janssen-generated letter sent to the South Carolina community of prescribing physicians, the so-called Dear Doctor Letter. Because both claims arose more than three years prior to January 24, 2007, Janssen pled the statute of limitations as a bar to the Complaint.

The matter proceeded to trial. A jury rendered a liability verdict against Janssen on both claims. The trial court rejected Janssen's defenses, including the statute of limitations, finding that both claims were timely. The trial court imposed civil penalties against Janssen for both claims totaling $327,073,700 based on 553,055 separate violations of SCUTPA in connection with its deceptive conduct in the sales and marketing of Risperdal.

Janssen appeals. Because this is an action at law, our review of factual challenges is limited to determining whether there is any evidence to support the verdict. As for properly preserved questions of law, our review is plenary. We affirm the liability judgment on the labeling claim but modify the judgment to limit the imposition of civil penalties to a period of three years from the date of the tolling agreement, which is essentially coextensive with the three-year statute of limitations, subject to an additional three months by virtue of the time period between the January 24, 2007, tolling agreement and the filing of the Complaint on April 23, 2007. We further remit the civil penalties on the labeling claim to $22,844,700. We affirm the liability judgment on the DDL claim, but remit those civil penalties to $101,480,000. Accordingly, we affirm in part, reverse in part, and remand for entry of judgment against Janssen in the amount of $124,324,700.

I.
A.FDA Regulatory Process and Background

A brief summary of the Food and Drug Administration's (FDA) regulatory authority over the pharmaceutical industry and the evolution of antipsychotic drugs provides a helpful backdrop to the facts of this case. "In the 1930's, Congress became increasingly concerned about unsafe drugs and fraudulent marketing, and it enacted the Federal Food, Drug, and Cosmetic Act (FDCA)."3 Wyeth v. Levine,555 U.S. 555, 566 (2009) (citation omitted). The FDCA's "most substantial innovation was its provision for premarket approval of new drugs." Id. Following implementation of the FDCA, the FDA "required every manufacturer to submit a new drug application, including reports of investigations and specimens of proposed labeling" for regulatory review and approval.4 Id. "Until its application became effective, a manufacturer was prohibited from distributing a drug." Id. FDA regulations require a new drug application to "include all clinical studies, as well as preclinical studies related to a drug's efficacy, toxicity, and pharmacological properties." Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193, 196 (2005) (citing 21 C.F.R. § 314.50(d)(2), (5) (2005)).

The FDA new drug approval process includes specific procedures through which warning labels are drafted, approved, and required to be included in the packaging of manufactured drugs. A drug label "must contain a summary of the essential scientific information needed for the safe and effective use of the drug," and the label "must be informative and accurate and neither promotional in tone nor false or misleading in any particular." 21 C.F.R. § 201.56(a)(1)-(2) (2014). Indeed, federal regulations set forth detailed requirements as to the content, the formatting, and the order of required information about potential risks and the safe and effective use of a drug. Id. § 201.57(c) (2014). Specifically, FDA regulations require drug labels to include, inter alia: (1) "black box" warnings about serious risks that may lead to death or serious injury; (2) contraindications describing any situations in which the drug should not be used because the risk of use outweighs any possible therapeutic benefit; (3) warnings and precautions about significant adverse reactions and other potential safety hazards; and (4) any adverse reactions for which there is a basis to believe a causal relationship exists between the drug and the occurrence of the adverse event. Id. As these FDA regulations make clear, the category in which a particular risk appears on a drug label is a critical indicator of both the degree of the risk and also the likelihood and severity of the adverse consequences the drug may cause.

After a new drug application has been approved, the drug's sponsor has continuing duties to the FDA to ensure the long term efficacy and safety of the approved drug.

For example, once drugs are approved by the FDA, the drug's sponsor is required to review, and report to the FDA, all "adverse drug experience"5 information it receives from any source, including adverse experiences reported during the process of post-marketing clinical trials. 21 C.F.R. § 314.80(b), (c) (2014). As new risks and side effects are discovered, a manufacturer must revise a drug's label "to include a warning about a clinically significant hazard as soon as there is reasonable evidence of a causal association with a drug; a causal relationship need not have been definitely established." 21 C.F.R. § 201.57(c)(6)(i). As the FDA does not conduct independent scientific testing, it is incumbent upon sponsors to disclose all clinical data to ensure the safe and effective use of drugs.

Some have expressed a growing concern regarding the pharmaceutical industry's reticence to disclose negative clinical data, and the impact this has on the public health and welfare. Indeed, it has been stated that:

[T]he failure to disclose study results not only impacts clinical trial participants, but the health of the general public may be put in jeopardy as well. For drugs that have received FDA approval, post-market clinical trials investigating new uses of the medication often reveal important information concerning side effects and related adverse complications with the treatment. To the extent that prescribing physicians do not have this essential data, they could inadvertently be putting their patients at serious risk by continuing to recommend the medication.
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