Stetser v. TAP PHARMACEUTICAL PRODUCTS, COA03-901.
| Citation | 598 S.E.2d 570,165 NC App. 1 |
| Decision Date | 06 July 2004 |
| Docket Number | No. COA03-901.,COA03-901. |
| Court | North Carolina Court of Appeals |
| Parties | Harry E. STETSER, Dale E. Nelson, and Michael de Montbrun, individually and on behalf of themselves and all others similarly situated, Plaintiffs, v. TAP PHARMACEUTICAL PRODUCTS, INC.; Abbott Laboratories; Takeda Chemical Industries, Ltd.; Johnson & Johnson; Ethicon Endo-Surgery, Inc.; Indigo Laser Corporation; David Jett; Christopher Coleman; Scott Hidalgo; and Eddy James Hack, Defendants. |
The Blount Law Firm, P.L.L.C., by Marvin K. Blount, Jr., Greenville, and Marvin K. Blount, III, and Kline & Specter, P.C., by Donald E. Haviland, Jr., pro hac vice, and TerriAnne Benedetto, Philadelphia, PA, for plaintiff-appellees.
Smith Moore LLP, by J. Donald Cowan, Jr. and Shannon R. Joseph, and Jones Day, by Daniel E. Reidy, pro hac vice, Greensboro, for defendant-appellant TAP Pharmaceutical Products, Inc.
Womble, Carlyle, Sandridge, & Rice, PLLC, by Pressly M. Millen, Raleigh, for defendant-appellant Abbott Laboratories.
Alston & Bird, LLP, by George O. Winborne, John J. Barnhardt, III, Charlotte, and Lance A. Lawson, and Patterson, Belknap, Webb & Tyler, LLP, by William F. Cavanaugh, Jr., pro hac vice, New York, NY, for defendant-appellants Johnson & Johnson and Ethicon Endo-Surgery, Inc.
Stubbs & Perdue, P.A., by George Mason Oliver and Trawick H. Stubbs, Jr., New Bern, for defendant-appellee Scott Hidalgo.
Gary S. Parsons, Raleigh, for the North Carolina Association of Defense Attorneys, amicus curiae.
Philip R. Isley, Daniel J. Popeo, pro hac vice, Richard A. Samp, pro hac vice, and George M. Teague, Raleigh, for Washington Legal Foundation and North Carolina Citizens for Business and Industry, amicus curiae.
Defendants TAP Pharmaceutical Products, Inc. (TAP), Abbott Laboratories (Abbott), Johnson & Johnson (Johnson) and Ethicon Endo-Surgery (Ethicon) appeal from the trial court's order certifying plaintiffs' class action lawsuit against defendants. Defendant TAP also appeals a separate order denying its motion to amend its answer to add a crossclaim.
Plaintiffs Harry E. Stetser, Dale E. Nelson and Michael de Montbrun filed this action in New Hanover County on 31 December 2001. Plaintiffs allege that defendants inflated the price of the prescription drug Lupron® from 1991 to 2001, thereby defrauding patients and insurance companies in North Carolina and throughout the United States in violation of the federal Prescription Drug Marketing Act (PDMA). Lupron® is used to treat patients with prostate cancer, endometriosis, female infertility, central precocious puberty in children and for preoperative treatment of patients with uterine fibroid-caused anemia. Lupron®, which is only available in liquid form, is administered by injection, usually in a doctor's office or hospital setting.
Defendants Abbott and Takeda are the joint owners of defendant TAP. TAP manufactures Lupron®. Takeda is a Japanese corporation, with headquarters in Osaka, Japan. Takeda's United States headquarters is located in Illinois. Abbott and TAP's principal offices are located in Illinois as well. On 3 October 2001, defendant TAP entered a plea of guilty to federal criminal charges stemming from an alleged conspiracy to violate the PDMA by inflating the price of Lupron®. Defendant TAP agreed to repay the federal government for the overcharges to Medicare and other federal programs as a result of the PDMA violations.
Defendant Johnson is headquartered in New Jersey, while its wholly-owned subsidiaries Ethicon and Indigo both have headquarters in Ohio. Indigo markets the "LASEROPTIC Treatment System," a procedure used to treat patients with enlarged prostate glands having a condition known as benign prostatic hyperplasia.
Individual defendants David Jett, Christopher Coleman, and Scott Hidalgo were employees of Indigo during the period at issue in this lawsuit. Defendant Eddy James Hack was the owner of Oncology Solutions, also known as International Oncology Network, which was a community-based oncology network. Jett and Coleman are residents of North Carolina, while Hidalgo and Hack are residents of the state of Florida. Jett, Coleman, Hidalgo and Hack pled guilty to a criminal information charging them with conspiracy to violate the PDMA in connection with the diversion and marketing of Lupron®.
The named plaintiffs, Harry E. Stetser, Dale E. Nelson and Michael de Montbrun, are all residents of North Carolina. The remaining members of the class are:
All persons and entities in North Carolina and throughout the United States who paid any portion of the cost of Lupron® based upon, in whole or in part, the published AWP for Lupron® (and/or Zoladex® in LCA states). Excluded from the Class are Defendants, any entity in which Defendants have a controlling interest, and their legal representatives, heirs, successors, and any governmental entities.
According to plaintiffs, three types of individual patients were disadvantaged by defendants' marketing scheme: (1) Government Assistance Patients (including individuals who relied on government assistance programs to pay, partially or in full, the cost of their medical care, including Medicare, Medicaid, and TRICARE [formerly known as CHAMPUS]); (2) Private Assistance Patients (including patients whose medical care was paid for in part or totally by private health insurance carriers); and (3) No Assistance Patients (individuals who had no insurance or government assistance to cover their medical costs). Although the federal government reached a settlement with several of the defendants, the settlement did not include reimbursement to individuals who were overcharged co-payments for Lupron® as a result of this conspiracy, nor did the settlement include reimbursement of private health insurance carriers for their alleged overpayments. Therefore, the plaintiff class includes individuals with no insurance nor government assistance, individuals who made co-payments for Lupron® while covered by government assistance programs, individuals who made co-payments while covered by private medical insurance, and private health insurance carriers.
Plaintiffs allege defendants created an elaborate scheme in order to profit illegally from the sale of Lupron® throughout the United States. Plaintiffs contend defendants used several methods to inflate the average wholesale price (AWP) of Lupron®. Government programs and private insurers usually set the amount of reimbursement to medical providers based upon the published AWP. The AWP also affects the amount of patients' co-payments made when they receive prescription drugs. The AWP is listed in a pharmaceutical industry publication called the Red Book. The plaintiffs allege defendants deliberately reported a higher AWP to the Red Book, which increased reimbursement and co-payment amounts for government insurers, private insurers and patients.
Plaintiffs further contend defendants encouraged medical providers to administer Lupron® by selling the drug to them at its actual cost. Therefore, the medical providers were charging patients, private insurance companies and the government the higher AWP while paying a lower actual cost of the drug. The difference between the amount medical providers charged for Lupron® and the cost they paid to acquire the drug accrued to the medical providers. Defendants referred to this difference in internal memos as "spread", "return to practice," "return on investment" or "profit".
Plaintiffs also allege defendants would provide free samples of Lupron® to medical providers and encourage them to seek reimbursement from the government programs, private insurers, or individual patients for those free samples. The misuse of these free samples by medical providers further inflated the AWP by increasing market demand for Lupron®. Also, defendants offered illegal incentives to medical providers to encourage them to use Lupron®, including promises of debt repayment, trips to resort areas, and free consulting services. Plaintiffs allege these actions encouraged physicians to use Lupron® and thereby increased the AWP of Lupron® even further.
The Lupron® price inflation scheme was a direct violation of the PDMA. Several of defendant TAP's employees, as well as several physicians, were indicted for conspiracy to violate the PDMA. As noted above, defendant TAP pled guilty to the federal criminal conspiracy charges, along with individual defendants Jett, Coleman, Hidalgo and Hack.
Plaintiffs filed this lawsuit on 31 December 2001, asserting claims for unjust enrichment, fraud, civil conspiracy, concert of action/aiding and abetting and violation of various consumer fraud and antitrust laws. Motions by defendants TAP and Abbott to dismiss, as well as to stay or dismiss the lawsuit pursuant to N.C. Gen.Stat. § 75-12.1, were denied on 13 May 2002, as were motions to dismiss pursuant to Rule 12(b)(6) by defendants Johnson, Ethicon and Indigo.
Defendant TAP filed its answer to the complaint on 29 April 2002. Defendants Johnson, Ethicon and Indigo filed a separate answer on 29 April 2002. Defendant Abbott's answer was filed on 1 May 2002. All defendants asserted affirmative defenses in their answers, but did not include any crossclaims.
The trial court entered a scheduling order for discovery on the question of class certification on 22 August 2002, which it amended on 19 September 2002.
Defendants TAP, Abbott and Johnson filed a motion to compel on 8 November 2002, requesting that the trial court order plaintiffs to submit settlement agreements entered...
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