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Trial Lawyers Inc.


  Trial Lawyers Inc.: Attorneys General
   A Report On The Alliance Between State AGs And The Plaintiffs' Bar 2011

 

Trial Lawyers Inc.: Attorneys General
A Message from the Director
Introduction: Tobacco
Pharmaceuticals
Securities and Finance
Public Nuisance
Insurance
Leadership Team
Conclusion
Other Resources
Media
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ARTICLES

State-Sponsored Lawsuits Are Trial Bar's New Cash Cow, James Copland, Washington Examiner, 10-25-11
Obama's CFPB Nominee Abused Private Attorney Contracting in Ohio, James Copland, Washington Examiner, 10-25-11


WEBCAST INTERVIEW

James Copland on Wall Street Journal Live
He discussed his new report, Trial Lawyers Inc.: Attorneys General on 10-27-11.


RADIO

James Copland appeared on the following radio programs to discuss his new report, Trial Lawyers Inc.: Attorneys General:
FM News Talk 97.1's "Randy Tobler Show," 10-29-11
WABC's "John Batchelor Show," 10-27-11
WTPL's "Bulldog Live with Brian Tilton," 10-26-11
SBA's "Small Business Advocate with Jim Blasingame," 10-26-11


VIRTUAL EVENT

Honorable Edwin Meese, James Copland, and Professor Lester Brickman discussed Trial Lawyers Inc: State Attorneys General in a nationwide conference call. View the event.


IN THE NEWS

Hood's No-Bid Contracts Criticized, Madison County Journal, 10-27-11
Report Details The Ties That Bind AGs, Trial Lawyers, Forbes, 10-25-11
Miller Denounces Report Ranking Him Among Friendliest To Trial Lawyers' Agenda, IowaPolitics.com, 10-25-11
Politics New Report Exposes Cozy Relationship Between State AGs and Trial Lawyers, The Blaze, 10-25-11
McGraw Criticized in National Report on State Attorneys General, West Virginia Watch Dog, 10-25-11
Hood Says Political Foe Abused His Office at DPS, Picayne Item, AP, 10-25-11
Report: Obama Nominee, Some AGs Too Close To Plaintiffs Bar, Legal News Line, 10-25-11
State Attorneys General Rake in Trial Lawyer Cash, Dole Out Contracts, Watchdog.org, 10-25-11

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PHARMACEUTICALS

FEEDING FRENZY

State Attorney Generals Serve Up Lunch for the Mass-Tort Bar

 


The state AGs’ strategy of enlisting contingency-fee lawyers to recoup states’ Medicaid expenses was subsequently extended to suits against pharmaceutical makers, mainly alleging that the companies were looting Medicaid through “price gouging” or the “improper marketing” of drugs, including the promotion of “off-label” uses not formally approved by the U.S. Food and Drug Administration (see “What Are ‘Off-Label’ Drugs?” box below).

 

McGraw Leads the Way


A pioneer in suing pharmaceutical companies, West Virginia attorney general Darrell McGraw and his allies in the litigation industry have taken full advantage of his state’s lenient attitude toward no-bid contracting. First elected in 1992, McGraw has actively courted an army of “special assistant” attorneys general, arguably in defiance of a West Virginia court’s holding that the state’s AG is unauthorized by either statute or the state constitution to make such agreements and a similar rebuke by the state’s auditor.[37]

 

McGraw’s best known case of parceling out the state’s business to Trial Lawyers, Inc., which spawned copycat cases nationwide, was filed in 2001 against Purdue Pharma, manufacturer of the painkiller Oxycontin, for allegedly “aggressive marketing” tactics that understated the drug’s risks.[38] To handle the case, McGraw hired four private firms that had given $47,500 to his campaigns. These firms garnered $3 million in fees out of an ultimate $10 million settlement.[39] McGraw also took the extraordinary step of deciding on his own to disburse the remaining funds—to various charitable causes of his choosing, including $500,000 to the University of Charleston’s pharmacy school[40]—rather than directing the money to the state’s general fund. In response, the U.S. Department of Health and Human Services withheld $2,732,968 that it claimed it was owed as its share of the proceeds by West Virginia’s Department of Health and Human Resources. McGraw’s lawsuit, in short, led to a hole in his state’s budget. [41]

 

Defying efforts to rein him in, McGraw has continued to farm out the state’s mass-tort business against drug manufacturers to some of the very same law firms. One of them, Cook, Hall & Lampros, has led the state’s suits against Merck-Medco and Bank of America.[42] The firm has given $20,000 to McGraw’s campaigns since 2004 and is headed by the nephew by marriage of McGraw’s brother.[43] Another firm, DiTrapano, Barrett & DiPiero, has handled suits against Abbott Laboratories, Geneva Pharmaceuticals, Warrick Pharmaceuticals, and Dey Pharma, among others.[44] The DiTrapano firm has given McGraw $37,800 since 2004, about 8 percent of the $500,000 raised by McGraw over that time span.[45]

 

A JUDICIAL REBUKE

Although the Zyprexa lawsuit netted millions of dollars for aggressive state AGs and Trial Lawyers, Inc., it did not impress U.S. District Judge Jack Weinstein, of the Eastern District of New York, who oversaw much of the drug’s mass-tort litigation. Weinstein is well known for crafting mass-tort settlements, dating back to his handling of the Agent Orange litigation in the 1980s.[46] When faced with Mississippi’s Zyprexa suit, however, he not only tossed out all but one of Mississippi’s claims; he also lambasted the attorneys for their legal theory:

If allowed to proceed in their entirety, the State’s claims could result in serious harm or bankruptcy for this defendant and the pharmaceutical industry generally. For the legal system to be used for this slash-and-burn style of litigation would arguably constitute an abuse of the legal process. Constitutional, statutory and common law rights of those injured to seek relief from the courts must be recognized. But courts cannot be used as an engine of an industry’s destruction.[47]


 

 

Antipsychotic Drug Prompts Crazy Litigation


Among the major pharmaceutical-industry targets of the state AGs—and Trial Lawyers, Inc.—is Eli Lilly, which markets the antipsychotic drug Zyprexa, a standard treatment for schizophrenia and bipolar disorder. A side effect of the drug can be weight gain and elevated blood sugar. In private litigation alleging that Zyprexa caused individuals’ diabetes and obesity, Lilly has already settled with more than 31,000 claimants—out of the 20 million people who had used the drug worldwide at the time of suit—for a minimum of $1.2 billion.[48]


State attorneys general went after Lilly using a different theory, namely, that in promoting Zyprexa as a treatment for dementia in elderly patients, an off-label use that had not been specifically approved by the FDA, Lilly was illegally inflating sales and thus state medical costs.[49]


In 2008, Lilly settled with 33 states, for $62 million, in litigation spearheaded by Illinois attorney general Lisa Madigan.[50] (Though Lilly admitted no wrongdoing, it did disclose the identity of individuals to whom it had paid consulting or promotional speaking fees.) But 12 states decided not to join the settlement and instead filed their own suits, which sought higher payments. These were often farmed out to Trial Lawyers, Inc. Among the states to have settled individual Zyprexa suits to date are:

 

  • Utah, settling for $24 million, with $4 million to private attorneys hired by Attorney General Mark Shurtleff;
  • West Virginia, settling for $22 million, with $6.75 million to private attorneys hired by Attorney General Darrell McGraw;
  • Louisiana, settling for $20 million, with $4 million to private attorneys hired by then–attorney general Charles Foti;
  • Mississippi, settling for $18.5 million, with $3.7 million to private attorneys hired by Attorney General Jim Hood;
  • Arkansas, settling for $18.5 million, with $2.78 million to private attorneys hired by Attorney General Dustin McDaniel; and
  • New Mexico, settling for $15.5 million, with $5.4 million to private attorneys hired by former attorney general Patricia Madrid.[51]


WHAT ARE “OFF-LABEL” DRUGS?

Off-label prescriptions of drugs are those written for the treatment of ailments or conditions beyond those for which the product was approved by the U.S. Food and Drug Administration. Only approved uses are listed on the label. However, drug companies may sell drugs for off-label uses, since all drugs approved for sale have undergone large-scale clinical trials that have established their safety.[52] (Possible side effects are also listed, but these can occur in patients who are taking the drugs for approved uses as well as in patients who are not.) Given the cost and time-consuming nature of the approval process, drug manufacturers typically do not submit new uses of already approved medications for full FDA review after the drug has been marketed and physicians have begun prescribing it for other ailments. But such uses are regularly studied in the medical literature, and such studies often reveal a broader spectrum of ailments against which the drug in question is effective than what the limited scope of clinical trials was able to reveal.[53] Off-label drug prescriptions constitute a large percentage of all pharmaceutical sales nationwide and likely contribute to public health.


 

A leading law firm handling the Zyprexa litigation for several states, including Mississippi and Arkansas, was the Texas firm Bailey Perrin Bailey. The firm donated $75,000 to Mississippi attorney general Jim Hood’s reelection campaign and $70,000 to the Arkansas Democratic Party.[54] Bailey Perrin was not involved in the Louisiana or New Mexico Zyprexa lawsuits. (The firms representing them did give generously to those states’ attorneys general, however—including $55,000 given by Santa Fe law firm Heard Robins Cloud & Lubel to the election campaign of New Mexico attorney general Gary King.)[55] But Bailey Perrin did represent Louisiana and New Mexico in similar litigation involving Janssen Pharmaceuticals’ antipsychotic drug Risperdal, and the Louisiana lawsuit scored a $258 million verdict at trial.[56] (The firm donated $20,000 to a political action committee that supported Louisiana attorney general Buddy Caldwell’s campaign, and $50,000 and $25,000 to current and former New Mexico attorneys general King and Madrid, respectively.[57] In addition, one of the firm’s name lawyers, Kenneth Bailey, gave $85,000 to the Democratic Attorneys General Association, which spent hundreds of thousands backing both Caldwell’s and King’s candidacy.)[58]


Alabama’s Crimson Tide of Pharma Suits


Although Trial Lawyers, Inc.’s state attorney general allies are usually Democrats, litigation opportunity counts for more with the plaintiffs’ bar than political affiliation does. Consider former Alabama attorney general Troy King, a Republican whose campaign profited handsomely from the political largesse of the influential law firm Beasley Allen—and hired the Montgomery firm to help lead a suit against 73 pharmaceutical companies over Medicaid reimbursements.[59]


The Alabama litigation, which is similar to that initiated by Kentucky attorney general Jack Conway and others, alleges that pharmaceutical companies have been “gouging” the state by recommending “average wholesale prices” (AWP) to pharmacists, which, the state argued, inflated its Medicaid bills. Like the Zyprexa lawsuits that actually went to trial, the Alabama AWP lawsuits that did so have not ultimately fared well. After juries awarded verdicts of $215 million, $33 million, and $80.9 million against AstraZeneca, Novartis, and GlaxoSmithKline, respectively, the companies pressed their cases on appeal, and the Alabama Supreme Court threw out these awards in their entirety.[60] According to the court, there was nothing preventing Alabama from negotiating its own pricing with the companies, and “[t]he State failed to produce substantial evidence that it reasonably relied on the misrepresentations and/or fraudulent suppression it alleged.”[61]


Notwithstanding this rebuke, the private firms hired by Alabama stand to profit handsomely from the AWP litigation. Rather than risk trial, a number of the other companies that were sued decided to settle the case in 2008 for $35 million, with $8.7 million going to the law firms for fees and expenses; a subsequent settlement in 2009 with still more companies came to $89 million, with $12 million reserved for the private attorneys.[62]


The evidence seems to suggest that at least some of these attorneys were also generous donors on behalf of Troy King’s political interests. Alabama’s permissive campaign-finance disclosure rules allow donors to filter donations through political action committees, but the American Tort Reform Association (ATRA) examined the money trail in detail and concluded that Beasley Allen played a big role in bankrolling King: according to ATRA’s report, Beasley Allen and its lawyers donated over $760,000 to eight separate PACs from 2006 through 2010, and these same PACs in turn gave $240,000 to support King’s campaign.[63] (The Beasley Allen firm is led by longtime personal-injury kingpin Jere Beasley, who, before achieving national prominence as a plaintiffs’ lawyer, served as the state’s attorney general, under Governor George Wallace.)


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33. For a thorough discussion of contingency fees, see generally Lester Brickman, Lawyer Barons: What Their Contingency Fees Really Cost America (2011).
34. See, e.g., John Beisner, et al., Bounty Hunters on The Prowl: The Troubling Alliance of State Attorneys General and Plaintiffs’ Lawyers,Institute for Legal Reform(May 26, 2005), available at www.instituteforlegalreform.com/get_ilr_doc.php?id=939.
35. For an example involving West Virginia’s Darrell McGraw, see John O’Brien, More OxyContin Money Dished Out by AG McGraw, LegalNewsline.com, Aug. 6, 2007, at http://www.legalnewsline.com/news/198887-more-oxycontin-money-dished-out-by-ag-mcgraw. For a broad critique of such so-called cy pres awards more generally in the class action context, see Theodore H. Frank, Cy Pres Settlements, Fed. Soc’y Class Action Watch (Mar. 8, 2008), available at http://www.fed-soc.org/publications/pubid.887/pub_detail.asp.
36. See Beisner, supra note 34.
37. See McGraw v. American Tobacco Co., No. 94-C-1707 (W. Va. Cir. Ct. Nov. 29, 1995) (holding that a contingency-fee arrangement is an unlawful appropriation of state funds and that the attorney general has neither statutory or constitutional authority to retain such counsel); Phil Kabler, Legislative Audit Questions Attorney General’s Authority, Charleston Gazette, January 8, 2002, at 5A (citing “constitutional requirement that the Legislature appropriate state funds”).
38. See Staff Reports, Oxycontin Case Divides McGraw’s Fans, Foes, The West Virginia Record (Aug. 8, 2008, 8:30 AM), http://wvrecord.com/news/contentview.asp?c=214129.
39. Id.
40. See John O’Brien, Feds Probing McGraw’s Handling of Purdue Pharma Settlement, Legal Newsline.com (May 17, 2007, 11:00 AM), http://www.legalnewsline.com/news/195289-feds-probing-mcgraws-handling-of-purdue-pharma-settlement.
41. See ATRA, Beyond Reproach? Fostering Integrity and Public Trust in the Offices of State Attorneys Generals 16 (2010), available at http://www.bcnys.org/inside/legalreform/2010/ATRA-Report-Beyond-Reproach.pdf.
42. See id.
43. See id.
44. See id.
45. See id.
46. See William Glaberson, Agent Orange, the Next Generation, N.Y. Times, Aug. 8, 2004, http://www.nytimes.com/2004/08/08/nyregion/08orange.html?pagewanted=all.
47. O’Brien, supra note 50.
48. See Alex Berenson, Lilly to Pay Up to $500 Million to Settle Claims, N.Y. Times, Jan. 4, 2007, http://www.nytimes.com/2007/01/04/business/04cnd-drug.html?hp&ex=1167973200&en=32c3e3c2d5309a8b&ei=5094&partner=homepage; Chris Rizzo, Lilly Settles with 32 States Over Its Zyprexa Marketing, Legal Newsline.com (Oct. 7, 2008, 10:51 AM), http://www.legalnewsline.com/news/216400-lilly-settles-with-32-states-over-its-zyprexa-marketing.
49. See Associated Press, Eli Lilly Settles Zyprexa Lawsuit for $1.42 Billion, MSNBC.Com(Jan. 15, 2009, 6:45 PM), http://www.msnbc.msn.com/id/28677805/#.ToJIReyxV98.
50. See Rizzo, supra note 48; John O’Brien, Louisiana Settles with Eli Lilly, $4M for private attorneys, Legal Newsline.com (Apr. 8, 2010, 4:52 PM), http://www.legalnewsline.com/news/226556-louisiana-settles-with-eli-lilly-4m-for-private-attorneys.
51. See John O’Brien, Lilly Settles Ark. Suit Brought by Bailey Firm, Legal Newsline.com (Feb. 18, 2010, 12:34 PM), http://www.legalnewsline.com/news/225611-lilly-settles-ark.-suit-brought-by-bailey-firm.
52. Note, however, that the FDA sharply limits companies’ ability to market drugs for off-label use and typically limits communications with doctors to the dissemination of peer-reviewed journal articles and textbook excerpts, as well as answering doctors’ questions posed directly about such off-label use. See, e.g., Gregory Conko & Henry I. Miller, Off Target on Off-Label Drugs, Forbes.com (May 12, 2010), at http://www.fed-soc.org/publications/pubid.887/pub_detail.asp.
53. See id.
54. See O’Brien, supra note 51.
55. See ATRA, supra note 41 at 12.
56. See John O’Brien, La. Jury Reaches $258M Verdict in Risperdal Case, Legal Newsline.com (Oct. 19 2010, 2:22 PM), http://www.legalnewsline.com/news/229180-la.-jury-reaches-258m-verdict-in-risperdal-case.
57. See ATRA, supra note 41 at 9, 12.
58. See id.
59. See id. at 6-7.
60. See John O’Brien, Ala. SC Consolidates Two of King’s AWP Lawsuits, Legal Newsline.com (Oct. 4 2010, 4:48 PM), http://www.legalnewsline.com/news/228973-ala.-sc-consolidates-two-of-kings-awp-lawsuits.
61. See ATRA, supra note 41 at 6.
62. See id.
63. See id. at 7.

 


 

 


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