Author: TSA Press

A health insurer is suing the maker of a drug on the market for more than 60 years in federal court, alleging that it engaged in “one of the most outrageous price-gouging schemes in the history of American medicine.”

In a complaint filed Thursday in the U.S. District Court for the Central District of California, Louisville, Kentucky-based Humana alleged that Staines-upon-Thames, U.K.-based Mallinckrodt engaged in monopoly, bribery, racketeering, fraud and other practices to increase the price of H.P. Acthar Gel (corticotropin) by more than 97,000 percent, from $40 per vial in 2001 to $39,000 by 2018. Were it not for the alleged scheme, Humana said it would have paid a fraction of the $700 million over the course of eight years that it did.

A spokesperson for Mallinckrodt wrote in an email the case should be dismissed, and that the drugmaker would “vigorously” defend itself.

“Mallinckrodt strongly believes that Humana’s complaint is completely without merit, as it is based on misstatements of fact and erroneous applications of the law,” the spokesperson wrote. “Humana’s past and present utilization management policies require that a patient and prescriber provide Humana with adequate clinical rationale and treatment history before Humana makes an informed and discretionary decision to reimburse Acthar.”

A spokesperson for Humana confirmed the filing of the lawsuit, but declined to comment further, citing a company policy of not commenting on pending litigation.

The drug initially won Food and Drug Administration approval in 1952 for a variety of indications – at a time when the agency’s regulations were less strict than today – and currently has approval for infantile spasms, exacerbations of multiple sclerosis and certain other indications.

The trajectory of Acthar’s list price will be familiar to those following drug price increases that have achieved similar infamy in recent years.

In 2001, Aventis – now part of French drugmaker Sanofi – sold rights to the then-moribund Acthar for $100,000 plus royalties to Questcor, which then increased the price to $750, increasing it further in the ensuing years. The price already exceeded $30,000 by the time Mallinckrodt bought Questcor for $5.6 billion in April 2014.

Humana’s complaint alleges that Mallinckrodt engineered the price increases in three ways. First, it acquired rights to a competing Novartis drug not approved in the U.S., Synacthen Depot, and then shelved it without developing it for the U.S. market. Second, it artificially increased demand for the drug by using a charitable foundation for illegal payment of patient copays. And third, it bribed doctors to prescribe Acthar when there were cheaper and more effective treatments available.

A study published last year found that 88 percent of more than 200 physicians who frequently prescribe Acthar had received payments from Mallinckrodt, including 20 percent who received payments of more than $10,000.

Photo: Chris Ryan, Getty Images

Vanquishing an opponent in IP litigation is never easy. Especially when significant legal developments complicate matters for plaintiffs. On the patent side, 2017’s Supreme Court opinion on patent venue in TC Heartland (discussed here, and on these pages too) has definitely complicated matters for patent owners. The formerly liberal venue rules, where a patentee could hale a defendant into every federal court where it could establish jurisdiction, were suddenly no more. Instead, patentees were limited to bringing suit where the defendant was incorporated or wherever it had a regular and established place of business. Big change, if only because win rates in patent cases for patentees have been and remain impacted by where a case is brought.

Before TC Heartland, proving venue was proper was easy in most patent cases. That has changed since that opinion was issued, with venue fights a more common occurrence — especially where the defendant is motivated to avoid facing suit in what it considers an unfavorable jurisdiction. While most plaintiffs have adapted to the new venue requirements by filing where the defendant is incorporated — hello, Delaware — or where it is physically headquartered, there are some plaintiffs that have persisted in pushing the envelope on the question of what a regular and established place of business is in America today. Not such a simple question, with customer behaviors changing rapidly. Just consider the ubiquitous uptake of the mobile phone as more than just a communication device and its impact on ecommerce, for example.

Two recent district court decisions are illustrative of the types of venue questions that district courts are grappling with post-TC Heartland. Both cases involve huge technology companies seeking to avoid litigating in unfavorable districts. In one, Google tried to avoid the clutches of the Eastern District of Texas with a motion under 12(b)(3) seeking dismissal of the complaint for improper venue. In the other, Amazon tried a motion to transfer based on improper venue; it sought to remove a case from the plaintiff’s home forum in upstate New York all the way to Amazon’s Seattle home base. While both Google and Amazon were unsuccessful, their attempts to challenge venue confirm the continued importance of this threshold question to modern-day litigation, while illustrating the challenges faced by today’s tech giants in trying to limit their patent litigation venue exposure to a few select districts.

In some ways, the Google case (Super Interconnect Technologies LLC v. Google LLC, case no. 2:18-cv-00463, E.D. Tex.) is a replay of earlier Google venue battles. At the core of the issue was whether the physical presence of Google “Global Cache” servers — which are provided by Google to ISPs in the EDTX’s environs — constitute a regular and established place of business under patent venue law. Despite losing on the issue in a previous case, Google re-urged the question before the same district court judge that had found against them earlier. Perhaps unsurprisingly, the judge once again found that the physical presence of the Google servers, coupled with the fact that they generate revenue for Google (like a 21st-century digital goods vending machine, I guess), meet the physical place of business requirement. Perhaps anticipating some pushback, the district court also limited its decision on whether a server can be a place of business to the facts of the case before it. That said, however, it remains clear that the EDTX is a court where an expansive definition of what constitutes proper venue still holds sway.

From servers in the Google case, we now turn to lockers and grocery stores in the Amazon dispute. In deciding whether or not Amazon had an established place of business in upstate New York, the court in Rensselaer Polytechnic Institute and CF Dynamic Advances LLC, v. Amazon.com, Inc., (case no. 1:18-cv-00549 N.D. NY) considered the full scope of Amazon’s links to that forum. First, the Court noted that Amazon owns Whole Foods and that there was a Whole Foods in Albany that advertised other Amazon services. Next, the Court found that Amazon had announced plans to set up a distribution center in the district, while already maintaining an Amazon Locker program in the Whole Foods and two gas stations in the area. Importantly, those lockers were branded with Amazon logos, were listed on Amazon’s website, and Amazon negotiated specific terms for hosting the lockers with the gas stations. The point of the lockers, of course, is to provide Amazon customers with a convenient location to pick up their purchases. Taking into account all of Amazon’s “touches” with the forum, venue was proper. But the court found that only the lockers were valid bases for imputing venue to Amazon, unlike the Whole Foods store or the prospective distribution center. Even though the lockers were not staffed by Amazon personnel, but rather serviced by Amazon agents on an ongoing basis, the fact that these were clearly physical locations that Amazon had set up to conduct business was enough to carry the day for the plaintiff on venue.

Ultimately, these decisions suggest that venue issues will continue as a source of conflict in patent cases. While the question of whether Amazon lockers or Google servers may not be relevant to other companies, each company should consider whether or not they are exposed to venue because of physical business locations they are maintaining. We know for sure that patent Caesers will do their best to choose the battlefield they find most favorable. Defendants hoping to make battle in a more favorable location are best advised to know where they are most vulnerable in advance of conflict. No sense in making things easier for the conqueror.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

Tale as old as time,
Trump just doesn’t see.
Capricious is a flaw,
Cannot change the law,
Arbitrarily.

Yesterday, the Trump administration announced it was gutting the Endangered Species Act. Why? The Department of the Interior says that changing the way the ESA is enforced will increase transparency and efficiency while still protecting wildlife. If you believe that, I have a oil rig in Manhattan I’d like to sell you. The real reason for the proposed changes is to make it easier for businesses and ranchers to trample wildlife on their way to greater profits. You can tell who this is intended to benefit by just looking at the validators who support this proposed change to the regulation:

A series of statements in support of the changes, published by the Interior Department, included comments from five Republican U.S. senators and six members of Congress, the National Association of Home Builders, the Public Lands Council, the National Cattlemen’s Beef Association and other organizations.

Right. If anybody cares about transparency and efficiency in protecting wildlife, it’s the National Association of Home Builders and the National Cattleman’s Beef Association. Sure.

Also yesterday, Massachusetts Attorney General Maura Healey and California Attorney General Xavier Becerra promised to sue the administration to stop these changes. From The Enterprise:

“By gutting key components of the Endangered Species Act, one of our country’s most successful environmental laws, the Trump administration is putting our most imperiled species and our vibrant local tourism and recreation industries at risk,” Healey said in a statement. “We will be taking the administration to court to defend federal law and protect our rare animals, plants, and the environment.”

Healey and California Attorney General Xavier Becerra said the new rules would allow federal agencies to ignore “serious threats to endangered animals and plants,” limit the circumstances when a species can be listed as threatened, and eliminate a requirement that agencies consider a species’ ability to recover before removing it from the endangered or threatened list.

Healey’s office said she believes the rules “would pave the way for approval of oil and gas and other development projects despite any species impacts.” U.S. Sen. Ed Markey took a similar stance, saying the changes came “at the behest of the oil, gas, and mining industries” and “will put countless species in the crosshairs of extinction.”

And so we play our game: the Trump administration wants to change the law based on a pretextual reason that nobody should actually believe. The states want to block the administration and will likely argue that their rule change is arbitrary and capricious. Progressive courts will recognize the bad faith and bad intentions of the Trump administration and try to block him from implementing wanton destruction of vulnerable species based on the say so of some dude who thinks methane-induced climate change is a socialist, vegan “hoax.” Republican courts will rule that the president can do whatever he wants because the last remaining habitats for the Ahch-To Porg should not stand in the way of voracious capitalism.

In a 5-4 decision, Chief Justice John Roberts will rule that not only is the Trump administration allowed to put Don Jr. in charge of “administering” the the Endangered Species Act, it will also rule that Massachusetts has no standing to sue unless lobsters are threatened, and overrule Mass v. EPA which is the thing even slightly standing in the way of fossil fuel proponents who want to ruin the climate.

Everything is terrible and will get worse.

AG Maura Healey plans to sue feds to protect wildlife [The Enterprise]

Elie Mystal is the Executive Editor of Above the Law and a contributor at The Nation. He can be reached @ElieNYC on Twitter, or at elie@abovethelaw.com. He will resist.