Settlements over its diabetes drug Avandia (coupled with drugs such as Paxil and Wellbutrin) have cost GlaxoSmithKline (NYSE: GSK) more than $3 billion. But if a decision by the U.S. District Court for the Third Circuit is allowed to stand, it could mean pharmaceutical companies could have to pay double damages to the private insurers serve Medicare Advantage Plans. That’s why GSK is petitioning the U.S. Supreme Court to hear the case.
GSK lawyers are awaiting an answer from the Supreme Court this March on whether it will take up GSK v. Humana. Healthcare lawyers differ on the Third Circuit’s decision to democratize how Medicare Advantage private insurers seek damages.
The heart of the case revolves around the Medicare Secondary Payer Act passed by Congress to help the federal government recover payment for the Medicare Trust Fund. It gives the government a private cause of action to sue for double damages if the tortfeasor (eg, a pharmaceutical company) didn’t pay damages when it was supposed to.
Depending on who you speak with, the decision by the Third Circuit last year to permit the private insurers that offer Medicare Advantage plans to sue pharmaceutical companies for double damages in federal court was at best fair and, at worst, really misguided.
What irks lawyers who support the Supreme Court petition is that it takes an issue decided by state law and brings it into the realm of the federal law. It also entitles private insurers that make up Medicare Advantage Organizations to double damages — something state laws generally don’t support.
David Farber of Patton Boggs has filed an Amicus brief on behalf of the Medicare Advocacy Recovery Coalition, or MARC, supporting the petition filed on behalf of GSK. He pointed out that the battle against the Third Circuit’s decision has aligned the interests of lawyers for pharmaceutical companies, plaintiffs, retailers and insurers, something he says rarely happens.
“It’s deeply ironic that in situations where beneficiaries and businesses small and large businesses alike want to settle, the Third Circuit’s decision will stand in the way of settling claims. They will shut down settlements which would cause hardship to all involved.”
Among the other groups that have filed Amicus briefs are Pharmaceutical and Research Manufacturers of America and the Washington Legal Foundation. A statement from senior litigation counsel Cory Andrews said if the decision is allowed to stand it “will result in an explosion of unintended private litigation under Medicare Part C” — Medicare Advantage plans.
A passage from the Third Circuit’s decision suggested it was a matter of fairness:
“If Medicare could threaten recalcitrant primary payers with double damages and MAOs could not, MAOs would be at a competitive disadvantage, unable to exert the same pressure and thus forced to expend more resources collecting from such payers. It is difficult to believe that it would have been the intent of Congress to hamstring MAOs in this manner.”
Accentuating the positive, in a Law360 article, Karen Palmersheim and Susan Welde of Locke Lord said the move could make Medicare Advantage programs more cost efficient:
“There is currently no mechanism in place for CMS to share the information it receives with MAOs. With the door now open for MAO recovery under the MSP, perhaps CMS in the future will share the reported information with MAOs, which should ultimately result in more cost-efficiencies in the Medicare Advantage program.”
David Harlow, who pens the healthcare law blog Health Blawg, acknowledged that although the Third Circuit’s decision, if allowed to stand, could cause some initial confusion, its decision makes the system fairer.
“It seems to me that if someone is involved in Medicare and someone is involved in [a Medicare ] Advantage contract, they should be treated equally.”
Even if the Supreme Court does agree to hear the case, it probably won’t happen until this Fall. In the meantime, SCOTUS watchers can gear up for March 19 when it is scheduled to hear Mutual Pharmaceutical Co. v Bartlett. The case focuses on sate law vs. federal law over generic drug design defects and whether claims can be avoided if drugmakers stop making their products, according to a summary of the petition.
The purpose of the MSP is to protect the Medicare Trust fund, not private insurers. This is yet another example of judicial activism. If Medicare Advantage plans what the same protections as the Medicare Trust funds and the windfall that does not benefit the taxpayers, then let them seek this remedy through the legislative process and not through a misreading and application of the MSP statute. If this holding stands, it will only result in placing a greater pall over our civil justice system by discouraging settlements. I hope the Supremes will take this case and interject some modicum of sanity back into the MSP.