Late last month, a South Carolina state court judge gave AstraZeneca a holiday gift - he denied a motion by state Attorney General Alan Wilson to dismiss a lawsuit the drugmaker filed last March. And AstraZeneca filed that lawsuit in response to a 2009 lawsuit brought by Wilson, who sought to recover funds spent to treat Seroquel side-effects and for reimbursements for alleged off-label uses.
The tit-for-tat filings underscore an interesting issue - the drugmaker claims Wilson is violating its constitutional due process rights because the state struck a contingency fee arrangement with three law firms to help with its lawsuit. Each firm would get up to 23 percent of any penalties awarded to the state under the South Carolina Unfair Trade Practices Act. The AG’s office would get 10 percent (here is the state lawsuit and the retention agreements).
The drugmaker argued that, in doing so, the state was prosecuting a “law enforcement action akin to a criminal proceeding” that was dressed up as a civil suit (here is the AstraZeneca lawsuit). AstraZeneca maintains the state attorney general, effectively, compromised his independence by having a stake in the financial outcome. State court judge Roger Couch did not rule on the merits of the case, but did agree the drugmaker has a valid claim (read here).
The outcome is likely to hinge on, among other things, a distinction between penalties and damages the state sought. For instance, AstraZeneca maintains the state amended its original fee agreement with the law firms to delete a previous provision strictly limiting recovery to the lawyers to actual damages. Nonetheless, the decision raises the possibility that such arrangements - in which states hire law firms and agree to share in the proceeds of such litigation - will come under scrutiny and embolden the pharmaceutical industry to file other such challenges.
We should note that, last year, AstraZeneca agreed to pay $68.5 million to 36 states and the District of Columbia to resolve litigation charging the drugmaker with illegally marketing its Seroquel antipsychotic, failing to sufficiently disclose potential side effects and withholding negative safety and effectiveness info (back story). But seven states were not among them, including South Carolina.
gavel pic thx to walknboston on flickr