IN RE PHARMACEUTICAL INDUSTRY AVERAGE WHOLESALE PRICE LITIGATION 588 F.3d. 24 (1st Cir. 2009) CASE BRIEF

IN RE PHARMACEUTICAL INDUSTRY AVERAGE WHOLESALE PRICE LITIGATION

588 F.3d. 24 (1st Cir. 2009)

NATURE OF THE CASE: Howe (P), named plaintiff, appeals from an order approving a $24 million class action settlement in one multidistrict litigation claiming that it creates a cy pres fund of up to $10 million rather than distributing all recovery to class members.

FACTS: This is one case of a series of class actions alleging pharmaceutical companies fraudulently inflated a figure known as the 'average wholesale price' (AWP) between 1991 and 2003 to boost sales. Insurers used AWPs to decide how much to reimburse providers when patients obtained drugs, which in turn affected patients' co-payments. A coalition of citizen, healthcare, senior citizen, and consumer advocacy groups sued dozens of drug manufacturers and healthcare-product companies. The district court denied some proposed classes and deferred certifying the Medicare Part B Co-Payment class until Ps located individuals to act as class representatives. The district court certified the Medicare Part B Co-Payment Class under Rule 23(b)(3). After months of intense litigation and negotiation, AstraZeneca and the Zoladex subclass reached a final settlement in May 2007, on the eve of trial. That settlement is at issue in this appeal. The parties expected a large portion of the total sum AstraZeneca was willing to pay would go unclaimed. Because Zoladex is used to treat prostate cancer, many class members were elderly, had died, or could die soon, and not all of them could be found. AstraZeneca agreed to pay class members only on a comparatively easy claims-made basis. The parties agreed to create a fund, called a cy pres fund, that would pay any amount remaining (after payout to the claimants) of the $24 million to 'mutually acceptable charitable organizations funding cancer research or patient care' that the court would approve in the future. The parties capped the cy pres amount at $10 million if not all of the $24 million was paid out. The district court granted preliminary approval of the settlement. Howe (P) filed a reply brief objecting to the settlement. She again argued that class members, not a cy pres fund, should receive the entire settlement amount; the claims-made process and loss formula were flawed; and the settlement risked subrogation of the plaintiffs' claims. The district court rejected P's objections. P now appeals the court order approving the settlement agreement. P argues the settlement is unreasonable because it creates a cy pres fund.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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