Massachusetts Argues Forcefully For $250 Million Judgment Against Former Schering-Plough Acquitision Warrick Pharma

Recently, the Commonwealth of Massachusetts filed a memo of law to support a nearly quarter-billion-dollar finding, against New Merck/Legacy Schering-Plough/Warrick Pharmaceuticals — as a result of what a federal jury found was pricing fraud, on Proventil®, the brand name by which a Schering-Plough acquired company sold albuterol — here is just some of it:

. . . .Defendants [including New Merck] are in psychological denial regarding their conduct, the jury’s findings, and the facts and law relevant to the imposition of penalties in this case. In their Response to the Commonwealth’s Motion for Entry of Judgment, Defendants assert that, ‘[a]t most…this is a case of negligence.” Dkt. No. 953, (“Defts’ Response”) at 26. In fact, the Court expressly instructed the jury that negligence would not support liability, and the jury found Defendants liable on all counts. In an attempt to minimize the egregiousness of their offense conduct, and thereby avoid substantial penalties, Defendants repeatedly, and falsely, assert that what they are charged with doing wrong in this case is failing to ensure that First Data Bank (FDB) deleted their launch prices from its electronic database, as they requested. Defts’ Response at 2. What the jury found, however, as a matter of fact, was that Defendants knowingly published false prices and acted “with the specific intent to disobey the law.” 9/28/10 Tr. 134:8-10. Defendants posit a hypothetical, never presented to the jury, and without evidentiary support in the record, that the only alternative to their false WAC prices would have been “no WACs,” and argue they caused no economic harm to the Commonwealth. Defts’ Response at 5-7. What the jury found, however, based on the evidence presented at trial, was that Defendants proximately caused $4.6 million in damages to the Commonwealth. Dkt. No. 934 (“Verdict Form”), Question 6.

In ruling on this Motion for Entry of Judgment, the Court must decide whether to apply the plain meaning of the Massachusetts False Claims Act (MFCA) and hold the Defendants liable for penalties for the false claims they caused to be presented to MassHealth. This Court must further decide whether the $191 million in requested penalties, which is less than four percent of the minimum penalties mandated by the MFCA, is “grossly disproportional” to the gravity of Defendants’ offenses. In making that decision, the Court must compare the requested penalties with Defendants’ actual offense conduct, as found by the jury, not Defendants’ post-verdict version of their wrongdoing. . . .

. . . .The jury found that Defendants did act “knowingly and willfully’ in violation of the MMFCA. Thus, Defendants’ assertion that this case is, “at worst,” a negligence case is flatly contradicted by the jury’s verdict. . . .

While it is true that MassHealth’s regulations did not require Defendants to publish a WAC price, that fact is of no consequence to the damages caused in this case. Defendants did in fact publish a WAC. Having made that choice, Defendants assumed a duty to correct their reported prices that were inaccurate, incomplete or misleading when made. Backman v. Polaroid, 910 F.2d 10, 16-17 (1st Cir. 1990). As set forth above, the Commonwealth presented extensive evidence at trial that Defendants’ direct prices at launch were misleading when made. The Defendants have conceded, based on this evidence, the jury could have concluded that Warrick’s direct prices were misleading. See Defendants’ JMOL Reply (Dkt. No. 943)(“JMOL Reply”) at 15, n. 9. Accordingly, there is no dispute that Defendants had a duty to correct their published prices. Backman, 910 F.2d at 16-17. . . .

Schering-Plough was aware, beginning in October 1997, that multiple law enforcement authorities were investigating its price reporting practices. CW’s Memo at 5-6. Each year, Schering-Plough received a request from FDB to update and correct Warrick’s reported prices. Each year, Defendants did nothing to correct Warrick’s illegal false prices. . . .

Schering-Plough pled guilty in 2004, and again in 2006, to felony criminal offenses which defrauded the Medicaid program nationwide, including MassHealth. CW’s Memo at 6-7. In 2008, Merck & Co., Schering-Plough’s merger partner, agreed to pay $650 million to resolve claims that it had defrauded Medicaid nationwide, including MassHealth. Id. at 7. Evidence that a defendant has repeatedly engaged in prohibited conduct provides relevant support that “strong medicine is required to cure the defendant’s disrespect for the law.” BMW, 517 U.S. at 576-77 (“a recidivist may be punished more severely than a first offender”). . . .

We will keep you posted, but when the judgment is entered, with interest it will very-likely eclipse $250 million.


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