Health Plans Take More Action To Recover Costs of Defective Drugs

When a drug or medical device company misrepresents the safety and/or efficacy of a drug or medical device, the financial consequences for the parties responsible for past and future health care are extreme. In the context of a Health Care Fund or Plan (“Fund”), a Fund, relying upon the marketing data presented by the manufacturer, unknowingly commits to paying for ineffective and/or unsafe products. The Fund is under the impression that the cost of the drug or device is justified since the benefits of preventative medicine will reduce the health costs from complications in the future.

However, when a company withholds data that is critical to the decision of whether to add a product to a Fund, the Fund is not in the best position to fully assess the risks and benefits of the product. Pharmaceutical recalls and litigations consistently reveal patterns of pharmaceutical companies placing marketing and sales ahead of patient safety. The conduct takes the shape of distorting clinical trial data, limited or no post marketing reporting, manipulating clinical trial design, and engaging in “off label” marketing campaigns. The New York Times reported last December that, “Nearly every company is under either civil or criminal investigation for alleged efforts to expand the use of its drugs beyond the specific illness or condition for which they are approved”.

When pharmaceutical companies mislead a Fund, the Fund unknowingly pays for more expensive and dangerous products, while increasing the health risk of its members and its financial exposure. The difference in costs between a quality alternative health care product and a defective product is often tens of millions and in some cases may be hundreds of millions. Lawsuits on behalf of health insurance companies, self insured health plans and union health plans (“Third Party Payors”) are designed to recover the TPP’s loss resulting from the companies’ conduct.

The Lyon Firm is investigation numerous claims for local and national union health plans.