Big Pharma Takes Biotech Seriously in 2007

FierceBiotech reports that: "2007 may well go down as the year that Big Pharma went beyond merely embracing biotechnology and decided that now was the time to marry up with the new technology. With Big Pharma's accountants totting up the last big rewards from a slew of blockbusters, biotech was seen at the next big thing in therapeutics, and companies were willing to spend big to get in the act."

FierceBiotech expects the unmistakable surge in deal-making (in 2007) between Big Pharma and biotechnology (through mergers, collaborative risk-sharing, joint ventures and other co-development and co-promotion arrangements) to continue in 2008.

IRS Issues FY 2008 Exempt Organization Implementing Guidelines

FY 2008 EO Implementing Guidelines

Tennessee Court of Appeals Allows Jury Instruction on Superseding Cause

In White v. Premier Med. Group, a wrongful death action, the decedent, Wastille Jones, was admitted to Gateway Medical Center with back pain and was negligently given an overdose of narcotics by the defendant, Scott William McLain, M.D. Jones was subsequently transferred to ICU where she was intubated, but a mucous "plug" obstruted the endotracheal tube, restricting oxygen flow. Jones died the following day. The Tennessee Court of Appeals held there was sufficient evidence for a jury to find that the subsequent negligent acts and omissions of the nurses and respiratory therapists in the ICU "actively worked to bring about a result which would not have followed from Dr. McLain’s original negligence."

White v. Premier Med. Group, No. M2006-01196-COA-R3-CV (Tenn. Ct. App. Nov. 28, 2007).

Court Confirms Application of "Alter Ego" Doctrine to Pierce the Veil of a Nonprofit Parent Corporation

Michael W. Peregrine, of McDermott Will & Emery LLP, writes in Health Lawyers Weekly (December 14, 2007), "The Return of Alter Ego": "In the recent decision, Network for Good v. United Way of the Bay Area, the San Francisco Superior Court applied the hoary legal concept of alter ego to allow a small charity to “pierce the corporate veil” of a United Way affiliate and attribute millions of dollars in liability to the larger parent organization. In so doing, the court confirms application of alter ego and related “ascending liability” theories to the nonprofit sector. It also raises a significant “yellow flag” to nonprofit organizations, including health systems, in their efforts to streamline system governance and management, and achieve system-based operating efficiencies. Indeed, some control practices utilized by nonprofit systems to achieve efficiencies through subsidiary operations may unintentionally expose the parent to greater liability based upon Network for Good-type facts. As such, the decision is a useful guide for nonprofit corporate counsel."

Peregrine continues: "The particular relevance of alter ego treatment, and of the Network for Good decision, lies in efforts by nonprofit organizations and systems (e.g., health systems) to transition from the traditional (but looser) holding company governance and management model, to the (tighter) corporate enterprise model. The attributes of the latter model include greater influence and (in some cases) outright control at the “top”/parent level over system assets, governance, management, and quality. Sometimes referred to as “systemness,” this model reflects the goal of acting more like a single integrated organization rather than as a collection of independent entities under common control."

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Supreme Court Hears Testimony in Medical Device Suits

The United States Supreme Court has granted certiorari to hear two cases to determine whether the manufacturer of a medical device approved for sale by the Food and Drug Administration (FDA) can be sued for damages under state law if the device injures a patient. In particular, the Court will determine whether the express preemption provision of the Federal Food, Drug and Cosmetic Act (FDCA) preempts state-law claims seeking damages for injuries caused by medical devices with FDA premarket approval (PMA). The New York Times reports that the last time the Court heard a medical device case was in 1996, "when it ruled that devices approved by the FDA under a different, more expedited process were not shielded from state liability."

The first case before the Court, Riegel v. Medtronic Inc., was brought by the family of a New York man who suffered severe medical complications when a balloon catheter burst during a procedure to clear his arteries. The second case, involving claims for injuries allegedly caused by Rezulin, a now-withdrawn drug used to treat diabetes, will be heard in February.

Continuing coverage:
- Los Angeles Times (12/4)
- Minneapolis Star-Tribune (12/4)
- Minnesota Public Radio (12/4)
- Wall Street Journal (12/5)
- Financial Times (12/5)
- Law.com (12/5)
- PharmExec.com (12/12)

U.S. Court In Tennessee Holds PBM Was Not ERISA Fiduciary

[Source: Health Lawyers Weekly, December 7, 2007 - AHLA]

A pharmaceutical benefits manager (PBM) was not a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) by virtue of the services it provided pursuant to its contract with the sponsor of an employee benefits plan, a federal trial court in Tennessee ruled November 13.

. . . .

Plaintiff alleged Caremark acted as an ERISA fiduciary in that it had sole discretion to (1) set the price the plan paid for generic prescriptions; (2) select the benchmark average wholesale price reporting source used to set the price the plan paid for brand-name prescriptions; (3) determine whether a particular prescription would be adjudicated and priced as a brand-name or generic prescription; (4) decide when to dispense a brand-name drug as a generic prescription at its mail order facilities; and (5) manage the plan’s formulary.

The U.S. District Court for the Middle District of Tennessee found these activities related to the basic administration of Caremark’s own business and that Morrell & Co. retained exclusive control over the management and administration of the plan at all times.
Thus, the court held Caremark did not exercise discretionary control over the plan and the PBM was not a fiduciary under ERISA.

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