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A Philadelphia judge has ruled in favor of a health benefits administrator in a test case for a proposed class of third-party payors who paid for advance supplies of Baycol, the anti-cholesterol drug pulled off the market in 2001 because of safety concerns. In an order issued last week, Common Pleas Judge Mark I. Bernstein granted partial summary judgment in favor of the Pennsylvania Employees Benefits Trust Fund on its claims of unjust enrichment and breach of implied warranty against Baycol’s manufacturer, Bayer Corp. Bernstein set a June trial date for determining the benefits trust fund’s damages against the drug company. The case is Pennsylvania Employees Benefits Trust Fund v. Bayer. The ruling severed the benefits trust fund from its involvement in In Re: Pennsylvania Baycol Third-Party Payor Litigation, an action filed by three remaining union health and welfare plans as the representatives of a proposed class of third-party payors against Bayer and GlaxoSmithKline, the pharmaceutical company that assisted Bayer in the U.S. marketing and distribution of Baycol. Bernstein is also handling the proposed class action. A lawyer for the proposed class in Pennsylvania Baycol said Bernstein’s judgment in favor of the benefits fund is a positive sign for the class because it establishes Bayer’s liability to third-party payors. “If you sell a drug, and before it’s used up it’s withdrawn from the market, it seems to us the drug company should provide a full refund and pay for the cost of consequential damages,” said Steven A. Schwartz, one of the lead attorneys for the proposed class. Bayer, headquartered in Pittsburgh, withdrew Baycol from the U.S. market in August 2001 after several deaths were associated with its side effects. Potentially, a class of third-party payors would include insurers, self-insured employees, and health benefit plans that purchased 30- or 90-day supplies of Baycol, or that reimbursed their members for Baycol supplies in the weeks before the drug was recalled by Bayer, said Schwartz, an attorney at Chimicles & Tikellis in Haverford. The proposed class is asking Bayer to refund the costs of the drugs the payors paid for in the 38 days before the drug was removed from the market, the cost of disposing of the advance drug supplies, as well as the costs the payors incurred when their members switched to an alternative anti-cholesterol drug therapy — plus interest, according to the complaint. Although it has settled many personal injury lawsuits brought by Baycol users, Bayer has thus far denied liability in suits brought by third-party payors, according to court documents. Counsel for Bayer referred questions to a Bayer spokeswoman, who declined to comment for this article yesterday. The class Schwartz and his co-counsel are organizing could include up to 10,000 third-party payors countrywide, he said. But class counsel know of a settlement reached last October between Bayer and several third-party payors, including the insurance companies Cigna and Aetna, Schwartz said. Under the settlement, Bayer would refund a third-party payor 55 percent of the amount the third party paid for Baycol prescriptions in the 38 days before the drug was recalled in exchange for releasing Bayer from legal claims. The lawyers who negotiated the settlement, led by Richard W. Cohen of Lowey Dannenberg Bemporad & Selinger in New York, would collect an amount equal to 10 percent of the refunded amount from Bayer, according to court documents. Including attorney fees, Bayer’s payout is capped at $20 million. Schwartz said that Bayer offered the same settlement to the individual representative plaintiffs of the Pennsylvania third-party payor litigation, as well as other third-party payors. But Schwartz and his co-counsel recommended their clients not take part in the settlement because it wouldn’t fully refund the cost of disposing of the drug. It also wouldn’t provide for any costs the payors incurred when their members switched to other anti-cholesterol drugs and would release Bayer from subrogation claims by third-party payors, Schwartz said. Cohen declined to comment yesterday. At the end of February, Medco Health Solutions Inc., a pharmaceutical benefits administrator, sent a letter to some of its clients, notifying them of the Bayer settlement. The letter does not advise its clients about whether they should participate in the settlement but states that a settlement was negotiated and that questions should be directed to Cohen. The Pennsylvania class counsel contend that this was an attempt by Bayer, through Medco, to solicit third-party payors — those represented by class counsel and those not represented — to join the settlement, according to court documents. The Pennsylvania class counsel argue that this is in violation of Pennsylvania Rules of Civil Procedure that require class action settlements to be negotiated through class counsel appointed by the court. The Pennsylvania class counsel also contend the letter, dated Feb. 26, should have noted the existence of the class action filed by third-party payors in Pennsylvania and explained in greater detail the terms of the settlement, according to court documents. In response to the letter, Pennsylvania class counsel filed a motion for approval of “curative notice” in Philadelphia Common Pleas Court last week , asking it to require Bayer or Medco to pay for the cost of informing third-party payors of the Pennsylvania class action, and to provide a “balanced background” of Bayer’s settlement negotiations with the various lawyers representing third-party payors. Also, the class counsel sought a preliminary injunction that would bar “further solicitation efforts (unless approved by the court with notice to class counsel) because the transmission of the letter and similar one-sided communications cause irreparable harm to the interests of the putative class members and constitutes an impermissible end-run around the class action process and protections provided thereunder,” according to the brief class counsel submitted to the court. Medco manages pharmaceutical benefits for large employers and insurers, which could qualify as third-party payors (Medco itself is not a third-party payor). A Medco spokeswoman, Soraya Rodriguez-Balzac, said the letter was not a solicitation letter. She noted that, generally, when there is a drug recall, Medco often communicates with its clients to update them on developments. Neither Bayer nor Medco has yet responded to the motion, which was filed March 3. Other lead attorneys for the class representatives are Morris M. Shuster and Daniel B. Scott at Chimicles; Steward L. Cohen and William D. Marvin of Kessler Cohen & Roth; and Ira Schochet of Goodkind Labaton Rudoff & Sucharow in New York. Ellen Meriwether, Melody Forrester and Michael Willner of Miller Faucher & Cafferty are liaison counsel for the class representatives. Albert G. Bixler, Charles F. Forer and Leslie A. Hayes of Eckert Seamans Cherin & Mellott are listed as local counsel for Bayer in court documents. (Copies of the one-page order in In Re: Pennsylvania Baycol Third-Party Payor Litigation: Pennsylvania Employees Benefits Trust Fund v. Bayer , PICS No. 04-0325, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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