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Virtually everyone who follows government and politics is familiar with new House Speaker Nancy Pelosi, D-Calif. Many know that one of her priorities early in the 110th Congress was passing legislation that affects the government’s ability to negotiate prescription drug prices, and on Jan. 12, the House passed such a bill. Far fewer of us, however, are familiar with Steve Berman of Seattle-based Hagens Berman Sobol Shapiro. But litigation initiated by Berman’s firm in federal court in Massachusetts may play a greater role in establishing drug prices than any law the new Congress may ultimately enact. If prices for prescription medicines are to be dictated through private litigation rather than public processes, our system of constitutional government, in which legislators and executives accountable to the public write laws and judges apply those laws to resolve disputes, will suffer badly. Such “regulation through litigation” is undemocratic; it disadvantages individuals and organizations not party to the litigation; and it creates incentives that have less to do with sound policy outcomes and more to do with the pursuit of high legal fees. In the case at issue, New England Carpenters Health Benefits Fund v. First DataBank Inc., Berman’s firm represents a consortium of health benefit plans that sued First DataBank (a publisher) and McKesson Corp. (a medicine wholesaler) in a class action for allegedly miscalculating the average wholesale price of more than 1,600 prescription medicines. That price is much like the sticker price on an automobile-virtually no one pays it, but the rate serves as a standard for negotiating discounts and reimbursements paid by insurers and state agencies for medicines. The facts of the case are not extraordinary, but the terms of the proposed settlement between the plaintiffs and First DataBank are: Not a penny will be paid to the plaintiffs who were allegedly harmed by First DataBank’s alleged misreporting, even though plaintiffs’ counsel will pocket more than $600,000 in fees. First DataBank will recalculate its price for more than 8,500 medicines-approximately 6,900 more medicines than those at issue in the litigation. Thus, the price of more than 8,500 prescription drugs will be recalculated with the stroke of a pen; neither Congress, nor a single state legislature, nor a duly authorized regulatory body will have had anything to say about it. And while $600,000 in fees would be considered a good payday for most Americans, it’s a relatively modest sum for Berman’s firm, which garnered an estimated $1 billion from state tobacco litigation. His potential payoff comes in an obscure clause of the proposed settlement that requires First DataBank’s capitulation in a separate, pricing-related case against pharmaceutical firms in courts across the nation in conjunction with several state attorneys general. Insidious financial relationships Berman’s firm and others have been retained on a contingency-fee basis by the AGs to coordinate their litigation against pharmaceutical companies. The American Tort Reform Association believes that the insidious financial relationships between personal injury lawyers and AGs undermine legislators and regulators. If they’re to be allowed at all, they should include open bidding and ample oversight by state legislatures and the public. Proponents claim that such regulation-through-litigation relationships are needed when legislatures “fail” to make appropriate policies and/or are controlled by “special interests.” But the plaintiffs’ bar, itself among the most powerful special interests, has no authority to decide unilaterally when a given legislative process has failed. Anyone may be frustrated by legislative inaction, but the strong opinions on either side of a controversial issue that slow legislative compromises have always been the foundation of our democratic system. It should surprise no one that, in the complex health care arena, lawmakers, industry experts, consumers and regulators have differing views on what would comprise the best new pricing model. But regardless of outcomes, the legislative process-over time-drives diverse parties toward consensus and compromise, and thereby forges solutions based on common interests. Litigation, on the other hand, puts the interests of the parties above those of everyone else. Regrettably, litigants consent to terms that can have a profound collateral impact on nonparties, who then face an unappealing choice: file an expensive, time-consuming motion to intervene, or live with the consequences. In a democracy, that’s a choice none of us should have to make. Sherman Joyce is president of the Washington-based American Tort Reform Association.

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