2017 was a near record year for securities class actions, as the number filed jumped from 271 in 2016 to 412 in 2017—well above the average of 193 per year for the years 1997 to 2016.[1] Only 2001 was comparable, and both 2001 and 2017 were inflated by special factors.[2] Add to this growth the $3 billion settlement in the Petrobras litigation this year (plus the highly favorable ruling by the Second Circuit in Petrobras last year),[3] and the plaintiff’s bar may feel that it has struck gold.

But the high number of cases is only one factor that made 2017 unique. Perhaps more importantly, the likelihood that a public company would be sued in a securities class action also jumped sharply in 2017 to 8.4 percent, with this rate more than doubling since 2014.[4] This is partly the product of the decline in the number of public companies, as well as the increase in the number of suits. Further, this factor of litigation intensity varies greatly by industry. If we look to the Standard Industrial Classification codes (or SIC codes), we find that SIC Code 283 (Drugs) saw 66 securities class actions filed in 2017.[5] If we add to that number the 16 securities class actions filed against firms in SIC Code 314 (Medical, Surgical and Dental Instruments and Supplies), we find that companies in the broader pharmaceutical field accounted for nearly 20 percent of all 2017 securities class actions.[6] This combination of sudden growth and high litigation intensity concentrated on a few industries raises the prospect of a political backlash. It is as predictable that “pharma” companies will lobby for litigation relief (possibly through mandatory arbitration clauses in corporate charters or bylaws) as that they will raise drug prices aggressively.