Michigan Drug Shield Dooms False Claims Act Lawsuit

Michigan Drug Shield Dooms False Claims Act Lawsuit

TROY, Mich. - (Mealey's) Michigan's attempt to obtain reimbursement under its Medicaid False Claim Act (MFCA) for money spent on Vioxx was thwarted March 17 by the state's own pharmaceutical liability shield when the state's Second District Court of Appeals reversed a circuit court decision denying summary judgment (Attorney General, State of Michigan, et al. v. Merck Sharp & Dohme Corporation, No. 292003, Mich. App., 2nd Dist.). 

The state had asserted a claim for unjust enrichment under the MFCA, saying it would not have covered Vioxx prescriptions had it known of the drug's cardiovascular risks.  The appeals court, in what it said was a case of first impression, said that although the state asserted no personal injury claims, the suit nevertheless was based on product liability as defined and prohibited by Michigan Compiled Law (MCL) 600.2946(5), the nation's only law that provides an absolute defense to pharmaceutical manufacturers provided that a product is approved by the U.S. Food and Drug Administration. 

The majority opinion and that of the dissent turned on whether the phrase "damage to property" in MCL 600.2946(5) encompassed the state's claim.  The majority said the first and third elements of product liability - that the action is based on a legal or equitable theory of liability and that the loss was caused by or resulted from the manufacture and marketing of a product - were clearly met.  Although there is no published authority for whether "Medicaid overpayments wrongfully received by Defendant" fulfills the second element - that the action is brought for damage to property - the matter is resolved, the majority said, by Reiter v. Sonotone Corp. (442 US 330, 340; 99 S Ct 2326; 60 L Ed 2d 931 [1979]), quoting Chattanooga Foundry and Pipe Works v. Atlanta (203 US 390, 396; 27 S Ct 65, 66, 51 L Ed 241 [1906]), which found that "[a] person whose property is diminished by a payment of money wrongfully induced is injured in his property." 

The court also referred to an unpublished opinion affirming summary judgment in a substantially similar case, Duronio v Merck & Co. Inc. (No. 267003, Mich. App. [June 13, 2006]), in which the plaintiff asserted fraud and violation of the Michigan Consumer Protection Act (MCPA) based on allegations that Merck misrepresented or concealed the risks associated with Vioxx.  

The majority opinion is by Judge Henry William Saad, with Judge David H. Sawyer concurring. 

Judge E. Thomas Fitzgerald dissented, saying that considered in context, the shield in MCL 600.2946 was not intended to avert fraud-based claims for unjust enrichment.  

"The point of contention is whether plaintiffs' claim was 'brought for the death of a person or for injury to a person or damage to property,'" Judge Fitzgerald said.  "Here, plaintiff is seeking money damages 'representing Medicaid overpayments wrongfully received by Defendant' as a result of defendant's allegedly fraudulent conduct that occurred after the FDA's approval of Vioxx.  

"To treat this case as a product liability action would require a finding that plaintiffs' claim for money wrongfully paid was brought for damage to property," he said. 

[Editor's Note:  Full coverage will be in the April 7 issue of Mealey's Emerging Drugs & Devices.  In the meantime, the opinion and dissent are available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Majority opinion.  Document #28-110407-001Z.  Dissent.  Document #28-110407-002Z.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.] 

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