Back in August, we reported that three PAL coalition members, Sergeants Benevolent Association Health and Welfare Fund, AFSCME District Council 37 Health & Security Plan and IUOE Local 4 Health and Welfare Fund, filed an objection to a proposed $40 million settlement in the case Carpenters and Joiners Welfare Fund et. al. v. SmithKline Beecham Corp (04-3500 D.MN).
The lawsuit alleged that GlaxoSmithKline (NYSE:GSK) defrauded health plans, union benefit funds and other “third party payors” by failing to disclose the increased risk of suicidal thoughts and behavior among children and adolescents taking the prescription antidepressants Paxil® and Paxil CR®.
The three union benefit funds objected to a number of provisions in the settlement, including an extremely burdensome, if not impossible, process to file claims for a refund of 40% Paxil expenditures. The objectors argued that this process would have unfairly favored larger health plans that have easy access to diagnosis information related to individual prescriptions. Without this information, only a 15% refund was possible. Other terms of the settlement that these funds objected to included limitations on class members’ rights to object to the settlement, opt out of it, speak at the fairness hearing, or appeal approval of the settlement.
The objectors were able to negotiate significant changes to the settlement that addressed their primary concerns regarding fairness and burdensome claims filing:
- In order to ensure that the settlement funds go first and foremost to health plans and union funds that paid for pediatric Paxil prescriptions, the revised settlement caps any cy pres award to a maximum of $1 million. Previously, any funds in the settlement that went unclaimed would be distributed a one or more organizations addressing children’s mental health issues.
Cy pres awards are frequently granted by Courts when there are unclaimed funds left in a class action settlement. Such awards are supposed to benefit class members who did not file claims. However, the cy pres award in this settlement will not go to benefit the health plans that paid for Paxil, but rather to children’s mental health organizations. While those organizations no doubt do invaluable work, the benefit to the class members here is indirect at best.
- Class members’ claims will be calculated in two “stages.” In the first stage, class members that are able to document individual prescriptions that were for Major Depressive Disorder will get refunds of 40% for those prescriptions. All other prescriptions will be refunded at 15%. In the second stage, the remaining settlement funds (after the $1 million cy pres award) will be distributed to all class members who file claims, based on their proportions of the total Paxil purchases claimed by all class members.
- Class members will not be required to include rebates and discounts in their calculations of the net cost of each prescription. The objectors had argued that it would be impossible for many, if not most, class members to make the calculation with rebates and discounts included. This is because in most cases, manufacturers give rebates to a health for all of their purchases of all of that company’s drugs – it’s not possible to separate what rebates were for Paxil, for instance, as opposed to for another GlaxoSmithKline drug.
- Lastly, the revised settlement gets rid of the provisions that attempted to limit the rights of class members to opt out or appeal the approval of the settlement.
Because these changes addressed their most pressing concerns, the objectors withdrew their objection. The objectors and PAL thus now support the revised settlement and will argue in favor of the Court approving it at the Final Approval hearing scheduled for September 30, 2008 in the U.S. District Court in Minneapolis, Minnesota.
The objection by PAL’s members underscores the important role that PAL plays in monitoring pharmaceutical class action settlements to ensure that they adequately protect the rights of consumers and smaller third party payors, health plans and union funds. To find out more about PAL’s coalition of consumer advocates and union benefit funds, and how to join, click here.
How to file a claim for reimbursement from the settlement: Any private insurers, employee welfare benefit plans, union health and welfare funds, employer-sponsored health plans, and other third-party payors (“TPPs”) that reimbursed, purchased, or paid for Paxil® (in both tablet and suspended form) and Paxil CR® prescribed to persons under 18 years of age, from January 1, 1998 through December 31, 2004 are eligible to submit claims forms for payment from the settlement. The deadline to submit claims for payment from the settlement is December 12, 2008.