Thursday, March 28, 2013

Supreme Court Hears Pharma Case for Pay for Delay on Generic Drugs

On Monday the U.S. Supreme Court heard arguments over whether drug companies can "pay off" generic drug rivals to keep the generic products off the market so that they can continue their monopolistic advantage marketing their patented drugs for longer than the law provides.  This is all done under the guise of settling patent litigation with generic rivals by making deals to keep cheaper products off the market. The case has not grabbed the attention of the press, except in a few isolated cases.
U.S. and state regulators all say the practice costs consumers, insurers and government billions of dollars annually and is a restraint of trade.
The Federal Trade Commission, which has called these arrangements "pay for delay," has fought them in court for years with mixed success, culminating in the case now before the Supreme Court.
In a brief the FTC said, "The continuing stream of monopoly profits is large enough to pay the generic competitors more than they could hope to earn if they entered the market at competitive prices."   They continued by saying that "at the same time, the brand-name manufacturer through their illegal monopoly receives greater profits than it could earn in the face of generic competition."
A host of public interest entities including the Justice Department, the European Union and more than two dozen U.S. state attorneys general view the deals as illegal restraint of trade, but drug companies defend them as a way to avoid potentially lengthy patent litigation.
"In every case that we've been in involved in that resulted in a settlement, it has resulted in years being taken off the patent life," added Paul Bisaro, chief executive of generic drug maker Actavis, Inc. Actavis was formerly Watson Pharmaceuticals.
"It's very unsophisticated to say 'Oh, they get paid a bunch of money to stay off the market,"' said Bisaro.
In the case before the court, Solvay Pharmaceuticals Inc, now owned by AbbVie, sued generic drug makers in 2003 to stop cheaper versions of AndroGel, a gel used to treat men with low testosterone.
These payments, as high as $30 million annually, went to rivals Watson, Paddock Laboratories Inc and Par Pharmaceutical Cos, and were intended to help Solvay preserve annual profits estimated at $125 million.
Under the deal, the three would stay off the market until 2015. The patent expires in 2020.
AbbVie was confident that it would win.
"The federal district and appellate courts have both previously ruled that the plaintiff's allegations lacked merit. We are confident that these decisions will be upheld," Adelle Infante, an AbbVie spokeswoman, said in a statement.
The Supreme Court is expected to issue a decision by the end of June.
AbbVie's arrangement is similar to the 40 deals made in the 2012 fiscal year, which ended on Sept. 30. That was up from 28 the previous year despite FTC efforts to stop them. The FTC said the agreements involved 31 different brand name drugs with total U.S. sales of more than $8.3 billion annually.
The FTC sued to stop the AndroGel arrangement, arguing that it was illegal under antitrust law because the companies divided up the market.
The FTC lost at the district court level and lost an appeal as well. But another appellate court has said the deals were illegal, prompting the Supreme Court to step in to resolve the split.
The FTC also sued Cephalon Inc, accusing it in 2008 of blocking a generic version of the anti-sleep drug Provigil. The case has been stayed pending the Supreme Court's decision.
In 2001 the FTC sued Schering-Plough Corp., later bought by Merck and Co Inc, because of payments to rivals to delay generic versions of its potassium supplement, K-Dur 20. The FTC lost that case.
But in a private case that also involved K-Dur, the U.S. Court of Appeals for the Third Circuit, in New Jersey, backed the FTC position and found the deals to be illegal.
Opponents of pay-for-delay deals in the United States and Europe are not waiting for a high court decision, though.
Senator Amy Klobuchar, a Democrat from Minnesota and chairwoman of the Senate Judiciary Committee's antitrust panel, and Senator Chuck Grassley, a Republican from Iowa, introduced legislation in February to make the deals illegal.
Previous bills have failed in part because of opposition from the drug industry, both branded and generic.
In Brussels, EU regulators have eight investigations under way involving more than a dozen drugmakers. The European competition regulator says the deals violate antitrust law.
The decision will be made by an eight-member court. Justice Samuel Alito recused himself, without giving a reason.
The case is Federal Trade Commission v. Watson Pharmaceuticals Inc et al, U.S. Supreme Court, No. 12-416.

Since the original post above was written there have been a number of significant developments on this subject.  Here is a good article on these developments.

last modified 10/3/15

Wednesday, March 20, 2013

JP Morgan Chase Plays Fast and Loose with Escheated Funds?

For those not familiar with the term:
es·cheat  (s-cht)   n.
1. Reversion of land held under feudal tenure to the manor in the absence of legal heirs or claimants.
2. Law
a. Reversion of property to the state in the absence of legal heirs or claimants.
b. Property that has reverted to the state when no legal heirs or claimants exist.
intr. & tr.v. es·cheat·edes·cheat·inges·cheats Law
To revert or cause to revert by escheat.

[Middle English eschete, from Old French (from escheoir, to fall out) and from Anglo-Latin escheta, both from Vulgar Latin *excadre, to fall out : Latin ex-, ex- + Latin cadere, to fall; see kad- in Indo-European roots.

In other words, when you leave money at a bank for too long with no activity in your account, the bank must escheat the funds to the State.  Most State Treasurers in the United States have on-line search engines where you check to see if you have any escheated funds (sometimes called unclaimed funds, or lost money). I have successfully recouped thousands of dollars on multiple occasions on funds that insurance companies have placed with the state for who knows what reason.  Unless you check, you will never know if they are there.
I check my name and all my dependents on an annual basis. I also check my business names.
I once found funds in South Dakota because I used a bill paying service in Sioux Falls and the broker did not have my home address, so they sent the funds to that state.  I have successfully recouped funds in six states.
Most recently I have a very unusual situation that has developed:

XXX LLC (name has been changed to keep anonymity) is a domestic Limited Liability Corporation registered for doing business within the State of New York, having been organized on Feb. 2, 2005.  XXX LLC is currently recorded as being active and in good standing with the Secretary of State of New York.  XXX LLC has maintained a business bank account with JPMorgan Chase Bank.  XXX LLC does business in the Bronx, NY. The address registered with the Secretary of State for New York for filing of service is in Nassau County, NY.

The Office of the Comptroller of New York State has indicated that they are holding funds in excess of $100 that were escheated to them by JPMorgan Chase Bank during the calendar year 2012 on behalf of XXX LLC. They record the address associated with XXX LLC as being in Yonkers, NY (Westchester County).  The New York State Comptroller’s Office also indicates that the XXX LLC account was established through a branch of JPMorgan Chase located within New York State and that the type of property is “Cashier’s/Teller Checks”.

While I can provide documentation to the Comptroller of New York State as to  XXX LLC’s identity, including articles of organization, and, further, I can provide substantiation as to my relationship as managing member of that entity, I cannot provide any substantiation to the Comptroller as to the address that was provided by JPMorgan Chase that they show as affiliated with this entity as required by the Comptroller.  The Comptroller of New York has taken the position that until I “prove” to their satisfaction that the funds are XXX’s, they will not honor an application for claiming the funds.  The Comptroller’s Office is requiring me to provide some substantiation that the address in Yonkers is associated with the XXX LLC for which I am the managing member

I have done a search with the Secretary of State of the State of New York with regard to entity names and there is only one entity by the name of XXX LLC (either active or inactive) that is associated with that name or a name similar to it in New York State, and that entity is the entity for which I am the managing member. I have also checked NJ and CT. In NJ and CT, again, I find no entities with that name.

I have checked the internet for “XXX”. I find no indication that there is any other entity on the internet doing business with this name in the United States, or for that matter, anywhere in the world.

JPMorgan Chase has disavowed any knowledge about the funds that were escheated to the Comptroller of New York or their ability to respond to my inquiry about the funds.  They have directed me to deal with the Comptroller of New York State.

Further, it is my understanding that by banking regulation, JPMorgan Chase would have been required to obtain the articles of organization and other identifying information from XXX LLC before opening an account in the name of XXX LLC.  Since I am the representative of the only entity that could have opened such an account, the funds that were escheated to the Comptroller of New York State by JPMorgan Chase must have been those of XXX LLC (the one and the same XXX LLC for which I am the managing member) and no other.

On March 11, I filed a complaint with the Office of the Comptroller of the Currency, which is the regulator of JPMorgan Chase, seeking assistance in this matter.  More specifically, I have asked OCC to require that JP Morgan Chase either:

1. correct the information provided to the Office of the Comptroller of New York State so that we may successfully claim the funds, or, alternatively,

2. Provide auditable substantiation to either me or the OCC that there is another legitimate entity with the same name as ours for which they escheated the funds to the Office of the Comptroller of New York State.

On March 19, I received a call from the executive office of JP Morgan Chase indicating that they have received a copy of the complaint that I filed and that they will respond in writing within 14 business days to both me and the OCC.

Through an unrelated sequence of events I have now learned that the Agent I retained for XXX LLC had maintained a lockbox with the same Post Office Box number in Yonkers New York that the Comptroller of New York State has associated with the unclaimed funds. So, it is clear that the funds are those of XXX LLC. I have now been attempting to get the proper documentation together so that I may claim the funds.

I have tried to get a letter from the Agent indicating that they maintained an Agency account at Hudson Valley Bank and directed my customers to remit their payments in the name of XXX LLC and in their name to that very lockbox in Yonkers, NY. The response I have gotten from the Hudson Valley Bank has been very interesting. They want to know the dates and number of checks that were not deposited in their lockbox in order for them to mail a letter of explanation to the New York State Comptroller's unclaimed funds department. Since I cannot provide that information they have been balking at writing any letter on my behalf. I have offered to indemnify them and hold them harmless for any claims they may sustain should they issue such a letter. Hudson Valley Bank's legal department is reviewing the matter.

I have also requested my Agent to issue a letter to the New York State Comptroller indicating that they are my Agent, that I have a contractual agreement with them, and that as part of the Agent agreement they maintained an Agency Account at Hudson Valley Bank and had remittances sent to the Post Office address in Yonkers New York. While I have not received that letter yet, they have indicated that they would send it.

I will post more on this story as it progresses. However, I must say that my recent interactions with JP Morgan Chase have been anything but friendly and enjoyable. I am glad that I have recently moved many of my accounts to other banks. For other information on JP Morgan Chase please see my other post.


I have now determined that my Agent also had instructions to other clients of mine to mail remittances to the same Post Office Box in Yonkers, NY and to make those remittances payable to them. The Comptroller of New York State also has funds associated with that address and my Agent listed in their database. I intend to pursue those funds also.


I have now searched the Comptroller of New York State for remittances to my previous Agent and have found that they are also holding funds there also. I am now pursuing those funds too.

I have now received adequate letters from Hudson Vally Bank and my Agent with regard to this matter. I have today filed a claim with the Office of Unclaimed Funds of the State Comptroller to retrieve those funds. I have sent them the letters from Hudson, and my Agent and the articles of organization of XXX LLC and a copy of my driver's license. I hope that they do not need any additional documentation. Shame on JPMorgan Chase for their behavior on this matter.
I will note when the funds are received or if there is a need for more documentation required.