Civil Procedure -- 2014

California ex rel. Wilson v. Superior Court   (California Supreme Court)

NAM opposes unreasonable standard

In a case concerning whether the California Insurance Fraud Prevention Act (IFPA) permits a finding of fault absent a showing of causation, the NAM filed an amicus letter on 8/26/2014 with the California Supreme Court in support of a Petition for Review. The plaintiffs before the trial court were former employees of the member and alleged that their employer engaged in illegal and fraudulent conduct aimed at doctors, pharmacists and insurance companies to induce the use of their products. The trial court found that the IFPA permits penalties only if the prescriptions would not have been written but for the unlawful conduct; that the prescriptions must be assessed on a case-by-case basis to have been a quid pro quo; and the claim itself must be independently fraudulent and contain an express misstatement of fact.

However, the Court of Appeals reversed the trial court in almost every aspect. It concluded that the proper test for damages under the IFPA was not the “but for” test, but instead the less rigorous “substantial factor” test. Under this test, a company could be subject to penalties when a doctor prescribes one of its products even when the prescription was perfectly medically sound. Additionally, prescriptions need not be assessed on a case-by-case basis; instead, use of statistical modeling and data to show trends can be sufficient. This ruling would make the threshold for penalties under the IFPA very low, and could criminalize a great deal of the legal activity that pharmaceutical and medical device manufacturers engage in.

In its amicus curiae letter with the California Supreme Court in support of the Petition for Review, the NAM argued that the Court of Appeals erred in its analysis of the IFPA and incorrectly applied the “substantial factor” test. Since this allows for aggregate proof of causation based on statistical evidence, it effectively places the burden on defendants to prove that their marketing practices were not the substantial cause of allegedly fraudulent insurance claims. Additionally, since manufacturers do not themselves file the insurance claims, they could be penalized for the actions of third-parties over which they have no control. This will broaden manufacturers' potential liability and increase the risk of litigation. We asked that the California Supreme Court grant the Petition for Review and seek reversal of the findings of the Court of Appeals.

Canifornia Supreme Court denied petition on the Insurance Fraud Prevention Act issue.

Related Documents:
NAM letter  (August 26, 2014)


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