Friday, January 15, 2010

Case Brief: State v. Astra Zeneca

By Brian A. Comer

This case brief involves an action brought by South Carolina Attorney General Henry McMaster against a pharmaceutical company, captioned State v. Astra Zeneca Pharmaceuticals, LP, 2009 WL 1227848 (D.S.C. May 5, 2009). It is significant because it discusses off-label promotion and preemption, and the extent to which they can serve as a basis for federal question jurisdiction.

FACTUAL BACKGROUND: Defendants manufactured an anti-psychotic drug known as Seroquel. The State sued Defendants to recover funds expended by South Carolina to provide medical treatment to certain Medicaid and state employee participants who experienced Seroquel-related illnesses, as well as to recover funds spent in purchasing Seroquel for off-label uses not covered by certain state programs. The State alleged causes of action for submission of false and fraudulent claims under the Medicaid program, violations of the South Carolina Unfair Trade Practices Act, negligence, breach of warranty, fraud and misrepresentation, and unjust enrichment in connection with Defendants' marketing of Seroquel.

PROCEDURE: The State filed its case in state court on January 9, 2009. Defendants removed the case to federal court (D.S.C., Spartanburg Division) based on federal question jurisdiction. Defendants also moved to stay the case pending transfer by the Judicial Panel on Multi-District Litigation. The State moved to remand on February 18, 2009, and it filed a motion to transfer the case to Judge Henry Herlong on February 23, 2009. The MDL Panel issued a conditional transfer order on February 26, 2009 transfering the action to the Middle District of Florida as part of the Seroquel MDL. On March 12, 2009, the Court granted in part Defendants' motion to stay the case, staying all issues except the pending motions to remand and transfer.

ISSUES: Pending before the court was the State's motion to remand the case to state court and its motion to transfer the case to Judge Herlong.

DISPOSITION: The court granted the State's remand motion, which rendered moot its motion to transfer.

RULES AND OPINION: Although the State did not assert a federal cause of action in its Complaint, Defendants maintained that the Court should exercise federal question jurisdiction because the case raises substantial questions of federal law, e.g. an examination of the Food, Drug and Cosmetic Act and other federal statutes. Defendants relied on the rule in the United States Supreme Court decision of Grable & Sons Metal Prod. v. Darue Eng'g & Mfg., 545 U.S. 308, 312 (2005) as the applicable law, as follows:
[D]oes a state law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial
The Court rejected Defendants' argument that the State's off-label promotion allegations implicated significant federal questions. First, the Court pointed out that this same argument was rejected by Judge Henry Herlong in State v. Eli Lilly & Co., Inc., 2007 WL 2261693 (D.S.C. Aug. 3, 2007) and State v. Janssen Pharmaceutica Inc., 2007 WL 2022173 (D.S.C. July 10, 2007). Second, the Court did not believe that the the State's claims had anything to do with "off-label" uses, as that term is defined in federal law. Finally, the Court did not believe that -- in applying the Grable test -- any references to "off-label" uses in the case were "substantial enough" to justify the exercise of federal question jurisdiction. "As alleged, the State could establish a prima facie case of Medicaid fraud under state law without having to establish that Defendants' communications were 'off-label' in violation of federal law."

The Court also rejected Defendants' arguments that the case raised substantial federal questions under federal Medicaid law. These arguments were also rejected by Judge Herlong in the above-referenced cases, and the Court quoted extensively from Judge Herlong's Janssen opinion as support for its decision. Judge Herlong's decision on this issue focused on the fact that (i) Defendants' liability depended on their breach of duties defined by state law, and (ii) the Federal Medicaid Act does not provide a private right of action, which further supports that there is no federal question jurisdiction.

Finally, the Court rejected Defendants' argument that the federal preemption issues implicated by Plaintiff's failure to warn claims raised a federal question. "Defendants concede that a failure to warn preemption defense has never been held sufficient to convey federal jurisdiction."

Based on its decision to grant Plaintiff's remand motion, it determined that the Plaintiff's motion to transfer the case to Judge Herlong was rendered moot.

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