Legal Roundup: Injury Compensation Cap ‘Unconstitutional,’ Med Director Denial of Coverage Settles Suit and More

A look at recent court decisions and how their rulings have an impact on risk management and the insurance industry.
By: | May 6, 2019

Two Drug Companies to Pay $125 Million to Settle Kickback Claims

The Case: Two prominent drug companies have been accused by federal prosecutors of providing financial support to charities that, in turn, bought their drugs.

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Amgen and Astellas Pharma were “part of a long-running Justice Department investigation into the financial support drug companies provide to charities that help patients pay for prescription drugs.”

“Prosecutors have said these charities helped boost the sales of those drugs, with the assistance ensuring patients fill their prescriptions, and insurance or taxpayers pick up the rest of the tab,” according to the Wall Street Journal.

“Prosecutors said Astellas used these charities to help cover patients’ costs for its Xtandi prostate-cancer treatment … Separately, Amgen agreed to pay about $25 million over its financial support to charities that offered patients its thyroid drug Sensipar and its multiple myeloma drug Kyprolis,” the Wall Street Journal further reported.

Both companies denied any wrongdoing.

Scorecard: In two separate cases, Amgen and Astellas Pharma agreed to pay $125 million to resolve the kickback claims. 

Takeaway: The Justice Department will continue to pursue similar cases in an effort to curb potential kickbacks.

Oklahoma Supreme Court Says Cap for Pain-and-Suffering Is Unconstitutional

The Case: In 2011, Oklahoma passed legislation capping pain-and-suffering damages at $350,000 as part of a push for tort reform.

In 2012, James Beason was severely injured when a boom from a crane fell and hit him, leading to two amputations on part of his arm, according to Tulsa World.

Beason was awarded $6 million but a judge was forced to cut that number to $350,000 (and award his wife $350,000 as well.) Beason sued to receive the full amount of damages.

After that, the Oklahoma Supreme Court ruled that the legislative cap on damages was unconstitutional.

Tulsa World further explains: “The statutory cap on noneconomic damages resulting from bodily injury is the type of special law forbidden by the state Constitution, the court said.

‘The failing of the statute is that it purports to limit recovery for pain and suffering in cases where the plaintiff survives the injury-causing event, while persons who die from the injury-causing event face no such limitation, according to the order.”

Scorecard: Beason will receive above the legislative cap, and the bill will no longer hold weight.

Takeaway: Limiting damages in tort cases is now deemed unconstitutional in Oklahoma — but tort reform is a major issue so expect the fight to continue.

Aetna Settles Suit Involving Medical Director Who Claimed He Never Read Patient Records

The Case: Back in February 2018, an Aetna medical director “said under oath that he never looked at patients’ records when deciding whether to approve or deny coverage,” according to CNN.

That prompted an investigation by the California insurance commissioner and a legal battle appeared to be brewing around Gillen Washington, who has a rare immune disorder and was denied coverage.

Dave Jones who launched the inquiry in 2018 told CNN “he found it troubling ‘if the health insurer is making decisions to deny coverage without a physician actually ever reviewing medical records.’ ”

Scorecard: That battle ended abruptly this week. Aetna settled the lawsuit but admitted no wrongdoing.

Takeaway: The case doesn’t shed light on how Aetna medical directors make decisions but does show that those decisions must be made carefully.

Morgan Stanley Settles Charges It Misled Pension Plans on Mortgage-Backed Securities

The Case: Morgan Stanley had been accused of misleading two California pensions programs about the risks of buying mortgage-backed securities.

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The California Public Employees’ Retirement System (CalPERS) and California State Teachers Retirement System (CalSTRS) said they bought the investments in the years leading up to the 2008 economic recession because Morgan Stanley overstated the quality of subprime lenders.

“The bank was also accused of failing to remove poor-quality loans from those securities, and hiding the risks because disclosure could become a ‘relationship killer’ prompting lenders to send future business elsewhere,” reported Reuters.

Morgan Stanley denied any wrongdoing: “The lawsuit was one of hundreds accusing banks of misleading investors in the marketing and sale of residential mortgage-backed securities,” Reuters explained.

Yet, “Morgan Stanley agreed in February 2016 to pay $3.2 billion to resolve federal and state claims over those securities.”

Scorecard: Morgan Stanley has agreed to settle the charges and pay $122 million to CalPERS, $8 million to CalSTRS and pay another $20 million to fund other investigations and cover costs.

Takeaway: The fallout from the global economic crisis still lingers years later, although such cases appear to be finally coming to a close. &

Jared Shelly is a journalist based in Philadelphia. He can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]