NPCA/FSCT files amicus brief in support of petitioner before Pennsylvania Supreme Count; argues against contingency fee.

As part of its formal Amicus Program, NPCA/FSCT filed an amicus brief August 11 in a notorious "pay to play" case, Commonwealth of Pennsylvania (c/o Office of General Counsel) v. Janssen Pharmaceutica, before the Supreme Court of Pennsylvania. This litigation, originated by a private plaintiffs attorney and substantial contributor to the reelection campaign of Pennsylvania Govenor Ed Rendell, was the lawyer's plan to bring a Parens Patriae case on behalf of the Commonwealth seeking substantial monetary awards against pharmaceutical manufacturers for purported Medicaid fraud involving "off-label" uses of certain drugs. Originally rebuffed by the Pennsylvania State Attorney General, he then secured a no-bid contingent fee contract to pursue the case on behalf of the state through the intervention of Govenor Rendell.

According to NPCA/FSCT, the case exemplifies why contingency fee arrangements with private law firms using the State's civil enforcement authority to protect public health and safety (in its capacity as Parens Patriae) inherently undermine the public trust in fair, impartial, and fiscally responsible prosecution. Here, where political contributions to the state's governor by the private law firm have positively influenced his decision that the Commonwealth enter the contingency fee contract advocated by it, NPCA/FSCT believes the Supreme Court of Pennsylvania must act in accord with its precedent to strike down the deal.

The paint industry, because of the old, lead-based paint issue, has been a primary target of such contingency fee schemes falsely billed as imposing "no government cost" by national plaintiffs' law firms, who often are also significant political contributors to state officeholders. A challenge to a lead remediation public contingency contract is now before the California Supreme Court.

NPCA/FSCT's brief in support of the petitioner emphasizes that, regardless of the pay-to-play aspect, purported no-cost contingency fee representation creates a "moral hazard," which prevents the Commonwealth of Pennsylvania from properly exercising its role as Parens Patriae. In its brief, NPCA/FSCT maintains that "when the Commonwealth is faced with the question whether to initiate a parens patriae claim independently, it must choose which cases are meritorious and most likely to lead to a return on its investment of public resources (measured in the broader benefit to the public good)." However, here, because the state's investment in the case "is minimal, and the potential payoff is sizeable, the government will behave opportunistically and allow contingent-fee counsel to prosecute such cases, regardless of their merit." Moreover, the government's incentive to monitor the progress of these relatively weak cases employing unfounded or experimental theories of recovery is "suboptimal," since it perceives its involvement as risk-free, as the amicus brief states: "Nothing is immediately lost to the government for this carelessness."

Citing legal authorities, NPCA/FSCT argues that "of course, there is a loss to the public. This suboptimal exercise of care allows the government to take on prosecution of cases that well may be weakly supported, poorly reasoned, and therefore of limited value as either a legal precedent or as a signal to future actors who wish to avoid engaging in fraudulent conduct. When such cases proceed, the public good is not served. Moral hazard costs include the risk of compromising socially important goals, the imposition of unnecessary litigation costs on parties to excessive litigation, the risk of establishing unclear or affirmatively bad legal precedent, and the risk of sending mixed deterrence signals to other providers and manufacturers who may be targeted as defendants in the future."

NPCA/FSCT emphasized by logical extension that "the state would never defend a scenario where a private party offers to pay the government a substantial sum of money in exchange for its agreement to prosecute specific private companies and to share in any proceeds with the payor. But that effectively is the very deal that the state has struck in this litigation."

The Pennsylvania Supreme Court is scheduled to hear oral arguments in the case on October 21, 2009.

For additional information, contact Tom Craves, NPCA/FSCT General Counsel, at [e-mail].