Judge Keeps $125M Provigil Settlement Intact, Denying Claim Document Wasn't Final
A federal judge has rejected an insurance provider's attempts to invalidate a $125 million settlement that the company, and several others, entered into with the makers of the sleep-disorder drug Provigil.
April 23, 2018 at 04:16 PM
4 minute read
The original version of this story was published on The Legal Intelligencer
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A federal judge has rejected an insurance provider's attempts to invalidate a $125 million settlement that the company, and several others, entered into with the makers of the sleep-disorder drug Provigil.
U.S. District Judge Mitchell Goldberg of the Eastern District of Pennsylvania on April 20 denied claims by United Healthcare Services that a 2015 memorandum of understanding aimed at settling antitrust claims against Cephalon and Teva over the anti-narcolepsy drug was merely part of the negotiating process and not a final agreement.
The insurance giant pointed to language in the agreement, including the use of the word “will” instead of “shall,” to argue that the terms were speculative and ambiguous, but Goldberg rejected those claims, finding instead that the agreement was clear.
“The memorandum of understanding unequivocally evidences the parties' intention to enter into a binding settlement agreement wherein all signing parties, which included UHS, released their claims against the Cephalon parties in exchange for some portion of a $125 million payment,” Goldberg said. “I view UHS's efforts to create a genuine issue of material fact on this issue, and thereby avoid summary judgment, as post-hoc efforts to undermine the clear language of the memorandum of understanding.”
Although the ruling rejected all of United Healthcare's claims, the decision in Teva Pharmaceutical Industries v. United Healthcare Services did not dismiss the case, but instead allowed the health insurance giant to proceed with arguments that its attorneys during settlement talks did not have authorization to enter into the agreement on its behalf. That issue, Goldberg said, cannot be decided at the summary judgment stage.
The $125 million settlement is part of a much broader antitrust litigation over Provigil, which included a claim by a separate generic drug company, a $1.2 billion settlement with the Federal Trade Commission and suits brought by direct purchasers of the drug. UHS, which is a third-party payer, was part of the litigation brought by indirect purchasers of the drug.
According to Goldberg, the indirect purchasers entered into the accord in late 2015, after class certification for third-party payers had been denied. The agreement said that Cephalon, which was the brand manufacturer of Provigil, and generic drug companies Teva and Barr Pharmaceuticals would pay $48 million to settle with end-payors and $77 million to settle claims brought by third-party payers.
Settlement negotiations, according to Goldberg, were handled by, among others, Kirkland & Ellis New York partner Jay Lefkowitz on behalf of the drug companies and Richard Cohen of Lowey Dannenberg Cohen & Hart in White Plains, New York, on behalf of the third-party payers. UHS outside counsel included Mark Sandmann and Pamela Slate of Hill, Hill, Carter, Franco, Cole & Black, Goldberg said.
According to Goldberg, UHS's outside counsel dealt mostly with Cohen, and did not deal with Cephalon's counsel directly regarding the settlement negotiations.
About six months after the memorandum of understanding was signed in December 2015, UHS told the drug companies it did not consider itself bound by the settlement, and fired its outside counsel.
One of the main issues UHS raised was that the accord did not spell out exactly how much each plaintiff would be receiving under the settlement, or how much would be set aside for the companies' attorneys. Without those specifications, the agreement was not clear enough to be enforceable, the company contended.
Goldberg disagreed.
“The heart of the agreement was plainly set forth in the memorandum of understanding,” Goldberg said. “The fact that UHS could not determine its precise share of this payment, how much would go to counsel, and whether some of its [administrative-services only] customers would attempt to make claims does not change my conclusion.”
Washington, D.C.-based Abby Dennis of Boies Schiller & Flexner represented UHS. Both Dennis and Lefkowitz did not return a call seeking comment.
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