Virtually everyone who follows government and politics is familiar with Speaker of the House Nancy Pelosi (D-Calif.).  Many know that one of her priorities in the 110^th Congress is passing legislation that would allow the government to negotiate prescription drug prices.

            Far fewer of us, however, are familiar with Steve Berman from the Seattle-based law firm of Hagens Berman Sobol Shapiro LLP.  But litigation initiated by Berman’s firm in federal court in Massachusetts may play a greater role in establishing drug prices than any law Speaker Pelosi and Congress may pass.

            If prices for prescription medicines are to be dictated through private civil litigation rather than public processes, our system of constitutional government, in which legislators and executives accountable to the public write laws and judges apply those laws to resolve disputes, will suffer badly. 

Such “regulation through litigation” is undemocratic, it disadvantages individuals and organizations that are not parties to the litigation, and it creates incentives that have less to do with achieving sound policy outcomes and more to do with the pursuit of multi-million or billion-dollar legal fees.  

            In the case at issue, New England Carpenters Health Benefits Fund v. First DataBank Inc., Berman’s firm represents a consortium of health benefit plans that sued First DataBank (a publisher) and McKesson Corporation (a medicine wholesaler) in a class action lawsuit for allegedly miscalculating the Average Wholesale Price (AWP) of more than 1600 prescription medicines.  That price is much like the sticker price on an automobile – virtually no one pays it, but the rate serves as a common standard for negotiating discounts and reimbursements paid by insurers and state agencies for medicines.

            The facts of the case are not extraordinary, but the terms of the proposed settlement between the plaintiffs and First DataBank are:

·         Not a penny will be paid to the allegedly harmed plaintiffs, even though their lawyers will pocket more than $600,000 in fees;

·         First DataBank will recalculate prices for more than 8500 medicines – approximately 6900 more than those at issue in the litigation; and

            Thus, the price of more than 8500 prescription medicines will be recalculated with the stroke of a pen, and not Congress, a single state legislature nor a duly authorized regulatory body will have had anything to say about it.

            Berman’s firm and others are working for the AGs on a contingency fee basis to coordinate their litigation against pharmaceutical manufacturers.  The AGs are presumably enticed by the prospect of banner headlines and a settlement or series of settlements that could perhaps pay billions of dollars in fees to Berman and other private lawyers who support them politically.

            The American Tort Reform Association argues that such insidious financial relationships between personal injury lawyers and attorneys general pervert policy outcomes.  If they’re to be allowed at all, open bidding for legal work and ample oversight by state legislatures and the public should be routine. 

Of course, the personal injury bar defends its relationship with various attorneys general, insisting that regulation through litigation is necessary when legislatures “fail” to make appropriate policies.  But the deliberative, compromise-based nature of lawmaking has always been at the heart of our democratic system. 

            Today, policymakers and health care experts are working on a variety of models to replace the AWP pricing structure. And considering the complexities of health care, it should surprise no one that there’s still some honest disagreement about what precisely would best comprise a new pricing model. 

But regardless of specific outcomes, the legislative process – over time – drives diverse parties toward consensus and compromise, and thereby forges solutions based on common interests.