Class action lawsuits: an emerging legal risk for pharmaceutical companies

World events have created difficult trading conditions. Covid-19, Brexit, the energy crisis and the war in Ukraine have put pressure on businesses, with inflationary increases now permeating economies around the world. These terms of trade are such that supply chains may be disrupted, leading to delays or the inability to perform the contract. Inflationary pressures can make performance unprofitable and lead parties to terminate contracts.

Regulatory attention remains focused on the pharmaceutical sector, and there is an emerging risk of class actions. Pharmaceutical companies should be aware that they could be the target of class action lawsuits. Class and class actions have become increasingly common, particularly in England and Wales.

Claims are usually large scale and high value and there is an infrastructure in place in the form of specialist claims law firms and funds available to pursue these claims.

English law provides a procedure for various claimants to bring similar claims against the same defendant, with all claims being heard together. A highly publicized example is Bates v Post Office Limited. The plaintiffs were deputy heads of post who had been victims of the Horizon accounting computer system used by the Post Office. He had incorrectly identified innocent sub-postmasters as dishonest and around 600 people filed complaints in a class action. The case settled for just under £58m in 2019.

Competition law

Another way to file claims is through a class action order in the Competition Appeal Tribunal. This allows a person to bring a claim for a class of competition law claimants, either in the context of a pre-existing finding of a competition law breach, or on its own.

A recent example is the Merricks vs Mastercard Case. Walter Merricks sued Mastercard over interchange fees charged by card issuers to retailers, which were often passed on to consumers. She claimed that the interchange fees were set in violation of competition law.

This is the first class action order issued in this jurisdiction. It was introduced on an “opt-out” basis – in other words, anyone who has used a Mastercard in this jurisdiction during the relevant period is a potential applicant. He has a class of around 45million with a claim worth around £14billion. The court said the value of the claim was around £155.80 plus interest for each class member.

Expensive litigation

Two findings follow from this: Mastercard is now facing a very substantial dispute, the defense of which will be long and costly, that is to say without even taking into account the cost of any damages and what it may have to pay. Secondly, it raises the question of whether a consumer would bring such a claim themselves for £155.80 plus interest.

There is a third way to bring class action claims, through the Representative Complaints Procedure. This offers the possibility of bringing a collective action on the basis of an “opt-out” for non-competition cases. The Supreme Court recently considered a lawsuit filed by Mr. Lloyd against Google, alleging a violation of data protection laws by Google in tracking the usage of Apple iPhone users.

Mr. Lloyd wished to bring the claim on an opt-out basis (as in Merricks). The Supreme Court decided that it could not do so because the plaintiffs had to have the same interest in the claim; in this case, they were all claiming damages but not all had suffered the same prejudice.

This creates the possibility of using opt-out procedures in the future for non-competition claims when the plaintiffs all suffer the same loss. These types of claims include competition, data breach, shareholder, commercial contract, consumer and product liability, and environmental, social and governance (ESG) claims. Life sciences companies could, at least in theory, face any of these types of claims.

Consumer Complaints

High profile consumer claims against pharmaceutical companies such as the Seroxat Group litigation against GSK, DePuy hip replacement lawsuits against Johnson & Johnson and its subsidiary DePuy, and PIP breast implant claims have failed , but many other claims have been filed may be settled.

Litigation funders are keen to invest in class actions. As already mentioned, there are plaintiff law firms that seek to file a complaint and use advertising to attract clients. They will offer potential clients a “no-gain-no-cost deal” and get legal protection insurance to protect the client from any adverse costs if the deal is lost.

The client is then able to pursue a claim without having to fund any and feel secure knowing that they will have no liability if the case is lost. Pharmaceutical companies should therefore be aware that they will be an attractive target and that claims against them may be pursued.

This article was first published in Pharmaceutical IQ and accessible here.

Martin E. Berry