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2022 Ballot Initiatives Resurrect Malpractice “Tort Wars”

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One of the Capitol’s most enduring conflicts pits personal injury attorneys and their allies in consumer advocacy groups against corporate interests and their insurers. The two factions clash incessantly over what events are deemed wrongful acts (torts), who can sue over those acts and what monetary damages can be awarded.

Dubbed “tort wars,” the conflict has raged for decades in the Legislature, in the courts and occasionally via ballot measures, each side depicting itself as the good guys and the other as rapaciously evil. Millions of dollars are spent each year on lobbyists, media strategists, political campaign advisors and other tools of the political trade.

CalMatters Reports that the intensity of the war varies from year to year, and 2022 is shaping up as one its hotter periods as the factions propose dueling ballot measures. One would effectively undo a 1975 law that limits damages for “pain and suffering” in medical malpractice cases, while another would place a new limit on the fees that personal injury attorneys can claim.

The controversial 1975 law, entitled the Medical Injury Compensation Reform Act (MICRA) and signed by Jerry Brown during his first year as governor, limits non-economic damages for medical malpractice to $250,000. Its passage was not only a big win for medical providers and their insurers but the opening salvo of the war.

MIRCA also ended workers’ compensation subrogation recoveries in California medical malpractice cases.

The attorneys not only have tried – very unsuccessfully so far – to repeal or modify MICRA while business groups and insurers have not only attempted to blunt the attorneys’ expansive ambition but to carry the MICRA model of damage limits into other potential injury cases.

According to the CalMatters article, in 1987, 12 years after MICRA was enacted, the speaker of the state Assembly, Willie Brown, mediated extensive negotiations between the warring factions on a truce, culminating in the infamous “napkin deal” worked out in Frank Fat’s restaurant near the Capitol with Brown hopping from table to table.

Quickly ratified by the Legislature, it gave lobbyists for every interest involved something to take back to their clients, including a slight modification of MICRA and new protections for the tobacco industry from lawsuits by smokers for cancer and other illnesses.

The napkin deal truce lasted for a few years, but tort wars resumed in the 1990s and have been waged ever since on specific issues, including several unsuccessful efforts to change MICRA. One subset of the conflict, involving roughly the same interests, has been perennial jousting over workers’ compensation, the employer-financed, multi-billion-dollar system that covers job-related injuries and illnesses.

A ballot measure that would indirectly but effectively repeal MICRA is already qualified for the 2022 ballot even though the anti-MICRA coalition has failed repeatedly in the past to undo what the Legislature and Jerry Brown wrought 46 years ago.

Meanwhile, the Civil Justice Association of California, an umbrella organization of business and insurance interests, has unveiled its own initiative measure that would limit lawyers’ contingency fees in personal injury cases to 20% of monetary judgments, sharply lower than the traditional one-third or more. The goal, obviously, is to make attorneys less willing to take on cases.

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Supreme Court Declines Another Vaccine Mandate Review

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The U.S. Supreme Court on Monday declined to issue an injunction against New York’s COVID-19 vaccine mandate for health care workers, which doesn’t allow them to seek a religious exemption.

New York state imposed the vaccine mandate for doctors and nurses in August, which allows only for medical exemptions, not religious ones. The religious exemption policy expired in November.

The latest decision suggests the high court lacks the appetite to wade into the matter of mandates. The Supreme Court has previously rejected other challenges, including one that focused on Maine’s lack of a religious exemption to vaccine mandates for health care workers.

Petitioners, which included Christian doctors, said New York’s vaccine mandate violates the U.S. Constitution’s First Amendment prohibition on religious discrimination on behalf of the government. They also argued that it violates federal civil rights law that requires businesses to accommodate employees’ religious beliefs.

Justices Clarence Thomas, Samuel Alito, and Neil Gorsuch wrote they would have supported temporarily halting enforcement of New York’s mandate.

“Sometimes dissenting religious beliefs can seem strange and bewildering. In times of crisis, this puzzlement can evolve into fear and anger,” Gorsuch wrote in his dissent.

“One can only hope today’s ruling will not be the final chapter in this grim story,” Gorsuch continued. “Cases like this one may serve as cautionary tales for those who follow.”

In October, when the Supreme Court didn’t take up the Maine vaccine case, Gorsuch wrote that “healthcare workers who have served on the front line of a pandemic for the last 18 months are now being fired and their practices shuttered,” adding that they have been terminated “for adhering to their constitutionally protected religious beliefs.”

“Their plight is worthy of our attention,” he argued.

Other than Maine and New York, Rhode Island is the only other state that doesn’t allow religious exemptions to the vaccine for health care workers.

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Farm Labor Contractor Charged With $1.8 M Premium Fraud

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62 year old Alfredo Casas, who lives in Stockton, has been arraigned on 15 felony counts of insurance fraud, grand theft and tax evasion.

Casas allegedly underreported payroll for his farm labor contracting business by over $1 million, resulting in a substantial loss to two insurance companies and the State Compensation Insurance Fund (State Fund).

Casas was convicted on similar workers’ compensation fraud charges in 2012. As part of that conviction, Casas’ business was found uninsurable by State Fund.

However, Casas allegedly renamed and restructured his business using family members to serve as its officers, allowing him to obtain new workers’ compensation insurance policies.

On March 6, 2019, the Department of Insurance received a referral from an insurance company alleging Casas’ business, AC Farm Ag Inc., was reporting no payroll in order to receive a reduced rate for workers’ compensation insurance. By reporting no payroll throughout the calendar year, Casas paid a lower premium rate than he was entitled to receive.  

A joint investigation and search warrant service conducted by the Department of Insurance and San Joaquin County District Attorney’s Office discovered Casas failed to disclose payroll, previous insurance claims, and policy cancellations and failed to provide correct job descriptions for his employees.

Casas also operated for over two years as Casas Farm Services using forged Certificates of Insurance, forged Department of Industrial Relations Farm Labor Contractor permits, forged San Joaquin County Agriculture permits and documents he obtained from the state’s Labor and Workforce Development Agency by fraud.

Under state law, employers must accurately report the number of employees, job classifications, and the amount of payroll expended. One of the common ways in which employers avoid paying insurance premiums is to underreport a business’s payroll by providing false payroll reports to their insurance company.

Casas is scheduled to return to court on February 10, 2022, for further arraignment. This case is being prosecuted by the San Joaquin County District Attorney’s Office.

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Pfizer Buys Pharma Rival Arena In All-Cash $6.7 Billion Deal

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In a move that may concern those responsible for payment of healthcare costs, Pfizer and Arena Pharmaceuticals, Inc. announced that the companies have entered into a definitive agreement under which Pfizer will acquire Arena, a clinical stage company developing innovative potential therapies for the treatment of several immuno-inflammatory diseases.

Under the terms of the agreement, Pfizer will acquire all the outstanding shares of Arena for $100 per share in an all-cash transaction for a total equity value of approximately $6.7 billion. The boards of directors of both companies have unanimously approved the transaction.

Pfizer expects to finance the transaction with existing cash on hand.

“The proposed acquisition of Arena complements our capabilities and expertise in Inflammation and Immunology, a Pfizer innovation engine developing potential therapies for patients with debilitating immuno-inflammatory diseases with a need for more effective treatment options,” said Mike Gladstone, Global President & General Manager, Pfizer Inflammation and Immunology. “Utilizing Pfizer’s leading research and global development capabilities, we plan to accelerate the clinical development of etrasimod for patients with immuno-inflammatory diseases.”

Arena’s portfolio includes diverse and promising development-stage therapeutic candidates in gastroenterology, dermatology, and cardiology, including etrasimod, an oral, selective sphingosine 1-phosphate (S1P) receptor modulator currently in development for a range of immuno-inflammatory diseases including gastrointestinal and dermatological diseases.

Arena has built a robust development program for etrasimod, including two Phase 3 studies in ulcerative colitis (UC), a Phase 2/3 program in Crohn’s Disease, a planned Phase 3 program in atopic dermatitis, and ongoing Phase 2 studies in eosinophilic esophagitis and alopecia areata.

In addition, Arena’s pipeline includes two development-stage cardiovascular assets, temanogrel and APD418. Temanogrel is currently in Phase 2 for the treatment of microvascular obstruction and Raynaud’s phenomenon secondary to systemic sclerosis. APD418 is currently in Phase 2 for acute heart failure.

“We’re delighted to announce Pfizer’s proposed acquisition of Arena, recognizing Arena’s potentially best in class S1P molecule and our contribution to addressing unmet needs in immune-mediated inflammatory diseases,” said Amit D. Munshi, President and Chief Executive Officer of Arena. “Pfizer’s capabilities will accelerate our mission to deliver our important medicines to patients. We believe this transaction represents the best next step for both patients and shareholders.”

Under the terms of the merger agreement, Pfizer will acquire all of the outstanding shares of Arena common stock for $100 per share in cash. The proposed transaction is subject to customary closing conditions, including receipt of regulatory approvals and approval by Arena’s stockholders.

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Roudup Maker Prevails Again – in SoCal Jury Verdict

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Claims administrators who are evaluating possible subrogation in cancer cases filed by California farm workers who file claims for having been exposed to the weed killer Roundup, should take note of another Southern California favorable jury verdict by the parent company Bayer AG, the German pharmaceutical conglomerate that owns Monsanto the maker the product.

The jury found that Roundup did not cause a San Bernardino woman’s cancer on Thursday, adding another tally to the winner’s column for Bayer over claims that its signature herbicide is carcinogenic.

The plaintiff, Donnetta Stephens, of Yucaipa, California, was diagnosed with non-Hodgkin’s lymphoma in 2017.  She argued that it was caused by 17 years of spraying Roundup twice a week in her yard. She sued Roundup maker Monsanto in 2020 for failing to warn her that glyphosate, the active ingredient in Roundup, could cause cancer.

But a jury decided that Roundup was not a substantial factor in Stephens’ diagnosis.

“The jury’s verdict in favor of the company brings this trial to a successful conclusion and is consistent with the evidence in this case that Roundup isn’t the cause of Ms. Stephens’ cancer. While we have great sympathy for Ms. Stephens, we agree with the jury that Roundup isn’t the cause of her illness,” a Bayer spokesperson said.

Stephens’ attorney, Fletch Trammell, told Reuters that he plans to appeal the judgment.

Wednesday’s verdict marks the second trial victory for Bayer, as a Los Angeles jury found in October that Roundup exposure did not cause 10 year-old Ezra Clark’s Burkitt’s lymphoma, a rare and aggressive form of pediatric cancer.

The first three trials were held in the Bay Area, where juries found in favor of the plaintiffs in every instance and awarded millions in damages.

The company hopes a ruling by the U.S. Supreme Court in a separate case will help put to rest yearslong litigation over the weedkiller. “The company continues to stand behind the safety of Roundup and will confidently defend the safety of our product as well as our good faith actions in any future litigation,” Bayer said.

Legal issues surrounding Roundup have prompted the company to set aside billions in provisions to settle cases.

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Federal Court Ends California Generic Drug Price Law

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In a case that is not quite good news for workers’ compensation claims administrators hoping to see lower generic drug prices, a federal judge on Thursday suspended California’s first-in-the-nation ban on pharmaceutical industry pay-for-delay deals, ruling the law intended to increase the flow of affordable generic drugs likely violates out-of-state commerce protections.

AB 824, was signed into law by California Governor Gavin Newsom on October 7, 2019. It creates a presumption that “reverse payment” settlement agreements regarding patent infringement claims between brand-name and generic pharmaceutical companies are anti- competitive and unlawful. A violation of the law is punishable by a civil penalty.

According to the State, AB 824 closes this loophole in the federal Hatch-Waxman Act and ensures a brand-name company cannot continue to enforce an otherwise weak patent against generic companies through these reverse payment settlement agreements.

The plaintiff in the case is a nonprofit, voluntary association comprised of the leading manufacturers and distributors of generic and biosimilar medicines, manufacturers and distributors of bulk active pharmaceutical ingredients, and suppliers of other goods and services to the generic and biosimilar pharmaceutical industry that filed suit in an attempt to invalidate AB 824.

Plaintiff argues AB 824: violates the dormant Commerce Clause by directly regulating out-of-state-conduct; is preempted by federal patent law, the delicate balance between the competing interests of patent protections and antitrust law struck by the U.S. Supreme Court in prior decisions.

The State contends that “AB 824 seeks to prevent or reduce anticompetitive pharmaceutical sales in California, and, thus, applies to agreements to engage in that conduct,” not “conduct occurring wholly outside California.”

U.S. District Judge Troy Nunley in his Opinion, agreed the law enables California to issue multimillion-dollar civil penalties against companies that have no connection to the state, and said it must be temporarily enjoined due to clear constitutional shortcomings.

“As it is written, the civil penalties provision could hypothetically reach a corporate officer of a Delaware company entering into a settlement agreement with another Delaware company regarding pharmaceutical sales in only Delaware,” Nunley wrote. “The court cannot reasonably find that Assembly Bill 824 regulates only the California market.”

“The court finds the balance of equities and the public interest element tips sharply in plaintiff’s favor such that an injunction would be proper even if there were only serious questions going to the merits,” Nunley concluded.

According to Courthouse News, the bill’s author said the judge’s decision was “beyond frustrating.”

“The association’s name and mission would imply that they are somehow on the side of patients when, in fact, they are only on the side of protecting their own profits,” said Assemblyman Jim Wood, D-Eureka.

On the other side, Jeff Francer, the association’s general counsel, celebrated the decision in an email. “AAM is encouraged that the federal court today recognized the harm caused by California in restricting litigation settlements that typically bring more affordable medicines to patients and taxpayers more quickly.”

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Price Gouging Drugmaker Resolves Antitrust Case for $40M

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A fraud conviction and seven-year prison sentence haven’t spared Martin Shkreli from a federal antitrust lawsuit tied to his former company’s infamous drug pricing scandal. Now, the pharmaceutical company formerly known as Turing has agreed to settle for $40 million.

The California Attorney General announced that Vyera Pharmaceuticals has agreed to pay up to $40 million as disgorgement of Ill-Gotten Gains, to settle charges that it engaged in anticompetitive practices to ward off generics and maintain “monopoly profits” from its more than 4,000% overnight price hike on the toxoplasmosis med Daraprim..

The agreement also bans the former Vyera CEO Kevin Mulleady from almost any role at a pharmaceutical company for seven years. Meanwhile, the litigation against Shkreli, who was the architect of the illegal scheme, will continue, James’ office said. His antitrust trial is slated to begin Dec. 14.

In January 2020, New York Attorney General James and the Federal Trade Commission (FTC) filed a lawsuit against Vyera, Shkreli, and Mulleady for antitrust violations that stifled competition and permitted the defendants to protect and maintain their monopoly profits from their more than 4,000 percent overnight increase – to $750 per pill – of the drug Daraprim (pyrimethamine).

Daraprim is the only Food and Drug Administration (FDA)-approved drug for the treatment of toxoplasmosis, a parasitic disease which may pose serious and often life-threating consequences for those with compromised immune systems, including babies born to women infected with the disease and individuals with the Human Immunodeficiency Virus (HIV).

Daraprim was cheap and accessible for decades, then, in August 2015, Vyera purchased the drug, increased the price, altered its distribution, and engaged in other conduct to delay and impede generic competition.
The high price and distribution changes limited access to the drug, forcing many to make difficult and risky decisions for the treatment of a life-threatening disease.

The illegal scheme perpetrated by Vyera, Shkreli, and Mulleady involved restrictive distribution and supply agreements, as well as data secrecy, with the intent and effect of delaying entry by lower cost generic competitors.

In April 2020, the states of California, Illinois, North Carolina, Ohio, Pennsylvania, and Virginia joined Attorney General James’ and the FTC’s lawsuit.

All money deposited in the Settlement Fund shall be used for equitable relief, including consumer redress and other equitable relief that the Plaintiff States determine to be related to the Defendants’ alleged violative practices and injury, any attendant expenses for the administration of such fund, and repayment of out-of-pocket expenses, and to satisfy the amount of any settlement reached in the related case,

Any money remaining in the fund after such distributions shall be deposited by the Plaintiff States as disgorgement to be used consistently with their respective state laws.

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LASD Fires Hundreds of Employees Over Vaccine Mandate

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Nearly 500 Los Angeles Unified School District employees were fired this week for refusing to comply with a mandate that they get vaccinated against COVID-19, while some 34,000 students have not yet been vaccinated as required.

KTLA News reports that the school board voted 7-0 in separate motions on Tuesday to terminate 496 employees, who make up less than 1% of the district’s approximately 73,000 workers.

Most of those fired had likely been on leave since mid-October when LAUSD staffers were to have received at least their first vaccine dose, the Los Angeles Daily News reported. Employees were required to receive their second dose by Nov. 15.

Of the 496 employee dismissals, 418 were classified employees who are non-credentialed but critical staff that can include positions such as instructional aides, custodians, cafeteria workers and others.

The district initially set an Oct. 15 deadline for its employees to be fully vaccinated against COVID-19 but extended the deadline to Nov. 15.  “The effective date of separation for employees without record of any vaccine by October 15, 2021, will not be prior to November 1, 2021,” according to the district. “Employees will remain in paid status through October 31, 2021.”

The mandate applies to all district students, along with charter school students on co-located district school facilities. Students “with qualified and approved exemptions under LAUSD’s existing immunization policies” are exempt.

LAUSD is one of several large districts in California to adopt their own rules requiring students to get the COVID-19 vaccination, ahead of a statewide policy that will take effect after federal officials fully approve the immunizations by age group. The state policy, announced by Gov. Gavin Newsom in October, is not expected to go into place before July, but the precise date is still unknown.

Districts including San Diego Unified, Sacramento City Unified, Oakland and West Contra Costa are among those that have deadlines for student vaccine policies scheduled to take effect in early 2022. The policies vary according to district, with some allowing students to opt for weekly testing and others making the shot a requirement for in-person classes.

In Los Angeles, students who are not fully vaccinated – or exempt – will be forced into the district’s independent study program or will have to leave the Los Angeles public school system.

Shifting 34,000 students into independent study would be challenging because the program faces staffing shortages, according to the Times.

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Retired WCJ Correro Clarifies Limits on Developing the Record

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Retired WCJ Raymond F. Correro recently published an excellent article on Exploring the Limitations on the WCAB’s Authority to Develop, Augment, and Reopen the Record, on the LexisNexis website.

As he explains, there is tension between the Workers’ Compensation Appeals Board’s power and authority to develop the evidentiary record pursuant to Labor Code sections 5701 and 5906, – and prohibitions on admitting evidence not listed on the pretrial conference statement pursuant to Labor Code section 5502(d)(3) and the closure of discovery at that point of the litigation.

Prior to the late 1990s, the tension was less severe, as the power to reopen a case after submission for decision was somewhat limited. If the applicant failed to carry their burden of proof, they simply did not prevail, and a take nothing award was the result.

Judge Carrero discussed a trifecta of cases that seemed to open the door and exacerbate this tension, by allowing seemingly unfettered power of the trial Judge, or WCAB on reconsideration to further develop the record after submission of the case for decision.

The cases are Tyler v, Workers’ Comp. Appeals Bd. ((1997) 56 Cal.App.4th 389, 62 Cal.Comp.Cases 924, 1967 Cal.App LEXIS 562; McClune v. Workers’ Comp. Appeals Bd. (1998) 62 Cal.App.4th 1117, 63 Cal.Comp.Cases 261, 1998 Cal.App. LEXIS 282; and M/A Com-Phi v. Workers’ Comp. Appeals Bd. (Sevadjian) (1998) 65 Cal.App.4th 1020, 63 Cal.Comp.Cases 821, 1998 Cal.App. LEXIS 670.

Judge Carrero points out that “The WCAB continues to rely on these same three cases from the late 1990’s which has been manifested in numerous cases to become a mantra of sorts frequently expressed or formulated in almost the exact same or similar language with little variation.”

However he concludes his article by pointing out that there are limitations to the application of the trifecta of cases, and cites as authority a case that followed approximately three years later, McDuffie v. Los Angeles County Metropolitan Transit Authority (2002) 67 Cal.Comp.Cases 138; 2002 Cal.Wrk.Comp. LEXIS 1218 (en banc).

McDuffie sets fourth a limit. Development of the record is allowed only if neither side has presented substantial evidence on which a decision could be based. But it is not appropriate where a decision could be rendered on the existing record and the party seeking to introduce new evidence has failed to show that such evidence “was not available or could not have been discovered by the exercise of due diligence prior to the [mandatory] settlement conference.”

In the case where further development of the record is appropriate, a seven step set of procedures to follow are suggested.

Many thanks to Judge Carrero for his thorough and well reasoned analysis of the limits on developing the record in a submitted case.

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DWC Updates QME Educational Offerings

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Ray Meister, MD, MPH, Executive Medical Director Division of Workers’ Compensation Department of Industrial Relations, has just announced a new educational offering for Qualified Medical Evaluators.

The Division of Workers’ Compensation launched an update to the online physician education course, Evaluating California’s Injured Workers: Qualified Medical Evaluators (QMEs).

The Center for Occupational and Environmental Health designates this enduring material for a maximum of 2 AMA PRA category 1 Credit(s) and the course is approved for 2 hours of QME continuing education credit. Those who took the previous course are eligible to retake the updated course for the additional credit.

This course will cover the following topics:

1) How to prepare for an evaluation and outline the components of a quality report
2) The concept of apportionment and how to apportion to causation of disability
3) What constitutes substantial medical evidence and how it applies to apportionment
4) Potential bias and how to avoid it in your medical-legal reports
5) Administrative regulations to stay in compliance as a QME

The DWC also offers a CME course on the Medical Treatment Utilization Schedule (MTUS). All providers involved in the care of California’s injured workers have no-cost access to the MTUS-ACOEM treatment guidelines.

– – Learn how to use the MTUS, the MTUS-ACOEM treatment guidelines and formulary to increase UR approvals
– – Learn how to use evidence-based treatment guidelines and medical recommendations in caring for your patients.
– – Learn which medications are consistent with the MTUS-ACOEM treatment guidelines and exempt from Prospective Review authorization.

Both courses are offered free of charge.

This activity has been planned and implemented in accordance with the accreditation requirements and policies of the California Medical Association (CMA) through the joint providership of The Center for Occupational and Environmental Health (COEH) and State of California Department of Industrial Relations Division of Workers’ Compensation. The Center for Occupational and Environmental Health is accredited by the CMA to provide continuing medical education for physicians.

The Center for Occupational and Environmental Health (COEH) designates this enduring material for a maximum of 2.0 AMA PRA Category 1 Credits™. Physicians should claim only the credit commensurate with the extent of their participation in the activity.

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