5th Circuit Decision in Vioxx Suit
In Avmed, Inc. V. BrownGreer, PLC, 2008 WL 4909535 (5th Cir. 2008), the 5th Circuit Court of Appeals hurt the health insurance subrogation industry when it comes to Vioxx claims. The court recognized that ERISA health plans have legitimate rights of subrogation and reimbursement for medical expenses paid to participants who suffered health issues after taking Vioxx, a drug intended to relieve pain.
The Court questioned whether settlement funds belonged to the subrogated plans and indicated that technical problems in mass tort multi-district litigation makes it difficult for plans to perfect their subrogation rights.
The court heard the appeal of the district court’s denial for preliminary injunctive relief filed by a group of self-funded ERISA plans. The plans sought to enjoin distribution of interim payments from the Vioxx settlement until such time as they are able to assert equitable rights against any of their beneficiaries who are involved in the settlement negotiation process and for whom they have paid Vioxx-related expenses.
It is estimated that 105 million prescriptions for Vioxx were written in the United States between May 20, 1999 and September 30, 2004, and that approximately 20 million patients have taken Vioxx in the states.
On February 16, 2005, the Judicial Panel on multi-district litigation transferred all such cases to the United States District Court for the Eastern District of Louisiana. On November 9, 2007, Merck announced that it had reached a settlement with the plaintiffs representing Vioxx patients. The private agreement establishes a program for resolving Vioxx claims against Merck as of the date of the settlement, involving claims of heart attack, ischemic stroke, and sudden cardiac death, for an overall amount of $4.85 billion.
It provides for the disbursement of interim settlement payments to eligible claimants. A group of self-funded ERISA plans filed suit against BrownGreer, PLC, the claims Administrator, and U.S. Bancorp, the Escrow Agent, with regard to the settlement.
The procedure that the U.S. Supreme Court and federal appellate courts have stated is necessary for ERISA plans to seek reimbursement is that the subrogated funds must be identifiable, belong in good conscience to the plans, and are within the possession and control of the beneficiary.
The court noted that the Claims Administrator has not yet finished determining which claimants are eligible for funds. The Court stated that there is no way of determining which claimants will receive funds or how much they will receive. It pointed out that none of the ERISA plans had language which designated an unallocated settlement fund as an identifiable fund from which the plan could recover.
The Court would not allow the injunctive relief asked for by the Plans since the subrogation issues surrounding the case were too complicated. Based on this case, plans should revise their plan language to designate an unallocated settlement fund like the one in Vioxx as an “identifiable” fund from which the plan may collect.