Bristol-Myers Squibb Agrees to Record Securities Litigation Settlement with Sweeping Drug Disclosure Requirements Announces Labaton Sucharow
The securities fraud claims were brought against BMS and others in the U.S. District Court for the District of New Jersey as a result of negative disclosures about BMS's potential "blockbuster" drug for hypertension called Vanlev. While the case involved a complicated challenge to the company's public statements about a drug in its pipeline that arguably propped up its stock price and damaged class members even though it ultimately was never mass-produced to the public, this settlement is the second largest recovery against a pharmaceutical company. Notably, it is the largest recovery ever obtained against a pharmaceutical company in a securities fraud case involving the development of a new drug, and it is the largest ever obtained against a pharmaceutical company in a securities fraud case that did not involve a restatement of financial results.
“As a union-owned bank, we were particularly concerned about the company's failure to disclose Vanlev's potential side-effects”
The Crux of the Plaintiff's Argument
The class action has been pending since April 2000 when BMS announced that it was withdrawing Vanlev's New Drug Application from consideration by the U.S. Food and Drug Administration because the agency expressed serious concerns about the incidence and severity of a side-effect called angioedema in patients taking Vanlev as part of clinical studies. Amalgamated Bank, represented by Labaton Sucharow as Lead Counsel, was appointed Lead Plaintiff in the action and alleged that BMS, Chief Executive Officer Peter R. Dolan, former Chief Executive Officer Charles A. Heimbold, Jr., and Dr. Peter S. Ringrose withheld material information about this potential drug from investors and the public. Vanlev was never marketed.
The class action was vigorously litigated by the parties. Lead Counsel, on behalf of Amalgamated Bank, reviewed more than four million pages of documents and deposed 36 current and former employees and officers of BMS, including Messrs. Heimbold and Dolan, as well as a number of non-parties, including securities analysts who covered BMS. More than 1,500 exhibits were marked during these depositions. The case also involved 26 experts in the fields of cardiology, pharmacoeconomics, epidemiology, regulatory matters, airway management, securities markets and damages. Each of these experts submitted reports and were deposed.
Unsurpassed Corporate Governance Reforms
As part of the settlement with BMS, the Lead Plaintiff was extremely interested in obtaining meaningful corporate governance reform measures. The Lead Plaintiff's interest in such reforms derived, in large part, from the nature of the alleged fraud, outlined above. The corporate governance reforms ultimately obtained by the Longview Fund of Amalgamated Bank are noteworthy for several reasons.
First, following the adoption of the PSLRA in 1995, corporate reform measures obtained by lead plaintiffs generally have been limited to financial reforms and board memberships. The corporate reforms obtained in this case have expanded this traditional concept of corporate reform.
The practical result of this corporate governance reform is that anyone taking a drug manufactured by BMS will now, for the first time, have instant access to crucial information about the drug, especially serious side effects. (The disclosures will be posted on Bristol Myers Squibb's website, www.bms.com, as well as an industry website, www.clinicalstudyresults.org.) It will allow for a more informed consumer and patient.
"As a union-owned bank, we were particularly concerned about the company's failure to disclose Vanlev's potential side-effects," stated Noel Beasley, the Lead Plaintiff and a representative from the Longview Fund. "We have seen time and again in recent cases such as Vioxx and Paxil the unnecessary health risks posed because a drug company left the public in the dark. Now, consumers will have access to crucial information about BMS drugs, especially any serious side effects."
Second, the corporate reform measures obtained here exceed the scope of the reforms obtained by New York State Attorney General Eliot Spitzer in his settlement of an action against GlaxoSmithKline ("GSK") arising from the sale of Paxil, an antidepressant. For example, the Paxil settlement, which required GSK to post results of its clinical trial data on a public website, was limited to drugs sold in the United States. The settlement in this action requires BMS to post the clinical trial results of drugs marketed in any country throughout the world. The settlement, as stated by Mr. Beasley, "takes it several steps further."
Finally, the corporate governance reforms obtained in this case implement many of the provisions of the Fair Access to Clinical Trials Act of 2005, a bill introduced in the House of Representatives by Representatives Markey and Waxman and in the Senate by Senators Dodd, Grassley, Johnson and Wyden.
Thomas Dubbs, the partner leading Labaton Sucharow's litigation and trial team in the BMS case remarked, " Not only is this the largest settlement dealing with drug development disclosure, but it is also precedent setting in that BMS has agreed to publicly disclose the clinical study design and the results of clinical trials, including the reporting of adverse events, for each and every drug that is marketed in the United States or any other country." Dubbs also said it is one of the 20 largest securities class action settlements overall.