The Clients’ Waiver of Their Rights Under Regulation BI of the Securities and Exchange Commission

TAMAR FRANKEL

BU Law emerita professor Tamar Frankel discusses the Securities and Exchange Commission (SEC)’s Regulation Best Interest (BI), which imposes on broker-dealers a commitment to act in the best interests of their clients. Specifically, Frankel addresses the SEC’s treatment of client waivers of the Regulation BI, which goes even further than general fiduciary law to prohibit any waiver of the broker-dealer’s conflicting interests.

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United States, ex rel. Banigan & Templin v. Pharmerica, Inc.

Court: US Court of Appeals for the First Circuit

Docket: 18-1487

Opinion Date: February 19, 2020

Judge: Kermit Victor Lipez

Areas of Law: Drugs & Biotech

The First Circuit reversed the judgment of the district court dismissing this qui tam action under the False Claims Act (FCA) against PharMerica, Inc. under the public disclosure bar, holding that relator James Banigan fell within an exception to that bar as an "original source of the information." Banigan and Richard Templin, former employees of the pharmaceutical company Organon, brought this action under the FCA and several of its state law equivalents alleging that PharMerica committed fraud by participating in a Medicaid scheme that rewarded it financially for incentivizing physicians to change patients' antidepressant prescriptions to Organon's medications. The district court dismissed the action under the public disclosure bar, which excludes from the subject matter jurisdiction of federal courts qui tam actions that are based upon the public disclosure of allegations in a civil hearing and other sources. The First Circuit reversed, holding that where the allegations of fraud were based upon Banigan's direct knowledge, Banigan's sources met the statutory requirement of "direct and independent knowledge of the information on which the allegations are based," see 31 U.S.C. 3730(e), to qualify as an original source.

Antrim Pharmaceuticals LLC v. Bio-Pharm, Inc.

Court: US Court of Appeals for the Seventh Circuit

Docket: 18-3434

Opinion Date: February 14, 2020

Judge: Brennan

Areas of Law: Contracts, Drugs & Biotech

The patent for Lexapro, an anti-depressant, was expiring, creating a potentially lucrative opportunity to sell a generic version, escitalopram. BioPharm, a generic drug manufacturer, and Antrim planned to sign an updated version of the terms for a previous venture, but never signed a contract for the escitalopram venture. The FDA approved Antrim’s Abbreviated New Drug Application for escitalopram. Bio-Pharm manufactured the first batch but never shipped it to Antrim because the companies never signed a new agreement. Antrim sued Bio-Pharm for breaching an oral contract. Bio-Pharm counterclaimed, arguing promissory estoppel or breach of the claimed oral contract. Antrim unsuccessfully argued the court should preclude testimony by Bio-Pharm’s expert on how the FDA regulates ANDA holders. BioPharm successfully argued the court should preclude testimony by Antrim’s expert on industry practices and how Bio-Pharm’s alleged breach impaired the value of Antrim’s business. The court rejected Antrim’s proposed Jury Instruction that under FDA policy an ANDA holder owns the product underlying that ANDA and denied Antrim’s motion to bar Bio-Pharm from requesting lost profits in its counterclaim, despite missing the Rule 26(a)(1) disclosure deadline. A jury ruled in favor of Bio-Pharm on Antrim’s claim and in favor of Antrim on Bio-Pharm’s counterclaim. Neither party was awarded damages. The Seventh Circuit affirmed, rejecting Antrim’s challenges to the jury instructions, evidentiary rulings, and allowing Bio-Pharm to request lost profits.