Digest 08.06.2020: COVID-19 Drug Availability | Federal Banking Rule vs. State Usury Laws | Kickbacks for Pain Meds


Bipartisan Group of Attorneys General Seeks to Expand Production of Antiviral Drug

  • A bipartisan group of 34 AGs, led by California AG Xavier Becerra and Louisiana AG Jeff Landry, sent a letter urging the U.S. Department of Health & Human Services (“HHS”), the National Institutes of Health (“NIH”), and the U.S. Food & Drug Administration (“FDA”) to take steps to increase supply and lower the cost of remdesivir, an antiviral drug manufactured by Gilead Sciences, Inc. (“Gilead”) and used to treat COVID-19.
  • In the letter, the AGs argue that the NIH and FDA should use their “march-in” rights under the Bayh-Dole Act to require Gilead to license the patent to a third party because remdesivir was developed with the help of federal funds. The AGs request that, if the agencies decline to use their march-in rights, those rights be assigned to the states.
  • The AGs further urge HHS to levy its legal authority under the Defense Production Act and the Executive Order of March 18, 2020, to require increased production of remdesivir to meet national needs in response to the COVID-19 crisis. 

Rodeo Bucks COVID-19 Safety Measures, Gets Sued

  • Minnesota AG Keith Ellison sued rodeo owner North Star Ranch, LLC over allegations that it intentionally drew large crowds to an event in violation of Executive Order 20-74, which restricts outdoor entertainment venues to 25% of their normal capacity, up to a maximum of 250 people, to mitigate the community spread of COVID-19.
  • The complaint alleges that North Star Ranch used the guise of political protest to allow thousands of people to attend its three-day rodeo where North Star Ranch solicited “donations” and sold event programs, and attendees watched the rodeo events, cheered rodeo participants, and were entertained by a rodeo clown.
  • The complaint seeks declaratory and injunctive relief, as well as restitution, disgorgement, damages, civil penalties, and attorneys’ fees and costs.

2020 AG Elections

Missouri and Washington Choose Attorney General Candidates in Primaries

  • Former prosecutor and private practice attorney Rich Finneran won the Democratic nomination for Missouri AG over former Missouri Assistant AG Elad Gross, and Finneran will face incumbent Republican AG Eric Schmitt in the general election.
  • Incumbent Democratic Washington AG Bob Ferguson will face Republican and former Pierce County Deputy Prosecutor Matt Larkin in the general election after both advanced from the state’s top-two primary.
  • For more AG election news, insights, and polls, visit Cozen O’Connor’s State AG Election Tracker.

Consumer Protection

FTC Sues Cash Advance Company Over Unauthorized Withdrawals from Customer Accounts

  • The Federal Trade Commission (“FTC”) sued merchant cash advance provider Yellowstone Capital and related entities and individuals (collectively, “Yellowstone Capital”) over allegations that Yellowstone Capital unlawfully withdrew millions of dollars in excess payments from customers’ accounts and used deceptive marketing practices in violation of the FTC Act.
  • The complaint alleges that Yellowstone Capital regularly made unauthorized withdrawals totaling millions of dollars from customers’ bank accounts after the businesses had repaid the full amounts owed to Yellowstone Capital, often refunding money only after receiving complaints and taking weeks or months to issue refunds. The complaint also alleges that Yellowstone Capital used misleading marketing and advertising practices, including requiring business owners to personally guarantee their businesses’ repayments after initially promising that no collateral would be required.
  • The complaint seeks injunctive relief, rescission or reformation of contracts, restitution, refunds, disgorgement, and attorneys’ costs.

Financial Industry

Attorneys General Sue to Stop Potential End-Run Around State Usury Laws

  • California AG Xavier Becerra, Illinois AG Kwame Raoul, and New York AG Letitia James sued the Office of the Comptroller of the Currency (“OCC”) to strike down a new rule titled “Permissible Interest on Loans That Are Sold, Assigned, or Otherwise Transferred,” which went into effect on August 3, 2020 and provides that when a bank sells, assigns, or otherwise transfers a loan, the interest permissible prior to the transfer remains in effect following the transfer.
  • The complaint, which seeks declaratory and injunctive relief, alleges that the new rule would help shield predatory lenders like payday, car title, and installment lenders, and facilitate “rent-a-bank” schemes in which national banks could enter into sham partnerships with unregulated entities in order to evade state usury laws. The complaint also alleges that the rule exceeds the OCC’s authority under the National Bank Act and that the OCC failed to follow the analysis and observation procedures required to implement a rule preempting state consumer protection laws.
  • As previously reported, the plaintiff AGs led a bipartisan group of 23 AGs in submitting a comment letter opposing the rule prior to its enactment by the OCC.

False Claims Act

Pharmaceutical Company Will Pay $3.5 Million to Settle Allegations of Illegal Kickbacks to Physicians

  • The U.S. Department of Justice (“DOJ”), the Department of Health and Human Services (“HHS”), and 15 state AGs reached a settlement with pharmaceutical company Pacira Pharmaceuticals Inc. (“Pacira”) to resolve allegations that it paid illegal kickbacks to physicians for prescribing its medication in violation of the federal False Claims Act.
  • According to the DOJ, the case, which was brought by the U.S. Attorney for the District of New Jersey and arose from a whistleblower complaint, involves allegations that Pacira paid illegal kickbacks to physicians for prescribing its analgesic EXPAREL and disguised the kickbacks as research grants. Pacira allegedly did not contractually require that grant recipients adhere to the research proposal or achieve any milestones before payment, and did not follow up with grant recipients to ensure that the contracted-for research was being carried out.
  • Pacira will pay approximately $2.81 million to the United States and approximately $689,000 to the 15 states under a separate settlement to settle claims relating to state Medicaid.