JERE BEASLEY REPORT June 2019 I. the American people. We have issues the company hasn’t been completely emails, text messages, telephone forthright about, the more information that CAPITOL records, and former company insid- is uncovered, the more questions are raised ers that we believe will prove a multi- about the development and certification of OBSERVATIONS year conspiracy to fix prices and the aircraft. divide market share for huge numbers of generic drugs. We all Alleged software glitch deactivates 44 STATES JOIN TOGETHER IN A DRUG PRICING wonder why our health care, and safety features SUIT specifically the prices for generic prescription drugs, are so expensive Following the two fatal crashes involving A coalition of attorneys general, includ- in this country—this is a big the 737 MAX, as discussed in a previous ing Alabama’s very own Attorney General reason why. Report, preliminary findings from investi- Steve Marshall, was recently announced gations of the two crashes show alarming involving an antitrust lawsuit that was filed Pharmaceutical costs have been skyrock- similarities and at the heart of these find- against 20 of the nation’s largest generic eting in this country and lawsuits like this ings is how the AOA sensors, AOA indica- drug makers and 15 of their senior execu- serve to hold the wrongdoers responsible tor, AOA disagree light and the MCAS work tives. The attorneys general of 44 states and recoup taxpayer dollars. Lawyers in together in the 737 MAX. have alleged that the Defendant drug Beasley Allen’s Consumer Fraud & Com- More than a month after the Ethiopian makers conspired with each other from mercial Litigation Section have represented Airlines crash, Boeing was finally pres- July 2013 to January 2015 to artificially at least nine states through their Attorney inflate and fix prices, allocate market General’s Office, in various pharmaceutical IN THIS ISSUE share, and reduce competition for more and health care litigation. We welcome the than 100 generic drugs. The drugs at issue opportunity to investigate potential phar- I. Capitol Observations ...............2 span all types and treat a wide range of maceutical fraud litigation of which you conditions, from infections to diabetes, may be aware. If you have any questions II. An Update On The Boeing Litigation ...2 cancer, epilepsy, multiple sclerosis, HIV, about our firm’s health care fraud practice, III. Opioid Litigation ..................4 ADHD and more. contact Ali Hawthorne, a lawyer in our The complaint is the second to be filed Consumer Fraud & Commercial Litigation IV. An Update On The Talc Litigation ......5 since 2016 in an ongoing, expanding inves- Section, at 800-898-2034 or by email at V. Regulation By The Federal tigation into generic drug pricing. As the [email protected]. Government Of Corporate America ....7 Connecticut Attorney General’s Office Source: Connecticut Attorney General’s Office announced in a recent press release, the VI. Purely Political News & Views ........7 complaint describes the frequent calls, VII. The Corporate World ...............8 emails, and text messages between senior executives for the drug makers that evi- II. VIII. Court Watch ......................8 dences their scheme of raising drug prices IX. Whistleblower Litigation ............9 and stifling competition. The industry AN UPDATE ON executives allegedly carried out their illegal THE BOEING X. Product Liability Update ...........11 deals during meetings and social events LITIGATION XI. An Update On The Vaping such as lunches, dinners, parties and golf Health Crisis ....................12 outings. The lawsuit was filed in the U.S. District XII. Mass Torts Update ................13 Court for the District of Connecticut NEWLY REVEALED SOFTWARE GLITCH, DECEPTION XIII. Employment and FLSA Litigation .....15 against Teva, Sandoz, Mylan, Pfizer and 16 BY BOEING RAISES MORE QUESTIONS ABOUT other generic drug makers. The 15 individ- CERTIFICATION OF 737 MAX XIV. Premises Liability Update ...........15 ual senior executives that were named as XV. Workplace Hazards ...............17 Defendants were accused of having respon- For more than a year after the 737 MAX sibility for the sales, marketing, pricing and had been in service, Boeing kept mum XVI. Issues Involving Transportation operations of the drugs at issue, that report- about the fact that two critical safety fea- Litigation .......................18 tures were not performing as airlines edly accounted for billions of dollars of XVII. Toxic Tort Litigation Concerns .......19 sales in the United States. would have expected. Boeing confirmed The complaint filed by the attorneys that it failed to disclose the error and indi- XVIII. Update On Nursing Home Litigation ..21 general alleges that the anticompetitive cated that both the company and the XIX. An Update On Class Action Litigation ..22 scheme resulted in drug prices increasing Federal Aviation Administration (FAA) in some instances more than 1,000%, missed the malfunction when the planes XX. Current Case Activity At Beasley Allen . 25 which affects the health insurance market, were certified in 2017. Airlines and others XXI. The Consumer Corner .............30 Medicare and Medicaid, and private indi- did not learn about the problem until after viduals who now must pay artificially the first of two deadly plane crashes involv- XXII. Recalls Update ...................31 inflated prices for their prescriptions. The ing the aircraft. suit was led by Connecticut Attorney The malfunction involved alerts directed XXIII. Firm Activities ...................35 General William Tong who said in a to the cockpit when two Angle of Attack XXIV. Special Recognitions ..............36 statement: (AOA) sensors disagree and send conflict- ing data to the Maneuvering Characteristics XXV. Favorite Bible Verses ..............38 We have hard evidence that shows Augmentation System (MCAS), the new XXVI. Closing Observations ..............38 the generic drug industry perpe- flight control system. Combined with other trated a multi-billion-dollar fraud on XXVII. Parting Words ...................39 2 BeasleyAllen.com sured into admitting the company and the the alerts inoperable unless airlines Rejected alternatives to increase safety FAA allegedly missed a glitch in the soft- upgraded features that were supposed to ware that operates the MCAS in connection be standard safety features on all planes. Additionally, Boeing also admitted to with the AOA sensors, how the information The manufacturer minimized the impor- using data from only one AOA sensor in the is communicated—or not—to pilots tance of what it deemed optional features, MAX version of the 737 while previous ver- through the AOA indicator with the dis- saying that the alerts were supplemental sions of the aircraft used data from two agree light serving as a warning, the Wall safety features and were not necessary to AOA sensors. Experts and industry stake- Street Journal reported. safely fly the plane. This led some airlines holders question Boeing’s reasoning for In previous versions of the 737, the AOA to delay purchasing the features or forgo- relying on a sole AOA sensor, especially sensors, indicator and disagree light had ing purchasing them altogether. after the FAA had flagged it 216 times for been standard. The sensors collect the data Boeing has not provided many specific failing, requiring maintenance or needing and feed it to the indicator, which displays details about the glitch or what initiated to be replaced, according to Business it for the pilots. If the data from the sensors the confusion over the once-standard Insider. Approximately one-fifth of the inci- was conflicting, the disagree indicator on alerts. Yet, former employees have been dents involved Boeing aircraft so the the aircraft’s flight deck would light up to revealing details that paint a picture of a company was well aware of the sensor’s warn pilots that the data may be flawed. haphazard development process that tendency to malfunction. Using only one Pilots and airlines believed these features yielded a dangerously defective aircraft and sensor is shocking to many in an industry were also standard on the MAX. While the sacrificed hundreds of lives in order to that is wedded to redundancy to main- alerts were incorporated as part of the maintain a competitive advantage and con- tain safety. MAX, the MCAS was a new addition to tinue raking in profits. A former Boeing flight engineer, Peter counter the negative and unintended side Bloomberg has reported that among Lemme, told CNN that “[fr]om the begin- effects of the MAX’s redesign. The MAX’s those former employees speaking out about ning [the airplane’s system] should have alerts and MCAS, therefore, operated differ- the company are former Boeing engineers. been a fail-safe design, which would have ently. However, to keep a competitive Rick Ludtke was a Boeing engineer who relied on two inputs to make sure that you advantage, Boeing refused to inform pilots was part of the flight crew operation team. weren’t sensitive to one failure.” Boeing, about the MCAS. The team managed how pilots interacted however, continues to defend its design, The aircraft manufacturing giant devel- with the aircraft’s software and controls, explaining that “single sources of data are oped the 737 MAX to compete with its rival including the alerts and the MCAS. After considered acceptable in such cases by our Airbus’ equivalent aircraft the Airbus the MAX was certified, the team was cut