Amgen Class Action Gets New Life in 9th Circuit

     (CN) – The 9th Circuit on Tuesday revived a class action filed by Amgen employees whose company stock took a hit following safety concerns about Amgen’s anemia drugs.
     Employees sued the company under the Employee Retirement Income Security Act, or ERISA, claiming Amgen should have yanked the company stock option when its executives knew or should have known that the stock was being sold at an artificially inflated price.
     Amgen’s problems first came to light in the late 1990s and early 2000s, when several clinical trials raised safety concerns about the drugs Epogen and Aranesp, used to treat anemia caused by cancer chemotherapy and chronic liver failure. In 2006 the two drugs made up about half of Amgen’s $14.3 billion revenue.
     One study showed higher rates of blood clotting. Others showed lower survival rates for head, neck and breast cancer patients.
     A Danish clinical trial was permanently halted after investigators concluded that tumor growth was worse for patients who took Aranesp than for those who did not.
     Amgen stood by its drugs in public statements, calling them “effective and safe medicines when administered according to the Food and Drug Administration (FDA) label.”
     It conducted its own clinical trial, but those results were not exonerating. The FDA said Amgen’s study revealed “significantly shorter” survival rates in cancer patients receiving the drugs than in those receiving transfusions.
     All the studies prompted the FDA in 2007 to issue a rare “black box” warning — the strongest warning the agency can require — for off-label use of Aranesp and Epogen.
     As the safety concerns became public, the price of Amgen stock tanked by one third.
     Investors filed two class actions against the company: one claiming Amgen, its board of directors and a subsidiary violated their fiduciary duty under ERISA; another claiming they violated federal securities law by artificially inflating the company’s stock price.
     The securities law case was recently heard by the U.S. Supreme Court, which ruled in February to uphold class certification.
     U.S. District Judge Philip Gutierrez dismissed Amgen from the ERISA lawsuit on the basis that the company was not a fiduciary, and rejected the remaining claims due to the “presumption of prudence” outlined in a 2010 ruling.
     “We held that a fiduciary is entitled to a presumption that he has been a prudent investor ‘when plan terms require or encourage the fiduciary to invest primarily in employer stock,'” Judge William Fletcher wrote, quoting the 2010 opinion.
     But this presumption does not apply in Amgen’s case, Fletcher wrote, because the company’s pension plans did not require or encourage employees to invest in company stock.
     “[I]n the absence of the presumption, plaintiffs have sufficiently alleged violation of the defendants’ fiduciary duties,” the panel concluded.
     “We further conclude that Amgen is an adequately alleged fiduciary of the Amgen Plan.”     

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