Two Steps Forward, One Back, in Amgen Case

     (CN) – Supreme Court precedent does not interfere with claims related to a drop in Amgen share prices amid safety concerns over anemia drugs, the 9th Circuit ruled Thursday.
     A three-judge panel issued its second opinion on the case after the Supreme Court vacated its 2013 holding in light of Fifth Third Bancorp v. Dudenhoeffer.
     For the 9th Circuit panel, Fifth Third did not alter its previous holding.
     Amgen employees had brought the suit in question under the Employee Retirement Income Security Act, or ERISA. They said 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.
     While one group of investors accused Amgen of violating its fiduciary duty under ERISA, another alleged violations of federal securities law in artificial inflation of the company’s stock price.
     The U.S. Supreme Court upheld class certification in the securities-law case, but U.S. District Judge Philip Gutierrez dismissed Amgen from the ERISA lawsuit on the basis that the company was not a fiduciary.
     Gutierrez rejected the remaining claims in light of the “presumption of prudence,” but the original 9th Circuit reversal found that the presumption does not shield Amgen because the company’s pension plans did not require or encourage employees to invest in company stock.
     The Supreme Court weighed in on the presumption of prudence while assessing similar claims by Fifth Third Bancorp workers this year.
     Though both a federal judge and the 6th Circuit found that the plan fiduciaries enjoy that presumption, the unanimous Supreme Court rejected Fifth Third’s claim “that the presump­tion at issue here is an appropriate way to weed out merit­less lawsuits or to provide the requisite ‘balancing.'”
     “The proposed presumption makes it impossible for a plaintiff to state a duty-of-prudence claim, no matter how meritori­ous, unless the employer is in very bad economic circum­stances,” Justice Stephen Breyer wrote for the court. “Such a rule does not readily divide the plausible sheep from the meritless goats. That important task can be better accomplished through careful, context-sensitive scrutiny of a complaint’s allegations. We consequently stand by our conclusion that the law does not create a special presumption of prudence for [certain] fiduciaries.”
     The 9th Circuit took this holding into account while reviewing the Amgen case for the second time this year but found no reason to affirm dismissal of the investors’ case.
     “We therefore conclude that plaintiffs have sufficiently alleged that defendants have violated the duty of care they owe as fiduciaries under ERISA,” the 41-page ruling states.

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