Jessica M. Karmasek Jul. 16, 2013, 1:30pm

FRANKFORT, Ky. (Legal Newsline) -- Pharmaceutical giant Merck & Co. is appealing a federal judge's decision to side with Kentucky Attorney General Jack Conway in a lawsuit filed over the state's contract with private attorneys.

Merck filed its notice of appeal June 12. It is appealing to the U.S. Court of Appeals for the Sixth Circuit.

Conway filed his notice of cross appeal June 26.

Last week, various pharmaceutical and business groups filed amicus, or friend-of-the court, briefs in support of Merck's appeal.

They include: the Pharmaceutical Research and Manufacturers of America, the Product Liability Advisory Council Inc., the American Bankers Association and the U.S. Chamber of Commerce.

The Chamber's Institute for Legal Reform owns Legal Newsline.

The Pharmaceutical Research and Manufacturers of America, or PhRMA, is a voluntary non-profit association representing the nation's leading research-based pharmaceutical and biotechnology companies.

During 2012 alone, PhRMA members invested an estimated $48.5 billion in efforts to research and develop new medicines.

The Product Liability Advisory Council Inc., or PLAC, is a non-profit association with more than 100 corporate members from a broad cross-section of American and international product manufacturers.

Both argue that the federal judge's decision needs to be overturned.

"Due process concerns are raised when state executives delegate enforcement of the law to private attorneys on a contingency-fee basis. Such litigation also raises public policy problems as the public interest may be in conflict with the interests of private attorneys who are motivated solely by profit," PLAC wrote in its brief, filed Thursday.

"The interests of government and private contingency-fee attorneys are widely divergent. Attorneys for the state are 'the representatives not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all.' Conversely, contingency-fee attorneys are legitimately motivated by financial incentives to maximize recovery for their private clients.

"The two functions -- impartial governance and for-profit lawsuit -- are irreconcilably conflicted. They should not and cannot mix."

The American Bankers Association, or ABA, is the principal national trade association of the banking industry in the United States.

ABA members hold an overwhelming majority -- about 95 percent of the domestic assets of the U.S. banking industry.

The association, along with the Chamber, argue they have a direct interest in the case because their members are being targeted "with increasing frequency" by private contingency-fee lawyers prosecuting civil-penalty and other enforcement actions on behalf of state and local governments across the country.

They, too, want the federal judge's ruling reversed.

"The district court adopted an exception that allows private, profit-motivated lawyers to prosecute a civil-penalty action on behalf of the government in exchange for a contingency fee, so long as a government lawyer maintains 'control' over the case as a 'safeguard' against the private prosecutors' partiality," they wrote in their joint brief, filed Friday.

"The Supreme Court has never recognized such a 'control' exception, and indeed has repeatedly rejected arguments that other procedural safeguards might minimize the risk that a judge or prosecutor's personal interest in a case will improperly influence proceedings."

In his May 24 ruling, Judge Danny Reeves, for the U.S. District Court for the Eastern District of Kentucky Central Division, said Merck failed to establish that Conway relinquished control over the underlying litigation.

Reeves concluded that the attorney general retained and exercised "decision-making authority" in the litigation; thus, Merck's due process rights were not violated.

Merck challenged the contingency fee contract Conway entered into with private attorneys to sue the pharmaceutical company over the anti-inflammatory drug Vioxx. That case is before a state court.

In September 2009, the attorney general filed a lawsuit against Merck over alleged violations of the state's Consumer Protection Act.

The drugmaker was charged with violating the law by marketing their anti-inflammatory drug Vioxx without revealing all the facts.

The suit, Commonwealth ex rel. Conway v. Merck & Co. Inc., alleged that in May 1999 Merck began an aggressive and deceptive promotional campaign of the drug directed at both consumers and health care professionals, without mentioning warnings of increased risk of cardiovascular events listed as a side effect.

Conway alleged that Merck was aware of the dangers through internal studies that were not disclosed to the FDA or the public.

The lawsuit also accused Merck of engaging in an elaborate scheme to create or publish scholarly articles under fake or ghost authors in order to drum up support for Vioxx.

In 2004, Merck admitted that Vioxx caused serious side effects and pulled the product from the market.

A year after filing his case, Conway hired Garmer & Prather PLLC, a plaintiffs firm in Lexington, Ky.

Merck alleged that, in entering into such a contract with private lawyers, Conway granted them a stake in the outcome of the lawsuit.

The company also alleged that Conway's outside counsel has assumed the lead role in the prosecution of the suit and has "made or influenced myriad decisions about the prosecution, large and small."

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