The UCL Practitioner

San Francisco City Attorney files antitrust and UCL action against prescription drug wholesaler

From a press release issued by San Francisco City Attorney Dennis Herrera on May 20, 2008:

City Attorney Dennis Herrera and the San Francisco Health Plan, the City-sponsored program that provides health insurance to more than 50,000 low-income San Franciscans, today filed suit against McKesson Corporation for illegally conspiring to manipulate pharmaceutical drug prices beginning as far back as 2001. The 88-page complaint filed in U.S. District Court in Boston this morning alleges an elaborate scheme to increase the markup on more than four hundred brand-name prescription drugs in violation of federal and state laws, forcing consumers and health coverage plans “to make hundreds of millions of dollars of excess payments.”

A copy of the complaint is available at this link. The plaintiffs are the San Francisco Health Plan, "individually and on behalf of the State of California and on behalf of a class of political subdivisions of the State of California," and the People of the State of California, "acting by and through San Francisco City Attorney Dennis Herrera."

The UCL claim appears on pp. 80-82 and is pleaded in a relatively plain-vanilla way. The meat of the allegations appears in the earlier sections of the complaint. The prayer, however, seeks $2,500 per violation in statutory penalties, which the UCL authorizes in public prosecutor actions. See Bus. & Prof. Code § 17206(a). The plaintiffs are represented by a well-known plaintiffs' class action firm, Hagens Berman Sobol Shapiro LLP, in addition to the city attorney's office. [Via SFBG Politics Blog]

Incidentially, last summer, S.B. 376 was signed into law. The bill amended Business and Professions Code sections 17204 and 17206(a) to ensure that the City and County of San Francisco could still pursue UCL claims even if its population dropped below 750,000 (which it did, slightly, according to the latest federal census). The Assembly Floor Analysis explains:

According to the author, [Senator Carole Migden,] the consolidated City and County of San Francisco has a population that hovers around 750,000. As a result, it continually has to prove standing whenever it seeks to bring an unfair competition action. This bill would appear to avoid this potential confusion by reconfirming standing to the City and County of San Francisco regardless of minor fluctuations in its population.

The Senate Committee Analysis further explained:

A federal census has recently put San Francisco's population at under 750,000. This has prompted defendants in unfair competition actions to argue, albeit unsuccessfully, that San Francisco no longer has standing to bring these actions. The San Francisco City Attorney's office is concerned that it will continuously need to defend attacks on its standing, which will consume scarce public resources unless the issue is clarified in the statute.

This bill would remove the population requirement pertaining to a city and county, and instead authorize the city attorney of any city and county to bring an action for unfair competition and recover a civil penalty from the defendant in those actions.

Here is Senator Migden's press release on the bill's passage last June. The amendments went into effect on January 1, 2008.

S.B. 376 - UCL's public prosecutor provisions amended

Legal Pad reports that on June 28, 2007, Governor Schwarzenegger signed S.B. 376, which amends Business and Professions Code sections 17204 and 17206 to permit the City and County of San Francisco to continue to pursue public UCL enforcement actions even if its population falls below 750,000. Now, public UCL enforcement actions may be brought by:

the Attorney General or any district attorney or by any county counsel authorized by agreement with the district attorney in actions involving violation of a county ordinance, or any city attorney of a city having a population in excess of 750,000, or by a city attorney in any city and county and, with the consent of the district attorney, by a city prosecutor in any city having a full-time city prosecutor ....

Bus. & Prof. Code § 17204 (as amended). A Recorder article from February 2006 has more on a previous, but unsuccessful, effort to pass similar legislation. My February 2006 blog post on the subject is also of interest.

A.B. 759 gutted

Last week, on April 3, 2006, the bill (A.B. 759) that would have allowed a "city and county," such as San Francisco, to bring a UCL claim on behalf of the general public regardless of population size was amended. The bill was completely gutted and now relates to an entirely different subject matter. I don't know whether any other bill still contains the proposed amendment to section 17204. My original post on A.B. 759 is here.

A.B. 759 - proposed amendment to UCL's public prosecutor provisions

The Recorder recently reported on amendments to A.B. 759, which would ensure that the San Francisco City Attorney may continue to bring UCL actions on behalf of the general public. Business & Professions Code section 17204 permits "any city attorney of a city, or city and county, having a population in excess of 750,000" to seek relief on behalf of the general public. According to the Recorder article, some defendants have begun challenging the City Attorney's standing, arguing that San Francisco's population has dropped below 750,000. The 2004 census indicates that the population shrank by over 4% since 2000 and is now estimated at 744,230.

A.B. 759 would not lower the 750,000 minimum, but would create, in effect, an exception for San Francisco. The Assembly Floor Analysis states that A.B. 759:

Ensures that the City and County of San Francisco will maintain its standing to bring actions under California's Unfair Competition Law (UCL). Specifically, this bill ensures San Francisco's standing by authorizing the city attorney of a consolidated city and county to bring an action under the UCL.

San Francisco is the only consolidated city and county in California. As a resident of San Francisco for almost ten years now, I see no reason why a population drop of 6,000 residents should result in dismissal of the city's pending enforcement actions, or why the city's efforts in that regard should be halted. San Francisco City Attorney Dennis Herrera's 2004 speech, "Public Prosecution: Using §17200 to Police the Marketplace," is of interest. The bill passed in the Assembly on January 30 and is now being reviewed in the Senate Committee on the Judiciary.