Arkansas "Illegal Exaction" Lawsuit Hits Actos

Earlier this year Takeda Pharmaceuticals, Inc., the manufacturer of Actos, was hit with an unusual lawsuit in Arkansas. While suits have been filed across the country accusing the company of marketing a defective drug (Actos has allegedly been linked to increased rates of bladder cancer), this particular case accuses the company of “illegal exaction” – a quirk of the state’s legal code that technically allows any citizen to seek compensation for the illegal use of taxpayers’ money.

This particular case accuses the company of illegal exaction.

How did Takeda get caught up in a taxpayer lawsuit? Simple: the plaintiff, identified as Greg Bowerman in a report by Lexology, is taking action on behalf of the state of Arkansas and its citizens for damages associated with Actos, including the costs of treatments for side effects, costs associated with deaths, and the original purchase of the drug. The suit alleges that the state of Arkansas would not have bought Actos had Takeda disclosed all potential complications of the drug. The suit was filed in the U.S. District Court for the Western District of Louisiana.

The suit seems to be on somewhat shaky legal ground. Illegal exaction under Arkansas law permits relief for “any exaction that is not authorized by law or is contrary to law,” and is taken to generally be a protection against the misappropriation – the exaction - of public funds from the citizenry. If a public official wastes money, then in theory any citizen can file a suit to prevent the money from being lost.

Just how far the principle can apply to the purchase and use of medication remains to be seen.

Arkansas courts have never defined the limits of “illegal exaction”, and the most famous ruling on the matter stems from a 1967 case in which a citizen uncovered a price fixing conspiracy between asphalt companies that sold their products to the state at an inflated price (Nelson v. Berry Petroleum Co). In that case, an illegal exaction suit was filed claiming that taxpayers had lost more than $3 million and that the money should be returned to the treasury. The court agreed and allowed the case to continue.

Takeda has already criticized the lawsuit saying it’s baseless and lacks legal backing, pointing out that Arkansas paid third parties, and not the company itself, for the drug. The company also questioned whether the plaintiff could show specific harm caused to each Actos user treated by the State of Arkansas. Questions have also been raised about the possible repercussions for Arkansas’ businesses and legal system should the illegal exaction suit be permitted to continue. Additionally, Bowerman may lack legal standing as he has not suffered personal injury.

The company also argued that the purchase of prescription drugs using public money is permitted by Arkansas law and that the law therefore does not apply.

The case has been transferred to multidistrict litigation in Louisiana and the Supreme Court of Arkansas has been asked to rule on the legality of Bowerman’s claim.