U.S. Seeking Share of Payout on Implants

Nine years and at least $1 billion ago, class-action plaintiffs settled their claims with makers of silicone breast implants. But one rather weighty party remains unhappy with the deal ' the United States government.

Lawyers with the U.S. Department of Justice have argued since the settlement was announced in 1994 that taxpayers should be reimbursed for Medicare payments made on behalf of women who claimed implants caused them to get sick. Lower courts have disagreed, but on January 10, a three-judge panel of the 11th U.S. Circuit Court of Appeals heard oral arguments on the matter. Exactly how much is at stake is unclear. Because of the intimate nature of the breast implants, the settlement kept the names of the plaintiffs confidential. The government claims that this makes it impossible to figure out which members of the class received the Medicare benefits it wants reimbursed.

Lawyers for the implant makers respond that the government has much of that information in its own files and that it failed to ask for the information in a timely or systematic way. Moreover, they argue that federal law does not entitle the government to collect insurance reimbursements from defendants. A federal judge in the Northern District of Alabama, where the class case was based, agreed with the defendants and dismissed the government's suit in 2001 because the government could not identify the women who got Medicare money.

1994 Settlement

Overall, hundreds of thousands of women settled their claims in the 1994 settlement with implant makers Baxter Healthcare Corp., Bristol-Myers Squibb Co., Minnesota Mining and Manufacturing Co. and Union Carbide Chemical & Plastics Co. At least $1 billion has been paid out to claimants, according to Atlanta lawyer Ralph I. Knowles Jr., who chairs the plaintiffs steering committee.

Last year, another implant maker, Dow Corning, settled with the government for $9.8 million as part of its Chapter 11 bankruptcy reorganization. The other implant makers haven't budged, setting up a new argument before 11th Circuit Judges Gerald B. Tjoflat, R. Lanier Anderson III and a visiting jurist, 7th Circuit Senior Judge Richard D. Cudahy.

At issue are federal statutes called the Medical Secondary Payer provisions, which were designed to save money by requiring Medicare recipients to exhaust all available insurance coverage before resorting to Medicare coverage. The provisions hold that Medicare should be reimbursed when a payment could have been made under a liability insurance plan.

Under these provisions, the government sued Baxter, Bristol-Myers Squibb, 3M and Union Carbide 'and the escrow agent for the settlement fund. Last year, however, Judge Edwin L. Nelson in Birmingham, AL, dismissed the case, concluding that the defendant implant makers were not insurance companies susceptible to the reimbursement provisions of the federal law. Moreover, he found that the government's case had to be dismissed because it failed to identify the Medicare recipients. In re: Silicone Gel Breast Implants Product Liability Litigation, 174 F. Supp. 2d 1242 (N.D. Ala., 9/26/01).

On appeal, government lawyers argue that Nelson's decision 'reflects a misunderstanding' of the Medical Secondary Payer provisions and that the government was entitled to discovery to find out which class members received Medicare benefits. The defendant companies fall under the provisions because they are self-insured, according to the government's brief.

The defendants' brief responds that the government never has petitioned properly for access to the claimant and that the Medical Secondary Payer provisions were designed to reach insurers, not alleged tortfeasors such as the implant makers. Knowles and Fredric L. Ellis of Boston's Ellis & Rapacki, among others, also submitted a brief on behalf of the plaintiffs steering committee. The brief shows that while the plaintiffs' lawyers were in obvious conflict with the defendants over the merits of the original case, they agree now that the settlement fund should not be disturbed by the government.

Perhaps the strongest argument the anti-government forces have comes from a decision the 5th Circuit issued in December 2002, well after the parties in the 11th Circuit filed their briefs. Ruling in a Texas case, a three-judge panel affirmed a lower court ruling against the government that it was not entitled to Medicare reimbursement from an alleged tortfeasor in a medical malpractice case. Thompson v. Goetzmann, No. 02-10198 (5th Cir., 12/17/02).

Nine years and at least $1 billion ago, class-action plaintiffs settled their claims with makers of silicone breast implants. But one rather weighty party remains unhappy with the deal ' the United States government.

Lawyers with the U.S. Department of Justice have argued since the settlement was announced in 1994 that taxpayers should be reimbursed for Medicare payments made on behalf of women who claimed implants caused them to get sick. Lower courts have disagreed, but on January 10, a three-judge panel of the 11th U.S. Circuit Court of Appeals heard oral arguments on the matter. Exactly how much is at stake is unclear. Because of the intimate nature of the breast implants, the settlement kept the names of the plaintiffs confidential. The government claims that this makes it impossible to figure out which members of the class received the Medicare benefits it wants reimbursed.

Lawyers for the implant makers respond that the government has much of that information in its own files and that it failed to ask for the information in a timely or systematic way. Moreover, they argue that federal law does not entitle the government to collect insurance reimbursements from defendants. A federal judge in the Northern District of Alabama, where the class case was based, agreed with the defendants and dismissed the government's suit in 2001 because the government could not identify the women who got Medicare money.

1994 Settlement

Overall, hundreds of thousands of women settled their claims in the 1994 settlement with implant makers Baxter Healthcare Corp., Bristol-Myers Squibb Co., Minnesota Mining and Manufacturing Co. and Union Carbide Chemical & Plastics Co. At least $1 billion has been paid out to claimants, according to Atlanta lawyer Ralph I. Knowles Jr., who chairs the plaintiffs steering committee.

Last year, another implant maker, Dow Corning, settled with the government for $9.8 million as part of its Chapter 11 bankruptcy reorganization. The other implant makers haven't budged, setting up a new argument before 11th Circuit Judges Gerald B. Tjoflat, R. Lanier Anderson III and a visiting jurist, 7th Circuit Senior Judge Richard D. Cudahy.

At issue are federal statutes called the Medical Secondary Payer provisions, which were designed to save money by requiring Medicare recipients to exhaust all available insurance coverage before resorting to Medicare coverage. The provisions hold that Medicare should be reimbursed when a payment could have been made under a liability insurance plan.

Under these provisions, the government sued Baxter, Bristol-Myers Squibb, 3M and Union Carbide 'and the escrow agent for the settlement fund. Last year, however, Judge Edwin L. Nelson in Birmingham, AL, dismissed the case, concluding that the defendant implant makers were not insurance companies susceptible to the reimbursement provisions of the federal law. Moreover, he found that the government's case had to be dismissed because it failed to identify the Medicare recipients. In re: Silicone Gel Breast Implants Product Liability Litigation, 174 F. Supp. 2d 1242 (N.D. Ala., 9/26/01).

On appeal, government lawyers argue that Nelson's decision 'reflects a misunderstanding' of the Medical Secondary Payer provisions and that the government was entitled to discovery to find out which class members received Medicare benefits. The defendant companies fall under the provisions because they are self-insured, according to the government's brief.

The defendants' brief responds that the government never has petitioned properly for access to the claimant and that the Medical Secondary Payer provisions were designed to reach insurers, not alleged tortfeasors such as the implant makers. Knowles and Fredric L. Ellis of Boston's Ellis & Rapacki, among others, also submitted a brief on behalf of the plaintiffs steering committee. The brief shows that while the plaintiffs' lawyers were in obvious conflict with the defendants over the merits of the original case, they agree now that the settlement fund should not be disturbed by the government.

Perhaps the strongest argument the anti-government forces have comes from a decision the 5th Circuit issued in December 2002, well after the parties in the 11th Circuit filed their briefs. Ruling in a Texas case, a three-judge panel affirmed a lower court ruling against the government that it was not entitled to Medicare reimbursement from an alleged tortfeasor in a medical malpractice case. Thompson v. Goetzmann, No. 02-10198 (5th Cir., 12/17/02).