Supremes question Matrixx's disclosure arguments

We'll have to wait to hear arguments on the Supreme Court cases accepted yesterday. But while we were talking about those cases, which involve prescription data-mining and drug-discount litigation, the justices were questioning pharma arguments in an investor suit. At issue: How much drugmakers must disclose when they start getting complaints about a drug.

Matrixx Initiatives pulled two nasal formulations of its cold remedy Zicam in 2009 after the FDA received more than 130 reports of patients losing their sense of smell after using the products. Matrixx investors accuse the company of failing to warn them of problems with the Zicam products; they say that by 2004, the company had some 23 early reports that patients were losing their sense of smell. The company says it released plenty of information as soon as it was necessary.

Matrixx argues--with the support of other drug and device makers--that disclosing complaints more broadly would confuse investors rather than help them. "[A] reasonable investor doesn't want false information," Matrixx attorney Jonathan Hacker told the court, according to Reuters. When asked how companies decide whether to take complaints seriously, Hacker said "statistical significance" was the proper test.

Justice Stephen Breyer didn't buy that argument. And Chief Justice John Roberts suggested that investors would want access to any information that might affect the stock value, even if it proved untrue. "[I]f it causes the stock to go down 20 percent, it seems to me that's material," he said. A ruling is expected by summer.

- get the Reuters news

ALSO: The controversy over so-called pay-to-delay settlements between brand-name and generic drugmakers has prompted attorneys general from 32 states to file an amicus, or friend-of-the-court brief urging the U.S. Supreme Court to review the deals, which the states say thwart competition and block needed access to lower-cost medications. Report