Part 1-Case Study

Analyze the facts in the scenario and develop appropriate arguments and recommendations using case laws and scholarly sources. Do not copy the case study to the paper. Cite your sources in APA format on a separate page.

Case Study

PEM, a pharmaceutical company created by the merger of Pfizer-Eli Lily and Merck, sells an over-the-counter cold remedy through its wholly owned subsidiary Mizac LLC. Between 2009 and 2013, PEM received several complaints from physicians and Mizac consumers alleging a connection between the use of Mizac's leading product, Mizac Cold Remedy, and loss of smell (anosmia). Even after being notified of an American Rhinologic Society presentation that described eleven Mizac users who lost their sense of smell after using the product, PEM made announcements that Mizac was "poised for growth in the upcoming cough and cold season" and that the company expected that revenues would "be up in excess of 50% and that earnings, per share for the full year [would] be in the 25 to 30 cent range." In an SEC report, Mizac reported the potential "material adverse effect" that could result from consumer complaints of anosmia but did not disclose that two consumers had already sued.

In early 2014, PEM's stock price fell by about 22% when Dow Jones Newswires reported that, in light of at least three lawsuits, the Food and Drug Administration was investigating complaints that Mizac may have caused some users to lose their sense of smell. PEM revived its stock price with a press release stating that there had been no reports of loss of smell in clinical trials of Mizac and that anosmia can result from the common cold. The stock price fell again when Good Morning America reported that more than a dozen Mizac users had lost their sense of smell. PEM reported to the SEC that, after meeting with "physicians and scientists to review current information on smell disorders," it concluded that "there is insufficient scientific evidence at this time to determine if Mizac, when used as recommended, affects a person's ability to smell." A few weeks later, PEM stated that it would begin "animal and human studies to further characterize these post-marketing complaints."

Shareholders brought a class action against PEM alleging that it violated SEC Rule 10b-5 and section 10(b) of the 1934 Act when it made misleading statements that failed to disclose reports of the possible link between Mizac and anosmia in an effort to maintain artificially high prices for PEM securities. PEM argued that the adverse event reports were not material information, as no statistically significant relationship was shown between reports of anosmia and use of the Mizac product. Plaintiffs countered that materiality should be determined by the "total mix of information" test.

Did PEM have a legal obligation to disclose information about possible side effects of its drug when there was no statistical information that linked use of the drug with the side effects?

What types of information will the court review to determine whether using the drug causes the side effect?

What standard will the court apply to address evidence of the claim?

Have the plaintiffs stated a valid claim under Rule 10b-5 and section 10(b), or will the court grant PEM's motion to dismiss?

Did PEM act ethically?

Part II-Research Paper

Locate and examine at least two cases that are related to the topic, Discrimination by health care providers. Summarize the cases and explain how they are related to your topic. If possible, review one state and one federal case. You may review more than two cases. Westlaw Campus Research is a great resource for finding specific state and federal cases. You must read and provide information from an actual court case. Do not report on a case that has not been decided or that has been summarized in an article, blog, or law firm website.

For each case, provide the following information in paragraph format. This portion of your paper should contain a minimum of two paragraphs, one for each case reviewed.

Case citation - include the names of the parties, reporter, court and year. See the lecture on Legal Citation in Week 1.
State or federal court
Issue
Summary of events
Ruling

Be sure to use your own words when summarizing the cases.

Combine your response to Part 1 (case study) and Part 2 (research paper) into one Microsoft Word document.

Response should be APA format on a separate page.