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Part One of a Two-Part Article. The FDA's approval of a prescription drug or biologic is the product of an often-delicate risk-benefit analysis of public benefit as opposed to individual safety. The therapeutic balance of these products must always be weighed against the risks inherent in their use. And there are always inherent risks associated with their use. Accordingly, while millions of Americans reap the benefits of prescription drugs every day, these same drugs may pose an unavoidable health hazard to a narrow, and often unidentifiable, subset of potential users. The American legal system currently regulates these risks by two means ' through the federal regulatory system as administered by the FDA, and through the common-law tort liability regime.

AstraZeneca Pharmaceuticals LP, the major pharmaceutical manufacturer headquartered in Wilmington, DE, pled guilty in a Delaware federal court to conspiring to violate the Prescription Drug Marketing Act (PDMA). (The PDMA was enacted in 1988 to regulate prescription drug marketing practices, such as providing free drug samples to physicians, since the practices could cause the diversion of drugs into gray markets, and incorporated into the federal Food Drug and Cosmetics Act under the 'prohibited acts' section at 21 U.S.C. ' 331(t)). AstraZeneca admitted that it caused claims to be submitted by urologists (who had received free samples from the company) for its anti-prostate cancer drug, Zoladex, to be submitted for reimbursement to federally funded health care programs during an 11-year period (from the beginning of 1991 through the end of 2002), resulting in almost $40 million in losses to these programs.

The Special Advisory Bulletin on Contractual Joint Ventures (SAB) is the OIG's latest reiteration in a series of missives that invoke the Federal anti-kickback statute, 42 U.S.C. ' 1320a-7b(b) (AKS). It's all part of an attempt to chill the proliferation of business arrangements between companies that are in the business of supplying medical equipment, pharmacy items, and/or services to patients (generically, 'suppliers') and providers such as hospitals and physicians (generically, 'providers') who are in a position to refer or 'steer' patients to a supplier. On April 23, 2003, the Office of Inspector General (OIG) for the Department of Health and Human Services (DHHS) issued the SAB, which describes various arrangements as 'potentially problematic.' See http://oig.hhs.gov/fraud/docs/alertsandbulletins/042303SABJointVentures. While many suppliers and providers may choose to alter or terminate their arrangements as a pragmatic reaction to the SAB, the conceptual underpinnings of the SAB are suspect themselves.

Highlights of the latest equipment leasing news and cases from around the country.

Features

In the May issue, author Pauline Clark discussed the Rhode Island Supreme Court's decision in <i>Oliveira v. Lombardi,</i> 794 A.2d 453 (R.I. 2002), holding that automobile leasing companies may be held liable under the state's vicarious liability statute for the negligence of drivers operating motor vehicles titled in the leasing companies' name. In a clear response to this and other similar cases, Ford Credit has announced that it plans to exit automobile leasing in Rhode Island in October 2003 and in New York after July 9, 2003.

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A recent decision of the U.S. Bankruptcy Court for the District of Connecticut, <i>In re Circuit-Wise, Inc.,</i> 277 B.R. 460 (Bankr. D. Conn.), attempts to clarify the rights of secured equipment lessors under Section 365(d)(10) of the Bankruptcy Code and suggests two mechanisms for ensuring that those rights are quickly and fairly addressed. However, the Bankruptcy Court may have unfairly denied the lessor, Wells Fargo Equipment Finance, Inc. ('Wells Fargo'), the prompt relief it deserved. Even if the Bankruptcy Court properly deferred whatever relief Wells Fargo was entitled to, the court's suggested methods for ultimately providing that relief were at least, in part, impractical.

One of the most fundamental and critical principles that enables the equipment leasing industry to function on a day-to-day basis is commercial certainty ' certainty in expectations regarding financing; certainty in the meaning of documentation; and reliance on the certainty of the application of legal principles that will be brought to bear in the event of a lease default or bankruptcy.

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (the '2003 Tax Act' or, simply, the 'Act'), signed by President Bush into law on May 28, 2003, provides strong inducements for the purchase of capital equipment. Together with record-low interest rates, the Act's 'tax subsidies' for the purchase of equipment should reduce the costs of equipment to equipment lessors and make them more competitive with asset-based lenders.