History Shows Again And Again How Judges Point Out The Folly Of TPPs

If insanity is doing the same thing over and over again and expecting a different result, then third party payers  suing drug manufacturers in New Jersey for alleged overpayments allegedly caused by various purported sins are certifiably crazy.  If the on-label meds don’t work, perhaps they should try something off label.

If that doesn’t work, then the defendants might want to think about Rule 11, given how widely these claims have been rejected.

The latest installment of TPP smackdown is District 1199P Health & Welfare Plan v. Janssen, L.P., slip op. (D.N.J. March 20, 2011).  It’s the usual dross – alleged off-label marketing of a drug (this time, Risperdal), and the TPPs claim they should get their money back even though the drug in all likelihood helped the patients for whom it was prescribed (indeed, some of the uses were later approved by FDA).

The theories are also familiar – RICO and assorted state-law economic-loss-only claims.

The result is also familiar.  Motion to dismiss granted.

And the reasoning is also familiar – getting back to that definition  of insanity:

Oh, No, There Goes RICO

The TPP Plaintiff couldn’t allege injury because the drug worked and wasn’t alleged to hurt anyone.  Simply because it was more expensive than equally effective drugs on the TPP’s formulary didn’t violate RICO:

[T]he TPPs’ asserted ‘overpayment’ for the Subject Drugs based on the existence of cheaper alternative medications or treatments that were available to a beneficiary’s prescribing doctor does not make the product received inferior or worth less and therefore does not constitute RICO injury.

Slip op. at 14.

Then the TPPs got TwIqballed.   They “peppered” their complaint (an amended one, their first was thrown out as being even worse) with allegations that alternative drugs were “more effective” or “safer.”  But these were disembodied adjectives – in TwIqbal-speak, “mere conclusions” without any facts that the court could ignore.  Slip op. at 14-15.  The plaintiffs referred to some studies in their complaint this time around, but they didn’t indicate that the studies involved the off-label uses that were the subject of the action:

Plaintiffs fail to allege whether these studies were conducted to discover side effects for on- or off-label uses of Risperdal.  This is significant because Plaintiffs’ claim is entirely based on Defendants’ alleged fraudulent marketing which induced patients to purchase Risperdal for off-label purposes.

Id. at 15 (emphasis original).  This is a pretty muscular use of TwIqbal, so we’re pointing it out specifically.  It’s a good idea, though, that if you’re claiming off-label use is more dangerous, to rely upon studies that are actually about the off label use in question.

Typically, the TPPs didn’t identify anyone actually hurt – probably because the off-label uses in fact worked.  Face it, doctors can’t be fooled for very long, since they’re actually treating their patients.  If an off-label use gains wide acceptance, that’s almost always because it’s effective.  A TPP plaintiff had better plead an exception to this rule:

Even more problematic, Plaintiffs do not identify any participant in their health plans who received an ineffective or unsafe off-label Risperdal prescription, or any participant who allegedly would have been treated with a less expensive and more effective medicine if that participant had not received Risperdal.  Here, nowhere do Plaintiffs allege that any beneficiaries, insured, or employees taking Risperdal ‘received an inadequate or inferior drug or even worse, suffered personal injuries as a result of Defendants’ alleged misrepresentations, and therefore, the studies to which Plaintiffs refer do not support Plaintiffs’ allegations of a cognizable RICO injury.

Slip op. at 17.  Why don’t they do this?  Because it would require real work.  It would also demonstrate (these are, as usual, purported class actions) that the existence of harm is very individualized, given that so few (if anybody) was.

Nor is the mere placement of a drug on a TPP formulary an “injury” “without proper allegations that the drug was inferior or otherwise ineffective.”   Slip op. at 19.  Despite two bites at the apple, the TPPs utterly failed to plead any facts to support their adjectives.

Thus, dismissal for no injury.

All this just goes to show that the TPP claims are legal parasites – trying to invent losses where no harm in fact occurred.  But it only gets better (for us defense guys, that is).  The complaint also failed to allege causation.

Again, it’s for the usual reason.  The alleged improper conduct (alleged in great detail), isn’t linked up to these (or any) plaintiffs.  “While Plaintiffs have gone to great lengths to chronicle Defendants’ alleged conduct, they fail to allege the connection between Defendants’ misrepresentation and Plaintiffs’ injuries.”  Slip op. at 21.  Sorry if you’ve heard all this before – because you have:

Plaintiffs’ allegations are too remote to satisfy the causation prong because they noticeably fail to allege that physicians or PBMs relied on any specific misrepresentation made by Defendants. . . .  Simply put, such an individualized inquiry would require allegations that off-label prescriptions were written by doctors (and ultimately paid for by Plaintiffs) as a direct result of Defendants’ alleged misconduct.

Slip op. at 21-22.

The RICO actions also failed on the predicate act requirement.  These were your TPP typical complaints – lots of allegations of defendants doing bad things, but everything left hanging – “in the air,” if you will – with nothing tying any of this purported conduct to any particular doctor, patient, or even to any particular TPP.  Id. at 27-29.

She Pulls The (Claim)-Splitting State Law Counts Down

What else is new?  NJ consumer fraud and RICO also require concrete allegations of harm.  Slip op. at 33 (“Plaintiffs’ theory of causation in this action is too speculative and attenuated to be cognizable”).  A “causal relationship” under the state consumer fraud statute, requires that prescribing doctors “relied on a misrepresentation in deciding to prescribe Risperdal” or that the TPPs relies “in deciding to place Risperdal on their formulary.”  Id. at 33-34.  Since this is already an amended complaint, chances are it wasn’t pleaded because it didn’t happen.

Not only that, but there must be reliance by prescribers for claims negligent misrepresentation and fraud allegedly resulting in the over-prescription of drugs.  Id. at 35-36.

Unjust enrichment doesn’t happen in the absence of either the drug not working or causing harm, which (as already mentioned) wasn’t alleged.  Id. at 36-37.

You can’t conspire to do nothing.  With all the substantive tort claims thrown out, conspiracy claims necessarily fail.  Id. at 37.

Go, Go TwIqbal

Plaintiffs can’t just throw in a “catch-all” cause of action glomming 49 other state’s consumer fraud together:

In Count VI, Plaintiffs allege that Defendants violated 49 other states’ consumer protection and unfair and deceptive acts or practices statutes (not including New Jersey). This Court finds, however, that every state’s consumer fraud statutes may not have the same elements as the NJCFA. . . .   This sort of ‘catch-all’ listing of statutes does not meet the most basic pleading requirements.

Slip op. at 34.