This just in: In Ironworkers Local 68 & Participating Employers Health & Welfare Funds v. AstraZeneca Pharmaceuticals LP, 2011 WL 833222, slip op. (11th Cir. March 11, 2011), the court affirmed dismissal under Rule 12(b)(6) (failure to state a claim) of one of these third-party payer economic loss class action strike suits. Because of Dechert’s involvement in the Seroquel litigation, unfortunately we can’t say too much.
But here are the high points:
The fundamental reason for affirmance is:
[E]conomic injury is a necessary element of all of the plaintiffs’ claims and, in the context of prescription drug purchases, the fact that the payer merely paid for more expensive drugs does not suffice. Instead, the purchased drugs must have been either unsafe or ineffective for their prescribed use—i.e., the prescription needs to have been medically unnecessary or inappropriate according to sound medical practice.
Slip op. at 11 (emphasis added). This rationale extends to RICO, consumer protection laws, and common-law fraud.
Insurers also obligated themselves to pay on very broad terms. Having done so, their remedy was to charge higher premiums:
The insurers, under the terms of their insurance policies, consciously exposed themselves to pay for all prescriptions of Seroquel, including those that were medically unnecessary or inappropriate—even if such prescriptions were birthed by fraud. In light of such broad exposure, conventionally a rational insurer would have charged its enrollees higher premiums than it would have if its policies offered more limited prescription drug coverage. These higher premiums, in turn, would compensate the insurer for its increased number of prescription payments, including payments for prescriptions that were medically unnecessary or inappropriate.
Slip op. at 12 (emphasis added). Hence the third party payers “consciously chose to assume the risk of paying for all medically unnecessary or inappropriate prescriptions of formulary-listed drugs.” Id. at 30. They could have imposed “preauthorization review” but chose not to. Id. at 28-29.
The medical judgment of independent prescribing physicians is crucial:
In light of physicians’ exercise of professional judgment, a patient suffers no economic injury merely by being prescribed and paying for a more expensive drug; instead, the prescription additionally must have been unnecessary or inappropriate according to sound medical practice—i.e., the drug was either ineffective or unsafe for the prescribed use. This is true even when the physician’s decision to prescribe the more expensive drug in lieu of a cheaper alternative is the product of fraud. To allow recovery based purely on the fact that the prescription was comparatively more expensive than an alternative drug—but otherwise safe and effective—would mean that physicians owe their patients a professional duty to consider a drug’s price when making a prescription decision. No such duty exists.
Slip op. at 18-19 (citations omitted) (emphasis added).
Drug manufacturers owe no duty of disclosure to third party payers:
For such a theory based on nonfeasance to prove tenable, the insurers would need to establish that AstraZeneca owed them a legal duty of disclosure. No such duty exists, however, absent a special relationship between the parties. The insurers have failed to allege the presence of a special relationship here—because none existed. Consequently, the insurers have asserted no cognizable fraud-by-omission claim against AstraZeneca.
Slip op. at 29 n.33.
An individual patient’s allegation that she suffered loss due to co-payments was TwIqballed because the “bare bones” pleading did not allege that her doctor’s particular off-label use (which was not even mentioned) was “unsafe or ineffective.” Slip op. at 33.
There was a concurrence (Martin, J.) who would have used a “much simpler” path to affirmance: “the independent decisions of the physicians and other intermediaries involved in Seroquel’s allegedly increased usage and pricing eviscerates the chain of causation.” Slip op. at 33.
Total victory for the defense – on failure to state a claim. It’s a big deal because it’s the first of many similar TPP dismissals to be affirmed.