We start June with a fabulous two-fer:  yes, that is two cases discussed in the same post. But wait, there’s more.  The two cases each discuss civil RICO claims against drug companies and state law claims.  For an unknown, but surely exorbitant, cost to the defendants, the courts, and maybe even the third party payors who brought these suits, the RICO claims are exposed as unsupported nonsense and most—maybe all, eventually—of the state law claims go the same way.  By acting now, the judge in the second case maybe signaled the end to an eight year old case.

Like some of the state AG cases proceeding against drug companies in state court under false claims act type statutes or consumer protections statues, which have been the subject of a number of posts (like this), we suspect that these cases started with a fast-talking sales pitch from plaintiff lawyers to the TPP plaintiffs. We find it hard to believe that the plaintiff in Indiana/Kentucky/Ohio Regional Council of Carpenters Welfare Fund v. Cephalon, Inc., No. 13-7167, 2014 U.S. Dist. LEXIS 69526 (E.D. Pa. May 21, 2014), decided to sue over its payments for one particular painkiller with fairly narrow use—even with the allegations of off-label promotion—and sought lawyers from other states to do so. Louisiana joined the fray late in Sergeants Benevolent Association Health & Welfare Fund v. Sanofi-Aventis US LLP, No. 08-CV-179 (SLT) (RER), 2014 U.S. Dist. LEXIS 65714 (E.D.N.Y. May 12, 2014), and certainly has experience trying to line its coffers through deals with plaintiff firms, but the original three plaintiff Funds seem unlikely to have decided to have sought out lawyers to sue over payments for a single antibiotic.  Like many schemes promising big money with no risk to you, it looks the plaintiffs will end up making nothing in these two cases.  We can only hope that the costs of litigating will be borne by the plaintiff firms that made the sales pitches rather than the Funds that probably actually need money to pay for health care for their members.

Ind./Ky./Ohio is a no nonsense decision on a motion to dismiss from a no nonsense judge.  As far as we can tell, the plaintiff will not get a chance to re-plead its dismissed claims, meaning the case would have only lasted a few months (at the district court level) and never got to discovery.  This would be an efficient result compared to many cases where allegations of off-label promotion seem to be enough to keep them going.  The basic story in IKO—we can take liberties with abbreviations—is that defendant’s prescription painkiller was approved only for “breakthrough pain” in cancer patients who already take maximum opioids, but the defendant allegedly promoted it for other types of breakthrough pain, which the Fund claims caused it to pay extra for painkiller prescriptions for its members.  Plaintiff alleged that FDA rejected an attempt to add indications for the drug, but the defendant nonetheless promoted off-label—as it had allegedly done (and been busted for) with another painkiller years before—so effectively that 93% of prescriptions filled in the drug’s first three years on the market were off-label.  2014 U.S. Dist. LEXIS 69526, **8-9.  This, it said, entitled it to relief under two sections of the RICO statute and Indiana common law unjust enrichment.

There were three basic hurdles for plaintiff’s RICO theories.  First, the court understood the FDA regulatory scheme as to off-label use. Other than a questionable statement that physicians “frequently rely on information supplied by drug manufacturers before” they “exercise [] their independent professional judgment” in prescribing off-label, the court makes many statements about how off-label prescriptions are common and legal and manufacturers can provide information about off-label use under certain situations.  Id. at **5-6.  Second, RICO claims must be predicated on “some sort of fraudulent misrepresentations or omissions reasonable calculated to deceive persons of ordinary prudence and comprehension.”  Id. at *14.  Third, RICO claims have to be pled with particularity under Fed. R. Civ. P. 9(b), which means that the complaint needs “the ‘who, what, when, where, and how’ of the events at issue,” must “inject[] precision and some measure of substantiation into their allegations of fraud,” and “must allege who made a misrepresentation to whom and the general content of the misrepresentation.”  Id. at **12-13 (citations omitted).

The court’s analysis started off with the statement that “off-label marketing is not per se fraudulent.”  Id. at * 15.  Even off-label promotion in violation of the FDCA and FDA regulation is not automatically fraudulent.  Id. at * 17.  Thus, the court had to look for specific allegations about specific communications that “could reasonably be interpreted to be a fraudulent misrepresentation or omission calculated to deceive the audience.”  Id. at *16.  Not surprisingly to anyone who has read many complaints, the “voluminous” complaint here only identified three specific communications amidst “sweeping” allegations about defendant’s conduct.  Id. at **15-16.  The closest the complaint came to identifying a fraudulent misrepresentation was a statement in a journal supplement that the drug “has been shown to be effective” for breakthrough pain beyond the approved indication, “but this statement neither contradicts nor conceals the limits of the FDA’s approval of the drug.”  Id. at **16-17.  In light of the drug’s Black Box warning on death in improper patients, contraindication for acute and post-operative pain, and warnings on misuse, abuse, and diversion, the court saw nothing about these three communications that suggested fraud.  General allegations about the defendant’s marketing “message” or “theme” being fraudulent did not suffice.  Id. at *19.  So, the two RICO claims were dismissed—you need a substantive claim to get a conspiracy claim—and the court did not even reach the issues of whether plaintiff had pleaded injury and causation with sufficient specificity.

The unjust enrichment claim also fell quickly. Without detailed fraud allegations, the lack of Indiana law supporting “the proposition that payments for a drug that has been promoted off-label, without more, present the sort of ‘circumstances . . . such that under the law of natural and immutable justice there should be a recovery.’”  Id. at * 28 (citation omitted).  The court did not even have to reach whether such a claim would be preempted if based on purported violation of federal law. RICO, as a federal statute, may not be subject to preemption—just primary jurisdiction—but state court claims like unjust enrichment can be.

The much longer decision in Sergeants focused on the causation and injury issues that IKO had not addressed.  Not only was this decision on summary judgment, but the case had a much more complicated and longer history with multiple complaints, state consumer fraud claims, four plaintiffs, and a prior denial of class certification. The court also utilized the magistrate judge for a report and recommendation, which added another two layers to any discussion.  While some readers may want to delve into the thorough discussion of the nuances of RICO law, we will focus on the parts of the decision about which we care.  The basic facts underlying the various claims was that defendant’s antibiotic was approved to treat acute bacterial sinusitis, acute exacerbation of chronic bronchitis, and community-acquired pneumonia, after FDA required a further clinical study in rejecting the initial New Drug Application.  Plaintiff claimed there was a conspiracy in relation to this further study, which was itself saddled with misconduct by multiple investigators, and defendant misrepresented the results of the study to FDA.  Thereafter, defendants allegedly marketed the drug off-label, there was a FDA public health advisory and labeling change about a risk of liver failure, FDA withdrew the sinusitis and bronchitis indications, and the defendant stopped promoting the drug in the U.S.  Within this relatively short period of time, the plaintiff Funds and Louisiana each claim they paid extra for their members’ antibiotics, although they have different methods of determining what drugs they cover and how they pay for them. The plaintiffs, of course, do not decide whether a member should be prescribed a drug or which drug should be prescribed.  2014 U.S. Dist. LEXIS 65714, *11.

The defendant made two related arguments for why plaintiffs’ RICO claims lacked of proof of causation:  (1) there was no proof that the alleged fraud made plaintiffs pay for more prescriptions of the drug and (2) there was no proof that the alleged fraud caused a greater payment for the member’s care given the availability of other drugs.  Id. at **25-26.  After a lengthy discussion of what is required to show causation for RICO claims and the meaning of the decision in UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121 (2d Cir. 2010), the court turned to plaintiff’s theory of causation:  “Plaintiffs have to establish that Defendants’ fraud resulted in FDA approval for additional indications, that Plaintiffs placed Ketek on their formularies as approved drugs, that Defendants represented to physicians and consumers that Ketek had valid regulatory approval for broad antibiotic uses, that these representations resulted in ‘excess’ prescriptions for Ketek, and that Plaintiff paid for these excess prescriptions.”  Id. at 59-60.  Even though this causal theory was “interrupted by the independent actions of prescribing physicians,” the plaintiffs sought to rely on “generalized proof to determine the injury to Plaintiffs caused by Defendants’ misconduct.” Id. at **60-62.  In other words, the plaintiffs had not even tried to muster proof on a prescription-by-prescription basis.  This is predictable because the lawyers’ get-rich-quick scheme pitched to the named plaintiffs would not work if they had to prove up their case without some major shortcuts.  Noting the role of physicians, that safety considerations “are not necessarily determinative of doctor’s decision regarding what to prescribe,” and prescriptions of the drug kept being written after new liver failure information was broadcast, the court ruled that “individualized proof would be necessary to establish RICO causation in this case.”  Id. at **61-65.  We would have liked this even more without the “in this case,” but we can add this case to the list of those that have rejected generalized proof of liability and causation in cases about drugs, devices, and healthcare decisions/billing.  And it did not even discuss the First Circuit’s Neurontin decision.  Being ignored can be even more telling than being rejected explicitly.

The court then turned to plaintiff’s state law claims and things got a bit hairy.  The plaintiffs asserted consumer fraud (our shorthand) claims under 43 different state statutes and unjust enrichment under unspecified state law.  Defendants only argued there should be summary judgment under the law of the states where the three plaintiff Funds were based—apparently, Louisiana did not assert all the claims—because they contended that the location of the physicians who wrote the prescriptions (and were subject to the alleged misrepresentations and omissions) was irrelevant since the decisions on drug coverage and benefits were only made in those three states. The court disagreed and invited another round of argument after the plaintiffs amend their state law counts “to clarify the state laws under which they actually seek to recover.”  Id. at **74-76.  The ensuing discussion of New York, Massachusetts, and Illinois law on consumer fraud and unjust enrichment involves some nuances we will not highlight, but results we will—summary judgment was granted on each issue decided. Even with a fairly low bar under New York consumer fraud law, plaintiffs could not support the “highly dubious proposition” that they “would not have had to pay for any antibiotics at all had no misrepresentations been made,” which eliminated causation.  Id. at *82.  There was no injury under the Massachusetts consumer fraud law because there was no proof that the plaintiffs ever paid for a drug that caused injuries or that was ineffective.  Id. at **87-88.  There was no proof of damage or causation under Illinois consumer fraud law because generalized proof says nothing about individual physician reliable or decision making.  Id. at **91-92.

When the last part of this gets cleaned up, the same principles that doomed the RICO and state law claims should make it very difficult to prove cognizable injury or causation except under the most lenient (or punitive, depending on your view) of state consumer fraud laws.  (The unjust enrichment should pretty much be a dead end everywhere.)  If any claims sneak by, they should be facing our old friend preemption.  As the court noted, the claims here were predicated on the defendant defrauding on the FDA in connection with the approval of its prescription drug.  Plaintiffs may keep chasing good money after bad on these claims, but they might as well be trying to buy a bridge in Buckmanland.