This being the week of Thanksgiving, we would be remiss to fail to weave in something about the great American (or ‘merican) holiday of giving thanks, eating turkey, watching football, and pondering the influence of the Pilgrims on our culture (beyond the obvious lasting fashion impact). In the past, we offered our readers a “fun” word search for food and drink terms in a post on express preemption. (Yes, the terms “fun” and “express preemption” are rarely linked in a single sentence, although “Today was no fun because I had to write a brief on express preemption” has probably been uttered.) We have offered other posts at this time of year that featured food to different degrees, like this and this. We have talked about reasons for being thankful, how football analogizes to law, and even how shopping has become a big part of this particular holiday. Surely, we have given our readers many reasons to ponder deeply on important issues in their lives. Why is stuffing called dressing in the South? Why did some combination of the Civil War, Restoration, and carpetbaggers not force a gastro-linguistic solidarity? Do elementary school depictions of Native Americans (f/k/a Indians; a/k/a indigenous peoples of North America, pre-Colombians, Amerinds, descendants of those who migrated across Beringia) send the right message? Should second graders learn about smallpox blankets? Was the choking risk with that third plate of food, after more than a few adult beverages, an acceptable one? We would like to think that we have contributed to such meaningful introspection with our purportedly clever posts during this week every year since the blog started being purportedly clever.
This year, we highlight a truly American tradition: trying to make as much money as possible by suing a deep pocket defendant with as little proof as possible. Recently, this has often involved combining three things. First, use remedial federal or state statutes that are really for another purpose entirely, but allow for big damages and even fines (e.g., the False Claims Act was enacted against war profiteering, RICO was enacted to combat organized crime). Second, seek to proceed on behalf of a class and/or some subset of the “public” to maximize the claims at issue. Third, use only generalized proof of injury, causation, and damages, which is required for a class but does not require a class. We could add in piggybacking on an issue with a product that has gotten attention because of other litigation or regulatory actions and outsource the work to contingency lawyers. Such cases have been the subject of many posts, often addressing how generalized proof of causation makes no sense in the context of drugs prescribed to specific patients by specific doctors based on, hopefully, individualized clinical judgment. High on the list of opinions that got it wrong are Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc., 712 F.3d 21 (1st Cir. 2013), and the rest of the First Circuit’s Neurontin trilogy, which took the top spot in our list of worst decisions of 2013. High on the list of opinions that got it right is the Second Circuit’s Zyprexa decision, UFCW Local 1776 & Participating Health & Welfare Fund v. Eli Lilly & Co., 620 F.3d 121 (2d Cir. 2010), which took home best decision in 2010 by reversing the second worst decision of 2008. The Second Circuit’s in Sergeants Benevolent Assoc. Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, No. 14-2319-cv, 2015 U.S. App. LEXIS 19797 (2d Cir. Nov. 13, 2015), adds to the weight of the good cases rejecting the misuse of generalized proof of causation by affirming class certification denial and summary judgment in a RICO (and state consumer protection) case over the antibiotic Ketek.
If the case seems familiar based on that description, then you might need to broaden your non-blog interests. We did post on the summary judgment decision last year and on the class certification decision more than four years ago. The timing of the decisions highlights another issue with these cases: they last a long time. Sergeants was brought back in January 2008, was on its third complaint within five months, and stuck around the district court for six more years until summary judgment—only to then head up on appeal. With the benefit of some of the decisions like the Second Circuit’s in Sergeants—which could have gone a little farther to close the loop—we would hope that future cases based on nonsensical generalized proof of causation do not linger so long. We crib from our prior post on summary judgment in recapping the pertinent facts:
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.
Unlike the district court, which did not even mention Neurontin, the Second Circuit spent a fair amount of time looking at the issue of whether a RICO case could ever be based on just generalized proof of causation, even though it agreed that the proof offered here was insufficient to either certify a class or get past summary judgment.
RICO requires proof of proximate causation between the alleged fraud and the alleged injury, a showing of direct or indirect reliance for each plaintiff/claim will typically be required. Because class actions require the predominance of common issues and generalized proof of causation, “it is quite difficult, though not impossible to certify a class in a RICO mail-fraud case.” 2015 U.S. App. LEXIS 1979, *40. In addition to Zyprexa, the court pointed to the purchasing decisions of light cigarette smokers allegedly mislead by health claims and the decision to gamble at a particular casino based on allegedly misleading claims about odds as the sort of individualized decisions that are not amenable to class certification. Id. at **41-43. Rather than ending there with the conclusion that there is no way that proving why a particular prescription was written would be a less individualized inquiry—there are many soundbites about “the individualized nature of physicians’ prescribing decisions”—the court kept open the possibility of proof that “the class members all faced ‘the same more-or-less one-dimensional decision-making process,’ such that the alleged misrepresentation would have been ‘essentially determinative’ for each plaintiff.” Id. at *43 (citing a law review article). We think this is description of a null set when it comes to a prescription drug RICO case and the type of evidence suggested that might fill it in unusual cases poses other problems. Cases predicated on why drugs cases were prescribed to individual patients are not like the “fraudulent overbilling” cases where “payment may constitute circumstantial proof of reliance based on the reasonable inference that customers who pay the amount specified in an inflated invoice would not have done so absent reliance upon the implicit representation that the invoiced amount was honestly owed.” Id. at *44 (quoting In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d 108, 120 (2d Cir. 2013)). The evidence offered in Sergeants, like the evidence offered in Zyprexa, was nowhere near what would allow an inference of reliance for every decision to prescribe the drug to each class member.
Plaintiffs contended in Sergeants that “safety is the preeminent consideration in prescribing an antibiotic, so that had physicians known about Ketek’s ‘true’ risks, none of them would have prescribed it.” Id. at *50. This sounds quite a bit like one of the formulations of strict liability design defect. Unlike in product liability cases where what physicians think matters to a decision to prescribe a particular drug will come from the mouth of a physician, the plaintiffs in Sergeants tried to prove their proposition through three other types of evidence: 1) the analysis of their frequent flyer statistician that drops in the number of prescriptions after additional liver warnings indicated that prior prescriptions must have been written in reliance on misrepresentations on safety; 2) the FDA’s subsequent decision to withdraw two of three indications for the drug; and 3) a study they contended showed a higher risk of liver toxicity than another antibiotic. Each was rejected based on its merits. The statistical analysis could not “support an inference that all pre-disclosure Ketek prescriptions were written in reliance on Aventis’ alleged fraud” because it failed to consider “significant larger changes in the market for anti-infectives” and that company stopped promoting it. Id. at **52-54. As such, the mere correlation to lower prescription volume was insufficient to show causation for each prescription. FDA’s decision to withdraw two of the drug’s indication did not support plaintiff’s causation theory because it was not tied solely to safety, let alone to hepatic risks. (It also was not a decision that the drug should be withdrawn or that the prior decision to approve the withdrawn indications had been wrong.) The study did not support plaintiff’s causation theory mostly because it was viewed as being non-informative based on investigator fraud. Moreover, the drug’s overall risk profile was generally in line with those of other antibiotics. So, the plaintiffs could not prove causation for purposes of class certification or avoiding summary judgment—as they did not bother to generate individualized prove of causation for even the named plaintiffs. That is well and good and we suspect that most RICO cases by payors for prescriptions drugs would do no better.
Not to appear unthankful, but we find the court’s discussion of how some other case might prove causation through theoretical generalized evidence to be problematic. First, the touchstone of plaintiffs’ case was that the manufacturer withheld material information on the drug’s safety and efficacy from FDA, “rendering Aventis’ marketing materials for Ketek misleading to the extent that those materials suggested that Ketek had ‘valid’ regulatory approval.” Id. at **50-51. While the court pointed out that the plaintiffs’ version of facts was off, it missed the larger point that this sort of fraud on the FDA should not be the basis of a claim. For the state claims, this walks right into Buckman preemption. For RICO—remember, preemption is based on the Supremacy Clause so it does not apply to conflicts between federal law—there should be a primary jurisdiction issue. Second, setting aside fraud on the FDA, the court’s formulation that causation might be inferred for all prescriptions for “a drug so dangerous that no physician would ever prescribe it to treat a non-fatal condition if that physician were aware of its true risks” also invites the jury to second guess FDA’s decisions to approve the drug and not withdraw it. The flip side of FDA’s unusual decision to withdraw two of Ketek’s indications is that it decided to the drug on the market based on a weighing of its risks and benefits.
Third, whereas plaintiff’s statistician did a “simplistic” analysis in this case, the court pointed out that she had done a more rigorous regression analysis for the plaintiffs in Neurontin in trying to suggest that off-label prescriptions were due to off-label promotion. The court stated that physician reliance on misrepresentations “can be proved to a jury with sufficiently powerful aggregate evidence, as opposed to individualized inquiries as to each prescribing physician’s actual decision-making.” Id. at **68-69. Statistics are ill-suited to answer questions of why each of thousands of prescriptions for a drug was made. While a thorough regression analysis might quantify the impact of one variable against specific other variables, it is unlikely to consider every variable that impacts the decision to prescribe a particular drug and will never be able to identify which particular prescriptions were written because of reliance on the misrepresentation. Even if the analysis suggested that, for example, 70% of the prescriptions were due to a misrepresentation and 30% were not, then class certification seems inappropriate. The percentage of injury cannot be blurred across the class. Relatedly, we do not see how “it may be possible to demonstrate class-wide RICO causation in a case such as this one by adducing generalized proof from which a reasonable jury could conclude that only some prescription paid for by each class member were written based on the defendant’s alleged misrepresentations.” Id. at *61 (emphasis in original). The RICO requirement of an “actual quantifiable injury” to each plaintiff—or class member—makes insufficient proof that just some prescriptions were caused by the misrepresentation. For an individual plaintiff, how many prescriptions were caused by a misrepresentation would surely turn on direct evidence about those prescriptions including some evidence from the physicians who wrote them. The expediency of the class action mechanism should not reduce the proof needed to make out a substantive claim. Particularly when the potential damages are so high—even without statutory trebling or fines—this can quickly become an issue of due process. We could try to draw some link between the Pilgrims and due process, but they burned suspected witches based on proceedings that bore no hallmarks of due process. So, we will leave it at that.