The Xarelto personal injury claims settled in 2019 after six bellwether trials all ended with defense verdicts.  What remained, until now, were several third-party payor (health insurers, “TPPs”) actions that have been dormant for almost six years.  Despite the passage of time, the motions before the court in 2021 were to dismiss under Rules 12(b)(6) and 9(b).    They were granted across the board with causation as the predominant stumbling block.  In re: Xarelto (Rivaroxaban) Products Liability Litigation, 2021 WL 2853069 (E.D. La Jul. 8, 2021).

The TPPs’ claims fall into several buckets:  RICO; fraud, violations of consumer protection laws; redhibition; and unjust enrichment.  Id. at *2.  Under these causes of action, TPPs seek to recover the amounts they paid to fill their patients’ Xarelto prescriptions.  At the core of their allegations, TPPs argue that defendants failed to sufficiently warn of the risks or misrepresented the safety and efficacy of Xarelto to prescribers, the FDA, pharmacy benefit managers (“PBMs”), and the medical community as a whole.  Id. at *3.  PBMs are outside vendors hired by TPPs to review the clinical evidence and prepare a formulary – a list of drugs approved for coverage by the TPPs.  Id.  Therefore, say the TPPs, they are entitled to recover because the PBMs would have not put the drug on formulary if not for defendants’ misrepresentations and they would not have paid for it or would have paid for a less expensive treatment.  Applying the law to the facts, the court found the route between any alleged misrepresentation and the TPPs out of pocket costs to be too circuitous.

The causation element of a RICO claim requires “some direction relation between the injury asserted and the injurious conduct alleged.”  Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258, 268 (1992).  Therefore, for proximate cause to exist in a RICO claim, causation must be “straightforward,” with “no independent factors that account for [plaintiffs’] injury,” “no risk of duplicative recoveries,” and “no more immediate victim better suited to sue.”  In re Xarelto, at *4 (citations omitted).  Despite the clear adoption of a “direct relation” requirement by the Supreme Court, in third-party payor actions against pharmaceutical manufacturers there remains a split in the circuits as to whether allegations of misrepresentations to physicians and PBMs meet that requirement.  The Second, Seventh, and Eleventh Circuits say no while the First and Ninth say yes.  The Xarelto decision walks through the precedent on both sides, id. at *5-6, before joining the ranks of the former circuits.

The distinguishing factor appears to be whether the drug manufacturer directly made misrepresentations to the TPP because otherwise intervening factors—such as a physician’s independent medical judgment or a patient’s decisionmaking—interrupt the chain of causation.

Id. at *6 (citation omitted).  Where, as here, the TPPs rely on misrepresentations to doctors, the TPPs are “several levels removed in the causal sequence.”  Id.  In this scenario, it is not clear that the TPPs are the “initially injured” party, let alone the sole injury party.  Id.  The TPPs also attempted to rely on statements made to the PBMs but conspicuously absent from their allegations is any contention that the TPPs made formulary decisions based on any misrepresentations by defendants or that the PBMs were acting as their agents rather than as outside vendors.  Id. at *7.

The reason for the Supreme Court’s “direct relationship” requirement is clear when you consider the impossibility of determining the amount of damages attributable to the alleged misrepresentation as opposed to other independent factors.  And the TPPs focus on the foreseeability of their injury is misplaced.  Foreseeability and directness are two different things.

 Intervening factors, such as the physician or PBM’s independent professional judgment and the patient’s physical condition, medical history, and personal decisionmaking, interrupt the chain of causation and extinguish proximate causation. And these intervening events are not so “readily predictable” that they could be considered the expected consequence of Defendants’ alleged misconduct.

Id. at *8.

After dismissing the RICO claims, the court moved on to common law fraud.  Under any state’s law, a fraud claim requires plaintiffs to plead both a misrepresentation of material fact and reliance on that misrepresentation causing damages.  Id.  On a motion to dismiss, fraud claims are subject to the heightened pleading standard of Rule 9(b) – the fraud must be alleged with particularity to include “the who, what, when, and where.”  Id. at *9.  Defendants argued the TPPs failed this requirement by not alleging the specific physicians or PBMs who received misleading information or how the misrepresentation influenced them to act.  Id.  In response, the TPPs argued that they did not have to identify which specific misrepresentations were made to which specific individuals because defendants “concealed material information from everyone.”  Id. But this type of generalized or fraud on the market causation is insufficient.  There are simply too many unanswered questions.  How many patients would have chosen to take Xarelto even if fully informed of all the risks?  How many doctors would still have prescribed it given an individual patient’s needs and the doctor’s past experience?  In other words, there is no proof, circumstantial or otherwise, that when presented with the warnings the TPPs allege should have been given, the risk benefit analysis undertaken by either the patients or the doctors would have changed.  Id.  This is especially true in a case like this where the drug is still on the market and still being prescribed.  Id.

The TPPs brought claims under the consumer protection laws of Illinois, Louisiana, and New Jersey.  The court concluded that the Illinois and Louisiana claims applied to the TPPs in those states respectively, but that both claims failed.  The Illinois statute requires proof of proximate cause – proof that plaintiff was “actually deceived by the misrepresentation.”  Id. at *11.  As with the RICO claims, the TPPs do not allege that they themselves received any misrepresentation from defendants making any alleged harm “too remote” to survive.  Id.  The claim under the Louisiana Unfair Trade Practices and Consumer Protection Act failed because in Louisiana all products liability claims, except redhibition, are subsumed by the Louisiana Products Liability Act (“LPLA”).  Id. at *12.  The TPPs attempted to argue that their claims were based on defendants’ deceptive marketing rather than on a defect in the product.  But it is undisputed that defendants are manufacturers, that Xarelto is a product, and that the Louisiana legislature made the LPLA the sole remedy for claims involving products.   Id.  at *13.  While the court found no grounds for a consumer protection claim under New Jersey law, that claim also would have failed for lack of causation.  Id.

That left only the redhibition and unjust enrichment claims.  Redhibition claims, however, are only available to buyers of products which the court found the TPPs were not.  The TPPs never take possession of the drug, nor do they pay the full purchase price.  Id. at *14.  Even if considered buyers, redhibition is also only available when a product is considered “so useless” that a buyer would not have bought it had he known of the defect.  Id.  As described above, the TPPs cannot demonstrate “that fewer doctors would have prescribed and fewer patients would have taken Xarelto but for Defendants’ actions.”  Id.  Finally, unjust enrichment is only allowed where there is no other available remedy.  The TPPs have subrogation claims on behalf of their insureds, therefore the unjust enrichment claims must be dismissed.  Id. at *15.