Almost 15 years ago to the day, we posted the following question: why do third party payers and not patients bring RICO claims against drug and device companies for behavior that supposedly makes products cost too much? We were reporting on a case that dismissed the RICO claims of patients because they were indirect purchasers of their knee implants. The indirect purchaser rule is a standing doctrine employed most notably in Illinois Brick Co. v. Illinois, 431 U.S. 720, 744 (1977), to bar Illinois, an indirect purchaser of concrete blocks, from bringing an antitrust claim under the Clayton Act against the concrete block manufacturers. Rejecting the argument that Illinois—two levels down the distribution chain from the manufacturers—should be allowed to recover the fraction of the overcharge “passed on” to them, the Supreme Court noted:
Permitting the use of pass-on theories … essentially would transform treble-damages actions into massive efforts to apportion the recovery among all potential plaintiffs that could have absorbed part of the overcharge from direct purchasers to middlemen to ultimate consumers. However appealing this attempt to allocate the overcharge might seem in theory, it would add whole new dimensions of complexity to treble-damages suits and seriously undermine their effectiveness.
Id. at 737.
But we said this post was about RICO claims. And so it is. Fifteen years ago, the District of New Jersey found that the rationale for the indirect purchaser rule in antitrust cases applied equally to bar the claims of patient-plaintiffs in RICO claims (the Third Circuit held the same 29 years ago, see McCarthy v. Recordex Serv. Inc., 80 F.3d 842 (3d Cir. 1996)). Now, the Middle District of Florida reaches the same conclusion in Humana Inc. v. Teva Pharmaceuticals USA, Inc., 2025 U.S. Dist. LEXIS 258748 (M.D. Fla. Apr. 28, 2025), to bar an insurer’s RICO claims.
Defendants include the manufacturer of a drug to treat multiple sclerosis and two “specialty pharmacies” that dispense that drug to plaintiff’s insureds, among others. Id. at *2. Plaintiff alleges that the manufacturer drove up the price of the drug through charitable copay-assistance funding. There are no allegations that the drug did not do what it was supposed to do, only that plaintiff-insurer had to pay the inflated prices. Plaintiff brought RICO and conspiracy to violate RICO claims as well as a host of state law fraud and consumer claims. Id. at *3-4. Defendants’ motion to dismiss asked the court to “extend the Supreme Court’s indirect purchaser bar from Clayton Act cases to civil RICO cases.” Id. at *7.
While neither the Supreme Court nor the Eleventh Circuit have addressed the issue, every circuit court to have considered the question has held that the rule applies to civil RICO cases. Id. (citing cases from 3rd, 6th, 7th, and 8th Circuits). As have other district courts within the Eleventh Circuit. Id. at *7-8. While not binding, the weight of authority is “exceedingly persuasive.” Id. at *8.
First, the RICO statute’s civil remedy provision is modeled after the civil-action provision of the Clayton Act. Applying the same meaning to similar statutory language is a “well-known canon of statutory interpretation.” Id. This is especially true when the comparable provisions share the same purpose—as they do here. Plaintiff offered and the court found no compelling reason to deviate from the Supreme Court’s interpretation of the same language in the Clayton Act.
Second, the rationale of Illinois Brick applies to RICO cases. RICO cases have the same “complicated web of damages at multiple levels,” as antitrust cases. Id. at *9-10. Further, Illinois Brick, directly advised lower courts in individual cases not to engage in “an unwarranted and counterproductive exercise to litigate a series of exceptions.” Id. at *10. Direction that the Middle District of Florida took to heart.
Third, intentionally mis-quoting an Eleventh Circuit decision, plaintiff argued that a civil RICO plaintiff has standing if his injuries were proximately caused by a RICO violation. The quote actually reads: “[A] plaintiff has RICO standing only if his injuries were proximately caused by the RICO violation.” Id. at *11. The court viewed the omission of the word “only” as an attempt to change the meaning of the legal authority. Standing and proximate cause are overlapping, but separate concepts. The Eleventh Circuit case plaintiff attempted to use held that proximate cause is required to plead a civil RICO claim. But it did not address standing or the indirect purchaser rule. Id. at *11-12, & n.8. Therefore, it is easily reconciled with Illinois Brick. A civil RICO plaintiff “must be a direct purchaser and must demonstrate proximate cause to state a viable civil RICO claim.” Id. at *11.
Finally, plaintiff argued that it was a direct purchaser because it made payments to the pharmacies on behalf of its insureds who were prescribed the drug. But insurance companies are “third-party payors” which by definition means they are not “end-payors” and therefore not direct purchasers. Id. at *13.
Plaintiff’s RICO and RICO conspiracy claims were dismissed with prejudice for lack of standing. As those were the only federal question claims in the case, the court declined to exercise supplemental jurisdiction over the remaining state court claims and those claims were dismissed for lack of subject matter jurisdiction.