Imagine a conspiracy so vast that it includes not only your usual plaintiff-side fantasy of the FDA conspiring with a drug company, but also high FDA officials, President Obama, Robert Mercer (noted Trump supporter and reputed Breitbart financier), a number of other investors, and just for good measure President and Hillary Clinton.

Larry Klaman could, and thus brought the lawsuit that recently resulted in Aston v. Johnson & Johnson, ___ F. Supp.3d ___, 2017 WL 1214399 (D.D.C. March 31, 2017).

Nobody else did, though.

In particular, and fortunately for everyone on the defense side, the judge in Aston could not.  Reading the Aston opinion, it is evident that the court is beyond skeptical of the vast, or even half-vast, conspiracy claims.  In a nutshell, five plaintiffs who claimed a great many personal injuries (the opinion lists 74 separate alleged injuries, 2017 WL 1214399, at *1) from their use of the drug Levaquin, brought suit alleging that the drug’s manufacturer and the FDA were in cahoots to cover up the drug’s risks, in order to increase the value of the manufacturer’s stock, to the advantage of various investors.  As for the political officials, according to the opinion:

Amazingly, former presidents Barack Obama and Bill Clinton also make cameo appearances in plaintiffs’ alleged scheme, together with former Secretary of State Hillary Clinton, and the Clinton Foundation; these actors are alleged to have solicited, or received, “gratuities” from defendants in exchange for securing [another alleged conspirator’s] appointment as FDA Commissioner.

Id. at *2.  We admit, this is an extreme oversimplification – the opinion took two Westlaw pages just to sort through the Aston plaintiffs’ labyrinthine conspiracy allegations.

Plaintiffs’ legal theories were almost as numerous as their injury allegations – twenty-two counts, including RICO, state-law (Arizona (?)) RICO, strict product liability, negligence, fraud, express and implied warranty, unjust enrichment, Lanham Act, and a bunch of state consumer fraud claims (D.C., New York, Maryland, Pennsylvania, Illinois, Arizona, and California). Id. at *3.

Aston threw everything out on the many defendants’ motions to dismiss. The half-vast conspiracy, and all its subsidiary theories of liability went down in a hail of defense-friendly rulings, and that’s why – aside from its humor value – the Aston opinion is well worth reading.  We’ll list the rulings so our readers will have an idea of what this goodie basket contains.

RICO – The deficiency in the RICO counts was rather basic. RICO does not allow recovery for personal injuries.  “The overwhelming weight of authority discussing the RICO standing issue holds that the ‘business or property’ language of Section 1964(c) does not encompass personal injuries.” Aston, 2017 WL 1214399, at *4 (citation and quotation marks omitted).  For a compilation of that authority, see Bexis’ Book, §2.15, footnote 3.  Further, “as plaintiffs’ counsel is well aware, courts in this District and elsewhere have consistently rejected the argument that pecuniary losses derivative of personal injuries are injuries to ‘business or property’ cognizable under RICO.”  Aston, 2017 WL 1214399, at *4 (citing, inter alia, Klayman v. Obama, 125 F. Supp.3d 67, 88 (D.D.C. 2015)).  Aston also distinguishes “tobacco litigation [RICO] precedents” because those cases arose from a federal prosecution that was not limited by the “business or property” requirements of RICO’s private cause of action.  2017 WL 1214399, at *5.

Nor did the Aston plaintiffs satisfy RICO’s causation requirements – for another very basic reason.  Even the most recent of the five plaintiffs’ injuries arose before the conspirators allegedly acted:

Barring some sort of temporal paradox, there is no way that suppression of an FDA report in 2013 could have caused plaintiffs to be injured in 2012 or earlier.  Because plaintiffs’ allegations, taken as true, are insufficient to establish proximate causation, their federal RICO counts must be dismissed.

Id. (citing H.G. Wells, The Time Machine, 22–23 (1895)) (other citation omitted).  On this basis alone, we’re rooting for the defendants to obtain recovery of their counsel fees, since the underlying premise of the entire litigation was physically impossible.

Arizona RICO – Same basis:  “[P]laintiffs have failed to plead facts that make possible − let alone plausible − the conclusion that the alleged cover up by defendants was the proximate cause of plaintiffs’ injuries.”  Id. at *6.  Unfortunately, the relatively terse dismissal of does not answer the burning question − Why Arizona?

Lanham Act – Another fundamental basis for dismissal.  “[T]o come within the zone of interests in a suit for false advertising under [the Lanham Act], a plaintiff must allege an injury to a commercial interest in reputation or sales.”  Id. (quoting Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1390 (2014) (emphasis original in Aston).

Now comes the most useful stuff – dismissal of the common-law claims.  For the record, Aston applies the law of the District of Columbia rather than the law of the plaintiffs’ (Maryland, Pennsylvania, Arizona, Illinois, California) or defendants’ (New Jersey) domiciles.  Aston, 2017 WL 1214399, at *6.

Product Liability (both strict liability and negligence) – Manufacturing defect is TwIqballed.  For all its factual prolixity, the Aston complaint was utterly devoid of any allegations that the drug wasn’t made precisely as intended.  Id. at *7 (“for all these recitals of the term ‘manufacture’ and its derivatives, plaintiffs plead no facts that would appear to relate to manufacturing defects”) (citation and quotation marks omitted).

Warning related claims were also dismissed, in a usefully rigorous application of TwIqbal.  Dismissal in Aston occurred because plaintiffs failed to plead:  (1) “the contents of the warning label” when the drug was taken (2) “how the contents of the label were inadequate,” (3) “the timing of each plaintiffs use of” the drug, including “when each individual plaintiff was prescribed,” (4) “the onset of [plaintiffs’] injuries,” (5) “how the alleged distinctions in the warnings would have had a causal effect,” (6) “what injuries each individual plaintiff experienced,” (7) “why [plaintiffs] think [the drug] was the cause of the[ir] injuries,” and (8) “why [plaintiffs] think inadequate warnings contributed to their injuries.”  Id. (various quotations omitted).  That’s a spicy TwIqbal – without even having to get into the learned intermediary rule.

As to warnings, we also note that the court held that all warnings publicly available on the FDA’s website are subject to judicial notice.  Id. at *2 n.1.

Design defect claims were preempted under Mutual Pharmaceutical Co. v. Bartlett, 133 S.Ct. 2466 (2013), and Aston rejected the well-worn plaintiff argument that, for some reason, implied preemption is different in generic, as opposed to branded (as in Aston) drugs:

Plaintiffs are mistaken.  [Bartlett] expressly found that “[o]nce a drug − whether generic or brand-name − is approved, the manufacturer is prohibited from making any major changes to [its formulation]” by federal law.  133 S. Ct. at 2471.  Thus, even though [Bartlett] arose from a state-law design-defect claim against a manufacturer of a generic drug, its holding applies to both types of drugs, and plaintiffs’ design-defect claim must be dismissed.

Aston, 2017 WL 1214399, at *8. Preemption is “fully consistent with the well-established tort law principle, ‘especially common in the field of drugs,’ that an unavoidably unsafe product is ‘not defective, nor is it unreasonably dangerous’ where it is ‘properly prepared, and accompanied by proper directions and warning.’”  Id. at *8 n.7 (quoting Restatement (Second) of Torts §402A, comment k (1965)).

Fraud/Misrepresentation – Perhaps predictably, plaintiffs’ fraud-based claims failed under Fed. R. Civ. P. 9(b).  Id.  Allegations broadly “span[ning] the more than twenty-year period” alleged could not possibly allow defendants to file a response.  Id.  Plaintiffs “do not even specify which corporate entity they believe was responsible.”  Id.  Nor did any of the five plaintiffs allege their own circumstances with the required specificity.  Id.  “In sum, plaintiffs fall woefully short of pleading any specific allegations that would support a claim of fraud or misrepresentation.”  Id.

Warranty – Again, perhaps predictably, plaintiffs’ express warranty claims failed for not “plead[ing] any express promises.”  Id. at *9.  Here, Aston made another good TwIqbal ruling:

[T]o state a claim for breach of express warranty in cases involving prescription drugs, Plaintiffs must allege facts demonstrating that Defendants’ affirmations formed the basis of the bargain, i.e., facts regarding how the warranties were made to Plaintiff’s physician, and that Plaintiff’s specific physician relied on them.

Id. (citations and quotation marks omitted).  Implied warranty claims “cannot be independently maintained in a case involving prescription drugs.”  Id.

Unjust Enrichment – As against the investor defendants, merely “earn[ing] profits” from allegedly more valuable stock was “far too remote and speculative to support an unjust enrichment claim.”  Id. at *9.  As against the drug manufacturer defendants, the plaintiffs did not allege “that they conferred a benefit” on those defendants.  Id. at *10 (emphasis original).

[Plaintiffs] do[] not allege that [they] paid any money for [the drug], rather than relying on an insurer, as most patients do.  This omission is significant because there is no authority demonstrating that benefits received from third-parties can be the proper subject of an unjust enrichment claim.

Id. “Because plaintiffs have not pleaded any facts showing that they paid for [the drug], I must dismiss their unjust enrichment claim.”  Id.

Obamacare to the rescue.

Readers should remember this point; we don’t remember ever seeing an individual (as opposed to TPP) unjust enrichment claim that contains the allegations – personal, as opposed to third party payer – required by Aston and the precedent it follows.

Consumer Fraud Claims

Seven states’ laws were implicated − D.C., New York, Maryland, Pennsylvania, Illinois, Arizona, and California. “Each count fails to state a claim.” Id.

Six of the states (all but Arizona) did not recognize consumer fraud claims involving prescription drugs.  Some states’ statutes did not allow personal injury damages (Pennsylvania, California, D.C.).  Others did not consider prescription drugs to be “consumer” goods (Maryland, New York).  Still other statutes simply had been held inapplicable to prescription drugs (California, Pennsylvania, Illinois).  Id.  Beyond that, all of the consumer fraud claims were dismissed as inadequately pleaded under Rule 9(b), which Aston applied to all consumer fraud claims.  Id. at *11.  In prescription drug cases, Rule 9(b) required specific pleading of prescriber reliance:

[T]he circumstances of those prescription decisions, and plaintiffs’ reliance on them, are particularly important − yet plaintiffs allege no information about them. The absence of detail about Plaintiffs experiences leads to the conclusion that Plaintiffs have not pleaded these claims with the requisite particularity.

Id. (citations and quotation marks omitted).

Finally, none of the plaintiffs resided in D.C. or New York.  Thus, claims under those two states’ consumer fraud statutes were also “dismissed because neither statute applies extraterritorially.”  Id. at *10 n.9.  We’ve always been interested in extraterritoriality.

So that’s Aston for you – an example of really poor facts (for the plaintiffs) making some quite excellent law for our side of the “v.”  Our only quibble with Aston is grammatical – in a couple of places, “principle” is used where “principal” is meant.  Id. at *2 (“principle role”); *6 (“principle place of business”).  But apart from a law clerk needing to repeat fifth grade English, the legal rulings in Aston are truly vast, and not half-vast at all.  In Ashton all too many defendants were made to spend all too much money to hire all too many of us lawyers.  With Aston now dismissed in its entirety, we certainly hope that all the defendants so inconvenienced seek to recover their fees as a sanction against such frivolous litigation.

July in D.C. is hot and sticky.  When scorching day follows scorching day, area residents look forward to evening thunderstorms, not just to water otherwise thirsty lawns and gardens but to cool things down.  Lightning can be frightening—that the words almost rhyme is no accident—but it seems to always accompany our rain during the swampiest part of our summers.

The decision in Sidney Hillman Health Ctr. v. Abbott Labs., No. 13 C 5865, 2016 U.S. Dist. LEXIS 84662 (N.D. Ill. June 29, 2016), is not as dramatic as a flash of lightning or as stirring as a thunderclap.  To us, though, it provides some welcome relief and suggests that a larger storm is coming for cases like this.  (Like awkward cocktail party banter, we will keep our discussion of weather brief.) Hillman is one of many third payor cases based on alleged off-label promotion of a prescription drug.  It is of the variant where benefit plans principally used RICO as the vehicle to try to get damages for past payments for members’ prescriptions for unapproved indications.  We sometimes lump such cases together with those using the False Claims Act or various state fraud statutes to try to recover for amounts paid as a result of allegedly improper marketing, often with large fines or a damages multiplier in the mix.  Sometimes these cases are class actions on behalf of lots of payors around the country.  Sometimes they are pursued by governmental entities, which occasionally outsource the work to contingency fee lawyers.  In their various forms, these TPP cases have caught our attention.  We have been particular perturbed by some courts’ blithe acceptance of collective proof of causation in these cases, the point of which is to lump together as many purported actionable claims or implicated payments as possible without having to generate proof as to why each prescription was written or paid.  We have also questioned whether statutes like RICO (enacted to combat organized crime) or the False Claims Act (enacted to combat war profiteering) are being stretched beyond their legitimate bounds to accommodate these cases, simply because the defendants are unpopular or the coffers of the governmental or benefit plan plaintiffs need an infusion of cash.

Many of these cases have also been predicated on the idea that promotion of off-label use is inherently wrong.  Over the last year or so, largely because of Amarin, the underpinnings of that idea have been eroding fast.  The First Amendment’s prohibition on laws “abridging the freedom of speech” applies to commercial speech, including commercial speech by and on behalf of drug companies about uses of their products that are off-label.  If truthful statements about unapproved uses of the drug—like those that accurately represent the information on risks and benefits and make clear what the label says—are protected, then civil liability should not be based on them.  That would go for cases under the FCA, RICO, or various state laws—with the Fourteenth Amendment making the First Amendment applicable to states.  To our eyes, some of the notorious cases imposing massive liability for alleged off-label promotion of prescription drugs seem to have relied in large part on vilifying truthful off-label promotion.  (Keep in mind that even pre-Amarin FDA regs allowed drug companies to provide information about off-label uses under certain circumstances without it being considered “promotion.”)  So, a First Amendment storm is brewing for these cases, both in terms of the precedential value of decisions in cases that did not differentiate between truthful and false statements about off-label uses and the viability of complaints drafted with the expectation that no such differentiation would be necessary.

This brings us back to Hillman, which had an interesting litigation history of its own.  It followed FCA and related actions based on alleged off-label promotion by the manufacturer of a prescription seizure and migraine medication.  A large settlement of civil and criminal claims, with attendant press coverage, followed.  The Hillman plaintiffs filed a putative class action over a year later, alleging overpayments for off-label prescriptions between 1998 and 2012.  The trial court dismissed on statute of limitations and the Seventh Circuit reversed.  The plaintiffs amended and the defendants moved to dismiss.  Along the way, there have been a number of product liability claims with the same drug, complete with off-label promotion allegations and preemption of some warnings claims.  (As an aside, it would be interesting if some of the alleged misrepresentations about safety in the Hillman complaint were about the same issues about which it would have been impossible for the defendants to warn.  There is no preemption for RICO claims, because preemption only applies to state law, but it should be hard to misrepresent a drug’s safety by accurately repeating the contents of a label that could not have been changed as to a particular risk.)

Continue Reading Another Off-Label Promotion Third Party Payor Case Lacks Causation

Is there a more misused statute than RICO?  Or one that more convincingly shows the weakness of the textualist position, which wads up any evidence of legislative intent and tosses it into the trash bin?  RICO was clearly intended to address organized crime, but its broad and vague language has been held to reach all sorts of commercial disputes and garden variety litigations where no hit-men, shake-down schemes, or cement shoes are in sight.  It’s easy to see why plaintiff lawyers love to lob RICO claims into their complaints – getting treble damages for labeling your opponent a racketeer is a good business model.  We’ve said all this before, of course.

The godfather of RICO was Notre Dame Law Professor G. Robert Blakey.  While in law school, Blakey authored a law review note about the inability of prosecutors to affix criminal liability to the attendees of the notorious Apalachin organized crime meeting in 1957.  Later, he worked on a bill that would take care of that problem.  President Nixon signed RICO into law in 1970 and, like a lot of what Nixon did, it created more problems than it solved.  Another law came into play – the law of unintended consequences.  The malleability of RICO didn’t merely suit plaintiff lawyers down to the ground; Blakey also seemed to enjoy the surprising scope and relevance of his baby.

When we were a young litigator we attended an all-day CLE conference in NYC on business litigation.  The moderator was a sharp litigator from the Mudge Rose firm named Jed Rakoff.  He is now one of the two or three smartest and scariest judges in the country.  The star speaker was Blakey, who held forth on how RICO was the cure for whatever ailed any wannabe plaintiff.  He probably never envisioned that RICO would result in his occupation of a Waldorf Astoria podium in front of 300 white-shoed lawyers.  But there he was.  The audience peppered Blakey with questions about the reach of RICO.  Would X fall within RICO’s grasp?  Yup.  Would Y?  Of course.  We went up to Blakey after the talk and poured into his ear a complex fact scenario we were defending.  Is that a RICO violation?  Sure.


Blakey must have been ecstatic about what happened in the District of Massachusetts Neurontin litigation, where allegations of off-label promotion and other marketing malfeasances supported RICO claims and, consequently, huge settlements.  RICO had been stretched up to (we would say past) its breaking point on issues such as causation, injury, and damages.  It was, in our judgment, one of this country’s enormous wrong turns in drug and device litigation.  D. Mass. prosecutors showed up at CLE conferences, crowing about their success and ominously hinting at more to come.  But their legal theories rang hollow and the showmanship looked cheesy.  Having prosecuted federal cases ourselves, we have a knee jerk reflex to assume the good faith and validity of USAO actions and policies.  Not so here.  It smelled like overreaching. We think history will vindicate our position.  It is not as if the history of Mass. litigation is a history of getting things right.  Ever heard of the Salem Witch trials?  Lizzy Borden?  Roberts v. Boston (which invented the separate but equal doctrine later embraced in Plessy v. Ferguson)? Sacco and Vanzetti?   A Civil Action? Reckis v. Johnson & Johnson (a Mass. Supreme Court decision that we listed as the single worst drug/device decision of 2015)? Anyway, maybe even the folks in Boston are starting to rethink the use of RICO to police the marketing of medicines.

Continue Reading D. Mass. (!) Refuses to Certify Celexa/Lexapro RICO Class Action

This post comes only from the Cozen O’Connor side of the blog.

For years, many courts have treated RICO as a sprawling monster, awkwardly extending its civil reach into areas and transactions for which RICO was seemingly never intended, including healthcare litigation.  For over fifteen years, the Third Circuit resisted this trend.  Until now.  With its decision in In re Avandia Marketing, Sales Practices & Prod. Liab. Litig., 2015 U.S. App. LEXIS 18633 (3d Cir. Oct. 26, 2015), the Third Circuit scuttled its previous good work and stretched RICO’s arms all the way out to reach consumer disputes with pharmaceutical manufacturers.

Fifteen years ago, the Third Circuit looked at things very differently.  In Maio v. Aetna, Inc., 221 F.3d 472 (3d Cir. 2000), it upheld the dismissal of a class action complaint in which HMO members tried to turn allegations that Aetna’s HMO didn’t provide the promised quality of healthcare into RICO claims seeking financial damages.  Plaintiffs claimed that Aetna restricted doctors’ ability to provide quality care, in fact offering them financial incentives to withhold quality service, even though Aetna had represented to plaintiff that it would provide high quality care from HMO doctors incentivized to do so.  Id. at 475.  Plaintiffs made clear, however, that they were not claiming injuries suffered through a denial of benefits or subpar treatment.  Id.  They were alleging only financial losses—that is, the difference in worth between the plan that they got and the one they were promised.  But this created a disconnect.  By failing to allege denial of or substandard care, plaintiffs had alleged no concrete financial injury.  They got what they paid for.  Id. at 483, 490.  RICO’s requirement of a concrete financial injury is intended to prevent plaintiffs from converting every ordinary tort claim into a RICO claim for the purpose of trying to win treble damages.  The Third Circuit focused on that requirement and upheld dismissal of plaintiffs’ RICO claim.

Continue Reading The Third Circuit Does an About-Face on RICO Claims

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 decisionUFCW 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.

Continue Reading Largely Thankful For The Second Circuit Striking A Blow Against Generalized Proof of Causation

The short answer is “no.”  We are just borrowing a line from one of the original gangster movies, “Little Caesar,” which readers other than McConnell would most likely know from references in “The Sopranos,” if they know it at all.  (Or from here.)  The titular character in that flick was known as “Rico.”  RICO (Racketeer Influenced and Corrupt Organizations Act), on the other hand, was an anti-gangster law, enacted in 1970 as part of the Organized Crime Control Act.  In a number of posts (like here), we have decried the gangster tactics used by plaintiffs—particularly quasi-public plaintiffs—to use the threat of RICO’s treble damages and cost-shifting provisions to extort settlements from drug and device manufacturers.  Particularly for prescription medical products, RICO seems like an inappropriate vehicle for addressing alleged harms allegedly caused by such standard product liability allegations as inadequate disclosure of risks or off-label promotion.  A small blow to curtail the expansion of RICO was struck in Short v. Janssen Pharms., Inc., No. 1:14-CV-1025, 2015 U.S. Dist. LEXIS 61123 (W.D. Mich. May 11, 2015).

Short is yet another case stemming from pediatric use of Risperdal.  We have posted many times on various Risperdal cases with various theories of recovery, usually tied to the idea that the drug was improperly promoted for off-label use without disclosing the true risk of gynecomastia and other prolactin disorders, like hereherehere and here.  In Short, the plaintiff allegedly took Risperdal as a minor, developed gynecomastia, and sued in his own behalf under RICO and state consumer protection and product liability acts.  His problems were that he never paid a cent for the drug and that he was from Michigan.  We suspect the latter may be why RICO was at issue at all.

Continue Reading Is This The End of RICO?

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.

This post discusses an Infuse case and therefore, is from the non-Reed Smith side of the blog only.

“Mother of mercy, is this the end of Rico?”  Those are the last words uttered by the gangster in Little Caesar.  That villain was played by Edward G. Robinson, who became well-known for playing tough-talking hoodlums, even though he was by all accounts a very sweet man.  He showed up as a hero in a couple of films, such as Double Indemnity and The Stranger, but he will always be most remembered  for his dastardly snarl.  [Ah – who are we kidding?  Today Edward G. Robinson’s voice is usually associated with the parody version mouthed by Chief Wiggum on The Simpsons.]

Those same Rico-valedictory words often dance through the heads of wishful-thinking corporate defense attorneys as they pray for the demise of the much-abused RICO statute.  A law ostensibly aimed at criminal enterprises has been tortured past any state of recognition, and is applied in all sorts of non-gangsterish contexts.  Too many courts let this abuse go, but more and more do not.  Recently, in Aaron v. Abubakar Atiq Durrani, M.D., et al., 2014 U.S. Dist. LEXIS 32693 (S.D. Ohio March 12, 2014), the court shot down an attempt to transform a garden variety med-mal and product liability case into a RICO case.

The court was sorely irked by the plaintiffs’ attorney, calling him out by name.  What provoked this ire?  To begin with, there is the matter of the form of the complaint.  Or, rather, complaints.  At least seven complaints were filed in these consolidated cases.  A second amended complaint was erroneously labeled a first amended complaint.  The court did not like any of this, not even a little:

Despite having filed no fewer than seven complaints in these consolidated cases, Plaintiffs have never alleged facts supporting the existence of a plausible claim under RICO or Ohio RICO.  Plaintiffs’ latest clumsy attempt to repackage medical malpractice and product liability claims is without any plausible basis, notwithstanding its prolixity.

Id. at *1.

The complaint is “anything but a short and plain statement.” Id. at *9.   That is one of the nicer things the court says about the plaintiff’s pleadings.  The 159 page second amended complaint was “virtually incomprehensible,” containing “976 paragraphs of largely irrelevant factual summaries.”  Id. at *10.  The complaint also lumps the defendants together, thereby failing “to give the individual Defendants proper notice of what they have allegedly done wrong.”  Id. at *11. Further, the plaintiffs’ attempt to incorporate its Exhibits A and B, one a criminal indictment and the other a Medtronic package insert, violates the Federal Rules of Civil procedure, “as to the former because it is a pleading in another case, and as to the latter because it is not an ‘instrument’ that can be attached pursuant to Civil Rule 10(b).”  Id. at *14.

The substantive deficiencies in the complaint were even more fundamental.  The plaintiffs were seeking recovery in federal court under anti-racketeering laws for their own state law personal injury claims, a practice which the Sixth Circuit has expressly rejected because, “[s]imply stated, RICO is not a means for federalizing personal injury tort claims arising under state law.”  Id. at *1.  The court concluded that if it accepted the plaintiffs’ theory, “any hospital will have engaged in a pattern of racketeering activity when a credentialed physician of the hospital is accused of committing medical malpractice.  This is nonsense.”  Id.

In any event, the plaintiffs failed to plead the most basic elements of a RICO claim, such as injury to one’s “business or property,” the existence of an “enterprise,” and specific frauds in furtherance of the enterprise.  The plaintiffs alleged only personal injuries – which are not fair game under RICO – and “lost economic opportunities,” which are “mere expectancy interests” that cannot form the basis for damages under RICO.  Plaintiffs never alleged the “time, place and content” of any claimed fraudulent communications by any defendant.  Rather, the plaintiffs conclusorily alleged that “all named Defendants in this complaint knew” that wires and mails would be used “to further the scheme” and that the defendants used the mails and wires for their billing.  Too vague.  As for alleging an “enterprise,” the plaintiffs alleged nothing more than legal conclusions that the defendants constituted an enterprise, without any factual allegations of organization or coordinated behavior among the defendants, or that the organization was separate from the patterns of racketeering activity that the plaintiffs allege.  And – no surprise here – the plaintiffs did not actually allege any “racketeering activity.” Instead, all that the plaintiffs alleged was that the defendant “hospitals, as a whole, conducted normal hospital activities such as allowing physicians to perform surgeries, ordering materials required by physicians for surgeries, and paying physician salaries.”  Id. at *22.  Remember how the court called the complaint “nonsense”?  This is even more nonsense.  Or, to draw inspiration from those double-talking Little Caesar pizza commercials, “Nonsense nonsense.”

Most noteworthy for DDL practitioners, the court held that any failure-to-warn claims alleged against the device company defendants were preempted under 21 U.S.C. §360(k)/Riegel.  “Plaintiffs cannot avoid this preemption by recasting the failure to warn as a RICO claim.”  Id. at *24. The FDA provides no private right of action, and what the FDCA did not create directly, even the crazily distorted RICO cannot create indirectly.  (Plaintiff lawyers who try to invoke RICO in inappropriate fact scenarios remind us of another Edward G. Robinson bad guy, Johnny Rocco, who terrorizes people in a hotel in the great Key Largo.   What does Rocco want out of life?  “More.”)

The court did not want any more from this particular group of plaintiffs and their attorney.  All of the plaintiffs’ claims against all named defendants were dismissed with prejudice, “as Plaintiffs have thoroughly demonstrated that any further leave to amend would be futile.” Id. at *26.  Mother of mercy, that’s the end of this RICO case.

We offer a tip of the cyber cap to Frank Woodside of Dinsmore & Shohl, who brought this case to our attention.

The following post is exclusively the work of the Reed Smith side of the blog.

Sometimes the smallest, least significant type of lawsuit can illustrate cracks in the edifice of the largest, most consequential litigation.  So, in our opinion, it is with Neurontin.  In this version of the story, the role of “Mack” is played by Herricks v. Pickaway Correctional Institute, 2013 WL 4804983 (S.D. Ohio Sept. 9, 2013).  That’s prisoner litigation − mostly convicts with nothing better to do with their time than try to sue their jailers.  The great majority of these cases get the back of the judicial hand.  There aren’t many litigation genres of less significance than that.

Playing the role of “Yertle” is the First Circuit’s circuit-splitting trilogy, Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc., 712 F.3d 21 (1st Cir. 2013), Aetna, Inc. v. Pfizer, Inc., 712 F.3d 51 (1st Cir. 2013), and Harden Manufacturing Corp. v. Pfizer, Inc., 712 F.3d 60 (1st Cir. 2013) – all of which also travel under the heading, In re Neurontin Marketing and Sales Practices Litigation.  Not so coincidentally, the defendants filed a petition for certiorari in the Neurontin trilogy the other day.  Big cases – high courts.

The Neurontin cert. petition didn’t cite Herricks, of course, but we think that what went on in Herricks is as good an illustration as any why the First Circuit got it spectacularly and loudly wrong when it allowed the plaintiffs in the Neurontin trilogy to proceed with what amounts to an aggregate trial by formula that deprives the defendants of contesting the individual merits of any of the thousands – heck, millions – of individual claims at issue.  Can you say “due process violation”?

First, Herricks.  Prisoner plaintiffs can’t sue prison doctors for ordinary malpractice, at least not in federal court, where most of these cases seem to end up.  Instead, they must meet a higher constitutional (Eighth Amendment) standard of “deliberate indifference.”  Needless to say, most prisoner cases can’t meet that standard.  But the inmate-plaintiff in Herricks did.  What did the court (actually, a magistrate) find could meet that standard?

The prison doctor’s refusal to treat the plaintiff-prisoner off-label with Neurontin.

Continue Reading On Litigation, Great and Small

Third party payer plaintiffs (mostly insurance
companies and union welfare funds in unholy alliance with plaintiff lawyers),
have not been doing very well with their economic loss claims against (mostly)
pharmaceutical companies – at least outside the rogue First Circuit − as
anyone following our TPP topic posts can attest.

So they’ve tried something new, and to our way of
thinking, even more extreme.  Some
manufacturers of branded pharmaceuticals, to try to stay competitive with the
discounts TPPs offer for generic drugs, have created programs that reimburse
the larger co-payments that TPPs charge their subscribers who use branded
drugs.  The intended effect of such
programs, of course, is to relieve at least some of the financial pressure on
TPP subscribers to use generic drugs whether they want to or not.

TPPs responded by, in effect, throwing their
subscribers, and their drug preferences, under the bus – by suing (under RICO, and
“commercial bribery”) branded drug companies for making it cheaper for TPP subscribers to use branded drugs. 
They sought to make the aphorism “no good deed goes unpunished” a

Well, we’ve received the first decision on the
validity of such litigation, and the result is favorable to both TPP
subscribers and branded drug manufacturers – and not so favorable for the TPPs
themselves, who (no surprise, really) attempted to put their own financial
interests above those of their plan subscribers.  The decision is AFSCME District Council 37
Health & Security Fund v. Bristol-Myers Squibb Co.
, No. 12 Civ. 2238
(JPO), slip op.
(S.D.N.Y. June 3, 2013).

The court granted a motion to dismiss, with
prejudice against the commercial bribery (antitrust) claims and some of the RICO claims, and with
leave to amend one piece of the RICO claims. 
Id. at 1-2.

Despite the TPPs’ efforts to vilify co-payment
reimbursement as “kickbacks” or “bribes” being offered, id. at 5, the
court was having none of it.  Such
reimbursements – directed to end users otherwise required to pay for the drugs
−  were really nothing more than publicly
available discounts.  There was nothing
hidden or fraudulent about them:

[T]he mere existence of the . . . co-pay
subsidy program is not a fraud on anyone because it involves no element of
deception.  To the contrary, the program
is “open and notorious,” information about its terms and conditions is readily
available on a number of public websites, and Plaintiffs do not allege that
anyone is deceived about the effect of these programs.  Nor do Plaintiffs allege any sort of omission
or misrepresentation with respect to the existence of the program.

DC37, slip op. at 9-10.  The plaintiff TPPs simply didn’t like drug
companies offering their subscribers co-pay reimbursement because “the co-pay
subsidy program is counter to their business objectives” to force their subscribers to use cheaper drugs.  Id. at 10.

Plaintiff TPPs had three theories why their
subscribers should lose their co-pay discounts:  (1) a “misrepresentation
theory” based upon supposed misinformation “at the point of purchase”; (2) a
“waiver theory” that “routine and hidden waiver of personal co-pay obligations”
was supposedly fraudulent; and (3) a “benchmark” theory that the discounts made
the defendant’s average wholesale price reports inaccurate.  Slip op. at 10.  The first two were thrown out as a matter of
law.  The third required repleading.

The misrepresentation theory failed for a pretty
simple reason – there wasn’t any misrepresentation.  Indeed, plaintiff TPPs failed to allege “that
they have been provided with any records” at all.  Id. at 11.

[T]here is no active deception in the pharmacists’
point-of-sale statements to TPPs that insureds have satisfied their co-pay
obligation − at least, no more so than would be the case if an insured got the
money to cover the cost from his rich uncle or a stranger on the street, as
opposed to his own pockets. Thus, even by their own account, Plaintiffs have
not received any records containing misrepresentations of the sort that could
ground a claim for fraud.


Nor was there any recognized legal duty.  The TPPs simply could not force their
prescribers to pay the entire inflated co-payment out of their own
pockets.  Neither the drug companies nor
the pharmacists had any duty to rat out their customers to the TPPs. 

The Complaint does not allege the existence of any
contractual relationship, or any other kind of relationship, between Defendants
and any party that would require either Defendants or pharmacies to disclose to
TPPs when a plan member uses a co-pay subsidy card provided by
Defendants. . . .  Moreover,
a pharmacy’s alleged failure to disclose to Plaintiffs the fact that a consumer
used a co-pay subsidy coupon to pay for part of his or her co-pay cannot
plausibly support a claim for fraud against Defendants because Plaintiffs admit
that their reimbursement of the pharmacy is separately governed by contract and
does not depend on any point-of-sale representation.

Id. at 12. 
No misrepresentation; no duty.  All in all, a pretty poor effort by the TPP.

The plaintiff TPPs’ waiver theory depended on the
proposition that “[r]outine and hidden waiver of personal copay obligations is
fraud.”  DC37, slip op. at
13.  However, that proposition was
entirely unsupported:

In support of this proposition, Plaintiffs invoke
several judicial decisions and federal statutes.  None of these sources supports the proposition
of law advanced by Plaintiff and, even if they did, Plaintiffs’ claim would
still fail because Plaintiffs have not alleged any waiver of co-pays.


The TPPs relied on contract cases, id. at
13-15, despite that their contracts with their subscribers did not obligate anyone in particular to
pay the co-payment.  Unlike physicians, or
dentists, who might be subject to an insurer’s economic coercion or inducements, the pharma
companies are too big to be forced by overreaching insurers to sign contracts
prohibiting such reimbursements.  While
TPPs “may create contracts that relieve them of the duty to pay physicians and
dentists who routinely waive co-pays,” id. at 16, that’s all they can
do.  Nothing forces the TPPs’ subscribers
to bear the freight, if someone else – not contractually bound to do the TPPs’
bidding − is willing to help them out:

[The law] do[es] not create any sort of general rule
that routine and hidden waiver of co-pays, even in the absence of a contractual
obligation to enforce the co-pay requirement, states a claim for fraud.


That didn’t stop the TPPs.  They claimed that discounts offered to their
own subscribers were “kickbacks” or “false claims” under various federal
statutes.  One big problem (actually,
two):  those statutes “apply only to
federal health care programs,” and the TPPs did not claim any violation.  DC37, slip op. at 17.  No case had ever held that “routine” co-pay
discounts to individual subscribers stated any sort of claim for health care
fraud.  Id. at 18.  While states or the federal government could,
if they chose, ban third-parties such as drug companies from offering
co-pay-related discounts, the simple fact is that they haven’t – and indeed
have been moving (if at all) in the opposite direction.  Id. at 18 n.14 (discussing state

Finally, as a matter of fact, there was no “waiver”
of anything.  Each and every co-payment
charged by the TPPs was paid – just not by the subscribers against whom the TPPs
sought to exert economic pressure:

[T]here is not actually any waiver.  Pharmacies collect the full amount of the
co-pay obligation every time, either from the patient or [the drug company
defendants’ programs].  Failure to do so
would force the pharmacy to bear that cost.  And . . . Plaintiffs do not allege
that any contracts between Plaintiffs and the pharmacies forbid pharmacies from
accepting co-pay assistance payments. . . .  Defendants cannot “waive” a co-pay subsidy
because that subsidy is not owed to them, and they do not commit fraud by
enabling pharmacies to “waive” co-pays—embracing that characterization
arguendo—because there is no deception, misrepresentation, or omission involved
when they do so.

DC37, slip op. at 18-19.  The waiver theory was just as bad as the
misrepresentation theory.

That could not be said for the “benchmark” theory,
which is predicated on whether end-user – that is to say “retail” − co-payment
discounts somehow violate a drug company’s “average wholesale price” reporting
requirements.  Id. at 19-20
(discussing allegations).  Because both
sides submitted all kinds of stuff that went beyond the pleadings, id.
at 20-21, the court found the merits of this claim not ripe for decision under
Rule 12, which is supposed to be pleading based.  Id. at 20-21.

The court did find, however, that the TPPs had
failed to plead anything resembling fraud. 
The complaint did not explain what these average “benchmarks” were, or
how they affected the TPPs.  Id.
at 22.  Nor were there any particularized
allegations how any particular published benchmark was fraudulent, or even who
was supposed to publish or rely upon them. 
Id.  Critically:

[The complaint] is also vague regarding one of the main
issues in the case:  whether the industry
understanding looks to the “net” or “true” price paid by the retailer to the
manufacturer in the course of all transactions . . , or whether the
“actual price for the ingredient cost” is understood only as the sale price
when the manufacturer actually sells the drug to the retailer (without regard
to any future rebates or discounts).

Close only counts in horseshoes, hand grenades, and H-bombs.  This sort of vicinity claim doesn’t cut it
under TwIqbalId. at
22-23.  We’re also content to leave this
claim at that, since we’ve generally considered AWC litigation beyond the scope
of this product liability blog.

We’ll give the commercial bribery claims similarly
short shrift, since we’re not focused on antitrust either.  Basically commercial bribery under
Robinson-Patman or state-law analogues, is the use of bribes to turn the
“agent” of a commercial enterprise against the principal.

That ain’t this.

A subscriber to health insurer isn’t in any way the
“agent” of the insurer – subscribers don’t owe “fiduciary” duties to insurers −
indeed, the court found the entire concept to border on the ridiculous:

It would be hard to comprehend the scope of any such
fiduciary duty − e.g., must patients
pressure physicians to choose generics, or act faithfully to the insurer in
deciding where and how to obtain the money necessary for co-pay obligations? − and
neither precedent nor logic supports the existence of the obligations that
Plaintiffs would impose on their insureds.

DC37, slip op. at 29.  Insurers such as TPPs simply can’t make their
insureds into their “agents.”  “The bare
fact that insureds’ decisions may entail financial consequences for the
insurers does not transform insureds into intermediaries or agents.”  Id. at 31.

To state it simply, “[t]he relationship between
insurer and insured is of a different sort than the principal-agent
relationship presupposed by commercial bribery doctrine.”  Id. at 33.  In trying to force their insureds to be their
agents, the TPPs exaggerated their own importance in the scheme of things:

Thus, even though insureds can oblige insurers to pay
for certain goods, they do not act as the insurers’ intermediaries or agents in
those scenarios.  Rather, they act as purchasers and consumers of medical goods
and services who have contracted for a certain independent financing mechanism
and who will be held to the terms of those contractual agreements if they
choose to finance the cost of their market behavior through that insurance

DC37, slip op. at 34.

Once upon a time we handled occasional insurance
litigation – enough to know that an insurer had a recognized legal obligation of
good faith and fair dealing with respect to its insureds.  To us, actions such as DC37, which
would stand that obligation utterly on its head, illustrate the absurd lengths
that some insurers (or, more properly, their counsel) will go in the pursuit of
litigation.  Thankfully, the court
recognized this as well.