We’ve been thinking a lot about class actions lately. One reason is that the Rule 23 Subcommittee of the (federal) Advisory Committee on Civil Rules just came out with a “sketch” of possible amendments – and from the defense perspective they’re frankly horrible. Bexis has been working with the Lawyers for Civil Justice to respond to a proposal that would: (1) allow classes where most members aren’t injured at all; (2) allow free reign for non-predominance “issue classes”; (3) legitimize “cy pres” donations of class funds to charities that foment litigation; and (4) allow settlement classes that ignore the rest of Rule 23, among other things. We’ll certainly have more to say on this if these “Frankenclass” amendments move forward, but for now, we just caution our pro-defense friends to remain alert and support LCJ.
The reason for such proposals is that, under the current rules, we on the defense side are generally not doing so badly, at least in prescription medical product third-party payor (“TPP”) cases. The latest win is in In re Actiq Sales & Marketing Practices Litigation, ___ F.R.D. ___, 2015 WL 1312015 (E.D. Pa. March 23, 2015), in which the plaintiffs (including, of all entities, the Pennsylvania Turnpike Commission) had their class bounced out on its ear.
So, what happened? First, plaintiffs proposed a nationwide class alleging the usual – off-label promotion of a drug that (this time a heavy-duty pain reliever approved under even more restrictive marketing scheme authorized by 21 C.F.R. §314.520 (so-called “Subpart H”), because of the drug’s known risks) that they never alleged was either ineffective or injurious to any of those prescribed. Rather, “[f]or many patients, Actiq proved effective for alleviating their pain.” Actiq, 2015 WL 1312015 at *6 (footnote omitted). In short, Actiq was another TPP strike suit, an attempt to gin up “damages,” or should we say “unjust enrichment,” that didn’t exist in fact.
One of the things the defendant was charged with was its failureto promote its drug “aggressively,” which we must admit is a new one on us. We usually see the opposite allegation. This failure was allegedly part of its nefarious scheme to ensure that prescribing physicians could help their patients obtain federal reimbursement:
[Defendant] launched Actiq “under the radar” of managed care by not aggressively promoting or discounting the product. It created a reimbursement assistance program designed to help patients obtain insurance coverage for Actiq. [Defendant’s] healthcare systems department worked with managed care organizations, TPPs, and pharmacy benefit managers to maximize reimbursement or coverage for products like Actiq.
Id. at *5 (emphasis added). According to these plaintiffs, it was “unjust” for a drug company help physicians and patients know what their rights are with respect to government reimbursement. They weren’t exactly looking for jury sympathy, dya think?
So, how did the plaintiffs lose? Primarily as a matter of law. While it helped that they were in the Third Circuit, as we’ve discussed here and here, class certification was denied for more mundane reason than usual. “Unjust enrichment” – to the extent it exists as a stand-alone tort claim at all – varies widely between the 50 states. Thus, choice of law created an insurmountable predominance/manageability problem based on the neet to apply the laws of many disparate jurisdictions.
Faced with this problems, plaintiffs did what plaintiffs do, they argued that the (single) law of the defendant’s home state should apply, rather than the law of the class members’ domiciles − or worse, the laws of the persons who actually took (and were helped by) the drug. No way, held the court:
[The analysis] weighs in favor of applying the law of putative class members’ home states because the parties’ relationship was centered there. Certainly, much of [defendant’s] activities . . . took place in Pennsylvania. The crux of the parties’ relationship, however, was in the TPPs’ home states because that is where [defendant] directed its sales efforts, where doctors made their prescribing decisions, where TPPs’ beneficiaries transacted for Actiq, and where TPPs conferred payments to [defendant] for Actiq prescriptions. . . . Policy considerations also lead to the same conclusion. Plaintiffs’ home states have a regulatory interest in providing redress to its citizens for acts of wrongdoing.
Actiq, 2015 WL 1312015 at *13.
By this time, however, the handwriting was on the wall. Part of choice of law analysis, whether a “true conflict” exists, itself depends on whether the law of other jurisdictions is substantively different from the law of the forum. If not, no reason exists to go any further. In Actiq it was readily apparent that a true conflict existed. Given plaintiff’s delay in bringing the action (typically, it was a “me too” filing in the wake of administrative action by the FDA), the statute of limitations loomed large:
[Defendant] has presented several bases upon which states’ laws purportedly conflict. For example, states apply various statutes of limitations to unjust enrichment claims. States also vary in how the applicable statute of limitations starts to accrue.
Id. at *11 (string citations omitted). Many other differences existed. “Additional variances in states’ unjust enrichment jurisprudence exists, including the availability of unjust enrichment as an independent cause of action, the need to show an absence of an adequate remedy at law, the requirement that a benefit be obtained at the direct expense of the plaintiff, the level of misconduct a plaintiff must prove, and the availability of defenses such as unclean hands and laches.” Id. (footnotes with more string citations omitted).
That handwriting had grown into a magnum opus on the ins and outs of unjust enrichment by the time that the opinion finished with the predominance requirement for class certification:
The elements of Plaintiffs’ unjust enrichment claim cannot be succinctly identified because, as discussed, the law of each TPP’s home state will govern. For example, some states require five elements to prove a claim of unjust enrichment while others require three or four. For the same reasons why an actual conflict exists among the unjust enrichment laws of the fifty states, individual issues of law predominate with regard to a nationwide class. In addition to proving different elements for all class members to establish unjust enrichment at trial, other individual issues that may predictably arise include the level of misconduct required to be proven and whether [defendant] may avail itself of particular defenses.
Actiq, 2015 WL 1312015 at *14 (more string cites omitted). The same multiplicity of state variations also defeated superiority. Id. at *18 (“the largest impediment to a finding of superiority is the difficulty of managing a class action in which the laws of TPPs' various home states apply”). Given all these string cites, we have to think that the briefing of unjust enrichment in Actiq was extraordinarily thorough. We’re not planning to reinvent the wheel. As soon as the briefing appears on Westlaw (we’ve asked for it), we intend to download it and use it as a resource in our cases.
The plaintiffs’ fallback, grouping of states, also failed. Plaintiffs asserted that four groups existed, with similar formulations for unjust enrichment claims. Id. at *15. That wasn’t enough – even assuming that these groups were valid – because numerous factual differences also defeated predominance, Nine prescribing physicians were deposed, “all of whom prescribed Actiq . . . consider[ing] a variety of factors in making their prescribing decisions.” Id. at *6 n.11. As for the claimed off-label promotion, “[p]rescribing physicians had varied exposure to [defendant’s] marketing.” Id. at *7. The TPPs themselves (at least the named plaintiffs) had wildly different payment systems, both generally and for Actriq. Id. All of these differences impacted on whether the alleged “enrichment,” that being the reimbursement for the drug, was “unjust.”
Injustice gets hard to find when the drug works.
- “Physicians may have accounted for a number of factors in making their Actiq prescriptions, including their experiences with patients and their experiences with prescribing Actiq.” Actiq, 2015 WL 1312015 at *16.
- “[TPPs] made their own decisions regarding coverage for Actiq prescriptions, which must be considered in assessing equitable circumstances.” Id.
- “TPPs treated claims for Actiq reimbursement differently throughout the proposed class period.” Id. at *17.
- “TPPs had varying degrees of control over prescription benefits and various cost-saving measures available to them.” Id.
- “[W]hether TPPs’ payments for Actiq prescriptions resulted in unjust enrichment is a question resolved by examination into the actions not only of [defendant], but also of individual TPPs and prescribing doctors.” Id. (footnote omitted).
For these reasons, an “unjust enrichment claim essentially demands an individualized inquiry” and “[w]hat may be unjust for one TPP may not be unjust for another depending on individual facts “ Id.
Predictably, plaintiffs also tried to rely in the First Circuit’s outlierNeurontin decisions (we blogged about those, here). The court found them unpersuasive. The Neurontin jury verdict was not a class action, but only a “single TPP plaintiff.” Id. at *17 n.34. Also, plaintiffs in Neurontin – unlike the plaintiffs in Actiq – had produced evidence supporting an ineffectiveness claim. Selling a safe and effective product makes proof of any “injustice” much more difficult.
Finally, mixed in among these legal rulings are other nuggets that should prove useful to defendants in other cases. On class actions, footnote 29, applies a “rigorous analysis” standard to expert testimony offered in support of certification. Actiq, 2015 WL 1312015 at *16. We note with satisfaction that, just last week, the Third Circuit confirmed that full Daubert rigor applies to experts offering opinions in support of class certification. SeeIn re Blood Reagents Antitrust Litigation, No. 12-4067, slip op. (3d Cir. April 8, 2015). On the merits, Actiq reaffirms that, no plaintiffs can’t sue because the defendant allegedly violated the FDCA through off-label promotion. Actiq, 2015 WL 1312015, at *2 (“[t]he U.S. government enforces the FDCA and no private cause of action is available”). Off-label use is discussed. “[I]t is a physician’s prerogative whether to prescribe Actiq for any medical purpose, on-label or off.” Id. at *16 (citations omitted).
The excellent result in Actiq underscores that, when a matter is purportedly a class action, individualized facts preclude certification. More globally, decisions like Actiq explain the other side’s push, through the Rule 23 Subcommittee described at the beginning – to neuter the Rule’s “predominance” requirement for classes (such as this) seeking money damages. The right side of the “v.” must remain vigilant and not let Rule 23 be amended to breathe life into this kind of Frankenclass.