Pharmaceutical manufacturers that promote off-label uses for prescription drugs have become litigation targets for third-party payors—especially after Kaiser received a nine-figure RICO award last year against the manufacturer of Neurontin. Health care insurers have filed most of these cases; in May 2014, Humana joined the crowd, suing a manufacturer over off-label use of a device designed for spinal fusion surgeries.
But workers compensation carriers—and even automobile insurers—can also spend large amounts on the same medications. Their claims face substantial obstacles, as shown by the recent decision dismissing the complaint in The Travelers Indemnity Co. v. Cephalon, Inc.
Cephalon manufactures two opioid pain relievers, Actiq and Fentora, which were approved by the FDA only for the management of "breakthrough" pain in cancer patients already receiving opioid therapy. In September 2008, Cephalon settled with the federal government and several states over its alleged promotion of Actiq for use by non-cancer patients. Follow-on suits included an action by a union health plan and, in June, a suit by the City of Chicago. The Travelers suit alleged that Cephalon’s marketing misleadingly understated the risks of its products for non-cancer patients, and specially targeted doctors who treat injured workers, because workers compensation laws limit insurers’ ability to restrict coverage for particular drugs. As a result, Travelers paid nearly $20 million for the two products. It asserted claims for fraud, negligent misrepresentation, violation of consumer protection statutes, and unjust enrichment.
The court dismissed the complaint on several grounds, beginning with lack of standing. Travelers claimed it was injured when it paid for Cephalon’s drugs, because (1) they were ineffective in off-label uses, and (2) they were prescribed in place of cheaper alternatives. On the first point, the court held that the absence of data proving a drug’s effectiveness for off-label use "does not support the conclusion that the drug is actually ineffective," and that "[t]he fact that a drug poses … a significant possibility of harm does not … establish injury-in-fact to the party paying for the drug." These findings also doomed the insurer’s second theory because the court further held that "[a] plaintiff is not injured simply because it paid for a more expensive drug." It chided Travelers for failing to name "an equally effective, safer, less expensive drug" that could have been prescribed in lieu of Cephalon’s products. It found the failure to allege an injury fatal to the state statutory claims, as well.
The court also dismissed Travelers’s claims for intentional and negligent misrepresentation, as well as for unjust enrichment, on the ground that "off-label promotion is not inherently deceptive," and that the insurer had failed to specifically allege an instance of false or misleading claims. The court expressly refused to infer the use of false statements from the fact that doctors prescribed the drug for off-label uses.
As Kaiser proved, it is possible to overcome all of these positions—in some cases. But even substantial evidence of improper marketing will not, without more, get a third-party payor before a jury.