You may have heard Einstein’s definition of insanity: doing the same thing over and over and expecting different results. Well, if that’s right, then squirrels must be looking for TPP plaintiffs, because they’re nuts at this point if they think they’re going to get a RICO class certified (in the Second Circuit, at least).
We’ve previously reported on the Second Circuit blowing out a putative class in Zyprexa; in fact, it came in number one on our 2010 Top Ten Opinions list. Now we have more good news to report: a Magistrate Judge Report & Recommendation finding class certification inappropriate in a RICO/consumer fraud class action involving Ketek. See Sergeants Benevolent Assn. Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, Case No. 1:08-cv-00179-SLT-RER (E.D.N.Y. Feb. 16, 2011) (we’re just going to call it Ketek). Hat-tip to Gary Spahn for sending along the opinion.
Ketek is a prescription antibiotic; plaintiffs were third-party payors (TPPs) who alleged the defendant fraudulently marketed Ketek by misrepresenting its safety and efficacy, and when the “truth” came out, prescriptions of Ketek plummeted. Plaintiffs sued on behalf of a nationwide class of TPPs, alleging claims under RICO, the consumer protection laws of forty-four states, and “unjust enrichment.”
The magistrate’s report and recommendation addressed only the RICO claims and deferred the pendent state claims, as plaintiffs suggested. Slip op. at 8 and n.7. The magistrate, following Zyprexa, found that individual issues predominated and doomed class certification.
The magistrate quickly zeroed in on the key issue, and the issue that hung up the Zyprexa TPPs – RICO reliance. “To prove injury by reason of a RICO violation, a plaintiff must demonstrate that the violation caused his injury in two ways: First, that the defendant’s conduct was the prximate cause of his injury – ‘there was a direct relationship between the plaintiff’s injury and the defendant’s injurious conduct.’ Second, that ‘but for’ the defendant’s conduct he would not have been injured. Although a plaintiff’s direct reliance is not a formal element of her RICO claim, there is no question that in cases such as this a plaintiff must allege and prove at least third-party reliance as part of the chain of causation. Because reliance is a necessary part of the causation theory Plaintiffs must be able to prove it through common evidence in order to obtain class certification.” Slip Op. at 18.
The Ketek plaintiffs couldn't make this showing, for the same reason that TPP RICO claims routinely fail to get certified: those pesky prescribing physicians and their intervening decision-making. Plaintiffs tried to get around this indivualized inquiry in a couple ways. According to plaintiffs’ expert Meredith Rosenthal, Ketek prescriptions plummeted in 2005, and then again in 2006 “once the true efficacy and safety risks were made known to the market.” Slip Op. at 18. Rosenthal contended that once this supposed “truth” was known, Ketek was allegedly restricted or removed from three-quarters of all TPP formularies, id., and the prescription drop was thus “common” proof that the alleged fraud must have caused a significant number of purchases. Id. at 21. Plaintiffs also offered the opinions of a number of medical experts, who opined as to Ketek’s safety profile and the information environment available to doctors. Id. at 23. One doctor went so far as to opine that prescribing Ketek was contrary to the applicable standard of care, and Ketek would not have been prescribed had the “truth” been known. Id.
None of that persuaded the magistrate, who efficiently summarized the many individual factors that may go into a particular doctor’s prescribing decision, id. at 24, before concluding: “physicians prescribe medications to their patients based on a variety of factors, which may or may not include information provided by drug companies. Based on the common evidence Plaintiffs proffer there is simply no way to determine whether all, or even most, of the physicians who previously prescribed Ketek for their patients based their decisions on Aventis’s purported misinformation. Indeed, the fact that Ketek sales plummeted…does not mean that prior thereto any physician based her decision to prescribe Ketek on Aventis’s fraud. It may well be that physicians prescribed Ketek based on factors other than Aventis’s fraud, and then later decided to discontinue prescribing Ketek once they knew of the true efficacy and health risks. Plaintiffs’ proffered common evidence simply does not prove reliance.” Id. at 30-31.
The magistrate didn't even need to seriously tangle with the other huge flaws in plaintiffs’ proposed proofs, including the fact that Rosenthal’s model did not attempt to account for other potential causes of the prescription decline, the fact that some doctors continued to prescribe Ketek for certain indications even after FDA withdrew those indications, the fact that other doctors may have switched to an antibiotic that cost as much or more than Ketek, and the fact that P&T Committees, PBMs, and TPPs, just like doctors, consider a host of different factors when deciding how to position drugs on a formulary and reimburse for those drugs. Id. at 25-26, 30-31. In fact, some of the named plaintiffs continued to reimburse for Ketek even after the adverse FDA actions. Id. at 26.
Most significant, of course, the magistrate had cover from the Second Circuit’s opinion in Zyprexa, which rejected a similar RICO causation theory proposed by a putative class of TPPs. Quoting extensively from Zyprexa, the magistrate concluded the same result was appropriate in Ketek – no class certification – and rejected plaintiffs’ specious attempts to distinguish the Second Circuit opinion (the relevant portion of Zyprexa was “purely dicta”? Really?).
This is clearly not the last word on Ketek – it is an R&R, after all, and we need to see what happens before the District Court. And there are still those nagging state-law claims. But this is still a good result, and maybe we’ll start to see a decline in TPP plaintiffs filing prescription drug RICO class actions. Unless they’re nuts, that is.