Today we have this guest post from Reed Smith's Andrew Stillufsen about a recent defense win in a third party payer (or is it"payor"?) case here in the Eastern District of Pennsyvania. We hope you find it as interesting as we did. As usual all credit and/or blame belong to the guest poster.
Travelers Indemnity Co. v. Cephalon, Inc., is a third party payor case where plaintiffs – workers compensation insurers – claimed that they were injured by paying for prescriptions for defendant drug company’s pain medications which were written as a result of its alleged off-label marketing of the drug. 2014 U.S. Dist. Lexis 95075 (E.D. Pa. July 14, 2014). SPOILER ALERT: as with similar cases, even after extensive discovery and an amended complaint, plaintiffs still failed to allege facts sufficient to establish standing or to support any of their fraud claims. Motion to dismiss granted.
Before the court could address plaintiffs’ substantive claims, it first had to determine whether the allegations were sufficient to establish standing. To establish standing, the plaintiff must show that they suffered a cognizable injury. Id. at *16-18. “The contours of the injury-in-fact requirement, while not precisely defined, are very generous, requiring only that the claimant allege some specific, identifiable trifle of injury.” Id. at *17. (citations and internal quotations omitted). Under the now-familiar TwIqbal analysis, plaintiffs failed to allege sufficient facts to show even a mere “trifle.”
In this case, plaintiffs essentially alleged two theories of injury. First, they claimed they were injured because “they did not get what they paid for,” as plaintiffs paid for drugs that were not safe or effective due to defendant’s alleged fraudulent off-label marketing. Second, but for the alleged off-label marketing, plaintiffs claimed they were injured when they paid for more expensive drugs when less-expensive drugs were available. Id. at *18-19.
To support their first theory, plaintiffs pointed to the labeling and FDA-mandated “dear-doctor” letters stating the drugs were contraindicated for certain users. In addition, plaintiffs claimed that the medications had never been proven safe and effective for any use other than the approved indication. However, the court warned that “the liberal use of conclusory adjectives such as ‘ineffective’ will not establish standing without factual allegations to show that the plaintiffs themselves were injured by paying for the drugs.” Id. at *19. Major point one: Furthermore, “[t]he absence of data or evidence affirmatively proving that a drug is safe and effective in treating a particular condition, without more, does not support the conclusion that the drug is actually ineffective or unsafe for the use.” Id. at *21. (citation omitted). In addition, the court noted that “[t]he fact that a drug poses even a significant possibility of harm does not, by itself, establish injury-in-fact to the party paying for the drug.” Id. at 24 (emphasis added). As Carl Sagan would say, “absence of evidence is not evidence of absence.”
Looking at these allegations through the TwIqbal lens, the court held that plaintiffs did not plead sufficient facts “to show that they paid for an ineffective drug, or that the drug’s safety risks resulted in some expenditure by the plaintiffs themselves.” Id. at *24-25. Therefore plaintiffs’ first theory – that they did not get what they paid for – failed.
Plaintiffs’ second theory - that they paid for more expensive drugs when less expensive ones were available - suffered the same result. Major point two: The court lucidly noted that “[a] plaintiff is not injured simply because it paid for a more expensive drug. If this were so, then any successful marketing campaign - no matter how truthful – that induced a consumer to purchase the more expensive of competing products would cause economic injury.” Id. at *25 (quotations omitted). Plaintiffs “must also plead facts to show that the drug was prescribed or purchased in reliance on untrue statements or misrepresentations about the drug’s attributes.” Id. at *28.
Once again, plaintiffs could not meet their burden. Somewhat nonsensically, plaintiffs pointed to defendant’s price reductions, made to compete with generic competitor and to maintain market share, as evidence. The court was not impressed. It held that plaintiffs not only failed to “name any equally effective, safer, less expensive drug that doctors might have prescribed,” but they also did not “identif[y] any demonstrably false statement or material omission by the defendants about the safety or efficacy” of the medications. Id at *28-29. Therefore, no cognizable injury, no standing, motion granted, complaint dismissed.
In some helpful dicta, the court also booted plaintiffs’ substantive claims. Since the amended complaint contained numerous allegations that the alleged off-label marketing campaign was intentionally deceptive, plaintiffs’ intentional and negligent misrepresentation claims “sounded in fraud.” Therefore, these claims were subject to Rule 9(b)’s “heightened pleading requirements.” Id. at 32.
On this count, plaintiffs again failed to meet their burden, as they “fail[ed] to identify a single false statement, misrepresentation or deliberate material omission” by defendants. Id. at 34. Major point three: Plaintiffs’ argument that off-label promotion “is ipso facto fraudulent” was simply incorrect, as “[c]ourts have consistently held that off-label promotion is not inherently deceptive, and does not support a private action for fraud or negligent misrepresentation unless the promotion includes an untruthful or misleading statement about the safety or efficacy of the drug itself.” Id. (emphasis added).
A similar fate befell plaintiffs’ state unfair competition laws. “State consumer protection statutes do require that a plaintiff have suffered an ascertainable loss or injury as a result of a defendant’s alleged wrongdoing.” Id. at *44. Since the court had already found that plaintiffs failed to allege sufficient facts to show a cognizable injury, they couldn’t satisfy this requirement either. Plaintiffs’ unjust enrichment claim was also dismissed, as plaintiffs failed to show a cognizable loss or that defendant engaged in fraudulent behavior. Id. at 48.
In sum, this decision falls squarely in line with previous third party payor decisions. While making splashy allegations about off-label promotion may look good on paper, courts will show the door to these claims without particularized allegations about what the defendant did and how it hurt plaintiff.