In just the past five years, billions of civil and criminal recoveries have come from pharmaceutical companies that have allegedly violated the False Claims Act by promoting their products for uses not approved by the FDA. While such promotions also typically impact private payors, private parties have largely given drug companies a pass on illegal off-label promotions. This trend may change after the United States Supreme Court recently let stand a game-changing First Circuit Court of Appeals decision.
In January 2014, the United States Supreme Court refused to scrutinize the First Circuit’s decision in In re Neurontin Marketing, which ruled that Pfizer subsidiary Warner-Lambert violated the civil Racketeer Influenced and Corrupt Organizations (RICO) statute by improperly marketing the epilepsy drug Neurontin to Kaiser Foundation Health Plan. With the Supreme Court denying cert, Pfizer is required to pay Kaiser $142 million in damages for violating the RICO Act and a further $65.4 million in restitution for violating the California Unfair Competition Law (UCL).
Pfizer sought to reverse the First Circuit’s decision by arguing that the decision ran afoul of the Supreme Court’s decision Holmes v. Securities Investor Protection Corporation, which held that the civil RICO Act contained both “but for” causation and proximate causation requirements. In effect, Pfizer admitted to the illegal promotion of Neurontin for off-label uses, but they argued that the promotion did not cause insurance companies to pay for the drugs, for physicians possessed independent medical decision-making and actually prescribed the drugs. Such arguments have previously gained traction, when courts have required civil RICO plaintiffs to prove that every physician who prescribed a drug had been influenced by the pharmaceutical companies’ off-label marketing.
The First Circuit refused to impose such a direct reliance requirement. Instead, the Court stated: “the causal chain in this case is anything but attenuated. Pfizer has always known that, because of the structure of the American health care system, physicians would not be the ones paying for the drugs they prescribed. Pfizer’s fraudulent marketing plan, meant to increase its revenues and profits, only became successful once Pfizer received payments for the additional Neurontin prescriptions it induced. Those payments came from . . . [Third-Party Payors, such as Kaiser].”
The First Circuit seemed particularly swayed by Kaiser’s statistical analysis, which evidenced that the alleged illegal promotions caused economic harm to Kaiser. Specifically, their expert witness used aggregate data and statistical analysis to evidence that prescribing trends changed in response to Pfizer’s promotional efforts. Indeed, this statistical analysis allowed the expert to quantify the effect of the promotional activities on the number of off-label prescriptions written. The First Circuit concluded that the testimony of the expert witness was sufficient to satisfy both the proximate causation and “but for” reliance requirements under the civil RICO statute.
Accordingly, the First Circuit explicitly adopted two important holdings that have important implications for future off-label marketing cases: (1) The civil RICO proximate causation requirement may be satisfied by mere foreseeability, and it does not require a direct causal relationship; and (2) Plaintiffs may show fraud causation and damages by aggregate evidence of a correlation between the alleged fraud and physicians’ prescribing behavior without any showing of actual individualized causation.
Like the case filed against Pfizer, many civil RICO cases against pharmaceutical companies are recycled successful civil False Claims Act cases. In fact, according to Pfizer’s cert petition, more than 7,500 civil RICO suits have been filed in the past decade, with a large percentage filed against pharmaceutical companies alleging off-label promotions. The vast majority of these cases have been brought by patients claiming physical injury from drugs prescribed as a result of misleading drug marketing. However, by embracing the “foreseeability” proximate causation standard and allowing aggregate statistics to evidence causation and damages, the First Circuit may have finally convinced private payors to take a more proactive role in filing civil RICO cases alleging illegal off-label promotions.
However, more importantly for potential qui tam whistleblowers, the First Circuit’s decision provides a helpful roadmap, particularly for courts wrestling with causation evidence in a False Claims Act off-label marketing case. Indeed, by allowing aggregate statistics to evidence causation under the stricter civil RICO standards, the First Circuit has, in effect, endorsed the argument that such evidence sufficiently passes muster in the False Claims Act context.
More information for whistleblowers is located at the Nolan Auerbach & White website.