This posting was written by Jody Coultas, Contributor to Wolters Kluwer Antitrust Law Daily.
The U.S. Court of Appeals in Boston affirmed verdicts of over $140 million, reached by both a jury and trial court, in favor of Kaiser Foundation Health Plan, Inc. for injuries suffered as a result of Pfizer, Inc.’s fraudulent scheme to market its epilepsy drug Neurontin for off-label uses (Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc., April 3, 2013, Lynch, S.).
Neurontin was approved by the FDA as an adjunctive therapy in the treatment of partial seizures in adults with epilepsy, with a maximum dose at 1800 mg/day. Pfizer’s marketing of Neurontin for off-label uses resulted in over $2 billion in sales, with only about ten percent of Neurontin prescriptions filled for on-label uses.
Kaiser alleged that Pfizer and its subdivision Warner-Lambert Company, LLC violated the federal RICO law and the California Unfair Competition Law (UCL) by fraudulent marketing Neurontin for off-label uses. Pfizer was found to have misrepresented Neurontin's effectiveness for off-label uses directly to doctors, sponsored misleading informational supplements and continuing medical education programs, suppressed negative information about Neurontin, and published articles in medical journals that reported positive information about Neurontin's off-label effectiveness.
The court found that Kaiser presented sufficient evidence of causation to support a RICO claim. Pfizer argued that Kaiser failed to show proximate causation because there were too many steps in the causal chain connecting its misrepresentations to the injury to Kaiser because the injury was based on the actions of independent actors -- the prescribing doctors.
Courts look at three factors to determine whether proximate cause exists under RICO: the less direct an injury is, the more difficult it becomes to ascertain the amount of damages attributable to the violation; claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury to avoid the risk of multiple recoveries; and the societal interest in deterring illegal conduct and whether that interest would be served in a particular case.
In cases where the plaintiffs did not receive the misrepresentations at issue, courts may still find proximate causation. Pfizer’s argument that Kaiser could not show causation because its misrepresentations went to prescribing doctors was, therefore, dismissed. Kaiser was a foreseeable victim of Pfizer's scheme to defraud, and Kaiser’s injury was a natural consequence of the scheme. Pfizer was obviously aware that doctors would not be the ones paying for the drugs they prescribed, and that its revenues stemmed from payments by insurance and health care plans such as Kaiser.
Kaiser submitted sufficient evidence to demonstrate but-for causation between Pfizer’s conduct and its injury, according to the court. Pfizer argued that its evidence at trial rendered Kaiser's theories of causation false. Kaiser presented evidence that its employees directly relied on Pfizer's misrepresentations in preparing monographs and formularies, which, in turn, influenced doctors' prescribing decisions, and Pfizer's fraudulent off-label marketing directed to physicians caused PMG doctors to issue more Neurontin prescriptions than they would have absent such marketing. Pfizer's evidence did not, as a matter of law or of evidence, "falsify" Kaiser's theory of reliance upon Pfizer's misrepresentations. The testimony of some doctors who did not view Pfizer’s statements that prescribed Neurontin for off-label uses did not defeat the inference that this misinformation had a significant influence on prescribing decisions which injured Kaiser.
The statistical evidence submitted by Kaiser’s expert was sufficient and admissible, according to the court. Pfizer argued that some of the evidence Kaiser presented to prove but-for causation was inadmissible based on the methodology used. However, regression analysis, used by Kaiser’s expert, is a recognized and scientifically valid approach to understanding statistical data. Pfizer also argued that the expert failed to account for other factors that may have led doctors to prescribe Neurontin for off-label use. The court found that the district court was well within its discretion to admit Kaiser’s evidence.
Kaiser presented sufficient evidence for the jury and district court to find that Neurontin was not effective for the four off-label conditions, according to the court. Pfizer argued that the court applied an erroneous burden of proof and an erroneous medical standard in making its findings as to Neurontin's effectiveness. However, the court did not but the burden on Pfizer of proving Neurontin’s effectiveness. Kaiser presented sufficient evidence on the topic, and Pfizer was unable to overcome it.
The court also dismissed Pfizer’s challenges to the amount of damages awarded by the jury and court. The district court did not err in accepting Kaiser’s methodology for calculating damages.