Federal Court Dismisses Yet Another Third Party Payor Case
By now the scenario has become formulaic: a pharmaceutical company is alleged to have promoted certain medicines for "off-label" uses, i.e., to treat conditions that are not indicated on the FDA-approved label. The patients who took the medicines don't sue; rather, the "Third-Party Payors ("TPPs")" who paid for the prescriptions sue, claiming that they would not have paid for the prescriptions (or would have paid less for them) but for the pharma company's promotion of the medicines for off-label use. These cases are routinely dismissed on the pleadings as failing to state a claim.
Central Regional Employees Benefit Fund v. Cephalon, Inc., 2010 U.S. Dist. LEXIS 29677 (D.N.J. Mar. 29, 2010), is no exception. In this case, local government health and welfare benefit funds sued Cephalon over a variety of medicines that it purportedly promoted for off-label use: Provigil (which treats narcolepsy), Gabitril (which treats seizure disorders), and Actiq and Fentora (which manage cancer pain in opiod-tolerant patients with malignancy). Plaintiffs sought to represent a nationwide class of "'all governmental entities in the United States of America who have been caused to expend monies for Provigil, Gabitril and Actiq as a result of the off label promotion by the defendants.'"
(Frequent readers will note that the class definition is a failsafe class: it requires a determination of the merits in order to determine who is in the class. The court, unfortunately, does not take up this issue.)
The court dismissed the complaint pursuant to Rule 12(b)(6) for failure to plead a cognizable claim. Its overall criticism of the complaint was that it was "yet another legally unsupportable attempt to bring a private cause of action against Cephalon for its 'misbranding' and off-label promotion violations of the Federal Food, Drug and Cosmetics Act ("FDCA") and implementing regulations." Id. at *17. The FDCA does not create a private right of enforcement; rather, it is enforced by the FDA. It allows doctors to prescribe medicines for uses not approved by the FDA, but FDA regulations restrict pharmaceutical companies' right to promote such unapproved uses to doctors. The U.S. Supreme Court recognized in Buckman, however, that off-label use of medicines is part of standard medical care, and courts -- like the court in Cephalon -- repeatedly recognize that "off-label promotion" that may be restricted by FDA regulations is not inherently false or misleading. See 2010 U.S. Dist. LEXIS 29677 at *9 (citing cases). The court in Cephalon held that plaintiffs could not sue to enforce any violations of FDA regulations, and yet they had not adequately pled any actual cause of action for fraud.
Indeed, the court dismissed the claim under New Jersey's RICO statute because plaintiffs failed to allege fraud with particularity. It noted that even an allegation that the defendant paid for studies did not mean that the studies were actually fraudulent. The plaintiffs' error -- as is so often the case in these cases -- is that they failed to connect any generic allegation of so-called fraud to a particular doctor or prescription at issue. Id. Interestingly, the court noted that the plaintiffs did not even allege that the medicines their plan members took were ineffective for the off-label uses for which they were prescribed. Id. at *10.
The court dismissed the fraudulent concealment and "illegal common law fraud" counts for the same reasons.
Plaintiffs also pled that favorite of Hail Mary counts: Unjust Enrichment. This, of course, is a theory of recovery in quasi contract. It just doesn't fit in the scenario where a purchaser buys and actually receives a product; it is more suited for the "incomplete performance" scenario. The court held that where, as here, unjust enrichment is pled accompanying traditional tort causes of action, the claim must be dismissed if the traditional tort claims are dismissed for lack of proximate cause.
The opinion in Cephalon does not really break new ground, but it is yet another strong decision indicating that so-called "third-party payor" claims lack merit.
