Antitrust Law Daily Wrap Up, RICO—E.D.N.Y.: Drug manufacturer granted dismissal of claims based on alleged misrepresentations of drug safety, (May 13, 2014)

By Jody Coultas, J.D.

The federal district court in Brooklyn granted drug manufacturer Sanofi-Aventis U.S. LLP summary judgment of Racketeer Influenced and Corrupt Organizations Act (RICO) and state law claims filed by health benefit providers for failure to show an injury causally related to Sanofi’s alleged misrepresentations of the safety and efficacy of its drugs (Sergeants Benevolent Association Health and Welfare Fund v. Sanofi-Aventis U.S. LLP, May 9, 2014, Townes, S.).

Sanofi-Aventis U.S. LLP and Sanofi-Aventis U.S., Inc. developed prescription antibiotic Ketek for the treatment of: acute bacterial sinusitis ("ABS"), acute exacerbation of chronic bronchitis ("AECB"), community-acquired pneumonia ("CAP"), and tonsillopharyngitis. The FDA approved Ketek for the treatment of ABS, AECB, and CAP. Sanofi launched a marketing campaign, seeking to have Ketek prescribed for "off-label" uses in addition to the three indications for which it was approved. The FDA eventually withdrew its approval of Ketek for the treatment of ABS and AECB due to side effects caused by Ketek.

The providers alleged that Sanofi misrepresented the safety and efficacy of Ketek in violation of 43 state consumer protection statutes. In an amended complaint, the providers also alleged RICO violations based on an alleged criminal enterprise and a conspiracy that enabled Sanofi to fraudulently represent that Ketek had valid regulatory approval for broad antibiotic uses.

RICO. The causal connection between Sanofi’s alleged wrongdoing and the providers’ injury was too attenuated to meet the RlCO's causation requirement, according to the court. Sanofi argued that the providers could not prove but-for causation through generalized proof because an individual physician's decision to prescribe Ketek was based on many factors and not solely on Ketek's safety and efficacy claims. To state a RICO claim, there must be evidence of a direct relation between the injury asserted and the injurious conduct alleged. The U.S. Supreme Court has noted that intervening acts may break the chain of causation. The alleged misconduct by Sanofi would not result in injury to the providers unless doctors relied on the fraudulent information in prescribing the antibiotic to patients. Here, the decision to prescribe a drug was based on many factors, making it impossible to attribute those decisions to a particular cause. Therefore, the providers’ theory of causation was interrupted by the independent actions of prescribing physicians.

Where the health risks of a drug were extremely severe, safety considerations might be the sole determinant of a physician's decision. Even assuming that the decline in Ketek sales was caused exclusively by safety considerations, the providers could not use generalized proof to determine the injury was caused by Sanofi’s misconduct. The cause of the providers’ financial injury was complicated by uncertainty as to what alternatives to Ketek would have been prescribed had doctors known of Ketek's true efficacy and side effects. Because individualized proof would be necessary to establish causation, the court granted Sanofi summary judgment.

State law claims. The providers alleged that Sanofi misrepresented and omitted material facts regarding the safety and efficacy of Ketek, and engaged in unfair competition or unfair or deceptive acts or practices. Sanofi based its summary judgment analysis only on the consumer protection law of New York, Massachusetts, Illinois, and New Jersey.

The providers were unable to prove an actual injury under the New York General Business Law stemming from Sanofi’s actions, according to the court. To state a claim under New York’s consumer protection law, the plaintiff must show an actual injury stemming from the defendant’s alleged violations. The conduct at issue must also be consumer-oriented. Although misrepresentations to regulatory entities are held to be consumer-oriented, the providers could not state a claim in light of a lack of evidence of an actual injury. The providers paid thousands of dollars for Ketek prescriptions, and argued they were entitled to recover these payments from Sanofi. However, the providers falsely assumed that they would not have had to pay for any antibiotics at all had no misrepresentations been made.

The court also dismissed the providers’ Massachusetts Consumer Protection Act claims for failure to show an injury. The providers argued that doctors would not have prescribed Ketek, and that they would have never paid for Ketek, absent the deceptive acts and omissions. The providers failed to show that the severe risks associated with Ketek were ever realized by any of their beneficiaries, causing additional expenses. There was also no proof that Ketek proved ineffective, necessitating the need to pay for a second round of antibiotics.

Similarly, the court dismissed the Illinois Consumer Fraud and Deceptive Business Practices Act claim for failure to show an injury. The providers did not establish that they suffered actual harm as a result of the deceptive acts or omissions. Although the providers may have paid more for Ketek than they would have paid absent the misrepresentations, there was no evidence that doctors would have prescribed no antibiotics, or less expensive antibiotics, for the providers’ beneficiaries absent the deception. There was also no way to establish that the harm alleged was caused by the deception.

The providers were granted leave to amend their pleading as necessary to clarify the scope of, and basis for, their state-law claims, by providing a list of the states in which their beneficiaries allegedly obtained and filled prescriptions for Ketek.

The case is No. 08-CV-179 (SLT) (RER).

Attorneys: Christopher A. Seeger (Seeger Weiss, LLP) and Douglas R. Plymale (Murray Law Firm) for Sergeants Benevolent Association Health and Welfare Fund; New England Carpenters Health Benefits Fund; Allied Services Division Welfare Fund; State of Louisiana; and Louisiana Department of Health and Hospital. Amanda Rachel Gaynor (Troutman Sanders LLP) for Sanofi-Aventis U.S. LLP and Sanofi-Aventis U.S., Inc.

Companies: Sanofi-Aventis U.S. LLP; Sanofi-Aventis U.S., Inc.

Cases: RICO StateUnfairTradePractices NewYorkNews