Friday, May 22, 2015

Weird "Science" = Preemption

Here at the DDL Blog, we write from time to time on food litigation.  You might think it’s out of left field, and sometimes we even justify our food posts by pointing out that the “F” in FDCA stands for “Food.”  But we need not be so clever.  The real reasons why we write on food cases can be summed up in two phrases:  federal preemption and class actions.  You might throw in preemption’s weaker sibling, primary jurisdiction, but that rarely applies in drug and device cases, so we won’t.  (Although we do sometimes write on primary jurisdiction, such as here)  You might also say that class actions have gone the way of the horse and buggy in the drug and device space, and you would be doing so with substantial justification.  But we write on class actions anyway, both because they are interesting and because even the black swan event of class certification would have devastating consequences for our clients.
A recent food case called Mee v. IA Nutrition, Inc., No. C-14-5006, 2015 U.S. Dist. LEXIS 63038 (N.D. Cal. May 13, 2015), combines our two marquee issues—it is a class action and the plaintiffs pleaded claims that ran squarely into preemption by alleging that the defendants should have followed testing standards different from what appear in FDA regulations.  This is a lesson that could translate to drugs and devices, and here is how it sets up:  The plaintiffs sued a seller of dietary supplements claiming that the defendant labeled and sold five products in a misleading and deceptive manner under California and Florida law.  Id. at **2-6.  According to the plaintiffs, the product labels misrepresented the amount of protein and amino acids in the various products, and the labels also allegedly omitted certain amino acids that were in the products and listed others than allegedly were not.  Id. 
How did the plaintiffs know these facts?  They allegedly discovered them through “scientific testing.”  Note that the quotation marks are not ours.  They were provided by the district court, which used quotations marks every time it mentioned the plaintiffs’ “scientific testing.”  According to the style manual that we used in law school, quotation marks can denote a direct quote.  Or they can denote that the phrase is being used as a euphemism, sometimes to communicate sarcasm.  We do not attribute sarcasm to this learned court, but we suspected things would not go well for the plaintiffs when we saw that the court felt compelled to demarcate their “scientific testing” as something other than “scientific” throughout its order. 
Our suspicions were correct.  Under the FDCA, states are prohibited from imposing “‘any requirement for the labeling of food that is not identical to’ the federal requirements.”  Id. at *6 (quoting 21 U.S.C. § 343-1(a)(5)).  This is a particularly strong express preemption provision, as strong or stronger than the “different from or in addition to” standard that we most often deal with in cases involving pre-market approved medical devices.  Under the “not identical to” food labeling standard, federal law preempts a state requirement where
the State requirement directly or indirectly imposes obligations or contains provision concerning the composition or labeling of food [that] . . . [a]re not imposed by or contained in the applicable [federal regulation] . . . or [d]iffer from those specifically imposed by or contained in the applicable [federal regulation]. 
Id. at **6-7 (quoting Lilly v. ConAgra Foods, Inc., 743 F.3d 662 (9th Cir. 2014).  That leaves plaintiffs very little room to maneuver. 
It also turns out that in connection with food ingredients—and particularly when it comes to protein and nutrients—the FDA’s regulations set forth the methodology for calculating those numbers we see on food labels.  That was critical because the plaintiffs’ “scientific testing” did not follow the FDA-specified methods.  For claims that the defendant misrepresented protein content, the plaintiffs alleged that the FDA’s method was flat out wrong because it does not result in a “direct measure of the actual protein content.”  Id. at *8.  If there are gradations of preemption, it is difficult to imagine a claim that is more preempted than a claim that the FDA’s method is wrong and that a defendant should be held liable under state law for complying with it.  It does not take a rocket “scientist” to figure that out.  As the district court ruled, the claim was “preempted, as it seeks to base liability on defendant’s failure to employ a testing procedure not imposed by or contained in any federal regulation, and, indeed, is a challenge to the very method allowed by the FDA.”  Id.
For other claims, the plaintiffs were less direct, but still unsuccessful.  They did not specifically allege either way whether their proposed testing method for amino acids complied with FDA regulations, which alone may have been enough to dismiss their claims as preempted.  The clincher was that the plaintiffs actually attached their “scientific testing” results to their complaint, and “nothing in the reports suggests that the [testing] method required by [FDA regulations] was employed.”  Id. at *12.  As a result, those claims were preempted, too.  As the district court noted,
[W]here, as here, an FDA regulation provides that the question of compliance must be determined using a method specified therein, a state law claim that seeks to establish a violation of such regulation by a different methodology is preempted.
Id. at *10.  This quote is the takeaway point of this case and this blogpost.  We have not surveyed FDA regulations, but we expect they sometimes call for certain methods in the development of drugs, medical devices, and their labeling.  If a plaintiff alleges that the method is flawed and that a manufacturer should have followed another, that’s preempted.  If a plaintiff alleges that a manufacturer’s labeling is misleading on the basis that a different method would produce different information, that’s preempted.  In this regard, “science” does not always add up to genuine science. 
The district court dismissed the plaintiffs’ complaint, but it granted them leave to amend.  Having boxed themselves into claims based on non-compliant “scientific testing,” we are not sure what the plaintiffs can do to resurrect their claims.  We are also not sure how these plaintiffs could ever get a class certified, given that most people do not read nutritional labels and even fewer rely on the exact measurements of protein and amino acids.  Even in the community of dietary supplement purchasers, it seems that you would have to determine elements of the claim by interviewing each putative class member, which would defeat any semblance of commonality.  But who knows, maybe the plaintiffs will offer “scientific testing” on that point, too. 

Thursday, May 21, 2015

The Mall Is Closed: Forum Shoppers Sent Home To Germany In Southern District Of Ohio’s Forum Non Conveniens Dismissal

As she famously clicked her ruby slippers together, Dorothy Gail proclaimed, “There’s no place like home.”  Such was the conclusion of the United States District Court for the Southern District of Ohio in Hefferan v. Ethicon, 2015 WL 2169689 (S.D. Ohio May 8, 2015).   Hefferan is a relatively rare example of complete dismissal of a case pursuant to the doctrine of forum non conveniens, a doctrine that has largely been supplanted by the transfer statute, 28 U.S.C. § 1404(a), in cases in which another United States court provides an appropriate forum.  In Hefferan, voicing repeated disapproval of the Plaintiffs’ blatant forum shopping, the Court found that the courts of Germany, and not any of the District Courts of the United States, provided the appropriate forum for the resolution of the Plaintiffs’ claims.

Plaintiff, a United States citizen domiciled in Germany, alleged that he was injured by an Ethicon Endo-Surgery (“EES”) surgical stapler used in a hemorrhoidectomy performed on him in Simmerath, Germany.  Hefferan, 2015 WL 2169689 at *1.  Plaintiff’s spouse is a German citizen who also resides in Germany.   All treatment of Plaintiff’s surgical complications occurred in Germany.  Id.  Of thirteen witnesses with discoverable information identified in Plaintiff’s initial disclosures, all but one live in Germany.  In addition, Plaintiff identified “two categories of unnamed persons with discoverable information” -- doctors and medical providers at two German hospitals.  Id.

Defendant EES is an Ohio corporation with its principal place of business in Ohio, and co-defendant Johnson & Johnson is a New Jersey corporation with its principal place of business in New Jersey.  Id.  The “overall direction of EES’s business, and work related to the design and marketing of the stapler and to regulatory compliance and quality control, took place principally at EES’s facility” in Ohio.”  Id.  Defendants identified two witnesses with discoverable information, both Ohio residents.  Id.

Plaintiffs initially filed suit in the District of New Jersey, and Defendants moved to dismiss based on forum non conveniens.  The Court declined to decide whether the case should be dismissed, but, concluding that the action had no connection to New Jersey, transferred it to the Southern District of Ohio, where Defendants renewed their forum non conveniens motion to dismiss.

As the Court explained, “[A] dismissal on forum non conveniens grounds is appropriate where the defendants established, first, that the claim can be heard in an available and adequate alternative forum, and, second, that the balance of private and public factors reveals that trial in the chosen forum would be unnecessarily burdensome for the defendant or the court.”  Id. (internal punctuation and citation omitted). 

Adequate Alternative Forum

As an initial matter, the Court found that the German court system provided an adequate alternative forum for the case.   Defendants had consented to service in Germany and had stipulated that they would not plead limitations if Plaintiffs re-filed within a reasonable period of time.  Id., at *3.   Plaintiffs argued that German courts did “not provide an adequate forum because of differences between [German] substantive and procedural rules” and those in the Southern District of Ohio.    Specifically, Plaintiffs pointed out that German law did not allow loss of consortium claims or claims for punitive damages.   However, the Court held that “the rights and remedies available in the foreign forum need not be identical for the foreign forum to be adequate.”  Id. (citation omitted).   

Next, Plaintiffs protested that they would recover less money in Germany than they would in the United States.  Plaintiffs’ candor about the true reason for their forum-shopping did nothing to soften the Court’s disapproval of this practice.  To the contrary, the Court held, “While Plaintiffs may recover less money in Germany, that fact alone does not render the German forum inadequate.  Indeed, the fact that Plaintiffs, who chose to live in Germany and obtain medical care there, sued in the United States for injuries suffered in Germany because they thought doing so would get them more money, is a factor that favors dismissal.”  Id. (citation omitted).  Thus, the Court concluded, “Defendants have established that the Regional Court of Aachen, Germany is an available and adequate alternate forum.”  Id. at *4.

Plaintiffs’ Choice of Forum and the Balance of Public and Private Interests

The Court explained that, before balancing the private and public interest factors, it was required to determine how much deference to afford to Plaintiffs’ choice of forum.  While, “[i]n general, a plaintiff’s choice of forum is afforded a great amount of deference,” in this case, “Plaintiffs did not choose this forum” (having initially filed in New Jersey).  Moreover, the Court again emphasized that Plaintiffs’ forum-shopping cost them deference they might otherwise have been afforded:   “Plaintiffs are entitled to less deference regardless, because they chose a forum, where they do not reside and that is obviously not convenient for them, for obvious tactical reasons.” 

The Court went on to explain that the relevant private interests included “ the relative ease of access to sources of proof, the availability of compulsory process for attendance of unwilling witnesses, . . . and other practical problems that make trying a case easy, expeditious, and inexpensive.”  Id.  The Court found that these factors weighed in favor of Defendants’ motion, as access to proof would be more convenient – and, in some instances, perhaps only available – in a German proceeding. 

Relevant public interests “include administrative difficulties of courts with congested dockets, the burden of jury duty on people of a community having no connection with the litigation, desirability of holding a trial near those most affected by it, and the appropriateness of holding a trial in a diversity case in a court which is familiar with the governing law.”  Id.  at *6 (citation omitted).  The Court noted that “Germany has a greater interest in the resolution of this litigation, because it concerns a product sold in Germany and used by a German citizen in a German hospital on a patient living in Germany.”  Id. (citation omitted). 

In contrast, while the device in question was developed in the United States, it was “sold and used in Germany by German surgeons.”  In addition, “. . . Plaintiffs are German residents, and [Plaintiff] chose to have his surgery and follow-up care in Germany.” Thus, under the relevant “most significant relationship” choice-of-law analysis, “German law governs the claims.  Applying German law is a strong factor favoring dismissal.”  Id. at *7 (citation omitted).  Finally, “[t]he imposition of jury duty upon citizens who have no relation to the litigation also weighs in favor of the Defendants.”  Id.  The Court concluded, “Therefore, the public interests also weigh strongly in favor of Defendants.  The balance of private and public factors reveals that trial in this forum would be unnecessarily burdensome for both the Defendants and this Court.”

And so ended Plaintiffs’ dreams of reaping the bounty of American law for their German-based claims.  Hefferan’s lesson?  Buyer beware.  Under a strong judge, the U. S. court system is not always a pleasant place to shop.

Wednesday, May 20, 2015

“Age Defying” Make-up Case Only Partially Defies Preemption

Coco Chanel said that nature gives you your face at 20, but you earn your face at 50.  Perhaps that is not so different from Mark Twain’s theory that one’s wrinkles should merely be monuments to smiles.  Those platitudes do nothing to stop people from trying to escape or cover up the effects of aging on our countenances.  It is a big business.  Revlon markets cosmetics under the brand name of “Revlon Age Defying with DNA Advantage.”  It is hard to conceive of anything that is more redolent of puffery.  Nevertheless, plaintiffs brought a class action alleging, essentially, that the marketing of the product is replete with lies.  The court’s decision in Elkind v. Revlon Consumer Prods. Corp., 2015 U.S. Dist. LEXJS 63464 (EDNY May 14, 2015), is the veritable mixed bag. 


The case was brought as a class action alleging false and misleading advertising in violation of N.Y. Gen Bus. Law sections 349 et seq., and Cal. Bus. &Prof Code § 17200 et seq., as well as breach of warranty, unjust enrichment, negligent misrepresentation, and fraud.  There is bicoastal ambition behind this lawsuit.  The plaintiffs claim that the product’s name and marketing fooled them and all reasonable consumers into believing that the products would "interact with the skin's DNA, perhaps on a cellular or molecular level, to provide scientifically-enhanced therapeutic benefits that reverse, minimize, slow, or otherwise 'defy' the process of aging.''  The named plaintiffs, who purchased a foundation and concealer from a CVS retail store, understood the product’s name and marketing to suggest "that the products contained something very scientific and special having to do with DNA.”   The plaintiffs alleged that they relied on those misrepresentations at the time of their purchase, and as a result paid more for the products than they otherwise would have.


More specifically, the plaintiffs alleged that the phrase "Age Defying  with DNA Advantage" on the products' labels and in other marketing duped them into believing that the product would favorably interact with their DNA on a molecular level.  The plaintiffs also asserted that because the phrase “Age Defying with DNA Advantage” manifests an intent that the products be used to manipulate the cells, the products are over-the counter drugs, as defined by the Federal Food, Drug, and Cosmetic Act (FDCA).  As such, the products would be mislabeled because they do not comply with the FDCA’s drug labeling requirement that all of a drug’s ingredients be listed, and they therefore violated New York and California laws prohibiting the unlawful sale of products.  The court helpfully breaks down the plaintiffs’ claims into two categories:  “Deceptive Advertising Claims” and “Mislabeling Claims.”


The defendant challenged the plaintiffs’ standing to bring claims for injunctive relief and to bring marketing claims relating to a product the named plaintiffs did not purchase, a powder.  The court agreed with the defendant.  The failure to show a likelihood of continuing harm foreclosed injunctive relief.  Further, there was no Article III standing regarding products that the plaintiff did not purchase.  Because they had not purchased the powder, the plaintiffs had not been injured in the “personal and individual way” required by Article III. 


So much for preliminaries.  Now on to the more interesting preemption analysis.  Both express preemption and implied preemption are relevant here.  The court reasoned that the plaintiffs needed to be suing for conduct that violates the FDCA, or else the  claims would be expressly preempted.  At the same time, the plaintiffs could not be suing because the conduct violated the FDCA, for such a claim would be impliedly preempted under Buckman.  The parties disputed whether the products were subject to the FDCA regulations as cosmetics or as over-the-counter drugs. At first blush (could not resist), this debate seems almost metaphysical.  Does the product make us feel better or look better?  Are the two really completely separable?   Was Roxy Music right when they sang "Love is the Drug"?  The FDCA’s definition of "drug" includes, inter alia, articles "intended for use in the diagnosis, cure. mitigation, treatment, or prevention of disease in man" and articles "intended to affect the structure or any function of the body of man." 21 U.S.C. section 321(g).  By contrast, cosmetics are articles "intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance.” 21 U. S. C. section 321 (i). People are liable to do any crazy thing with a product, particularly a drug or cosmetic.  But the best evidence as to which category applies and what is the intended use of the product is usually found in the product's current and past containers, instructions, and advertisements.


The Elkind court decided not to decide.  (Yes, that still ends up being a decision, and in this case the particular decision is probably wrong.)  Resolving the intended use issue at the early stage of the litigation seemed a bit daunting to the court, so it simply assumed that all of the products were "Drugs” as defined by the FDCA.  The court ruled that the FDCA does not endeavor to regulate -- and therefore does not purport to preempt -- whether certain phrases on the branding of non-prescription drugs are misleading.  Thus, “advertising issues relating to … misleading or deceptive claims are outside the scope of pre-emption.”  That conclusion, to our unadorned eyes anyway, is hardly self-evident.  What seemed to drive the court’s opinion, or at least provide a handy rationale for its conclusion that the plaintiffs’ Deceptive Advertising Claims were not pre-empted, was the lack of any suggestion that the FDA had issued, or might issue, any relevant guidance.  The Elkind court drew a contrast with other cases that found preemption when the FDA had issued some sort of a monograph.  It is as if the FDA’s reticence threw open the courthouse door for the plaintiffs. 


But the court reached a different decision with respect to the Mislabeling Claims.  Those claims, according to the court, did not “squeak through the narrow gap through which a plaintiff’s state-law claim must fit if it is to escape express or implied pre-emption.”  Rather, those mislabeling claims arose because the plaintiffs alleged that the powder and concealer violate the FDCA, and prosecuting that violation lies squarely within the province of the FDA.    


The defendant also contended that the court should refrain from entertaining the plaintiffs’ claims as a matter of deference to the FDA, pursuant to the doctrine of primary jurisdiction.  The plaintiffs’ Deceptive Advertising Claims called on the Court to determine whether the phrase “DNA Advantage” is misleading to a reasonable consumer in light of the products’ actual effects.  The court concluded that it was well-equipped to answer that question.  It also discounted the possibility that the FDA might issue guidance conflicting with the court’s ruling, because the parties had not suggested that any relevant FDA ruling or guidance was imminent.  Consequently, the FDA’s silence helped the plaintiffs in fending off primary jurisdiction as well as preemption.



The defendant disputed whether the plaintiffs pled a cognizable injury, but the court was persuaded that it was enough for the plaintiffs to allege that they paid a premium for the product based on the alleged misrepresentations.  The court did not find persuasive the defendant’s argument that the “premium” alleged by the plaintiffs was inadequately pled because it lacked numerical specificity.  Determining the exact cost of the premium recovered due to the alleged misrepresentations would require discovery to which the plaintiffs had not yet been entitled and expert analysis that the plaintiffs were not required to undertake at such an early pleading stage.


The defendant argued that the plaintiffs’ claims for negligent misrepresentation must be dismissed pursuant to the economic loss doctrine.  The economic loss doctrine restricts the remedy of plaintiffs who have suffered economic loss, but not personal or property injury, to an action in contract.  The doctrine applied to the claims for negligent misrepresentation, so they were dismissed.  But the economic loss doctrine did not apply to the plaintiffs’ intentional misrepresentation claim, so they lived to annoy another day. 


The complaint included claims for breach of express warranty under New York and California law.  The court held that “Age Defying with DNA Advantage” could be plausibly inferred to suggest that the product would combat or reverse aging by interacting with one’s DNA.  The court considered such advertising hocus-pocus to be a statement of fact regarding the products’ efficacy, and that such statement of fact was sufficient to constitute an express warranty.  But the implied warranty claims, under both New York and California law, failed for want of privity.  


Finally, the court dismissed the plaintiffs’ claims for unjust enrichment and restitution, because the plaintiffs had failed to demonstrate how those claims were in any way distinct from the contract and tort claims.


As we said, the Elkind opinion is a mixed bag.  Given the subject matter, the bag might be a Chanel, Fendi, or Hermes.  But its contents are still mixed.  There are bits we like, and bits we do not like.  We have tried to report the results impartially.  It is not as if we wanted to put lipstick on a pig.   


Tuesday, May 19, 2015

California Federal Court Gets Tough on Off-Label Promotion FCA Claims

            This post is from the non-Reed Smith side of the blog.

            Modglin v. DJO Global Inc., 2015 U.S. Dist. LEXIS 60812 (C.D. Cal. May 8, 2015) is one of those cases that has so much good stuff going on, we just want to dive right in.  It is the complete dismissal with prejudice of an attempt to state a False Claims Act (“FCA”) case against the manufacturers of Pre-Market Approved (“PMA”) bone-growth stimulators based on allegations that the manufacturers were aware their products were being used off-label – a fact they failed to disclose to Medicare and other federal healthcare plans when submitting claims for reimbursement.  We’ve got allegations of fraud, connected to off-label promotion, surrounding a PMA medical device and all tied up in a dismissal with prejudice.  It’s like package wrapped in shiny paper with a big red bow on top.  As pretty as the trappings are, we’re still going to rip them off to see what’s inside.  And we don’t think you’ll be disappointed.

            Relators’ specific allegations are that defendants requested reimbursement for stimulators approved for lumbar spine use when they knew that the stimulators were being used with the cervical spine – an off-label use – which they claim is not allowed.  Id. at *25.  So, what is allowed?  Under the Medicare Act, to be reimbursed, the device must be “reasonable and necessary” for diagnosis or treatment.  Id. at *13.  The Department of Health and Human Services (“HHS”) has decided that PMA devices generally can be reimbursed.  Id. at *15.  So far so good for stimulators. 

            Next, HHS has authority to make “up-front rules” regarding the scope of coverage for certain devices.  There are National Coverage Decisions (NCD) and Local Coverage Determinations (LCD).  Id. at *16.  Stimulators are covered by both.  The NCD for stimulators states that they are covered by Medicare for six uses, including “as an adjunct to spinal fusion surgery.”  Id. at *17.  The 4 LCDs for stimulators mirror the NCD language.  Id.  Neither the NCD nor the LCDs distinguish between use in one part of the spine versus another; nor do they distinguish between on and off-label use.  Id.  Still looking good. 

            When the manufacturers submit the form required for reimbursement, they must provide the PMA number for the device.  Here is where relators try to create an issue.  They allege that by identifying the PMA number for a stimulator  that is approved only for lumbar use, defendants misrepresent “that the stimulator will be used will be used on the lumbar spine when they know it will be used on the cervical spine instead.”  Id. at *25.   According to relators, this gives rise to a false certification claim under the FCA because defendants certified to a government agency that they had complied with applicable rules and regulations governing reimbursement when they in fact had not.  Id. at *40. 

            Because we are talking about fraud claims in the context of a motion to dismiss, we are also talking about the heightened pleadings requirements of Federal Rule of Civil Procedure 9(b).  To satisfy that heightened standard, relators

must specify the content of the fraudulent representation, the person who made it, when and where the representation was made, and the manner in which it was untrue and misleading, or the circumstances indicating that it was false.

Id. at *42.  Now, roll all that together and we get to the really good parts.

            First, we need to point out that relators’ claims had already been dismissed once before.  Relators were given a limited opportunity to re-plead their claims to try to assert a claim “premised on the theory that defendants made implied false certifications by unlawfully promoting their devices for off-label uses.”  Id. at *4.  That’s because all of their other theories failed.  But relators either failed to appreciate that their other claims had been dismissed or chose to ignore it because they re-pleaded the same FCA claims.  So, the court once again dismissed them, giving us a chance to share that ruling as well.

            In their prior complaint, relators made two claims: (1) that defendants submitted a false claim by failing to affirmatively disclose that the devices were prescribed for off-label uses and (2) that under 21 C.F.R. §§801.4 and 814.39, defendants were obligated to seek a PMA supplement based on their knowledge that the devices were sometimes put to off-label use.  Id. at *43.    On argument one, the court relied on the HHS provisions cited above which do not bar reimbursement for devices used for off-label purposes.  Id. at *43-44.  In other words, where Medicare does not prohibit reimbursement of off-label use, the fact of off-label use is not material.  On this point, the court also embraced an argument that we advance every time we talk about off-label use – the FDA approves devices, not uses:

In its prior order dismissing the second amended complaint, the court explained that the Medicare Benefit Policy Manual clearly states that devices approved through the PMA process are eligible for coverage, not that the use of a device that has been approved by the FDA is eligible for coverage. 

Id. at *69. 

            On argument two, the court joined others in ruling that §801.4 does not “impose an affirmative duty on manufacturers to file a PMA supplement . . . every time they know or should know that a . . . physician has prescribed or will prescribe, a device for off-label use.”  Id. at *44. 

            After re-dismissing those claims, the court reiterated that the only issue left for it to address was whether relators “could allege that defendants engaged in off-label promotion of the type that would trigger a duty to file PMA supplement, and hence permit them to plead submission of false claims.”  Id. at *45-46.  Regardless of whether they “could,” the court found that they “didn’t.” 

            Relators’ claims fell apart for failing to plead fraud with sufficient specificity.  None of their allegations rose to the Rule 9(b) level.  For example, relators alleged defendants had a “corporate-wide policy and practice to train their representatives to tell physicians that all stimulators were the same and therefore that their lumbar devices could be safely used on the cervical spine.”  While that gives some detail on the content, it doesn’t provide any information on the “who” (at a minimum need to identify speaker by job title or responsibility); the “where” (“at trade conventions” without providing name, location and date not enough); or the “when” (“over time” insufficient).  Id. at *53-57. 

            Relators’ failure to distinguish among the defendants was also instrumental in their failure to meet the fraud pleading standards:

Not only are the agents or employees unidentified, but the allegation fails to distinguish between defendants. Rule 9(b) does not allow a complaint . . . merely [to] lump multiple defendants together but require[s] plaintiffs to differentiate their allegations when suing more than one defendant . . . and inform each defendant separately of the allegations surrounding his alleged participation in the fraud.

Id. at *59.  All of this is great language for use in products liability off-label cases as well where plaintiffs face the same pleadings standards as the relators here.

            We told you the gift was as good as the wrapping.    

Monday, May 18, 2015

Another Municipality Tries to Recover Its Costs for Pharmaceuticals

This post comes from the Cozen O'Connor side of the blog only. 

City of Chicago v. Purdue Pharma L.P., 2015 U.S. Dist. Lexis 60587 (N.D. Ill. May 8, 2015), deals with an effort by the City of Chicago to recover payments it made to drug companies on opioid prescriptions for City employees (and retirees) covered by HMO, PPO and worker’s compensation plans.  Id. at *9-11.  Chicago claimed that it should get its money back because the drug companies misrepresented that the opioids were effective for more than short-term treatment of cancer pain.  The City lost—at least for the time being.  

The City claimed that the drug companies had mounted a coordinated campaign to use key opinion leaders to write, speak and create guidelines on long-term opioid therapy, use professional and patient advocacy groups as marketing tools, develop and support medical journal articles on long-term opioid therapy, misuse CME programs to market such long-term therapy, and more.  In this campaign, according to the City, the drug companies overstated the effectiveness of opioids, downplayed the effectiveness of alternatives, and hid or understated risks such as addiction.  Id. at *4-9.  The City made common law fraud, conspiracy and unjust enrichment claims, and claims under certain Chicago municipal codes that, among other things, incorporated the Illinois Consumer Fraud and Deceptive Businesses Practices Act.  E.g., Chicago Municipal Code § 2-25-90.  Chicago asked for its money back and, as is often the case, hired private counsel to help them get it.  Read here for our take a number of years ago on efforts by municipalities to recover these and other types of costs.  

The drug companies moved to dismiss. The good news is that they won.  Despite hundreds of paragraphs of allegations, the City did not allege actual facts to support what were essentially fraud claims.  The City’s allegations had two glaring omissions.  First, there was nothing to indicate that the content of the alleged improper materials or speeches, be they journal articles, guidelines, or CME programs, were controlled by the drug companies.  Second, the city alleged no facts to connect the alleged misstatements to Chicago doctors or patients or their decisions to prescribe and use opioids.  Here, for instance, is what the court said about the City’s claims under its municipal codes against the Endo Pharmaceuticals defendants:  

[T]he City does not explain what editorial control, if any, the Endo entities had over materials they allegedly sponsored or funded.  Further, it does not allege that the Endo entities distributed the educational materials or advertisements to Chicago doctors or consumers, that Chicago doctors attended the continuing medical education programs, that Chicago doctors or consumers visited the websites or otherwise indicate when, how, and to whom the alleged misrepresentations were made.  Without such allegations, the City has not stated viable §§ 2-25-90 and 4-276-470 claims against the Endo entities.

Id. at *40-41.  The court offered the same ruling, time and again, as to all defendants and all claims.  The only claim that survived was a portion of a claim against Purdue Pharmaceuticals related to statements made on its own website (that the court presumably believed would likely reach Chicago doctors).  This almost complete dismissal is the good news.

The bad news is that, before getting to the dismissals for insufficient factual pleading, the court denied almost every legal argument made by the defendants.  The defendants asked the court to choose not to hear the case under the doctrine of primary jurisdiction (admittedly, a weak argument in this context), and the court refused.  Id. at *13-14.  Two foreign companies sought to be dismissed for lack of personal jurisdiction, but the court dismissed only one, holding that alleged facts as to a fairly ordinary and proper holding company structure were enough to suggest at the pleading stage that the foreign company was the successor-in-interest to its United States subsidiary.  Id. at * 21-25.  The court rejected legal arguments that prescription drugs like opioids do not fit within the reach of the City’s municipal codes and that the City did not have standing to bring its claims.  Id. at * 27-32.  And the court rejected the argument that the FDA-approved label, which addresses addiction and abuse, preempted or foreclosed the City’s argument on misrepresentations of those risks.  Id. at *32-33.  

Ominously, the court gave the City thirty days to come up with allegations that might work.  Id. at *54.  The City will try.  There’s too much money at stake not to.  And, while the court dismissed almost all the claims this time, its uniform rejection of all the defendants’ legal arguments (as opposed to pleading-deficiency arguments) makes us wonder what will happen if the City is able to boost its factual allegations even just a little bit.  There should be another motion, and probably another opinion, later this year.