Thursday, July 05, 2012

TPPs Hoisted By Their Own Petard?

We’ve chronicled many times the largely unsuccessful attempts of third-party payers (in unholy alliance with plaintiffs’ lawyers) to sue derivatively over alleged off-label promotion of prescription drugs and medical devices.  Basically, these insurers, having already set their premiums and recovered for their expenses, take “free shots” at trying to get money back for what are mostly medically valid and beneficial off-label uses.  That’s usually why they’ve lost − because they can’t prove that anybody was actually hurt.


Insurance companies complain about “free riders” all the time, and legitimately so.  But in filing these suits, those same insurers are trying to be free riders themselves.

But is the attempted free ride always that free?

Or, to put it differently, can the TPPs’ unholy alliance with the other side come unhinged?

Take a look at the allegations in Borreani v. Kaiser Foundation Hospitals, 2012 WL 2375323 (N.D. Cal. June 22, 2012).  The Borreani decision itself isn’t all that interesting − preemption hasn’t been a basis for federal question-based removal since before we’ve been blogging − but the wrongdoing alleged against the TPP defendant stems directly from its attempt to create a causation rationale in one of its prior off-label use lawsuits:

[Defendant TPP] discovered [drug manufacturer] was utilizing illegal strategies to market [a drug] for off-label use. . . .

Upon learning of this alleged illegal behavior, [TPP] filed suit against [manufacturer]. . . .

At trial, [TPP’s] agents testified that had the company known of [the drug’s] dangerous side effects, it would not have listed it as unrestricted in the formularies. They also represented that they intended to educate [their] physicians about the increased risk. . . .

According to plaintiffs, [TPP] has yet to notify its physicians of the [litigation] findings or to modify the formularies to include [the risk] as a side effect of [the drug] or of its generic version. . . .

Borreani, 2012 WL 2375323, at *1 (emphasis added)

The plaintiff in Borreani alleged that the TPP was her decedent's health insurer, that he took the drug (almost certainly the generic, although it’s not entirely clear), and that he died from the side effect that the defendant TPP had pledged − but failed − to warn its plan doctors about.  Id. at *2. The TPP, having loudly proclaimed in its off-label use litigation that it would act to curtail the off-label use, was allegedly liable in Borreani for not in fact doing what it claimed it would.  Id.

Frankly, we don’t think there’s a duty here either.  TPPs should no more be liable for allegedly defective (but unactionable post-Mensing) generic drug warnings than branded manufacturers − there’s simply no common-law duty to warn about the risks of a product that a defendant didn’t make or sell.

But we take a degree of grim satisfaction in seeing TPPs (post-Mensing generic plaintiffs are looking for non-manufacturer deep pockets and have largely struck out against branded manufacturers) being called to account on their extravagant allegations made in suits against manufacturers (our clients) over what they supposedly would have done if only they had known about off-label promotion.

Cases like Borreani thus pose the question that, if TPPs allege (to plead causation as plaintiffs in suits against our clients) they would undertake to do things, had they only known of this or that purported risk of off-label use − then if they don’t do the things they alleged after actually finding out, have they negligently failed to follow through on what were litigation-inspired pledges to start with?

The general theory is called “negligent undertaking” − that is, the assumption of a duty that doesn’t independently exist under the law to start with − such as to reduce allegedly risky off-label use.

We don’t know, but it looks like post-Mensing plaintiffs in search of viable claims might actually put the causation allegations of erstwhile TPP plaintiffs to the test.  TPPs, as we’ve pointed out, lose most of these suits, but they keep bringing them because there’s no down side for them, and occasionally some court lets such claims proceed.  Borreani is an example of a possible down side.  What one plaintiff’s lawyer might want a TPP to plead as a plaintiff, might come back to bite that TPP when construed by another plaintiff’s lawyer against the TPP as a defendant.

Our bottom line − anything that increases the TPPs’ litigation down side risk can only work to the benefit of our clients by deterring litigation generally.

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