Kaiser v. Pfizer and the Question of Who Pays When Fraudulent Pharmaceutical Promotion Has Its Intended Effect

By Kate Greenwood

Cross-Posted at Health Reform Watch

On April 3, 2013, the First Circuit issued decisions in three cases in which third-party payers sought compensation from Pfizer for damages sustained as a result of fraudulent pharmaceutical promotion.  The decisions were noteworthy because in them the First Circuit lent its imprimatur to a causal chain of injury running from a pharmaceutical company’s fraudulent promotion, through the prescribing decisions of thousands of individual physicians, to the prescriptions for which a third-party payer paid.  In the lead case, brought by Kaiser Foundation Health Plan and Kaiser Foundation Hospitals, the  appellate court upheld a jury verdict that, after trebling, came to $142 million.

Not surprisingly, Pfizer has petitioned for certiorari, arguing that the First Circuit’s decisions “warrant review because they…raise important and recurring questions concerning the proper test for proximate cause under RICO and the permissibility of aggregate statistical proof in collective fraud cases.”  Amici briefs filed by BIO, PhRMA, and the Washington Legal Foundation echo these arguments, leaning heavily on the spectre of a “staggering” increase in suits founded on “pharmaceutical companies’ alleged off-label promotion.”  In addition to the financial burden posed by the “likely surge”, amici argue that it would chill their “truthful and constitutionally protected speech concerning beneficial off-label uses of FDA-approved drugs.”

Civil RICO claims cannot be predicated on “off-label promotion”, however.  To state a claim, a plaintiff has to allege that the defendant pharmaceutical company engaged in one of the predicate acts enumerated in the RICO statute, typically mail or wire fraud.  In this case, the jury found that Pfizer promoted the anti-seizure drug Neurontin as a safe and effective treatment for indications for which Pfizer knew it was no more effective than a placebo.  On appeal, Pfizer did not contest the jury’s finding that it committed fraud.  This distinguishes this case from those decided by other circuits and suggests that the First Circuit’s decisions may not open the floodgates quite as wide as Pfizer and its amici claim.

There is also reason to question the claim that the First Circuit adopted a new, more “relaxed” standard of causation in the case. Continue reading