Back to the future: civil RICO in off-label promotion litigation.

• Author: Cooney, J. Gordon, Jr.

IN THE 1980s, courts addressed a wave of "garden-variety" fraud cases brought under the private civil action provision of the Racketeer Influenced and Corrupt Organizations ("RICO") Act. (1) As these cases proceeded, a substantial body of case law developed limiting RICO's potentially vast scope. For example, many claims were dismissed on standing grounds for failure to allege a direct injury proximately caused by the alleged racketeering activity. (2) Others failed in the pleading stages for lack of the specificity required for allegations of fraud under Federal Rule of Civil Procedure 9(b). (3) Many courts also held that RICO could not be used to circumvent already-existing law governing business or securities fraud. (4)

More recently, plaintiffs have filed a new wave of civil RICO claims in class actions concerning pharmaceutical products. In this "Back to the Future" trend, pharmaceutical manufacturers now face suits brought by third-party payors and individuals. These plaintiffs generally claim that the defendant manufacturers engaged in off-label promotion and/or acts of deception and allege acts of mail or wire fraud as the RICO predicate acts. Frequently, the theory offered is that off-label promotion caused plaintiffs to pay or reimburse more for prescription drugs or to pay for prescriptions that they claim should not have been written. The plaintiffs generally claim that the off-label promotion caused economic injury to the payors, rather than claiming that the prescriptions were harmful or caused personal injury. To establish class-wide proof of causation and injury, plaintiffs often attempt to rely on statistical models and variations of the fraud-on-the-market theory advanced in securities litigation.

Plaintiffs invoke civil RICO in this context for several reasons. First, a successful civil RICO claim can produce an award of treble damages, costs and attorneys' fees. Second, civil RICO plaintiffs potentially gain broad choices of venue because RICO claims generally may be brought against "any [liable] person" wherever "such person resides, is found, has an agent, or transacts his affairs" under 18 U.S.C. [section] 1965(c). Perhaps most importantly in the class-action context, civil RICO claims conceivably allow plaintiffs to sidestep the predominating choice-of-law issues that typically prevent nationwide class actions based on fraud or deceptive practice law after such decisions as Castano v. American Tobacco Co. (5) and Matter of Rhone-Poulenc Rorer, Inc. (6) The Supreme Court's 2008 ruling in Bridge v. Phoenix Bond & Indemnity Co., (7) eliminating the requirement that plaintiffs plead and prove first-party reliance in RICO (8) mail fraud claims, also has encouraged potential plaintiffs to invoke RICO more frequently.

But like a new wax job on an old DeLorean, under the shiny new surface of such claims lie many of the same old problems. Most courts considering the issues in this context--including a wave of decisions following Bridge--have rejected class action claims for off-label marketing of prescription drugs under RICO. Several decisions have rejected complaints at the pleading stages by granting motions to dismiss. (9) Other courts have disposed of these claims by denying motions for class certification. (10) Only one reported opinion has granted class certification in this context; the presiding judge in that matter described the basis of the theory as "thin," and that matter is currently pending in the Court of Appeals. (11)

Plaintiffs asserting these claims generally have encountered many of the same difficulties as plaintiffs who attempted to use civil RICO to bring traditional fraud claims in the 1980s. As a threshold matter, many courts have found that off-label promotion is not synonymous with fraud, and that civil RICO cannot be used to create a private right of action under the Federal Drug and Cosmetic Act ("FDCA"). When mere allegations of off-label promotion are stripped from the complaint, courts have rejected these claims for failure to plead fraud with sufficient particularity under Rule 9(b).

In addition, a number of courts also have rejected these claims on standing grounds for failure to plead or prove proximate cause or a cognizable direct injury. When considering causation, courts have largely rejected plaintiffs' attempts to establish reliance and injury on a class-wide basis by using a fraud-on-the-market or price-inflation theory of liability. In cases such as Ironworkers Local Union No. 68 v. AstraZeneca Pharmaceuticals LP, (12) courts also have concluded that the alternative to a fraud-on-the-market theory--determining why scores of physicians exercised their medical judgment to prescribe medicines for off-label uses for all of the prescriptions for which the payors seek reimbursement--asserts an injury too remote and speculative to sustain a RICO claim. This article will discuss these recent cases and analyze the legal principles which once again have limited attempted expansion of civil RICO.

1. Off-Label Promotion is Not the Same as Fraud

   In most of these recently-filed cases, plaintiffs have principally based their claims on allegations that defendants engaged in off-label promotion of the medicines at issue. Civil RICO claims, however, must be based on violations of certain enumerated federal statutes. Alleged violations of federal regulatory laws concerning off-label promotion by pharmaceutical companies are not among the enumerated RICO predicate acts. Although acts of mail fraud or wire fraud can constitute RICO predicate sets, a number of courts properly have rejected plaintiffs' attempts to equate "off-label promotion" and fraud. In In re Epogen & Aranesp Off-Label Marketing, (13) for example, the plaintiffs alleged that Amgen committed mail and wire fraud based on a purported scheme to promote the prescription drugs at issue for off-label uses. The Court rejected the plaintiffs' attempts to equate off-label promotion with wire fraud, concluding that "[p]romotion of off-label uses is not inherently misleading simply because the use is off-label." (14) Because the complaint lacked specificity regarding fraud, as opposed to alleged off-label promotion, the court dismissed the complaint without prejudice for failure to identify specific misrepresentations in the complaint.

   After the plaintiffs filed an amended complaint, the court granted Amgen's motion to dismiss with prejudice. (15) The court found that the plaintiffs merely made cosmetic changes by adding the words "false" and "deceptive" throughout their complaint instead of providing specific allegations about allegedly false statements. Allegations that Amgen promoted the drug for unapproved uses could not satisfy plaintiffs' responsibility to plead fraud with particularity under Rule 9(b). Instead, the court held that these allegations were "puffery" or nonactionable statements of fact, concluding that "[t]o merely assert that Amgen promoted EPO for 'ineffective' or 'unapproved' uses, without more, will not pass muster" under Rule 9(b). (16) To state actual fraud, the Court held that plaintiffs "must show that Amgen's actions went beyond presenting its drugs in the best light possible and crossed the line into actionable fraud." (17) For example, plaintiffs would need to allege that defendants falsely represented that the drugs were approved by the Federal Drug Administration for the off-label uses or that the defendants falsely reported the results of scientific studies. Although plaintiffs claimed that the defendant did not disclose certain information such as its sponsorship of several studies, the court found that the defendant had no duty to disclose this information, and thus the omission was not actionable. Without more, the plaintiffs' allegations were too generalized to state a fraud claim. (18)

   Epogen rejected the use of civil RICO as a vehicle to enforce existing federal law governing pharmaceuticals. The Epogen court held that "[a]llowing Plaintiffs to proceed on a theory that...