On February 16, 2011, Magistrate Judge Ramon E. Reyes issued a Report & Recommendation in Sergeants Benevolent Assn. Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, Case No. 1:08-cv-00179-SLT-RER (E.D.N.Y. Feb. 16, 2011), recommending that the district court not certify a class of union health and welfare funds and other third-party payors claiming that they paid for prescriptions for the antibiotic Ketek that doctors would not have written but for the defendant Sanofi-Aventis’ fraudulent marketing. Jim Edwards at Placebo Net summarizes the plaintiffs’ fraud allegations as follows: “Basically, Sanofi knew in October 2001 that one of its main researchers on the drug was probably faking her data. That researcher was indicted for research fraud in April 2003. Yet in April 2004, the FDA approved Ketek for sale even though both it and Sanofi knew the data on which the approval was based was entirely bogus. In 2007, after 53 cases of liver failure including four deaths , the FDA all but withdrew Ketek from the market.”
Judge Reyes’ R & R is just the latest in a string of decisions rejecting plaintiffs’ attempts to fit the peg of fraudulent or illegal promotion of drugs and devices into the hole of a civil Racketeering Influenced and Corrupt Organizations Act (RICO) class action. Writing in Defense Counsel Journal in April of 2010, J. Gordon Cooney, John P. Lavelle, and Bahar Shariati explain the reasons why civil RICO is attractive to class action plaintiffs. The Food Drug & Cosmetic Act does not have a private right of action, so those harmed when a drug is promoted fraudulently or illegally (for an off-label use, for example) cannot simply allege a violation of the FDCA. Frequently, they claim instead that the promotion at issue constituted mail or wire fraud, both of which count as racketeering activity under the RICO statute, and that the defendant was guilty of conducting a RICO enterprise. The civil RICO vehicle has several advantages for plaintiffs, including the possibility of treble damages, broad choice of venues, and “[p]erhaps 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[.]”
As the authors of the defense-oriented blog Drug and Device Law explain , however, third-party payors like the union health and welfare funds who brought the Ketek case have encountered difficulty at the class certification stage. This is because they have been unable to convince courts that the members of the class could rely on common evidence to prove their claims. In particular, courts have held that class certification is not appropriate because each plaintiff would have to put on individualized prescription-by-prescription evidence to establish that the promotion in question caused it to pay for prescriptions that would not otherwise have been written.
As Jim Edwards puts it, Judge Reyes held that “[t]he doctor’s decision to write a Ketek prescription removes the ‘proximate cause’ necessary to establish that the plaintiffs paid for the drug based on fraud even though the only reason the drug was on the market was because of Sanofi’s fraud, and individual doctors are in no position to know whether drugs are backed by fraudulent data or not.” Edwards suggest that “[i]f Congress wanted to find a cost-free way of reducing government spending on medical bills, then loosening the legal definitions of fraud, kickbacks and false statements to include common sense interpretations of bad behavior would be one way to do it.”