SARA L. ELLIS, United States District Judge.
Sidney Hillman Health Center of Rochester ("Hillman") and Teamsters Health Services and Insurance Plan Local 404 ("Local 404," and collectively with Hillman, the "Funds") are multi-employer benefit plans and health services funds that provide health benefits, including prescription drug coverage, to their members. The Funds seek to represent a nationwide class of such third-party purchasers or third-party payors ("TPPs") who from 1998 to 2012 reimbursed and paid all or some of the purchase price for Depakote, a drug developed and initially marketed by Abbott Laboratories and later by AbbVie, Inc. (collectively, "Abbott"), for indications not approved by the Food and Drug Administration (the "FDA").
Since 1983, the FDA has approved Depakote (divalproex sodium), which is sold and marketed by Abbott, for the treatment of epileptic seizures, acute manic or mixed
Nonetheless, Abbott has marketed Depakote for such unapproved "off-label" uses. To do so, it has used intermediary marketing firms, allegedly independent entities, paid physician spokespeople, as well as its own internal sales divisions. These efforts resulted in dramatically increased sales of Depakote, reaching $1.5 billion in 2007.
Abbott established and controlled three enterprises to promote off-label Depakote uses. First is what the Funds have termed the "CENE Enterprise," comprised of Abbott, associated physicians, the Council for Excellence in Neuroscience Education ("CENE"), and ACCESS Medical Group ("ACCESS"). CENE — a purportedly independent continuing education medical group with undisclosed ties to Abbott — disseminated materials and sponsored webinars and meetings on off-label Depakote uses. CENE also retained "faculty" and "council" physician members to promote Depakote for off-label uses. ACCESS aided CENE by creating continuing education materials, including slide show presentations for use by doctors in Abbott's speakers' bureau. The second — the so-called "PharmaCare Enterprise" — included Abbott, its sales representatives, and PharmaCare Strategies, Inc. ("PharmaCare Strategies"), a market development firm that trained Abbott employees to successfully promote Depakote for off-label uses. PharmaCare Strategies conducted its training off-site rather than at Abbott's headquarters. The third enterprise, the "ABcomm Enterprise," funneled kickbacks to physicians to increase Depakote prescriptions. The ABcomm Enterprise included physicians and other medical professionals, Abbott, and ABcomm, Inc. ("ABcomm"), a medical continuing education provider that created training materials and provided live activities. Abbott controlled and participated in each of these enterprises with the goal of increasing the amount of off-label Depakote prescriptions purchased by the TPPs.
Through these three enterprises, Abbott sponsored dinners and other programs where a physician would speak on off-label Depakote uses. Abbott directly or indirectly compensated the speaker, also paying for the meals of those physicians attending the dinners. Abbott funded physicians' studies of Depakote, which served as a backdoor way of increasing Depakote prescriptions. Abbott also funded the development of clinical practice guidelines for Depakote that mandated its use as a first-line of defense for dementia and long-term agitation and sundown syndrome in patients suffering from dementia. The guidelines did not disclose Abbott's financial support, instead purporting to be independent. Similarly, Abbott issued supplements to medical journals disguised as peer-written articles free from pharmaceutical manufacturer influence that promoted Depakote's use for off-label indications.
In addition to working with these outside entities and physicians to promote off-label uses of Depakote, Abbott also had internal mechanisms in place to drive such sales. This included providing incentive packages to sales representatives based on their success in marketing Depakote. Abbott promoted standardized messaging among its sales representatives, providing them with scripts on how to sell physicians on prescribing Depakote for off-label uses. Abbott then had monthly contests for each
Abbott marketed Depakote for off-label uses despite having no reliable evidence of its safety or efficacy for the treatment of these off-label conditions and, in some cases, having evidence that it was actually ineffective or unsafe for those conditions. For example, a study suspended in March 1999 for safety reasons "failed to show that Depakote was effective in treating the signs and symptoms of mania in elderly dementia patients." Doc. 92 ¶ 60. Abbott also started but did not complete another clinical trial to evaluate Depakote's safety and efficacy in treating agitation in elderly dementia patients in 2000 and received reports in May 2003 and December 2004 that Depakote made no meaningful difference in the treatment of elderly dementia patients when compared to a placebo group.
Nonetheless, Abbott persisted with its off-label marketing efforts. According to FDA projections, between March 2008 and February 2009, for retail outpatient Depakote prescriptions for patients over 61 years old, approximately 11% were associated with a schizophrenia diagnosis, 6.1% with a dementia diagnosis, and 5.4% with a depression diagnosis. Over the same time period, more than 12% of retail outpatient Depakote prescriptions for patients 17 years or older were associated with a schizophrenia diagnosis, nearly 17% of retail outpatient Depakote prescriptions for patients between 12 and 16 years old were associated with an ADHD diagnosis, and 25% of retail outpatient Depakote prescriptions for patients between 17 and 20 were associated with conduct disturbance or impulse control disorder diagnoses. From March 2002 to February 2009, approximately 11.3% of retail outpatient Depakote prescriptions for patients over 61 years old were associated with dementia, schizophrenia, or depression. During this same time period, nearly 9% of retail outpatient Depakote prescriptions written for patients 17 years or older were for schizophrenia diagnoses.
Between 2007 and 2010, however, four sealed qui tam actions were filed against Abbott pursuant to the False Claims Act, 31 U.S.C. § 3730(b), asserting illegal marketing of Depakote for non-FDA approved uses. On February 1, 2011, the qui tam actions were unsealed as the United States and fifteen state governments intervened. Another state intervened two months later. After the consolidation of those actions, on May 7, 2012, Abbott agreed to pay $1.6 billion to resolve the criminal and civil claims against it.
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir.2011). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.
Rule 9(b) requires a party alleging fraud to "state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b). This "ordinarily requires describing the `who, what, when, where, and how' of the fraud, although the exact level of particularity that is required will necessarily differ based on the facts of the case." AnchorBank, 649 F.3d at 615 (citation omitted). Rule 9(b) applies to "all averments of fraud, not claims of fraud." Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir.2007). "A claim that `sounds in fraud' — in other words, one that is premised upon a course of fraudulent conduct — can implicate Rule 9(b)'s heightened pleading requirements." Id. This includes fraud allegations in civil RICO complaints. Slaney v. The Int'l Amateur Athletic Fed'n, 244 F.3d 580, 597 (7th Cir.2001).
The Funds assert that Abbott violated 18 U.S.C. § 1962(c) by conducting the affairs of the CENE Enterprise, the PharmaCare Enterprise, and the ABcomm Enterprise through patterns of racketeering activity. To state a claim under § 1962(c), the Funds must demonstrate they have standing, as required by statute, and allege "(1) conduct (2) of an enterprise (3) through a pattern of racketeering activity." DeGuelle v. Camilli, 664 F.3d 192, 198-99 (7th Cir.2011) (citation omitted). Additionally, to recover under RICO, the Funds must allege that their injuries arise "by reason of" a violation of § 1962, requiring both "but for" and proximate causation. 18 U.S.C. § 1964(c); DeGuelle, 664 F.3d at 199. Abbott argues that the Funds have not properly alleged statutory standing, causation, racketeering activity on behalf of an enterprise, or the required two predicate acts of racketeering. Because the Court finds that the Funds have not adequately alleged proximate cause, it need not address Abbott's other arguments.
In determining whether the Funds have adequately alleged proximate cause, the
Courts considering TPPs' off-label RICO claims have reached differing conclusions as to whether the link between the alleged misrepresentations made by pharmaceutical company defendants and the ultimate injury suffered by TPP plaintiffs is sufficiently direct to meet RICO's proximate cause requirement. Some courts have found that the chain of causation involves too many independent steps or actors. See, e.g., UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121, 134 (2d Cir.2010) (finding chain of causation too "attenuated" where TPPs did not "allege that they relied on Lilly's misrepresentations" but rather that Lilly directed its misrepresentations at doctors prescribing the drug at issue because "only the TPPs were in a position to negotiate the price paid for Zyprexa" and so "the only reliance that might show proximate causation with respect to price is reliance by the TPPs, not reliance by the doctors"); United Food & Commercial Workers Cent. Penn. & Reg'l Health & Welfare Fund v. Amgen, Inc., 400 Fed. Appx. 255, 257 (9th Cir.2010) (TPPs failed to plead proximate causation linking alleged misconduct to alleged injury where it depended on "an attenuated causal chain that involved at least four independent links," including doctors' decisions to prescribe drug for off-label uses); In re Yasmin & Yaz (Drospirenone) Mktg., Sales Practices & Prods. Liab. Litig., No. 3:09-CV-20071-DRH, 2010 WL 3119499, at *7 (S.D.Ill. Aug. 5, 2010) (finding that "multiple steps separate the alleged wrongful conduct ... and the alleged injuries," with the "causal link necessarily involv[ing] the decision making process of the patient, the prescribing physician, and the third party payor").
The Funds argue that the distinction drawn by courts relying on direct and indirect misrepresentations is misplaced and that the proximate cause analysis should turn instead on foreseeability. See Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 657, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008) (describing the plaintiffs' injury as "the direct result" of the defendants' fraud because "[i]t was a foreseeable and natural consequence" of the defendants' scheme); BCS Servs., Inc. v. Heartwood 88, LLC, 637 F.3d 750, 758 (7th Cir.2011) ("Once a plaintiff presents evidence that he suffered the sort of injury that would be the expected consequence of the defendant's wrongful conduct, he has done enough to withstand summary judgment on the ground of absence of causation."); In re Neurontin Mktg. & Sales Practices Litig., 712 F.3d 51, 58 (1st Cir.2013) (finding sufficient evidence of proximate cause despite no direct representations to TPPs based on evidence that the alleged injury was a foreseeable and natural consequence of the defendant's scheme).
Having carefully reviewed the case law and the parties' arguments concerning alleging proximate cause for prescription drug TPP RICO cases, the Court agrees that a line must be drawn to "distinguish the direct consequences in a close causal chain from more attenuated effects influenced by too many intervening causes." Emp'r Teamsters-Local Nos. 175/505 Health & Welfare Trust Fund v. Bristol Myers Squibb Co., 969 F.Supp.2d 463, 475 (S.D.W.Va.2013). The Court finds the distinguishing characteristic to be whether the drug manufacturer directly made misrepresentations to the TPP because otherwise intervening factors — such as a physician's independent medical judgment or a patient's decisionmaking — interrupt the chain of causation:
Med. Mut. of Ohio, 159 F.Supp.3d at 919, 2016 WL 427553, at *13. The Court does not read the Seventh Circuit's decision in BCS Services to require a different result, because any intervening causes were predictable and so could essentially be discounted in the analysis. BCS Servs., Inc., 637 F.3d at 757 (discussing that the only intervening "cause and effect" was "straightforward" and predictable and as a result did not "weaken the inference" of causation); see also Lexmark Int'l, Inc. v. Static Control Components, Inc., ___ U.S. ___, 134 S.Ct. 1377, 1394, 188 L.Ed.2d 392 (2014) (noting "general tendency not to stretch proximate causation beyond the first step" unless there are "unique circumstances" where causation "follow[s] more or less automatically" despite intervening causes (citations omitted) (internal quotation marks omitted)).
Here, the Funds have not alleged that Abbott made direct misrepresentations to them so as to cause them to place Depakote on their formularies or pay for Depakote when prescribed. Indeed, they do not
Because the Funds have not adequately pleaded proximate causation, the Court dismisses the RICO claim. This means their RICO conspiracy claim under § 1962(d) fails as well. See United Food & Commercial Workers Unions & Emp'rs Midwest Health Benefits Fund v. Walgreen Co., 719 F.3d 849, 856-57 (7th Cir. 2013).
The Funds also bring claims for violation of the New York Deceptive Business Practices Act, New York Gen. Bus. Law § 349, and unjust enrichment under New York and Massachusetts law. Abbott argues that these claims fail for the same reasons the RICO claims fail, namely that the Funds have not pleaded cognizable injury, materially deceptive conduct, causation, or fraud in accordance with Rule 9(b)'s pleading requirements. Additionally, it contends the Court should dismiss the unjust enrichment claims because the Funds have an adequate remedy at law. Finally, Abbott resurrects its argument that the New York claims are time-barred, despite the fact that the Seventh Circuit reinstated the Court's dismissal of the state law claims on statute of limitations grounds, binding this Court to that decision. See Sidney Hillman Health Ctr., 782 F.3d at 931 ("Because the state law claims were dismissed based on similar reasoning, they are reinstated as well."); Kovacs v. United States, 739 F.3d 1020, 1024 (7th Cir.2014) ("The lower court is bound, through the mandate rule, to the resolution of any points that the higher court has addressed.").
Here, the Funds have pleaded that the Court has original jurisdiction over the RICO claims pursuant to 28 U.S.C. § 1331 and supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367.
For the foregoing reasons, Abbott's motion to dismiss [98] is granted. The Court dismisses the amended class action complaint without prejudice.