NATHANIEL M. GORTON, District Judge.
This case arises out of the marketing and sales of the related anti-depressant drugs Celexa and Lexapro by defendants Forest Laboratories, Inc. and Forest Pharmaceuticals, Inc. ("defendants" or, collectively, "Forest"). Plaintiff Painters and Allied Trades District Council 82 Health Care Fund ("plaintiff" or "Painters") is a health and benefit fund providing benefits to covered members and their families. It acts as a third-party payor ("TPP") that reimburses the medical expenses of plan members.
Painters alleges that defendants violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), Minnesota Consumer Fraud Act ("MCFA"), Minnesota Unfair Trade Practices Act ("MUTP") and Minnesota Deceptive Trade Practices Act by misrepresenting and concealing material information about the efficacy of Celexa and Lexapro in treating major depressive disorder ("MDD") in pediatric patients.
Pending before the Court is Painters' motion to certify certain classes (Docket No. 546). For the reasons that follow, that motion will be denied.
Celexa and Lexapro are closely-related selective serotonin reuptake inhibitor ("SSRI") anti-depressants. Forest obtained the approval of the Food and Drug Administration ("FDA") to market Celexa for adult use in 1998 and Lexapro for adult use in 2002. It later sought to market both drugs for treating MDD in children and adolescents.
In order to obtain FDA approval to market Celexa and Lexapro as effective for pediatric use, Forest had to make a sufficient showing to the FDA that the drugs would be more effective than placebos in treating MDD in pediatric patients. The FDA typically requires the submission of at least two "positive" placebo-controlled clinical trials supporting such use. A "positive" drug study shows statistically significant improvements for patients who are administered the drug rather than a placebo. A "negative" study is one that indicates no statistically significant difference in outcomes between patients who receive the drug and those who receive a placebo.
Drug manufacturers submit the results of such trials to the FDA as part of their "new drug applications" ("NDAs"). The manufacturer may also request FDA approval of use of the drug to treat a specific condition which is known as an "indication". A manufacturer may only market and sell the drug for approved indications.
Forest conducted four double-blind, placebo-controlled studies on the efficacy of Celexa and Lexapro in treating pediatric depression. The first two studies examined the efficacy of Celexa and were completed in 2001. The Celexa Study 18 ("MD-18") produced positive results whereas Celexa Study 94404 ("Lundbeck Study") produced negative results. Forest submitted the results of the two Celexa studies to the FDA in a supplemental NDA in 2002. The FDA denied Forest's application for a pediatric indication for Celexa after finding that the Lundbeck Study was a clearly negative study.
The other two studies addressed the efficacy of Lexapro. Lexapro Study 15 produced negative results but Lexapro Study 32 arguably produced positive results.
The FDA-approved labels for both drugs prior to 2005 stated that "[s]afety and effectiveness in pediatric patients have not been established." In February, 2005, Forest revised Celexa's label to include a description of MD-18 and the Lundbeck Study and Lexapro's label to describe Lexapro's negative study.
In 2008, Forest submitted the results of the studies to the FDA in a supplemental NDA. In March, 2009, the FDA reviewed the positive results in MD-18 and Lexapro Study 32, noted the chemical similarities between Celexa and Lexapro and approved Lexapro as safe and effective in treating MDD in adolescents. Forest did not seek similar FDA approval for Celexa.
Plaintiff Painters initiated this action on behalf of two putative nationwide TPP classes in November, 2013. It filed a first amended complaint in February, 2014, asserting violations of RICO (Counts I and II) and three Minnesota consumer protection statutes (Counts III, IV and V) on behalf of the two nationwide classes of TPPs and two Minnesota classes of TPPs and consumers. This Court dismissed Count V in December, 2014.
Painters moved for class certification in February, 2016 and the Court heard oral argument in May, 2016.
Painters requests the certification of two nationwide classes:
Painters also requests certification of two Minnesota subclasses: 3)
Under Fed. R. Civ. P. 23, a court may certify a proposed class only if it satisfies all of the requirements in Rule 23(a) and one of the requirements in Rule 23(b).
Although a court must conduct a "rigorous analysis" before certifying a class,
Rule 23(a) contains requirements of numerosity, commonality, typicality and adequacy:
Fed. R. Civ. P. 23(a). Rule 23(b)(3) requires that 1) common questions of law or fact "predominate" over those affecting individual class members and 2) a class action be the "superior" method for fair and efficient adjudication. Fed. R. Civ. P. 23(b)(3).
With respect to numerosity, it is undisputed that the proposed classes would include "hundreds of [TPPs] nationwide and many within the State of Minnesota". Those TPPs are sufficiently numerous that joinder of all members would be impractical.
In assessing commonality, the court should inquire into "the capacity of a classwide proceeding to generate common
Painters alleges that "Forest engaged in a common course of fraudulent conduct directed toward the entire class" by fraudulently promoting off-label, pediatric prescriptions of Celexa and Lexapro paid for by TPPs. Painters satisfies the commonality requirement.
Under the typicality requirement, the injuries of the named plaintiff must arise from the same events or course of conduct and be based upon the same legal theory as the injuries and claims of the class.
Painters asserts that both its claims and the class claims arise from defendants' misconduct in "deliberately provid[ing] misleading information to the class". It contends that it, like the other TPPs, "fell victim to Forest's off-label promotion scheme, and lost money as a result,"
Forest responds that Painters is atypical because 1) its claims are time-barred, 2) Forest did not cause it injury and 3) it has no viable claim and thus no standing to sue as the class representative. Forest submits that Painters did not suffer an attributable injury because Painters did not rely on, and was not exposed to, any of its representations. It suggests that Prime, Painters' pharmacy benefit manager ("PBM"), was "aware" of the negative efficacy studies and yet continued to reimburse the drugs and that such awareness is imputable to Painters. Forest also faults Painters for allegedly taking no steps to investigate the efficacy of the drugs even though it conceded at one point that it had "no idea whether these drugs work on kids or not."
Forest's arguments are unavailing. Although its statute of limitations defense involves evidence and determinations specific to Painters, that defense is not "unique" because Forest intends to launch the same kind of defense against all of the TPPs in the proposed classes. There is no danger that "absent class members will suffer if [Painters] is preoccupied with defenses unique to it."
With respect to Forest's assertions that Painters has no viable claim because Forest did not cause it injury, the Court declines, at the class certification stage, to make that determination on the merits and instead notes that Painters' claims and injuries stem from the same factual events and legal theories that give rise to the asserted claims and injuries of the class. That is sufficient for Painters to satisfy the typicality requirement.
Adequacy requires a showing that the class representative will "fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). The named plaintiff must show that 1) its interests align with those of the class and 2) its counsel is qualified, experienced and able to litigate the claims vigorously.
Painters declares that its interests align with those of the class because it, like each class member, has a strong interest in establishing that Forest fraudulently promoted off-label use and caused it damages. It submits that its counsel is "well-versed" in litigating complex pharmaceutical cases and class actions and has represented clients in "thousands of cases relating to the use of SSRIs."
Forest reiterates that Painters has no standing and no viable claim as a result of the statute of limitations and Painters' lack of injury. Those arguments are unpersuasive for the reasons set forth above. Forest also contends that the exclusion of PBMs from the proposed classes creates a conflict of interest between Painters, which is a TPP, and PBMs. That argument is misplaced because the adequacy requirement is concerned with whether the named plaintiff has a conflict with other class members, not individuals or entities outside of the proposed classes.
Forest cites
The Court is satisfied that Painters plays more than a "superfluous" or token role in this action. Painters is unlike the class representative in
Accordingly, Painters and its counsel can adequately represent the interests of the proposed classes.
The crux of the dispute between the parties is whether Painters satisfies the predominance requirement that
Fed. R. Civ. P. 23(b)(3). The purpose of the requirement is to assess whether the proposed class is "sufficiently cohesive" to warrant class adjudication.
The predominance requirement is "far more demanding" than the commonality requirement set forth in Rule 23(a),
A plaintiff with a RICO claim must establish 1) conduct 2) of an enterprise 3) through a pattern 4) of racketeering activity such as violations of the mail and wire fraud statutes located at 18 U.S.C. §§ 1341 and 1343.
Instead, the parties contest whether 1) Painters can establish causation, injury and damages through common proof and 2) Forest's statute of limitations defenses will require individualized determinations that overwhelm the common ones.
The first set of disputes arise from the civil damages provision of the RICO statute which allows "[a]ny person injured in his business or property by reason of a [RICO violation]" to recover damages. 18 U.S.C. § 1964(c). The term "by reason of" refers to both but-for causation and proximate causation.
For RICO claims, proximate causation depends upon the "directness" of the causal chain and the application of three functional factors.
The second part of the assessment involves three functional factors which implicate 1) concerns about proof, given that the less direct an injury, the more difficult it is to calculate the attributable damages, 2) concerns about administrability and avoidance of multiple recoveries and 3) the societal interest in deterring unlawful conduct and the issue of whether directly injured victims would be likely "to vindicate the law as private attorneys general".
Here, as discussed below in the injury section, Painters asserts that it and other TPPs suffered injuries in the form of economic costs incurred when they paid for additional prescriptions for Celexa and Lexapro for pediatric use.
Painters intends to use common proof that Forest targeted physicians during its unlawful promotion with the knowledge and intent that TPPs, such as Painters and the class members, would pay for the majority of the induced prescriptions. In support, Painters submits a declaration by Dr. Peter Penna asserting that Forest "specifically marketed to health care plans to promote [the] preferential status" of Celexa and Lexapro on their official lists of prescriptions. It suggests that it and other TPPs were the intended victims of the fraudulent scheme and their injuries were the foreseeable and natural consequences of that scheme. Painters plans to use that class-wide evidence to show the directness of the causal chain between the TPPs' injuries and Forest's misconduct.
Forest responds that Painters cannot use class-wide evidence to show that TPPs relied upon, or were even exposed to, its purportedly fraudulent statements because the issue of reliance requires a predominantly individualized determination.
That argument, however, overlooks the decision of
Forest next submits that it will present individualized evidence of certain physicians who prescribed drugs based upon patient-specific considerations, not upon Forest's statements. It argues that those physicians are intervening causes that sever the causal chain between the TPPs' asserted economic injuries and Forest's promotional statements such that Painters cannot prove proximate causation.
Forest's physician-specific evidence will not, however, trigger individualized inquiries that overwhelm the class-wide inquiries. That is because Painters has class-wide evidence that Forest fraudulently promoted its drugs with the intent to cause physicians to write more prescriptions that would be paid for by TPPs. Painters could use that common evidence to show that Forest expected and intended physicians to rely on its fraudulent statements and, therefore, the physicians were not intervening causes that severed the proximate causal chain.
Painters' evidence suggests that 1) TPPs like Painters were the foreseeable, intended and primary victims of Forest's RICO scheme, 2) TPPs suffered economic injuries as a result of that scheme because they paid for the majority of the resulting prescriptions, 3) they suffered direct injuries and are best-positioned to enforce the law and 4) allowing the case to continue as a class action will help deter unlawful conduct. Forest does not specifically allege that it will raise member-specific challenges to Painters' presentation of evidence.
The Court finds that Painters can use that evidence as class-wide proof to establish directness and a favorable balance of the three factors, just as the plaintiffs did in the three
The parties fervently dispute the applicability of the three
Forest correctly points out that the
Painters, however, does not purport to cite the
Based upon Painters' proposed use of class-wide evidence, the Court is satisfied, for the purposes of class certification, that adjudication of the proximate causation issue on the merits will not require individualized inquiries that overwhelm the common issues.
Accordingly, Painters satisfies the predominance requirement with respect to proximate causation.
The inquiry with respect to but-for causation asks whether the plaintiff would have suffered the injury absent the alleged misconduct.
If the plaintiff intends to present causation evidence through expert analysis, the court must also evaluate
Painters asserts that it can establish but-for causation with common proof that the TPPs in the class paid for "induced off-label prescriptions" as a natural consequence of Forest's fraudulent conduct. It contends that it and other TPPs would have paid for fewer off-label prescriptions for pediatric use had Forest not engaged in its unlawful scheme.
The centerpiece of Painters' argument is the report of an expert witness who performed an econometric "regression analysis" of Forest's fraudulent promotions and the allegedly resulting fraudulent prescriptions. The First Circuit Court of Appeals ("the First Circuit") regards regression analyses as "well recognized and scientifically valid approach[es] to understanding [the] statistical data" used to establish causation.
In
The First Circuit considered Rosenthal's regression analysis in the
Moreover, the aggregate statistical evidence in the Rosenthal report established but-for causation even without physician-specific evidence of causation.
Here, Painters retained Dr. Christopher Baum ("Baum") to construct regression models and Dr. Rosenthal to run the "same" regression analysis from the
Forest responds that the Rosenthal report in this case differs from the Rosenthal report in the
The Court is concerned with Painters' ability to present sufficient class-wide evidence of but-for causation due to the apparent "fundamental flaw" in Rosenthal's but-for approach. Rosenthal assumes that the relationship between
After careful consideration of Rosenthal's expert report, her rebuttal report and Painters' oral argument, however, the Court is not persuaded that the cited articles justify her assumption. The expert report cites 1) the Dorfman and Steiner article in paragraph 29 for the proposition that consumer receptivity to promotional marketing and product price affects the relationship between promotional spending and total sales and 2) two analyses and two articles in paragraphs 31 and 32 for the econometric theory that profit-maximizing drug manufacturers will pursue off-label promotions if the marginal revenue of product demand exceeds the marginal costs of promotion and the expected legal costs and penalties. Rosenthal does not, however, cite any authority to support her conclusion in paragraph 37 that:
She then declares in paragraph 38 that the discovery materials in this action corroborate those economic theories in the context of Forest's use of marketing activities to increase sales of Celexa and Lexapro for pediatric use.
In her rebuttal report Rosenthal cites the same articles by reference in paragraph 26 and, without citing any new articles, asserts that, based upon the scholarly literature and discovery materials previously reviewed, the relationship between total promotion and total prescribing is a "reasonable proxy" for the relationship between off-label promotion and the off-label prescribing caused by that off-label promotion.
Moreover, during oral argument, Painters' counsel relied on the authorities cited in the expert report in his explanation of how Rosenthal reached her "reasonable proxy" conclusion. Painters offered no other authorities to support that conclusion.
Accordingly, the Court concludes that Rosenthal has not justified her "reasonable proxy" conclusion. The academic literature, as summarized by Rosenthal, suggests that all promotional activities,
Painters' reliance on
The
Because Painters relies primarily on the inapposite Rosenthal report as class-wide proof of but-for causation, it has not shown that it can establish but-for causation without individualized determinations predominating over common ones. Class certification is unwarranted for that reason.
Class certification is also improper because Painters has not established that individual assessments of RICO injury will not predominate over class-wide assessments.
Painters' RICO claims arise from allegations that Forest misrepresented and concealed material information about the efficacy of Celexa and Lexapro for pediatric use. The issue of efficacy is thus at the apex of the dispute over Painters' ability to establish class-wide RICO injuries with common proof.
Painters contends that it and other TPPs suffered economic injuries in the form of payments for additional prescriptions of Celexa and Lexapro for off-label use. It claims that it has significant, class-wide evidence of inefficacy relating to
Forest responds that 1) there is no "reliable" evidence that the drugs were ineffective for pediatric use and 2) the FDA's determination that MD-18 and Lexapro Study 32 yielded positive results for efficacy is sufficient evidence thereof. It explains that it did not seek FDA approval for Celexa for pediatric use because it ceased promoting Celexa in 2002. It further asserts that the efficacy determination turns on the utility of the drug for each individual patient.
Painters' arguments are underwhelming. In the first place, because the FDA is the "exclusive judge of safety and efficacy",
The
Because the class-wide evidence in this action is "equivocal", adjudication of the efficacy issues will likely require individualized assessments of the utility of Celexa and/or Lexapro for each patient based upon his or her particular medical circumstances. Painters has not shown that those patient-specific determinations will not overwhelm the class-wide determinations. The Court will deny the motion for class certification on that additional ground.
Accordingly, class certification is unwarranted due to Painters' inability to establish RICO injuries in compliance with the predominance requirement.
To satisfy the predominance requirement with respect to damages, plaintiffs must "present a damages model that directly reflects and is linked to an accepted theory of liability".
Here, Painters estimates in its Rosenthal report that the Celexa class suffered $140.7 million in damages and the Lexapro class suffered $160.5 million in damages. Rosenthal reached those estimates by using Baum's regression models, simulating "but-for scenarios" to predict the value of prescriptions induced by Forest's misconduct and making adjustments to account for unrelated variables.
As discussed above, however, the unsubstantiated assumption in the expert report that the relationship between all promotions and all sales is a "reasonable proxy" for the relationship between fraudulent promotions and fraudulently induced sales creates a fundamental flaw in Rosenthal's expert analysis. Because Painters relies primarily on Rosenthal's expert report as its evidence of but-for causation and its model of damages, it lacks both an accepted theory of liability and a valid model of damages. Accordingly, Painters cannot establish damages pursuant to the predominance requirement.
The statute of limitations for civil RICO claims is four years after the plaintiff discovers or should have discovered the injury.
Forest informs the Court that it intends to challenge the timeliness of each TPP's claim through evidence specific to each TPP and PBM. Forest plans to establish that each class member knew, or reasonably should have known, before August 2, 2008 that it paid for potentially ineffective drugs. It contends that Painters is a sophisticated TPP with a fiduciary duty to monitor its prescriptions and that it had access to information available to Prime, its PBM, that should have put it on notice of its asserted injury "well before" August 2, 2008. It intends to present evidence that Prime and Painters were, or reasonably should have been, aware of the negative clinical studies and revised FDA labels before August, 2008.
Forest's limitations defense will involve TPP-specific evidence and predominating, individualized inquiries as to when each TPP knew or should have known, based upon its own access to information and/or that of its PBM, that it had paid for potentially ineffective prescriptions. Those TPP-specific assessments sever the "constellation of common issues [binding] class members together" and further support the Court's conclusion that class certification is unwarranted under the predominance requirement.
Accordingly, Painters has not shown that it satisfies the predominance requirement with respect to the individualized issues raised by Forest's statute of limitations defense.
The superiority criterion requires that class action be "superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). In evaluating superiority, courts consider 1) the interests of class members in individually litigating separate actions, 2) the extent and nature of existing litigation that concerns the controversy and involves the class members, 3) the desirability of concentrating the litigation of the claims in a particular forum and 4) the likely difficulty in managing a class action.
Painters asserts that a class action would be superior because 1) for most TPPs, the cost of litigating the action individually would "likely eclipse any possible recovery", 2) the Judicial Panel on Multidistrict Litigation has already determined that the litigation be concentrated in this Court, 3) adjudicating one class action is more judicially efficient than adjudicating "thousands of individual" actions and 4) there are no issues of manageability.
Forest responds that the "myriad individualized inquiries" indicate that class-wide adjudication would not be superior. It claims that the purpose of class adjudication does not apply here where TPPs are sophisticated entities with ample incentive and significant resources to pursue individual actions, particularly in light of their observations that 1) successful RICO plaintiffs can receive treble damages and attorney's fees and 2) "[o]ver half a dozen TPPs have filed suit in this MDL and in state court".
A class action is not the superior method of adjudicating this case. As discussed above, Painters cannot establish but for causation or injury with common proof sufficient to satisfy the predominance requirement. Evaluation of the but for causation and injury issues will require individualized evidence from each TPP that
The Court thus declines to certify the nationwide RICO classes because Painters cannot satisfy the Rule 23(b)(3) requirements of 1) predominance with respect to but-for causation, injury, damages and the statute of limitations defense or 2) superiority.
Painters, a Minnesota TPP, also seeks certification of two subclasses under the Minnesota Consumer Fraud Act and the Minnesota Unlawful Trade Practices Act. The MCFA prohibits:
Minn. Stat. § 325F.69(1). The MUPTA provides:
Minn. Stat. § 325D.13. Painters brings its Minnesota claims pursuant to the "private attorney general statute" which provides a private cause of action to "any person injured by a violation" of the MCFA or MUPTA. Minn. Stat. § 8.31(3)(a).
The Minnesota subclasses do not satisfy the Rule 23(b)(3) requirements of predominance or superiority for the same reasons that the nationwide RICO classes do not meet those requirements. The subclasses will not be certified.
For the foregoing reasons, plaintiff's motion to certify class (Docket No. 546) is DENIED.