Humana, Inc. v. Indivior, Inc. ( 2022 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 21-2573 & 21-2574
HUMANA, INC.,
Appellant in 21-2573
v.
INDIVIOR, INC., f/k/a Reckitt Benckiser Pharmaceuticals, Inc.;
INDIVIOR SOLUTIONS, INC., f/k/a Reckitt Benckiser Pharmaceuticals Solutions, Inc.;
INDIVIOR PLC; RECKITT BENCKISER HEALTHCARE (UK) LTD.;
RECKITT BENCKISER GROUP PLC;
AQUESTIVE THERAPEUTICS, INC., f/k/a
Monosol RX, LLC
CENTENE CORPORATION; WELLCARE HEALTH PLANS, INC.;
NEW YORK QUALITY HEALTHCARE CORPORATION doing business as
Fidelis Care; HEALTH NET, LLC,
Appellants in 21-2574
v.
INDIVIOR, INC., f/k/a Reckitt Benckiser Pharmaceuticals, Inc.;
INDIVIOR SOLUTIONS, INC., f/k/a Reckitt Benckiser Pharmaceuticals Solutions, Inc.;
INDIVIOR PLC; RECKITT BENCKISER GROUP, PLC; RECKITT BENCKISER
HEALTHCARE (UK) LTD; AQUESTIVE THERAPEUTICS, INC., f/k/a
Monosol RX, LLC
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D. C. Nos. 2-20-cv-04602 & 2-20-cv-05014)
District Judge: Honorable Mitchell S. Goldberg
Argued on March 31, 2022
Before: RESTREPO, ROTH, and FUENTES, Circuit Judges
(Opinion filed: December 15, 2022)
Keith J. Harrison
Daniel W. Wolff
Crowell & Moring
1001 Pennsylvania Avenue, N.W.
Washington, DC 20004
Jonathan S. Massey (ARGUED)
Massey & Gail
1000 Maine Avenue, S.W.
Suite 450
Washington, DC 20024
Counsel for Appellants
Brett W. Bell
Jones Day
901 Lakeside Avenue
North Point
Cleveland, OH 44114
Jonathan B. Berman (ARGUED)
William D. Coglianese
Jones Day
51 Louisiana Avenue, N.W.
Washington, DC 20001
Tiffany D. Lipscomb-Jackson
Jones Day
325 John H. McConnell Boulevard
Suite 600, P.O. Box 165017
Columbus, OH 43215
Counsel for Appellees Indivior Solutions, Inc. and Indivior, PLC
Mark A. Ford
Timothy Perla
Wimer Cutler Pickering Hale & Dorr
60 State Street
Boston, MA 02109
Counsel for Appellees Rickett Benckiser Healthcare (UK) LTD and Rickett
Benckiser Group, PLC
Daniel Aldrich
James F. Hibey
Steptoe & Johnson
1330 Connecticut Avenue, N.W.
Washington, DC 20036
John J. Byron
Steptoe & Johnson
227 West Monroe Street
Suite 4700
Chicago, IL 60606
Jamie Lucia
Steptoe & Johnson
One Market Plaza
Steuart Tower, 10th Floor
Suite 1070
San Francisco, CA 94105
Counsel for Appellee Aquestive Therapeutics, Inc.
Charles Z. Kopel
Lowey Dannenberg
One Tower Bridge
100 Front Street, Suite 520
West Conshohocken, PA 19428
3
Uriel Rabinovitz
Peter D. St. Phillip, Jr.
Lowey Dannenberg
44 South Broadway
Suite 1100
White Plains, NY 10601
Counsel for Amicus Appellant America’s Health Insurance Plans, Inc.
OPINION*
ROTH, Circuit Judge.
Humana, Inc., and Centene Corporation (Insurers) are health benefit program
insurers that provide their members with insurance to cover prescription drug costs. They
maintain approved lists of medications covered by their members’ health insurance plans.
These lists are known as formularies. Defendants are companies that are involved in the
development, manufacture, and sale of Suboxone and Suboxone film, two forms of a drug
used to treat opioid addiction. According to Insurers, defendants engaged in a nationwide
racketeering effort to convince Insurers to place Suboxone film on their formularies. As a
result of this effort and the alleged misrepresentations made by defendants in connection
with it, Insurers did place Suboxone film on their formularies. Insurers have now brought
suits in federal court,1 alleging substantive and conspiracy offenses in violation of the
* This disposition is not an opinion of the full Court and under I.O.P. 5.7 does not constitute
binding precedent.
1
The Insurers’ complaints consist of substantially the same allegations. Although
appellants in these appeals brought two separate lawsuits by filing similar complaints, those
lawsuits were consolidated in the District Court, and this Court consolidated the appeals
for all purposes.
4
Racketeer Influenced and Corrupt Organizations Act (RICO), as well as numerous state-
law claims. 2
The District Court dismissed Insurers’ complaints with prejudice, reasoning that the
Insurers had alleged their RICO claims based on a theory of injury caused by their
downstream reimbursements for Suboxone film,3 a theory foreclosed by the indirect-
purchaser rule.4 The court held that, because Insurers merely reimbursed the purchase of
Suboxone film, they were indirect purchasers of the drug and therefore lacked standing
under the indirect-purchaser rule, first articulated in Illinois Brick Co. v. Illinois,5 and
subsequently applied by this Court to RICO cases in McCarthy v. Recordex Service, Inc.6
Insurers appealed, asserting that the indirect-purchaser rule did not apply to them. They
allege that they have stated a claim for relief of a direct injury under In re Avandia
Marketing, Sales Practices & Product Liability Litigation.7 Defendants assert that Avandia
is not applicable in this case.
For the reasons set out below, we will affirm the judgment of the District Court.
I.8
2
The viability of the state-law claims in federal court turns on whether the complaints
successfully invoke supplemental jurisdiction. Thus, if the RICO claims cannot be
sustained, then the state-law claims cannot independently proceed in federal court.
3
JA23–24.
4
JA23–24.
5
431 U.S. 720 (1977).
6
80 F.3d 842 (3d Cir. 1996).
7
804 F.3d 633 (3d Cir. 2015).
8
These facts are taken from the complaints and treated as true because, in reviewing a
denial of a motion under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), we accept
as true all well-pleaded allegations and construe the complaints in the light most favorable
to the plaintiffs. See Lewis v. Atlas Van Lines, Inc., 542 F.3d 403, 405 (3d Cir. 2008).
5
Insurers sell insurance plans that cover drug costs. Defendants have developed,
manufactured, and sold Suboxone, a drug used to treat opioid addiction, and the related
Suboxone film, which is the drug at issue here.9 In 2009, Invidior’s exclusivity on
Suboxone tablets was about to expire. Generic pharmaceutical companies would then be
able to produce less expensive versions of the tablets and Invidior would lose a great deal
of business. To avoid this, Invidior and Aquestive Therapeutics, Inc., developed a
sublingual film version of Suboxone. When the film was approved by the FDA, defendants
started a campaign to induce physicians, patients and health plans to switch from Suboxone
tablets to Suboxone film. In this way, by the time generic tablets entered the market, a
majority of patients had already switched to Suboxone film and Invidior and Aquisitive
now had exclusivity on the film.
According to Insurers, defendants’ scheme caused Insurers to “continue[ ] to pay
higher prices for treatment of [their] insureds.”10 Specifically, they allege that defendants
“designed and coordinated” their scheme to “charge and maintain inflated prices for
Suboxone, the Suboxone market, and to defraud payors like” Insurers. 11 In addition,
Insurers claim that they “paid hundreds of millions of dollars for Suboxone film, as well
as higher prices for Suboxone tablets, due to the mail and wire fraud, and pattern of
racketeering activity alleged” in the complaints.12
9
JA69–70; JA290.
10
JA70; JA290.
11
JA114; JA336.
12
JA340.
6
Insurers specifically admit that they made “indirect purchases of Suboxone” but
claim that they “suffered injuries when [they] reimbursed prescriptions for Suboxone.”13
Insurers also allege that “the institutional structure of pricing and regulation in the
pharmaceutical drug industry assures that overcharges at the higher level of distribution
are passed on to end-payors like” them.14 Thus, “[w]holesalers and retailers passed on the
inflated prices of Suboxone to” the Insurers.15 This characterization, however, fits the
description of a “third-party payor” who is barred from recovery in a RICO action by the
indirect-purchaser rule.
Insurers, nonetheless, attempt to invoke their theory of direct injury. They allege
that defendants fraudulently induced them to include Suboxone film on their formularies,
and thus defendants’ scheme directly injured them. They allege that “[d]riving formulary
support for Suboxone film through payors—like [the Insurers]—was a key goal of the
Suboxone Scheme because third-party payors like [the Insurers] were the ultimate source
of [defendants’] profits.”16 The Insurers claim that they “reasonably relied on [defendants’]
statements and misrepresentations—not knowing they were false statements or
misrepresentations—and included Suboxone film on [their] formularies. [The Insurers]
rightfully relied on [defendants’] false statements and misrepresentations.”17 18
13
JA130; JA353.
14
JA124; JA346.
15
JA124; JA346.
16
JA84; JA305.
17
JA133; JA355–56.
18
We note, however, that the above allegations are not directly connected in the complaints
to the Insurers’ RICO claims. The complaints make only passing reference to the
formularies. They do not define formularies. Nor do they describe the misrepresentations,
7
II.19
The District Court dismissed the Insurers’ complaints because it found that the
Insurers’ RICO claims turned on an indirect injury that they suffered from being end-
payors.20 The court concluded that the Insurers do not have RICO standing to assert their
primary theory: that the Insurers “suffered injuries when [they] reimbursed prescriptions
for Suboxone.”21 For that reason, they suffered no direct injury from defendants’ alleged
RICO scheme. Thus, the District Court held that the Insurers lacked RICO standing under
the indirect-purchaser rule.
As mentioned above, this characterization of the Insurers’ position aligns with the
definition of a “third-party payor,” which comprises those who are barred from recovery
in a RICO action by the indirect-purchaser rule. The Supreme Court first recognized that
plaintiffs, asserting Clayton Act violations, cannot demonstrate an injury by providing
who made them, to whom they were made, or which statements the Insurers relied on when
they placed Suboxone film on their formularies. In fact, in support of their state-law claims
(not of their RICO claims), the Insurers merely make the conclusory allegation only that
they “reasonably relied on [defendants’] statements and misrepresentations . . . and
included Suboxone film on [their] formularies.” JA133; JA355–56.
19
This Court has appellate jurisdiction over the District Court’s final decision pursuant to
28 U.S.C. § 1291. “Whether the District Court had jurisdiction is the issue before us. We
exercise plenary review over all jurisdictional questions, including those related to
standing.” Const. Party of Pa. v. Aichele, 757 F.3d 347, 356 n.12 (3d Cir. 2014) (citing
Belitskus v. Pizzingrilli, 343 F.3d 632, 639 (3d Cir.2003)).
20
As the District Court correctly noted, cases involving allegations of fraud are subject to
a heightened pleading standard in lieu of the traditional pleading standard enumerated by
Fed. R. Civ. P. 8(a)(2). Under Fed. R. Civ. P. 9(b), “In alleging fraud or mistake, a party
must state with particularity the circumstances constituting fraud or mistake. Malice, intent,
knowledge, and other conditions of a person’s mind may be alleged generally.”
21
JA130; JA353.
8
evidence of being an “indirect purchaser.”22 The Court instituted the indirect-purchaser
rule because pecuniary recoveries by indirect purchasers would “transform treble-damages
actions into massive multiparty litigations involving many levels of distribution and
including large classes of ultimate consumers remote from the defendant.” 23 We later
recognized in McCarthy that the same policy concerns apply to RICO cases.24 Thus, the
indirect-purchaser rule is applicable here.
The main theory advanced in the Insurers’ complaints is a textbook indirect-
purchaser theory: They seek redress for injuries suffered because their insureds purchased
Suboxone film and the Insurers reimbursed those purchases. In their complaints, the
Insurers allege that defendants “marketed, sold, purchased, or provided Suboxone film to
thousands of individuals” and that the Insurers “suffered injuries when [they] reimbursed
prescriptions for Suboxone [film] that otherwise would not have been made and/or paid
the higher prices that resulted from illegal conduct.”25 In that way, based on the Insurers’
complaints, the injury that the Insurers purportedly suffered came from the “reimbursed
prescriptions.”26 Such a claim is barred by the indirect-purchaser rule.
On appeal, however, the Insurers contend that the District Court’s analysis did not
address their theory of direct, cognizable injury, a theory based on the contention that
defendants fraudulently induced them to include Suboxone film on their formularies. But
22
Illinois Brick Co. v. Illinois, 431 U.S. 720, 737 (1977).
23
Id.24
McCarthy v. Rocordex Serv., Inc., 80 F.3d 842, 851 (3d Cir. 1996) (recognizing that “all
of the policy concerns expressed in Illinois Brick were implicated” in RICO cases).
25
JA130; JA353.
26
JA130; JA353.
9
even if we were to take the Insurers’ claim at face value, they still fail to satisfy the Rule
9(b) standard of particularity. Because the Insurers’ claim is one of fraud, it must comply
with Fed. R. Civ. P. 9(b). As mentioned above, “In alleging fraud or mistake, a party must
state with particularity the circumstances constituting fraud or mistake.”27 “The purpose
of Rule 9(b) is to provide notice of the ‘precise misconduct’ with which the defendants are
charged and to prevent false or unsubstantiated charges.”28 “Although Rule 9(b) falls short
of requiring every material detail of the fraud such as date, location, and time, plaintiffs
must use ‘alternative means of injecting precision and some measure of substantiation into
their allegations of fraud.’”29 One such alternative measure would have been through
satisfaction of the standard set forth by the RICO statute, which “requires (1) conduct (2)
of an enterprise (3) through a pattern (4) of racketeering activity. The plaintiff must, of
course, allege each of these elements to state a claim.”30
And yet, there is no specific allegation of injury or pattern other than the expense of
the drug involved. The Insurers’ complaints make only passing references to formularies.
They fail to specify, for example: which of Defendants’ misrepresentations Insurers relied
27
Fed. R. Civ. P. 9(b).
28
Rolo v. City Investing Co. Liquidating Gr., 155 F.3d 644, 658 (3d Cir. 1998), abrogation
on other grounds recognized by Forbes v. Eagleson, 228 F.3d 471 (3d Cir. 2000).
29
In re Rockefeller Ctr. Properties, Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002) (citing
In re Nice Systems, 135 F.Supp.2d 551, 577 (D.N.J. 2001)).
30
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985); see also Lum v. Bank of Am.,
361 F.3d 217, 223 (3d Cir. 2004) (“Where, as here, plaintiffs rely on mail and wire fraud
as a basis for a RICO violation, the allegations of fraud must comply with Federal Rule of
Civil Procedure 9(b), which requires that allegations of fraud be pled with specificity.”),
abrogation on other grounds recognized by In re Ins. Brokerage Antitrust Litig., 618 F.3d
300, 323 n.22 (3d Cir. 2010).
10
on when they placed Suboxone film on their formularies; to whom or by whom those
misrepresentations were made; or when they were made. At most, the Insurers state the
conclusory allegation that they “reasonably relied on [defendants’] statements and
misrepresentations . . . and included Suboxone film on [their] formularies.”31
To comply with Rule 9(b), Insurers’ must at least describe, with particularity, how
they were induced by Defendants. Instead, they merely claim that they were induced
without pointing to which misrepresentations caused their induction. In other words, under
Rule 9(b), there is no indication which “circumstances constitute[ed] the fraud” they
complain of. If this Court cannot say how defendants’ fraud caused Insurers’ injury, it
cannot say that Fed. R. Civ. P. 9(b) was satisfied.32
III.
For the reasons stated above, we will affirm the District Court’s order, dismissing
the Insurers’ complaints.
31
JA133; JA355–56.
32
We also agree with defendants that Avandia is not applicable here. The Insurers here
did not overcome the heightened pleading standard. Thus, this Court need not contrast this
matter with Avandia any further.
11