Aetna, Inc. v. Pfizer, Inc.

United States Court of Appeals
For the First Circuit
No. 11-1595
IN RE: NEURONTIN MARKETING AND SALES PRACTICES LITIGATION
AETNA, INC.,
Plaintiff, Appellant,
v.
PFIZER, INC.; WARNER-LAMBERT COMPANY, LLC,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Lynch, Chief Judge,
Souter,* Associate Justice,
and Lipez, Circuit Judge.
Peter D. St. Phillip, with whom Richard W. Cohen, Gerald
Lawrence, and Lowey Dannenberg Cohen & Hart, P.C. were on brief,
for appellant.
Mark S. Cheffo, with whom Katherine A. Armstrong and Skadden,
Arps, Slate, Meagher & Flom LLP were on brief, for appellees.
*
Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
April 3, 2013
LYNCH, Chief Judge. In Kaiser Foundation Health Plan,
Inc. v. Pfizer, Inc. (Kaiser), Nos. 11-1904, 11-2096 (1st Cir. ____
__, 2013), a related appeal in which we also issue an opinion
today, we affirmed a court and jury verdict against Pfizer, Inc.
("Pfizer"), under section 1962 of the Racketeer Influenced and
Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-68, and a state
statute, for fraudulent marketing of off-label uses of its drug
Neurontin. The arguments presented in Kaiser and in another
related appeal in which we issue an opinion today, Harden
Manufacturing Co. v. Pfizer, Inc., No. 11-1806 (1st Cir. ____ __,
2013), on most issues are the same as or parallel to those
presented in this appeal, which concerns the claims of Aetna, Inc.
("Aetna") against Pfizer. Many of the arguments made by Pfizer
against Aetna in this case were rejected in Kaiser.
This case comes to us on Aetna's appeal from a grant of
summary judgment in favor of Pfizer and against Aetna. In the
Kaiser case, after trial, Pfizer lost. While the trial record in
Kaiser was somewhat larger than the record here, the record on
summary judgment in this case was very similar and included much
the same expert and other evidence as to causation.
The outcome of this case turns on whether Aetna, a health
insurer which makes claims of harm from third-party payments for
its insureds' fraudulently induced prescriptions, is so differently
situated from Kaiser that summary judgment was correctly entered
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against it, thus precluding it from proving its case to a jury.
The district court largely distinguished this case from Kaiser's on
the basis that Kaiser had much stronger evidence of
misrepresentations made directly to Kaiser and reliance by Kaiser
on those misrepresentations in its formulary decisions.
We conclude that Aetna presented evidence of causation
and damages sufficient to survive summary judgment on its RICO
claim, and reverse the dismissal of this claim. We vacate the
district court's dismissal of Aetna's claim under the Pennsylvania
Insurance Fraud Statute (PIFS), 18 Pa. Cons. Stat. § 4117.
I.
We assume familiarity with the description of this case's
procedural history and facts set forth in Kaiser, slip op. at 3-22.
On February 1, 2005, Aetna filed a coordinated complaint with
Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals
(together, "Kaiser") and Guardian Life Insurance Company of America
("Guardian") in the U.S. District Court of Massachusetts against
Pfizer and Warner-Lambert Company (together, "Pfizer"). The
coordinated plaintiffs asserted that they had suffered injury from
the fraudulent marketing of Neurontin for off-label uses, and
alleged violations of, inter alia, RICO and the PIFS. The
coordinated complaint was part of a multidistrict litigation
("MDL") which had been consolidated in the District of
Massachusetts on November 24, 2004.
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On March 2, 2009, Pfizer filed a motion seeking summary
judgment on all of the coordinated plaintiffs' pending claims. On
January 8, 2010, the district court granted Pfizer's motion in
part, dismissing the claims of Guardian and Aetna, but denying
summary judgment as to Kaiser's claims. See In re Neurontin Mktg.
& Sales Practices Litig. (Neurontin Coordinated SJ), 677 F. Supp.
2d 479, 499 (D. Mass. 2010). The court entered judgment against
Guardian and Aetna and in favor of Pfizer on February 9, 2011, and
on April 20, 2011, the court denied Aetna's motion to alter or
amend judgment and motion for reconsideration. On May 19, 2011,
Aetna timely filed a notice of appeal as to the district court's
judgment against Aetna and the court's denial of Aetna's motion for
reconsideration.
II.
We review a district court's grant of summary judgment de
novo, "drawing all reasonable inferences in favor of the non-moving
party while ignoring 'conclusory allegations, improbable
inferences, and unsupported speculation.'" Sutliffe v. Epping Sch.
Dist., 584 F.3d 314, 325 (1st Cir. 2009) (quoting Sullivan v. City
of Springfield, 561 F.3d 7, 14 (1st Cir. 2009)). We must reverse
a grant of summary judgment if we find that "the nonmovant has
'established a genuine issue of material fact that a reasonable
jury could resolve in their favor.'" Rockwood v. SKF USA Inc., 687
F.3d 1, 9 (1st Cir. 2012) (emphasis omitted) (quoting Collins v.
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Univ. of N.H., 664 F.3d 8, 19 (1st Cir. 2011)). We assume
familiarity with the background facts concerning Neurontin's
development and FDA approval described in Kaiser, slip op. at 7-8.
These were not disputed at summary judgment. We describe only the
facts relevant to Aetna's appeal.
A. Neurontin's Effectiveness for Off-Label Uses
As the district court noted, Aetna presented studies
showing that Neurontin was not more effective than a placebo in
treating certain off-label indications. These studies included:
four clinical studies regarding bipolar disorder, Neurontin
Coordinated SJ, 677 F. Supp. 2d at 489; six clinical trials
regarding neuropathic pain, id.; four clinical trials regarding
nociceptive pain, id. at 490; three studies regarding migraine,
id.; and three clinical trials regarding doses above 1800 mg per
day, id. at 490-91.
B. Defendants' Marketing of Neurontin for Off-Label Uses
Beginning in late 1995 and early 1996, Parke-Davis, a
subsidiary of Warner-Lambert, began marketing Neurontin as an
effective treatment for bipolar disorder and other mood disorders,
neuropathic and nociceptive pain, migraines and other headaches,
and doses above 1800 mg per day, though the FDA had not approved
Neurontin for these off-label uses. These marketing efforts
continued after Pfizer purchased Parke-Davis in 2000, through at
least 2001, and are described in Kaiser, slip op. at 8-9.
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As the district court stated, Aetna "presented evidence
that Defendants communicated half truths that are actionable under
the RICO statute" in conducting this marketing, including by
"suppressing negative information while submitting for publication
in monographs positive information about off-label indications."
Neurontin Coordinated SJ, 677 F. Supp. 2d at 492; see also id. at
495, 498-99. Pfizer does not argue to the contrary on appeal.
C. Defendants' Targeting of Third-Party Payors ("TPPs"),
Including Aetna
Defendants' efforts to promote Neurontin, for both on-
label and off-label uses, demonstrated their understanding that
TPPs, including Aetna, would both play a role in determining demand
for Neurontin (by managing access to formularies, or lists of drugs
for which TPPs would pay) and ultimately pay for most prescriptions
of Neurontin.
In 1993, Parke-Davis listed Aetna as the number four
managed care plan it intended to target to encourage the use of
Neurontin as an anticonvulsant. In 1994, Parke-Davis commissioned
a survey of the pharmacy directors of ten managed care plans,
including Aetna. This study concluded that these plans, including
Aetna, were unlikely to place formulary restrictions on
anticonvulsants. A 1998 Parke-Davis business plan stated that,
"[i]n general, formulary access is not an issue for Neurontin so
share building programs can be carried out unrestricted." Pfizer
prepared a marketing business plan regarding Aetna in 2002 that
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noted that Pfizer's "sales representatives have open access to the
providers" in Aetna's network. That same year, Pfizer established
a Neurontin Outcomes Research Task Force that sought to support the
marketing of Neurontin for neuropathic pain and to prepare "for a
more vigorous defense of reimbursement" to managed care plans. In
2003, as Neurontin's patent neared expiration, defendants
commissioned a study by a market research company of how TPPs would
react to a new tablet form of the drug intended to compete with
generic forms of the drug. The market research company conducted
focus groups with TPP representatives, including representatives
from Aetna. Pfizer prepared "HMO Opportunity Reports" for
Neurontin that tracked formulary status, projected annual sales and
prescriptions, potential profits, and market share for various
HMOs, including Aetna. Pfizer also tracked sources of revenue for
Neurontin sales; in 2001, Pfizer recorded that 69% of its Neurontin
revenues came from TPPs.
D. Aetna's Decision to Pay for Neurontin Prescriptions
Aetna, a large TPP, provides health payment benefits to
more than 13 million people across the country. Aetna added
Neurontin to its formulary -- a list of drugs it agreed to pay for
under its member contracts -- soon after the FDA approved Neurontin
in 1993 for use as an add-on therapy in the treatment of epilepsy.
Aetna had a formulary development team comprised of
pharmacists who developed clinical reviews of drug classes to
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present to Aetna's Pharmacy and Therapeutics Committee ("P & T
Committee"). These reviews presented all the clinical information
available to Aetna about a drug class, and included all the drugs
within a class used for a particular therapeutic purpose. The
formulary development team looked at package inserts, drug
compendia, and online collections of clinical research, and also
met with drug manufacturers to get information that had not been
published.
Aetna's P & T Committee met monthly to determine what
would be included on formularies, as well as appropriate coverage
restrictions on drug classes, by majority vote. The Committee
reviewed clinical drug reviews, previous clinical policy bulletins
the Committee had issued, and any other formulary documents (such
as formulary guides disseminated to doctors). The Committee
considered the safety, efficacy, on-labeled indications, and
off-label indications of drugs, as well as cost information and the
other drugs within a class. To control drug prescriptions, Aetna
used formulary controls and mailings to physicians.
Aetna initially decided not to place formulary
restrictions on the anticonvulsant drug class, which included
Neurontin. In late 2003, however, Aetna decided to manage the
class of anticonvulsants because it wanted to encourage the use of
first-line monotherapy drugs. Neurontin was moved to
"non-preferred" status. That is, Aetna imposed quantity (i.e.,
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dose) limits on Neurontin prescriptions in 2004, and step edits
(under which other drugs needed to be tried before Neurontin could
be prescribed) in 2006. Some other anticonvulsants were moved to
non-preferred status at the same time.
Michael Brodeur, the head of formulary development and
clinical pharmacy policies at Aetna, had communications with Pfizer
and Warner-Lambert, but did not remember any specific
communications about Neurontin. Aetna conceded that defendants, in
any communications to Aetna about Neurontin, had not made any
direct misrepresentations to it, its P & T Committee, or its
formulary development team. Before January 2004, Aetna did not
manage the drug class which included Neurontin. But Brodeur stated
that, had the facts concerning the manufacturers' misleading
marketing campaign surfaced earlier, he believed this would have
led Aetna to start to manage this drug class at an earlier date.
E. Statistical Evidence of Causation
The summary judgment record included the statistical
evidence presented by experts Dr. Meredith Rosenthal, Ph.D., and
Dr. Raymond Hartman, Ph.D., that we described in Kaiser, slip op.
at 13-16, 19-20. For the reasons stated in Kaiser, that evidence
could be found by a reasonable factfinder to show that Pfizer's
marketing of Neurontin for off-label indications caused a sharp
increase in the number of prescriptions that Aetna paid for or
reimbursed.
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Dr. Rosenthal, an associate professor of health economics
and policy at the Harvard School of Public Health, submitted an
expert report in which she used "standard econometric methods" to
quantify the impact of defendants' promotional activities on the
number of off-label prescriptions of Neurontin written. Dr.
Rosenthal's data on promotional spending included defendants'
expenditures on detailing and advertising in professional journals.
Her database included prescriptions paid for by Aetna, as did Dr.
Hartman's.
Dr. Rosenthal's analysis demonstrated that defendants'
marketing of Neurontin for the off-label indications of bipolar,
neuropathic pain, nociceptive pain, migraine, and doses over 1800
mg per day caused 43 million off-label prescriptions of Neurontin
between 1995 and 2004. This total included prescriptions for
Neurontin for these uses paid for by Aetna. She concluded that
nationally during this period, defendants' off-label marketing
caused 99.4% of the Neurontin prescriptions written by
psychiatrists for bipolar; 27.9% of the Neurontin prescriptions
written by neurologists for migraine; 70.0% of the Neurontin
prescriptions for neuropathic pain; 84.7% of the Neurontin
prescriptions for nociceptive pain; and 37.5% of the Neurontin
prescriptions for doses exceeding 1800 mg per day.
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III.
In ruling on defendants' motion for summary judgment, the
district court concluded that Aetna had "presented evidence that
Defendants communicated half truths that are actionable under the
RICO statute," Neurontin Coordinated SJ, 677 F. Supp. 2d at 492,
and that plaintiffs "presented sufficient evidence to support
[their] RICO claim that Neurontin was ineffective for the off-label
indications," so that they sustained injury from paying for off-
label prescriptions of Neurontin, id. at 498.
However, the court also determined that:
There is no evidence in the record that Guardian or Aetna
at any point directly relied on Pfizer's "half truths,"
communicated through its alleged manipulation and
withholding of studies that suggested Neurontin's
ineffectiveness for off-label indications. Rather, their
causation argument is wholly dependent on individualized
proof that their members' prescribing physicians relied
on defendants' misrepresentations. Because the Court has
concluded that the evidence provided in support of this
theory, namely the aggregate evidence presented in Dr.
Meredith Rosenthal's report, is legally insufficient to
effectively segregate damages caused by Defendants'
misrepresentations from damages caused by other sources,
Guardian and Aetna cannot rely solely on the aggregate
evidence to prove causation. Accordingly, the motion for
summary judgment with respect to Guardian and Aetna will
be allowed.
Id. at 497 (emphasis added) (footnote omitted). The district court
determined that "[w]hile each of the Coordinated Plaintiffs can
prove through aggregated proof that the fraudulent marketing
campaign likely caused them injury, they cannot prove which
doctor's prescriptions were caused by Defendants' alleged
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fraudulent misrepresentations or omissions and which were not."
Id. at 495. Because Aetna did not present proof of its direct
reliance upon defendants' misrepresentations,1 as Kaiser did, the
court concluded that Aetna's evidence of but-for causation -- which
relied largely on aggregate statistical evidence -- was
insufficient as a matter of law. The district court granted
defendants' motion for summary judgment as to Guardian and Aetna's
claims, including Aetna's claim under the PIFS (though the court
did not discuss this claim separately). Id. at 499.
Aetna argues on appeal that the district court erred in
rejecting its aggregate evidence of causation and damages under
RICO and in requiring Aetna to present stronger evidence of direct
misrepresentations and reliance as to its formulary. Aetna also
argues that the court erred in dismissing its claim under the PIFS.
Defendants respond that the court correctly rejected Aetna's
aggregate evidence and PIFS claim, and that Aetna's RICO claim was
further doomed by its failure to present evidence of proximate
causation or injury.
1
Aetna argues on appeal that in addition to its aggregate
evidence of but-for causation, it presented Brodeur's testimony as
to the effect of Pfizer's suppression of negative information about
Neurontin's off-label effectiveness on Aetna's decision not to
impose restrictions on Neurontin in its formulary. Because we
conclude that Aetna's aggregate evidence of but-for causation was
sufficient to survive summary judgment, we need not separately
consider the adequacy of Brodeur's testimony.
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A. RICO: But-For Causation and Aggregate Evidence
The but-for causation question in this case is "whether,
absent Pfizer's fraud, [a plaintiff TPP] would have paid for fewer
off-label Neurontin prescriptions." Kaiser, slip op. at 24. In
Kaiser, we noted "the use of . . . aggregate evidence to show
causation under several causes of action" and concluded that there
was "no reason to reach a different conclusion for the specific
subset of RICO claims based on fraudulent marketing." Id. at 54.
We believe the evidence Aetna presented on but-for causation --
that in the absence of Pfizer's alleged fraud, Aetna would have
paid for fewer off-label prescriptions of Neurontin -- survives
summary judgment.2 Aetna's evidence of but-for causation included
not only aggregate statistical evidence, but circumstantial
evidence, such as the increase in off-label prescriptions of
Neurontin following the initiation of Pfizer's alleged fraudulent
marketing efforts, and the fact that Pfizer embarked on these
efforts in order to increase sales of Neurontin for off-label uses.
The absence of evidence from individual doctors in this record does
not defeat our conclusion that summary judgment was inappropriately
2
Defendants argue on appeal that "[a]ggregate proof of
reliance in these circumstances is impermissible for the additional
reason that it represents a back-door attempt to invoke the 'fraud
on the market' doctrine, which is limited to the securities context
and cannot be applied to Plaintiffs' RICO claims." As we explained
in Kaiser, slip op. at 29 n.9, the analogy between the fraud-on-
the-market doctrine and the use of aggregate evidence in civil RICO
cases is inapt.
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granted.3 It should have been left to a jury to weigh the
aggregate and circumstantial evidence of causation presented by
Aetna against any failure to present individualized testimony from
doctors.
While Aetna did have the burden of "segregat[ing] damages
caused by Defendants' misrepresentations from damages caused by
other sources," Neurontin Coordinated SJ, 677 F. Supp. 2d at 497,
this did not mean that Aetna was required to "prove which doctor's
prescriptions were caused by Defendants' alleged fraudulent
misrepresentations," id. at 495, as the district court concluded.
Quantifying the damages caused by defendants' alleged fraud belongs
to the damages phase of Aetna's RICO case, and "[o]n that phase of
the case the plaintiff has a more relaxed burden of proof." BCS
Servs., Inc. v. Heartwood 88, LLC, 637 F.3d 750, 759 (7th Cir.
2011).
3
Defendants argue that Aetna failed to make an adequate
showing of but-for causation because it "did not produce a single
doctor who claimed to have 'relied on a misrepresentation or
omission in prescribing Neurontin for an off-label indication.'"
Defs.' Br. at 19 (quoting Neurontin Coordinated SJ, 677 F. Supp. 2dat 495). Aetna's failure to present the form of but-for causation
evidence that defendants would have favored does not mean that the
evidence Aetna did present was insufficient for a jury to conclude
that Aetna showed the needed causation. Moreover, as we noted in
Kaiser, slip op. at 50, relying on physicians' individual
recollections as to their prescribing decisions might have been an
unreliable approach.
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B. RICO: Proximate Causation
Pfizer also argues that summary judgment was, in any
event, appropriate because there was inadequate evidence of
proximate causation. For reasons similar to those we enunciated in
Kaiser, we conclude that Aetna made a sufficient showing of
proximate causation to withstand summary judgment.
Regarding Pfizer's argument that Aetna, unlike Kaiser,
has not shown direct reliance on Pfizer's misrepresentations,
direct reliance is not an element of proximate cause in a private
RICO claim predicated on mail fraud. See Bridge v. Phoenix Bond &
Indem. Co., 128 S. Ct. 2131, 2134 (2008). Moreover, Aetna's
aggregate statistical evidence of causation did not rely upon the
theory that direct misrepresentations by Pfizer influenced Aetna's
management of its formulary. Instead, Dr. Rosenthal demonstrated
a causal relationship between Pfizer's alleged fraudulent marketing
to doctors and Aetna's payment for off-label prescriptions of
Neurontin. Aetna did not have to show direct reliance to establish
proximate or but-for causation.
A jury could have found that Aetna, like Kaiser, was "the
primary and intended victim[] of the scheme to defraud," id. at
2139, and that the injury suffered was a "foreseeable and natural
consequence" of the fraudulent scheme, id. at 2144. Because TPPs
ultimately paid for most prescriptions of Neurontin, Pfizer
monitored TPPs' management of Neurontin on their formularies, kept
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track of sales to TPPs, and targeted TPPs as Neurontin customers,
with respect to both on-label and off-label sales of the drug.
Defendants particularly monitored sales to Aetna, targeted Aetna as
a Neurontin customer, and sought information from Aetna about its
formulary management practices and willingness to pay for Neurontin
instead of generic gabapentin. Pfizer prepared a marketing
business plan targeting Aetna. A reasonable jury could have
concluded based on this evidence that Aetna was the intended victim
of defendants' fraudulent scheme and that Aetna's economic injury
was a "foreseeable and natural consequence" of this scheme. That
is so even if the scheme involved making misrepresentations to
doctors about Neurontin's off-label effectiveness instead of making
those misrepresentations directly to Aetna itself.
The functional tests for proximate cause articulated in
Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 269-
70 (1992), further favor the conclusion that Aetna made an adequate
proximate causation showing. A jury could have ascertained the
amount of Aetna's damages based on Dr. Rosenthal's and Dr.
Hartman's expert reports; Aetna alone suffered the damages it
alleged, so there was no risk of multiple recoveries; and as the
party directly injured, Aetna was best placed to act as a private
attorney general. Id.
The "individualized decisions made by thousands of
physicians who decided to prescribe Neurontin" do not introduce
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such attenuation into Aetna's causal theory as to prevent a
reasonable jury from finding proximate causation, as defendants
contend. A reasonable jury could have concluded, based on the
evidence, that defendants' scheme relied upon the expectation that
fraudulent off-label marketing to doctors would induce them to act
in a foreseeable fashion -- i.e., to write off-label prescriptions
for Neurontin that would be paid for by Aetna.
C. RICO: Economic Injury
Defendants argue on appeal that the district court's
grant of summary judgment may also be affirmed on the alternate
theory, rejected by the district court, that Aetna failed to
present evidence of economic injury. Defendants argue that, to
establish the economic injury needed to make out its civil RICO
claim, Aetna was required to prove that Neurontin was always
ineffective for the off-label uses at issue,4 and that Aetna failed
to produce evidence of ineffectiveness at summary judgment.
Defendants are incorrect. Aetna presented evidence at summary
4
Defendants argue that Aetna "expressly disavowed any burden"
to prove Neurontin's ineffectiveness, and instead opposed summary
judgment based on a purportedly invalid "cheaper alternative"
theory of economic injury. That misrepresents Aetna's arguments
that it could prove economic injury based either on a "cheaper
alternative" theory or on a theory of Neurontin's ineffectiveness.
See Coordinated Pls.' Mem. Law in Opp'n to Defs.' Mot. Summ. J. at
18-21 & n.16. Because we conclude that Aetna presented sufficient
evidence of Neurontin's ineffectiveness to survive summary
judgment, we need not pass on the viability of the "cheaper
alternative" theory of injury.
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judgment5 that multiple clinical trials had demonstrated that
Neurontin was no more effective than placebo in treating the off-
label conditions at issue. A reasonable jury could have found from
the evidence on the summary judgment record that Neurontin was
ineffective for these uses,6 as the district court correctly
concluded. Neurontin Coordinated SJ, 677 F. Supp. 2d at 498 ("The
Court finds that [plaintiffs have] presented sufficient evidence to
support [their] RICO claim that Neurontin was ineffective for the
off-label indications . . . .").
D. Aetna's PIFS Claim
Coordinated plaintiffs asserted a PIFS claim pursuant to
18 Pa. Cons. Stat. § 4117(a)(2). The district court denied Aetna's
PIFS claim without separate discussion. Id. at 499. In light of
our holding on the RICO claim, we vacate and leave the matter for
further consideration on remand.
5
Defendants devote much of their argument on this point to
the evidence presented at the trial on Kaiser's claims, and to the
district court's findings with respect to Kaiser's state law claim,
rather than examining the evidence of ineffectiveness plaintiffs
presented at summary judgment. In this case "we review the record
as it existed at the time the district court rendered its ruling."
Lewis v. City of Boston, 321 F.3d 207, 214 n.7 (1st Cir. 2003).
Further, on the fuller trial record, we rejected Pfizer's argument.
6
Defendants argue that "Aetna had the burden of proving that
none of its members derived any benefit from the defendant's drug,"
but they offer no authority in support of this contention, and it
is plainly incorrect. As we noted in Kaiser, slip op. at 57, "due
to the placebo effect, some patients would report improvements
regardless of whether the drug was scientifically effective for
their conditions."
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IV.
The judgment of the district court is reversed as to
Aetna's RICO claim, and vacated as to Aetna's PIFS claim. We
remand for further proceedings consistent with this opinion.
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