United States: Second Circuit Rejects Health-Benefit Plans' Class Bid To Recover Costs Of Antibiotic Drug Telithromycin

On November 13, 2015, the Second Circuit affirmed the denial of class treatment for claims by three health-benefit plans to recover the amounts they paid for the antibiotic drug Telithromycin, marketed as "Ketek." Sergeants Benevolent Ass'n Health & Welfare Fund v. sanofi-aventis U.S., LLP, No. 14-2318-cv, 2015 U.S. App. LEXIS 19797 (2d Cir. Nov. 13, 2015). Plaintiffs brought suit under the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. § 1961 et seq. ("RICO"), and various state laws, claiming that Defendants engaged in mail fraud by failing to disclose the true risks of Ketek. They sought a full refund of all Ketek prescription payments they made on the theory that Ketek would not have been prescribed if Defendants did not misrepresent Ketek's safety risks. Relying on UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121 (2d. Cir. 2010) ("Zyprexa"), the district court denied Plaintiffs' motion for class certification on the basis that their aggregate proof of causation and injury was insufficient to avoid the necessity of examining the individual decisions of prescribing physicians. Noting that its Zyprexa decision does not foreclose all such claims, the Second Circuit nonetheless affirmed. "While it may be possible for a class of plaintiffs to prove the causation element of a pharmaceutical fraud claim such as this one with generalized proof, Plaintiffs have failed to offer such proof here." Sergeants, 2015 U.S. App. LEXIS 19797, at *3.

Following the denial of class certification, the district court granted summary judgment in favor of Defendants because Plaintiffs relied on the same aggregate proof they advanced to demonstrate class wide proof of injury and damage, which the district court again found insufficient to create a material issue of fact as to causation and injury. In affirming the district court's grant of summary judgment, the Second Circuit reached an issue it did not decide in Zyprexa: whether aggregate proof that is insufficient to establish class-wide proof of causation and injury likewise precludes an individual health-benefit plan's attempt to recover its own prescription costs. Again, the Second Circuit viewed Plaintiffs' aggregate proof as insufficient because it was not probative on the issue of causation, characterizing it as nothing more than "simplistic correlation." Sergeants, 2015 U.S. App. LEXIS 19797, at *71. Because Plaintiffs presented no individualized evidence that they or any of their members' treating physicians would have made a different decision to prescribe or pay for Ketek based on new information about its safety, they failed to demonstrate a triable issue of fact.

The aggregate proof offered by Plaintiffs in Sergeants was a so-called "descriptive analysis" of the pattern of Ketek sales following the FDA's withdrawal of two of three approved indications in early 2007. Pointing to the monotonic decline in Ketek sales after early 2007, and arguing that the FDA's decision was prompted by increasing safety concerns as a result of a spike in reports of hepatic adverse events associated with Ketek in 2006, Plaintiffs argued that physicians must have prescribed Ketek in reliance on Defendants' misrepresentations because they stopped prescribing Ketek upon learning of new information in 2007. The Court held that such evidence was insufficient to demonstrate causation. Defendants showed that there were many factors that could have caused a decline in Ketek sales, such as the Defendants' decision to stop promoting Ketek in 2007, the entry of authorized generics in the market, and seasonal patterns in prescriptions. Plaintiffs' expert conceded that she was not asked to perform the type of regression analysis that might have isolated the causal affects of the numerous variables bearing upon the decline in Ketek sales. However, the Court declined to express any view on whether a regression analysis would be sufficient to prove causation on a class-wide basis in other such cases. Cf. In re Neurontin Mktg. & Sales Practices Litig., 712 F.3d. 21 (1st Cir. 2013).

Defendants sanofi-aventis LLP and sanofi-aventis U.S., Inc. were represented in this action by Troutman Sanders' attorneys William N. Withrow, Jr., Lindsey B. Mann, and J. Nick Phillips.

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