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First Circuit Decision Opens Door for More RICO Claims


By Mari Serebrov
Washington Editor

An appellate court's ruling Wednesday against Pfizer Inc. paints the way forward for more racketeering claims against drugmakers who plead guilty to criminal off-label promotion charges as part of a government settlement.

In separate opinions handed down Wednesday, the U.S. Court of Appeals for the First Circuit upheld a $142 million racketeering verdict against Pfizer and revived two similar civil cases filed by third-party payers asserting violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act based on the company's off-label promotion of epilepsy drug Neurontin (gabapentin).

Under RICO, plaintiffs can receive triple the damages in a civil suit. But in the past, payers have had trouble sticking drugmakers with racketeering claims.

In affirming the $142 million jury award to Kaiser Foundation Health Plan Inc., the First Circuit said, "Holding Pfizer liable will have an effect in deterring wrongful conduct." Noting that "the effect of that wrongful conduct was clear in foresight," the court added that upholding the verdict would protect the ability of other victims of off-label marketing to obtain compensation and it would simplify future litigation.

The three RICO suits – filed by Kaiser, Aetna Inc. and Harden Manufacturing Corp. in federal district court in Massachusetts – stemmed from Pfizer's 2004 settlement with the Department of Justice, in which its Warner-Lambert division pleaded guilty to two felony counts of promoting Neurontin for the off-label treatment of neuropathic pain, bipolar disorder and migraine.

As part of that whistleblower settlement, Warner-Lambert agreed to pay a $240 million criminal fine, and Pfizer paid $190 million in additional civil fines.

According to court documents, the off-label promotion strategy began prior to Pfizer's 2000 acquisition of Warner-Lambert and its Parke-Davis unit. Parke-Davis estimated in 1994 that Neurontin would produce $500 million in profit over the term of its patent, so it developed strategies to increase those sales. By 2003, sales of the drug had exceeded $2 billion.

That year, only 10 percent of Neurontin prescriptions were for on-label uses. More than a third of the prescriptions were for higher daily doses than the approved 1,800 mg or for the off-label treatment of neuropathic pain, migraine/headache and bipolar disorder, the court said. (In 2001, Pfizer withdrew an application for a broad indication for neuropathic pain due to negative feedback from the FDA.)

The jury found that the company intentionally promoted the off-label sales through physician detailing that included misrepresentations of the drug's efficacy, sponsoring misleading informational supplements and continuing medical education programs, and suppressing negative information about the drug while publishing articles in medical journals that reported positive information about its efficacy in the off-label uses.

The company also targeted third-party payers and developed a specific plan that called for forming relationships with Kaiser decisionmakers "who are not considered whistleblowers," according to court records. Pfizer employed physicians associated with Kaiser to serve on speakers' bureaus and publish misleading articles about Neurontin.

The district court found that Pfizer's misrepresentations directly affected Kaiser's decisions about placing Neurontin on its formulary without restrictions.

Proving Causation

What helped Kaiser prevail where other payers asserting RICO claims have failed was its evidence of causation linking the New York company's off-label marketing to an increase in physician prescriptions. In the past, RICO claims have been tossed when evidence of causation was based on extrapolation from the fact that the number of off-label prescriptions fell after a drugmaker's fraud became known.

In this case, Kaiser's expert witness, Meredith Rosenthal, a professor at the Harvard School of Public Health, used aggregate data and statistical approaches to link patterns in Pfizer's promotional spending to patterns in prescribing for Neurontin.

Excluding off-label prescriptions by physicians who received legitimate on-label promotion, she concluded that 99.4 percent of Neurontin prescriptions for bipolar disorder, 70 percent of the prescriptions for neuropathic pain, 27.9 percent of prescriptions for migraine and 37.5 percent of prescriptions for doses greater than 1,800 mg/day were caused by Pfizer's "fraudulent marketing" of the drug.

Responding to Pfizer's insistence that only doctor-by-doctor evidence could prove causation, Rosenthal said physician self-reporting about controversial patterns of practice shows conscious reluctance and unconscious bias, which lead them to deny being influenced. Thus, it is "neither standard nor appropriate to look physician by physician," she testified.

Arguing against the RICO claims, Pfizer claimed there was no proximate causation because there were "too many steps in the causal chain connecting its misrepresentations to the injury to Kaiser, particularly because that injury rests on the actions of independent actors – the prescribing doctors," according to court documents.


But the First Circuit ruled that the big pharma's "scheme relied on the expectation that physicians would base their prescribing decisions in part on Pfizer's fraudulent marketing. The fact that some physicians may have considered factors other than Pfizer's detailing materials in making their prescribing decisions does not add such attenuation to the causal chain as to eliminate proximate cause."

The three-judge appellate panel added that "if Pfizer's information could not be expected to affect a single doctor's decisionmaking, the company's choice to undertake the marketing campaign would be inexplicable."

Besides affirming the lower court ruling for Kaiser, the First Circuit reinstated Aetna's RICO case against Pfizer, as well as the Harden class action. The lower court had dismissed both of those cases, granting Pfizer summary judgment.

In response to the First Circuit's decisions, Pfizer said it "believes that doctors and the FDA, and not courts, should make determinations about the efficacy of medicines and whether they should be prescribed to individual patients." The company is exploring whether to appeal in all three cases.