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From Health Law Daily, July 16, 2014

Cephalon escapes charges related to off-label promotion, again

By Melissa Skinner, JD

Charges of fraud and unjust enrichment filed against Cephalon related to its off-label promotion of the prescription drugs Actiq® and Fentora® were dismissed based on a failure to plead injury or causation, which is necessary to establish standing. Treating the third-party payer (TPP) claimants’ allegations for intentional and negligent misrepresentation as fraud claims, the court also found that the claims did not pass muster under heightened fraud pleading requirements. Other charges related to off-label promotion of these drugs were brought against Cephalon under the Racketeer Influenced and Corrupt Organizations Act (RICO) by TPPs and were dismissed earlier this year (The Travelers Indemnity Company v Cephalon, Inc., July 14, 2014, McLaughlin, M).

Claims. The Travelers Indemnity Company, Travelers Casualty & Surety Company, St. Paul Fire & Marine Insurance Company, and the Standard Fire Insurance Company (collectively Travelers) brought suit against Cephalon, Inc. (Cephalon) asserting the following causes of action: (1) intentional misrepresentation; (2) negligent misrepresentation; (3) violation of unfair trade and consumer protection laws of multiple states; (4) unjust enrichment; and (5) seeking a mandatory injunction compelling Cephalon to advise prescribers on the dangers of off-label uses of Actiq and Fentora.

In general, Travelers claimed Cephalon fraudulently promoted off-label uses of Actiq and Fentora, which were approved by the FDA for treatment in individuals managing breakthrough cancer pain and were tolerant to other opioid therapies. In turn, Travelers argued that it was injured as it was made to pay for or reimburse the prescriptions for these drugs that were “ineffective, unnecessary, unsafe, or otherwise inappropriate as prescribed.” Specifically Travelers claimed that it was targeted by Cephalon because it provided workers compensation to injured workers whose medical expenses were paid for by Travelers pursuant to state law. Cephalon filed a motion to dismiss.

Standing. According to Travelers, Cephalon’s fraudulent marketing caused injury to Travelers because Travelers did not get what it paid for—in that the drugs were unsafe or ineffective—or, in the alternative, because it paid for more expensive drugs. The court rejected both theories and found that Travelers lacked standing due to the lack of injury. First, the court noted that Travelers’ allegations that the drugs were unsafe and ineffective were conclusory and that “the absence of data or evidence affirmatively proving that a drug is safe and effective in treating a particular condition, without more, does not support the conclusion that the drug is actually ineffective or unsafe for that use.” As to the second theory, that Travelers was injured because it was forced to pay for more expensive drugs, the court found that injury does not arise simply because an entity paid for a more expensive drug. In order to find liability under such a theory, the court determined that a party “must also plead facts to show that the drug was prescribed or purchased in reliance on untrue statements or misrepresentations about the drug’s attributes.” Because Travelers fails to plead as such here, the court found that it did not establish an injury to support standing.

Failure to state a claim. Assuming that standing was properly shown, the court considered Cephalon’s argument that Travelers failed to properly state its causes of action and found that these claims should be dismissed as well. The court agreed that the claims of misrepresentation were “sounded in fraud” and, therefore, should be analyzed according to the heightened pleading standards for fraud. In this sense, Travelers failed to identify with the particular necessary to properly plead fraud, as the court noted it did not “identify a single false statement, misrepresentation, or deliberate omission,” on the part of Cephalon. In so finding, the court rejected the implicit argument in Travelers’ complaint, that is, that “Cephalon must have misrepresented the safety of efficacy of the drugs, or doctors would not have prescribed them for off-label use.” However, because it is not illegal to prescribe drugs for off-label uses, the court found this sole allegation was not enough to meet the fraud-pleading requirements. The court also dismissed the other claims brought by Travelers for failure to properly state claims.

The case number is 12-4191.

Attorneys: James J. Reardon, Jr. (Reardon Scanlon Vodola LLP) for The Travelers Indemnity Company, Travelers Casualty & Surety Company, St. Paul Fire & Marine Insurance Company, and The Standard Fire Insurance Company. Brian M. Ercole (Morgan Lewis) for Cephalon, Inc., Teva Pharmaceuticals USA, Inc., and Teva Pharmaceutical Industries Ltd.

Companies: The Travelers Indemnity Company; Travelers Casualty & Surety Company; St. Paul Fire & Marine Insurance Company; The Standard Fire Insurance Company; Cephalon, Inc.; Teva Pharmaceuticals USA, Inc.; Teva Pharmaceutical Industries Ltd.

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