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From Health Law Daily, May 22, 2014

RICO charges stemming from off-label promotion of pain medication fail

By Melissa Skinner, JD

A third-party payer’s claims of violation of the Racketeer Influenced and Corrupt Organizations Act (RICO) against the manufacturers of a prescription narcotic pain medication were dismissed due to the failure of the third-party payer to identify misrepresentations or omissions that formed a basis for a scheme to defraud. The court also dismissed the causes of action brought against the manufacturers under state consumer protection statutes and for unjust enrichment due to the failure to plead any specific deceptive representations, solicitations, unlicensed transactions, or fraudulent conduct (Regional Council of Carpenters Welfare Fund v Cephalon, Inc., May 21, 2014, Bartle, H).

Background. The Indiana/Kentucky/Ohio Regional Council of Carpenters Welfare Fund (the Fund) brought a putative class action suit against Cephalon, Inc. and Teva Pharmaceuticals USA, Inc. (collectively Cephalon) alleging violations of RICO, state consumer protection laws, and unjust enrichment. The Fund’s allegations were grounded in the notion that Cephalon improperly promoted the potent narcotic pain medication Fentora® for off-label use and, as a result, the Fund suffered economic injuries because it is the third-party payer of these prescriptions for its beneficiaries.

Fentora’s active ingredient, fentanyl, is a narcotic that is approximately 100 times more potent than morphine. Fentanyl, which can cause a patient to stop breathing if abused, is described as carrying a “significant risk of death,” and, in turn, its approved labeling indicates it is to be used for the management of breakthrough pain in cancer patients who are already tolerant to “around-the-clock opioid therapy.” Fentora’s labeling also includes “abnormally strong ‘Black Box’ warning” labels, which states that serious adverse events including death have been reported in patients treated with Fentora. Further, the FDA did not approve Cephalon’s proposal to expand Fentora’s labeling to indications that it could be used to treat breakthrough pain in all opioid-tolerant patients.

Alleged scheme. In its complaint, the Fund claimed that Cephalon employed a fraudulent promotional scheme that promoted off-label uses. Specifically, the Fund asserted that Cephalon acquired Fentora to replace another fentanyl-based narcotic, Actiq, which was the subject of a suit against Cephalon by the U.S. government based on improper marketing. In general terms, the Fund alleged that Cephalon promoted off-label Fentora use while “ignoring the high risk of addiction and loss of functionality that accompany the long term use of an opioid like Fentora.” The Fund based its allegations of RICO violations by claiming that this promotion was supported by the use of mail and wire communications.

RICO. While the court noted the Fund’s reliance on certain specific Cephalon communications and its allegations that this correspondence represented Cephalon’s attempt to “hide the lack of scientific support for the off-label use,” this was not sufficient to adequately plead a violation of RICO by Cephalon. Although the actions that were illuminated by Cephalon’s communications did constitute off-label promotion, the court found that it did not necessarily follow that the promotion was fraudulent, as off-label promotions are common-place and not alone indicative of fraud. As such, the court found that the Fund did not bring sufficient evidence to specifically support the fraudulent nature of Cephalon’s alleged scheme and, as such, the RICO charges failed. Cephalon also argued that the Fund did not properly allege causation or injury under RICO but the court did not consider these points.

Other claims. The court considered the state consumer protection claims under Indiana law because the Fund only claimed to have sustained damages in Indiana. These claims, however, also failed because the allegations did not include any evidence of deceptive representations, solicitations, or unlicensed transactions by Cephalon, which are required under Indiana law when bringing these claims. Finally, the court also dismissed the Fund’s claim for unjust enrichment against Cephalon because it did not believe that these circumstances presented sufficient facts to support recovery under this claim. In other words, the Fund cannot recover damages simply because it paid for drugs that were promoted off-label, without any specific showing of fraudulent activity.

The case number is 13-7167.

Attorneys: Daniel J. Kurowski (Hagens Berman Sobol Shapiro LLP), J. Barton Goplerud (Hudson Mallaney & Shindler PC) and Joseph N. Williams (Price Waicukauski & Riley) for Indiana/Kentucky/Ohio Regional Council of Carpenters Welfare Fund. J. Gordon Cooney, Jr. (Morgan, Lewis, & Bockius LLP) for Cephalon, Inc. and Teva Pharmaceuticals USA, Inc.

Companies: Indiana/Kentucky/Ohio Regional Council of Carpenters Welfare Fund; Cephalon, Inc.; Teva Pharmaceuticals USA, Inc.

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