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From Health Law Daily, October 13, 2017

Third-party payers may not recover under RICO for improper Depakote® marketing

By Amy Berger, J.D.

The Seventh Circuit held that improper marketing to physicians does not support a claim by third-party payers under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §1964 (RICO) because the third-party payers are several layers removed in the casual sequence to support a RICO claim. The court reasoned that Abbott’s prior criminal conviction and payment of $1.6 billion were the proper remedies (Sidney Hillman Health Center of Rochester v. Abbott Laboratories, October 12, 2017, Easterbrook, F.).

Criminal proceedings. Abbott Laboratories manufactured Depakote®. The FDA approved the use of Depakote to treat seizures, migraine headaches and some bipolar conditions. Abbott promoted the off-label use of Depakote while hiding its involvement in such marketing. In 2012, Abbott pleaded guilty to unlawful promotion of Depakote and paid $1.6 billion to resolve a criminal case and settle qui tam actions that had been filed against it.

RICO. In 2013, two welfare-benefit plans (payers) that paid for Depakote’s off-label use filed suit, seeking treble damages under the civil liabilities provisions of RICO. The payers asked the district court to certify a class consisting of all third-party payers. The district court dismissed the action as untimely since civil RICO actions must be brought within four years after injury was or should have been known. However, since the qui tam suits began under seal which lasted until 2011, and the payers alleged that Abbott had concealed its role in the off-label production, the case was remanded for the parties to examine when a reasonable payer should have known that it was paying for drugs in response to an improper marketing campaign. The district court dismissed the complaint on different grounds, ruling that the payers could not show proximate cause as required by RICO (see Unorthodox dismissal not justified in Depakote® RICO suit, April 14, 2015).

Injury. The Seventh Circuit reasoned that although payers part with money, they are not the only injured party and not the most directly injured party. The court explained that patients suffer by taking the off-labelled Depakote if it is useless because it may aggravate their condition, create side effects not justified by the benefits of its use, and/or prevent patients from taking drugs that would alleviate their conditions. The court noted that physicians also suffer less direct loss by prescribing ineffective medicine and thereby losing business and revenue. Thus, the court stated, although payers bear some costs for the off-label promotion, it is difficult to compare the patients’ health costs and monetary costs with payers’ costs.

In addition, the court held that comparison difficulties are compounded by other factors. First, some off-label use of Depakote may be beneficial to patients. Second, some physicians may have written off-label prescriptions regardless of Abbott’s misleading promotion. Third, some physicians may not have changed their practices at all and payers did not present any study or data to show causation in relation to Abbott’s promotion. Accordingly, the court found insufficient grounds for the third party payers’ suit and determined that the prior criminal proceedings were the proper remedies.

The case is No. 17-1483.

Attorneys: Adam J. Levitt (Grant & Eisenhofer P.A.) for Sidney Hillman Health Center of Rochester and Teamsters Health Services and Insurance Plan Local 404. William F. Cavanaugh, Jr. (Patterson Belknap Webb & Tyler LLP) for Abbott Laboratories, Inc. and AbbVie Inc.

Companies: Abbott Laboratories, Inc.; AbbVie Inc.

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