Ironworkers Local Union 68 v. Astrazeneca Pharmaceuticals

Decision Date11 March 2011
Docket NumberNo. 08–16851.,08–16851.
Citation634 F.3d 1352
CourtU.S. Court of Appeals — Eleventh Circuit
PartiesIRONWORKERS LOCAL UNION 68 and Participating Employers Health and Welfare Funds, on behalf of themselves and all others similarly situated, Ironworkers Local Union No. 399 and Participating Employers Health and Welfare Funds, on behalf of themselves and all others similarly situated, Ironworkers District Council of Philadelphia and Vicinity Benefit and Pension Plan, on behalf of themselves and all others similarly situated, International Brotherhood of Electrical Workers local 98, Teamsters Joint Council Local No. 53 Retiree Health & Welfare Fund, Plaintiffs–Appellants,v.ASTRAZENECA PHARMACEUTICALS, LP, Astrazeneca PLC, Astrazeneca LP, Parexel International Corp., Defendants–Appellees,MDL–1796 Personal Injury Plaintiffs, Interested Party.

OPINION TEXT STARTS HERE

Shiva Sharifahmadian, Halley F. Ascher, Finkelstein Thompson, LLP, Washington, DC, Casandra A. Murphy, Joseph H. Meltzer, Schiffrin & Barroway, Radnor, PA, Brian J. McCormick, Stephen A. Sheller, Sheller, Ludwig & Badey, Philadelphia, PA, Denise Davis Schwartzman, Chimicles & Tikellis, LLP, Haverford, PA, for PlaintiffsAppellants.Catherine M. Salinas, Carlton Fields, P.A., Atlanta, GA, Kurt S. Kusiak, William G. Cosmas, Jr., Boston, MA, Terence S. Ziegler, Barroway, Topaz, Kessler, Radnor, PA, Brian W. Shaffer, J. Gordon Cooney, Jr., Morgan, Lewis & Bockius, LLP, Philadelphia, PA, Allyson N. Ho, R. Ted Cruz, Morgan, Lewis & Bockius, LLP, Houston, TX, Sylvia H. Walbot, Robert L. Ciotti, Carlton Fields, P.A., Tampa, FL, for DefendantsAppellees.Appeal from the United States District Court for the Middle District of Florida.Before TJOFLAT, PRYOR and MARTIN, Circuit Judges.TJOFLAT, Circuit Judge:

I.

These cases involve payments made by health insurers1 for the prescription drug Seroquel, an antipsychotic medication2 manufactured and marketed in the United States by AstraZeneca Pharmaceuticals LP (AstraZeneca). Seroquel has received Food and Drug Administration (“FDA”) approval for the treatment of schizophrenia and bipolar disorder. 3 The drug, however, has been used to treat various other diseases and disorders, even though the FDA has not approved it for such uses. The practice of prescribing a drug for a use not approved by the FDA, commonly referred to as “off-label” use, is both legal and commonplace in the medical community.4

The insurers claim that physicians prescribed Seroquel for many of these off-label uses because AstraZeneca fraudulently induced them to do so. Specifically, the insurers say that AstraZeneca, through an illegal off-label marketing campaign, falsely represented that Seroquel was safer and more effective in treating many off-label conditions than less expensive drugs also used to treat those conditions.5 Physicians, in turn, relying on AstraZeneca's false representations, prescribed Seroquel instead of the cheaper—and sometimes safer or more effective—substitutes for the insurers' insureds (“enrollees”). As a result, because the insurers' insurance policies covered payment for Seroquel—either in full or in part, depending on whether the policies obligated enrollees to pay a prescription drug copayment (“co-pay”)6—the insurers claim that AstraZeneca's fraud caused them “to unnecessarily pay for [the more expensive] Seroquel off-label prescriptions.” Absent the fraud, they say they would have paid less for their enrollees' prescription drugs. Consequently, the insurers seek to recover the difference between the amount that was paid for the off-label Seroquel prescriptions and the amount that would have been paid for the less expensive substitutes.7

A.

Each of the cases before us is a class action brought against AstraZeneca 8 on behalf of all third-party payers for health care services. 9 One of the cases, in addition to being brought on behalf of a group of insurers, includes a claim by an individual enrollee, Cheryl Martin, a resident of Tennessee. Martin, like the insurers, paid for an off-label prescription of Seroquel instead of a less expensive substitute.10 She seeks to represent a class of similarly situated enrollees.

The allegations of these cases have been merged within a consolidated complaint consisting of seven counts.11 Counts I and II seek treble damages under the civil provision of the federal Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1964(c). 12 Count I is based on 18 U.S.C. § 1962(c).13 It alleges that AstraZeneca has marketed Seroquel through an “enterprise” and that its false representations to physicians concerning Seroquel's superior safety and efficacy constitutes “a pattern of racketeering activity”—i.e., violations of the mail and wire fraud statutes.14 Count II is based on 18 U.S.C. § 1962(d).15 It alleges that AstraZeneca conspired to commit the substantive § 1962(c) offense. Finally, counts III–VII, respectively, seek damages under the consumer protection statutes and the common law of forty-six States.16

B.

AstraZeneca moved the district court to dismiss the plaintiffs' claims under Federal Rule of Civil Procedure 12(b)(6), and the court granted its motion. See Ironworkers Local Union No. 68 v. AstraZeneca Pharms. LP, 585 F.Supp.2d 1339, 1342, 1347 (M.D.Fla.2008). The court ruled that the complaint did not adequately plead that AstraZeneca's false representations proximately caused the plaintiffs' purported economic losses.17 Id. at 1345–47.

The court first noted the proximate causation a RICO plaintiff must establish to make out a case under 1964(c): a plaintiff has to show “some direct relation between the injury asserted and the injurious conduct alleged.” Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 112 S.Ct. 1311, 1318 117 L.Ed.2d 532 (1992) (emphasis added). The court concluded that the complaint's allegations failed to establish a direct relation between AstraZeneca's false representations and the plaintiffs' losses. Instead, the allegations showed that the plaintiffs' losses could have been “caused by other, independent, factors.” 585 F.Supp.2d at 1344. Key among such factors—and a potential independent intervening cause—was that Seroquel was prescribed by physicians in the exercise of their independent professional judgment, and such judgment could be informed by sources other than AstraZeneca's “representations ... [regarding the] drug's relative safety and efficacy.” Id. Ascertaining whether and, if so, to what extent AstraZeneca's representations caused a physician to prescribe Seroquel off-label in a given situation would amount to a “highly complex damages assessment,” id. at 1345, that “would require an inquiry into the specifics of [the] doctor-patient relationship,” id. at 1344. This complex assessment, the district court concluded, weighed against a finding of direct injury to the plaintiffs as a result of AstraZeneca's conduct, and the court therefore dismissed the plaintiffs' RICO claims. Id. at 1345.

The district court subsequently dismissed the state law18 consumer protection and common law claims on the same proximate causation ground that required the dismissal of the RICO claims.19 The court then entered a final judgment for AstraZeneca in conformance with its order dismissing the plaintiffs' complaint, and the plaintiffs lodged this appeal.

II.

We review de novo the district court's grant of a motion to dismiss under 12(b)(6) for failure to state a claim, accepting the allegations in the complaint as true and construing them in the light most favorable to the plaintiff.” Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1288 (11th Cir.2010). In assessing the sufficiency of the complaint's allegations, we are bound to apply the pleading standard articulated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, ––– U.S. ––––, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). That is, the complaint “must ... contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face. Am. Dental Ass'n, 605 F.3d at 1289 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. at 1974) (emphasis added).

Applying these standards, we affirm the district court's judgment; however, we do so on grounds different from those employed by the district court. See Powers v. United States, 996 F.2d 1121, 1123–24 (11th Cir.1993) (We may affirm the district court's judgment on any ground that appears in the record, whether or not that ground was relied upon or even considered by the court below.” (citations omitted)). As subpart A presents, economic injury is a necessary element of all of the plaintiffs' claims, and, in the context of prescription drug purchases, the fact that the payer merely paid for more expensive drugs does not suffice. Instead, the purchased drugs must have been either unsafe or ineffective for their prescribed use—i.e., the prescription needs to have been medically unnecessary or inappropriate according to sound medical practice.20

In subpart B, we affirm the district court's dismissal of the insurers' claims in all seven counts of the complaint. The insurers, under the terms of their insurance policies, consciously exposed themselves to pay for all prescriptions of Seroquel, including those that were medically unnecessary or inappropriate—even if such prescriptions were birthed by fraud. In light of such broad exposure, conventionally a rational insurer would have charged its enrollees higher premiums than it would have if its policies offered more limited prescription drug coverage. These higher premiums, in turn, would compensate the insurer for its increased number of prescription payments, including payments for prescriptions that were medically unnecessary or inappropriate. Moreover, to the extent the insurer's payments for medically unnecessary or inappropriate prescriptions exceeded the premiums charged, only actuarial...

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