In re Actimmune Marketing Litigation

• Decision Date: 28 April 2009
• Docket Number: Master File No. C 08-02376-MHP.
• Citation: 614 F.Supp.2d 1037
• Court: U.S. District Court — Northern District of California
• Parties: In re ACTIMMUNE MARKETING LITIGATION. This Document Relates to All Actions.

Page 1037

614 F.Supp.2d 1037

In re ACTIMMUNE MARKETING LITIGATION This Document Relates to All Actions.

Master File No. C 08-02376-MHP.

United States District Court, N.D. California.

April 28, 2009.

COPYRIGHT MATERIAL OMITTED

Reed R. Kathrein, Hagens Berman Sobol Shapiro LLP, Berkeley, CA, David S. Nalven, Thomas M. Sobol, Hagens Berman Sobol Shapiro LLP, Cambridge, MA, Douglass A. Kreis, Aylstock, Witkin & Sasser, PLC, Pensacola, FL, Lance A. Harke, Harke & Clasby, LLP, Miami, FL, Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Seattle, WA, Kim Elaine Miller, Kahn Gauthier Swick LLC, New York, NY, for Plaintiff.

Simon J. Frankel, Erin C. Smith, Covington & Burling LLP, San Francisco, CA, Ethan M. Posner, Covington & Burling LLP, George W. Hicks, Jr., Gerson Avery Zweifach, Jessamyn Sheli Berniker, Richard S. Scott, Williams & Connolly LLP, Washington, DC, William M. Goodman, Kasowitz, Benson, Torres & Friedman LLP, Conor Patrick Moore, Jeffrey G. Knowles, Coblentz, Patch, Duffy & Bass LLP, San Francisco, CA, for Defendant.

MEMORANDUM & ORDER

MARILYN HALL PATEL, District Judge.

In this proposed nationwide class action, plaintiffs contend that defendants Inter-Mune Inc. ("InterMune"), W. Scott Harkonen ("Harkonen") and Genentech, Inc. ("Genentech") engaged in a fraudulent and deceptive scheme to market and sell the drug Actimmune® (interferon gamma-1b) Plaintiffs allege numerous causes of action pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO") 18 U.S.C., sections 1962(c)-(d); the California Business and Professions Code, sections 17200 et seq.; the California Civil Code, sections 1770 et seq.; various state consumer protection acts; and unjust enrichment. Now before the court are three separate motions, by Genentech, Inter-Mune, and Harkonen, to dismiss the actions pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Having considered the parties arguments and submissions and for the reasons stated below, the court enters this memorandum and order.

BACKGROUND

I. Procedural Issues

According to Plaintiffs' complaints, the allegations of which must be accepted as true for the purposes of a motion to dismiss, see Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), this case is about fraudulent marketing and sales practices surrounding the pharmaceutical drug known as Actimmune®, a bio-engineered form of interferon gamma. There are two complaints governing the four related civil actions listed above. There are also three related criminal cases: United States v. InterMune, 06-cr-00707 and United States v. Harkonen, 08-cr-00164, and Harkonen v. Arch Specialty Ins. Co., 08-cr-5458, none of which is the subject of the instant motions.

The parties to the civil actions have agreed that the two pending complaints (the First Amended Class Action Complaint, brought jointly with leave of court by plaintiffs in the first three related actions, 08-2376, 08-2916 and 08-3797, and the Class Action Complaint, brought by plaintiffs in the recently related action 08-4531) are substantially similar. The primary substantive difference is that Genentech is named as a defendant only in the latter case for the unjust enrichment claim. The parties agreed that to avoid duplicative briefing and to streamline the cases, it would be preferable to adopt the arguments presented in defendants' motions to dismiss the first three cases and apply those arguments to all four cases.

Accordingly, the court GRANTS this request and applies defendants' moving papers, along with the oppositions and reply briefs, to all four cases, i.e., to the joint complaint governing the first three cases as well as the second complaint governing the fourth case. The court will rely primarily on the joint complaint for the factual allegations, but will distinguish between the two complaints where needed.

II. The Parties and the Factual Background

Plaintiffs bring this suit on behalf of themselves and others similarly situated as consumers and third-party payors ("TPPs") of Actimmune®, alleging fraud and deception in the marketing and sale of the drug for scientifically unproven purposes, primarily in the treatment of idiopathic pulmonary fibrosis ("IPF"). See First Amended Class Action Complaint ("Compl.") ¶ 2. Plaintiffs Deborah Jane Jarrett, Nancy Eisenhower, Jeffrey H. Frankel, and Linda K. Rybkoski, residing in Georgia, Indiana, Pennsylvania, and Ohio, respectively, represent current or former users of Actimmune® who administered the drug by self-injection and incurred payment obligations from their own funds. Id. ¶¶ 8-11.

Plaintiff Zurich American Insurance Company ("Zurich"), a New York corporation with its headquarters located in Illinois, is a TPP that provides health and pharmacy benefits to its insureds across the United States. During the Class Period, Zurich paid for prescriptions of Actimmune® to treat IPF. Id. ¶ 12. Plaintiff Government Employees Health Association, Inc. ("GEHA"), a not-for-profit organization incorporated in Missouri, is another TPP that serves as a large national health insurance plan for federal employees and retirees, as well as their families, across the United States and around the world. See Class Action Complaint ("GEHA Compl."), ¶ 7. During the Class Period, GEHA paid for more than $4 million of Actimmune® prescriptions for its insureds suffering from IPF. Id.

Genentech is a Delaware corporation with its primary place of business in San Francisco, California. Compl. ¶ 15. Genentech is a publicly traded biotechnology company that uses human genetic information to discover, develop, manufacture, and commercialize bio-therapeutics. Id. ¶ 20. During the 1980s, Genentech developed a bio-engineered form of interferon gamma-1b, a naturally occurring protein in the human body that stimulates the immune system. Id. ¶ 21. In 1990, Genentech obtained approval from the Food and Drug Administration ("FDA") to market and sell interferon gamma-1b under the brand-name Actimmune® for the treatment of Chronic Granulomatous Disease ("CGD").¹ CGD is a rare, inherited autoimmune disease that affects about 400 people annually in the U.S. Id. ¶¶ 22-23. In 2000, Genentech obtained FDA approval to broaden Actimmune®'s indication to include delaying disease progression in patients with severe, malignant osteopetrosis, which is another rare congenital disorder that affects about 400 people annually in the U.S. Id. ¶ 25.

In May 1998, Genentech exclusively licensed the U.S. marketing and development rights to interferon gamma, including Actimmune®, to Connetics Corporation ("Connetics"). Id. ¶ 29; see also Def. Br., Exh. A ("License Agreement for Interferon Gamma").² Connetics is a Delaware corporation with its principal place of business in Palo Alto, California, that was founded by Genentech executives. Compl. ¶¶ 16, 29. Genentech granted Connetics an exclusive license "to use, sell, offer for sale and import (but not to make or have made) Licensed Products in the Field of Use" within the United States. Compl. ¶ 30; Def. Br., Exh. A § 2.1(a) at 8-9. "Licensed Products" referred to any pharmaceutical formulations containing interferon gamma. Def. Br., Exh. A § 1.22 at 6. "Field of Use" was defined as "the administration to humans of Licensed Product for the treatment or prevention" of various diseases and conditions, including in pertinent part, CGD, severe, malignant osteopetrosis, and pulmonary fibrosis. Id. §§ 1.12(c)-(e) at 3.

The license agreement also required Connetics to pursue research and development in an effort to gain additional FDA approval of new indications for interferon gamma. Compl. ¶ 30; Def. Br., Exh. A § 3.1(a) at 19. Specifically, Genentech required Connetics to "use its Best Efforts to develop, seek FDA clearance for marketing of, commercialize and sell Licensed Products in the Territory in all Areas of the Field of Use" and provided deadlines called "commercialization milestones" for so doing. Id. (emphasis added). The license included annual reporting requirements by Connetics to Genentech regarding these activities. Id. § 3.3 ("Review of Clinical Development Plan and Marketing Programs") at 24. These requirements stated in part that:

On or about each August 1 during the term of this Agreement, Connetics shall supply Genentech with a report on Connetics' development and marketing programs for Licensed Products in the Field of Use in the Territory. The report shall include the following: (i) a description of Connetics' progress in such programs during the twelve (12) months prior to the date of each such report, (ii) a description of Connetics' planned development and marketing programs for the twelve (12) months after the date of each such report, (iii) a copy of the most recent version of the Clinical Development Milestones ... Genentech shall have the right to comment on the Clinical Development Milestones and the development and marketing programs, and at Genentech's discretion, the Parties shall meet to discuss and agree upon changes to the Clinical Development Milestones.

Id. at 24-25; Compl. ¶ 31 (emphasis added in Complaint).

The license further stated that "Connetics shall conduct clinical trials ... and shall make, use, sell and distribute Licensed Products in accordance with all applicable laws and regulations." Id. § 3.7(a) at 25-26.³ The license explicitly contemplated a sub-license by Connetics to its newly created and wholly-owned subsidiary InterMune to carry out the development and commercialization requirements. Id. § 3.1(a) at 19; Compl. ¶ 33.

InterMune is a pharmaceutical product marketing company, incorporated in Delaware with its principal place of business in Brisbane, California. Compl. ¶ 13. InterMune generally distributes its products through specialty pharmacies, which then resell to hospitals, general pharmacies and physicians. Id. ¶ 34. In August 1998, Connetics sub-licensed some of its Actimmune® rights to...