Kaiser Found. Health Plan, Inc. v. Pfizer, Inc. (In re Neurontin Mktg. & Sales Practices Litig.)

• Decision Date: 03 April 2013
• Docket Number: 11–2096.,Nos. 11–1904,s. 11–1904
• Citation: 712 F.3d 21
• Parties: In re NEURONTIN MARKETING AND SALES PRACTICES LITIGATION. Kaiser Foundation Health Plan, Inc.; Kaiser Foundation Hospitals; Kaiser Foundation Health Plan of Colorado; Kaiser Foundation Health Plan of Georgia, Inc.; Kaiser Foundation Health Plan of the Mid–Atlantic States, Inc.; Kaiser Foundation Health Plan of Northwest; Kaiser Foundation Health Plan of Ohio, Plaintiffs, Appellees, v. Pfizer, Inc.; Warner–Lambert Company, LLC, Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

712 F.3d 21

In re NEURONTIN MARKETING AND SALES PRACTICES LITIGATION.Kaiser Foundation Health Plan, Inc.; Kaiser Foundation Hospitals; Kaiser Foundation Health Plan of Colorado; Kaiser Foundation Health Plan of Georgia, Inc.; Kaiser Foundation Health Plan of the Mid–Atlantic States, Inc.; Kaiser Foundation Health Plan of Northwest; Kaiser Foundation Health Plan of Ohio, Plaintiffs, Appellees,

v.Pfizer, Inc.; Warner–Lambert Company, LLC, Defendants, Appellants.

Nos. 11–1904, 11–2096.

United States Court of Appeals, First Circuit.

April 3, 2013.

Kathleen Sullivan, with whom Mark S. Cheffo, Katherine A. Armstrong, Quinn Emanuel Urquhart Oliver & Hedges LLP, and Skadden, Arps, Slate, Meagher & Flom LLP were on brief, for appellants.

David C. Frederick, with whom Scott K. Attaway, W. Joss Nichols, Caitlin S. Hall, Linda P. Nussbaum, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C. and Grant & Eisenhofer, P.A. were on brief, for appellees.

Before LYNCH, Chief Judge, SOUTER,^* Associate Justice, and LIPEZ, Circuit Judge.

LYNCH, Chief Judge.

This is an appeal from verdicts of over $140 million, reached by both a jury and a court, compensating Kaiser, a major health plan provider and insurer, for the injury Kaiser suffered by its payment for four categories of off-label Neurontin prescriptions which had been induced by a fraudulent scheme by Pfizer, the manufacturer of Neurontin. These verdicts followed a settlement that Warner–Lambert, a subdivision of Pfizer, had reached in a criminal case brought by the United States, in which Warner–Lambert pled guilty to two counts and agreed to pay a $240 million criminal fine concerning the off-label marketing of Neurontin; Pfizer agreed to pay an additional $190 million in civil fines. This is one of several related appeals regarding Neurontin, which result in separate opinions, of which this is the lead. We affirm the verdicts for Kaiser.

I.

On February 1, 2005, Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals (together, “Kaiser”), Aetna, Inc. (“Aetna”), and The Guardian Life Insurance Company of America (“Guardian”) filed a coordinated complaint in the U.S. District Court in Massachusetts against Pfizer, Inc. and Warner–Lambert Company(together, “Pfizer”), asserting injury from the fraudulent marketing of Neurontin for off-label uses. The coordinated plaintiffs asserted violations of, inter alia, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962, and the California Unfair Competition Law (“UCL”), Cal Bus. & Prof.Code § 17200. Ultimately, Kaiser prevailed, but Aetna and Guardian's claims were dismissed on summary judgment, and Aetna's dismissal is the subject of a separate appeal.

In a related case in which we issue a separate opinion, Harden Manufacturing Corporation (“Harden”) filed a class action complaint on May 14, 2004, in the same court, against Pfizer and Parke–Davis (as a division of Warner–Lambert) on behalf of a broad purported class consisting of “[a]ll entities throughout the United States and its territories who, for purposes other than resale, purchased, reimbursed and/or paid for Neurontin for indications not approved by the FDA (‘the Class') during the period from January 1, 1994 through the present (‘the Class Period’).” Harden asserted claims under RICO, as well as state-law claims for common law fraud, violation of consumer protection statutes, and unjust enrichment.

Both the class complaint and the coordinated complaint were part of a larger multidistrict litigation (“MDL”) concerning the marketing and sale of Neurontin, which was consolidated in the District of Massachusetts in November 2004. In each case, the defendants moved for summary judgment. On January 8, 2010, on defendants' motion the district court dismissed the claims of Guardian and Aetna; the court denied summary judgment as to Kaiser's claims. See In re Neurontin Mktg. & Sales Practices Litig. (Neurontin Coordinated SJ), 677 F.Supp.2d 479 (D.Mass.2010). On December 10, 2010, the court granted summary judgment against all of the Harden purported class plaintiffs except two, whose claims are not relevant to this appeal. See In re Neurontin Mktg. & Sales Practices Litig. (Neurontin Class SJ), 754 F.Supp.2d 293, 311 & n. 4 (D.Mass.2010).

Beginning on February 22, 2010, the district court held a jury trial on Kaiser's RICO claims against the defendants. On March 25, 2010, after a five-week trial, the jury concluded that “Kaiser prove[d] that Pfizer violated RICO with respect to its promotion of Neurontin for” bipolar disorder, migraine, neuropathic pain,¹ and dosages exceeding 1800 mg per day, and that these “violation[s] of RICO cause[d] Kaiser injury.” See In re Neurontin Mktg. & Sales Practices Litig. (Kaiser Findings), No. 04–cv–10739–PBS, 2011 WL 3852254, at *1 (D.Mass. Aug. 31, 2011). The jury awarded Kaiser damages in the amount of $47,363,092, which the court trebled to $142,089,276. Id. The jury also rendered an advisory verdict in favor of Kaiser on its state UCL claim, finding that Pfizer had engaged in fraudulent business acts or practices which caused Kaiser damages with respect to bipolar disorder, migraine, neuropathic pain, and doses over 1800 mg, but no liability with respect to nociceptive pain.

On November 3, 2010, the district court found in Kaiser's favor on its claims under the UCL, issuing extensive findings of fact and conclusions of law. In re Neurontin Mktg. & Sales Practices Litig., 748 F.Supp.2d 34 (D.Mass.2010), amended and superseded by

Kaiser Findings, 2011 WL 3852254. The district court ordered defendants to pay $95,286,518 in restitution, Kaiser Findings, 2011 WL 3852254, at *2, but because this figure reflected the same damage claims encompassed by the jury verdict on Kaiser's RICO claim, the court did not add it to the jury award, id. at *60 n. 25. On February 22, 2011, the court entered judgment in favor of Kaiser on its RICO and UCL claims, and on July 27, 2011, the court denied Pfizer's motion for a new trial or, in the alternative, to alter or amend judgment.

On September 20, 2011, Pfizer filed a notice of appeal as to the court's entry of judgment in favor of Kaiser on its RICO and UCL claims, and as to the court's denial of Pfizer's motion for a new trial. This opinion concerns only that appeal.

II.

We review de novo defendants' contention that Kaiser's RICO and UCL claims failed as a matter of law, taking the evidence in the light most favorable to the verdict. Tuli v. Brigham & Women's Hosp., 656 F.3d 33, 38 (1st Cir.2011). Where defendants challenge the district court's findings of fact, we review these findings for clear error. Fed.R.Civ.P. 52(a)(6). We begin by setting out the district court's findings of fact and the jury's conclusions.

A. The Defendants' Fraudulent Marketing Campaign

Parke–Davis, an operating division of Warner–Lambert Company, developed Neurontin² during the 1980s and early 1990s as an anti-epileptic drug. Kaiser Findings, 2011 WL 3852254, at *5. To secure approval from the Food and Drug Administration (“FDA”) for a drug for a particular indication, a drug manufacturer must submit two favorable double-blind randomized controlled trials (“DBRCTs”). Id. On December 30, 1993, the FDA approved Neurontin as an adjunctive therapy in the treatment of partial seizures in adults with epilepsy, setting the maximum dose at 1800 mg/day. Id. The FDA found that certain patients taking Neurontin experienced depressive side effects, and the FDA issued a warning to physicians in January 2008 to “[b]e aware of the possibility of the emergence or worsening of depression, suicidality, or any unusual changes in behavior” resulting from the use of anti-epileptic drugs including Neurontin. Id. (alteration in original) (internal quotation marks omitted). In 1996, Parke–Davis applied to the FDA for approval of Neurontin as a monotherapy for the treatment of seizures, and sought an increase in Neurontin's effective dose range and maximum recommended dose; the FDA rejected this application. Id. at *6.

Pfizer acquired Warner–Lambert in 2000. Id. at *5. In 2001, Pfizer filed an application with the FDA seeking approval of Neurontin for the broad indication of neuropathic pain; after receiving negative feedback from the FDA and non-FDA experts, Pfizer withdrew its application. Id. at *10. The FDA did approve Neurontin for the treatment of post-herpetic neuralgia (“PHN”), a type of neuropathic pain associated with shingles, in 2002. Id.

In 1994, Parke–Davis had estimated that Neurontin would generate $500 million in profits over the duration of its patent. Id. at *6. In order to increase Neurontin's earning potential, Parke–Davis began in 1995 to develop strategies to market Neurontin for off-label conditions—that is, conditions not included on the official label approved by the FDA. Id. As Parke–Davis was implementing these strategies, Pfizer acquired Warner–Lambert, and so, Parke–Davis. Id. at *5. These marketing strategies apparently worked; in the year 2003, Neurontin sales exceeded $2 billion. Id. at *6. Pfizer's Neurontin team estimated that only about ten percent of Neurontin prescriptions that year were for the FDA-approved on-label uses for epilepsy or PHN, and that more than a third of prescriptions were for the off-label uses of neuropathic pain, migraine or headache, or bipolar disorder.

Both the jury and the district court found that Parke–Davis, Warner–Lambert, and Pfizer had “engaged in the fraudulent marketing of Neurontin” for the treatment of bipolar disorder, beginning in July 1998, id. at *17; for the treatment of neuropathic pain, beginning in November 1997, id. at *23; for the treatment of migraines, beginning in April 1999, id. at *25; and for doses greater than 1800 mg/day, beginning in November 1997, id. at *28.³ This fraudulent marketing included, but was not limited to, three strategies, each of which included subcomponents: (1) direct marketing (or “detailing”...