Med. Mut. of Ohio v. Abbvie Inc. (In re Testosterone Replacement Therapy Prods. Liab. Litig. Coordinated Pretrial Proceedings)

• Decision Date: 04 February 2016
• Docket Number: No. 14 C 8857,No. 14 C 1748,MDL No. 2545,14 C 1748,14 C 8857
• Parties: In re Testosterone Replacement Therapy Products Liability Litigation Coordinated Pretrial Proceedings. Medical Mutual of Ohio, Plaintiff, v. Abbvie Inc., Abbott Laboratories, Abbott Products, Inc., Solvay America, Inc., Solvay Pharmaceuticals, Inc., Solvay S.A., Unimed Pharmaceuticals, LLC, Besins Inc., Besins S.A., Auxilium, Inc., Glaxosmithkline LLC, Oscient Pharmaceuticals, Inc., Eli Lilly and Company, Lilly USA, Inc., Acrux Commercial Party Ltd., Acrux DDS Party Ltd., Actavis PLC, Actavis, Inc., Actavis Pharma, Inc., Watson Pharmaceuticals, Inc., Watson Laboratories, Inc., Anda, Inc., and Endo Pharmaceuticals, Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

159 F.Supp.3d 898

In re Testosterone Replacement Therapy Products Liability Litigation Coordinated Pretrial Proceedings.Medical Mutual of Ohio, Plaintiff,

v.Abbvie Inc., Abbott Laboratories, Abbott Products, Inc., Solvay America, Inc., Solvay Pharmaceuticals, Inc., Solvay S.A., Unimed Pharmaceuticals, LLC, Besins Inc., Besins S.A., Auxilium, Inc., Glaxosmithkline LLC, Oscient Pharmaceuticals, Inc., Eli Lilly and Company, Lilly USA, Inc., Acrux Commercial Party Ltd., Acrux DDS Party Ltd., Actavis PLC, Actavis, Inc., Actavis Pharma, Inc., Watson Pharmaceuticals, Inc., Watson Laboratories, Inc., Anda, Inc., and Endo Pharmaceuticals, Inc., Defendants.

No. 14 C 1748

MDL No. 2545

No. 14 C 8857

United States District Court, N.D. Illinois, Eastern Division.

Filed February 3, 2016

Signed February 4, 2016

As Amended February 5, 2016

MEMORANDUM OPINION AND ORDER (CORRECTED)

MATTHEW F. KENNELLY

, District Judge:

Defendants in this MDL proceeding are manufacturers, sellers, and promoters of testosterone replacement therapy drugs (TRTs). Nearly all of the plaintiffs have brought lawsuits claiming personal injuries they claim were caused by TRTs. The Court has already ruled on a motion to dismiss many of those personal injury claims. See In re Testosterone Replacement Therapy Products Liab. Litig. (“In Re TRT”) , No. 14 C 1748, 2014 WL 7365872 (N.D.Ill. Dec. 23, 2014)

(denying motions to dismiss as to personal injury fraud, misrepresentation, and failure-to-warn claims).

In the case now before the Court, plaintiff Medical Mutual of Ohio (MMO), an Ohio mutual insurance company, purports to represent a class of third-party payors (TPPs) who allege that they suffered economic injuries when—as the result of defendants' fraudulent marketing schemes—they made reimbursement payments for medically inappropriate TRT prescriptions. In its complaint, MMO sorts the twenty-three named defendants into seven separate groups: (1) Solvay S.A., Solvay America, Inc., Solvay Pharmaceuticals, Inc., Unimed Pharmaceuticals, LLC, Besins Inc., Besins Healthcare, S.A., Abbott Products, Inc., AbbVie Inc., and Abbott Laboratories (collectively, AbbVie or AbbVie defendants); (2) Auxilium Pharmaceuticals, Inc. (Auxilium); (3) GlaxoSmithKline LLC (GSK); (4) Oscient Pharmaceuticals Corp. (Oscient); (5) Eli Lilly and Company, Lilly USA, Inc., Acrux Commercial Pty Ltd., Acrux DDS Pty Ltd. (collectively, Lilly or Lilly defendants); (6) Actavis plc, Actavis Pharma, Inc., Actavis, Inc., Watson Pharmaceuticals, Inc., Watson Laboratories, Inc., Anda, Inc. (collectively, Actavis or Actavis defendants); and (7) Endo Pharmaceuticals, Inc. (Endo).

MMO alleges that defendants participated in a fraudulent marketing scheme that mischaracterized TRT drugs as a safe and effective treatment for various “off label” conditions. As a result, MMO and other TPPs allegedly paid for numerous off-label TRT prescriptions that were unnecessary and unsafe for their insureds and for which they would have never paid but for defendants' fraudulent scheme. In its complaint, MMO asserts claims for mail and wire fraud in violation of the federal RICO Act, 18 U.S.C. § 1962(c)

, as well as for conspiracy to violate the Act, 18 U.S.C. § 1962(d), against AbbVie, Auxilium, Lilly, Actavis, and Endo (the RICO defendants). MMO also asserts claims against AbbVie, Auxilium, Lilly, Actavis, and Endo under the consumer protection statutes of all fifty states and the insurance fraud statutes of the states in which they are headquartered. In addition, MMO asserts claims against “all defendants” for common law fraud, negligent misrepresentation, and unjust enrichment. Plaintiff has already amended its complaint twice: one substantive amendment in response to defendants' motion to dismiss and a technical, non-substantive amendment. All defendants except Besins Inc., Besins Healthcare, S.A., and Oscient have moved to dismiss this second amended complaint for lack of standing and for failure to state a claim.¹ Solvay, S.A. and Solvay America, Inc. have also moved to dismiss for lack of personal jurisdiction. For the reasons stated below, the Court grants defendants' motion in part and denies it in part.

Background

The Court takes the following facts from the allegations in plaintiff's 434-page complaint, which describes a number of nationwide schemes orchestrated by defendants with the intention to boost TRT sales by deceiving patients, primary care physicians, and TPPs about the drugs' safety and efficacy for treating certain conditions. The United States Food and Drug Administration (FDA) has approved TRT drugs for the treatment of a single rare condition, called “classical hypogonadism

,” which is characterized by insufficient secretion of the testosterone necessary for the body to perform normal functions. Though the FDA has not approved TRT drugs for the treatment of conditions other than classical hypogonadism, plaintiff alleges that defendants have marketed the drugs as being safe and effective for the treatment of other “off label” conditions and symptoms, such as erectile dysfunction, diabetes, AIDS, cancer, depression, and obesity. Defendant's off-label marketing scheme allegedly included a “disease awareness” campaign that promoted the existence of a false disease, called “Andropause” or “Low T,” which they had invented and for which they claimed TRT drugs were a safe and effective treatment.

According to plaintiff, however, off-label TRT drug use—for “Low T” or otherwise—is neither safe nor effective. Plaintiff asserts that no competent medical evidence demonstrates that TRT drugs are effective at treating off-label conditions but that medical evidence does show that off-label TRT use is associated with increased incidence of adverse cardiovascular events, including myocardial infarction

(heart attack ), stroke, pulmonary embolism, and other thromboembolic (blood clotting) adverse events. As one doctor allegedly commented regarding TRT drugs' effectiveness, for the millions of patients that do not have truly low testosterone levels, TRT drugs are “in the same category as snake oil.” Compl. ¶ 21. In addition, plaintiff alleges that the safety risks are particularly high for aging men, who are most likely to experience symptoms of “Low T” and at whom defendants' marketing scheme was primarily aimed. According to plaintiff, in certain patient populations, “TRT drugs may increase the incidence of adverse events and death by over 500%.” Id. ¶ 93. Though increased off-label marketing coincided with an “astronomical spike” in TRT drug prescriptions and sales, those sales have begun to decrease, despite “continued rampant promotion,” in response to recent revelations of the drugs' safety risks. Id. ¶¶ 18–20.

Plaintiff alleges that defendants' own research put them in a position to be aware of the risks TRT use poses. For example, in 2009, a safety review board halted a study of frail and aging men using Testim (Auxilium's TRT drug) after 23 of 106 patients in the Testim group suffered adverse cardiovascular events, compared to 5 of the 103 placebo group patients.

Plaintiff asserts that despite defendants' alleged knowledge (or obligation to know) of their products' dangers and ineffectiveness, defendants targeted TPPs, physicians, and consumers with fraudulent marketing schemes that affirmatively promoted the drugs' safety and effectiveness for off-label use and actively concealed unfavorable evidence. According to plaintiff, each group of RICO defendants engaged in respective marketing schemes by forming four “complementary and mutually reinforcing” fraudulent enterprises: a TPP “formulary access” enterprise, which targeted TPPs directly; “peer selling” and “publication” enterprises, which targeted prescribing physicians; and a “direct-to-consumer” enterprise, which targeted consumers. Id. ¶¶ 140–144. Totaling the alleged enterprises formed by AbbVie, Auxilium, Lilly, Actavis, and Endo, plaintiff asserts the existence of twenty complementary and mutually reinforcing fraudulent marketing enterprises. Plaintiff alleges that the planning and coordinating of each fraudulent enterprise “required extensive use of the wires and mails” and that the RICO defendants conducted the affairs of the enterprises through a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c)

. In addition, plaintiff alleges that the RICO defendants conspired with third parties and with each other to carry out their fraudulent enterprises, thus violating 18 U.S.C. 1962(d). Though plaintiff does not allege that GSK or Oscient themselves formed illegal enterprises in violation of the RICO Act, it does allege that they participated in Auxilium's peer selling enterprise.

A. TPP formulary access enterprises

Because, as plaintiff alleges, TPPs are the entities “directly reimbursing most, if not all, of the cost of TRT Drug prescriptions,” TPPs were the primary and intended victims of the RICO defendants' marketing schemes. Id. ¶ 30. Typically, if a TPP provides drug benefit coverage for a patient's TRT drug prescription, the TPP will pay approximately 80–90% of the prescription's cost, and the patient will pay a co-payment for the remainder. Plaintiff asserts that it reimbursed for “one or more of Defendants' drug products” and that it paid a total of $38,962.566.73 in TRT reimbursements from November 2001 through April 2015. Id. ¶ 37–38.

Whether a TPP will cover the cost of a particular drug depends on the “formulary status” the TPP has assigned to that drug.

According to plaintiff, the goal of TPPs' prescription drug benefit programs is to provide “appropriate, affordable and accessible coverage” for patients, and TPPs' “managed care” benefit programs use a variety of tools to manage and contain prescription drug costs. Id. ¶ 169. Formularies are one such cost-containment tool. Plaintiff explains that if a TPP places a drug “ ‘on formulary,’ it will be covered when prescribed.” Id. ¶ 172. TPPs can thus use formularies to give patients...