Reliance Remains a High Hurdle in Establishing Third-Party Payor Claims


Third-party payor (TPP) claims against pharmaceutical companies are nothing new. The arguments are common – TPP insurers claim financial injury arising out of payments made for alleged medically unnecessary prescriptions written for numerous insureds/ beneficiaries. In some instances, the TPP plaintiffs point to evidence or allegations of off-label promotional activity to support the claims of lack of medical necessity; and sometimes the TPP plaintiffs attempt to bolster their allegations of “medically unnecessary” prescriptions by advancing a variation of the garden variety failure-to-warn narrative:

“Had defendant not overstated the efficacy and benefits of the drug and not downplayed the dangers and side effects – of which defendant had superior knowledge – Plaintiff would not have underwritten the cost of so many prescriptions, and/or would have opted for a less expensive, less dangerous and more effective drug as a first-line treatment agent on Plaintiff’s formulary.”

Over the years, TPP plaintiffs have failed to articulate and adduce facts necessary to prove their claims. However, a recent opinion out of the United States District Court for the Northern District of Illinois suggests that recovery by TTP plaintiffs is possible. Recognizing the possibility that the complained-of behavior by the defendant could result in the damages alleged by the TPP plaintiff, the court made clear that “reliance” remains the sine qua non of any TPP claim.

Related Decisions

In In re Testosterone Replacement Therapy Products Liability Litigation: Medical Mutual of Ohio v. Abbvie, Inc., No. 14-C-1748, 2019 WL 652217 (N.D. Ill. Feb. 14, 2019), Medical Mutual of Ohio (MMO) alleged “it suffered economic injuries when, as a result of defendants’ fraudulent marketing schemes, it made reimbursement payments for what it alleges were medically inappropriate” prescriptions for testosterone replacement therapy (TRT) drugs. Id. at *1.

Specifically, MMO’s claims under the RICO Act reduced to allegations that the defendants purposely engaged in off-label marketing schemes and colluded with one another to directly target prescribing physicians and consumers so that they would prescribe and take their products. Id. at *6-7. The court disagreed, granting summary judgment in favor of the defendants. In denying MMO’s TTP claims, the court concluded “even if a reasonable jury could find that defendants made false or misleading statements to MMO about the safety or efficacy of their TRT drugs, it could not find that MMO relied on them to make any formulary or utilization management decisions regarding the drugs.” Id. at *11. The court used this same reasoning to discredit MMO’s theories under Ohio state law . Id. at *18-19.

The touchstone of the court’s decision in In re Testosterone Replacement Therapy was MMO’s failure to show reliance on the defendants’ alleged misrepresentation. In practice, however, establishing reliance always has proved a difficult task.

In Sergeant’s Benevolent Association Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, 806 F. 3d 71, 90-91 (2d Cir. 2015) the Second Circuit affirmed dismissal of the plaintiff’s TTP claims regarding Ketek, a pneumonia antibiotic, finding that plaintiffs could not establish that they or other third parties actually relied on the defendants’ alleged misrepresentations. It cited to the Second Circuit’s decision in UFCW Local 1176 v. Eli Lily & Co., 620 F. 3d. 121 (2nd Cir. 2010) (Zyprexa), which it found to be “virtually identical.” The court explained, “given the number of factors that enter into a doctor’s prescribing decisions, it is simply not reasonable to infer from just that decline in sales that all pre-decline Ketek prescriptions were written in reliance on the alleged misrepresentations about Ketek’s safety.” Id. at *94.

The Seventh Circuit used similar reasoning in Sidney Hillman Health Center of Rochester v. Abbott Labs, 873 F. 3d 574 (7th Cir. 2017). The court concluded that the payor could not recover under RICO for wrongs committed while marketing the prescription medication Depakote, used to treat seizures, bipolar disorder and migraines, because “there are so many layers, so many independent decisions, between promotion and payment that the causal chain is too long…” Id. at 578.

In 2012, the Third Circuit concluded that this causal relationship requirement for RICO claims was so important, it denied plaintiff’s TTP claims for lack of standing in In re Schering Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235 (3d Cir. 2012). The plaintiff’s TTP claims involved the antiviral medication Rebetol, with claims that defendants participated in illegal and false sales and marketing campaigns, causing plaintiffs to pay for products that were ineffective or unsafe for the off-label uses for which they were prescribed. Id. at 239. The Third Circuit disagreed, finding the plaintiff had failed to establish standing; the plaintiff did not plausibly allege a link between the class representative’s alleged injuries and any miscommunication or false claim about Rebetol.

Accordingly, while the most recent Northern District of Illinois decision leaves open the possibility that TTP claims may be viable, it also confirms that proving reliance in the real world is a higher hurdle than most TTP claims can clear.

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