Tag: RICO

The Co-Pay Coupon Controversy: Time for Detente?

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By Kate Greenwood

Cross-Posted at Health Reform Watch

At the end of last month, the Secretary of Health and Human Services Kathleen Sebelius made headlines when, in a letter addressed to Representative Jim McDermott (D-WA), she announced that “[qualified health plans], other programs related to the Federally-facilitated Marketplace, and other programs under Title I of the Affordable Care Act” were not “federal health care programs under section 1128B of the Social Security Act”.  One implication of the Secretary’s interpretation is that the “anti-kickback act”, which is found in Section 1128B, does not apply to qualified health plans.  And that, in turn, means, among other things, that individuals insured under those plans, unlike individuals on Medicare or Medicaid, will be able to use drug company coupons to defray the cost of their prescription drugs.

Prescription drug coupons have been a source of controversy, favored by branded manufacturers and patients, and opposed by generic manufacturers, health insurers, third party payers, and pharmaceutical benefit managers.  Joseph Ross and Aaron Kesselheim studied a large number of coupons advertised on the website www.internetdrugcoupons.com and found that “62% (231 of 374) were for brand-name medications for which lower-cost therapeutic alternatives were available.”  Ross and Kesselheim argue that the coupons are costly at the population level, but also for individual patients.  This is because the coupons are nearly always time-delimited and the short-term savings do not typically outweigh the long-term cost of taking a branded drug.  On the other hand,  in an article in last week’s JAMA, Leah Zullig and colleagues pointed out that reducing co-payments has been proven to improve medication adherence, a problem which there “is an increasing business case for addressing[.]”

The coupon controversy has carried over into the courts.  On March 7, 2012, seven lawsuits were filed in district courts by third party payers against a number of drugmakers, alleging that prescription drug coupons violate antitrust, commercial bribery, and racketeering laws.  (This post at FDA Law Blog includes links to the seven complaints, and this one provides an update on the status of the litigation as of late June 2013.)

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Kaiser v. Pfizer and the Question of Who Pays When Fraudulent Pharmaceutical Promotion Has Its Intended Effect

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By Kate Greenwood

Cross-Posted at Health Reform Watch

On April 3, 2013, the First Circuit issued decisions in three cases in which third-party payers sought compensation from Pfizer for damages sustained as a result of fraudulent pharmaceutical promotion.  The decisions were noteworthy because in them the First Circuit lent its imprimatur to a causal chain of injury running from a pharmaceutical company’s fraudulent promotion, through the prescribing decisions of thousands of individual physicians, to the prescriptions for which a third-party payer paid.  In the lead case, brought by Kaiser Foundation Health Plan and Kaiser Foundation Hospitals, the  appellate court upheld a jury verdict that, after trebling, came to $142 million.

Not surprisingly, Pfizer has petitioned for certiorari, arguing that the First Circuit’s decisions “warrant review because they…raise important and recurring questions concerning the proper test for proximate cause under RICO and the permissibility of aggregate statistical proof in collective fraud cases.”  Amici briefs filed by BIO, PhRMA, and the Washington Legal Foundation echo these arguments, leaning heavily on the spectre of a “staggering” increase in suits founded on “pharmaceutical companies’ alleged off-label promotion.”  In addition to the financial burden posed by the “likely surge”, amici argue that it would chill their “truthful and constitutionally protected speech concerning beneficial off-label uses of FDA-approved drugs.”

Civil RICO claims cannot be predicated on “off-label promotion”, however.  To state a claim, a plaintiff has to allege that the defendant pharmaceutical company engaged in one of the predicate acts enumerated in the RICO statute, typically mail or wire fraud.  In this case, the jury found that Pfizer promoted the anti-seizure drug Neurontin as a safe and effective treatment for indications for which Pfizer knew it was no more effective than a placebo.  On appeal, Pfizer did not contest the jury’s finding that it committed fraud.  This distinguishes this case from those decided by other circuits and suggests that the First Circuit’s decisions may not open the floodgates quite as wide as Pfizer and its amici claim.

There is also reason to question the claim that the First Circuit adopted a new, more “relaxed” standard of causation in the case. Read More