Alerts and Updates

Class Actions Against Pharmaceutical Companies over Off-Label Marketing Claims Have No Leg to Stand on, Third Circuit Rules

May 24, 2012

In light of the Third Circuit's precedential decision in In re: Schering-Plough Corp., it is apparent that the heightened pleading standards established in Iqbal and Twombly remain viable and effective defenses in defeating conclusory-based lawsuits.

In a recent decision of first impression in the U.S. Court of Appeals for the Third Circuit, the court in In re: Schering-Plough Corp. held that two groups of plaintiffs lacked standing to pursue claims against pharmaceutical manufacturer Schering-Plough Corporation and its affiliated marketing and sales companies for marketing drugs for off-label uses. Affirming the district court's decision, the Third Circuit dismissed the claims because the complaints failed to adequately plead the required injury-in-fact causation element.

Schering-Plough manufactured certain oncology and hepatitis drugs and purportedly advertised and otherwise promoted off-label uses for these drugs. Notwithstanding the legality of physicians to prescribe drugs to patients for off-label uses, the federal Food, Drug, and Cosmetic Act prohibits manufacturers from marketing, advertising or otherwise promoting unapproved, off-label uses. Schering pleaded guilty to a complaint filed by the United States Attorney for the District of Massachusetts that it knowingly and willfully made false representations to the U.S. Food and Drug Administration (FDA) regarding the promotion of these drugs for off-label use.

Shortly after Schering's settlement with the federal government, the plaintiffs—a class of consumers who were prescribed medications for off-label uses as well as third-party payors, union health and welfare funds and insurance carriers, that paid for drugs prescribed for off-label uses—filed complaints. They contended that as a result of Schering-Plough's unlawful marketing practices, physicians prescribed Schering-Plough drugs for off-label uses instead of equally effective alternative treatments that were FDA-approved for the indicated use. These unlawful marketing practices included: (1) promoting certain of the drugs for off-label uses; (2) using false and misleading statements to promote certain drugs as safe and effective for off-label use; and (3) providing physicians with disguised and undisguised bribes, kickbacks and other illegal inducements to encourage physicians to prescribe the drugs for off-label uses. The plaintiffs claimed this caused "ascertainable loss" because they paid "hundreds of millions, if not billions, of dollars for the [drugs] that they otherwise would not have paid." Collectively, the plaintiffs asserted violations of the Washington State Consumer Protection Act; the consumer protection statutes of the remaining 49 states; federal and the New Jersey RICO statutes; and common law claims of civil conspiracy, breach of fiduciary duty and unjust enrichment.

The federal district court dismissed plaintiffs' complaints, finding that the plaintiffs lacked Article III standing to sue. Such standing requires a plaintiff to demonstrate a causal connection between the injury and the conduct complained of. The plaintiffs appealed the dismissal, but the Third Circuit affirmed, finding that the complaints failed to show that because of Schering's unlawful marketing practices the drugs at issue were actually prescribed to the individual plaintiffs, or those represented by their unions or health insurance carriers. In so doing, the Third Circuit cited the pleading standards of Bell Atl. Corp. v. Twombly and Ashcroft v. Iqbal, requiring that a complaint must contain, among other things, sufficient factual information to state a plausible claim for relief. The court also found the complaints of the third-party payors and individual patient-plaintiffs failed to include sufficient averments that their physicians were influenced by Schering's marketing practices at the time the drugs were prescribed. As a result, the circuit court dismissed the complaints for lack of Article III standing.

In light of the Third Circuit's precedential decision in In re: Schering-Plough Corp., it is apparent that the heightened pleading standards established in Iqbal and Twombly remain viable and effective defenses in defeating conclusory-based lawsuits. Specifically, private plaintiffs who seek to recover for injuries from off-label marketing practices will need to adduce sufficient facts establishing a causal connection between the physician's decision to prescribe the drug for an off-label use and the drug manufacturer's off-label marketing practices. Absent such a showing, cases involving off-label marketing claims against pharmaceutical companies are likely to be ripe for disposition at the motion-to-dismiss stage.

For Further Information

If you have any questions about the information addressed in this Alert, please contact Alan Klein, Fletcher W. Moore, any member of the Products Liability and Toxic Torts Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.