In Re Avandia Marketing, Sales Practices & Product Liability Litigation
2015 U.S. App. LEXIS 18633
| 3rd Cir. | 2015Background
- Third-party payors (TPPs) — union health and welfare funds — sued GlaxoSmithKline (GSK) alleging it concealed and misrepresented cardiovascular risks of Avandia and thereby fraudulently induced TPPs/PBMs to place Avandia on formularies at favorable reimbursement rates.
- Plaintiffs assert RICO predicate acts (mail and wire fraud, witness tampering, use of interstate facilities) and theories of economic harm: "excess price" (overpayment because Avandia was overpriced due to fraud) and "quantity effect" (more prescriptions caused by misrepresentations).
- FDA actions: early labeling warnings in 2001 and 2006; Nissen study (2007) reported increased myocardial infarction risk; FDA added black-box warnings in 2007 and restricted access in 2010. GSK allegedly countered with promotional campaigns minimizing risks.
- District Court denied GSK’s motion to dismiss RICO claims for lack of standing/proximate cause, finding plaintiffs plausibly alleged concrete economic injury and a direct causal link; certified interlocutory appeal under 28 U.S.C. § 1292(b).
- Third Circuit reviews de novo and affirms: holds TPPs adequately pleaded RICO standing (injury to business or property and proximate causation) at the motion-to-dismiss stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TPPs alleged a cognizable RICO injury to business or property | Overpayment due to GSK’s fraudulent marketing caused concrete monetary loss (analogous to antitrust overpayment cases) | No concrete injury; plaintiffs received what they bargained for unless beneficiaries were harmed (relying on Maio and Horvath) | TPPs alleged a concrete economic injury (present overpayment), distinguishable from Maio; standing satisfied at pleading stage |
| Whether TPPs pleaded RICO proximate causation | GSK’s misrepresentations directly caused TPPs/PBMs to place Avandia on formularies and pay inflated prices; injury was foreseeable and intended | Intervening decisions by doctors and public disclosures (post‑2007) break the causal chain; plaintiffs continued covering Avandia, so causation fails | Causal chain is sufficiently direct (Bridge analogy); intermediaries do not defeat proximate cause at pleading stage |
| Effect of publicization (Nissen study/2007 warnings) on causation | Public reports did not necessarily disclose the full scope of GSK’s alleged fraud; GSK’s post‑study marketing could have continued to influence formularies | Once risks were publicized in 2007, plaintiffs’ continued coverage shows lack of reliance and severs causation | Court will not assume plaintiffs knew full scope in 2007; factual dispute inappropriate to resolve on motion to dismiss |
| Whether plaintiffs must identify cheaper alternatives to show injury | Excess‑price theory does not require showing an available alternative; quantity theory can rely on metformin as a cheaper drug | Plaintiffs must show alternatives or that doctors would have prescribed cheaper drugs | Plaintiffs pleaded metformin as a cheaper alternative and may proceed; question of alternatives pertains to damages/proof, not standing |
Key Cases Cited
- Maio v. Aetna, Inc., 221 F.3d 472 (3d Cir. 2000) (insureds lacked RICO standing where injury depended on speculative future inadequate care)
- In re Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004) (TPPs suffer direct economic harm when they pay supracompetitive prices due to misconduct)
- Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992) (RICO proximate‑cause analysis requires direct relation to limit remote claims)
- Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) (plaintiffs need not directly rely on misrepresentations if injury is the foreseeable, direct result of the fraud)
- Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) (no proximate cause where harm was caused by actions distinct from the alleged fraud)
- Hemi Group, LLC v. City of New York, 559 U.S. 1 (2010) (attenuated causation where separate actors and actions produced the harm)
- Neurontin Marketing & Sales Practices Litig., 712 F.3d 21 (1st Cir. 2013) (TPP standing where TPPs were primary, intended victims and injury was foreseeable)
- Ironworkers Local Union 68 v. AstraZeneca Pharm., LP., 634 F.3d 1352 (11th Cir. 2011) (insurers lacked standing where premiums accounted for anticipated fraud)
- Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912 (3d Cir. 1999) (no proximate cause where plaintiffs’ losses derived from third‑party injuries)