943 F.3d 1243
9th Cir.2019Background
- Defendants (Takeda and Eli Lilly) developed and marketed Actos, FDA‑approved in 1999; plaintiffs allege defendants learned studies showed Actos increased bladder‑cancer risk but concealed that risk from physicians, consumers, and third‑party payors (TPPs).
- FDA announced a safety review in 2010 and issued a public warning in 2011; Actos sales allegedly fell ~80% after the warnings.
- Plaintiffs are five individual patients (who paid out‑of‑pocket and stopped taking Actos once they learned of the risk) and Painters and Allied Trades District Council 82 Health Care Fund (a TPP that reimbursed members’ drug claims).
- Plaintiffs asserted RICO claims (mail and wire fraud) under a "quantity effect" damages theory: they paid for prescriptions they would not have purchased had they known of the cancer risk (they abandoned an excess‑price theory on appeal).
- The district court dismissed the RICO claims for failure to plead proximate causation (RICO standing) under Rule 12(b)(6); the Ninth Circuit reviewed de novo and reversed, remanding for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether patients and TPPs pleaded RICO proximate cause for payments made for Actos | Plaintiffs allege direct relation: defendants’ concealment caused purchases; but‑for and proximate causation adequately pleaded | Defendants argue injuries are too remote; other parties (physicians, patients, PBMs) are intervening decisionmakers | Ninth Circuit: plaintiffs adequately pleaded proximate cause at the pleading stage and reversed dismissal |
| Whether prescribing physicians’ or PBMs’ decisions are intervening, unforeseeable causes that sever proximate causation | Physicians/PBMs were foreseeable links in the causal chain; defendants intended to influence prescribing and downstream payments | Defendants contend physicians’ independent judgments and intermediaries break the causal chain | Court: physicians/PBMs are not unforeseeable intervening causes; chain remains direct enough for RICO at pleading stage |
| Whether Painters Fund adequately alleged reliance (and specificity) for indirect reliance | Painters Fund alleged it relied on members/physicians to make informed prescribing decisions and alleged physicians relied on defendants’ misrepresentations | Defendants argue Painters Fund’s indirect reliance allegations are too general and lack specific doctors who relied | Court: indirect reliance suffices at pleading stage; specificity is not required pre‑discovery |
| Adequacy of damages (quantity‑effect) allegations given potential alternatives and apportionment concerns | Plaintiffs alleged they would not have purchased Actos and identified cheaper alternatives; damages ascertainable later | Defendants argue damages are speculative and attributable to other factors (e.g., purchases of alternate drugs) | Court: damages issues are factual and for later proceedings; pleading stage allegations are sufficient to survive dismissal |
Key Cases Cited
- Holmes v. Securities Investor Prot. Corp., 503 U.S. 258 (establishes RICO requires both but‑for and proximate causation)
- Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639 (proximate‑cause direct‑relation test can allow recovery by parties who did not directly receive misrepresentations)
- Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (rejects recovery where the directly injured party was a different victim of the fraud)
- Hemi Group, LLC v. City of New York, 559 U.S. 1 (holds injury too attenuated where third‑party conduct directly caused the harm)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (limits RICO standing via proximate‑cause/direct‑relation analysis)
- Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (RICO’s scope includes non‑organized‑crime commercial frauds)
- Oregon Laborers‑Employers Health & Welfare Trust Fund v. Philip Morris Inc., 185 F.3d 957 (9th Cir.) (RICO proximate‑cause analysis where indirect payors alleged injury from smokers’ illnesses)
- Canyon County v. Syngenta Seeds, Inc., 519 F.3d 969 (9th Cir.) (RICO standing elements summarized)
- Harmoni Int’l Spice, Inc. v. Hume, 914 F.3d 648 (9th Cir.) (proximate‑cause precedent in RICO context)
- UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121 (2d Cir.) (TPP claims held too attenuated at class stage)
- Sidney Hillman Health Ctr. v. Abbott Labs., 873 F.3d 574 (7th Cir.) (TPPs held too far removed to satisfy RICO proximate cause)
- In re Neurontin Mktg. & Sales Practices Litig., 712 F.3d 21 (1st Cir.) (TPP recovery allowed; causal chain not attenuated)
- In re Avandia Mktg., Sales Practices & Prod. Liab. Litig., 804 F.3d 633 (3d Cir.) (TPPs adequately pleaded proximate cause)