IN RE NEURONTIN MARKETING AND SALES PRACTICESNos. 11-1904, 11-2096.
712 F.3d 21 (2013)
In re NEURONTIN MARKETING AND SALES PRACTICES LITIGATION.
Kaiser Foundation Health Plan, Inc.; Kaiser Foundation Hospitals; Kaiser Foundation Health Plan of Colorado; Kaiser Foundation Health Plan of Georgia, Inc.; Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc.; Kaiser Foundation Health Plan of Northwest; Kaiser Foundation Health Plan of Ohio, Plaintiffs, Appellees,
Pfizer, Inc.; Warner-Lambert Company, LLC, Defendants, Appellants.
Kaiser Foundation Health Plan, Inc.; Kaiser Foundation Hospitals; Kaiser Foundation Health Plan of Colorado; Kaiser Foundation Health Plan of Georgia, Inc.; Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc.; Kaiser Foundation Health Plan of Northwest; Kaiser Foundation Health Plan of Ohio, Plaintiffs, Appellees,
Pfizer, Inc.; Warner-Lambert Company, LLC, Defendants, Appellants.
United States Court of Appeals, First Circuit.
April 3, 2013.
Kathleen Sullivan, with whom Mark S. Cheffo, Katherine A. Armstrong, Quinn Emanuel Urquhart Oliver & Hedges LLP, and Skadden, Arps, Slate, Meagher & Flom LLP were on brief, for appellants. David C. Frederick, with whom Scott K. Attaway, W. Joss Nichols, Caitlin S. Hall, Linda P. Nussbaum, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C. and Grant & Eisenhofer, P.A. were on brief, for appellees.
Before LYNCH, Chief Judge, SOUTER, Associate Justice, and LIPEZ, Circuit Judge.
LYNCH, Chief Judge.
This is an appeal from verdicts of over $140 million, reached by both a jury and a court, compensating Kaiser, a major health plan provider and insurer, for the injury Kaiser suffered by its payment for four categories of off-label Neurontin prescriptions which had been induced by a fraudulent scheme by Pfizer, the manufacturer of Neurontin. These verdicts followed a settlement that Warner-Lambert, a subdivision of Pfizer, had reached in a criminal case brought by the United States, in which Warner-Lambert pled guilty to two counts and agreed to pay a $240 million criminal fine concerning the off-label marketing of Neurontin; Pfizer agreed to pay an additional $190 million in civil fines. This is one of several related appeals regarding Neurontin, which result in separate opinions, of which this is the lead. We affirm the verdicts for Kaiser.
On February 1, 2005, Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals (together, "Kaiser"), Aetna, Inc. ("Aetna"), and The Guardian Life Insurance Company of America ("Guardian") filed a coordinated complaint in the U.S. District Court in Massachusetts against Pfizer, Inc. and Warner-Lambert Company
In a related case in which we issue a separate opinion, Harden Manufacturing Corporation ("Harden") filed a class action complaint on May 14, 2004, in the same court, against Pfizer and Parke-Davis (as a division of Warner-Lambert) on behalf of a broad purported class consisting of "[a]ll entities throughout the United States and its territories who, for purposes other than resale, purchased, reimbursed and/or paid for Neurontin for indications not approved by the FDA (`the Class') during the period from January 1, 1994 through the present (`the Class Period')." Harden asserted claims under RICO, as well as state-law claims for common law fraud, violation of consumer protection statutes, and unjust enrichment.
Both the class complaint and the coordinated complaint were part of a larger multidistrict litigation ("MDL") concerning the marketing and sale of Neurontin, which was consolidated in the District of Massachusetts in November 2004. In each case, the defendants moved for summary judgment. On January 8, 2010, on defendants' motion the district court dismissed the claims of Guardian and Aetna; the court denied summary judgment as to Kaiser's claims. See In re Neurontin Mktg. & Sales Practices Litig. (Neurontin Coordinated SJ),
Beginning on February 22, 2010, the district court held a jury trial on Kaiser's RICO claims against the defendants. On March 25, 2010, after a five-week trial, the jury concluded that "Kaiser prove[d] that Pfizer violated RICO with respect to its promotion of Neurontin for" bipolar disorder, migraine, neuropathic pain,
On November 3, 2010, the district court found in Kaiser's favor on its claims under the UCL, issuing extensive findings of fact and conclusions of law. In re Neurontin Mktg. & Sales Practices Litig.,
On September 20, 2011, Pfizer filed a notice of appeal as to the court's entry of judgment in favor of Kaiser on its RICO and UCL claims, and as to the court's denial of Pfizer's motion for a new trial. This opinion concerns only that appeal.
We review de novo defendants' contention that Kaiser's RICO and UCL claims failed as a matter of law, taking the evidence in the light most favorable to the verdict. Tuli v. Brigham & Women's Hosp.,
A. The Defendants' Fraudulent Marketing Campaign
Parke-Davis, an operating division of Warner-Lambert Company, developed Neurontin
Pfizer acquired Warner-Lambert in 2000. Id. at *5. In 2001, Pfizer filed an application with the FDA seeking approval of Neurontin for the broad indication of neuropathic pain; after receiving negative feedback from the FDA and non-FDA experts, Pfizer withdrew its application. Id. at *10. The FDA did approve Neurontin for the treatment of post-herpetic neuralgia ("PHN"), a type of neuropathic pain associated with shingles, in 2002. Id.
In 1994, Parke-Davis had estimated that Neurontin would generate $500 million in profits over the duration of its patent. Id. at *6. In order to increase Neurontin's earning potential, Parke-Davis began in 1995 to develop strategies to market Neurontin for off-label conditions — that is, conditions not included on the official label
Both the jury and the district court found that Parke-Davis, Warner-Lambert, and Pfizer had "engaged in the fraudulent marketing of Neurontin" for the treatment of bipolar disorder, beginning in July 1998, id. at *17; for the treatment of neuropathic pain, beginning in November 1997, id. at *23; for the treatment of migraines, beginning in April 1999, id. at *25; and for doses greater than 1800 mg/day, beginning in November 1997, id. at *28.
The defendants' fraudulent marketing campaign also targeted third-party payors ("TPPs"), including Kaiser, a non-profit healthcare provider which is also one of the largest health maintenance organizations ("HMOs") in the United States. Id. at *2. As to these targets, additional mechanisms were used to influence both formulary decisions and prescribing decisions. In 1994, in a memo discussing the promotion of Neurontin as an anti-convulsant, Parke-Davis's marketing team listed Kaiser as second on its list of "Top 10 HMOs Targeted for Neurontin." Id. at *11. In 2004, Pfizer developed an "Operating Plan" for marketing a number of drugs, including Neurontin, to Kaiser; tellingly, the plan featured, as a strategy, "develop[ing] relationships with [decisionmakers affiliated with Kaiser] who are not considered whistle blowers." Id. (emphasis added) (internal quotation marks omitted). Pfizer also employed physicians associated with Kaiser to serve on speakers' bureaus and publish misleading articles about Neurontin. Id.
B. Kaiser's Management of Neurontin on Its Formularies
Kaiser is composed of two separate corporations: the Kaiser Foundation Health Plan, which owns six regional health plans and directly provides medical coverage to beneficiaries in California and Hawaii, providing medical insurance to about 8.6 million members; and Kaiser Foundation Hospitals, which operates health care facilities and pharmacies. Id. at *2. The Kaiser Foundation Health Plan and its subsidiaries do not employ physicians themselves, but have exclusive contractual relationships with regional Permanente Medical Groups ("PMGs"). Id. at *3.
Each PMG has its own Pharmacy and Therapeutics ("P & T") Committee which manages each PMG's formulary, or list of medications that treating physicians may prescribe. Id. Representatives from both
PMG formularies may list drugs (1) without restrictions; (2) with restrictions limiting prescribing to a particular group of physicians; or (3) with guidelines for appropriate prescribing. Id. at *4. Kaiser will pay for off-formulary prescriptions and no prior authorization is required for any prescription. Nonetheless, an internal Kaiser study found that 95% of prescriptions written by PMG physicians comply with formularies. Id.
After the FDA approved Neurontin for epilepsy in 1993, the P & T Committee of each regional PMG added Neurontin to its formulary, with one regional PMG — Hawaii — not adding Neurontin to its formulary until 2000. Id. The Southern California PMG initially restricted prescribing of Neurontin to neurologists. Id. In September of 1997, however, its P & T Committee permitted anesthesiologists to prescribe Neurontin for reflex sympathetic dystrophy, a particular pain syndrome. Id. In June of 1999, the Committee removed prescribing restrictions on Neurontin and added guidelines reserving its use for neuropathic pain patients who were unresponsive to or intolerant of other treatments. Id. Then, in September of 1999, the P & T Committee removed all remaining formulary restrictions on Neurontin. Id. at *5. Prescriptions of Neurontin increased dramatically thereafter. Id. at *31.
The district court found that "Kaiser relied on Pfizer's misrepresentations and omissions during the development of drug monographs in both June and September 1999," id. at *29, and that Pfizer's misrepresentations "directly affected decisions about Neurontin's placement on formulary without restrictions," id. at *30.
C. Physicians' Prescribing Behavior as to Neurontin
The jury and court found that the prescribing of Neurontin had in fact been causally affected by the fraudulent marketing scheme, which included the sponsorship of CME events attended by physicians and direct marketing to physicians. Id. at *12. Defendants stress that no physician in this case, or in the Neurontin MDL as a whole, testified that he or she prescribed Neurontin because of defendants' fraudulent off-label marketing. Id. at *32. But Kaiser presented other evidence as to causation, and evidence as to why such individual testimony was unreliable.
The primary evidence was the expert testimony of Dr. Meredith Rosenthal, who holds a Ph.D. in health economics from Harvard University and is a professor at the Harvard School of Public Health. Id. Dr. Rosenthal "use[d] aggregate data and statistical approaches to link patterns in promotional spending[
Dr. Rosenthal used "gold standard" national data on Neurontin prescriptions, and employed the assumptions that (1) "Kaiser's patient population and physician distribution are similar to the national mix," and (2) "promotional spending on off-label marketing was the same as the promotional spending on fraudulent off-label marketing." Id. at *32-33. The district court found both assumptions to be reasonable. Id. at *32-33.
As is customary for such experts, Dr. Rosenthal testified that she "assumed that the allegations in the complaint are true" for purposes of conducting her analysis, but offered no view as to whether or not there had been a fraudulent marketing scheme. She further explained that her assignment was only to calculate the percentage of prescriptions caused by Pfizer's fraudulent off-label marketing and not to convert that percentage into a damages number for Kaiser, which was the task of another expert witness, Dr. Raymond Hartman, Ph.D.
Dr. Rosenthal explained the difference between correlation and causation and stated that her analysis established causation by performing a regression analysis on sales information against promotional spending on detailing, professional journal advertising, and the retail value of samples, while controlling for other variables. Her analysis excluded the many off-label prescriptions by physicians who received legitimate on-label promotion. She concluded that the "percentage[s] of Neurontin prescriptions that were caused by Pfizer's fraudulent marketing of Neurontin" were, by off-label indication, as follows: 99.4% of prescriptions for bipolar disorder; 70% of prescriptions for neuropathic pain; 27.9% of prescriptions for migraine; and 37.5% of prescriptions for doses over 1800 mg/day. Id. at *33. Thus, three out of ten Neurontin prescriptions written by neurologists for migraine would not have been written or filled but for the alleged misconduct. As for Neurontin prescriptions written by psychiatrists for bipolar disorder between November 1995 and December 2004, 99.4% would not have been written had there been no fraud. Dr. Rosenthal testified that it was her opinion "to a reasonable degree of scientific certainty that these calculations are the best way to estimate the number of prescriptions and the share of prescriptions that were affected by the alleged misconduct."
Turning to Pfizer's insistence that only doctor-by-doctor evidence could prove causation, Dr. Rosenthal testified as to the well-recognized unreliability in the field of healthcare economics of asking doctors individually whether they were influenced by the many methods of off-label marketing. She said that self-reporting from physicians about patterns of practice that may be controversial shows both conscious reluctance and unconscious bias, which lead them to deny being influenced. As a result, it is preferable "[t]o examine objectively the causal association between promotion and sales using ... econometric models." Dr. Rosenthal utilized the standard practice of using "aggregate data and... statistical approaches to link patterns in promotional spending to patterns in prescribing for the drug." Dr. Rosenthal testified that it was "neither standard nor appropriate to look physician by physician."
The court also found that subsidiary evidence tended to show a causal link. For example, PMG physicians attended conferences where Neurontin was promoted for off-label uses, and after one such conference, in May 1999, new starts of Neurontin increased by 62%. Id. at *30.
D. Criminal Proceedings and Related Proceedings Against the Defendants Concerning Neurontin
Dr. David Franklin was employed as a medical liaison at Parke-Davis for about five months in 1996; on August 13, 1996, he filed a sealed qui tam action against Parke-Davis under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733. United States ex rel. Franklin v. Parke-Davis, Div. of Warner-Lambert Co.,
On May 13, 2004, the U.S. Department of Justice filed a criminal information charging Warner-Lambert with illegal off-label promotion of Neurontin. Kaiser Findings, 2011 WL 3852254, at *11. Pfizer caused Warner-Lambert to plead guilty to two felony counts of marketing Neurontin for unapproved uses, with Warner-Lambert "expressly and unequivocally admit[ting]" that it promoted the sale and use of Neurontin for neuropathic pain, bipolar disorder, and migraine. Id. To be clear, this plea did not admit to fraudulent marketing. Warner-Lambert agreed to pay a $240 million criminal fine, and Pfizer paid $190 million in additional civil fines. Id. News of this action, plea, and settlement caused Kaiser to take certain steps, as described below.
E. Kaiser's Actions To Reduce Neurontin Prescriptions
Neurontin prescriptions written by PMG physicians increased dramatically after September 1999 (the fraudulent marketing campaign began in 1997). This notable increase led some Kaiser regions to "examine their members' use of Neurontin" and make efforts to limit it. Id. at *31. By the spring of 2002, the Northern California PMG had barred Pfizer drug representatives from detailing its physicians regarding Neurontin, and the same PMG's Drug Utilization Group ("DRUG") began a campaign to promote only the appropriate use of Neurontin, which other regional PMGs joined. Id.
In late 2002, Kaiser learned about Franklin's qui tam action and escalated its efforts to limit prescribing of Neurontin
The P & T Committees did not remove Neurontin from their formularies or impose restrictions on its use after learning about the allegations of defendants' fraudulent off-label marketing of Neurontin. Favorable information about using Neurontin to treat neuropathic pain remained on Kaiser's website until the eve of trial. Id. at *30. The district court found, however, that Kaiser employees did not know about the full scope of defendants' fraud. Rather, they learned of the full scope of the fraud through (1) discovery in this suit, and (2) the publication, in November of 2009, of an article in the New England Journal of Medicine reporting defendants' use of scholarly publications to disseminate misleading information about Neurontin. Id. at *31, *7 & n. 4.
F. Injury and Damages Sustained by Kaiser Due to Defendants' Fraud
The court and the jury found that Kaiser had suffered both injury and quantifiable damages as a result of defendants' actions.
After reviewing the evidence at trial — including the results of DBRCTs and other clinical trials, anecdotal accounts of clinical success, regulatory approval in other countries, and expert opinions, id. at *34-45 — the district court found that "there is no reliable scientific evidence that Neurontin is effective for bipolar disorder, migraine, or at high doses," and that although there was evidence that Neurontin was effective in treating some kinds of neuropathic pain, "there is no reliable scientific evidence to support a broad indication of neuropathic pain," id. at *34. The court also found that "PMG physicians would have almost certainly prescribed alternative medication to their patients had they not prescribed Neurontin." Id. at *33.
In addition to Dr. Rosenthal's expert testimony on causation and injury, Kaiser presented testimony by a second expert, Dr. Hartman, who provided evidence as to the damages incurred by Kaiser. His analysis used a list
Dr. Keeley, Pfizer's expert, testified that Dr. Hartman's calculations were flawed because he did not have data that permitted
Pfizer argued to the jury that Neurontin was effective for the off-label uses at issue, and that as a result, (1) Pfizer's promotional campaign involved no misrepresentations about Neurontin's effectiveness; (2) even if Pfizer made misrepresentations, Kaiser doctors prescribed Neurontin for off-label uses because it was effective in their clinical experience, not because of Pfizer's misrepresentations; and (3) because Kaiser's damages theory was based on Neurontin's complete ineffectiveness for off-label uses, Kaiser's damages calculations were invalid if Neurontin was sometimes effective for these uses. The jury rejected Pfizer's arguments and awarded Kaiser $47,363,092 in damages, which the court trebled to $142,089,276. Id. at *1.
Pfizer argued to the district court that since doctors consider "multiple sources, types, and levels of scientific evidence" in making treatment decisions, and the effectiveness of a drug is a patient-specific inquiry, the court should not confine its analysis of Neurontin's effectiveness for off-label uses to whether DBRCTs demonstrated efficacy. Kaiser responded that DBRCTs were the "gold-standard for determining efficacy" and that "[l]ower-tier evidence is insufficient, especially in place of existing DBRCTs."
Pfizer further argued to the court that because Neurontin was not "completely and categorically ineffective" for off-label uses, Pfizer had not misled Kaiser about Neurontin's efficacy and Kaiser had not proved that it suffered economic injury. Pfizer also argued that Dr. Rosenthal's and Dr. Hartman's testimony was flawed and hence not probative of causation or damages. The court rejected Pfizer's arguments and accepted Dr. Rosenthal's and Dr. Hartman's calculations as the basis for its own damages award of $95,286,518. Id. at *58-60.
Pfizer seeks to vacate the court and jury findings of liability and damages on a number of theories. It argues that Kaiser's claims fail as a matter of law, that the evidence was insufficient, and that there were trial errors. At the heart of the appeal is the claim that, as a matter of law, Kaiser cannot meet the RICO or UCL causation requirements, and so Pfizer was entitled to a directed verdict. On appeal, Pfizer does not challenge the conclusions of the jury and district court that it engaged in a fraudulent scheme with respect to its promotion of Neurontin for off-label uses.
A. RICO Causation
The civil damages provision of RICO provides that "[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor ... and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's
Our RICO causation analysis is controlled by the Supreme Court's decisions in Holmes v. Securities Investor Protection Corp.,
Pfizer's primary argument is that, as a matter of law, there is no proximate causation in this case because there are too many steps in the causal chain connecting its misrepresentations to the injury to Kaiser, particularly because that injury rests on the actions of independent actors — the prescribing doctors. As to but-for causation, Pfizer argues that its evidence at trial "falsified" Kaiser's theories of causation, and that some of the evidence Kaiser presented to prove but-for causation was inadmissible. We take these arguments in sequence.
B. Proximate Causation
In Holmes, the Supreme Court upheld entry of summary judgment for the defendant on RICO claims brought by a plaintiff who was subrogated to the rights of others, based on the plaintiff's failure to meet the proximate cause requirement. Id. at 262-64, 271-74, 112 S.Ct. 1311. The Holmes plaintiff alleged that the defendant had engaged in an enterprise to manipulate the prices of certain stocks, id. at 261, 112 S.Ct. 1311, and complained that this conduct caused the plaintiff to have to pay the claims of customers of two broker-dealers that had become insolvent once the fraud was revealed, see id. at 262-63, 112 S.Ct. 1311. The Court determined that, even if this plaintiff were allowed to stand in the shoes of a better-situated plaintiff (namely, the customers), the link was too remote between the alleged stock manipulation scheme and the harm to the customers, because that harm was itself contingent on the harm suffered by the broker-dealers who had purchased the manipulated
The Holmes Court stated that, "[a]t bottom, the notion of proximate cause reflects `ideas of what justice demands, or of what is administratively possible and convenient.'" Id. at 268, 112 S.Ct. 1311 (quoting W. Keeton, et al., Prosser & Keeton on Law of Torts § 41, at 264 (5th ed.1984)). As a result, the Court explained, it was "us[ing] `proximate cause' to label generically the judicial tools used to limit a person's responsibility for the consequences of that person's own acts." Id.
Because of "the infinite variety of claims that may arise" in which a court must analyze proximate causation, it is "virtually impossible to announce a black-letter rule that will dictate the result in every case." Id. at 272 n. 20, 112 S.Ct. 1311 (quoting Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters,
The Court noted that RICO's civil provision drew its language directly from the Clayton and Sherman Acts, which had for decades been interpreted as incorporating proximate cause requirements. Id. at 267-68, 112 S.Ct. 1311; see Associated Gen. Contractors, 459 U.S. at 531-34, 103 S.Ct. 897. In the antitrust context, the Court had identified a number of factors that bear on the proximate cause question, including whether the injury was of the sort that the statutes sought to redress, Associated Gen. Contractors, 459 U.S. at 538, 103 S.Ct. 897; the "directness or indirectness of the asserted injury," including whether the "links" in the "chain of causation" were clear or were only "vaguely defined," id. at 540, 103 S.Ct. 897; the identity of the "immediate victims" of the antitrust conduct, id. at 541, 103 S.Ct. 897; whether the injuries complained of may have been caused by "independent factors," id. at 542, 103 S.Ct. 897; and whether the plaintiffs were part of "an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement," id.
The Holmes Court used various phrases to define what it takes to meet RICO's proximate cause standard, such as "some direct relation between the injury asserted and the injurious conduct alleged," 503 U.S. at 268, 112 S.Ct. 1311, and whether "the link is too remote" between the conduct and the harm suffered, id. at 271, 112 S.Ct. 1311. The Court noted that the proximate cause analysis at common law often included such a "demand for some direct relation"; that is, proximate cause would be lacking if, as in Holmes, the plaintiff "complained of harm flowing merely from the misfortunes visited upon a third person by the defendant's acts." Id. at 268, 112 S.Ct. 1311. Later, in Anza v. Ideal Steel Supply Corp.,
Importantly, the Holmes Court also provided three functional factors with which
Holmes makes it clear that both the directness concern and the three functional factors are part of the proximate cause inquiry. See id. at 271-74, 112 S.Ct. 1311. Indeed, the Court warned that its "use of the term `direct' should merely be understood as a reference to the proximate-cause enquiry that is informed by the concerns" of justice and administrability. Id. at 272 n. 20, 112 S.Ct. 1311; see id. at 268, 112 S.Ct. 1311. Holmes and its successor, Anza, both found a lack of proximate cause when examining the attenuated relationship between the plaintiffs and the direct victim or victims of the alleged fraud.
In Bridge v. Phoenix Bond & Indemnity Co.,
In Bridge, the plaintiffs alleged that the defendants had engaged in a scheme to make misrepresentations to county tax authorities in order to win more bids at tax lien auctions than they would have been able to win absent the fraud. See id. at 2135-36. The plaintiffs were other bidders at the auctions whose bids had tied with defendants' bids, and whose claimed injury was the deprivation of their fair share of winning bids. Id. at 2136.
A unanimous Court held that first-party reliance is not an element of proximate cause in a private RICO claim predicated on mail fraud. Id. at 2134. Thus, even where the plaintiffs did not receive the misrepresentations at issue — the county was the party that had relied on the misrepresentations — the plaintiffs had sufficiently
Bridge also supports the conclusion that Kaiser meets the proximate cause requirement for several additional reasons. First, Bridge held that the plaintiffs there "clearly were injured by [defendants'] scheme," as they lost valuable property they would not otherwise have lost. Id. at 2139. In so holding, the Court analogized to a business being harmed by misrepresentations made by a rival to its suppliers and competitors but not to the business itself. See id. The Court rejected the argument that no RICO injury could exist in such circumstances. In doing so, it commented on the fact that a business so injured would be "the primary and intended victim of the scheme to defraud." Id. Here, Kaiser was likewise a "primary and intended victim of [Pfizer's] scheme to defraud."
Further, the Bridge Court saw no risk of multiple recoveries or other policy reasons to limit recovery. See 128 S.Ct. at 2144 (citing Holmes,
In our view, Kaiser has met both the direct relationship and functional tests articulated in Holmes and its progeny. We reject Pfizer's core defense that there are too many steps in the causal chain between its misrepresentations and Kaiser's alleged injury to meet the proximate cause "direct relation" requirement as a matter of law. Pfizer characterizes this causal relationship as involving at least four steps: Pfizer communicating tainted information about Neurontin to Kaiser's DIS; the DIS producing monographs that rely on the misrepresentations; those monographs influencing the PMGs in their formulary decisions; and the prescribing physicians (who exercise independent medical judgment) acting within the formulary to issue the prescriptions. We think this characterization misconstrues the way in which the Court has framed the direct relation test. Moreover, the adoption of Pfizer's view would undercut the core proximate causation principle of allowing compensation for those who are directly injured, whose injury was plainly foreseeable and was in fact foreseen, and who were the intended victims of a defendant's wrongful conduct.
In fact, the causal chain in this case is anything but attenuated. Pfizer has always known that, because of the structure of the American health care system, physicians would not be the ones paying for the drugs
With respect to the mechanisms by which Pfizer marketed Neurontin to PMG doctors through detailing and educational programs, Pfizer fraudulently marketed to physicians with the intent that those physicians would write prescriptions paid for by Kaiser. The fraudulent scheme worked as intended, inducing a huge increase in Neurontin prescriptions for off-label uses. Pfizer now argues that because doctors exercise independent medical judgment in making decisions about prescriptions, the actions of these doctors are independent intervening causes. But Pfizer's scheme relied on the expectation that physicians would base their prescribing decisions in part on Pfizer's fraudulent marketing. The fact that some physicians may have considered factors other than Pfizer's detailing materials in making their prescribing decisions does not add such attenuation to the causal chain as to eliminate proximate cause. Rather than showing a lack of proximate causation, this argument presents a question of proof regarding the total number of prescriptions that were attributable to Pfizer's actions. This is a damages question. Cf. Anza, 547 U.S. at 466, 126 S.Ct. 1991 (Thomas, J., concurring in part and dissenting in part) ("Proximate cause and certainty of damages, while both related to the plaintiff's responsibility to prove that the amount of damages he seeks is fairly attributable to the defendant, are distinct requirements for recovery in tort.").
The doctrine of proximate cause, as Judge Posner has noted, "does its work" in situations where
BCS Servs., 637 F.3d at 754. That is not the situation here. Holding Pfizer liable will have an effect in deterring wrongful conduct. And the effect of that wrongful conduct was clear in foresight, not hindsight. See id. at 755. Upholding the finding of proximate cause here will "protect the ability of primary victims of wrongful conduct to obtain compensation; simplif[y] litigation; recognize the limitations of
C. But-For Causation
Kaiser introduced several categories of evidence at trial which clearly demonstrated but-for causation. It produced evidence that (1) its employees directly relied on Pfizer's misrepresentations in preparing monographs and formularies, which, in turn, influenced doctors' prescribing decisions; and (2) Pfizer's fraudulent off-label marketing directed to physicians caused PMG doctors to issue more Neurontin prescriptions than they would have absent such marketing. The latter type of evidence came from Dr. Rosenthal's report
1. But-For Reliance Evidence
Kaiser presented ample evidence of the ways in which its reliance on Pfizer's misrepresentations regarding the effectiveness of Neurontin for the four relevant off-label uses met the but-for causation requirement. Kaiser received Pfizer's misrepresentations through Pfizer's contacts with Kaiser's DIS, which disseminated information throughout the Kaiser organization. See Kaiser Findings, 2011 WL 3852254, at *3-4. The DIS also relied on publicly available information about Neurontin, id. at *3, which, because of Pfizer's publication strategy, omitted important information about negative study results, see id. at *7-8. A reasonable factfinder could readily conclude that misinformation received by the DIS would be widely disseminated, utilized, and relied upon throughout the Kaiser organization to cause but-for injury.
Kaiser specifically presented evidence that the DIS shared with all regions at least two monographs that recommended Neurontin for bipolar disorder and that recommended removal of any formulary restrictions on Neurontin. See id. at *28-29. These monographs were compiled without Pfizer having disclosed certain adverse material information. Id. "In making formulary decisions, P & T Committees rely heavily on DIS's monographs," id. at *3, and PMG physicians comply with the formulary at a 95 percent rate, id. at *4.
There was also evidence that PMG physicians received and acted upon Pfizer's misrepresentations, both through information
From this evidence, the district court concluded that
Id. at *30. This finding was not clearly erroneous. Further, a reasonable jury could have reached the same conclusion.
Pfizer argues that Kaiser's DRUG and DUAT campaigns to reduce prescriptions of Neurontin were not evidence of but-for causation because they were motivated by the desire to contain costs, not by concerns about Neurontin's efficacy for off-label uses. Pfizer also argues that once evidence of the DRUG and DUAT campaigns is properly discounted, there is no evidence that the Kaiser PMGs took steps to restrict Neurontin on their formularies, which "falsifies" Kaiser's causal theory of direct reliance.
Pfizer did present evidence that Kaiser continued to permit and even recommend the prescription of Neurontin for certain off-label uses after it became aware of Pfizer's fraud, as well as evidence that Kaiser's efforts to limit Neurontin prescriptions were driven in part by its cost. But Kaiser presented evidence that it did not learn the full scope of Pfizer's fraud until November 2009, Kaiser Findings, 2011 WL 3852254, at *31, and that its efforts to limit Neurontin prescriptions were motivated by concerns about its efficacy for off-label uses. It was within the factfinder's province to weigh this evidence. Pfizer's evidence did not, as a matter of law or of evidence, "falsify" Kaiser's theory of reliance upon Pfizer's misrepresentations.
2. Regression Analysis Aggregate Evidence
Pfizer relies heavily on its argument that the aggregate statistical evidence presented by Dr. Rosenthal was also insufficient to show causation (or injury) as a matter of law, and was inadmissible as well.
a. Admissibility of Rosenthal Testimony
We review a district court's ruling on the admissibility of an expert witness's testimony for abuse of discretion. In re Pharm. Indus. Average Wholesale Price Litig. (AWP),
It is clear that Dr. Rosenthal's evidence met several requirements of Federal Rule of Evidence 702. Dr. Rosenthal is a witness with the requisite "knowledge, skill, experience, training, or education," Fed.R.Evid. 702, and her opinion would assist the trier of fact to understand the evidence or to determine a fact in issue, Fed.R.Evid. 702(a). Yet Pfizer argues that Dr. Rosenthal's testimony should have been excluded, attacking both the methodology and the "fit" of the Rosenthal report.
As to the methodology, regression analysis is a well recognized and scientifically valid approach to understanding statistical data, and courts have long permitted parties to use statistical data to establish causal relationships. See, e.g., Wards Cove Packing Co., Inc. v. Atonio,
Pfizer argues that Dr. Rosenthal's analysis is nonetheless unreliable in this instance because it did not account for other factors that may have led a doctor to prescribe Neurontin for off-label use, particularly because the model did not include a "time trend."
The district court acted well within its discretion in concluding that Dr. Rosenthal's methods met the scientific validity standard under Rule 702. "So long as an expert's scientific testimony rests upon `good grounds, based on what is known,' it should be tested by the adversarial process, rather than excluded for fear that jurors will not be able to handle the scientific complexities." Milward, 639 F.3d at 15 (citation omitted) (quoting Daubert, 509 U.S. at 590, 113 S.Ct. 2786). Pfizer's own expert witness admitted that peer-reviewed, published studies do not always contain time trends. Moreover, Dr. Rosenthal explained her reason for declining to use a time trend: because the case involved only a single drug (as opposed to other studies involving multiple drugs), the time trend would likely be a confounding variable, because its inclusion would produce results showing that promotional spending had no statistically significant effect on prescriptions — a conclusion that would not comport with basic economics. Indeed, Pfizer's own documents and testimony show that it expected and believed that off-label marketing of Neurontin would increase off-label prescriptions, and that its marketing had that result. The choice not to use a time trend did not make Dr. Rosenthal's methodology unreliable.
Pfizer's objections regarding data that allegedly contradict the reliability of the model also do not show that the district court abused its discretion. These objections presented a question for the jury. The post-October 2004 increase in gabapentin prescriptions does not render the regression analysis inadmissible. Indeed, the increase can be explained by the fact that gabapentin became a generic drug at that time, and the generic's lower price would be expected to increase gabapentin sales even though marketing efforts for Neurontin had ceased. This change in circumstances does not negate the causal relationship between marketing and prescriptions that the model revealed for the pre-October 2004 period.
There was also nothing methodologically suspect about Dr. Rosenthal's controlling for a spike in promotional spending in 2003, because that spike was likely the result of "strategic interaction" between the marketing efforts for Neurontin and for Pfizer's launch of a new anti-epileptic drug, Lyrica. As Dr. Rosenthal explained, this was the most plausible reason why promotional spending for Neurontin would increase even as it neared the end of its patent life.
Finally, Pfizer's argument about the 85% figure for nociceptive pain misunderstands the structure of the model. In conducting her analysis, Dr. Rosenthal assumed — at the plaintiffs' direction — that
As to the "fit" between Dr. Rosenthal's model and the facts at issue in the case, Pfizer objects that: (1) Dr. Rosenthal did not analyze the effect of the distorted studies or educational events on prescriptions, but rather the effect of promotional spending on prescriptions; (2) she did not analyze the effect of formulary expansion on the number of prescriptions written; (3) the analysis used national drug utilization data, as opposed to drug utilization data of Kaiser; (4) the analysis assumes all off-label marketing expenditures for Neurontin were for fraudulent marketing; and (5) the diagnostic codes used to determine what condition the drug was prescribed for indicate a patient's primary condition, so Neurontin could have been prescribed for an on-label use, but appear to be off-label. The basic thrust of Pfizer's argument is that Dr. Rosenthal's analysis does not provide insight into the quantity of prescriptions written as a result of Pfizer's alleged fraudulent marketing.
None of these arguments demonstrate that the district court abused its discretion under the "fit" criterion in admitting Dr. Rosenthal's testimony. The use of promotional spending as a variable was a reasonable "fit" to represent Pfizer's fraud because Pfizer targeted its promotional activities toward PMG physicians and toward Kaiser itself, and the money it spent on promotion helped to implement its fraudulent publication strategy. See Kaiser Findings, 2011 WL 3852254, at *11-28. The analysis did not require Kaiser to quantify the "publication strategy" as distinct from other promotional activities in order to effectively model the causal relationship. In fact, if publications and CME events did exert an effect independent of detailing (for instance, an effect on decisions about the formulary), the model would have underestimated the impact of the fraud.
Next, the use of national drug data was reasonable, and the district court did not abuse its discretion in so holding. See id. at *32. Dr. Rosenthal used data that was prepared by independent consulting companies, and this type of data is used by Pfizer itself in its own strategic planning and marketing efforts. Kaiser did not independently keep track of the usage for which each prescription was written, so Dr. Rosenthal used what she considered the best alternative, derived from national databases that the district court described as the "gold standard." Id. Pfizer does not challenge the district court's determination that it was reasonable to assume that Kaiser's patient population and physician distribution are similar to the national mix. See id. The district court also permissibly found a "fit" in Dr. Rosenthal's use of the databases' diagnostic codes (particularly with respect to bipolar disorder)
Finally, that Dr. Rosenthal's report assumed all of Pfizer's off-label marketing was fraudulent marketing is not a basis to find that the district court erred in admitting the report. Pfizer is incorrect that this assumption means that Dr. Rosenthal was "assum[ing] the very conclusion she was attempting to prove." Dr. Rosenthal's analysis sought to determine whether Pfizer's marketing had a causal effect on prescribing behaviors, not whether the marketing was in fact fraudulent. Pfizer's objection does not go to the question of whether Dr. Rosenthal's regression had a close enough "fit" to satisfy Daubert; rather, it is a question of damages.
b. Sufficiency of Aggregate Evidence
Having found that Dr. Rosenthal's testimony was admissible, we turn to Pfizer's argument that it was insufficient evidence to support the jury's and district court's findings of causation. We reject the argument, while pointing out that her testimony was not the only evidence of but-for causation.
Pfizer insists that Dr. Rosenthal's testimony cannot be credited because it does not take into account the patient-specific, idiosyncratic decisions of individual prescribing physicians. Thus, according to Pfizer, the report was legally insufficient proof of causation. Indeed, Pfizer purports to find support for its position in the district court's rulings entering summary judgment against Aetna and Harden. See Neurontin Class SJ, 754 F.Supp.2d at 310-11; Neurontin Coordinated SJ, 677 F.Supp.2d at 485, 494-95.
A tort plaintiff need not "prove a series of negatives; he doesn't have to `offer evidence which positively exclude[s] every other possible cause of the accident.'" BCS Servs., 637 F.3d at 757 (alteration in original) (quoting Carlson v. Chisholm-Moore Hoist Corp.,
Pfizer's argument is a repetition of its assertion that there is an intervening cause — individual physicians' independent medical judgment — which precludes a finding of causation based on aggregate evidence. But "the burden of proving an `intervening cause' — something which snaps the `causal chain' (that is, operates as a `superseding cause,' wiping out the defendant's liability) that connects the wrongful act to the defendant's injury — is on the defendant." Id. at 757 (citation omitted). Pfizer did offer the testimony of doctors who said that their decisions to prescribe Neurontin were not influenced by Pfizer's fraudulent marketing, and the jury and district court, within their powers, rejected the argument.
Pfizer also argues that its testimony from doctors who stated that they prescribed Neurontin for off-label uses without relying on Pfizer's misrepresentations "falsified" Kaiser's statistical analysis. Not so. The existence of some doctors who purportedly were not influenced by Pfizer's misinformation would not defeat the inference that this misinformation had a significant influence on prescribing decisions which injured Kaiser. Indeed, Dr. Rosenthal noted the scientific invalidity of looking to physician-by-physician accounts of their prescribing decisions. Weighing the individual testimony presented by Pfizer
Pfizer next argues that the Rosenthal report merely demonstrated "correlation" and not "causation." But if Pfizer's information could not be expected to affect a single doctor's decisionmaking, the company's choice to undertake the marketing campaign would be inexplicable. Cf. id. at 758 ("The object of [the defendants'] conspiracies was to obtain liens that would otherwise go to [the plaintiffs and other] bidders — there could be no other reason for wanting to pack the room in violation of the County's rule.... How likely is it that [plaintiffs] lost no bids to bidders who had 13 arms in the room but should have had only three?").
More generally, Pfizer argues that Kaiser's use of aggregate evidence is precluded by the decisions of other courts in pharmaceutical marketing RICO fraud cases. Pfizer relies on a series of cases that it argues have rejected evidence like Kaiser's. See, e.g., In re Schering Plough Corp. Intron/Temodar Consumer Class Action,
In particular, Pfizer leans heavily on the Second Circuit's decision in UFCW Local 1776 v. Eli Lilly & Co.,
As to the excess quantity theory, the Second Circuit described the plaintiffs' aggregate evidence of causation as involving only an extrapolation from the fact that the number of off-label prescriptions for Zyprexa fell after Eli Lilly's fraud became known. See id. at 135. This does not come close to resembling Dr. Rosenthal's evidence, which examined contemporaneous data that reflected what was actually happening with regard to spending and prescriptions while Pfizer's fraud was ongoing. Finally, the Second Circuit specifically noted that, "while [the excess quantity] theory cannot support class certification, it is not clear that the theory is not viable with respect to individual claims by some TPPs." Id. at 136. Kaiser's case, of course, is just such an individual claim by a TPP.
The other cases on which Pfizer relies are distinguishable. The Eleventh Circuit, addressing alleged fraudulent marketing claims involving the drug Seroquel, specifically declined to decide the case on causation grounds. Ironworkers, 634 F.3d at 1359-60. Instead, that court held that the TPP plaintiffs had failed to show economic injury because the prescriptions at issue
The Third Circuit addressed the causation question as a matter of Article III standing rather than RICO doctrine. In re Schering Plough, 678 F.3d at 246. It also did not address the use of aggregate evidence at all, finding merely that the TPP plaintiff in that case had not connected the pharmaceutical company's alleged fraudulent marketing scheme as to two drugs to the TPP's payment for a third drug owned by the same company. Id. at 247-48. The Ninth Circuit, in an unpublished decision, did not mention aggregate evidence. United Food & Commercial Workers Cent. Pa. & Reg'l Health & Welfare Fund v. Amgen, Inc., 400 Fed.Appx. 255, 257-58 (9th Cir.2010).
Courts' treatment of aggregate evidence is not as Pfizer represents. Earlier we cited to the use of such aggregate evidence to show causation under several causes of action. We see no reason to reach a different conclusion for the specific subset of RICO claims based on fraudulent marketing.
At trial, Pfizer argued that it had not committed fraud because Neurontin was effective for the off-label uses at issue. The jury and court rejected the argument, and on appeal Pfizer does not contest the finding of fraud. Nonetheless, it uses the question of Neurontin's effectiveness to argue that Kaiser failed to prove that it suffered economic injury. Pfizer contends that because Neurontin was actually effective for the off-label uses at issue, Kaiser suffered no economic injury from paying for prescriptions for these uses. Pfizer claims that the court applied an erroneous burden of proof and an erroneous medical standard in making its findings as to Neurontin's effectiveness.
Pfizer asserts that the district court erroneously shifted the burden of proof to it when the court allowed Kaiser to prove its economic injury by showing that "there is no reliable scientific evidence that Neurontin is effective" for the conditions at issue, Kaiser Findings, 2011 WL 3852254, at *34, rather than requiring Kaiser to show that Neurontin was actually ineffective for
The district court did not place the burden on Pfizer to show that Neurontin was effective. Kaiser produced expert witnesses and evidence showing that Neurontin was no more effective than placebo for the indications at issue — i.e., that it was ineffective. See Kaiser Findings, 2011 WL 3852254, at *35-45 (reviewing such evidence). Pfizer then produced its own evidence to attempt to rebut Kaiser's evidence.
Pfizer's second argument asserts that the district court rested its conclusion on the FDA approval standard — two positive DBRCTs showing efficacy — to determine whether Neurontin was effective, and that this meant the court's conclusion was fatally flawed. Pfizer argues that the proper standard was the standard governing the practice of medicine, not the standard for FDA approval.
Kaiser responds that the district court did not frame the issue of ineffectiveness only in terms of DBRCTs, but rather considered a number of different types of evidence, including clinical trials that did not meet the DBRCT requirements and reports of clinical judgments such as case studies. The court was aware of Pfizer's critique of DBRCTs; it was also aware that, due to the placebo effect, some patients would report improvements regardless of whether the drug was scientifically effective for their conditions, making non-DBRCT evidence less probative of effectiveness. Kaiser argues that the court properly chose the weight to give each type of medical evidence. Kaiser's is the more accurate description of the record. We conclude that the totality of the evidence supported the district court's ultimate conclusion that Kaiser met its burden of showing that Neurontin was ineffective for the four off-label indications.
Randomized controlled studies like DBRCTs are widely accepted as "ideally suited" for showing causation and as a "good measure of the treatment effect." D. Kaye & D. Freedman, Reference Guide on Statistics, in Federal Judicial Center, Reference Manual on Scientific Evidence
Thus, the totality of the evidence strongly supports a conclusion that Neurontin was not effective for the four off-label conditions as to which the district court and jury found liability. We need not address what the standard for efficacy would be if there were no DBRCTs in existence, or if the results of DBRCTs were equivocal, or if there were a different mix of DBRCT and non-DBRCT evidence.
Because Kaiser met both causation requirements with legally sufficient evidence and proved that it suffered economic injury from Pfizer's fraudulent scheme, we move to the separate challenges to the amount of damages awarded. "On that phase of the case the plaintiff has a more relaxed burden of proof ..., especially if as in this case the defendants' conduct has made it difficult for the plaintiff to prove the precise extent of his damages." BCS Servs., 637 F.3d at 759; see also Thermo Electron Corp. v. Schiavone Constr. Co.,
Pfizer argues that the district court erred in its calculation of damages, primarily because Dr. Hartman used a list of alternatives to Neurontin created by Dr. Millares (the chairman of the DIS) but no expert testified that the drugs on the list were at least as effective or as well tolerated as Neurontin. Moreover, Pfizer argues, there was no evidence that PMG doctors would have prescribed those lower-cost alternative drugs but for Pfizer's conduct; indeed, those doctors may have prescribed more expensive drugs instead of Neurontin. Pfizer claims that these assumptions made the estimation of damages too speculative. See Irvine v. Murad Skin Research Labs., Inc.,
The burden of proof as to damages is lower than that for causation, and the factfinder is afforded a greater deal of freedom to estimate damages where the defendant, as here, has created the risk of uncertainty. See Ocean Spray Cranberries, Inc. v. PepsiCo, Inc.,
The district court did not err in accepting Dr. Hartman's methodology for calculating damages. In fact, Pfizer never offered an alternative: it did not provide its own list of substitute drugs, nor did it offer testimony about the Kaiser list's exclusion of lamotrigine (the only drug Pfizer names on appeal as improperly excluded).
Pfizer raises two other issues on appeal, concerning the district court's denial of Pfizer's motion to transfer venue before trial and its denial of Pfizer's motion for a new trial.
A. Denial of Pfizer's Motion to Transfer Venue
The coordinated plaintiffs filed their complaint in the Massachusetts district court on February 1, 2005. More than four years later, on December 4, 2009, Pfizer filed a motion to transfer venue to California pursuant to 28 U.S.C. § 1404.
Pfizer's motion followed more than two months of discussions among the coordinated plaintiffs, the defendants, and the Massachusetts district court regarding the possibility of holding a bellwether trial as to one TPP's claims against the defendants. The court stated on September 18, 2009, that it favored holding a trial on Kaiser's claims, a view joined by plaintiffs on October 2, 2009.
On November 12, 2009, the district court ordered that "[t]he trial in the action brought by coordinated plaintiff Kaiser will begin [before it] on February 22, 2010." About a month later, Pfizer moved to transfer venue pursuant to 28 U.S.C. § 1404, arguing for the first time that transfer was favored by (1) Kaiser's residence in California, (2) California's greater interest in the litigation, (3) the greater familiarity of California federal courts with the California UCL, and (4) the convenience of witnesses. The district court, with years of experience in the case, denied this motion, explaining that (1) Kaiser did not wish to transfer venue; (2) transfer would result in considerable delay as any transferee judge familiarized herself with the case; and (3) defendants would not be prejudiced, since they had access to videotaped deposition testimony of non-party witnesses. Kaiser Findings, 2011 WL 3852254, at *11 n. 6.
On appeal, Pfizer argues that this was error because it violated the MDL transfer requirements pursuant to 28 U.S.C. § 1407(a) and the rule of Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach,
Pfizer is wrong on the law. Section 1407(a) provides that an action "transferred to any district for coordinated or consolidated pretrial proceedings ... shall be remanded by the panel at or before the conclusion of such pretrial proceedings to
There was no abuse of discretion as to § 1404. See Coady v. Ashcraft & Gerel,
B. Denial of Pfizer's Motion for New Trial Based on Purportedly New Evidence Regarding the Cochrane Review of Neuropathic Pain
There was no abuse of discretion in the district court's denial of defendants' March 22, 2011 motion for new trial. At trial, Pfizer had presented expert testimony that Neurontin was effective for the broad treatment of neuropathic pain, which relied in part on a 2005 review by the Cochrane Collaboration, an independent organization, that concluded that adequate evidence supported Neurontin's efficacy for neuropathic pain. Kaiser Findings, 2011 WL 3852254, at *42. The district court discounted this testimony because the 2005 Cochrane Review was based on incomplete information, given defendants' suppression of negative information about Neurontin's efficacy for the broad treatment of neuropathic pain. Id. at *42-43.
In 2011, the Cochrane Collaboration published another review of the effects of gabapentin in treating chronic neuropathic pain. This revised review was "updated with the inclusion of unpublished information made available through litigation" and concluded that "[g]abapentin provides pain relief of a high level in about a third of people who take [it] for painful neuropathic pain."
The district court denied defendants' motion for a new trial, explaining that a credible meta-analysis from the Cochrane Collaboration based on the entirety of the scientific evidence concerning Neurontin's use in treating broad neuropathic pain was unavailable to defendants at the time of trial only because "Pfizer itself did not provide the Cochrane Group with all available studies prior to the trial because it fraudulently suppressed these studies." That reason was sufficient.
The judgment of the district court is affirmed.
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