Off-label promotion occurs when pharmaceutical companies promote prescription drugs for uses that have not been approved by the U.S. Food & Drug Administration (FDA). When drugs have been subject to the FDA review process, the FDA critically reviews the scientific evidence submitted by the drug company to ensure that the drug is both safe and effective for the proposed use. The FDA approved label sets forth the precise parameters of the drug’s proven safety and efficacy. When drug companies subvert FDA review by obtaining approval for one use but then promote it for a different (and often more lucrative), alternative use, there can be no assurance that the medication is either safe or effective for the unapproved use. Because neither the FDA nor any other non-interested organization has comprehensively reviewed the medical evidence and supporting data, there also can be no assurance that medical articles that tout the benefits of an off-label use describe the research accurately. Nor is there any assurance that the results of all relevant clinical trials have been made public. When engaged in off-label marketing, pharmaceutical giants may weave a tangled web of half-truths, omissions, and outright untruths. As a result, drug purchasers, including health insurers and consumers, may spend huge amounts on worthless and possibly dangerous drugs.

The Federal Food, Drug, and Cosmetic Act (FD&C Act), 21 U.S.C. § 301 et seq., forbids marketing of drugs for off-label uses, but it does not create a private right of action. Drug purchasers who have been economically harmed by off-label promotion must use another avenue to obtain redress. One alternative is a fraud based claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961-1968. At least one case, concerning the off-label marketing of the drug Neurontin, has been tried to a successful jury verdict on such a cause of action.The plaintiff in that action was Kaiser Foundation Health Plan (Kaiser), the largest nonprofit insurer in the country.2 This article will explore how RICO can be used in cases involving fraudulent off-label marketing and examines some of the unique challenges faced by an insurer-plaintiff bringing a RICO claim.

Establishing the Elements of RICO

A civil RICO claim contains four elements: (1) conduct by the defendant; (2) of an enterprise; (3) through a pattern; (4) of racketeering activity.3 The plaintiff must also prove a direct relation between the injury asserted and the injurious conduct alleged.4 The principal obstacles a plaintiff will face include establishing a pattern of racketeering activity by certain predicate acts, proving that the racketeering conduct caused the plaintiff’s injuries and satisfying the enterprise element of the statute. Additionally, at the pleading stage, because the plaintiff is bringing a fraud based RICO claim, a viable complaint is required to allege the circumstances of the fraud with specificity pursuant to Rule 9(b) of the Federal Rules of Civil Procedure.5

The Predicate Acts Requirement and Off-Label Marketing

The “racketeering activity” required as an element of civil RICO claims “consists of no more and no less than the commission of a predicate act.”6 Two or more predicate acts are required to establish a “pattern.”The predicate acts must have been committed within 10 years of each other to be considered continuous, and they may not stem from one act (even if the act could be considered more than one type of predicate act).8 Since most off-label marketing is performed as part of a marketing campaign that features numerous efforts to communicate the off-label message to physicians, the “pattern” requirement under RICO in many cases will not be difficult to establish. Proving that the drug company has engaged in “racketeering activity,” however, will be more challenging.

The RICO statute contains an exhaustive list of predicate acts, but violations of the FD&C Act are not included.9 Instead, off-label marketing RICO claims are based on predicate acts of mail fraud and/or wire fraud. These claims must be based on the drug company’s misrepresentation of the benefits or risks of using the medication for the unapproved use at issue. When the FDA has not reviewed the medical evidence to ensure that the drug is actually safe or effective for the promoted use, such misrepresentations are not uncommon. After all, if the drug company had conclusive medical evidence that the product was safe and effective for the claimed use, the company would likely have petitioned the FDA to amend the drug’s labeled indications.10 

In order to convince physicians to prescribe a medication for an unapproved use, drug companies will naturally emphasize favorable clinical trial results. These reports are contained in medical articles that are usually published under the names of prestigious researchers or clinicians, but which are frequently developed, and even written, by medical marketing firms retained by the drug company. The company and the medical marketing firm work together to create a comprehensive publication strategy for the drug at issue, figuring out what types of publications will best achieve a drug company’s marketing strategies, where such articles will be published, and whose names the articles should be published under. The medical marketing firm usually provides ghost writers who will be responsible for writing the articles, sometimes with almost no input from the “authors.” Every aspect of the publication process, including approval of the final content, is overseen and controlled by the drug company. Needless to say, the final versions of the articles usually depict the drug company’s products in a favorable light and most articles about off-label usage describe positive results.

Such a publication strategy is fraught with legal risk when the messages in the published articles do not accurately depict the scientific information about off-label usage actually known to the drug company. It is well recognized that drug companies have superior access to information about their products.11 They have a special duty to investigate and report new developments regarding their products.12 They cannot use their superior access to information to deceive purchasers regarding the qualities and limitations of those products. When a company elects to promote a drug for unapproved uses by disclosing positive information about the drug it possesses, it has a duty to also disclose scientific data in its possession that demonstrates a lack of efficacy.13 

There are several techniques that drug companies may use to mislead the medical community about off-label usage. The most pernicious is simply failing to publish negative studies. Studies that show that a drug does not work for a particular condition can be just as important to clinicians as studies that prove that a medication is effective. But if a drug company does not publish the results of such studies, this information is simply unavailable to the medical community. And if the only studies that a drug company allows to be published are those with favorable results, the medical community has no way of knowing that the results were not repeatable and of dubious validity. Scientists call this phenomenon “selective outcome reporting bias,”14 but the legal community recognizes it as fraud. It is nothing less than the deliberate suppression of material information in order to influence prescribing decisions and obtain a financial benefit.15

There are other methods of misleading prescription drug payors that may constitute fraud by the use of the mail or wires. Drug companies, with the assistance of medical marketing firms, will create medical articles that do not accurately describe the results of the conducted research. After the results of a clinical trial have been reviewed, the “primary endpoint”—the study’s main outcome—may be changed so what would have been a negative trial under the original protocol, becomes a positive trial.16 Another technique for turning negative tests into positive tests is redefining the population to be studied after the results are available. By eliminating patients with negative results from the study sample, statistical significance can be achieved after the fact.  These techniques of manipulation—known as “moving the goalposts”—are ordinarily not disclosed in the medical article released to the general public, and thus the medical community will not be able to know that the test results are invalid.17 

In an off-label marketing RICO case, it is imperative to have qualified experts compare the drug company’s internal research reports with the published medical articles to determine whether the articles accurately report the results of the medical research. The research reports are internal documents that include the protocol that defined the clinical trial and an extensive statistical analysis of all aspects of the trial. Drug company research reports are designed to be reviewed by the FDA and are scientifically rigorous. Often hundreds of pages in length, and containing numerous data appendices, these documents contain far more information about the clinical tests than corresponding articles published in medical journals.

Medical researchers and practicing physicians, however, only have access to the journal articles. The medical community expects that medical articles will accurately report the finding of the clinical trials. But in the Neurontin litigation, when the plaintiff’s expert compared the published medical articles, most of which were reported in peer-reviewed journals, to the original protocols and internal research reports, she found that each and every one exhibited “some form of bias or deviation from the truth.”18 This type of intentional misreporting of medical research can be the basis of predicate acts of mail fraud or wire fraud for RICO purposes.19

Defining a RICO Enterprise in an Off-Label Context

A successful RICO claim also requires proof that the defendant participated in an “enterprise.” RICO defines enterprise as “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.”20 Although the requirement has been construed broadly by the Supreme Court, it has ruled that an enterprise must be a group of persons associated together for a common purpose of engaging in a course of conduct.21 An enterprise thus includes any union or group of individuals associated in fact, and may be proven by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.22

In asserting a RICO claim against a pharmaceutical company for fraudulent off-label marketing, one may not rest on the claim that the company itself is an enterprise. In the context of a complaint against a pharmaceutical company, the defendant company is a legal person; a RICO defendant cannot also be the entire enterprise.23 Nor can the enterprise be defined as the company and its various subsidiaries.24 It is not uncommon, however, for pharmaceutical companies to engage medical marketing firms to assist in publicizing a drug’s off-label uses. To the extent these firms work closely and continuously with the drug company to disseminate misleading messages about a drug’s unapproved uses, these types of relationship can be identified as RICO enterprises. In the Neurontin RICO case, Kaiser successfully argued that two marketing firms that worked with Pfizer to create and distribute misleading medical articles regarding Neurontin’s off-label use each formed a RICO enterprise that engaged in racketeering activity.

If an alleged RICO enterprise is not an overtly self-identifying group, the analysis rests on whether the enterprise may be considered an association-in-fact. The Supreme Court has recently identified three structural features an “association in fact” enterprise must contain: (1) a purpose; (2) relationships among those associated with the enterprise; and (3) longevity sufficient to permit these associates to pursue the enterprise’s purpose.25 

To constitute an enterprise, an association-in-fact must share a common purpose to engage in a particular common course of conduct and work together to achieve that purpose.26 There is some question as to whether the common purpose of a RICO enterprise must be illegal if it is not the furtherance of predicate acts. The medical marketing firms that help publicize the off-label messages may not know, for example, that the research described in their articles or continuing education programs is fraudulent. This should not be an insurmountable barrier. Most courts of appeals that have examined the question have determined that an association-in-fact enterprise need not be purely criminal in nature.27 Moreover, in the off-label marketing context, it is not necessary to decide this legal question. Even if some of the participants in a publication enterprise are unaware that the information publicized is fraudulent, misleading, or both, all of the participants are aware that they are assisting the marketing of a drug for an unapproved use. By creating an association-in-fact that has a purpose of furthering off-label marketing, the enterprise is involved in illegal conduct, even if that conduct is distinct from the fraudulent racketeering activity that at least some of the enterprise members are conducting.28

In addition to finding a common purpose among a pharmaceutical company and its medical marketing firms, to establish a RICO enterprise the plaintiff must show that the common purpose was a result of, and coordinated by, a systematic linkage, such as overlapping leadership, structural or financial ties, or continuing coordination.29 This analysis is intertwined with the concept of a continuing unit. Mere conspiracy is not enough to establish an enterprise; a continuing unit must be shown to distinguish ad hoc, one-time criminal ventures from continuing enterprises covered by RICO.30 There must be an ongoing structure or series of relationships that allows the enterprise to continue to operate over time.

In the pleading stage of the Neurontin litigation, Kaiser and other plaintiffs alleged that several different associations in fact were involved in the off-label promotion of Neurontin and could be considered RICO “enterprises.” The most comprehensive of these associations were the 10 medical marketing firms that Pfizer hired to assist its off-label promotion, and the “stable” of physicians who were paid to make presentations or put their names on ghost-written articles that delivered the off-label messages. The district court refused to find such a group constituted an enterprise.  The court termed this purported enterprise a “hub-and-spoke model” with Pfizer as the center and its contacts reaching out to all of the “spokes.” But because there was no general agreement or organization among all members of the alleged enterprise, there was no “rim to connect the spokes.”31 This theory’s failure underlines the importance of establishing that all members of an enterprise not only have a common purpose, but are aware of, and part of, a coordinated effort.

Kaiser had far more success when it alleged smaller enterprises that were only comprised of the drug company and a single medical marketing firm. Kaiser pled (and ultimately offered evidence at trial) that Pfizer and two firms that worked closely with it to create and distribute the misleading medical articles were “enterprises.” Each of these companies, over a period of years, worked closely with Pfizer to create “tactical plans” to promote Neurontin off-label, and each was in regular communication in pursuit of that end. There were significant financial ties because Pfizer paid the firms for their involvement. Due to the length of the companies’ joint marketing efforts, Kaiser was also able to show that the relationships were ongoing, rather than ad hoc. This type of evidence fully satisfied the ongoing organization and continuing unit considerations.  Consequently the trial court allowed the case to go to the jury under the theory that the associations with the medical marketing firms were enterprises, and Pfizer, by using the mail and the wire to provide fraudulent and misleading medical information, conducted the enterprises’ activities through a pattern of racketeering conduct. The jury, by its sizable verdict, accepted that theory.

Proving Causation

Proving predicate acts and a viable enterprise, however, are still insufficient to win a RICO case. It is also necessary to show that the plaintiff suffered injury, and that the defendant’s racketeering activity caused that injury. Proof of causation in an off-label marketing case can be highly contested because off-label marketing is generally directed to the physicians that prescribe drugs as opposed to the payors who actually pay for the prescriptions. Insurance companies may never have been directly exposed to misrepresentations regarding a drug’s off-label efficacy or safety and may have difficulty providing direct evidence of causation.

The Supreme Court, in a unanimous decision, has made it clear that a plaintiff is not required to prove that it relied on a RICO defendant’s false representations to prevail in a fraud-based RICO claim.32 Nonetheless, a plaintiff must still prove that it was damaged by the defendant’s fraudulent conduct and it will be unable to establish “but for” causation unless it shows that the defendant’s misrepresentations or omissions affected someone’s conduct to the detriment of the plaintiff.33 How such a showing is made and the type of evidence the RICO plaintiff must present is hotly contested.

In the Neurontin litigation, health insurers and other prescription drug purchasers, including Kaiser, presented aggregate economic data that showed that Pfizer’s fraudulent marketing campaign greatly increased the number of off-label prescriptions to physicians. The court acknowledged that this evidence established “that the fraudulent marketing campaign likely caused them injury.”34 Nonetheless, it found that this was not enough. The aggregate proof was insufficient to determine which physicians relied upon the fraudulent representations and the court required the insurers to present direct evidence that their plans relied upon the representations or omissions or to provide a reliable methodology to calculate the percentage of doctors who did rely.35 Despite the difficulty in obtaining evidence from physicians that they were misled by the representations of drug companies, the current disposition of the Neurontin litigation suggests that some evidence of reliance by a third-party payor is required to win a RICO claim against a pharmaceutical company.36 

In the recent Neurontin trial, Kaiser met this burden by showing that it monitored the medical literature and that it modified restrictions on Neurontin’s off-label usage imposed on its participating doctors based on the information published in medical journals. Prior to the litigation, it had periodically reviewed the literature to evaluate when Neurontin could be properly prescribed for unapproved uses. It was able to show that it actually reduced restrictions on Neurontin’s usage due to its reliance on some of the medical articles that were alleged to be misleading. Further, when news of Pfizer’s improper promotion of Neurontin was publicly revealed, it re-established controls that significantly reduced its Neurontin expenditures, so the jury could credibly conclude that similar measures would have been taken had information about Neurontin’s inefficacy been disclosed. Kaiser also presented evidence that when it was attempting to decide how to properly use Neurontin, it received direct communications from Pfizer that misrepresented Neurontin’s efficacy. In short, there was extensive evidence that misrepresentation of Neurontin’s benefits did make a difference in the amount of Neurontin Kaiser purchased.37

At the same time the trial court permitted Kaiser’s case to go forward, it dismissed two other insurers’ claims due to their failure to present adequate evidence of causation. Those insurers had no history of reviewing their participating physicians’ off-label usage of Neurontin or attempting to delineate the off-label uses that were appropriate for reimbursement. Nor did they provide any evidence of having received any of the misrepresentations or misleading medical articles. In short, their causation evidence was based solely on the aggregate economic evidence that unspecified physicians relied on the misrepresentations when they prescribed for unapproved uses. The trial court found this was insufficient proof of causation.38

While Kaiser exercises more control over its formulary than most third party payors, this does not mean a traditional health insurer could not meet the level of proof required by Neurontin II. The insurers other than Kaiser submitted a weak factual record regarding their efforts to monitor ineffective drug usage. They did not present evidence that they routinely reviewed medical literature to determine which drug uses were ineffective or that they instituted programs to discourage improper drug utilization when the medical evidence established that such treatments had little value. Evidence that an insurer, or its agent, proactively reviewed the medical literature to eliminate inappropriate usage could support a jury finding that publishing suppressed articles or accurately reporting negative clinical trials would have led to fewer prescriptions. Moreover, because many firms entrust formulary management to third parties, such as pharmacy benefit managers, plaintiff’s counsel need to develop evidence from these organizations regarding active steps they take to discourage prescribing of ineffective medications.

Conclusion

RICO’s powerful remedies make it an attractive tool to redress fraud injuries, but the statute’s onerous requirements prevent it from frequently being applied. Fraudulent off-label marketing, however, is an area where RICO can be successfully employed. The type of enterprises and racketeering conduct Kaiser alleged in the Neurontin case can be a model for other prescription drug purchasers who have suffered economic losses because of misleading claims of efficacy and safety. Even if the case can be successfully pled, however, evidence of loss causation must be carefully assembled so the plaintiff can prove that it would not have reimbursed claims for a drug’s off-label uses had the complete medical evidence been properly disclosed.

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