June 13, 2017 / 6:51 PM / 2 months ago

Business lobby claims RICO charges against pharma will chill free speech

(Reuters) - It’s always revealing to track amicus filings by groups like the U.S. Chamber of Commerce, the National Association of Manufacturers and the Washington Legal Foundation. I regard amicus briefs from the business lobby as a rough index of litigation threats to U.S. companies - or, at least, an indicator of what companies perceive to be litigation threats. Based on that assumption, it looks like businesses, and, in particular, pharmaceutical companies, are still worried about the prospect of treble damages in racketeering suits by alleged victims at the end of supposedly fraudulent schemes.

On Monday, the Chamber, NAM and Pharmaceutical Research and Manufacturers of America submitted an amicus brief in a class action at the 7th U.S. Circuit Court of Appeals. The Washington Legal Foundation (WLF) submitted a separate brief. Their argument: If the 7th Circuit allows plaintiffs' lawyers to abuse the threat of treble damages under the Racketeer Influenced and Corrupt Organizations Act, free speech will be chilled.

That’s an interesting argument to posit in a case stemming from the U.S. government’s 2012 settlement with Abbott Laboratories for supposedly marketing the anti-seizure drug Depokate fraudulently as a treatment for schizophrenia and dementia. The class action at the 7th Circuit was filed by healthcare plan sponsors alleging that because they ultimately paid for Depakote improperly prescribed for their members, they were the ultimate victims of what they call a racketeering scheme by Abbott and its spinoff AbbVie.

In February, U.S. District Judge Sara Ellis of Chicago tossed the health plans’ racketeering claims, holding that the plaintiffs could not show Abbott and AbbVie directly caused their supposed damages. The defendants, according to Judge Ellis, did not make false representations about Depakote directly to health plan sponsors but to physicians who prescribed the drug for schizophrenia and dementia patients. Because of the doctors’ role, the judge said, the chain of causation between the health plan plaintiffs and the defendants is too attenuated to justify RICO damages.

Plaintiffs' lawyers at Grant & Eisenhofer, Hausfeld and Hach Rose Schirripa & Cheverie have asked the 7th Circuit to revive the racketeering claims. They argue that the 1st and 3rd Circuit have allowed health plans to wield RICO against pharma companies that fraudulently marketed Neurontin and Avandia and that the U.S. Supreme Court blessed RICO claims by third parties in 2008’s Bridge v. Phoenix Bond & Indemnity Co.

Abbott and AbbVie, represented at the 7th Circuit by Patterson Belknap Webb & Tyler, countered that the Neurontin and Avandia decisions involved direct alleged misrepresentation to healthcare plans so those cases are not analogous to the Depakote suit. They also cited Supreme Court precedent that cautions against RICO suits based on extended causation chains, as well as a 1999 7th Circuit ruling that dismissed healthcare plans’ RICO claims against tobacco companies as too attenuated. A host of RICO suits, Abbott said, have been filed by healthcare plans trying to capitalize on government settlements with pharmaceutical companies accused of fraudulent marketing. The vast majority of those cases have been tossed, Abbott argued.

Nevertheless, the business lobby felt compelled to weigh in. And though the Chamber and WLF briefs overlap considerably with Abbott’s filing, the business groups are worried about broader implications for pharma companies if the 7th Circuit allows the Depakote RICO claims to move forward. “The importance of deterring such lawsuits extends beyond protecting pharmaceutical companies from the burdens of speculative litigation,” the Chamber brief said. “More broadly, such litigation potentially chills protected speech, deprives physicians and other medical professionals of truthful, beneficial scientific information and ultimately denies patients the advantage of informed medical treatment.”

WLF’s brief similarly argued that allowing the healthcare plans to sue over falsely marketed drugs would undermine effective care. “Unless drug manufacturers and others are permitted to speak freely regarding off-label uses, doctors will be unlikely to acquire all the information they need to treat their patients effectively,” the brief said. “RICO suits of this sort — in which reputable manufacturers are accused of “racketeering” and face potentially massive treble-damage awards — are likely to chill the dissemination of valuable medical information.”

Free speech is unexpected clothing for arguments to shut down a suit against defendants accused of fraudulent marketing, but the business groups are worried the 7th Circuit will make it easier for plaintiffs at the end of a causation chain to claim RICO damages. Their goal is to make sure the appellate court requires a direct link between defendants’ conduct and RICO damages.

“They may be concerned in general that RICO may have a resurgence,” said James Sabella of Grant & Eisenhofer, who represents the lead plaintiffs in the Depakote case. Sabella said he doubts the amicus free speech arguments will influence the 7th Circuit in light of his clients’ detailed allegations of patients improperly prescribed a drug that was at best ineffective and at worst unsafe.

“It’s hard to believe the court will believe this is the kind of speech RICO claims should be tossed to protect,” Sabella said.

I left a phone message for lead defense counsel William Cavanaugh and put in a request to speak with the Chamber about its brief but did not hear back.

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