Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In Re: Schering Plough Corp. Intron/Temodar Consumer Class Action

May 16, 2012


On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 2-06-cv-05774) District Judge: Honorable Stanley R. Chesler

The opinion of the court was delivered by: Vanaskie, Circuit Judge.


Argued December 15, 2011

Before: SLOVITER, VANASKIE and GREENBERG, Circuit Judges


At issue in these consolidated appeals is the standing of third-party payors of drugs prescribed for "off-label" purposes, i.e., uses not approved by the Food and Drug Administration ("FDA"), as well as the standing of individual patients prescribed drugs for off-label purposes, to pursue claims against a pharmaceutical company and its affiliated marketing entities under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., the New Jersey RICO statute, N.J.S.A §2C:41-1, et seq., as well as other state statutory and common law causes of action. Both groups of plaintiffs claim that the defendants pursued illegal marketing campaigns to persuade physicians to prescribe certain drugs for off-label uses. The District Court found that both groups of plaintiffs lacked standing because, inter alia, they did not allege a plausible nexus between the assailed marketing campaign and the physicians' decisions to prescribe certain drugs for off-label use. Having carefully considered the parties' contentions in the context of the entire record, we agree that dismissal of both actions for want of standing is warranted. Accordingly, we will affirm the District Court's well-reasoned decisions.


A. The Parties

There are two sets of plaintiffs in these consolidated appeals. One set of Plaintiffs consists of a putative nationwide class of third-party payors ("TPPs").*fn1 The other set of Plaintiffs is comprised of a putative nationwide class of individual patient-consumers who paid for prescriptions of certain drugs for off-label uses, with the named class representative being Angela F. Montgomery.*fn2 Separate Amended Complaints were filed on behalf of each set of Plaintiffs. The Defendants common to both Amended Complaints are the Schering-Plough Corporation, a manufacturer of pharmaceutical products, and its affiliated marketing and sales companies, the Schering Sales Corporation and Schering Corporation. The TPP Amended Complaint also names as defendants another Schering subsidiary, Integrated Therapeutics Group, Inc., individual Schering executives Richard J. Kogan, William K. Heiden, and Mary Naughton, as well as unnamed individuals ("John Doe" and "Jane Doe" defendants), and unknown business entities ("ABC Corporations"), who purportedly participated in the alleged illegal and false sales and marketing campaigns. For sake of simplicity, we shall refer to the Defendants collectively as "Schering." Both sets of Plaintiffs assert that they paid for Schering drugs that were ineffective or unsafe for the off-label uses for which they were prescribed.

B. FDCA Labeling and Marketing Regulations

The off-label marketing claims are at least partially predicated on Schering's alleged violations of the labeling and marketing restrictions of the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301 et seq. ("FDCA"). The FDCA regulates the manufacturing, marketing and sale of prescription drugs, and provides that a drug cannot be sold in interstate commerce unless it is approved by the FDA for the specific medical use, or "indication," listed on the drug's labeling. See 21 U.S.C. § 355(a) ("No person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of an application filed pursuant to subsection (b) or (j) of this section is effective with respect to such drug."). To obtain FDA approval, drug companies generally must submit evidence from clinical trials and other testing that evaluate the drug's risks and benefits and demonstrate that it is safe and effective for all of the indications "prescribed, recommended, or suggested" on the drug's label. See id. at § 355(d).

Prescription drugs frequently have therapeutic uses other than their FDA-approved indications. The FDCA, however, generally prohibits manufacturers from marketing, advertising, or otherwise promoting drugs for such unapproved or "off-label" uses. See 21 U.S.C. § 331(a) and (d) (prohibiting manufacturers from introducing a drug into interstate commerce with an intent that it be used for an off- label purchase, or by "misbranding" it by including information about unapproved uses on its label).

Because the FDCA does not regulate the practice of medicine, physicians may lawfully prescribe drugs for off-label uses. See Buckman Co. v. Plaintiffs' Legal Comm., 531 U.S. 341, 350 (2001) (recognizing off-label usage as "an accepted and necessary corollary of the FDA's mission to regulate in this area without directly interfering with the practice of medicine."); Wash. Legal Found. v. Henney, 202 F.3d 331, 333 (D.C. Cir. 2000) ("A physician may prescribe a legal drug to serve any purpose that he or she deems appropriate, regardless of whether the drug has been approved for that use by the FDA."). Thus, there is a certain "asymmetry" in the regulation of off-label uses: while physicians may lawfully prescribe drugs for off-label uses, the FDCA generally prohibits manufacturers from marketing these uses to physicians. See id. at 332-33 (referring to the FDCA's "asymmetrical-if not necessarily inconsistent- regulatory treatment" of off-label uses). Indeed, the FDCA's regulatory regime prohibits manufacturers from directly advertising off-label uses, such as through labeling claims or explicit statements made by sales representatives. Moreover, it is also unlawful for manufacturers to engage in certain indirect methods of off-label marketing. For example, in certain circumstances it is unlawful for manufacturers to sponsor continuing medical education ("CME") courses that focus on off-label uses. The FDCA does, however, permit manufacturers to distribute information about off-label uses in certain limited circumstances. See id. at 333.

The drugs involved in these consolidated appeals (the "Subject Drugs") are certain oncology and Hepatitis drugs, including Intron®-A ("Intron-A"), PEG-Intron® ("PEGIntron"), Rebetol® ("Rebetol") and Rebetron® ("Rebetron") (collectively the "Intron Franchise Drugs"), and Temodar® ("Temodar"). The FDA has approved these drugs for specific purposes.

C. Criminal Case Against Schering

In June 2001, the FDA's Division of Drug Marketing, Advertising, and Communications sent Schering Sales a letter notifying it that the FDA had "identified various promotional activities that [were] in violation of the [FDCA] and its implementing regulations." (Information at 12-16, United States v. Schering Sales Corp., No. 06-CR-10250 (D. Mass. Aug. 29, 2006)). The letter cited a May 2001 American Society of Clinical Oncology Annual Meeting in San Francisco at which the FDA witnessed Schering sales representatives give purportedly "false or misleading efficacy information about Temodar to visitors at the commercial exhibit hall booth," and "promote[] Temodar for the unapproved use in first line therapy of anaplastic astrocytoma." (Id. at 12-13). The FDA's letter requested that Schering "immediately cease making such violative statements and any other promotional activities or materials for Temodar that make the same or similar claims or presentations." (Id. at 13).

In August 2006, the United States Attorney for the District of Massachusetts charged Schering Sales with conspiracy to make false statements to the federal government, in violation of 18 U.S.C. § 371. (Id. at 12-16). The Government's one-count Information alleged that "Schering Sales and its co-conspirators knowingly and willfully made material false statements to the FDA." (Id. at 8). It stated that Schering Sales' response to the FDA June 2001 letter specifically asserted that Schering's home office had "aggressively pursued sales of Intron A and Temodar for unapproved uses" through numerous methods, including training the sales force to seek off-label sales, requiring the sales force to "create business plans that emphasized detailed promotional goals to obtain off-label sales," and compensating the sales force partly on their success in achieving off-label sales. (Id.)

Schering Sales pleaded guilty to the one-count Information pursuant to a written Settlement Agreement. (See Amended Judgment, United States v. Schering Sales Corp., 06-CR-10250 (D. Mass. Feb 7, 2007)). Under the Settlement Agreement, Schering Sales agreed to pay fine of $180 million. (Id.) It also agreed to pay $255 million to resolve civil claims that it defrauded U.S. Government health benefit programs, including Medicare, Medicaid, and the Veteran's Administration. (Id.)

D. Consolidated Putative Class Action

Following Schering's settlement with the Government, various civil suits were filed across the country by consumer plaintiffs who were prescribed, consumed, and paid for the drugs, and by TPPs who paid for the Subject Drugs prescribed to their plan members. The Judicial Panel on Multi-District Litigation ordered the cases to be transferred to the District of New Jersey, where Schering is incorporated, and consolidated pursuant to 28 U.S.C. § 1407.

The District Court directed that the various actions transferred to it be consolidated for pretrial management and that a consolidated complaint on behalf of all plaintiffs be filed. In December 2007, the nine named plaintiffs (the four TPPs and five patients identified in footnotes 1 and 2, supra) filed a Consolidated Class Action Complaint (the "Complaint") on behalf of themselves and others similarly situated, alleging that the Defendants engaged in illegal promotion of the Subject Drugs in violation of the federal and New Jersey RICO statutes (Counts I and II), and the New Jersey Consumer Fraud Act ("NJCFA"), N.J. Stat. Ann. § 56:8-1, et seq. (Count III). The Complaint also asserted common law claims for unjust enrichment (Count IV); civil conspiracy (Count V); fraud (Count VI); negligent misrepresentation (Count VII); aiding and abetting breach of fiduciary duty (Count VIII); and equitable accounting (Count IX).

In an Order and Opinion issued on July 10, 2009, the District Court dismissed the Complaint in its entirety pursuant to Fed. R. Civ. P. 9(b), 12(b)(1) and 12(b)(6), for failure to state a claim and lack of standing, but granted leave to file an amended complaint. In re Schering-Plough Corp. Intron/Temodar Consumer Class Action, Slip Copy, 2009 WL 2043604 (D.N.J. 2009) ("Schering I"). The Court found that the Complaint lacked sufficient factual allegations to plausibly assert an injury-in-fact that was cognizable under any of the asserted causes of action and fairly traceable to the Defendants' alleged misconduct.

In September 2009, two separate Amended Complaints were filed, one by Montgomery and the other by the four TPP plaintiffs identified in footnote 1, supra. Montgomery filed an Amended Civil Consumer Class Action Complaint ("MAC") individually and on behalf of a putative nationwide class of similarly situated patient-consumers who purchased, were reimbursed, and/or paid for any of the Subject Drugs during the class period. The MAC asserted violations of the Washington State Consumer Protection Act, Wash. Rev. Code § 19.86.010, et seq. (Count I), and the consumer protection statutes of the remaining 49 states, the District of Columbia, and Puerto Rico (Count II), as well as claims of civil conspiracy (Count III), aiding and abetting breach of fiduciary duty (Count IV), and unjust enrichment (Count V).

The TPP plaintiffs filed an Amended Consolidated Class Action Complaint ("TPP Complaint") on behalf of a proposed class of health and welfare funds and other TPPs who paid any portion of the purchase price for the Subject Drugs during the class period. The TPP Complaint asserted violations of the federal and New Jersey RICO statutes, (Counts I and II), in addition to common law claims for intentional interference with contractual relations (Count III) and unjust enrichment (Count IV).

The Plaintiffs' Amended Complaints allege that Schering engaged in a widespread marketing campaign that employed illegal techniques to promote prescriptions of the Subject Drugs for off-label uses. They contend that these illegal practices included: (1) promoting certain of the Subject Drugs for off-label uses; (2) using false and misleading statements to promote certain of the Subject Drugs as effective, safe, and cost-effective for off-label uses; and (3) providing physicians with disguised and undisguised bribes, kickbacks and other illegal inducements to encourage them to prescribe the Subject Drugs for off-label uses.

Plaintiffs claim that Schering used a variety of methods to effectuate this marketing scheme and disseminate its false claims. For example, they allege that Schering trained its sales representatives to mislead medical professionals about the Subject Drugs' effectiveness for off-label uses by distorting contrary scientific data and the results of clinical studies. They also claim that the Schering sales force promoted off-label prescriptions by disseminating false and misleading statements in private sales meetings with doctors, at medical conferences, and in CME programs. Plaintiffs also ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.