Drug marketing class actions continue despite preemption defense

In re Celexa and Lexapro Marketing and Sales Practices Litig., --- F. Supp. 2d ----, 2010 WL 4644429 (D. Mass.)

Defendant Forest markets the antidepressants Celexa (and generic equivalent citalopram) and Lexapro. Forest allegedly illegally promoted the drugs for off-label use in pediatric and adolescent patients, even though the FDA specifically denied Celexa approval for pediatric use. In 2001, Forest received the results of two studies, one indicating that Celexa was more effective than placebo in treating pediatric depression, the other that it wasn’t and that it caused more suicidal ideation than placebo. (Another study also did not show superiority to placebo.) Forest nonetheless allegedly misled doctors for years thereafter by promoting the positive study and failing to disclose the negative one. Forest withheld the negative study from its thousands of sales reps, pediatric specialists hired to give promotional speeches on Celexa, the advisory board responsible for giving information to sales personnel, its department responsible for disseminating information to doctors, and its pediatric researchers, including Dr. Wagner, who’d conducted the highly publicized positive study. In early 2005, Forest added a black-box warning to the Celexa label about risk of suicidality and effectiveness in pediatric patients.

Forest also allegedly illegally promoted Celexa through kickbacks such as honoraria for participation in advisory boards, restaurant gift certificates, lavish entertainment, and research grants, all given to doctors who wrote more prescriptions for Celexa. Forest sales representatives would also interview doctors about how Celexa was used in practice, paying them up to $1,000 for participation.

In 2003 and 2005, two qui tam suits were filed against Forest; the United States intervened, alleging that Forest caused false claims to be submitted to federal health care programs in violation of the False Claims Act. A final settlement was just approved. Five related cases were transferred to the court in 2009.

Plaintiff Wilcox sued on behalf of a putative class of California consumers, alleging violations of the UCL and FAL. He alleged that his son was first prescribed Celexa in 2003 at the age of 12 and took it for 6 more years, because Forest’s misrepresentations and omissions misled his son’s doctor. Other plaintiffs, Jaeckel and Palumbo, sought to certify a US class, alleging 1) unjust enrichment, 2) fraudulent concealment and misrepresentation, 3) fraud and 4) violations of the Missouri Consumer Protection Act.

Forest argued that Wilcox lacked standing because the complaint failed to allege that his son’s doctor saw, heard of, or relied on, any of Forest’s alleged misrepresentations. Under Tobacco II, actual reliance can be proved by showing that a misrepresentation or nondisclosure was an immediate cause of the plaintiff’s injury-producing conduct. There’s a presumption or inference of reliance when a misrepresentation was material, which is generally a question of fact. Where an ad campaign was long-running, “the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements.”

Forest argued that Wilcox’s son’s doctor couldn’t have been materially misled because s/he continued to prescribe the medication for five years after the negative study was disclosed to the public. However, a reasonable juror could find that the negative study would be material to a doctor’s prescription decision and that such materiality was proof that the doctor relied on Forest’s alleged misrepresentation. “The fact that Forest issued a press release in 2004 and changed its label in 2005 does not automatically mean that class members and their physicians could not have reasonably relied on the misrepresentations after those events.” Tobacco II held that “an allegation of reliance is not defeated merely because there was alternative information available to the consumer-plaintiff, even regarding an issue as prominent as whether cigarette smoking causes cancer.” Thus, Wilcox sufficiently pled causation.

Forest then argued that Wilcox could not claim restitution because merely purchasing a product doesn’t constitute injury in fact, and Wilcox didn’t allege a difference in value between Celexa as advertised and as it was. Medina v. Safe-Guard Products, 78 Cal.Rptr.3d 672, 678 (Cal.App.4th 2008), held thata a plaintiff must allege more than purchase: that 1) he or she did not want the product in the first place, 2) the product was unsatisfactory or 3) the product was worth less than what the plaintiff paid for it. Here, pleading that Celexa was "inappropriate" and "not efficacious" for his son was sufficient.

Failure to state a claim: Forest argued that Wilcox failed to plead an “unlawful” practice because of the FDCA’s express preemption provision requiring that all enforcement of the FDCA must be brought only by the US. The court agreed that, if the only claim was that Forest violated the FDCA, his UCL claim would be preempted “because that would amount to using the UCL as a vehicle for bringing a private cause of action for violations of the FDCA.” (Note that there are California courts that reason otherwise: that such a claim enforces California law, not the FDCA; it’s just that California has chosen to incorporate the FDCA in its own law.) But that’s not dispositive, because Wilcox also argued that Forest’s specific claims were deceptive and fraudulent, which are unlawful business practices; this wasn’t preempted.

Forest then contended that Wilcox’s claims didn’t allege unfair business practices. The relevant test: a practice is unfair when the consumer's injury is 1) substantial, 2) not "outweighed by any countervailing benefits to consumers or competition" and 3) one that "consumers themselves could not reasonably have avoided." The court disagreed. “The cumulative effect of all class members purchasing an allegedly ineffective or unsafe drug instead of an alternative medication amounts to substantial consumer injury.” Nor is there any consumer or competitive benefit in failing to disclose a study revealing that a drug is ineffective or dangerous. “Finally, given that the non-disclosure was not publicly known until June, 2004, Wilcox's injury could not have been reasonably avoided.”

The court then found that Wilcox’s fraud allegations were pled with sufficient particularity, identifying details of the marketing campaign and plaintiffs’ doctors as recipients of the marketing.

Statute of limitations: the UCL has a 4-year statute of limitations, and the FAL 3. Forest argued that the claims were time-barred because the alleged deceptive acts occurred more than 4 years before December 2009, when Wilcox filed his complaint. The UCL cause of action generally accrues when the defendant’s conduct occurs, not when the plaintiff learns about it. Wilcox argued that the discovery rule should apply, and the court agreed, because the basis for the claim is the allegation that Forest concealed material information until June 2004. However, Wilcox failed to allege that he reasonably didn’t discover Forest’s misrepresentations until after December 2006 (FAL) and December 2005 (UCL). Thus, the court allowed the motion to dismiss but with leave to replead.

The other class action complaints: Forest moved to dismiss the Missouri state law claim brought by non-Missouri plaintiffs on choice of law grounds. The court agreed that there were significant differences in the statute of limitations in Missouri and the plaintiffs' home states, which included Utah, Connecticut, Texas and Pennsylvania. Forest had principal places of business in Missouri and New York. Missouri follows a rule that “[i]n false advertising, fraud and misrepresentation cases, unlike personal injury cases, the principal location of the defendant's alleged misrepresentations is more important than the place of loss when the place of loss is difficult to identify.” New York looks for the most significant interest, which, for conduct-regulating laws like those governing fraud, is the law of the place where the tortious conduct occurred. The court determined that choice of law would be best left for the class certification stage, because more facts were needed to determine where the plaintiffs relied on the claims and were injured, and where the allegedly fraudulent statements came from.

Forest argued that the plaintiffs failed to state a claim under the Missouri consumer protection law, which requires an “ascertainable loss of money or property.” The plaintiffs alleged that their injuries came from failing to receive full value for their direct or indirect payment of money for Celexa and Lexapro for pediatric use; incurring personal debt and/or out-of-pocket expenditures to purchase Celexa and Lexapro for pediatric use; and foregoing safe and effective alternative treatment options in reliance upon Forest’s misrepresentations that Celexa and Lexapro for pediatric use was effective and had a positive risk-benefit profile. Under Missouri law, buying a product in reliance on a deceptive statement doesn’t amount to injury. Some form of economic or property damage is required, which can be satisfied when a plaintiff alleges that the actual value of the item purchased was less than the value of the item as it was represented to be. The court found the plaintiffs’ pleading sufficient.

Causation: Forest made the same reliance argument as above. In Missouri, a plaintiff must allege that the unlawful practice caused his or her loss but need not allege that it caused him or her to make a purchase. "[I]t is presumed from the statute that the customer has relied upon the obligation of fair dealing in making his purchase." Plaintiffs’ allegations of reliance were sufficient.

The court also found that these allegations were pled with sufficient particularity. Unjust enrichment claims also survived at this time.