What a headache: Kaiser wins Neurontin marketing case

In re Neurontin Marketing and Sales Practices Litigation, -- F. Supp. 2d --, 2010 WL 4325225 (D. Mass.) (Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc.)

Pfizer falsely and unlawfully promoted numerous off-label uses of the drug Neurontin, which became a best-seller. Kaiser obtained a multimillion-dollar verdict against Pfizer. Pro tip: if your drug is called “snake oil” by your own sales team, take it off the market for anything but making snakes shiny.

As the district court summarized, the drug companies suppressed negative clinical results and extensively publicized positive ones. Warner-Lambert ultimately pled guilty to criminal violations of the FDCA for its off-label marketing and paid civil fines and criminal penalties totaling $430 million.

In previous litigation, the court granted defendants summary judgment against two other third party payors suing for false advertising because they hadn’t provided admissible evidence to create disputed fact issues with respect to reliance or causation. Kaiser, which spent about $200 million on Neurontin from 1996-2004, sued for violations of RICO and the California UCL. A jury found that Pfizer engaged in a RICO enterprise that committed mail and wire fraud by fraudulently marketing Neurontin for off-label conditions such as bipolar disorder, neuropathic pain (pain caused by nerve damage), and migraine, and at doses greater than 1800 mg/day, though it did find for defendants with respect to plaintiffs' claims of fraudulent promotion of Neurontin for nociceptive pain (pain caused by injury). The jury awarded $47,363,092, which was trebled pursuant to the RICO statute.

The court then considered whether the same conduct violated the UCL, which, because it provides for only equitable relief, was a question for the court, though it nonetheless empaneled an advisory jury, which also found Pfizer liable. The court commented favorably on the caliber of most of both sides’ expert witnesses, but noted pointedly that, “[r]emarkably, Pfizer did not offer live testimony from any officer or employee, nor was any Pfizer representative present during the trial.”

Kaiser proved that Pfizer “fraudulently marketed Neurontin by making material misrepresentations in advertising supplements, articles it sponsored, and direct communications to Kaiser,” and “by showcasing positive information about Neurontin's efficacy in the published literature, while suppressing negative evidence from Pfizer-sponsored clinical trials about Neurontin's efficacy for bipolar disorder, neuropathic pain, migraine, and at doses greater than 1800 mg/day.” Kaiser proved that there was little or no scientific evidence that Neurontin is effective for the treatment of those conditions at those doses. Kaiser further proved that Pfizer’s conduct caused it injury “in the form of reimbursements for Neurontin prescriptions in excess of payments for alternative prescriptions that would have been made for more or equally effective, but less expensive medicines, in the absence of Pfizer's fraudulent marketing campaign.” Kaiser was entitled to over $95 million in restitution. (By way of comparison, in 2003 alone, Neurontin sales were over $2 billion.)

As early as 1994, Parke-Davis identified Kaiser as a potentially lucrative customer: Kaiser was second on marketers’ list of top 10 HMOs targeted for Neurontin, and it remained a target throughout the relevant period, including a Kaiser-specific marketing plan in 2004. Pfizer detailed to doctors who were Kaiser decisionmakers and paid them to serve as speakers and publish articles.

Equally early on, Parke-Davis (acquired by Pfizer in 2000) strategized about marketing Neurontin for off-label uses in order to enhance profits, even as efforts to expand approved uses “hit a brick wall” at the FDA. At the time of acquisition, Pfizer estimated that 87.5% of Neurontin prescriptions were for unapproved indications, including 14.7% for bipolar disorder, 33% for neuropathic pain, and 3.8% for migraine.

To promote off-label uses, Pfizer sponsored publications, funded continuing medical education, and directly promoted to doctors. It also worked with an advertising partner to “spin, delay and/or suppress negative evidence about Neurontin.” One of Kaiser’s witnesses, who donated her fee to Johns Hopkins and published her findings in the NEJM  to get the truth out, found that “what was in the published record didn't agree with what was actually planned or what had been done” and that there was a "failure to publish results that were known." Of 21 trials sponsored by the defendants, each and every trial exhibited "some form of bias or deviation from the truth," such as changing the primary outcome being studied when the data didn’t support a positive effect on the original primary outcome sought to be measured. (Example taken from the court’s opinion: one study that initially concluded that Neurontin provided no benefit over placebo was changed to eliminate any reference to the control group, so that patients who felt less pain after treatment counted as success. The court found that this was an intentional misrepresentation in that it specifically changed the lead investigator's primary conclusion.) The court found this testimony credible and compelling. This publication bias distorted the information available to doctors, influencing their prescribing decisions.

The court found that Pfizer’s promotions were intentionally misleading, because Pfizer promoted only good results while knowing that numerous well-controlled studies showed that Neurontin didn’t work for the off-label indications (including some that showed Neurontin to be worse than placebo for bipolar disorder, which was especially troubling given Neurontin’s association with suicide risk). One published study even said it was the “first” to evaluate Neurontin for neuropathic pain, which Pfizer knew to be false because it had in hand a negative unpublished study. Pfizer consistently failed to disclose known negative results, even in so-called “review” articles supposedly canvassing the available data, and even when the negative studies were more reliable than the positive ones (for example, when the positive ones were subject to unblinding).

Continuing medical education was another venue for Pfizer’s intentionally misleading promotions, which propounded deliberate half-truths. The opinion goes into great detail about the strategies employed.

Medical liaisons who marketed to doctors were also trained to promote off-label uses. At one Parke-Davis training session, for example, two lawyers gave a videotaped presentation on FDA regulations on off-label promotion. “While the camera was recording, the two attorneys explained the FDA's rules regarding off-label promotion of drugs, although they stated their belief that these were ‘odd’ rules.” Not only did this not correspond to actual practice among liaisons, the lawyers then turned off the camera “and explained that the medical liaisons should not worry about these FDA regulations. They told the audience of medical liaisons ‘that it was ... our job to sell’ and ‘that we needed to dismiss what [was] just said and just be very careful ... about how we went about doing [off-label marketing].’” At another training, a Parke-Davis employee “handed out two notepads with the text ‘Ladies and Gentlemen of the Jury’ and ‘Your Honor, I plead.’ She explained that these notepads were meant to emphasize the ‘importance of not creating a paper trail.’” Practice tip: Don’t do this. (This and other evidence came from qui tam litigation initiated by a former Parke-Davis liaison, who ultimately received over $24.6 million.)

Parke-Davis continued these activities even after FDA investigated its off-label promotions and rejected its supplemental NDAs for expanded indications/higher doses, because there was insufficient evidence to support them, though the FDA did approve Neurontin for treating a type of neuropathic pain associated with shingles. The FDA required that the label include the phrase "[a]dditional benefit of using doses greater than 1800 was not demonstrated."

In 2004, Warner-Lambert (owned by Pfizer) pled guilty to two felony counts of marketing Neurontin for various unapproved uses and paid a $240 million criminal fine and a $190 million civil fine. The plea included an admission of the illegal off-label promotions through the use of sales representatives, medical liaisons, advisory board meetings, consultants meetings, and teleconferences.

Pfizer’s victory: Though there was some evidence that Pfizer wanted to promote Neurontin for nociceptive, rather than just neuropathic, pain, that evidence wasn’t enough to show fraudulent marketing. There were some sloppy references to pain generally, and some internal discussions showing hope that it could be marketed for nociceptive pain, but that wans’t enough to meet Kaiser’s burden on this point.

In making its decisions about approving Neurontin on its formulary for various conditions, Kaiser relied on Pfizer’s misrepresentations, both generally and in specific communications to Kaiser. The court accepted as credible testimony that Kaiser would not have approved the significantly more expensive Neurontin for these off-label uses had it not been for the misrepresentations and failure to disclose negative information. Kaiser has 95% compliance with its formulary, so formulary restrictions “necessarily affect the number of prescriptions written for any given drug.” Kaiser also analyzed how prescribing decisions changed when physicians attended continuing medical education that promoted Neurontin; new starts of Neurontin increased by 62%, and the CME had a continuing effect. The court found that direct communications to Kaiser physicians also caused Kaiser injury because it ended up reimbursing for Neurontin rather than for less costly alternatives.

Pfizer argued that Kaiser didn’t do enough to prevent prescriptions for Neurontin once it became aware of the fraud. Kaiser didn’t remove Neurontin from its formulary or impose restrictions, and favorable information about Neurontin for the treatment of neuropathic pain even remained on the Kaiser website until the week before trial. But Kaiser did start a vigorous information campaign to reduce off-label prescribing once it became aware of Pfizer’s off-label marketing, including banning detailing of Neurontin to its physicians and beginning a campaign to promote appropriate use of the drug. When it learned about the qui tam suit, Kaiser increased its efforts, which were resource-intensive and successful in decreasing new starts of Neurontin.

Damages were difficult to quantify because prescription decisions are influenced by a number of factors, including doctors’ clinical experience and those of their colleagues. No individual doctor testified that he or she prescribed Neurontin as a result of fraudulent off-label promotion. (Would any doctor’s insurer be happy with such testimony?) And during the relevant period Kaiser didn’t track Neurontin data by medical indication. Instead, Kaiser offered an expert opinion from a health economist linking use to Pfizer’s promotional spending.

Pfizer criticized the calculations because the expert equated promotional spending on off-label marketing with promotional spending on fraudulent off-label marketing. Though off-label marketing can be truthful, the court found the assumption reasonable in this case “given the pervasive nature of the publication fraud that infected the nationwide sources of information available to all physicians.” The expert concluded that 99.4% of prescriptions for bipolar disorders were caused by fraudulent marketing, 70% of those for neuropathic pain, 27.9% of those for migraine, and 37.5% for doses over 1800 mg/day. Another expert then converted this into dollar amounts paid for Neurontin: roughly $69.4 million, excluding interest. Subtracting the cost of alternative, much cheaper, treatments that Kaiser almost certainly would have paid for instead, the expert calculated nearly $62.5 million in damages.

Defendants argued that any misrepresentations were not material because Neurontin is actually effective off-label for the disputed conditions. The court found that there was no reliable scientific evidence for this, except that there was some evidence of efficacy for some kinds of neuropathic pain. But there was no reliable evidence to support a broad indication of neuropathic pain. The double-blind, randomized, controlled trial was the gold standard, entitled to the most weight, and the court adopted the FDA’s requirement of two such trials as a reliable standard followed by the scientific community, rather than Pfizer’s proposed standard that Kaiser needed to prove that the drug was not effective for any patient.

The court agreed with the advisory jury that defendants engaged in fraudulent business acts or practices with respect to all off-label indications except nociceptive pain and that those fraudulent acts or practices caused Kaiser damages.

Defendants argued that they had no duty to disclose negative information about Neurontin, but under California law, nondisclosure or concealment can be actionable fraud when a defendant makes partial representations but also suppresses material facts. Such half-truths can be accurate in some sense but still likely to mislead or deceive. The court concluded that “Pfizer had a duty to disclose scientific data demonstrating the lack of efficacy of Neurontin for off-label uses. This duty arose because Pfizer was marketing the drug for unapproved uses by disclosing positive information about the drug while suppressing negative information in its possession.” Pfizer’s failure was “particularly outrageous in the area of bipolar disorder where there was not a scrap of evidence supporting efficacy and where there were actual negative side effects of depression for certain segments of the population.” Moreover, because off-label prescriptions are legal, it is imperative that doctors have accurate scientific information. The suppressed information would likely have been material to any Kaiser doctor in determining the best treatment, and it was material to health plans like Kaiser managing a drug formulary.

The UCL has a four year statute of limitations, and the complaint was filed February 1, 2005. Plaintiffs argued that a related class action filed May 14, 2004 tolled the UCL statute of limitations per American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), but that class action didn’t make UCL claims, thus not putting Pfizer on notice of Kaiser’s claims.

Plaintiffs also argued that defendants fraudulently concealed the facts, thus tolling the statute. California law is unsettled on whether the discovery rule applies to UCL claims, but California courts have applied a discovery rule in fraud-based UCL cases. Thus, the statute of limitations starts to run when a reasonable person would have discovered the factual basis for a claim. A suspicion of wrongdoing, or actual notice, trumps fraudulent concealment, no matter the lengths to which a defendant has gone to conceal the wrongdoing.

The court found that Kaiser proved Pfizer’s fraudulent concealment of the facts underlying the UCL claims because Pfizer kept suppressing negative results, even when people acting for Kaiser requested all available information. Pfizer argued that Kaiser was put on notice by an article in The Pink Sheet on April 3, 2000, stating that Warner-Lambert was under investigation by the US for off-label promotions of Neurontin. “While this article may have suggested to Kaiser that defendants were violating FDA rules about off-label promotion, there is nothing in the article that supports an inference that Neurontin might not be effective for certain off-label indications for which it was widely used.”

Pfizer also argued that Kaiser should have been on notice when the qui tam lawsuit was unsealed in 2000. But “[t]he unsealing of a case in Massachusetts, unaccompanied by extensive press coverage, cannot be viewed as sufficient notice, particularly to a California corporation.” Instead, Kaiser was put on notice in 2002, when defendants’ fraud was nationally publicized, at which point it investigated its injuries.

Pfizer then contended that Kaiser couldn’t recover under the UCL for Neurontin prescriptions written outside California. The parties agreed that Massachusetts choice-of-law rules applied, and for fraud that means application of the law of the state in which a plaintiff took action in reliance on a defendant's representations. Kaiser argued that the Kaiser entity that primarily gathered information on Neurontin and corresponded with Pfizer was in California, while Pfizer argued that only prescriptions written in California were subject to California law. Courts have held that the UCL doesn’t apply to conduct occurring outside California. However, California courts have also permitted certification of nationwide class actions under the UCL. Thus, applying California law was legitimate as long as Kaiser showed that it relied, in California, on defendants’ misrepresentations. It did so.

Kaiser’s headquarters are in California, where it’s incorporated; the majority of its members and operations are in California; its drug information service, which gathered the information on Neurontin, is in California. The service creates monographs summarizing its findings and shares them across regions. As a result, Kaiser formularies are very similar across regions, and the Medicare formulary is identical. In addition, Pfizer specifically targeted Kaiser for off-label Neurontin prescriptions. Kaiser is “an evidence-based organization” and its drug information service relied on Pfizer’s misrepresentations, as a result of which its physicians relied on those misrepresentations. Thus, the court found, Pfizer’s misrepresentations “were made, received and relied on primarily in California,” resulting in a legitimate claim under the UCL for all prescriptions.

Causation: the UCL allows restitution of any money or property “which may have been acquired by means of” a violation. This was the most difficult issue. In Rule v. Fort Dodge Animal Health, Inc., 607 F.3d 250 (1st Cir. 2010), plaintiffs in a proposed class action sought to recover for an undisclosed safety risk associated with a veterinary medicine. The plaintiff conceded that the drug was ineffective, and the court held that where a product had been consumed and provided the intended benefit the plaintiff couldn’t show a concrete injury or adverse economic impact. But Rule was inapplicable. First, plaintiffs proved that Neurontin was totally ineffective in treating certain off-label conditions, so it didn’t provide the intended benefit. In addition, even if the drug may have had effectiveness for some pain, Kaiser demonstrated a “significant adverse economic impact” because it could have paid for less expensive alternatives.

Still, there were three layers of causation. (1) What misrepresentations and omissions did Kaiser rely on, and did that cause injury? (2) Would doctors nonetheless have prescribed Neurontin if Kaiser hadn’t recommended it to them or if there had been restrictions on Neurontin’s formulary status? (3) How can the number of prescriptions caused by fraudulent marketing be quantified?

Under Tobacco II, reliance can be proved by showing that a misrepresentation or nondisclosure was an immediate cause of the plaintiff’s injury-producing conduct, which can be done by showing that without the misrepresentation the plaintiff in all reasonable probability wouldn’t have engaged in the conduct. A plaintiff need not show that the misrepresentation was the only cause, or even the predominant or decisive factor, as long as it played a substantial part in the plaintiff’s decision. And a presumption, or at least an inference, of reliance arises when a misrepresentation was material. Nor, in the context of an extended marketing campaign, need a plaintiff prove reliance on particular ads or statements.

Pfizer’s off-label campaign was extensive and long-term. Kaiser relied on direct misrepresentations from Pfizer as well as the misrepresentations introduced into the literature by Pfizer. Pfizer argued that Kaiser couldn’t have relied on the misrepresentations, because one published study expressly mentioned the potential issue of unblinding, putting Kaiser on notice of potential problems. But the study’s author claimed that proper analysis had been done to ensure reliability, and this was not true. Kaiser didn’t and couldn’t have known the truth without access to the raw data. Plus, Parke-Davis didn’t mention this key flaw in its ad campaign, which generated more than 85 million impressions. Kaiser’s witnesses credibly testified that they lacked a full understanding of the study’s flaws because of the way in which it was presented.

Pfizer also argued that Kaiser’s true motive in its anti-Neurontin campaign was expense rather than lack of efficacy; some regions put the drug back on the formulary after it went generic. Thus, misrepresentations weren’t a substantial factor in Kaiser’s decisionmaking. But cost can be a factor along with lack of efficacy in determining a formulary’s contents. “If it had known the truth, Kaiser would likely not have removed restrictions on, or sanctioned widespread use of, an extremely expensive drug whose efficacy was not established, or even disproven (i.e., with respect to bipolar disorder).”

As to prescribing behavior: would the doctors have prescribed Neurontin even if Kaiser had published truthful monographs and/or restricted it on the formulary? No Kaiser physician testified that she wouldn’t have prescribed Neurontin had she known the truth. To the contrary, Pfizer’s experts, with impressive credentials, all stated they’d reviewed the data and still believed that Neurontin might be effective. Courts have refused to accept proof of fraud on the market in the aggregate to show causation in individual drug cases.

However, the fact that Kaiser physicians have a 95% compliance rate with the Kaiser formulary was proof that they would likely have changed their Neurontin prescribing behavior had Kaiser issued negative monographs and made different formulary decisions. Based on the successful anti-Neurontin campaigns starting in 2002, the court found that it was more likely than not that Kaiser would have taken action to reduce inappropriate Neurontin prescriptions if it had known the truth earlier, and that doctors would have responded by using cheaper alternatives, even for neuropathic pain where there is some evidence of efficacy for certain narrow indications.

Pfizer argued that Kaiser’s experts were only using impermissible generalized proof by creating percentage estimates of reductions in prescriptions. But Pfizer relied on class action cases; this is not a class action, and probabalistic harm to a population translates into predictable and quantifiable harm to Kaiser since Kaiser made relevant overarching decisions and paid for it all.

The UCL provides a court with broad discretion in awarding restitution, and the standard of proof for a damages determination is "patently less stringent" than the requirements for standing under the UCL, though an award can’t be arbitrary and capricious or unsupported by the record. Here, the appropriate measure of Kaiser’s damages was the difference between the cost of Neurontin and the cost of the cheaper and more optimal drug that would have been prescribed without the misrepresentations.

Pfizer argued that efficacy is patient-specific. For example, tri-cyclic antidepressants are among the alternative treatments, and while they’re generally effective for treating pain, they fail for some patients and can have unpleasant side effects. Pfizer claimed that Neurontin would be better tolerated by some patients. Even if that was true, Kaiser proved that “other drugs are equally or more effective and much cheaper, and would likely have been the first line of treatment if the truth about Neurontin's efficacy had been known. Moreover, Neurontin has its own drawbacks; that is, depression with or without suicidal ideation in some patients.”

Result: $65.4 million in restitution, plus prejudgment interest as a matter of right, bringing the total to nearly $95.3 million. However, because this amount reflects the same damage claims encompassed by the jury claim, it would not be added to the jury verdict. (This confuses me, but then I don’t do RICO. Wouldn’t the trebling of damages under RICO be an independent penalty, so that the court should subtract the initial award, but still pay the extra restitution under the UCL claim?)

ETA: I recommend White Coat, Black Hat for more depressing tales of pharmaceutical marketing.  Neurontin is unusual only in that Pfizer got caught.