Sidney Hillman Health Center of Rochester and Teamsters Health Services and Insurance Plan Local 404, Plaintiffs-Appellants,
Abbott Laboratories and AbbVie Inc., Defendants-Appellees.
September 12, 2017
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 13 C 5865 - Sara
L. Ellis, Judge.
Easterbrook, Kanne, and Williams, Circuit Judges.
Easterbrook, Circuit Judge.
Food and Drug Administration has approved the use of Depakote
(divalproex sodium) to treat seizures, migraine headaches,
and some conditions associated with bipolar disorder.
Physicians are free to prescribe it to treat other
conditions, called off-label uses, but a drug's
manufacturer can promote it only as suitable for uses the FDA
has found to be safe and effective. Abbott Laboratories,
which makes Depakote, encouraged intermediaries to encourage
Depakote's off-label uses while hiding its own
involvement. This promotion, for conditions including
schizophrenia, dementia, and attention deficit hyperactivity
disorder (ADHD), was detected, and prosecution followed. In
2012 Abbott pleaded guilty to unlawful promotion and paid
$1.6 billion to resolve the criminal case and settle qui
tarn actions that had been filed against it under the
False Claims Act, 31 U.S.C. §§ 3729-33. The next
year saw the transfer of Depakote sales in the United States
to Abb Vie, a fraternal corporation, but for simplicity we
ignore Abb Vie.
welfare-benefit plans that paid for some of Depakote's
off-label uses filed this suit in 2013 seeking treble damages
under the civil-liability provision in the Racketeer
Influenced and Corrupt Organizations Act, 18 U.S.C.
§1964. They asked the district court to certify a class
comprising all third-party payors of drug expenses. (The
parties call them TPPs; we prefer Payors.) The district court
dismissed the suit as untimely. 64 F.Supp.3d 1146 (N.D. 111.
2014). Civil RICO actions must be commenced within four years
after injury was or should have been known. Agency
Holding Corp. v. Malley-Duff & Associates, Inc., 483
U.S. 143 (1987); Rotella v. Wood, 528 U.S. 549
(2000). The judge observed that off-label promotion began in
1998 and the first qui tarn suit was filed in 2007.
But the qui tarn suits began under seal, which
lasted until 2011, and alleged that Abbott had concealed its
role in the off-label promotions. These considerations led us
to remand so that the parties could explore through discovery
when a reasonable Payor first should have understood that it
was paying for drugs that had been prescribed in response to
an undercover marketing campaign. Sidney Hillman Health
Center of Rochester v. Abbott Laboratories, Inc., 782
F.3d 922 (7th Cir. 2015).
did not occur. Nor was a class certified. Instead the
district judge dismissed the complaint on a different ground,
this time ruling, see 192 F.Supp.3d 963 (N.D. 111. 2016),
that the plaintiffs could not hope to show proximate
causation, another of RICO's requirements. See, e.g.,
Hemi Group, LLC v. New York City, 559 U.S. 1 (2010);
Anza v. Ideal Steel Supply Corp., 547 U.S. 451
(2006); Holmes v. Securities Investor Protection
Corp., 503 U.S. 258 (1992). The judge observed that the
improper marketing was directed at physicians and concluded
that tracing loss through the steps between promotion and
payment would be too complex.
extent the district judge believed that it is never
permissible to base RICO damages on injury to one person
caused by wrongs against another, the decision conflicts with
Bridge v. Phoenix Bond & Indemnity Co., 553 U.S.
639 (2008). The plaintiffs in Bridge alleged that
defendants had conspired to submit multiple bids in an
auction whose rules limited to one the number of bids allowed
to any person or group. Plaintiffs contended that the extra
bids did not harm the auctioneer but diminished their own
chances of profitable transactions. The Court held that a
RICO recovery is possible when a wrong against A directly
injures B. Our plaintiffs say that their situation is
identical: unlawful sales tactics don't injure doctors,
who do not use or pay for the drugs they prescribe, but
directly injure Payors. The Supreme Court several times has
stated in RICO litigation that the initially injured person
can recover, and indeed that "[t]he general tendency of
the law, in regard to damages at least, is not to go beyond
the first step/' Holmes, 503 U.S. at
271-72, quoted with approval in Hemi Group,
559 U.S. at 10. Plaintiffs insist that Payors are the
"first step" and so are entitled to proceed with
part with money, to be sure, but it is not at all clear that
they are the initially injured parties, let alone the sole
relators in the qui tarn actions alleged, as did the
criminal prosecutor, not simply that Abbott promoted Depakote
for unapproved uses, but also that Depakote was not
effective, or even was harmful (compared with placebos or
other drugs), for some of those uses. Abbott commissioned
studies that it hoped would show the benefits of Depakote for
additional maladies, and the relators asserted that one of
these studies was discontinued because Depakote was harming
the patients, while the result of another was suppressed
because it showed no benefit compared with a placebo.
According to the qui tarn suits, however, Abbott
went right on marketing Depakote for off-label uses. This
description of the conduct implies that the Payors are not
the only, or even the most directly, injured parties.
suffer if they take Depakote even though it is useless to
them and may be harmful. They suffer adverse health effects
if Depakote (a) aggravates their medical conditions, (b)
produces side effects not justified by medical benefits, or
(c) dissuades them from taking drugs that would
alleviate their conditions. Many patients also incur
financial loss. Filling prescriptions usually entails
out-of-pocket costs to patients even when health insurance or
welfare-benefit plans cover most of the expense. The
patients' health and financial costs come first in line
temporally; that pharmacies then send bills to Payors, which
cover the remainder of the expense, does not make those
Payors the initial losers from the promotional scheme to
which Abbott pleaded guilty.
also may lose, though less directly. People with medical
conditions such as schizophrenia or ADHD want help. If a
physician prescribes an ineffective medicine and so does not
provide that help, patients may turn elsewhere. Physicians
affected by off-label promotions thus may lose business and
contend that Payors bear the principal costs of
off-label promotions, because they pay for most of the cost
of the drugs, but comparing the patients' health costs