Lowey Dannenberg Helps Secure Another Big Win for Health Insurers

On October 26, 2015, the Third Circuit affirmed a district court ruling that Third Part Player ("TPP") Plaintiffs had pled viable RICO economic claims for overpayments made for GSK’s drug Avandia due to alleged fraud.

Lowey Dannenberg Cohen & Hart partner Peter St. Phillip helped to secure another big appellate victory for health insurers representing, as amicus curiae, Aetna Inc., Louisiana Health Service Indemnity Company, Premera Blue Cross, Caring for Montanans Inc., Blue Cross & Blue Shield of Minnesota, CareFirst of Maryland Inc, Cambia Health Solutions, Highmark Inc., EmblemHealth Services Co LLC, Group Health Cooperative, Blue Cross & Blue Shield of Rhode Island, Noridian Mutual Insurance Company, Health Net Inc., Government Employees Health Association, Blue Cross & Blue Shield of Florida, Blue Cross & Blue Shield of North Carolina, Wellpoint Inc., Blue Cross & Blue Shield of South Carolina, Blue Cross & Blue Shield of Massachusetts and AvMed Health Plans.

The Court concluded that:

  • Plaintiffs had adequately alleged that they were injured because their harm was sufficiently concrete and reaffirmed its decision in Warfarin Sodium;
  • the TPPs’ alleged injury “does not depend on Avandia’s ineffectiveness, but rather on GSK’s fraudulent behavior”;
  • GSK’s “premium pass-on” argument based on the Eleventh Circuit’s IronworkErs decision did not support dismissal;
  • the presence of doctor intermediaries did not render the claims deficient under RICO’s proximate causation element;
  • Plaintiffs’ failure to earlier amend their formularies to restrict Avandia “assumes that plaintiffs knew the full scope of GSK’s fraud based on the Nisson study and GSK’s continued misrepresentations plausibly contributed to the TPPs’ forbearance;
  • It was not necessary to the TPPs’ “price inflation” damages theory that cheaper alternative products were available for treating diabetes; and
  • drug manufacturers were well aware that TPPs cover the cost of their drugs, making their injuries “sufficiently direct” under RICO.

The rejected arguments cover virtually every defense raised by pharmaceutical manufacturers to these claims over the past 15 years.  The Third Circuit’s decision will go a long way towards allowing health insurers to recover the money spent on fraudulently marketed drugs. The case is In Re: Avandia Marketing, Sales Practices & Product Liability Litigation, case number 14-1948, in the U.S. Court of Appeals for the Third Circuit

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