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Sergeants Benevolent Ass'n Health & Welfare Fund v. Sanofi-Aventis United States LLP

United States Court of Appeals, Second Circuit

November 13, 2015


Argued June 25, 2015

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Appeal from the March 30, 2011 and May 12, 2014 orders of the United States District Court for the Eastern District of New York (Sandra L. Townes, Judge) denying Plaintiffs-Appellants' motion to certify a proposed class and granting Defendants-Appellees' motion for summary judgment. Plaintiffs sought to certify a class of health insurance plans that paid for prescriptions of Defendants' antibiotic drug Ketek, arguing that Defendants violated the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq., by making misrepresentations that underplayed Ketek's safety risks. Relying on our decision in UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121 (2d Cir. 2010) , the district court denied class certification, and later granted summary judgment to Defendants, on the ground that Plaintiffs could not prove causation by generalized evidence. We agree that, because Plaintiffs cannot show causation by generalized evidence and have offered no individualized evidence, Plaintiffs' claims may not be litigated as a class action, and Defendants were entitled to summary judgment on Plaintiffs' individual claims. Accordingly, we AFFIRM the orders and the judgment below.

THOMAS SOBOL (Lauren Barnes and Jessica R. MacAuley, on the brief), Hagens Berman Sobol Shapiro, LLP, Cambridge, MA, for Plaintiffs-Appellees.

WILLIAM N. WITHROW JR. (Lindsey B. Mann and J. Nick Phillips, on the brief), Troutman Sanders LLP, Atlanta, GA, for Defendants-Appellees.

Before: CABRANES, LIVINGSTON, and DRONEY, Circuit Judges.


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Debra Ann Livingston, Circuit Judge

Plaintiffs-Appellants are three health-benefit plans (" HBPs" ) that brought suit under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. (" RICO" ), and various state laws, claiming that Defendants-Appellees sanofi-aventis U.S. LLP and sanofi-aventis U.S., Inc. (collectively, " Aventis" ) engaged in a pattern of mail fraud by failing to disclose the true risks of the antibiotic drug telithromycin, marketed as " Ketek." Plaintiffs sought to certify a class of all HBPs that paid for Ketek prescriptions on the theory that such HBPs were injured as a result of paying for Ketek prescriptions that would not have been written if Aventis had not concealed Ketek's safety risks. The United States District Court for the Eastern District of New York (Sandra L. Townes, Judge ), denied Plaintiffs' motion for class certification, relying on our decision in UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121 (2d Cir. 2010) (" Zyprexa " ), to hold that the individual decisions of prescribing physicians thwarted Plaintiffs' effort to prove class-wide causation using generalized proof. The district court subsequently granted Aventis summary judgment on all claims, again citing Zyprexa and Plaintiffs' inability to prove causation with generalized evidence.

Although we agree with Plaintiffs that Zyprexa does not foreclose class certification for all RICO mail-fraud claims brought against a drug manufacturer, we nevertheless conclude that Zyprexa 's reasoning applies to this case, and bars Plaintiffs' attempt to certify a class. While it may be possible for a class of plaintiffs to prove the causation element of a pharmaceutical

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fraud claim such as this one with generalized proof, Plaintiffs have failed to offer such proof here. Class certification was therefore correctly denied. Our class certification decision, moreover, necessarily disposes of the summary judgment question as well: if Plaintiffs' RICO claims cannot be proved by generalized proof and Plaintiffs have adduced no individualized proof (which they have not), Plaintiffs' claims cannot survive summary judgment. We also agree with the district court's dismissal of Plaintiffs' state-law claims. Accordingly, we affirm the district court's orders denying class certification and granting Aventis's motion for summary judgment on all claims.


A. Antibiotic Treatment Options for Respiratory Tract Infections

The human respiratory tract--comprising the sinuses, throat, and lungs--is highly susceptible to invading microorganisms. These microscopic invaders are the cause of the sniffling, sneezing, congestion, and coughing that most laypeople identify as symptoms of " a cold" or " the flu." The medical community classifies such symptoms as those of either upper respiratory infections--the common cold and sinusitis being the most common examples--or lower respiratory infections--of which bronchitis and pneumonia are the most familiar. See Patrick R. Murray et al., Medical Microbiology 6-7, 153-54 (7th ed. 2013). Respiratory tract infections may be caused by bacteria or by viruses; most cases are caused by viruses. Ctrs. for Disease Control & Prevention, Get Smart: Know When Antibiotics Work (What Everyone Should Know), (last visited Nov. 12, 2015) [hereinafter CDC, Get Smart ].

Antibiotic drugs were first produced for widespread use in the 1940s, and their discovery was one of the greatest medical advances in history. Ctrs. for Disease Control & Prevention, About Antimicrobial Resistance, (last visited Nov. 12, 2015) [hereinafter CDC, Antimicrobial Resistance ]. One of the first antibiotic drugs was penicillin, which was a member of a class of antibiotics known as beta-lactams. Pneumonia: In-Depth Report (Antibiotic and Antiviral Drug Classes), N.Y. Times, (last visited Nov. 12, 2015). Other beta-lactam antibiotics include amoxicillin, which, with the addition of clavulanic acid, is marketed under the name Augmentin. Id. In addition to the beta-lactams, the most common classes of antibiotic drug used to treat respiratory infections are macrolide drugs, such as azithromycin (Zithromax) and clarithromycin (Biaxin), and the most recent major class of antibiotics to come on the market, fluoroquinolones. Id. All categories of antibiotic drug have their own benefits and risks. Antibiotics in all categories, however, are only effective against bacteria, and not against viral infections. Thus, because most respiratory tract infections are viral in nature, most such infections are unaffected by antibiotics. CDC, Get Smart.

For a variety of reasons, doctors nonetheless frequently prescribe antibiotic drugs to patients with respiratory tract infections, even if they have no evidence that the infection in question is caused by a bacteria rather than a virus. This kind of over-prescription of antibiotic drugs, as well as the widespread use of antibiotic therapies in general, has given rise to a phenomenon known as antibiotic resistance. CDC, Antimicrobial Resistance. Antibiotic resistance occurs when bacteria

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mutate to become impervious to the antibacterial action of a particular antibiotic drug; this resistant bacterial strain then multiplies and spreads, becoming more prevalent as antibiotic drugs wipe out its competitor strains. Id. Many of the bacteria commonly responsible for respiratory tract infections, such as Streptococcus pneumoniae, exist in strains that have developed resistance to beta-lactam antibiotics or to macrolide antibiotics. Ctrs. for Disease Control & Prevention, Antibiotic Resistance Threats in the United States 79 (2013) (" S. pneumonia has developed resistance to drugs in the penicillin and erythromycin groups," causing 19,000 excess hospitalizations and 7,000 deaths every year.). Some strains have developed resistance to multiple classes of antibiotic drugs: these are known as multi-drug-resistant strains, or MDRS.

Although the various classes of drugs used to treat respiratory infections exhibit similar effectiveness and thus offer a similar benefit, each class has different downsides. Beta-lactams such as penicillin and amoxicillin are not suitable for patients with penicillin allergies, and Augmentin (amoxicillin with clavulanic acid) is a well-known cause of liver injury. In addition, resistance to both beta-lactams and to macrolide antibiotics is high. Macrolides can cause serious allergic reactions, impaired liver function, and sometimes-fatal heart problems. Fluoroquinolones can cause serious side effects in the central and peripheral nervous system, and can cause heart problems. Although all antibiotics can cause colitis by killing the normal, healthy microorganisms in a patient's body that protect us from the dangerous bacterium Clostridium difficile, or C. dif, see Ctrs. for Disease Control & Prevention, Making Health Care Safer: Stopping C. difficile Infections, (last visited Nov. 12, 2015), fluoroquinolones are particularly prone to this effect, because they attack a broader spectrum of bacteria, and thus kill more healthy gut bacteria than other drugs. All antibiotic drugs can have dangerous side effects; antibiotics are responsible for approximately twenty percent of all emergency room visits for adverse drug events. CDC, Get Smart.

B. The FDA Approval Process for Ketek

1. Aventis's Original Application for FDA Approval for Ketek

On February 28, 2000, Aventis submitted a New Drug Application (" NDA" ) to the Food and Drug Administration (" FDA" ) seeking approval to sell and market Ketek as a treatment for four types of respiratory infections: acute bacterial sinusitis (" ABS" ), acute exacerbation of chronic bronchitis (" AECB" ), tonsillopharyngitis, and community-acquired pneumonia (" CAP" ). In support of the NDA, Aventis submitted data from in vitro testing of Ketek against various bacteria in a controlled lab setting, data from animal testing, and data from small human safety and efficacy trials. The in vitro data demonstrated that Ketek was capable of killing strains of common bacterial pathogens that were resistant to other antibiotics, including MDRS, though in vitro results cannot always be replicated in clinical trials.

At the time when the FDA was considering the Ketek application, the FDA used a non-inferiority standard to assess the efficacy of antibiotic drugs in treating respiratory tract infections. This means that the FDA accepted, as conclusive proof of a drug's effectiveness, trials demonstrating that a new drug was no worse at treating a particular illness than existing, approved drugs--or, at least, was not so much worse than existing drugs that it fell below a set

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statistical threshold. The FDA did not require, and there was thus no incentive for a manufacturer to conduct, studies comparing the effectiveness of the new drug to the effectiveness of a placebo. In other words, manufacturers were merely required to prove that their product was no worse than similar products, even though--because minor respiratory infections like sinusitis and bronchitis usually go away on their own even without medication--the FDA did not know whether any of those similar products actually improved patient outcomes. This odd situation arose mostly by historical accident: because antibacterial drugs were discovered so long ago and represented such a major advance in treatment, " antibacterial therapy was incorporated into clinical practice . . . before clinical trial design had become more sophisticated." J.A. 4448. There was also an ethical concern regarding giving sick patients placebos instead of real drugs.

Aventis's Ketek application was evaluated by the FDA's Anti-Infective Drug Advisory Committee (" AIDAC" ), a panel of experts tasked with assessing an antibiotic drug's risk/benefit profile and making an approval recommendation to the FDA. The agency usually follows the recommendation of such a committee, but it is not bound by it. On April 26, 2001, the AIDAC met and voted to recommend limited approval of Ketek only for treatment of CAP--the most serious of the four conditions considered. The committee also recommended that further studies be performed to assess Ketek's potential side effects, known in the medical community as " adverse events." Specifically, the AIDAC members were concerned that Ketek might have serious but rare side effects that the small-scale clinical trials conducted thus far might not have revealed. Following this meeting, the FDA sent Aventis a letter finding its application for CAP, AECB, and ABS (though not tonsillopharyngitis) " approvable" --subject to the performance of a large-scale clinical study. Such a study would ideally reveal rarer side effects that might not have appeared in trials of only a few hundred or few thousand subjects. In other words, the study recommended by the AIDAC would be a microcosm of what could be expected to happen if Ketek were approved and entered the marketplace.

2. Study 3014

Aventis agreed to perform such a study, and enlisted Pharmaceutical Product Development, Inc. (" PPD" ) to create the study protocol for and oversee the operation of what Aventis dubbed " Study 3014." Study 3014 was designed to enroll 24,000 patients, half of whom would be treated with Ketek, and half of whom would be treated with Augmentin. Patients were to be randomly assigned to one or the other drug. PPD was charged with recruiting physicians, who would be paid $400 for every patient of theirs who completed the study. The study required that each patient be diagnosed with ABS, AECB, or CAP at an initial appointment, at which baseline labs would be drawn and one of the two study medications would be prescribed. The protocol then required two followup visits.

Study 3014 was a fiasco. Dr. David Ross, who was the primary FDA safety reviewer responsible for review of Ketek, testified before a congressional hearing that the fraud in Study 3014 was " unprecedented . . . at this scope and scale." J.A. 4213. " [O]ut of 10 [study] sites that were inspected [by the FDA], all had serious problems that made their data completely unreliable. . . . [E]very single one was found to have significant violations of what are called Good Clinical Practices, the rulebook for conducting clinical trials. Four

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of the 10-40 percent--were referred for criminal investigation." Id. Most egregiously, the study's largest enroller by far--Dr. Anne Kirkman-Campbell, who enrolled 407 patients--fabricated data on a vast scale. In the end, FDA investigators determined that she had only administered the study drugs to fifty patients, and that the other 350 patients were fictitious. Another study site regularly failed to report adverse events, while yet another site submitted suspiciously similar records for multiple subjects, including nearly identical blood test results. A site that enrolled 160 patients was run by a doctor who was ignorant of the study guidelines or the Good Clinical Practices rules, " argumentative about complying with the guidelines," and " [un]interested in learning about" them. J.A. 3798-99.

As a result of this widespread fraud and incompetence, the FDA Division of Scientific Investigations (" DSI" ) concluded that " [t]he integrity of data from all sites involved in Study 3014 cannot be assured with any degree of confidence." J.A. 643. " [I]f these sites, which were high-enrolling sites, where supposedly the company had been keeping close tabs on the doctors, were unreliable, the rest of the sites couldn't be relied on either." J.A. 4213. Ultimately, because " the integrity of data from all of the 1,800 investigative sites . . . could not be assured," the FDA " did not rely on those data to take a regulatory action." J.A. 4539; see also J.A. 4387 (" Although the FDA did not rely on study 3014 to support approval, we reviewed the study for safety findings that would have counted 'against the drug,' as is consistent with good review practice." ). Thus, Study 3014's ultimate conclusion--that Ketek was comparable to Augmentin in safety and effectiveness--was worthless.

3. FDA Approval of Ketek

On July 24, 2002--before the FDA had reason to suspect fraud in Study 3014--Aventis filed its amended NDA, including data from Study 3014, and post-marketing safety data from countries in Europe and South America, where Ketek had already been approved for sale. Aventis's report about Study 3014 omitted any mention of the study's data integrity problems. On October 15, 2002, DSI began its investigation of Dr. Kirkman-Campbell's involvement in Study 3014, which led swiftly to discovery of her fraud.

On January 8, 2003, the AIDAC met for a third time to discuss the Ketek application. The committee was missing crucial information, however--the FDA did not reveal to the AIDAC members any information relating to DSI's ongoing investigation of Study 3014. Unaware of the unreliability of Study 3014's results, the AIDAC recommended that the FDA approve Ketek for ABS, AECB, and CAP. The FDA, armed with the information the AIDAC lacked, did not accept the committee's recommendation, but instead requested additional information from Aventis concerning both Study 3014 and post-marketing safety data from countries where Ketek was already in use.

Finally, on April 1, 2004, the FDA approved Ketek for three indications: ABS, AECB, and CAP. Because the agency was aware that Study 3014 was unreliable, and Aventis had conducted no other large-scale safety studies, the FDA relied almost entirely on post-marketing safety reports from other countries in approving the drug. This was highly unusual. See J.A. 4231 (Dr. David Graham, associate director for science and medicine in FDA's Office of Surveillance and Epidemiology, testified that he could not " think of a single other example where FDA used such data as the primary basis for the approval of a drug['s] safety." ).

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At congressional hearings later convened on the topic of Ketek's approval, witnesses put forth different explanations for the FDA's decision. Dr. Ross pointed to " a culture of approval" at the FDA, J.A. 4199, and " a fear of being seen as holding up new products," J.A. 4220. Dr. John Powers, former lead medical officer for antimicrobial drug development at the FDA, noted that there were " economic issues regarding antibiotic development that were pressuring FDA from the outside" --namely, drug companies " had decided to stop antibiotic discovery" because the market for antibiotics is flooded with generic competitors, and because antibiotics are not as lucrative as drugs like antidepressants or statins, which are taken continuously for months or years. J.A. 4200-02. This slowdown in the development of new antibiotic drugs, according to Dr. Powers, was especially dangerous given the need for new drugs to replace older antibiotics to which antibiotic resistance had developed. In this environment, " if [the] FDA made any moves to increase the rigor of scientific studies in the area of antibiotics," there was a fear that " it would be perceived as a . . . disincentive" to the development of new drugs. J.A. 4201. Dr. Andrew von Eschenbach, then-commissioner of the FDA, testified that Ketek's approval was based on " the need for newer, more effective antibiotics" to " overcome resistance" and add to the " antibiotic armamentarium." J.A. 4298.

The label agreed upon by Aventis and the FDA for Ketek noted that there was some risk of liver failure associated with the drug, but this information was not included in the " Warnings" section, nor was any indication included therein that Ketek should not be prescribed to patients with a history of liver problems. J.A. 3934-35. No information from Study 3014 appeared on the Ketek label. The FDA's approval of Ketek, like FDA approval of any other drug, see Zyprexa, 620 F.3d at 127, permitted doctors to prescribe Ketek not only for its approved indications (ABS, AECB, and CAP), but also for any other disease or symptom for which an individual physician thought it might be effective. Prescription of a drug for an indication other than the indications approved by the FDA is called " off-label" prescription or " off-label" use. Id.

C. Ketek in the Marketplace

1. The Marketplace for Antibiotic Drugs

A prescription for antibiotic drugs, like any prescription, involves three main actors: the patient, who takes the medication and often assumes some share of the cost; the doctor, who prescribes the drug but is not involved with the financial side of the prescription; and the payer, who covers the majority of the drug's cost. For insured patients, the payer is a health-benefit plan (" HBP" ), which pays whatever cost the patient's co-pay does not cover. Plaintiffs in this case are all HBPs. Most HBPs contract out their prescription drug benefit coverage to pharmacy benefit managers (" PBMs" ), and all three named plaintiffs here did so. PBMs manage approximately seventy-five percent of all outpatient prescription drug claims, and the three largest PBMs--Medco, Caremark, and Express Scripts--handle about two-thirds of those claims, or about half of all retail prescriptions.

Most PBMs use formularies to outline which drugs are covered by a particular plan and what type of coverage each drug receives. Many formularies are " tiered," often using a three-tier system which separates generics (Tier 1), " preferred" brand name drugs (Tier 2), and " non-preferred" brand name drugs (Tier 3). ...

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