Takeda, Eli Lilly Face Revived RICO Class Suit Over Actos Labels

Takeda Pharmaceuticals Co. and Eli Lilly & Co. will face revived class claims that they conspired to hide the link between their diabetes drug Actos and bladder cancer after the Ninth Circuit held Dec. 3 that the plaintiffs have standing to sue.

The Ninth Circuit had never addressed whether patients and insurance companies adequately allege proximate cause under the Racketeer Influenced and Corrupt Organizations Act when they argue they wouldn’t have paid for a drug if its makers had disclosed a known safety risk.

The court joined the First and Third Circuits in answering the question in the affirmative. The Second and Seventh Circuits have held the opposite.

Patients and health insurance companies sued the drug companies alleging they refused to change the warning label on Actos—intended to lower blood sugar in type 2 diabetics—after they learned the drug increased a patient’s risk of developing bladder cancer.

The suit alleged the companies conspired to commit mail and wire fraud by intentionally misleading doctors, consumers, and insurers that Actos was safe.

The trial court dismissed the RICO claims for lack of standing, finding the plaintiffs failed to allege their harm was “by reason of” the alleged RICO violation.

The Ninth Circuit disagreed. It held the plaintiffs sufficiently alleged a direct relationship.

Prescribing doctors served as intermediaries between the companies’ fraudulent omission of the risk and the plaintiffs’ payments for Actos, the court acknowledged. But they didn’t constitute an intervening cause to cut off the chain of proximate causation, the court said.

The central dispute in the circuit split seems to be whether the decisions of prescribing physicians and pharmacy benefit managers constitute intervening causes, the Ninth Circuit said.

“We think the First and Third Circuits have it right because their reasoning is more consistent with the Supreme Court’s direct relation requirement,” it said.

If the court were to join the Second and Seventh Circuits, “drug manufacturers would be insulated from liability for their fraudulent marketing schemes, as they could continuously hide behind prescribing physicians and pharmacy benefit managers,” the court said.

The court also issued an unpublished opinion addressing the plaintiffs’ state law claims.

Judge Carlos T. Bea wrote the opinion for the U.S. Court of Appeals for the Ninth Circuit. Judges Jacqueline H. Nguyen and Paul J. Watford joined the opinion.

Baum Hedlund Aristei & Goldman PC and Pendley Baudin & Coffin LLP represented the plaintiffs.

Norton Rose Fulbright US LLP represented Takeda. Bowman and Brooke LLP represented Eli Lilly.

The case is IUPAT Dist. Council 82 v. Takeda Pharm. Co., 9th Cir., No. 18-55588, 12/3/19.