United States Court of Appeals
For the First Circuit
Nos. 11-1904, 11-2096
IN RE: NEURONTIN MARKETING AND SALES PRACTICES LITIGATION
KAISER FOUNDATION HEALTH PLAN, INC.; KAISER FOUNDATION HOSPITALS;
KAISER FOUNDATION HEALTH PLAN OF COLORADO; KAISER FOUNDATION
HEALTH PLAN OF GEORGIA, INC.; KAISER FOUNDATION HEALTH PLAN OF
THE MID-ATLANTIC STATES, INC.; KAISER FOUNDATION HEALTH PLAN OF
NORTHWEST; KAISER FOUNDATION HEALTH PLAN OF OHIO,
Plaintiffs, Appellees,
v.
PFIZER, INC.; WARNER-LAMBERT COMPANY, LLC,
Defendants, Appellants.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Lynch, Chief Judge,
Souter,* Associate Justice,
and Lipez, Circuit Judge.
Kathleen Sullivan, with whom Mark S. Cheffo, Katherine A.
Armstrong, Quinn Emanuel Urquhart Oliver & Hedges LLP, and Skadden,
Arps, Slate, Meagher & Flom LLP were on brief, for appellants.
David C. Frederick, with whom Scott K. Attaway, W. Joss
Nichols, Caitlin S. Hall, Linda P. Nussbaum, Kellogg, Huber,
*
Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
Hansen, Todd, Evans & Figel, P.L.L.C. and Grant & Eisenhofer, P.A.
were on brief, for appellees.
April 3, 2013
LYNCH, Chief Judge. This is an appeal from verdicts of
over $140 million, reached by both a jury and a court, compensating
Kaiser, a major health plan provider and insurer, for the injury
Kaiser suffered by its payment for four categories of off-label
Neurontin prescriptions which had been induced by a fraudulent
scheme by Pfizer, the manufacturer of Neurontin. These verdicts
followed a settlement that Warner-Lambert, a subdivision of Pfizer,
had reached in a criminal case brought by the United States, in
which Warner-Lambert pled guilty to two counts and agreed to pay a
$240 million criminal fine concerning the off-label marketing of
Neurontin; Pfizer agreed to pay an additional $190 million in civil
fines. This is one of several related appeals regarding Neurontin,
which result in separate opinions, of which this is the lead. We
affirm the verdicts for Kaiser.
I.
On February 1, 2005, Kaiser Foundation Health Plan, Inc.
and Kaiser Foundation Hospitals (together, "Kaiser"), Aetna, Inc.
("Aetna"), and The Guardian Life Insurance Company of America
("Guardian") filed a coordinated complaint in the U.S. District
Court in Massachusetts against Pfizer, Inc. and Warner-Lambert
Company (together, "Pfizer"), asserting injury from the fraudulent
marketing of Neurontin for off-label uses. The coordinated
plaintiffs asserted violations of, inter alia, the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C.
-3-
§ 1962, and the California Unfair Competition Law ("UCL"), Cal Bus.
& Prof. Code § 17200. Ultimately, Kaiser prevailed, but Aetna and
Guardian's claims were dismissed on summary judgment, and Aetna's
dismissal is the subject of a separate appeal.
In a related case in which we issue a separate opinion,
Harden Manufacturing Corporation ("Harden") filed a class action
complaint on May 14, 2004, in the same court, against Pfizer and
Parke-Davis (as a division of Warner-Lambert) on behalf of a broad
purported class consisting of "[a]ll entities throughout the United
States and its territories who, for purposes other than resale,
purchased, reimbursed and/or paid for Neurontin for indications not
approved by the FDA ('the Class') during the period from January 1,
1994 through the present ('the Class Period')." Harden asserted
claims under RICO, as well as state-law claims for common law
fraud, violation of consumer protection statutes, and unjust
enrichment.
Both the class complaint and the coordinated complaint
were part of a larger multidistrict litigation ("MDL") concerning
the marketing and sale of Neurontin, which was consolidated in the
District of Massachusetts in November 2004. In each case, the
defendants moved for summary judgment. On January 8, 2010, on
defendants' motion the district court dismissed the claims of
Guardian and Aetna; the court denied summary judgment as to
Kaiser's claims. See In re Neurontin Mktg. & Sales Practices
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Litig. (Neurontin Coordinated SJ), 677 F. Supp. 2d 479 (D. Mass.
2010). On December 10, 2010, the court granted summary judgment
against all of the Harden purported class plaintiffs except two,
whose claims are not relevant to this appeal. See In re Neurontin
Mktg. & Sales Practices Litig. (Neurontin Class SJ), 754 F. Supp.
2d 293, 311 & n.4 (D. Mass. 2010).
Beginning on February 22, 2010, the district court held
a jury trial on Kaiser's RICO claims against the defendants. On
March 25, 2010, after a five-week trial, the jury concluded that
"Kaiser prove[d] that Pfizer violated RICO with respect to its
promotion of Neurontin for" bipolar disorder, migraine, neuropathic
pain,1 and dosages exceeding 1800 mg per day, and that these
"violation[s] of RICO cause[d] Kaiser injury." See In re Neurontin
Mktg. & Sales Practices Litig. (Kaiser Findings), No. 04-cv-10739-
PBS, 2011 WL 3852254, at *1 (D. Mass. Aug. 31, 2011). The jury
awarded Kaiser damages in the amount of $47,363,092, which the
court trebled to $142,089,276. Id. The jury also rendered an
advisory verdict in favor of Kaiser on its state UCL claim, finding
that Pfizer had engaged in fraudulent business acts or practices
which caused Kaiser damages with respect to bipolar disorder,
1
Neuropathic pain is pain caused by damage to the nerves, as
opposed to nociceptive pain, which is pain caused by an injury. In
re Neurontin Mktg. & Sales Practices Litig. (Kaiser Findings), No.
04-cv-10739-PBS, 2011 WL 3852254, at *38, *1 n.1 (D. Mass. Aug.
31, 2011).
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migraine, neuropathic pain, and doses over 1800 mg, but no
liability with respect to nociceptive pain.
On November 3, 2010, the district court found in Kaiser's
favor on its claims under the UCL, issuing extensive findings of
fact and conclusions of law. In re Neurontin Mktg. & Sales
Practices Litig., 748 F. Supp. 2d 34 (D. Mass. 2010), amended and
superseded by Kaiser Findings, 2011 WL 3852254. The district court
ordered defendants to pay $95,286,518 in restitution, Kaiser
Findings, 2011 WL 3852254, at *2, but because this figure reflected
the same damage claims encompassed by the jury verdict on Kaiser's
RICO claim, the court did not add it to the jury award, id. at *60
n.25. On February 22, 2011, the court entered judgment in favor of
Kaiser on its RICO and UCL claims, and on July 27, 2011, the court
denied Pfizer's motion for a new trial or, in the alternative, to
alter or amend judgment.
On September 20, 2011, Pfizer filed a notice of appeal as
to the court's entry of judgment in favor of Kaiser on its RICO and
UCL claims, and as to the court's denial of Pfizer's motion for a
new trial. This opinion concerns only that appeal.
II.
We review de novo defendants' contention that Kaiser's
RICO and UCL claims failed as a matter of law, taking the evidence
in the light most favorable to the verdict. Tuli v. Brigham &
Women's Hosp., 656 F.3d 33, 38 (1st Cir. 2011). Where defendants
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challenge the district court's findings of fact, we review these
findings for clear error. Fed. R. Civ. P. 52(a)(6). We begin by
setting out the district court's findings of fact and the jury's
conclusions.
A. The Defendants' Fraudulent Marketing Campaign
Parke-Davis, an operating division of Warner-Lambert
Company, developed Neurontin2 during the 1980s and early 1990s as
an anti-epileptic drug. Kaiser Findings, 2011 WL 3852254, at *5.
To secure approval from the Food and Drug Administration ("FDA")
for a drug for a particular indication, a drug manufacturer must
submit two favorable double-blind randomized controlled trials
("DBRCTs"). Id. On December 30, 1993, the FDA approved Neurontin
as an adjunctive therapy in the treatment of partial seizures in
adults with epilepsy, setting the maximum dose at 1800 mg/day. Id.
The FDA found that certain patients taking Neurontin experienced
depressive side effects, and the FDA issued a warning to physicians
in January 2008 to "[b]e aware of the possibility of the emergence
or worsening of depression, suicidality, or any unusual changes in
behavior" resulting from the use of anti-epileptic drugs including
Neurontin. Id. (alteration in original) (internal quotation marks
omitted). In 1996, Parke-Davis applied to the FDA for approval of
Neurontin as a monotherapy for the treatment of seizures, and
2
Neurontin's generic name is gabapentin. Kaiser Findings,
2011 WL 3852254, at *5.
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sought an increase in Neurontin's effective dose range and maximum
recommended dose; the FDA rejected this application. Id. at *6.
Pfizer acquired Warner-Lambert in 2000. Id. at *5. In
2001, Pfizer filed an application with the FDA seeking approval of
Neurontin for the broad indication of neuropathic pain; after
receiving negative feedback from the FDA and non-FDA experts,
Pfizer withdrew its application. Id. at *10. The FDA did approve
Neurontin for the treatment of post-herpetic neuralgia ("PHN"), a
type of neuropathic pain associated with shingles, in 2002. Id.
In 1994, Parke-Davis had estimated that Neurontin would
generate $500 million in profits over the duration of its patent.
Id. at *6. In order to increase Neurontin's earning potential,
Parke-Davis began in 1995 to develop strategies to market Neurontin
for off-label conditions -- that is, conditions not included on the
official label approved by the FDA. Id. As Parke-Davis was
implementing these strategies, Pfizer acquired Warner-Lambert, and
so, Parke-Davis. Id. at *5. These marketing strategies apparently
worked; in the year 2003, Neurontin sales exceeded $2 billion. Id.
at *6. Pfizer's Neurontin team estimated that only about ten
percent of Neurontin prescriptions that year were for the FDA-
approved on-label uses for epilepsy or PHN, and that more than a
third of prescriptions were for the off-label uses of neuropathic
pain, migraine or headache, or bipolar disorder.
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Both the jury and the district court found that Parke-
Davis, Warner-Lambert, and Pfizer had "engaged in the fraudulent
marketing of Neurontin" for the treatment of bipolar disorder,
beginning in July 1998, id. at *17; for the treatment of
neuropathic pain, beginning in November 1997, id. at *23; for the
treatment of migraines, beginning in April 1999, id. at *25; and
for doses greater than 1800 mg/day, beginning in November 1997, id.
at *28.3 This fraudulent marketing included, but was not limited
to, three strategies, each of which included subcomponents: (1)
direct marketing (or "detailing") to doctors, which misrepresented
Neurontin's effectiveness for off-label indications; (2) sponsoring
misleading informational supplements and continuing medical
education ("CME") programs; and (3) suppressing negative
information about Neurontin while publishing articles in medical
journals that reported positive information about Neurontin's off-
label effectiveness. See id. at *12, *17, *18, *25, *28.
The defendants' fraudulent marketing campaign also
targeted third-party payors ("TPPs"), including Kaiser, a non-
profit healthcare provider which is also one of the largest health
maintenance organizations ("HMOs") in the United States. Id. at
*2. As to these targets, additional mechanisms were used to
influence both formulary decisions and prescribing decisions. In
3
The court and the jury found that Kaiser had not proven that
Pfizer fraudulently marketed Neurontin for nociceptive pain. Kaiser
Findings, 2011 WL 3852254, at *26.
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1994, in a memo discussing the promotion of Neurontin as an anti-
convulsant, Parke-Davis's marketing team listed Kaiser as second on
its list of "Top 10 HMOs Targeted for Neurontin." Id. at *11. In
2004, Pfizer developed an "Operating Plan" for marketing a number
of drugs, including Neurontin, to Kaiser; tellingly, the plan
featured, as a strategy, "develop[ing] relationships with
[decisionmakers affiliated with Kaiser] who are not considered
whistle blowers." Id. (emphasis added) (internal quotation marks
omitted). Pfizer also employed physicians associated with Kaiser
to serve on speakers' bureaus and publish misleading articles about
Neurontin. Id.
B. Kaiser's Management of Neurontin on Its Formularies
Kaiser is composed of two separate corporations: the
Kaiser Foundation Health Plan, which owns six regional health plans
and directly provides medical coverage to beneficiaries in
California and Hawaii, providing medical insurance to about 8.6
million members; and Kaiser Foundation Hospitals, which operates
health care facilities and pharmacies. Id. at *2. The Kaiser
Foundation Health Plan and its subsidiaries do not employ
physicians themselves, but have exclusive contractual relationships
with regional Permanente Medical Groups ("PMGs"). Id. at *3.
Each PMG has its own Pharmacy and Therapeutics ("P & T")
Committee which manages each PMG's formulary, or list of
medications that treating physicians may prescribe. Id.
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Representatives from both entities sit on the P & T Committees and
participate in formulary management. Kaiser Foundation Hospitals
has a Drug Information Service ("DIS") that researches and
communicates information about drugs, including monographs about
new drugs or new drug uses, to physicians and P & T Committees.
Id. DIS monographs summarize available evidence -- including
publicly available evidence and unpublished information obtained
from pharmaceutical manufacturers -- on drug safety and efficacy,
and P & T Committees rely heavily on these monographs in making
formulary decisions. Id.
PMG formularies may list drugs (1) without restrictions;
(2) with restrictions limiting prescribing to a particular group of
physicians; or (3) with guidelines for appropriate prescribing.
Id. at *4. Kaiser will pay for off-formulary prescriptions and no
prior authorization is required for any prescription. Nonetheless,
an internal Kaiser study found that 95% of prescriptions written by
PMG physicians comply with formularies. Id.
After the FDA approved Neurontin for epilepsy in 1993,
the P & T Committee of each regional PMG added Neurontin to its
formulary, with one regional PMG -- Hawaii -- not adding Neurontin
to its formulary until 2000. Id. The Southern California PMG
initially restricted prescribing of Neurontin to neurologists. Id.
In September of 1997, however, its P & T Committee permitted
anesthesiologists to prescribe Neurontin for reflex sympathetic
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dystrophy, a particular pain syndrome. Id. In June of 1999, the
Committee removed prescribing restrictions on Neurontin and added
guidelines reserving its use for neuropathic pain patients who were
unresponsive to or intolerant of other treatments. Id. Then, in
September of 1999, the P & T Committee removed all remaining
formulary restrictions on Neurontin. Id. at *5. Prescriptions of
Neurontin increased dramatically thereafter. Id. at *31.
The district court found that "Kaiser relied on Pfizer's
misrepresentations and omissions during the development of drug
monographs in both June and September 1999," id. at *29, and that
Pfizer's misrepresentations "directly affected decisions about
Neurontin's placement on formulary without restrictions," id. at
*30.
C. Physicians' Prescribing Behavior as to Neurontin
The jury and court found that the prescribing of
Neurontin had in fact been causally affected by the fraudulent
marketing scheme, which included the sponsorship of CME events
attended by physicians and direct marketing to physicians. Id. at
*12. Defendants stress that no physician in this case, or in the
Neurontin MDL as a whole, testified that he or she prescribed
Neurontin because of defendants' fraudulent off-label marketing.
Id. at *32. But Kaiser presented other evidence as to causation,
and evidence as to why such individual testimony was unreliable.
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The primary evidence was the expert testimony of Dr.
Meredith Rosenthal, who holds a Ph.D. in health economics from
Harvard University and is a professor at the Harvard School of
Public Health. Id. Dr. Rosenthal "use[d] aggregate data and
statistical approaches to link patterns in promotional spending[4]
to patterns in prescribing for the drug." Id. (internal quotation
mark omitted). Her regression analysis found a causal connection
between the fraudulent marketing and the quantity of prescriptions
written for off-label indications. She also testified as to why
Pfizer's proposed physician-by-physician analysis of causation was
not a scientifically valid approach to causation.
Dr. Rosenthal used "gold standard" national data on
Neurontin prescriptions, and employed the assumptions that (1)
"Kaiser's patient population and physician distribution are similar
to the national mix," and (2) "promotional spending on off-label
marketing was the same as the promotional spending on fraudulent
off-label marketing." Id. at *32-33. The district court found
both assumptions to be reasonable. Id. at *32-33.
As is customary for such experts, Dr. Rosenthal testified
that she "assumed that the allegations in the complaint are true"
for purposes of conducting her analysis, but offered no view as to
4
Dr. Rosenthal's promotional spending data included "spending
on detailing of doctors, advertisements in professional journals,
and the retail value of samples." Kaiser Findings, 2011 WL
3852254, at *32 n.19.
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whether or not there had been a fraudulent marketing scheme. She
further explained that her assignment was only to calculate the
percentage of prescriptions caused by Pfizer's fraudulent off-label
marketing and not to convert that percentage into a damages number
for Kaiser, which was the task of another expert witness, Dr.
Raymond Hartman, Ph.D.
Dr. Rosenthal explained the difference between
correlation and causation and stated that her analysis established
causation by performing a regression analysis on sales information
against promotional spending on detailing, professional journal
advertising, and the retail value of samples, while controlling for
other variables. Her analysis excluded the many off-label
prescriptions by physicians who received legitimate on-label
promotion. She concluded that the "percentage[s] of Neurontin
prescriptions that were caused by Pfizer's fraudulent marketing of
Neurontin" were, by off-label indication, as follows: 99.4% of
prescriptions for bipolar disorder; 70% of prescriptions for
neuropathic pain; 27.9% of prescriptions for migraine; and 37.5% of
prescriptions for doses over 1800 mg/day. Id. at *33. Thus, three
out of ten Neurontin prescriptions written by neurologists for
migraine would not have been written or filled but for the alleged
misconduct. As for Neurontin prescriptions written by
psychiatrists for bipolar disorder between November 1995 and
December 2004, 99.4% would not have been written had there been no
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fraud. Dr. Rosenthal testified that it was her opinion "to a
reasonable degree of scientific certainty that these calculations
are the best way to estimate the number of prescriptions and the
share of prescriptions that were affected by the alleged
misconduct."5
Turning to Pfizer's insistence that only doctor-by-doctor
evidence could prove causation, Dr. Rosenthal testified as to the
well-recognized unreliability in the field of healthcare economics
of asking doctors individually whether they were influenced by the
many methods of off-label marketing. She said that self-reporting
from physicians about patterns of practice that may be
controversial shows both conscious reluctance and unconscious bias,
which lead them to deny being influenced. As a result, it is
preferable "[t]o examine objectively the causal association between
promotion and sales using . . . econometric models." Dr. Rosenthal
utilized the standard practice of using "aggregate data and . . .
statistical approaches to link patterns in promotional spending to
patterns in prescribing for the drug." Dr. Rosenthal testified
that it was "neither standard nor appropriate to look physician by
physician."
In opposition to Dr. Rosenthal's expert testimony, Pfizer
introduced the expert testimony of Dr. Michael C. Keeley, Ph.D.,
5
These calculations applied to Kaiser as well as to other
payors across the country.
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who testified as to alleged flaws in Dr. Rosenthal's methodology.
Dr. Keeley testified that when he re-ran Dr. Rosenthal's regression
analysis with different assumptions, he did not find a
statistically significant relationship between Pfizer's promotion
of Neurontin and prescriptions of Neurontin. Dr. Keeley did not
present his own causation or damages model, however. The court
rejected Dr. Keeley's criticisms and accepted Dr. Rosenthal's
calculations. Id. at *58.
The court also found that subsidiary evidence tended to
show a causal link. For example, PMG physicians attended
conferences where Neurontin was promoted for off-label uses, and
after one such conference, in May 1999, new starts of Neurontin
increased by 62%. Id. at *30.
D. Criminal Proceedings and Related Proceedings Against the
Defendants Concerning Neurontin
Dr. David Franklin was employed as a medical liaison at
Parke-Davis for about five months in 1996; on August 13, 1996, he
filed a sealed qui tam action against Parke-Davis under the False
Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733. United States ex rel.
Franklin v. Parke-Davis, Div. of Warner-Lambert Co., 147 F. Supp.
2d 39, 43-44, 46 (D. Mass. 2001). Franklin alleged that Parke-
Davis engaged in a fraudulent scheme to promote off-label uses of
Neurontin, and that this campaign caused false claims to be
submitted to the Veterans Administration and to the federal
government for Medicaid reimbursement. Id. at 43. Franklin's suit
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remained under seal for more than three years, as the government
considered whether to intervene, and was then unsealed on December
21, 1999, with the government participating only as an amicus
curiae. Id. at 46. On June 16, 2004, Franklin, Parke-Davis,
Pfizer, and the United States entered into a stipulation of
dismissal, under which Franklin received a relator's share of
$24,640,000.
On May 13, 2004, the U.S. Department of Justice filed a
criminal information charging Warner-Lambert with illegal off-label
promotion of Neurontin. Kaiser Findings, 2011 WL 3852254, at *11.
Pfizer caused Warner-Lambert to plead guilty to two felony counts
of marketing Neurontin for unapproved uses, with Warner-Lambert
"expressly and unequivocally admit[ting]" that it promoted the sale
and use of Neurontin for neuropathic pain, bipolar disorder, and
migraine. Id. To be clear, this plea did not admit to fraudulent
marketing. Warner-Lambert agreed to pay a $240 million criminal
fine, and Pfizer paid $190 million in additional civil fines. Id.
News of this action, plea, and settlement caused Kaiser to take
certain steps, as described below.
E. Kaiser's Actions To Reduce Neurontin Prescriptions
Neurontin prescriptions written by PMG physicians
increased dramatically after September 1999 (the fraudulent
marketing campaign began in 1997). This notable increase led some
Kaiser regions to "examine their members' use of Neurontin" and
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make efforts to limit it. Id. at *31. By the spring of 2002, the
Northern California PMG had barred Pfizer drug representatives from
detailing its physicians regarding Neurontin, and the same PMG's
Drug Utilization Group ("DRUG") began a campaign to promote only
the appropriate use of Neurontin, which other regional PMGs joined.
Id.
In late 2002, Kaiser learned about Franklin's qui tam
action and escalated its efforts to limit prescribing of Neurontin
for neuropathic pain, bipolar disorder, migraine, and nociceptive
pain. Id. Kaiser shared materials about Neurontin produced by
DRUG and the Southern California PMG's Drug Utilization Action Team
("DUAT") with all regional PMGs. The district court found that
though Neurontin use continued to increase nationally, Kaiser's
efforts to limit its use "result[ed] in a 33-34% decrease in new
starts of Neurontin." Id.
The P & T Committees did not remove Neurontin from their
formularies or impose restrictions on its use after learning about
the allegations of defendants' fraudulent off-label marketing of
Neurontin. Favorable information about using Neurontin to treat
neuropathic pain remained on Kaiser's website until the eve of
trial. Id. at *30. The district court found, however, that Kaiser
employees did not know about the full scope of defendants' fraud.
Rather, they learned of the full scope of the fraud through (1)
discovery in this suit, and (2) the publication, in November of
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2009, of an article in the New England Journal of Medicine
reporting defendants' use of scholarly publications to disseminate
misleading information about Neurontin. Id. at *31, *7 & n.4.
F. Injury and Damages Sustained by Kaiser Due to Defendants'
Fraud
The court and the jury found that Kaiser had suffered
both injury and quantifiable damages as a result of defendants'
actions.
After reviewing the evidence at trial -- including the
results of DBRCTs and other clinical trials, anecdotal accounts of
clinical success, regulatory approval in other countries, and
expert opinions, id. at *34-45 -- the district court found that
"there is no reliable scientific evidence that Neurontin is
effective for bipolar disorder, migraine, or at high doses," and
that although there was evidence that Neurontin was effective in
treating some kinds of neuropathic pain, "there is no reliable
scientific evidence to support a broad indication of neuropathic
pain," id. at *34. The court also found that "PMG physicians would
have almost certainly prescribed alternative medication to their
patients had they not prescribed Neurontin." Id. at *33.
In addition to Dr. Rosenthal's expert testimony on
causation and injury, Kaiser presented testimony by a second
expert, Dr. Hartman, who provided evidence as to the damages
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incurred by Kaiser. His analysis used a list6 of alternative drugs
that "were more appropriate for each off-label indication than
Neurontin" in order to determine the average cost of the
alternative medications that would have been prescribed in the
absence of defendants' fraud. Id. Dr. Hartman then multiplied the
quantity of affected prescriptions (as determined by Dr. Rosenthal)
by the average excess cost of each Neurontin prescription as
compared to alternative medications. Id. He concluded that
Kaiser's damages from defendants' fraud totaled $62,457,082, with
Kaiser sustaining the following damages from fraud-induced
prescriptions for each off-label indication: $17,822,647 for
bipolar disorder; $39,774,623 for neuropathic pain; $1,260,464 for
migraine; and $3,599,348 for doses over 1800 mg/day. Id. at *34.
In fact, the total awarded by the jury was less than this sum.
Dr. Keeley, Pfizer's expert, testified that Dr. Hartman's
calculations were flawed because he did not have data that
permitted him to determine which alternative drugs would have been
prescribed in place of Neurontin. Dr. Keeley did not present his
own estimate of Kaiser's damages, however.
Pfizer argued to the jury that Neurontin was effective
for the off-label uses at issue, and that as a result, (1) Pfizer's
promotional campaign involved no misrepresentations about
6
This list had been developed by the chairperson of Kaiser's
DIS, Dr. Marta Millares. Kaiser Findings, 2011 WL 3852254, at *33.
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Neurontin's effectiveness; (2) even if Pfizer made
misrepresentations, Kaiser doctors prescribed Neurontin for off-
label uses because it was effective in their clinical experience,
not because of Pfizer's misrepresentations; and (3) because
Kaiser's damages theory was based on Neurontin's complete
ineffectiveness for off-label uses, Kaiser's damages calculations
were invalid if Neurontin was sometimes effective for these uses.
The jury rejected Pfizer's arguments and awarded Kaiser $47,363,092
in damages, which the court trebled to $142,089,276. Id. at *1.
Pfizer argued to the district court that since doctors
consider "multiple sources, types, and levels of scientific
evidence" in making treatment decisions, and the effectiveness of
a drug is a patient-specific inquiry, the court should not confine
its analysis of Neurontin's effectiveness for off-label uses to
whether DBRCTs demonstrated efficacy. Kaiser responded that DBRCTs
were the "gold-standard for determining efficacy" and that
"[l]ower-tier evidence is insufficient, especially in place of
existing DBRCTs."
Pfizer further argued to the court that because Neurontin
was not "completely and categorically ineffective" for off-label
uses, Pfizer had not misled Kaiser about Neurontin's efficacy and
Kaiser had not proved that it suffered economic injury. Pfizer
also argued that Dr. Rosenthal's and Dr. Hartman's testimony was
flawed and hence not probative of causation or damages. The court
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rejected Pfizer's arguments and accepted Dr. Rosenthal's and Dr.
Hartman's calculations as the basis for its own damages award of
$95,286,518. Id. at *58-60.
III.
Pfizer seeks to vacate the court and jury findings of
liability and damages on a number of theories. It argues that
Kaiser's claims fail as a matter of law, that the evidence was
insufficient, and that there were trial errors. At the heart of
the appeal is the claim that, as a matter of law, Kaiser cannot
meet the RICO or UCL causation requirements, and so Pfizer was
entitled to a directed verdict. On appeal, Pfizer does not
challenge the conclusions of the jury and district court that it
engaged in a fraudulent scheme with respect to its promotion of
Neurontin for off-label uses.7
A. RICO Causation
The civil damages provision of RICO provides that "[a]ny
person injured in his business or property by reason of a violation
of section 1962 of this chapter may sue therefor . . . and shall
7
As noted, Pfizer argued to the jury and the district court
that Neurontin was effective for off-label uses and that Pfizer
therefore made no material misrepresentations. It does not make
this argument on appeal. Instead, it argues on appeal only that
Neurontin's effectiveness means Kaiser did not prove that it
suffered economic injury from paying for off-label prescriptions of
Neurontin. Pfizer does state on appeal, in passing, that Kaiser
"presented no evidence of fraudulent detailing (sales calls) to PMG
doctors," but it does not squarely challenge the district court's
contrary finding and, in any event, makes this argument only to
attack the "fit" of Kaiser's expert testimony.
-22-
recover threefold the damages he sustains and the cost of the suit,
including a reasonable attorney's fee." 18 U.S.C. § 1964(c). In
relevant part, section 1962 prohibits "any person employed by or
associated with any enterprise engaged in, or the activities of
which affect, interstate or foreign commerce" from "conduct[ing] or
participat[ing], directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering activity."
Id. § 1962(c). A "racketeering activity" can consist of a wide
range of predicate offenses, including, as alleged in this case,
mail and wire fraud, see id. § 1961(1), and a "pattern" of such
activity requires at least two racketeering acts, id. § 1961(5).
Our RICO causation analysis is controlled by the Supreme
Court's decisions in Holmes v. Securities Investor Protection
Corp., 503 U.S. 258 (1992), and its progeny.8 See Anza v. Ideal
Steel Supply Corp., 547 U.S. 451 (2006); Bridge v. Phoenix Bond &
Indem. Co., 128 S. Ct. 2131 (2008); Hemi Grp., LLC v. City of New
York, 130 S. Ct. 983 (2010). In Holmes, the Supreme Court held
that the civil RICO provision's "by reason of" language contains
both but-for causation and proximate causation requirements. 503
U.S. at 268. In our view, these are two quite distinct questions.
Here, the harm to Kaiser plainly was foreseeable, and
foreseeability is needed for, but does not end the inquiry as to,
8
The parties apply the same analysis on the proximate
causation questions to both Kaiser's RICO claim and its UCL claim,
so we proceed on the assumption that this approach is correct.
-23-
proximate causation. The proximate causation question in this
appeal concerns whether the chain of events between Pfizer's
misrepresentations and Kaiser's payment for the prescriptions is so
attenuated that, for legal and policy reasons, Kaiser's claim for
recovery should be denied. The but-for causation question, in
contrast, is whether, absent Pfizer's fraud, Kaiser would have paid
for fewer off-label Neurontin prescriptions.
Pfizer's primary argument is that, as a matter of law,
there is no proximate causation in this case because there are too
many steps in the causal chain connecting its misrepresentations to
the injury to Kaiser, particularly because that injury rests on the
actions of independent actors -- the prescribing doctors. As to
but-for causation, Pfizer argues that its evidence at trial
"falsified" Kaiser's theories of causation, and that some of the
evidence Kaiser presented to prove but-for causation was
inadmissible. We take these arguments in sequence.
B. Proximate Causation
In Holmes, the Supreme Court upheld entry of summary
judgment for the defendant on RICO claims brought by a plaintiff
who was subrogated to the rights of others, based on the
plaintiff's failure to meet the proximate cause requirement. Id.
at 262-64, 271-74. The Holmes plaintiff alleged that the defendant
had engaged in an enterprise to manipulate the prices of certain
stocks, id. at 261, and complained that this conduct caused the
-24-
plaintiff to have to pay the claims of customers of two broker-
dealers that had become insolvent once the fraud was revealed, see
id. at 262-63. The Court determined that, even if this plaintiff
were allowed to stand in the shoes of a better-situated plaintiff
(namely, the customers), the link was too remote between the
alleged stock manipulation scheme and the harm to the customers,
because that harm was itself contingent on the harm suffered by the
broker-dealers who had purchased the manipulated stock. See id. at
271. The only connection between the RICO conduct and the claimed
harm was the broker-dealers' insolvency. Id.
The Holmes Court stated that, "[a]t bottom, the notion of
proximate cause reflects 'ideas of what justice demands, or of what
is administratively possible and convenient.'" Id. at 268 (quoting
W. Keeton, et al., Prosser & Keeton on Law of Torts § 41, at 264
(5th ed. 1984)). As a result, the Court explained, it was "us[ing]
'proximate cause' to label generically the judicial tools used to
limit a person's responsibility for the consequences of that
person's own acts." Id.
Because of "the infinite variety of claims that may
arise" in which a court must analyze proximate causation, it is
"virtually impossible to announce a black-letter rule that will
dictate the result in every case." Id. at 272 n.20 (quoting
Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of
Carpenters, 459 U.S. 519, 536 (1983)) (internal quotation marks
-25-
omitted). Instead, the Court set out certain principles, derived
from the common law and from interpretations of analogous statutes,
to govern the proximate cause inquiry under RICO.
The Court noted that RICO's civil provision drew its
language directly from the Clayton and Sherman Acts, which had for
decades been interpreted as incorporating proximate cause
requirements. Id. at 267-68; see Associated Gen. Contractors, 459
U.S. at 531-34. In the antitrust context, the Court had identified
a number of factors that bear on the proximate cause question,
including whether the injury was of the sort that the statutes
sought to redress, Associated Gen. Contractors, 459 U.S. at 538;
the "directness or indirectness of the asserted injury," including
whether the "links" in the "chain of causation" were clear or were
only "vaguely defined," id. at 540; the identity of the "immediate
victims" of the antitrust conduct, id. at 541; whether the injuries
complained of may have been caused by "independent factors," id. at
542; and whether the plaintiffs were part of "an identifiable class
of persons whose self-interest would normally motivate them to
vindicate the public interest in antitrust enforcement," id.
The Holmes Court used various phrases to define what it
takes to meet RICO's proximate cause standard, such as "some direct
relation between the injury asserted and the injurious conduct
alleged," 503 U.S. at 268, and whether "the link is too remote"
between the conduct and the harm suffered, id. at 271. The Court
-26-
noted that the proximate cause analysis at common law often
included such a "demand for some direct relation"; that is,
proximate cause would be lacking if, as in Holmes, the plaintiff
"complained of harm flowing merely from the misfortunes visited
upon a third person by the defendant's acts." Id. at 268. Later,
in Anza v. Ideal Steel Supply Corp., 547 U.S. 451, the Court
similarly found proximate cause lacking where the RICO conduct
alleged had directly harmed a party other than the plaintiff and
the plaintiff's alleged injury was only a collateral result of the
direct harm. In that case, the defendant's scheme to underpay
sales taxes had directly injured the state by depriving it of tax
revenue, whereas the plaintiff's alleged harm related to the
competitive effects of the defendant charging lower prices without
sales tax. See id. at 458.
Importantly, the Holmes Court also provided three
functional factors with which to assess whether proximate cause
exists under RICO. First, the Court noted concerns about proof,
reasoning that "the less direct an injury is, the more difficult it
becomes to ascertain the amount of a plaintiff's damages
attributable to the violation, as distinct from other, independent,
factors." 503 U.S. at 269. Second were concerns about
administrability and the avoidance of multiple recoveries:
"[R]ecognizing claims of the indirectly injured would force courts
to adopt complicated rules apportioning damages among plaintiffs
-27-
removed at different levels of injury from the violative acts, to
obviate the risk of multiple recoveries." Id. Third, the Court
focused on the societal interest in deterring illegal conduct and
whether that interest would be served in a particular case: "[T]he
need to grapple with [the previous two] problems [may be] simply
unjustified by the general interest in deterring injurious conduct,
since directly injured victims can generally be counted on to
vindicate the law as private attorneys general, without any of the
problems attendant upon suits by plaintiffs injured more remotely."
Id. at 269-70.
Holmes makes it clear that both the directness concern
and the three functional factors are part of the proximate cause
inquiry. See id. at 271-74. Indeed, the Court warned that its
"use of the term 'direct' should merely be understood as a
reference to the proximate-cause enquiry that is informed by the
concerns" of justice and administrability. Id. at 272 n.20; see
id. at 268. Holmes and its successor, Anza, both found a lack of
proximate cause when examining the attenuated relationship between
the plaintiffs and the direct victim or victims of the alleged
fraud.
In Bridge v. Phoenix Bond & Indemnity Co., 128 S. Ct.
2131, the Court considered the RICO claims of such direct victims.
It also relatedly addressed the question of whether first-party
-28-
reliance on a defendant's misrepresentations is required under
RICO, and answered that question "no."9
In Bridge, the plaintiffs alleged that the defendants had
engaged in a scheme to make misrepresentations to county tax
authorities in order to win more bids at tax lien auctions than
they would have been able to win absent the fraud. See id. at
2135-36. The plaintiffs were other bidders at the auctions whose
bids had tied with defendants' bids, and whose claimed injury was
the deprivation of their fair share of winning bids. Id. at 2136.
A unanimous Court held that first-party reliance is not
an element of proximate cause in a private RICO claim predicated on
mail fraud. Id. at 2134. Thus, even where the plaintiffs did not
receive the misrepresentations at issue -- the county was the party
that had relied on the misrepresentations -- the plaintiffs had
sufficiently alleged proximate causation under RICO. Id. at 2138,
9
We disagree with Pfizer's argument that "attempting to prove
non-party doctors' reliance through inferences from aggregate sales
data invokes the 'fraud on the market' doctrine." The
fraud-on-the-market doctrine, utilized in securities law, "relieves
the plaintiff of the burden of proving individualized reliance on
a defendant's misstatement, by permitting a rebuttable presumption
that the plaintiff relied on the 'integrity of the market price'
which reflected that misstatement." In re PolyMedica Corp. Sec.
Litig., 432 F.3d 1, 7 (1st Cir. 2005) (discussing Basic Inc. v.
Levinson, 485 U.S. 224 (1988)). While reliance "is an essential
element of the § 10(b) private cause of action," Amgen Inc. v.
Conn. Retirement Plans & Trust Funds, ___ S. Ct. ___, 2013 WL
691001, at *4 (2013) (internal quotation marks omitted),
first-party reliance is not an element of a private RICO claim
predicated on mail fraud, Bridge, 128 S. Ct. at 2134, so the
analogy is inapt.
-29-
2143-44. Here, like the defendants in Bridge, Pfizer argues that
its supposed misrepresentations went to prescribing doctors, and so
the causal link to Kaiser must have been broken. Even putting
aside the evidence of Pfizer's direct communications to Kaiser, we
think Bridge forecloses this argument. The Bridge Court rejected
the attempt to impose a direct reliance requirement on top of the
statutory language providing a private right of action under RICO,
finding no support for it in the common law. See id. at 2139-41.
We likewise find none here.
Bridge also supports the conclusion that Kaiser meets the
proximate cause requirement for several additional reasons. First,
Bridge held that the plaintiffs there "clearly were injured by
[defendants'] scheme," as they lost valuable property they would
not otherwise have lost. Id. at 2139. In so holding, the Court
analogized to a business being harmed by misrepresentations made by
a rival to its suppliers and competitors but not to the business
itself. See id. The Court rejected the argument that no RICO
injury could exist in such circumstances. In doing so, it
commented on the fact that a business so injured would be "the
primary and intended victim[] of the scheme to defraud." Id.
Here, Kaiser was likewise a "primary and intended victim[] of
[Pfizer's] scheme to defraud."10 Its injury was a "foreseeable and
10
In using this language, we do not suggest that a defendant
can escape RICO liability to a foreseeably and actually injured
plaintiff by saying it did not "intend" such a result. Pfizer
-30-
natural consequence" of Pfizer's scheme, id. at 2144 -- a scheme
that was designed to fraudulently inflate the number of Neurontin
prescriptions for which TPPs paid. The evidence that Pfizer had
specifically targeted Kaiser for Neurontin sales in general
supports the conclusion that Kaiser's injury was a natural
consequence of Pfizer's fraudulent scheme, but such evidence was
not required, given the mechanisms by which Pfizer's marketing plan
operated. As Judge Posner stated in the Bridge case, after remand:
"The doctrine of proximate cause . . . protects the ability of
primary victims of wrongful conduct to obtain compensation . . . ."
BCS Servs., Inc. v. Heartwood 88, LLC, 637 F.3d 750, 756 (7th Cir.
2011). Here Kaiser was a primary victim.
Further, the Bridge Court saw no risk of multiple
recoveries or other policy reasons to limit recovery. See 128 S.
Ct. at 2144 (citing Holmes, 530 U.S. 258; Anza, 547 U.S. 451). Nor
did it see a "more immediate victim . . . better situated to sue."
Id. So too here: none of the three functional problems that the
Holmes test is meant to avoid are present in this case. To the
contrary, the functional interests in justice and administrability
work in Kaiser's favor. Because Kaiser was both the natural and
foreseeable victim of the fraud and the intended victim of the
fraud, there is no risk of duplicative recovery. See id. Neither
the individual physicians, nor the DIS members, nor the P & T
could not plausibly make such a claim here in any event.
-31-
Committee members -- the parties to whom Pfizer directly made its
misrepresentations -- ever paid anything toward a Neurontin
prescription, so there is no risk of multiple recoveries due to a
suit by another of those actors.11 See Holmes, 503 U.S. at 269.
Kaiser is also in the best position to enforce the law because
Kaiser is the party that directly suffered economic injury from
Pfizer's scheme. See id. at 269-70. And, as we explain below,
Kaiser was able to present sufficient evidence to ascertain the
amount of its damages attributable to Pfizer's conduct. See id. at
269.
In our view, Kaiser has met both the direct relationship
and functional tests articulated in Holmes and its progeny. We
reject Pfizer's core defense that there are too many steps in the
causal chain between its misrepresentations and Kaiser's alleged
injury to meet the proximate cause "direct relation" requirement as
a matter of law. Pfizer characterizes this causal relationship as
involving at least four steps: Pfizer communicating tainted
information about Neurontin to Kaiser's DIS; the DIS producing
monographs that rely on the misrepresentations; those monographs
11
There are, of course, other potential victims of Pfizer's
scheme, such as uninsured individuals who paid for their own
prescriptions. But any such injury would be different in kind from
Kaiser's injury and could not be considered "multiple" in that
respect. At oral argument, Pfizer raised the possibility that
premium payers might also sue as victims of Pfizer's scheme, but
the question of whether any injury to such payers was proximately
caused by this scheme is not before us in this case.
-32-
influencing the PMGs in their formulary decisions; and the
prescribing physicians (who exercise independent medical judgment)
acting within the formulary to issue the prescriptions. We think
this characterization misconstrues the way in which the Court has
framed the direct relation test. Moreover, the adoption of
Pfizer's view would undercut the core proximate causation principle
of allowing compensation for those who are directly injured, whose
injury was plainly foreseeable and was in fact foreseen, and who
were the intended victims of a defendant's wrongful conduct.12
12
The Supreme Court's recent decision in Hemi Group, LLC v.
City of New York, 130 S. Ct. 983, does not, as Pfizer argues, lead
to a contrary conclusion. As an initial matter, that case produced
a 4-1-3 decision with no majority on the proximate cause question.
See id. at 995 (Ginsburg, J., concurring in part and concurring in
the judgment) (providing fifth vote to overturn the decision below,
"[w]ithout subscribing to the broader range of the Court's
proximate cause analysis"). But in any event, the factual
situation here is easily distinguished.
In Hemi Group, the defendant's alleged RICO conduct was using
the mails to violate the federal Jenkins Act, which requires out-
of-state cigarette vendors to report customer information to the
customers' states of residence. See id. at 987 (plurality
opinion). Thus, if the defendant's scheme could even be said to
have a foreseen or intended victim, it was New York State (to whom
Hemi Group owed the Jenkins Act reports), not the plaintiff New
York City. Cf. id. at 990 (identifying the state as a "better
situated" plaintiff).
Further, Hemi Group raised a policy problem not at issue here:
in that case, allowing the city to bring what was essentially a
Jenkins Act claim under the rubric of RICO would have risked
"turning RICO into a tax collection statute." Id. at 993 n.2; see
id. at 995 (Ginsburg, J., concurring in part and concurring in the
judgment) (stating that Justice Ginsburg would have rejected the
city's claim because it was an attempt to make an "end-run" around
the scope of the Jenkins Act). Kaiser's case involves no such
unusual policy risk. If anything, the risk cuts in the other
direction: accepting Pfizer's argument on proximate cause as a
matter of law would effectively preclude TPPs from bringing suit
-33-
In fact, the causal chain in this case is anything but
attenuated. Pfizer has always known that, because of the structure
of the American health care system, physicians would not be the
ones paying for the drugs they prescribed. Pfizer's fraudulent
marketing plan, meant to increase its revenues and profits, only
became successful once Pfizer received payments for the additional
Neurontin prescriptions it induced. Those payments came from
Kaiser and other TPPs. See Bridge, 128 S. Ct. at 2144 (noting that
other auction bidders, not the county officials who immediately
relied on defendants' misrepresentations, were the intended victims
of defendants' RICO conduct); BCS Servs., 637 F.3d at 756. Kaiser
sought only economic recovery in this case, and its economic injury
occurred when it paid for fraudulently induced Neurontin
prescriptions.13
under RICO as the primary victims of fraudulent off-label drug
marketing, and from recovering for their economic injuries. That
could mean that no viable plaintiffs would remain to "vindicate the
law as private attorneys general." Holmes, 503 U.S. at 269-70.
Given the high costs imposed by fraud in our health care system,
and Kaiser's status as a primary victim, this result would not be
in the service of either justice or accountability.
13
While first-party reliance was not needed, the evidence as
to Kaiser's reliance on Pfizer's misrepresentations was
particularly strong, and it came directly from Pfizer itself.
Pfizer had specifically identified Kaiser as a potential target for
increased Neurontin sales and had developed a five-point plan for
promoting Neurontin to Kaiser. That plan included making contact
with members of the DIS and the P & T Committees. Kaiser Findings,
2011 WL 3852254, at *11. This strategy shows that Pfizer did not
view the various arms within Kaiser as "third and even fourth
parties," Hemi Grp., 130 S. Ct. at 992 (plurality opinion); rather,
it viewed the Kaiser organization as a single entity to which
-34-
With respect to the mechanisms by which Pfizer marketed
Neurontin to PMG doctors through detailing and educational
programs, Pfizer fraudulently marketed to physicians with the
intent that those physicians would write prescriptions paid for by
Kaiser. The fraudulent scheme worked as intended, inducing a huge
increase in Neurontin prescriptions for off-label uses. Pfizer now
argues that because doctors exercise independent medical judgment
in making decisions about prescriptions, the actions of these
doctors are independent intervening causes. But Pfizer's scheme
relied on the expectation that physicians would base their
prescribing decisions in part on Pfizer's fraudulent marketing.
The fact that some physicians may have considered factors other
than Pfizer's detailing materials in making their prescribing
decisions does not add such attenuation to the causal chain as to
eliminate proximate cause. Rather than showing a lack of proximate
causation, this argument presents a question of proof regarding the
total number of prescriptions that were attributable to Pfizer's
actions. This is a damages question. Cf. Anza, 547 U.S. at 466
(Thomas, J., concurring in part and dissenting in part) ("Proximate
cause and certainty of damages, while both related to the
plaintiff's responsibility to prove that the amount of damages he
Pfizer could pitch Neurontin in order to create effects that would
reach prescribing physicians.
-35-
seeks is fairly attributable to the defendant, are distinct
requirements for recovery in tort.").
The doctrine of proximate cause, as Judge Posner has
noted, "does its work" in situations where
too many unexpected things had to happen
between the defendant's wrongdoing and the
plaintiff's injury, in order for the injury to
occur -- so many unexpected things that the
defendant couldn't have foreseen the effect of
his wrongdoing and therefore couldn't have
been influenced, in deciding how much care to
employ in the activity that produced the
wrongful act, by the prospect of inflicting
such an injury as occurred.
BCS Servs., 637 F.3d at 754. That is not the situation here.
Holding Pfizer liable will have an effect in deterring wrongful
conduct. And the effect of that wrongful conduct was clear in
foresight, not hindsight. See id. at 755. Upholding the finding
of proximate cause here will "protect[] the ability of primary
victims of wrongful conduct to obtain compensation; simplif[y]
litigation; recognize[] the limitations of deterrence . . . and
eliminate[] some actual or possible but probably minor causes as
grounds of legal liability." Id. at 756. The district court
correctly concluded that Kaiser met the proximate causation
requirement.
C. But-For Causation
Kaiser introduced several categories of evidence at trial
which clearly demonstrated but-for causation. It produced evidence
that (1) its employees directly relied on Pfizer's
-36-
misrepresentations in preparing monographs and formularies, which,
in turn, influenced doctors' prescribing decisions; and (2)
Pfizer's fraudulent off-label marketing directed to physicians
caused PMG doctors to issue more Neurontin prescriptions than they
would have absent such marketing. The latter type of evidence came
from Dr. Rosenthal's report14 as well as inferences from other data.
Pfizer has argued both that the direct reliance evidence was
insufficient and that Dr. Rosenthal's aggregate evidence was
inadmissible and insufficient. Pfizer's insufficiency claims rest
on the argument that certain evidence, introduced at trial and
considered by the jury and district court, "falsified" Kaiser's
theories of causation. We reject both of Pfizer's arguments.
1. But-For Reliance Evidence
Kaiser presented ample evidence of the ways in which its
reliance on Pfizer's misrepresentations regarding the effectiveness
14
Kaiser has argued that the district court did not actually
use the Rosenthal report as evidence of causation, but rather used
it only to quantify damages. The district court's findings are not
clear on this point. Compare Kaiser Findings, 2011 WL 3852254, at
*32 ("To meet its burden of proving causation, plaintiffs offered
the testimony of Professor Meredith Rosenthal . . . ."), with id.
at *54 (describing causation question as "what misrepresentations
and omissions Kaiser and DIS relied on[,] . . . whether that
reliance caused Kaiser to suffer injury[, and] . . . whether or not
PMG physicians would have nonetheless prescribed Neurontin to their
patients if DIS had not published monographs recommending Neurontin
or if the P & T Committees had added guidelines or restrictions to
Neurontin's formulary status"). The jury charge on causation and
damages did not mention the aggregate evidence one way or another.
We will proceed on the understanding that the aggregate evidence
both went to causation and set the basis for damages.
-37-
of Neurontin for the four relevant off-label uses met the but-for
causation requirement. Kaiser received Pfizer's misrepresentations
through Pfizer's contacts with Kaiser's DIS, which disseminated
information throughout the Kaiser organization. See Kaiser
Findings, 2011 WL 3852254, at *3-4. The DIS also relied on
publicly available information about Neurontin, id. at *3, which,
because of Pfizer's publication strategy, omitted important
information about negative study results, see id. at *7-8. A
reasonable factfinder could readily conclude that misinformation
received by the DIS would be widely disseminated, utilized, and
relied upon throughout the Kaiser organization to cause but-for
injury.
Kaiser specifically presented evidence that the DIS
shared with all regions at least two monographs that recommended
Neurontin for bipolar disorder and that recommended removal of any
formulary restrictions on Neurontin. See id. at *28-29. These
monographs were compiled without Pfizer having disclosed certain
adverse material information. Id. "In making formulary decisions,
P & T Committees rely heavily on DIS's monographs," id. at *3, and
PMG physicians comply with the formulary at a 95 percent rate, id.
at *4.
There was also evidence that PMG physicians received and
acted upon Pfizer's misrepresentations, both through information
sent through the DIS and information provided to them at Pfizer-
-38-
sponsored events. For one, when DIS answered physicians' questions
through its inquiry service, DIS relied on half-truths communicated
to it by Pfizer. See id. at *29. Second, after PMG physicians
attended a medical education conference in May 1999, new Neurontin
prescriptions increased by 62 percent. Id. at *30. And
significantly, when Kaiser conducted the DRUG and DUAT campaigns to
reduce Neurontin usage after the negative information about
Neurontin came to light, new prescriptions of Neurontin fell by
about 33 percent. At the same time, such prescriptions continued
to rise nationally. Id. at *31.
From this evidence, the district court concluded that
[t]he publication strategies and the other
communications between Pfizer and Kaiser
directly affected decisions about Neurontin's
placement on formulary without restrictions.
In addition, the direct communications to PMG
physicians caused Kaiser injury because it
reimbursed for Neurontin rather than less
costly alternatives. Because Kaiser has a 95%
compliance rate with its formulary, formulary
restrictions necessarily affect the number of
prescriptions written for any given drug. I
find that Kaiser was injured as a result of
its reliance on Pfizer's intentional
misrepresentations and omissions.
Id. at *30. This finding was not clearly erroneous. Further, a
reasonable jury could have reached the same conclusion.
Pfizer argues that Kaiser's DRUG and DUAT campaigns to
reduce prescriptions of Neurontin were not evidence of but-for
causation because they were motivated by the desire to contain
costs, not by concerns about Neurontin's efficacy for off-label
-39-
uses. Pfizer also argues that once evidence of the DRUG and DUAT
campaigns is properly discounted, there is no evidence that the
Kaiser PMGs took steps to restrict Neurontin on their formularies,
which "falsifies" Kaiser's causal theory of direct reliance.
Pfizer did present evidence that Kaiser continued to
permit and even recommend the prescription of Neurontin for certain
off-label uses after it became aware of Pfizer's fraud, as well as
evidence that Kaiser's efforts to limit Neurontin prescriptions
were driven in part by its cost. But Kaiser presented evidence
that it did not learn the full scope of Pfizer's fraud until
November 2009, Kaiser Findings, 2011 WL 3852254, at *31, and that
its efforts to limit Neurontin prescriptions were motivated by
concerns about its efficacy for off-label uses. It was within the
factfinder's province to weigh this evidence. Pfizer's evidence
did not, as a matter of law or of evidence, "falsify" Kaiser's
theory of reliance upon Pfizer's misrepresentations.
2. Regression Analysis Aggregate Evidence
Pfizer relies heavily on its argument that the aggregate
statistical evidence presented by Dr. Rosenthal was also
insufficient to show causation (or injury) as a matter of law, and
was inadmissible as well.
a. Admissibility of Rosenthal Testimony
We review a district court's ruling on the admissibility
of an expert witness's testimony for abuse of discretion. In re
-40-
Pharm. Indus. Average Wholesale Price Litig. (AWP), 582 F.3d 156,
198 (1st Cir. 2009). Under Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579 (1993), expert testimony must have a "reasoning
or methodology" that is "scientifically valid," id. at 592-93, and
that methodology must also have a "valid scientific connection to
the pertinent inquiry" -- that is, a proper "fit" with the facts of
the case, id. at 591-92. Admissibility does not turn on a
determination by the trial court of "which of several competing
scientific theories has the best provenance," nor does it turn on
convincing the trial court that the proffered expert is correct.
Milward v. Acuity Specialty Prods. Grp., Inc., 639 F.3d 11, 15 (1st
Cir. 2011) (quoting Ruiz-Troche v. Pepsi Cola of P.R. Bottling Co.,
161 F.3d 77, 85 (1st Cir. 1998)) (internal quotation mark omitted).
It is clear that Dr. Rosenthal's evidence met several
requirements of Federal Rule of Evidence 702. Dr. Rosenthal is a
witness with the requisite "knowledge, skill, experience, training,
or education," Fed. R. Evid. 702, and her opinion would assist the
trier of fact to understand the evidence or to determine a fact in
issue, Fed. R. Evid. 702(a). Yet Pfizer argues that Dr.
Rosenthal's testimony should have been excluded, attacking both the
methodology and the "fit" of the Rosenthal report.
As to the methodology, regression analysis is a well
recognized and scientifically valid approach to understanding
statistical data, and courts have long permitted parties to use
-41-
statistical data to establish causal relationships. See, e.g.,
Wards Cove Packing Co., Inc. v. Atonio, 490 U.S. 642, 657-58 (1989)
(holding that under Title VII of the Civil Rights Act of 1964,
"specific causation" is shown and a "prima facie case" is
"establish[ed]" when plaintiff identifies a specific employment
practice linked to a statistical disparity); Watson v. Fort Worth
Bank & Trust, 487 U.S. 977, 994 (1988) (opinion of O'Connor, J.)
(explaining that, to establish a prima facie case under Title VII,
"[o]nce the employment practice at issue has been identified,
causation must be proved; that is, the plaintiff must offer
statistical evidence of a kind and degree sufficient to show that
the practice in question has caused the exclusion of applicants for
jobs or promotions because of their membership in a protected
group"); Duren v. Missouri, 439 U.S. 357, 366-67 (1979) (permitting
petitioner to establish prima facie violation of fair cross-section
requirement of Sixth and Fourteenth Amendments by using "statistics
and other evidence" to show that "the underrepresentation of women,
generally and on his venire, was due to their systematic exclusion
in the jury-selection process"); Times-Picayune Pub. Co. v. United
States, 345 U.S. 594, 621 (1953) (in antitrust case, looking to
"economic statistics" to determine whether "demonstrably
deleterious effects on competition may be inferred"); In re High
Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 660-61 (7th
Cir. 2002) (permitting use of regression analysis to show causation
-42-
in antitrust case); Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d
768, 794 (6th Cir. 2002) (finding regression analysis "to be
admissible on the issue of causation" in antitrust case (emphasis
omitted) (quoting Jahn v. Equine Servs., PSC, 233 F.3d 382, 390
(6th Cir. 2000))).
Pfizer argues that Dr. Rosenthal's analysis is
nonetheless unreliable in this instance because it did not account
for other factors that may have led a doctor to prescribe Neurontin
for off-label use, particularly because the model did not include
a "time trend."15 Pfizer also argues that the methodology must be
unsound because the data contradict the results of Dr. Rosenthal's
regression in three ways: (1) gabapentin prescriptions continued to
grow after October 2004, when marketing spending plummeted as
Neurontin lost patent protection; (2) the model improperly
controlled for a spike in promotional spending in 2003, when
Neurontin prescriptions remained relatively flat; and (3) the model
attributed 85% of Neurontin prescriptions for nociceptive pain to
alleged fraudulent marketing, but the factfinders found that there
was no fraudulent marketing for that indication.
The district court acted well within its discretion in
concluding that Dr. Rosenthal's methods met the scientific validity
15
Dr. Rosenthal described a "time trend" as a variable that
is "introduced to capture some conglomeration of variables believed
to have a pattern over time . . . . [I]t's a hypothetical based on
the idea that there are some things [other than promotional
spending] over time that drive sales."
-43-
standard under Rule 702. "So long as an expert's scientific
testimony rests upon 'good grounds, based on what is known,' it
should be tested by the adversarial process, rather than excluded
for fear that jurors will not be able to handle the scientific
complexities." Milward, 639 F.3d at 15 (citation omitted) (quoting
Daubert, 509 U.S. at 590). Pfizer's own expert witness admitted
that peer-reviewed, published studies do not always contain time
trends. Moreover, Dr. Rosenthal explained her reason for declining
to use a time trend: because the case involved only a single drug
(as opposed to other studies involving multiple drugs), the time
trend would likely be a confounding variable, because its inclusion
would produce results showing that promotional spending had no
statistically significant effect on prescriptions -- a conclusion
that would not comport with basic economics. Indeed, Pfizer's own
documents and testimony show that it expected and believed that
off-label marketing of Neurontin would increase off-label
prescriptions, and that its marketing had that result. The choice
not to use a time trend did not make Dr. Rosenthal's methodology
unreliable.
Pfizer's objections regarding data that allegedly
contradict the reliability of the model also do not show that the
district court abused its discretion. These objections presented
a question for the jury. The post-October 2004 increase in
gabapentin prescriptions does not render the regression analysis
-44-
inadmissible. Indeed, the increase can be explained by the fact
that gabapentin became a generic drug at that time, and the
generic's lower price would be expected to increase gabapentin
sales even though marketing efforts for Neurontin had ceased. This
change in circumstances does not negate the causal relationship
between marketing and prescriptions that the model revealed for the
pre-October 2004 period.
There was also nothing methodologically suspect about Dr.
Rosenthal's controlling for a spike in promotional spending in
2003, because that spike was likely the result of "strategic
interaction" between the marketing efforts for Neurontin and for
Pfizer's launch of a new anti-epileptic drug, Lyrica. As Dr.
Rosenthal explained, this was the most plausible reason why
promotional spending for Neurontin would increase even as it neared
the end of its patent life.
Finally, Pfizer's argument about the 85% figure for
nociceptive pain misunderstands the structure of the model. In
conducting her analysis, Dr. Rosenthal assumed -- at the
plaintiffs' direction -- that all off-label marketing was
fraudulent,16 then analyzed the relationship between marketing and
prescriptions. Such an approach to proving injury from an
underlying assumption of unlawful behavior (to be proven to the
fact-finder) is well accepted in the antitrust context from which
16
Her analysis excluded the marketing for on-label uses.
-45-
RICO has drawn many of its causation principles. See, e.g.,
Associated Gen. Contractors, 459 U.S. at 528, 535-46 (noting that
appellate court had "properly assumed" that defendant's alleged
conduct "might violate the antitrust laws," id. at 528, then going
on to separately evaluate whether plaintiff had sufficiently
alleged antitrust injury). Ultimately, Pfizer's attacks on Dr.
Rosenthal's methodology were all grist for the trier of fact; they
warranted "test[ing] by the adversarial process, rather than
exclu[sion]." Milward, 639 F.3d at 15.
As to the "fit" between Dr. Rosenthal's model and the
facts at issue in the case, Pfizer objects that: (1) Dr. Rosenthal
did not analyze the effect of the distorted studies or educational
events on prescriptions, but rather the effect of promotional
spending on prescriptions; (2) she did not analyze the effect of
formulary expansion on the number of prescriptions written; (3) the
analysis used national drug utilization data, as opposed to drug
utilization data of Kaiser; (4) the analysis assumes all off-label
marketing expenditures for Neurontin were for fraudulent marketing;
and (5) the diagnostic codes used to determine what condition the
drug was prescribed for indicate a patient's primary condition, so
Neurontin could have been prescribed for an on-label use, but
appear to be off-label. The basic thrust of Pfizer's argument is
that Dr. Rosenthal's analysis does not provide insight into the
-46-
quantity of prescriptions written as a result of Pfizer's alleged
fraudulent marketing.
None of these arguments demonstrate that the district
court abused its discretion under the "fit" criterion in admitting
Dr. Rosenthal's testimony. The use of promotional spending as a
variable was a reasonable "fit" to represent Pfizer's fraud because
Pfizer targeted its promotional activities toward PMG physicians
and toward Kaiser itself, and the money it spent on promotion
helped to implement its fraudulent publication strategy. See
Kaiser Findings, 2011 WL 3852254, at *11-28. The analysis did not
require Kaiser to quantify the "publication strategy" as distinct
from other promotional activities in order to effectively model the
causal relationship. In fact, if publications and CME events did
exert an effect independent of detailing (for instance, an effect
on decisions about the formulary), the model would have
underestimated the impact of the fraud.
Next, the use of national drug data was reasonable, and
the district court did not abuse its discretion in so holding. See
id. at *32. Dr. Rosenthal used data that was prepared by
independent consulting companies, and this type of data is used by
Pfizer itself in its own strategic planning and marketing efforts.
Kaiser did not independently keep track of the usage for which each
prescription was written, so Dr. Rosenthal used what she considered
the best alternative, derived from national databases that the
-47-
district court described as the "gold standard." Id. Pfizer does
not challenge the district court's determination that it was
reasonable to assume that Kaiser's patient population and physician
distribution are similar to the national mix. See id. The
district court also permissibly found a "fit" in Dr. Rosenthal's
use of the databases' diagnostic codes (particularly with respect
to bipolar disorder) to determine the percentage of prescriptions
written for each indication. Indeed, Pfizer's own estimate was
that bipolar disorder accounted for 14.7 percent of Neurontin
prescriptions, which is "quite close" to Dr. Rosenthal's estimate
of 16 percent. See id. at *32 n.20.
Finally, that Dr. Rosenthal's report assumed all of
Pfizer's off-label marketing was fraudulent marketing is not a
basis to find that the district court erred in admitting the
report. Pfizer is incorrect that this assumption means that Dr.
Rosenthal was "assum[ing] the very conclusion she was attempting to
prove." Dr. Rosenthal's analysis sought to determine whether
Pfizer's marketing had a causal effect on prescribing behaviors,
not whether the marketing was in fact fraudulent. Pfizer's
objection does not go to the question of whether Dr. Rosenthal's
regression had a close enough "fit" to satisfy Daubert; rather, it
is a question of damages.
-48-
b. Sufficiency of Aggregate Evidence
Having found that Dr. Rosenthal's testimony was
admissible, we turn to Pfizer's argument that it was insufficient
evidence to support the jury's and district court's findings of
causation. We reject the argument, while pointing out that her
testimony was not the only evidence of but-for causation.
Pfizer insists that Dr. Rosenthal's testimony cannot be
credited because it does not take into account the patient-
specific, idiosyncratic decisions of individual prescribing
physicians. Thus, according to Pfizer, the report was legally
insufficient proof of causation. Indeed, Pfizer purports to find
support for its position in the district court's rulings entering
summary judgment against Aetna and Harden. See Neurontin Class SJ,
754 F. Supp. 2d at 310-11; Neurontin Coordinated SJ, 677 F. Supp.
2d at 485, 494-95.
A tort plaintiff need not "prove a series of negatives;
he doesn't have to 'offer evidence which positively exclude[s]
every other possible cause of the accident.'" BCS Servs., 637 F.3d
at 757 (alteration in original) (quoting Carlson v. Chisholm-Moore
Hoist Corp., 281 F.2d 766, 770 (2d Cir. 1960) (Friendly, J.)).
"Once a plaintiff presents evidence that he suffered the sort of
injury that would be the expected consequence of the defendant's
wrongful conduct," the burden shifts to the defendant to rebut this
causal inference. Id. at 758.
-49-
Pfizer's argument is a repetition of its assertion that
there is an intervening cause -- individual physicians' independent
medical judgment -- which precludes a finding of causation based on
aggregate evidence. But "the burden of proving an 'intervening
cause' -- something which snaps the 'causal chain' (that is,
operates as a 'superseding cause,' wiping out the defendant's
liability) that connects the wrongful act to the defendant's injury
-- is on the defendant." Id. at 757 (citation omitted). Pfizer
did offer the testimony of doctors who said that their decisions to
prescribe Neurontin were not influenced by Pfizer's fraudulent
marketing, and the jury and district court, within their powers,
rejected the argument.
Pfizer also argues that its testimony from doctors who
stated that they prescribed Neurontin for off-label uses without
relying on Pfizer's misrepresentations "falsified" Kaiser's
statistical analysis. Not so. The existence of some doctors who
purportedly were not influenced by Pfizer's misinformation would
not defeat the inference that this misinformation had a significant
influence on prescribing decisions which injured Kaiser. Indeed,
Dr. Rosenthal noted the scientific invalidity of looking to
physician-by-physician accounts of their prescribing decisions.
Weighing the individual testimony presented by Pfizer against the
aggregate evidence presented by Kaiser was a task for the jury and
district court.
-50-
Pfizer next argues that the Rosenthal report merely
demonstrated "correlation" and not "causation." But if Pfizer's
information could not be expected to affect a single doctor's
decisionmaking, the company's choice to undertake the marketing
campaign would be inexplicable. Cf. id. at 758 ("The object of
[the defendants'] conspiracies was to obtain liens that would
otherwise go to [the plaintiffs and other] bidders -- there could
be no other reason for wanting to pack the room in violation of the
County's rule. . . . How likely is it that [plaintiffs] lost no
bids to bidders who had 13 arms in the room but should have had
only three?").
More generally, Pfizer argues that Kaiser's use of
aggregate evidence is precluded by the decisions of other courts in
pharmaceutical marketing RICO fraud cases. Pfizer relies on a
series of cases that it argues have rejected evidence like
Kaiser's. See, e.g., In re Schering Plough Corp. Intron/Temodar
Consumer Class Action, 678 F.3d 235 (3d Cir. 2012); Ironworkers
Local Union 68 v. AstraZeneca Pharm., LP, 634 F.3d 1352 (11th Cir.
2011); UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121 (2d Cir.
2010); Se. Laborers Health & Welfare Fund v. Bayer Corp., 655 F.
Supp. 2d 1270 (S.D. Fla. 2009). But we disagree with Pfizer's
characterization of these cases and find them either supportive of
our result or inapposite. We see no split in authority.
-51-
In particular, Pfizer leans heavily on the Second
Circuit's decision in UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d
121, which reversed a district court's certification of a class of
TPP plaintiffs who claimed that Eli Lilly's fraudulent marketing of
Zyprexa caused them to pay an inflated price for that drug and to
pay for prescriptions that would not have otherwise been written.
Id. at 123, 137. To begin, the district court in Eli Lilly granted
class certification on the former (excess pricing) claim, and the
Second Circuit reversed on that basis. See id. at 133. By
contrast, the claimed injury to Kaiser resembles the latter (excess
quantity) theory. The Second Circuit found a lack of but-for
causation only on the excess pricing theory, because doctors do not
generally consider the price of a drug when they make prescribing
decisions. Id. at 133-34. On the other hand, doctors would
certainly consider information about the efficacy of a drug when
deciding whether to prescribe it for their patients.
As to the excess quantity theory, the Second Circuit
described the plaintiffs' aggregate evidence of causation as
involving only an extrapolation from the fact that the number of
off-label prescriptions for Zyprexa fell after Eli Lilly's fraud
became known. See id. at 135. This does not come close to
resembling Dr. Rosenthal's evidence, which examined contemporaneous
data that reflected what was actually happening with regard to
spending and prescriptions while Pfizer's fraud was ongoing.
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Finally, the Second Circuit specifically noted that, "while [the
excess quantity] theory cannot support class certification, it is
not clear that the theory is not viable with respect to individual
claims by some TPPs." Id. at 136. Kaiser's case, of course, is
just such an individual claim by a TPP.
The other cases on which Pfizer relies are
distinguishable. The Eleventh Circuit, addressing alleged
fraudulent marketing claims involving the drug Seroquel,
specifically declined to decide the case on causation grounds.
Ironworkers, 634 F.3d at 1359-60. Instead, that court held that
the TPP plaintiffs had failed to show economic injury because the
prescriptions at issue were merely less cost-effective than the
alternatives, rather than being "medically unnecessary or
inappropriate."17 Ironworkers, 634 F.3d at 1360. Kaiser, in
contrast, staked much of its case on proving that Neurontin was
ineffective for the promoted off-label uses, and the district court
so found. See Kaiser Findings, 2011 WL 3852254, at *34-45.
The Third Circuit addressed the causation question as a
matter of Article III standing rather than RICO doctrine. In re
Schering Plough, 678 F.3d at 246. It also did not address the use
17
The Eleventh Circuit also decided that the TPPs had assumed
the risk of paying for all prescriptions of covered drugs, even
those induced by fraud, through the process of setting and
collecting premiums. Ironworkers, 634 F.3d at 1364. Without
commenting on such a theory, we note that neither party in this
litigation has raised it.
-53-
of aggregate evidence at all, finding merely that the TPP plaintiff
in that case had not connected the pharmaceutical company's alleged
fraudulent marketing scheme as to two drugs to the TPP's payment
for a third drug owned by the same company. Id. at 247-48. The
Ninth Circuit, in an unpublished decision, did not mention
aggregate evidence. United Food & Commercial Workers Cent. Pa. &
Reg'l Health & Welfare Fund v. Amgen, Inc., 400 F. App'x 255, 257-
58 (9th Cir. 2010).18
Courts' treatment of aggregate evidence is not as Pfizer
represents. Earlier we cited to the use of such aggregate evidence
to show causation under several causes of action. We see no reason
to reach a different conclusion for the specific subset of RICO
claims based on fraudulent marketing.
IV.
At trial, Pfizer argued that it had not committed fraud
because Neurontin was effective for the off-label uses at issue.
The jury and court rejected the argument, and on appeal Pfizer does
not contest the finding of fraud. Nonetheless, it uses the
18
Further, some courts appear to have conflated the proximate
and but-for causation inquiries in evaluating aggregate evidence
and the role of doctors' medical judgments. See, e.g., Se.
Laborers, 655 F. Supp. 2d at 1280-81 (stating that court was
performing proximate cause inquiry, but proceeding to analyze but-
for cause question of whether doctors would have prescribed drug at
issue in the absence of misrepresentations). And to the extent
that some district courts may have endorsed Pfizer's position that
aggregate evidence is legally insufficient to prove but-for
causation, we disagree, at least on the facts of this case.
-54-
question of Neurontin's effectiveness to argue that Kaiser failed
to prove that it suffered economic injury. Pfizer contends that
because Neurontin was actually effective for the off-label uses at
issue, Kaiser suffered no economic injury from paying for
prescriptions for these uses. Pfizer claims that the court applied
an erroneous burden of proof and an erroneous medical standard in
making its findings as to Neurontin's effectiveness.19 We disagree.
Pfizer asserts that the district court erroneously
shifted the burden of proof to it when the court allowed Kaiser to
prove its economic injury by showing that "there is no reliable
scientific evidence that Neurontin is effective" for the conditions
at issue, Kaiser Findings, 2011 WL 3852254, at *34, rather than
requiring Kaiser to show that Neurontin was actually ineffective
for these conditions in all cases.20 See, e.g., In re Schering
19
Pfizer also advances a somewhat confusing argument about the
lack of jury instructions on efficacy. Because we decide that, for
the purpose of proving injury, Kaiser adequately proved Neurontin's
inefficacy for the relevant indications, we need not determine
exactly what standard the jury may have used.
20
Pfizer also argues, briefly, that Kaiser presented another
theory of injury: that cheaper, alternative drugs could have been
used even if Neurontin was effective. Pfizer asserts that this
theory has been rejected by numerous courts, citing, for example,
Ironworkers, 634 F.3d at 1360; and Dist. 1199P Health & Welfare
Plan v. Janssen, L.P., 784 F. Supp. 2d 508, 520 (D.N.J. 2011).
Kaiser does not explicitly defend the cheaper alternative drug
theory in any detail, devoting only one footnote in its brief to
the theory and relying on only one case, Desiano v. Warner-Lambert
Co., 326 F.3d 339 (2d Cir. 2003), without delving into the trial
evidence. Because neither party has properly briefed the issue,
and because we can dispose of the damages question on the fully
briefed effectiveness theory instead, we do not pass on the
-55-
Plough Corp. Intron/Temodar Consumer Class Action, No.
2:06-cv-5774, 2010 WL 2346624, at *4 (D.N.J. June 9, 2010) ("[A]
lack of data or evidence affirmatively proving that a Subject Drug
was effective in treating a condition [is] not the same as the
actual ineffectiveness of the Subject Drug.").
The district court did not place the burden on Pfizer to
show that Neurontin was effective. Kaiser produced expert
witnesses and evidence showing that Neurontin was no more effective
than placebo for the indications at issue -- i.e., that it was
ineffective. See Kaiser Findings, 2011 WL 3852254, at *35-45
(reviewing such evidence). Pfizer then produced its own evidence
to attempt to rebut Kaiser's evidence.
Pfizer's second argument asserts that the district court
rested its conclusion on the FDA approval standard -- two positive
DBRCTs showing efficacy -- to determine whether Neurontin was
effective, and that this meant the court's conclusion was fatally
flawed. Pfizer argues that the proper standard was the standard
governing the practice of medicine, not the standard for FDA
approval.21 In clinical practice, Pfizer argues, FDA-type trials
are not dispositive; instead, physicians rely on their own
experience, other doctors' positive clinical experiences, and other
"cheaper alternatives" theory.
21
We acknowledge the brief of amicus curiae Pharmaceutical
Research and Manufacturers of America on this issue.
-56-
evidence. Relatedly, Pfizer argues that Kaiser's use of "negative"
studies to show ineffectiveness was not legally sufficient because
such studies do not "establish the drug's inefficacy for treating
the condition in all other patients and circumstances."
Kaiser responds that the district court did not frame the
issue of ineffectiveness only in terms of DBRCTs, but rather
considered a number of different types of evidence, including
clinical trials that did not meet the DBRCT requirements and
reports of clinical judgments such as case studies. The court was
aware of Pfizer's critique of DBRCTs; it was also aware that, due
to the placebo effect, some patients would report improvements
regardless of whether the drug was scientifically effective for
their conditions, making non-DBRCT evidence less probative of
effectiveness. Kaiser argues that the court properly chose the
weight to give each type of medical evidence. Kaiser's is the more
accurate description of the record. We conclude that the totality
of the evidence supported the district court's ultimate conclusion
that Kaiser met its burden of showing that Neurontin was
ineffective for the four off-label indications.
Randomized controlled studies like DBRCTs are widely
accepted as "ideally suited" for showing causation and as a "good
measure of the treatment effect." D. Kaye & D. Freedman, Reference
Guide on Statistics, in Federal Judicial Center, Reference Manual
on Scientific Evidence 211, 218, 220 (3d ed. 2011). Where, as
-57-
here, numerous DBRCTs indicate that a drug is ineffective, that
provides powerful scientific evidence of inefficacy, particularly
as compared to anecdotal experiences, which can be tainted by the
placebo effect. As one witness in this trial testified, "the
default position [in medical decisionmaking] is that a drug is
ineffective unless it's proven otherwise." Experiments start with
a null hypothesis that the drug is no more effective than placebo.
In this case, DBRCTs repeatedly showed that there was not enough
evidence to reject the null hypothesis for the indications at
issue. See Kaiser Findings, 2011 WL 3852254, at *35-45. Pfizer's
claimed evidence of Neurontin's efficacy came from less convincing
sources.
Thus, the totality of the evidence strongly supports a
conclusion that Neurontin was not effective for the four off-label
conditions as to which the district court and jury found liability.
We need not address what the standard for efficacy would be if
there were no DBRCTs in existence, or if the results of DBRCTs were
equivocal, or if there were a different mix of DBRCT and non-DBRCT
evidence.
V.
Because Kaiser met both causation requirements with
legally sufficient evidence and proved that it suffered economic
injury from Pfizer's fraudulent scheme, we move to the separate
challenges to the amount of damages awarded. "On that phase of the
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case the plaintiff has a more relaxed burden of proof . . . ,
especially if as in this case the defendants' conduct has made it
difficult for the plaintiff to prove the precise extent of his
damages." BCS Servs., 637 F.3d at 759; see also Thermo Electron
Corp. v. Schiavone Constr. Co., 958 F.2d 1158, 1166 (1st Cir.
1992). Under such circumstances, damages do not need to be proven
"with mathematical certainty, provided an award has a rational
basis in the evidence." Thermo Electron, 958 F.2d at 1166 (quoting
Jay Edwards, Inc. v. New Eng. Toyota Distrib., Inc., 708 F.2d 814,
819 (1st Cir. 1983)) (internal quotation mark omitted); see
Restatement (Second) of Torts § 912 cmt. a. "Otherwise 'the more
grievous the wrong done, the less likelihood there would be of a
recovery.'" BCS Servs., 637 F.3d at 759 (quoting Bigelow v. RKO
Radio Pictures, Inc., 327 U.S. 251, 265 (1946)).
Pfizer argues that the district court erred in its
calculation of damages, primarily because Dr. Hartman used a list
of alternatives to Neurontin created by Dr. Millares (the chairman
of the DIS) but no expert testified that the drugs on the list were
at least as effective or as well tolerated as Neurontin. Moreover,
Pfizer argues, there was no evidence that PMG doctors would have
prescribed those lower-cost alternative drugs but for Pfizer's
conduct; indeed, those doctors may have prescribed more expensive
drugs instead of Neurontin. Pfizer claims that these assumptions
made the estimation of damages too speculative. See Irvine v.
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Murad Skin Research Labs, Inc., 194 F.3d 313, 320 (1st Cir. 1999).
Our review of the district court's admission of Dr. Hartman's
testimony is for abuse of discretion, AWP, 582 F.3d at 197, and
there was none here.
The burden of proof as to damages is lower than that for
causation, and the factfinder is afforded a greater deal of freedom
to estimate damages where the defendant, as here, has created the
risk of uncertainty. See Ocean Spray Cranberries, Inc. v. PepsiCo,
Inc., 160 F.3d 58, 63 (1st Cir. 1998). The damages inquiry does
not allow a defendant to benefit from the scope of its wrongdoing;
this is why "[e]ven 'speculation has its place in estimating
damages, and doubts should be resolved against the wrongdoer.'"
BCS Servs., 637 F.3d at 759 (quoting Mid-Am. Tablewares, Inc. v.
Mogi Trading Co., 100 F.3d 1353, 1365 (7th Cir. 1996)).
The district court did not err in accepting Dr. Hartman's
methodology for calculating damages. In fact, Pfizer never offered
an alternative: it did not provide its own list of substitute
drugs, nor did it offer testimony about the Kaiser list's exclusion
of lamotrigine (the only drug Pfizer names on appeal as improperly
excluded).
VI.
Pfizer raises two other issues on appeal, concerning the
district court's denial of Pfizer's motion to transfer venue before
trial and its denial of Pfizer's motion for a new trial.
-60-
A. Denial of Pfizer's Motion to Transfer Venue
The coordinated plaintiffs filed their complaint in the
Massachusetts district court on February 1, 2005. More than four
years later, on December 4, 2009, Pfizer filed a motion to transfer
venue to California pursuant to 28 U.S.C. § 1404.
Pfizer's motion followed more than two months of
discussions among the coordinated plaintiffs, the defendants, and
the Massachusetts district court regarding the possibility of
holding a bellwether trial as to one TPP's claims against the
defendants. The court stated on September 18, 2009, that it
favored holding a trial on Kaiser's claims, a view joined by
plaintiffs on October 2, 2009.22 Defendants opposed, saying that
any bellwether trial should not be on Kaiser's claims because
"Kaiser is the most atypical of the named TPPs." During none of
these discussions did Pfizer suggest that venue should be
transferred to California.
On November 12, 2009, the district court ordered that
"[t]he trial in the action brought by coordinated plaintiff Kaiser
will begin [before it] on February 22, 2010." About a month later,
Pfizer moved to transfer venue pursuant to 28 U.S.C. § 1404,
arguing for the first time that transfer was favored by (1)
Kaiser's residence in California, (2) California's greater interest
22
While the coordinated plaintiffs represented that they would
prefer to all proceed to trial at one time, they agreed that if the
court were to initially hold only one trial, it should be Kaiser's.
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in the litigation, (3) the greater familiarity of California
federal courts with the California UCL, and (4) the convenience of
witnesses. The district court, with years of experience in the
case, denied this motion, explaining that (1) Kaiser did not wish
to transfer venue; (2) transfer would result in considerable delay
as any transferee judge familiarized herself with the case; and (3)
defendants would not be prejudiced, since they had access to
videotaped deposition testimony of non-party witnesses. Kaiser
Findings, 2011 WL 3852254, at *11 n.6.
On appeal, Pfizer argues that this was error because it
violated the MDL transfer requirements pursuant to 28 U.S.C.
§ 1407(a) and the rule of Lexecon Inc. v. Milberg Weiss Bershad
Hynes & Lerach, 523 U.S. 26 (1998), and because it was an abuse of
discretion, in any event, under 28 U.S.C. § 1404.
Pfizer is wrong on the law. Section 1407(a) provides
that an action "transferred to any district for coordinated or
consolidated pretrial proceedings . . . shall be remanded by the
panel at or before the conclusion of such pretrial proceedings to
the district from which it was transferred unless it shall have
been previously terminated." The Court held in Lexecon that a
district court conducting such pretrial proceedings could not
"invoke § 1404(a) to assign a transferred case to itself for
trial." 523 U.S. at 28. The coordinated plaintiffs filed their
complaint in the District of Massachusetts; it was not transferred
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to this district for pretrial proceedings, and so § 1407(a) and
Lexecon do not govern here.
There was no abuse of discretion as to § 1404. See Coady
v. Ashcraft & Gerel, 223 F.3d 1, 11 (1st Cir. 2000). Kaiser
opposed defendants' motion to transfer, and coordinated plaintiffs
Aetna and Guardian were domiciled in New York and Connecticut,
respectively. The Massachusetts district court had considerable
experience with complex claims against defendants arising out of
the fraudulent marketing of Neurontin, and coordinated plaintiffs'
claims were national in scope, not localized to California.
B. Denial of Pfizer's Motion for New Trial Based on
Purportedly New Evidence Regarding the Cochrane Review of
Neuropathic Pain
There was no abuse of discretion in the district court's
denial of defendants' March 22, 2011 motion for new trial. At
trial, Pfizer had presented expert testimony that Neurontin was
effective for the broad treatment of neuropathic pain, which relied
in part on a 2005 review by the Cochrane Collaboration, an
independent organization, that concluded that adequate evidence
supported Neurontin's efficacy for neuropathic pain. Kaiser
Findings, 2011 WL 3852254, at *42. The district court discounted
this testimony because the 2005 Cochrane Review was based on
incomplete information, given defendants' suppression of negative
information about Neurontin's efficacy for the broad treatment of
neuropathic pain. Id. at *42-43.
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In 2011, the Cochrane Collaboration published another
review of the effects of gabapentin in treating chronic neuropathic
pain. This revised review was "updated with the inclusion of
unpublished information made available through litigation" and
concluded that "[g]abapentin provides pain relief of a high level
in about a third of people who take [it] for painful neuropathic
pain."
The district court denied defendants' motion for a new
trial, explaining that a credible meta-analysis from the Cochrane
Collaboration based on the entirety of the scientific evidence
concerning Neurontin's use in treating broad neuropathic pain was
unavailable to defendants at the time of trial only because "Pfizer
itself did not provide the Cochrane Group with all available
studies prior to the trial because it fraudulently suppressed these
studies." That reason was sufficient.
VII.
The judgment of the district court is affirmed.
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Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc.
Court: Court of Appeals for the First Circuit
Date filed: 2013-04-03
Citations: 712 F.3d 21
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