Tony Soprano Meets the FDA: Off-label Promotion as a RICO Violation

When one thinks of the Racketeering Influenced and Corrupt Organization Act (RICO) images of the mob, Tony Soprano and organized crime come to mind – not Fortune 500 pharmaceutical companies. Yet late last week, a jury found that Pfizer had violated RICO and awarded damages in excess of $141 million to Kaiser Permanente.

Pfizer's "crime" was the off-label promotion of the drug neurontin and its failure to tell Kaiser about all of the negative data associated with the off-label use of this drug.

This case could sign a new trend in off-label enforcement and is important for several reasons:

• It is rare to use RICO against a highly reputable company.
• It is rare for off-label promotion to be the basis of a RICO claim.
• It is rare for a customer to sue its supplier, particularly under RICO.
• The use of RICO by private entities is a new avenue of attack against manufacturers.

Background

Neurontin, a drug made by Parke-Davis (a Pfizer subsidiary), has a long and painful enforcement history. Earlier this decade, a medical officer employed by the company brought a qui tam or whistleblower action against Parke-Davis, alleging that Parke-Davis was deliberately and illegally promoting neurontin for unapproved indications and had not disclosed negative clinical data about these off-label uses.

Pfizer eventually settled with the government and paid fines totally about $430 million. In addition to the usual product liability suits, a number of entities, including insurance companies and health care providers, also sued Pfizer. In these actions, the plaintiffs (so-called "third party payors" or "TPP"s) brought a RICO action against Pfizer claiming that they had been duped by Pfizer into buying neurontin for these off-label uses. The plaintiffs sought compensation for these excess purchases and treble damages. As one can imagine, Pfizer has fought these claims vigorously.

Earlier this year, the federal court in Boston dismissed lawsuits filed by two insurance companies but allowed Kaiser to maintain its RICO case against Pfizer. In doing so, the court held that the insurance carriers had too remote an association with the physician decision to use neurontin. However, Kaiser established more connection with the prescribing decisions and set forth evidence that it explicitly relied on Pfizer statements about the benefits of the drug and was swayed by Pfizer's off-label promotional activity.

Kaiser v. Pfizer – The Specifics

In its RICO action, Kaiser claimed that Pfizer had violated RICO by a pattern of off-label promotion coupled with Pfizer's failure to disclose negative clinical information about these uses. Note that rather than the traditional acts underlying RICO cases such as extortion, bribery and vice, Kaiser used repeated acts of off-label promotion to establish the required illegal conduct.

Specifically, Kaiser asserted that Pfizer had repeatedly promoted neurontin to Kaiser for off-label uses. In addition, Kaiser claimed that Pfizer failed to provide necessary information about the off-label uses of neurontin. These inaccuracies, according to Kaiser, fell into two categories:

• First, Pfizer affirmatively provided inaccurate information in response to specific requests by Kaiser.
• Second, Pfizer only told Kaiser the good news and failed to provide negative clinical information to Kaiser.

This last point is important. Pfizer was held liable for providing incomplete information – not just for providing false information.

At the end of the day, the jury apparently concluded that Pfizer had illegally promoted neurontin, had provided false information to Kaiser and had failed to provide negative clinical information and awarded Kaiser $141 million. Note that actual damages were around $47 million, but damages are trebled under RICO.

Key Points

This case demonstrates that a company engaged in off-label promotion risks not only FDA enforcement actions and False Claims Act liability, but also RICO actions, including cases brought by customers. This case also finds that there is an affirmative duty to provide negative information to the company – even if legally doing so in response to an unsolicited request. The risk of off-label promotion continues to increase. Now, companies face liability under a statute designed to be used against Tony Soprano and the mob.

Pfizer has pledged to appeal this case and so there is more to come.