Health Care: Pfizer Found Liable in Civil RICO Case

Yesterday was quite newsworthy the U.S. District Court in Boston. (See blog entry below about the identity theft sentencing.) In a case before the court a jury found Pfizer, Inc., liable for the violation of federal racketeering law by improperly marketing its epilepsy drug Neurontin for off-label uses. The jury awarded the plaintiffs, Kaiser Foundation Hospitals and the Kaiser Foundation Health Plan, $47 million. Civil RICO (Racketeer Influenced and Corrupt Organizations) provides for the awarding of triple damages. Thus, the jury's award is increased to a judgment of $141 million.

Off-label uses of a drug are its prescription for medical purposes not approved by the Food and Drug Administration. Pfizer marketed Neurontin not only for the treatment of epilepsy, the FDA approved use, but the company also marketed Neurontin for the treatment of migraine headaches, pain, and bipolar disorders. While physicians are free to prescribe drugs for off-label uses, drug companies may only market their products for the uses approved by the FDA.

To succeed on a claimed RICO violation the plaintiffs must prove the existence of an enterprise, which engaged in racketeering activity two or more times in a ten year period, thus establishing a pattern of racketeering activity. In this case Pfizer itself, or at least its division marketing Neurontin, would be the enterprise. The racketeering activity would be the fraudulent marketing of the drug for off-label uses, in essence a mail fraud or wire fraud. Finally, the pattern of racketeering activity would be the repeated marketing of the drug for off-label uses.

Pfizer has stated its intention to appeal the verdict. Previously, in 2004 Pfizer had pleaded guilty to a criminal charge for its promotion of off-label uses for Neurontin and paid a fine of $430 million to the federal and state governments. Pfizer believes that the court erred in allowing evidence of the criminal conviction to come before the jury and has stated its intention to base the appeal on this alleged error.

For more about the Pfizer case please see Forexyard, "US Jury's Neurontin Ruling to Cost Pfizer $141 Mln," March 26, 2010, http://www.forexyard.com/en/news/jurys-Neurontin-ruling-to-cost-Pfizer-141-mln-2010-03-25T220425Z-US.

White Collar and Healthcare: Big Tobacco Seeks Supreme Court Review of RICO Finding

Three of the nations largest companies are seeking Supreme Court review of the determination that they had engaged in racketeering acts in violation of the federal RICO statute. The appeal is of the decision of a three judge panel of the United States Court of Appeals for the District of Columbia. That court upheld the decision of the United States District Court finding the companies liable for racketeering violations based on fraud.

Philip Morris, Lorillard, and R.J. Reynolds Tobacco are asking the Supreme Court to review the circuit court's decision to uphold the trial court. The U.S Department of Justice brought a civil action against the tobacco companies in 1999, alleging that the companies violated RICO by making deceptive claims as part of their advertising. Among the deceptions were claims of low tar and "light" cigarettes. At trial the district court judge found that the companies had conspired to hide the dangers of cigarette smoking through these fraudulent claims.

To succeed in the RICO allegatiion the government had to prove that the companies constituted racketeering enterprises and that they engaged in a pattern of racketeering activity. The government satisfied the trial court that the companies met the definition of an enterprise and that they had conspired to engage in the pattern of racketeering activity, which was the pattern of false claims designed to increase sales and profits.

The companies appear to be asking the Supreme Court to hear the case on the basis of a First Amendment challenge. The companies contend that the government's use of RICO in the context of the suit against big tobacco is a violation of protected speech and will chill public debate on scientific matters.

It may seem like quite a stretch to move from advertising light cigarettes to a defense of scientific speech. However, the thinking of the company attorneys probably is that recently the Supreme Court reversed years of precedent by treating corporate expenditures for political advertising as the equivalent of individual speech in the political context. Using the same logic, they will argue that product advertising is immune from control. After its ruling on compaign funding by corporations, it will be interesting to see if the Court is willing to go further down this activist revolutionary path. My guess is that the Court will put on the brakes and decline to hear the case.