Defeating Economic Loss Claims In Pharma Class Actions

by Pepper Hamilton LLP

This article was published in the Class Action, Consumer Protection, Life Sciences, and Product Liability sections of Law360 on October 23, 2013. © Copyright 2013, Portfolio Media, Inc., publisher of Law360. It is republished here with permission.

Where product liability actions or government investigators have targeted a prescription drug, class actions follow alleging that patients are entitled to a refund of what they paid for the medicine. The theory of these parasitic class actions is that the manufacturer misrepresented the safety or efficacy of the medicine, thereby violating consumer protection statutes.

But a patient should not get her money back if the medicine worked and caused no physical injury. Or should a patient get her money back where she cannot show that, but for the misrepresentations, her doctor would have prescribed a safer, cheaper alternative.

Two recent decisions dismissing Avandia class actions illustrate these principles.1

The Federal Rules Require Plausible Allegations of Injury

Under Federal Rule of Civil Procedure 8, the plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Absent such a showing, the defendant is entitled to dismissal of the action.

The U.S. Supreme Court ruled in Ashcroft v. Iqbal that “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”2 A claim “has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”3

Therefore, “[a] plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”4

Essential Elements of Class Action Claims Involving Pharmaceuticals

Plaintiffs must “plead some awareness of the advertising itself” to state a cognizable claim under a false advertising or consumer protection law.5 General references to advertisements and statements will not suffice.6

Some courts have found that advertising must be specifically directed at the plaintiff. In In re Rezulin Products Liability Litigation, the court held that the plaintiff's health plans did not state a valid consumer protection claim because the alleged fraud was directed at pharmacy benefit managers rather than patients:

The conduct for which [plaintiff health benefits provider] seeks to hold [defendant] liable was directed at Medco, not at diabetes patients. It consisted of [defendant’s] efforts to persuade Medco, a large and sophisticated business, to include Rezulin in its formularies. The nature of this marketing effort - communication from one sophisticated business to another - was quite different from that of any promotion aimed directly at diabetes patients.7

Even if a plaintiff has adequately alleged exposure to a deceptive statement, “a plaintiff must show that the defendant's deceptive act caused the complained-of injury.”8 Allegations that the plaintiff viewed purportedly false advertising at some point are normally insufficient to establish causation.9

A plaintiff has not alleged causation if she fails to identify when she purchased the medication at issue in relationship to viewing the allegedly false advertising “or other facts from which the Court can infer a causal connection.”10

In addition, the plaintiff must plead not only facts connecting her exposure to the alleged false advertising with paying for the advertised medicine but also the likelihood of paying for a safer, cheaper medicine. In Zafarana v. Pfizer Inc., the plaintiffs alleged merely that they could have been prescribed cheaper alternative medicines.11 These deficient allegations, coupled with the discretion of prescribing physicians, rendered the plaintiffs’ alleged injuries to be hypothetical and, thus, noncognizable.12

Similarly, in Dumpson v. SmithKline Beecham Corp d/b/a GlaxoSmithKline,13 the court dismissed a pharmaceutical class action where the plaintiff failed to allege “his health was impaired by Avandia, .... what he would have paid for some other drug had he not paid for Avandia, ... or anything beyond that his physician ‘might have considered prescribing’ some ‘alternative medicine.’”14

Plaintiffs may not sidestep their causation requirement by advancing claims that rely on the alleged experiences of other consumers. The court in In re McNeil Consumer Healthcare, et al., Marketing and Sales Practices Litigation rejected the plaintiffs’ contention that they could state a claim by virtue of the fact that other McNeil products had been recalled:

[P]laintiffs here rely upon the experiences of other individuals to establish that the drugs they purchased were defective. This they cannot do. The injury complained of must have been injured "in a personal and individual way." The fact that other persons suffered adverse effects, or that the defendants recalled some products that were manufactured in the same facility as the drugs they purchased, does not suffice to establish injury in fact as to this group.15

A plaintiff also cannot circumvent the causation requirement by pleading that the medication she used had no value at all, particularly where the plaintiff benefits from using the treatment without experiencing a side effect. Allegations that a medication has no value are implausible where the medication does what it was marketed to do.

In In re Rezulin Prods. Liab. Litig.,16 plaintiffs contended that there were undisclosed hepatic risks of using a diabetes medication. The court denied the plaintiffs’ bid for class certification, noting that “[p]laintiffs' contention that everyone who took Rezulin sustained an ascertainable loss presumes that Rezulin was worthless. But that is not a defensible position.”17

One court did not agree, however, that claims of economic loss from purportedly false pharmaceutical advertising must be considered in relationship to alternative therapies. In Plubell v. Merck & Co. Inc.,18 the Missouri Court of Appeals rejected defendant Merck’s contention that the costs of alternative therapies to Vioxx were relevant at the class certification stage.

The court found that it was sufficient for plaintiffs to allege that Vioxx was worth less than it was initially represented to be worth, although the court noted that “[w]hether a plaintiff is able to prove a theory is irrelevant at the class certification stage because the sole issue is whether the certification requirements were met.”19

In a case involving baby bottles, a federal judge in Missouri, however, rejected the plaintiffs’ theory, based on Plubell, that mere purchase constituted a loss where the product had been used: “Plaintiffs essentially are claiming that their purchases, ipso facto, caused an economic loss. There is no authority, in Missouri or otherwise, for this proposition."20

Motions to Dismiss Have Value Even if Amendment of a Complaint Is Permitted

An initial dismissal is unlikely to yield a lasting victory. Federal Rule of Civil Procedure 15(a)(2) provides that leave to amend a complaint should be “freely given when justice so requires.”

Persistence in filing motions to dismiss where plaintiffs cannot plead facts showing a plausible claim may lead to dismissals with prejudice. In Dumpson v. SmithKline Beecham Corp d/b/a GlaxoSmithKline21 and Schrank v. SmithKline Beecham Corp d/b/a GlaxoSmithKline,22 the court dismissed the proposed class actions with prejudice after dismissing prior complaints in each case without prejudice. There, the plaintiffs had twice omitted key factual allegations from their complaints that made an economic injury plausible.

If the plaintiff ultimately shows a plausible injury, a motion to dismiss will still have value. A defendant’s efforts to obtain greater specificity regarding the named plaintiff will be helpful at the class certification stage when arguments about individualized injuries dominate.


1 See Dumpson v. SmithKline Beecham Corp d/b/a GlaxoSmithKline, No. 10-2476, 2013 U.S. Dist. LEXIS 96776 (E.D. Pa. July 10, 2013) (dismissing case brought under California law); Schrank v. SmithKline Beecham Corp d/b/a GlaxoSmithKline, No. 07-4965, 2013 U.S. Dist. (E.D. Pa. July 10, 2013) (dismissing case brought under New York law). Dumpson is presently on appeal to the Third Circuit. The ruling in Schrank was not appealed.

2 129 S.Ct. 1937, 1949 (2009).

3 Id.

4 Id.

5 Pa. Employee Benefit Trust Fund v. Zeneca, Inc., 2010 U.S. Dist. (D. Del. May 6, 2010).

6 See, e.g., Myers-Armstrong v. Actavis Totowa, LLC, 2010 U.S. App. (9th Cir. June 3, 2010) (unpublished) (affirming dismissal of consumer protection claim where plaintiff did not state the specifics of an alleged misrepresentation by pharmaceutical manufacturer).

7 392 F. Supp. 2d 597, 613 (S.D.N.Y. 2005).

8 Pa. Employee Benefit Trust Fund v. Zeneca, Inc., 2010 U.S. Dist.

9 Id. at *56-57 (finding plaintiff failed to establish causation because he failed to allege “some awareness of a defendant’s misrepresentations prior to purchasing the product”).

10 Schrank v. SmithKline Beecham Corp d/b/a GlaxoSmithKline, No. 07-4965, 2013 U.S. Dist. But see Plubell v. Merck & Co., Inc., 289 S.W.3d 707, 714 (Mo. Ct. App. 2009) (the Missouri Merchandising Practices Act “does not require that an unlawful practice cause a ‘purchase’”).

11 2010 U.S. Dist. (E.D. Pa. July 20, 2010).

12 Id.

13 No. 10-2476, 2013 U.S. Dist.

14 See also Schrank v. SmithKline Beecham Corp d/b/a GlaxoSmithKline, No. 07-4965, 2013 U.S. Dist. (plaintiff “failed to allege facts to support a plausible claim that she was injured by the advertisements” where she failed to allege that she paid more for Avandia than an alternative treatment).

15 877 F.Supp.2d 254, 273 (E.D. Pa. 2012) (citations omitted).

16 210 F.R.D. 61, 69 (S.D.N.Y. Sept. 12, 2002).

17 Id.; see also Myers-Armstrong v. Actavis Totowa, LLC, 2009 U.S. Dist. (N.D. Cal. April 22, 2009) (“California law does not allow a civil lawsuit to recover the purchase price for medicine consumed by the purchaser which performed as intended with no harm or fear of future harm”).

18 289 S.W.3d 707, 714 (Mo. Ct. App. 2009).

19 Id. at 715.

20 In re: Bisphenol-a (BPA) Polycarbonate Plastics Prod. Liab. Litig. (BPA), No. 08-1967, 2011 U.S. Dist. (W.D. Mo. Dec. 22, 2011). BPA did not distinguish Plubell in reaching this conclusion.

21 No. 10-2476, 2013 U.S. Dist.

22 No. 07-4965 2013 U.S. Dist.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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