Intron Class Lacked Standing

On June 9, 2010, Judge Stanley R. Chesler of the U.S. District Court for the District of New Jersey dismissed, in its entirety, a class action lawsuit filed against various entities of drug manufacturer Schering-Plough Corporation.  In that case, In re Schering-Plough Corp. Intron/Temodar Consumer Class Action, No. 2:06-cv-5774, 2010 U.S. Dist. LEXIS 56621 (D.N.J. June 9, 2010), a group of third party payors of prescription drugs alleged that the drug company unlawfully promoted the off-label use of certain drugs, causing the payors to overpay for the drugs used by their beneficiaries. The court, however, rejected the third party payors’ contention that they were actually injured by the drug company’s allegedly unlawful marketing practices.

Specifically, the district court held that the plaintiffs lacked standing with respect to their New Jersey and federal RICO fraud claims because plaintiffs failed to show any “injury-in-fact.” Article III of the Constitution allows federal courts to hear only “Cases” or “Controversies.” To satisfy this requirement, Plaintiffs who seek to represent a class must demonstrate that they have been personally injured; plaintiffs cannot rely on an injury suffered by unidentified class members. The court dismissed plaintiffs’ lawsuit despite plaintiffs’ many detailed allegations that the drug company (1) misrepresented to doctors the drug’s abilities, (2) bribed physicians to write off-label prescriptions, and (3) misrepresented study results. While the court recognized the egregiousness of the allegations, the plaintiffs lacked standing because they failed to allege facts to support a theory that the drugs were ineffective; the court observed that the mere lack of scientific data to support the alleged promotional claims cannot constitute actual ineffectiveness.

Even assuming that plaintiffs demonstrated injury-in-fact, the court held that the named plaintiffs failed to sufficiently allege causation. The court explained that while plaintiffs alleged the existence of some fraudulent promotion and bribes, they failed to show that the plaintiffs’ purchases of drugs was connected to that alleged activity. Plaintiffs argued that the court must infer a connection because of the high volume of drugs purchased by the plaintiffs; however, the court noted that plaintiffs failed to allege how widespread the drug company’s alleged bribery of physicians was. Further, the plaintiffs did not allege that any doctor that wrote prescriptions for a named plaintiff’s beneficiary was bribed. Since the plaintiffs failed to show injury-in-fact or causation, the court dismissed the RICO fraud claims.

A defendant in a class action lawsuit must not be blindsided by seemingly bad facts. If the named plaintiffs cannot demonstrate that they were personally injured or show the causal connection between the alleged bad acts of the defendant and the plaintiffs’ injury, the court has no jurisdiction to hear the case.

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