The opinion of the court was delivered by: Wolfson, United States District Judge:
Presently before the Court is a motion filed by Defendants, Janssen,
L.P. and Johnson & Johnson (collectively, "Defendants"),*fn1
to dismiss all counts (I-X) of the Consolidated Class Action
Complaint ("Complaint") pursuant to Fed. R. Civ. P. 12(b)(6). This
putative class action involves Risperdal, a prescription medication
currently marketed and sold by Defendants for the treatment of
schizophrenia, bipolar mania, and autistic disorder. Plaintiffs,
District 1199P Health and Welfare Plan, Ironworkers Local Union No.
399 and Participating Employers Health and Welfare Funds,
International Brotherhood of Electrical Workers Local 98, and
Southeastern Pennsylvania Transport
Authority (collectively "Plaintiffs"),*fn2 are third
party payors who seek to recover under the federal RICO statute and
state law, expenses they have incurred, and continue to incur, due to
alleged "off-label" marketing and sales of Risperdal. The Court
previously dismissed Plaintiffs' consolidated amended class action
complaint filed in 2008 and provided Plaintiffs an opportunity to
amend their complaint consistent with the Court's Opinion dated
December 23, 2008.*fn3 In this new Complaint,
Plaintiffs re-allege that Defendants engaged in a fraudulent scheme to
promote the off-label use of Risperdal, thereby violating: (1) 18
U.S.C. § 1962(c), Conducting the Affairs of the Enterprise Through a
Pattern of Racketeering Activity ("RICO"); (2) 18 U.S.C. § 1962(d) by
conspiring to violate 18 U.S.C. § 1962(c); and (3) N.J.S.A. 2C:41-1,
New Jersey's RICO statute ("NJ RICO"). In addition, Plaintiffs assert
various new causes of action pursuant to state law. In the instant
matter, Defendants move to dismiss the Complaint arguing that the RICO
related claims, Counts I-III, are substantively flawed and have not
met the strictures of the Court's Opinion, and that the remaining
state law claims, Counts IV-X, fail for a lack of causation and/or
reliance. This second time around, Plaintiffs' new Complaint fares no
better than its predecessor, and therefore, for the reasons that
follow, the Court grants Defendants' motion to dismiss.
I.Background and Procedural History
Since Defendants have moved to dismiss Plaintiff's claims pursuant to Fed. R. Civ. P. 12(b)(6), the following relevant facts assume the allegations in the Complaint to be true. Plaintiffs initially filed a complaint in 2008 ("2008 Complaint"), which was dismissed without prejudice by this Court. See Dist. 1199P Health & Plan v. Janssen, L.P., No. 06-3044, 2008 U.S. Dist. LEXIS 103526 (D.N.J. Dec. 23, 2008) (hereinafter "District 1199P I"). The 2008 Complaint alleged that Defendants violated: (1) the RICO Act; (2) RICO conspiracy; and (3) the New Jersey RICO Act. Among other deficiencies, this Court explained that the 2008 Complaint failed to sufficiently allege a cognizable RICO injury under federal or New Jersey law. The Complaint in the instant matter attempts to cure the defects of the 2008 Complaint, and asserts new claims under state law.*fn4 In deciding the present motion, this Court will refer to its previous Opinion.
The Complaint alleges that Defendants illegally promoted Risperdal for off-label purposes through a comprehensive and carefully orchestrated scheme. (See Compl. ¶ 2). The Complaint avers in detail that the scheme involved a fraudulent and deceptive marketing program that led Plaintiffs and other third party payors ("TPPs") to suffer direct economic harm. Id. at ¶¶ 2, 5. Specifically, Plaintiffs alleged that they were paying approximately 80% of the purchase price of Risperdal -- a drug nearly ten times as expensive as other, more effective, safer and more tolerable drugs -- for their insureds. Id.
Risperdal is currently sold and marketed by Defendants, see Id. at ¶¶ 14, 15, to patients suffering from schizophrenia, bipolar mania, and autistic disorder under strict regulation by the Food and Drug Administration ("FDA"). See Id. at 31--33. For off-label purposes,*fn5 Risperdal has been prescribed to adults for dementia, Alzheimer's disease, some forms of depression, Obsessive-Compulsive Disorder, Post-Traumatic Stress Disorder, Personality Disorders, anxiety, sleep disorders, anger management, mood enhancement or mood stabilization, and behavioral disorders not caused by adult schizophrenia or bipolar I disorder. Id. at ¶ 47. The drug has also been prescribed off-label to treat children and adolescents for general mood and behavior disorders. Id. In 2006, Risperdal was used off-label 66 percent of the time. Id. at ¶ 48.
Plaintiffs assert that Risperdal, as well as other second-generation
antipsychotics ("SGAs") are neither more effective nor safer than
older, cheaper antipsychotics.*fn6 Id. at ¶
50. However, to make Risperdal marketable and profitable, Defendants
aggressively marketed the drug by overstating the drug's uses and
understating or concealing the seriousness and frequency of
Risperdal's potentially life-threatening side effects.*fn7
Id. at ¶ 51. Plaintiffs further allege that Defendants' aggressive and
fraudulent marketing was due to Defendants' understanding that
schizophrenia represented only 35 percent of antipsychotic
prescriptions, and therefore, "[a]ggressive expansion of Risperdal use
in other indications [was] therefore mandatory." Id. at ¶ 54 (citing a
2010 Bloomberg article). As part of this aggressive expansion,
Defendants conducted meetings and adopted strategies to expand
Risperdal for off-label uses. Id. at ¶¶ 56-57. Indeed, Plaintiffs cite
to a J & J internal report, which indicated that names were provided
to the company in an effort to increase the call frequency on
resistant prescribers in order to influence them to use more Risperdal
for off-label purposes; in particular, for elderly patients with
dementia,*fn8 Psychosis in Alzheimer's Disease
("PAD"), autism (prior to its FDA approval in 2006), ADHD, disruptive
behavior and agitation in children, mood and anxiety disorders,
bipolar disorders in children and adolescents, post-traumatic stress
disorder ("PTSD"), and refractory depression. Id. at ¶¶ 70, 82, 89-94,
101. Because Defendants allegedly withheld or provided false
information regarding the true effects and safety of Risperdal,
prescribing physicians did not have the necessary information to make
informed decisions about prescribing Risperdal for off-label purposes.
Id. at ¶ 106. Ultimately, according to Plaintiffs, Defendants knew
that Plaintiffs and other TPPs would bear the responsibility of paying
for Risperdal prescriptions, rather than other more efficacious, safe,
and less expensive medications (or no medicine at all). Id. at ¶ 116.
Plaintiffs claim that the injury they suffered -- the excess money
Plaintiffs paid Defendants for the Risperdal that they would not have
purchased "but for" Defendants'
fraud -- is unaffected by whether any patient who took Risperdal
became ill or suffered any harm as a result of ingesting the drug. Id.
at ¶ 117.
To support their assertion that Risperdal is harmful for its off-label uses, Plaintiffs aver that in 2003, a researcher at the FDA identified 131 cases of risperdone-associated diabetes or hyperglycemia in an FDA reporting database. Id. at ¶ 160. Of the 131 cases, 78 were newly diagnosed hyperglycemia, 46 were exacerbations of a pre-existing disease, and 7 were unclassifiable.*fn9 Id. Plaintiffs argue that Defendants knew, or should have known, that the risk of new-onset diabetes mellitus or hyperglycemia associated with Risperdal is significantly higher than with older, cheaper, and equally effective "typical" antipsychotic drugs. Id. at ¶ 169.
Plaintiffs also allege that Defendants "caused" Plaintiffs and other TPPs to list Risperdal on their formularies -- a list of approved drugs for which payment will be made -- as part of their scheme to make Plaintiffs pay for expensive Risperdal prescriptions.*fn10
Id. at ¶ 104. Formularies are prepared by Pharmacy Benefit Managers ("PBMs"), who act as agents for TPPs, see Id. at ¶ 108, and Plaintiffs rely almost exclusively on their PBMs to make formulary decisions. Plaintiffs claim that if they had been aware that Defendants were illegally promoting Risperdal for off-label uses that were unsafe and/or ineffective for their beneficiaries, they would have requested that Risperdal either be placed on a restricted formulary that would require prior authorization, or be removed from the formulary entirely.*fn11 See Id. at ¶¶ 114, 115, 285.
Regarding Defendants' marketing tactics, Plaintiffs allege that
Defendants employed the services of a network of third-party marketing
firms to effectuate their scheme to market Risperdal for off-label
uses. Id. at ¶ 204. Indeed, Defendants allegedly controlled the
marketing firms' activities, which consisted of physicians
disseminating information about off-label uses of Risperdal in
Continuing Medical Events ("CME"), consultants' meetings, speaking
engagements and other programs. Id. In addition, Plaintiffs allege
that Defendants employed publication strategies to generate favorable
articles promoting the off-label uses of Risperdal.*fn12
Id. at ¶¶ 205, 230, 247. Plaintiffs claim that to lure
doctors to participate in such marketing strategies, Defendants
offered substantial funding to doctors willing to speak favorably
about Risperdal.*fn13 Id. Plaintiffs also claim that
the key strategy to promote Risperdal was through "thought leaders,"
who were doctors that would promote Risperdal through peer-selling
programs. Id. at ¶ 212.
During these programs, the "thought leaders" would provide allegedly false information regarding Risperdal's safety, efficacy, and widespread use and popularity. Id. Plaintiffs assert that the planning and coordination of the CMEs by the marketing firms required extensive use of the wires and mails, including the mailing of invitations to physicians, the mailing of proposals to the accrediting institutions, booking of hotels and airplane tickets, the arrangement of meals, the scheduling of telephone conference calls, the development and modification of tactical plans, and the coordination of Risperdal presentation content for the events.*fn14 Id. at ¶ 215. Plaintiffs allege that "Defendants' marketing activities naturally led to increases in sales for Risperdal as a result of the marketing's influence on physician behavior."*fn15 Id. at ¶ 225 (emphasis added).
Plaintiffs also aver that these physicians received direct payments in order to promote Defendants' alleged fraudulent scheme. Indeed, Plaintiffs state that these financial incentives include expensive dinners and lavish vacations in return for prescribing Risperdal, and excessive payments to physicians for conducting clinical trials of Risperdal. Id. at ¶ 244. In Massachusetts, Plaintiffs specifically note that four patients' medications were changed to Risperdal for non-medical reasons and without their consent. Id. Plaintiffs submit that the physicians wanted to be eligible for a drug trial sponsored by Janssen, wherein each physician would have been paid upon completion of the trial.*fn16 Id. at ¶ 259.
In sum, Plaintiffs claim that as a result of Defendants' fraudulent scheme, "the medical literature and usage practices relating to Risperdal have been severely contaminated by years of false and misleading information regarding the scientific, medical and clinical data relating to the safety, medical efficacy, effectiveness and usefulness of Risperdal for off-label conditions." Id. at ¶ 289. In turn, because "studies have illustrated that physicians can prescribe lower-cost and equally effective alternatives to Risperdal for both FDA-approved conditions and conditions for which Defendants have promoted the off-label use of Risperdal," Defendants' wrongful marketing, advertising and promotion of Risperdal caused Plaintiffs to pay Defendants for Risperdal that they would not have otherwise purchased. Id. at ¶ 116--19, 265.
The Federal Rules of Civil Procedure provide that a complaint "shall contain (1) a short and plain statement of the grounds upon which the court's jurisdiction depends ... (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief the pleader seeks." Fed.R.Civ.P. 8(a). The purpose of a complaint is "to inform the opposing party and the court of the nature of the claims and defenses being asserted by the pleader and, in the case of an affirmative pleading, the relief being demanded." 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1182 (3d ed. 2004).
In reviewing a motion to dismiss for failure to state a claim under 12(b)(6), a Court must take all allegations in the complaint as true, viewed in the light most favorable to the plaintiff "and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citation and quotations omitted). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court "retired" the language in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Twombly, 550 U.S. at 561 (quoting Conley, 355 U.S. at 45-46). Rather, the factual allegations in a complaint "must be enough to raise a right to relief above the speculative level." Id. at 555. The Third Circuit summarized the pleading requirement post-Twombly:
The Supreme Court's Twombly formulation of the pleading standard can be summed up thus: 'stating . . . a claim requires a complaint with enough factual matter (taken as true) to suggest' the required element. This 'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of 'the necessary element.' Phillips, 515 F.3d at 234 (quoting Twombly, 550 U.S. at 556).
In affirming that the Twombly standard applies to all motions to dismiss, the Supreme Court recently further clarified the 12(b)(6) standard. "First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). "Second, only a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 129 S.Ct. at 1950. Accordingly, "a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. In short, "a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to 'show' such an entitlement with its facts." Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).
The Third Circuit recently reiterated that "judging the sufficiency of a pleading is a context-dependent exercise" and "[s]ome claims require more factual explication than others to state a plausible claim for relief." West Penn Allegheny Health System, Inc. v. UPMC, 627 F.3d 85, 98 (3d Cir. 2010). This means that, "[f]or example, it generally takes fewer factual allegations to state a claim for simple battery than to state a claim for antitrust conspiracy." Id. That said, the Rule 8 pleading standard is to be applied "with the same level of rigor in all civil actions." Id. (quoting Iqbal, 129 S.Ct. at 1953).
A.Counts I and III: RICO and NJRICO*fn17
Plaintiffs argue that Defendants' alleged conduct violated the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c), which "makes it unlawful 'for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity.'" In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 362 (3d Cir. 2010) (citing 18 U.S.C. § 1962(c)). For Plaintiffs to plead a civil RICO claim under 18 U.S.C. § 1962(c), they must allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Sedima v. Imrex Co., 473 U.S. 479, 482-83 (1985). The term "enterprise" includes '"any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.'" Ins. Brokerage, 618 F.3d at 362--63 (citing 18 U.S.C. § 1961(4)). With respect to the pattern of racketeering activity, the statute "requires at least two acts of racketeering activity within a ten-year period" which "may include, inter alia, federal mail fraud under 18 U.S.C. § 1341 or federal wire fraud under 18 U.S.C. § 1343." Id. (citing 18 U.S.C. § 1961(1)(5) and Lum v. Bank of Am., 361 F.3d 217, 223 (3d Cir. 2004)). In addition, the Third Circuit has articulated that Section 1964(c) requires "a RICO plaintiff to make two related but analytically distinct threshold showings . . . (1) that the plaintiff ...