Defeating Economic Loss Claims In Pharma Class Actions

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...