(CN) – The 2nd Circuit decertified a class action accusing Eli Lilly of encouraging doctors to overprescribe its antipsychotic drug Zyprexa for off-label uses, leading to higher drug costs.
A group of insurers, unions and other health care payers filed a class action against the drug maker, claiming Eli Lilly downplayed the risks and side effects of Zyprexa, including hyperglycemia, diabetes and substantial weight gain. A 1993 study showed that Zyprexa users gained an average of 1.5 pounds per week, according to the plaintiffs.
The payers also accused Eli Lilly of promoting the drug for off-label uses, including the treatment of depression, anxiety and elderly dementia. However, the Food and Drug Administration has only approved Zyprexa to treat schizophrenia and bipolar disorder.
By 2002, almost two-thirds of Zyprexa prescriptions were for off-label uses. Accordingly, prices jumped from $188 per prescription in 1996 to $368 in 2006, at which point the drug cost $150 more than rival drugs.
As the FDA required more warning labels, prescription sales fell 50 percent between Zyprexa’s peak in 2003 and 2008. The plaintiffs attributed this drop “almost entirely” to a decline in off-label prescriptions.
In 2005, an insurance company in Tennessee filed a class action against Eli Lilly, claiming the company operated a racketeering enterprise, and engaged in mail and wire fraud by deliberately misrepresenting the drug’s safety and efficacy.
An expert estimated that the higher price of Zyprexa and its off-label promotion cost insurers and other third-party payers between $4 billion and $7.7 billion.
A federal judge certified the class action and rejected Eli Lilly’s motion to dismiss, finding that the drug maker could have increased the price and demand for Zyprexa by leading “doctors to continue to prescribe, and plaintiffs to continue to pay for, greater amounts … than they would have absent the fraud.”
In other words, doctors relied on Eli Lilly’s misrepresentations when they wrote too many Zyprexa prescriptions, which led to the drug’s higher cost, according to the plaintiffs’ theory.
But the Manhattan-based federal appeals court ruled that such a claim must be established by individualized, not generalized, proof.
“[G]eneralized proof of reliance by doctors cannot complete the causation chain,” Judge Gerard Lynch wrote, because Eli Lilly was not “the only source of information on which doctors based prescribing decisions” (emphasis in original).
Lynch pointed out that physicians prescribing Zyprexa “may have relied on Lilly’s alleged misrepresentations to different degrees, or not at all,” making it impossible to generalize proof of causation.
The panel reversed class certification and vacated the lower court’s order denying Eli Lilly’s motion for summary judgment on the overpricing claims.