AstraZeneca, maker of the blockbuster acid reflux drug Nexium, may have finally ended its five-year class action litigation battle with the Pennsylvania Employee Benefit Trust Fund, other third party payors, and individual plaintiffs. On May 6, 2010, in Pennsylvania Employee Benefit Trust Fund v. Zeneca, Inc., the US District Court of Delaware granted AstraZeneca's motion to dismiss plaintiffs' amended complaint for failure to state claims of consumer fraud, unjust enrichment, and negligent misrepresentation. The court's opinion, written by Judge Eduardo Robreno, is enlightening in its canvassing of several state consumer protection statutes and, in the process, detailing some nuanced distinctions in consumer protection law, such as the difference between a causation and reliance requirement and between a product purchased for "personal, family or household purposes" and for commercial purposes. It also underscores the high threshold for pleading causation and reliance in consumer fraud actions.
The litigation has centered around whether AstraZeneca, after the patent for its highly successful "purple pill" Prilosec expired, merely "repackaged" Prilosec as Nexium, with marginal chemical modifications. The union third party payors and individual plaintiffs claim that the advertising campaign for Nexium was misleading and resulted in billions of dollars of needless drug expenditures, since consumers and third party payors were induced to buy Nexium, even though a less-costly, equally-effective generic option was available. The plaintiffs first filed the class action in 2005. It eventually landed in the US Supreme Court in 2009, only to be remanded all the way back again to Delaware, where the federal district court finally addressed plaintiffs' substantive claims of consumer fraud, unjust enrichment, and negligent misrepresentation (the prior appeals focused on preemption issues).
The court first decided that the law of each plaintiff's home state (Pennsylvania, New York, Michigan) applied. As a result the court wrestled with significant differences between the consumer protections laws of Delaware (no reliance requirement), Pennsylvania (reliance requirement), New York (no reliance, but causation requirement), and Michigan (no reliance, but must involve product purchased for "personal, family, or household purposes").
In relating the reliance and causation requirements of Pennsylvania and New York law, respectively, the court said plaintiff's reliance on a defendant's misrepresentations is not "wholly irrelevant" to the analysis of causation. The plaintiff does not have to prove justifiable reliance or that the defendant's misrepresentation was the lone motivation behind a product purchase, but the plaintiff "must allege some awareness of a defendant's misrepresentation prior to purchasing the product in order to establish the element of causation." Since neither the Pennsylvania nor New York plaintiffs alleged to even be aware of the physician-directed marketing or direct-to-consumer advertising of Nexium, their consumer fraud claims were dismissed. Without any awareness of defendants' representations, Plaintiffs' own opinions as to the quality of a product add nothing to the causation and reliance analysis.
Michigan consumer protection law, on the other hand, lacking a reliance requirement, only regulates "the conduct of a business providing goods, property, or service primarily for personal, family, or household purposes..." The "ultimate purpose for which the product is purchased is determinative," not the "characterization of the purchaser." The question then for the court was whether the Michigan plaintiff - a third party payor - was a "'mere conduit or intermediary' for its participants' use of Nexium or whether it purchased Nexium principally to engage in its own commercial enterprise." Since the plaintiff's complaint offered no explanation for how it purchased Nexium (directly or via a partial reimbursement to its members), the court dismissed it.
Though this case has been pending for five years, the majority of time has been consumed with issues outside the sufficiency of the pleadings. Therefore, Judge Robreno left the door open for the plaintiffs to refile, as he dismissed the complaint without prejudice. Through his opinion, he also provided them with a roadmap for amending their complaints to avoid dismissal. Stay tuned to see if AstraZeneca's heartburn (litigation) fully subsides after all.
- Randy Shaheen and John Eason
