Third Circuit Affirms Dismissal of Off-Label Marketing Actions Against Schering for Lack of Standing

In a consolidated appeal pitting a putative class of third-party payors of drugs prescribed for uses not approved by the Food and Drug Administration, and a putative class of individual patients prescribed such drugs, against Schering-Plough and affiliated entities, the Third Circuit in In re Schering-Plough Corp. Intron/Temodar Consumer Class Action affirmed the district courts’ dismissals of both actions for lack of standing. The Third Circuit held that both plaintiffs, who brought federal and state statutory and common law causes of action, failed to allege a plausible nexus between Schering’s allegedly illegal marketing campaign and the doctors’ decisions to prescribe various drugs for unapproved uses.

The plaintiff in the third-party payor action, Local 331, alleged that Schering falsely marketed certain drugs as efficacious for unapproved uses and was damaged when it paid doctors for prescribing a particular drug, Rebetol, to patients who did not need it. The Third Circuit found that Local 331 lacked Article III standing, which requires (1) an injury-in-fact, (2) a causal connection between the injury and the conduct complained of, and (3) a likelihood that the injury will be redressed by a favorable decision, because it had failed to allege facts showing that its payments for Rebetol were “fairly traceable” to Schering’s allegedly improper marketing efforts.

The court rejected Local 331’s argument that the allegations about the off-label marketing of other drugs, together with the fact that Schering alone marketed Rebetol, was sufficient to plead that Schering falsely marketed Rebetol, finding that the argument was based on “pure conjecture.” Rather, “Local 331 must allege facts sufficient to show that the Rebetol which it paid for was prescribed to its members for ineffective off-label uses because of Schering’s alleged misconduct.”

The individual patient, Angela Montgomery, a consumer of Rebetol and PEG-Intron, similarly lacked standing. Montgomery alleged that her physician initially decided not to prescribe her any drugs to treat Hepatitis C when tests showed she was asymptomatic. However, at a follow-up visit her physician recommended a treatment of Rebetol and PEG-Intron, even though she was still asymptomatic. As a result of that treatment, Montgomery suffered serious side effects and missed weeks of work.

Montgomery contended that her doctor recommended the combination treatment because of Schering’s improper marketing of it. But, in support of this contention, Montgomery alleged that Schering had engaged her physician in a phony clinical trial for a different combination therapy involving Rebetron. The Third Circuit found this allegation insufficient for standing because it does not support a causal connection between Schering’s alleged misconduct — an improper clinical trial of one combination therapy — and Montgomery’s injury — the side effects she suffered from a different combination therapy. The court also found the allegation of a phony trial, as well as several other allegations, to be conclusory because the complaint did not provide any factual support for them.

The Third Circuit’s precedential decision in Schering-Plough should serve as an additional hurdle to otherwise speculative and conclusory allegations that an alleged economic injury is “fairly traceable” to some identifiable misconduct. In the context of Article III standing, allegations merely implying that a defendant’s actions must be causally related to the injury because that defendant has engaged in similar conduct elsewhere causing similar injury is not enough.