Opinion
04-MD-1596.
February 12, 2008
MEMORANDUM ORDER
I. Introduction
Zyprexa, an antipsychotic drug manufactured and produced by Eli Lilly Company ("Lilly") was approved in 1996 by the United States Food and Drug Administration ("FDA") for use in the treatment of schizophrenia. In 2000, the FDA approved Zyprexa for use in the short-term treatment of acute mixed or manic episodes associated with bipolar disorder, and, in 2004, for maintenance treatment of bipolar disorder. Zyprexa has been one of Lilly's top-selling drugs and has been prescribed to over twelve million people worldwide. Sales of Zyprexa are in the billions of dollars annually.
Multidistrict litigation involving Zyprexa currently pending before this court involves thousands of individuals, organizations and governmental entities all over the United States. This litigation falls under five categories: (1) personal injury litigation involving individuals who were prescribed Zyprexa and as a result suffer from weight gain, diabetes and other aliments, most of which has been settled along with Medicaid and Medicare liens of the federal and state governments; (2) securities litigation involving parties who purchased Lilly stock; (3) third-party payer and Zyprexa-patient payer litigation involving health care insurers and unions who claim that they overpaid for Zyprexa; (4) litigation commenced by Attorneys General of various states alleging that the government overpaid for Zyprexa; (5) litigation involving federal Medicaid and Medicare liens; and (6) a suit by Aetna, Inc., a third-party payer, against the trustees of settlement fund, now reportedly settled.
The instant suit is from the fourth category. It is an action by the Attorney General of Montana brought on behalf of Montana Medicaid recipients and consumers. Originally filed in Montana state court, the complaint on its face alleges violations of state statutory and common law.
The case was removed by Lilly to the United States District Court for the District of Montana and then transferred to this court by the Judicial Panel on Multidistrict Litigation ("JPML") for coordinated or consolidated pretrial proceedings. Pending is Montana's motion to remand the case to state court. The resolution of Montana's claims necessarily depend on decisive federal questions, including the state's claims based upon its participation in the federal Medicaid program, the requirements of which are governed by federal law, and the construction and application of the federal Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. § 301, et seq. and federal Medicaid law, 42 U.S.C. § 1396r-8(d). Its motion to remand is denied.
II. Background History
This action was filed by the Attorney General of Montana in the First Judicial District Court of Lewis and Clark County, Montana on March 1, 2007. See Complaint, Docket Sheet for 07-CV-1933, Entry No. ("EDNY Docket Entry No.") 4. The complaint alleges violations of Montana statutory and common law, including violations of Montana Consumer Protection Act, Mont. Code Ann. § 30-14-103, et seq.; the Montana False Claims Act, id. at § 17-8-403, et seq.; the Montana Food, Drug and Cosmetic Act, id. at § 50-31-101, et seq.; and common law fraudulent misrepresentation and unjust enrichment. See Complaint at ¶ 1. On its face the complaint does not allege violations of federal law.
Central to Montana's complaint is the claim that Lilly devised elaborate schemes to market Zyprexa for so-called "off-label" uses — indications not approved by the FDA — including unapproved uses by the elderly and for long-term care patients.Id. at ¶¶ 19-54. It alleges a nationwide fraudulent scheme by the defendant. Id. Specifically the complaint alleges that Lilly (1) advertised Zyprexa for off-label uses, including geriatric dementia, pediatric symptoms, and for general depression; (2) marketed and sold Zyprexa for a number of non-approved or off-label uses including Alzheimer disease, geriatric dementia, Tourette's syndrome, pervasive developmental delay, autism, anorexia nervosa, and general depression; (3) misrepresented that testing had been performed for off-label uses when no such testing had been done and the FDA had not approved Zyprexa for such uses; and (4) created a 280 person national sales force to promote Zyprexa exclusively for off-label uses, specifically for long-term care facilities serving the elderly. Id. at ¶¶ 19, 11, 21, 30 and 41 (quotation marks omitted).
Montana also claims that the Zyprexa label required by the FDA was not adequate; and Lilly failed to warn health care providers and consumers about the true nature of the serious risks of diabetes, hyperglycemia, diabetic ketoacidosis and other serious conditions associated with the use of Zyprexa. Id. at ¶ 16 (quotation marks omitted). Lilly, according to Montana, did not accompany Zyprexa with proper warnings or packaging regarding all possible side effects associated with the use of Zyprexa and failed to warn of the comparative severity, incidence, and duration of such adverse effects. Id. at 64 (quotation marks omitted)
Lilly's misrepresentations were allegedly intended to induce Montana to approve the distribution of Zyprexa in the Montana Medicaid Program. Id. at ¶ 80. Montana seeks "restitution of all moneys acquired by [Lilly] by means of its unlawful practices."Id. at ¶ 6 (prayer for relief). It seeks injunctive relief, restitution and monetary damages for past and future injuries by the State and its citizens caused by Zyprexa. Attorneys General from several other states have also sued Lilly under the same theory.
The case was removed to the United States District Court for the District of Montana by Lilly on March 29, 2007. See Notice of Removal, EDNY Docket Entry No. 3. In its notice of removal, Lilly alleged that Montana's state law claims raise a substantial issue of federal law and therefore conferred federal question jurisdiction under 28 U.S.C. § 1331, or, in the alternative, that Montana's claims were preempted by federal law. See Notice of Removal, EDNY Docket Entry No. 3.
In April 2007, the JPML transferred the case to this court because it involved questions of fact common to other Zyprexa related actions already transferred here for coordinated or consolidated pretrial proceedings. See Conditional Transfer Order of the JPML, EDNY Docket Entry No. 1; see also 28 U.S.C. § 1407 (providing for multidistrict coordination); In re Zyprexa Prods. Liab. Litig., 314 F. Supp. 2d 1380 (J.P.M.L. 2004) (transferring the original Zyprexa-related cases to this court).
Montana now moves for remand on the grounds that its claims do not raise substantial and disputed issues of federal law requiring an interpretation or application of federal law for their resolution, and defendant's preemption defense, even if available, is insufficient to confer removal jurisdiction on this court. See Plaintiff's Motion to Remand, Docket Entry Nos. 7, 13 and 14.
III. Discussion
The national aspects of the Zyprexa litigation are illustrated by the global resolution under federal law of fifty state Medicaid liens. See In re Zyprexa Prods. Liab. Litig., 451 F. Supp. 2d 458 (E.D.N.Y. 2006) (Montana recovered a substantial amount of its Medicare disbursements for Zyprexa in related personal injury litigation pending in this court). Uniformity in treating claims brought in this multidistrict litigation is desirable.
The instant motion to remand deals with essentially the same factual and legal issues this court considered in deciding similar motions brought by the Attorneys General of Louisiana, West Virginia and Mississippi. See In Zyprexa Prods. Liab. Litig., 375 F. Supp. 2d 170 (E.D.N.Y. 2005) ("Louisiana"); State of West Virginia v. Eli Lilly Co., 476 F. Supp. 2d 230 (E.D.N.Y. 2007) ("West Virginia"); Hood ex rel. State of Mississippi v. Eli Lilly Co., No. 07-CV-0645, 2007 WL 1601482 (E.D.N.Y. June 5, 2007) ("Mississippi"). Familiarity with these opinions is assumed. Like Montana, those states sought to recover costs allegedly incurred by the states' Medicaid programs as a result of Lilly's allegedly wrongful promotion of Zyprexa with its harmful side effects. Resolution of the question of the state's obligation to reimburse its insureds for Zyprexa, using funds largely provided by the federal government, is essential to the states' theory of damages and presents a substantial and disputed federal issue.
In Louisiana, West Virginia and Mississippi, this court found federal jurisdiction, holding that the question of the state's obligation to reimburse its insured for prescriptions drugs, using funds largely provided by the federal government, is essential to the state's theory of damages and presents an unavoidable central and disputed federal issue. See West Virginia, 476 F. Supp. 2d at 233; Louisiana, 375 F.Supp.2d at 172-73. The West Virginia opinion emphasized that at issue was "not simply a federal standard, but also the added factor of an intricate federal regulatory scheme, including detailed federal funding provisions, requiring some degree of national uniformity in interpretation." 476 F. Supp.2d at 234. The court noted:
In this action, West Virginia claims injuries arising from payments for drugs made as part of its participation in the federal Medicaid program. The parameters and requirements of that participation are governed by federal law. The state claims damages resulting from its coverage of the drug Zyprexa. That coverage was mandated by federal law. See 42 U.S.C. § 1396r-8(d)(4)(B). Resolution of the question of the state's obligation to reimburse its insureds for Zyprexa, using funds largely provided by the federal government, is essential to the state's theory of damages and presents a substantial and disputed federal issue under Grable [ Sons Metal Prods., Inc. v. Darue Eng'g Mfg., 545 U.S. 308 (2005)].
The cases on which plaintiff primarily relies do not significantly undermine this view. . . . The opinion in Alaska v. Eli Lilly, involving a Zyprexa suit brought by the Alaska attorney general, does not discuss the federal Medicaid issues presented in sufficient detail for this court to be able to analyze them in conjunction with the present claims of West Virginia.
The determination that West Virginia's suit presents a substantial and disputed federal question does not end the jurisdictional inquiry: "the federal issue will ultimately qualify for a federal forum only if federal jurisdiction is consistent with congressional judgment about the sound division of labor between state and federal courts. . . . "
The exercise of federal jurisdiction over the West Virginia Attorney General's action implicating the federal Medicaid laws will not attract "a horde of original filings and removal cases raising other state claims with embedded federal issues." Unlike the situation addressed by the Merrell Dow [Pharms. v. Thompson, 478 U.S. 804 (1986)] Court, where finding federal jurisdiction over a state cause of action that implicated a federal standard might have led to a significant rise in the caseload of the federal courts, this case does not pose such a threat. At issue here is not simply a federal standard, but also the added factor of an intricate federal regulatory scheme including detailed federal funding provisions, requiring some degree of national uniformity in interpretation.West Virginia, 476 F. Supp. 2d at 233-34 (some citations omitted).
There is a split of authority on the matter. See Utah v. Eli Lilly Co., 509 F. Supp. 2d 1016 (D. Utah 2007) ("Utah"); South Carolina ex rel. McMaster v. Eli Lilly Co., No. 07-CV-1875, 2007 WL 2261693 (D. S.C. Aug. 3, 2007) ("South Carolina"); Alaska v. Eli Lilly Co., No. 06-CV-88, 2006 WL 2168831 (D. Ala. July 28, 2006) ("Alaska"); Pennsylvania v. Eli Lilly Co., 511 F. Supp. 2d 576 (E.D. Pa. 2007) ("Pennsylvania"); see also Pennsylvania Employees Benefit Trust Fund v. Eli Lilly Co. No. 07-CV-2057, 2007 WL 2916195 (E.D. Pa. Oct. 5, 2007). The federal district courts inUtah, South Carolina, Alaska and Pennsylvania have remanded virtually identical cases to the respective state courts where they were originally filed.
The instant motion to remand is denied for the same reasons as in West Virginia, Louisiana, and Mississippi decisions. The well-reasoned opinion of the Pennsylvania court, as adopted by the South Carolina and Utah courts, represents a clear difference of opinion. According to the Pennsylvania court:
First, the term "medically accepted indication" is used in the Complaint merely as a common standard that delimits the Medicaid fraud claim, but does not alone present a disputed federal issue. Even if the term itself is disputed, it does not define the entire scope of permissible conduct under the Pennsylvania Medicaid statute, the PACE statute, or the common law claims. Simply put, it is not the act of causing the submission of a claim for a non-medically accepted indication that creates liability under the state law causes of action, but rather the act of causing the submission of a false or fraudulent claim. A false or fraudulent claim may or may not be submitted for a medically accepted indication.
Similarly, the Commonwealth's allegation that the Defendants failed to adequately warn Medicaid and PACE participants of the risks associated with their respective drug turns not on a violation of federal labeling standards, but on a violation of Pennsylvania common law. There is no liability asserted in the Complaint for mere failure to comply with federal law. Thus, the Commonwealth's claims this case, as in Empire [Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006)] are "fact-bound" and "situation-specific," and unlike the allegations in Grable, where the meaning of a federal statute was both disputed and an essential element of the plaintiff's state law cause of action, the allegations presented here do not turn on the interpretation of federal law. Rather, as previously noted, the central disputes in this case are factual.
Second, with the possible exception of the medically accepted indication standard, the federal "issues" cited by the Defendants are affirmative defenses and, therefore, insufficient to confer subject matter jurisdiction.Pennsylvania, 511 F. Supp. 2d at 582-83 (some citations omitted). It held that because the Commonwealth's claims in that case "may proceed on entirely non-federal grounds," federal questions raised by other claims were not sufficient to confer federal jurisdiction. Id. at 583.
Federal jurisdiction, however, can rest on a federal question raised by only one of several claims that the plaintiff asserts.See Broder v. Cablevision Systems Corp., 418 F.3d 187, 194 (2d Cir. 2005) ("A single claim over which federal-question jurisdiction exists is sufficient to allow removal.") (citingExxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 (2005) and City of Chicago v. Int'l Coll. of Surgeons, 522 U.S. 156, 164-66 (1997)); see also 28 U.S.C. § 1441(a) (defendants may remove from state court to federal court "[a]ny civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States.").
Here Lilly's alleged submission of a claim for non-medically accepted indication and promotion of Zyprexa for an off-label use is central and disputed in this case. The extensive use of these terms in the complaint establishes that Montana regards Lilly's alleged violations of federal law as essential to its case.
As noted in the West Virginia and Louisiana opinions, there is no state-law equivalent of "off-label." The concept is entirely federal. The FDA's responsibility to regulate prescription drugs sold in the United States and to enforce laws with respect to such drugs, including the precise content and format of prescription drug labeling is plenary and exclusive. See 21 U.S.C. § 301 et seq. The agency also defines what constitutes impressible activity by a pharmaceutical company relating to off-label uses. See Washington Legal Found. v. Henney, 128 F. Supp. 2d 11 (D.D.C. 2000). Montana's claim that by marketing Zyprexa for off-label uses, Lilly "violated its obligations under law," see Complaint ¶ 41, necessarily refers to violations of federal law. The off-label marketing claims will therefore necessarily raise substantial federal questions by requiring the court to interpret the meaning of the FDCA and its implementing regulations.
Unconvincing is Lilly's argument that subject matter jurisdiction over Montana's claims lies in federal court because federal law and FDA regulations have preempted state law claims.Cf., e.g., Desiano v. Warner-Lambert, 467 F.3d 85, 97 n. 9 (2d Cir. 2006) (discussing the legal implications of the FDA's views on the preemptive effect of its regulations); Matthew C. Stephenson, The Strategic Substitution Effect: Textual Plausibility, Procedural Formality, and Judicial Review of Agency Statutory Interpretations, 120 Harv. L Rev. 529, 536 (2006) (suggesting that an administrative agency such as the federal Food and Drug Administration would want to enhance its power to nationalize control of pharmaceuticals, implying a reduction of state tort interjections into the process, thus introducing doubt about the neutrality of its preemption conclusion).
The exercise of federal jurisdiction over the instant action implicating the federal Medicaid laws will not attract "a horde of original filings and removal cases raising other state claims with embedded federal issues." Grable, 545 U.S. at 318. But see Pennsylvania, 511 F. Supp. 2d at 586-87 ("The exercise of federal jurisdiction . . . would upset the balance between state and federal courts because it would . . . open the federal courthouse to any number of state law causes of actions that invoke a federal standard or stand against the backdrop of a federal regulatory scheme."). Unlike the situation addressed by Merrell Dow, 478 U.S. 804, supra, where finding federal jurisdiction over a state cause of action that implicated a federal standard might have led to a significant rise in the caseload of the federal courts, this case does not pose such a threat. See Grable, 545 U.S. at 318. ("For if the federal labeling standard without a federal cause of action could get a state claim into federal court, so could another federal standard without a federal cause of action. And that would have meant a tremendous number of cases.").
By consolidating these state actions for pretrial purposes in one court, judicial efficiency will be enhanced. At issue here is not simply a federal drug standard, but the factor of an intricate federal regulatory medicine scheme. It includes detailed federal funding provisions, requiring some degree of national uniformity in interpretation.
In a slightly different context, the District of Massachusetts currently handling Average Wholesale Price ("AWP") litigation held, with respect to Arizona's suit against drug manufacturers, "that the meaning of AWP in the federal Medicare statute is a substantial federal issue that properly belongs in federal court. The government has a strong national interest in prohibiting fraud upon Medicare beneficiaries because fraudulent acts threaten Medicare's integrity." In re Pharmaceutical Indus. Average Wholesale Price Litig., 475 F. Supp. 2d 77, 80 (D. Mass. 2006). The court further noted:
The interpretation of AWP under the statute determines whether the Arizona Medicare beneficiaries, by definition the sick and elderly, overpaid on their drug co-payments. Furthermore, once the meaning of AWP is determined, it can be applied to the many pending similar pharmaceutical drug pricing cases in the Medicare context. This directly impacts the viability and effectiveness of the federal Medicare program. Arizona's state-law claims on behalf of Medicare Part B beneficiaries based on the meaning of AWP in the federal statute therefore raise a substantial federal issue. . . .
[A]s the judge assigned the massive multi-district litigation, involving class actions and numerous attorney general suits, I conclude that the issue of the meaning of AWP under the federal Medicare statute has national significance. A federal forum provides experience, solicitude and uniformity on this important federal issue.Id. at 81-82.
It is difficult to accept the proposition that the federal judicial system cannot provide a single integrated practice in these cases by the Attorneys General. Potentially fifty states and the Commonwealth of Puerto Rico can independently sue in their respective jurisdictions; local courts can potentially deliver at least fifty-one different results. In any rational system involving, as this case does, federal control of labeling and advertising by federal agencies, and the provisions and reimbursements under the federal Medicare program one court should supervise pretrial. Any fractured approach places enormous burdens on both plaintiffs, who must replicate extensive paperwork, the pharmaceutical company, whose legal expenses and burdens are multiplied, and makes it more difficult to obtain a rational and consistent settlement or other disposition.
This case will remain in the federal multidistrict court for pretrial proceedings. The federal district court of Montana will try it if a trial is necessary. Montana law will not be ignored.See AMERICAN LAW INSTITUTE, PRINCIPLES OF THE LAW OF AGGREGATE LITIGATION (Discussion Draft No. 2) (April 6, 2007).
IV. Conclusion
The motion to remand is denied.
SO ORDERED.