Humana, Inc. v. Indivior, Inc., 2022 WL 17718342 (3d Cir. Dec. 15, 2022) (unpublished):

OPINION^*

*1 Humana, Inc., and Centene Corporation (Insurers) are health benefit program insurers that provide their members with insurance to cover prescription drug costs. They maintain approved lists of medications covered by their members’ health insurance plans. These lists are known as formularies. Defendants are companies that are involved in the development, manufacture, and sale of Suboxone and Suboxone film, two forms of a drug used to treat opioid addiction. According to Insurers, defendants engaged in a nationwide racketeering effort to convince Insurers to place Suboxone film on their formularies. As a result of this effort and the alleged misrepresentations made by defendants in connection with it, Insurers did place Suboxone film on their formularies. Insurers have now brought suits in federal court,¹ alleging substantive and conspiracy offenses in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), as well as numerous state-law claims.²

The District Court dismissed Insurers’ complaints with prejudice, reasoning that the Insurers had alleged their RICO claims based on a theory of injury caused by their downstream reimbursements for Suboxone film,³ a theory foreclosed by the indirect-purchaser rule.⁴ The court held that, because Insurers merely reimbursed the purchase of Suboxone film, they were indirect purchasers of the drug and therefore lacked standing under the indirect-purchaser rule, first articulated in Illinois Brick Co. v. Illinois,⁵ and subsequently applied by this Court to RICO cases in McCarthy v. Recordex Service, Inc.⁶ Insurers appealed, asserting that the indirect-purchaser rule did not apply to them. They allege that they have stated a claim for relief of a direct injury under In re Avandia Marketing, Sales Practices & Product Liability Litigation.⁷ Defendants assert that Avandia is not applicable in this case.

For the reasons set out below, we will affirm the judgment of the District Court.

I.⁸

Insurers sell insurance plans that cover drug costs. Defendants have developed, manufactured, and sold Suboxone, a drug used to treat opioid addiction, and the related Suboxone film, which is the drug at issue here.⁹ In 2009, Invidior’s exclusivity on Suboxone tablets was about to expire. Generic pharmaceutical companies would then be able to produce less expensive versions of the tablets and Invidior would lose a great deal of business. To avoid this, Invidior and Aquestive Therapeutics, Inc., developed a sublingual film version of Suboxone. When the film was approved by the FDA, defendants started a campaign to induce physicians, patients and health plans to switch from Suboxone tablets to Suboxone film. In this way, by the time generic tablets entered the market, a majority of patients had already switched to Suboxone film and Invidior and Aquisitive now had exclusivity on the film.

*2 According to Insurers, defendants’ scheme caused Insurers to “continue[ ] to pay higher prices for treatment of [their] insureds.”¹⁰ Specifically, they allege that defendants “designed and coordinated” their scheme to “charge and maintain inflated prices for Suboxone, the Suboxone market, and to defraud payors like” Insurers.¹¹ In addition, Insurers claim that they “paid hundreds of millions of dollars for Suboxone film, as well as higher prices for Suboxone tablets, due to the mail and wire fraud, and pattern of racketeering activity alleged” in the complaints.¹²

Insurers specifically admit that they made “indirect purchases of Suboxone” but claim that they “suffered injuries when [they] reimbursed prescriptions for Suboxone.”¹³ Insurers also allege that “the institutional structure of pricing and regulation in the pharmaceutical drug industry assures that overcharges at the higher level of distribution are passed on to end-payors like” them.¹⁴ Thus, “[w]holesalers and retailers passed on the inflated prices of Suboxone to” the Insurers.¹⁵ This characterization, however, fits the description of a “third-party payor” who is barred from recovery in a RICO action by the indirect-purchaser rule.

Insurers, nonetheless, attempt to invoke their theory of direct injury. They allege that defendants fraudulently induced them to include Suboxone film on their formularies, and thus defendants’ scheme directly injured them. They allege that “[d]riving formulary support for Suboxone film through payors—like [the Insurers]—was a key goal of the Suboxone Scheme because third-party payors like [the Insurers] were the ultimate source of [defendants’] profits.”¹⁶ The Insurers claim that they “reasonably relied on [defendants’] statements and misrepresentations—not knowing they were false statements or misrepresentations—and included Suboxone film on [their] formularies. [The Insurers] rightfully relied on [defendants’] false statements and misrepresentations.”¹⁷¹⁸

II.¹⁹

The District Court dismissed the Insurers’ complaints because it found that the Insurers’ RICO claims turned on an indirect injury that they suffered from being end-payors.²⁰ The court concluded that the Insurers do not have RICO standing to assert their primary theory: that the Insurers “suffered injuries when [they] reimbursed prescriptions for Suboxone.”²¹ For that reason, they suffered no direct injury from defendants’ alleged RICO scheme. Thus, the District Court held that the Insurers lacked RICO standing under the indirect-purchaser rule.

*3 As mentioned above, this characterization of the Insurers’ position aligns with the definition of a “third-party payor,” which comprises those who are barred from recovery in a RICO action by the indirect-purchaser rule. The Supreme Court first recognized that plaintiffs, asserting Clayton Act violations, cannot demonstrate an injury by providing evidence of being an “indirect purchaser.”²² The Court instituted the indirect-purchaser rule because pecuniary recoveries by indirect purchasers would “transform treble-damages actions into massive multiparty litigations involving many levels of distribution and including large classes of ultimate consumers remote from the defendant.”²³ We later recognized in McCarthy that the same policy concerns apply to RICO cases.²⁴ Thus, the indirect-purchaser rule is applicable here.

The main theory advanced in the Insurers’ complaints is a textbook indirect-purchaser theory: They seek redress for injuries suffered because their insureds purchased Suboxone film and the Insurers reimbursed those purchases. In their complaints, the Insurers allege that defendants “marketed, sold, purchased, or provided Suboxone film to thousands of individuals” and that the Insurers “suffered injuries when [they] reimbursed prescriptions for Suboxone [film] that otherwise would not have been made and/or paid the higher prices that resulted from illegal conduct.”²⁵ In that way, based on the Insurers’ complaints, the injury that the Insurers purportedly suffered came from the “reimbursed prescriptions.”²⁶ Such a claim is barred by the indirect-purchaser rule.

On appeal, however, the Insurers contend that the District Court’s analysis did not address their theory of direct, cognizable injury, a theory based on the contention that defendants fraudulently induced them to include Suboxone film on their formularies. But even if we were to take the Insurers’ claim at face value, they still fail to satisfy the Rule 9(b) standard of particularity. Because the Insurers’ claim is one of fraud, it must comply with Fed. R. Civ. P. 9(b). As mentioned above, “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”²⁷ “The purpose of Rule 9(b) is to provide notice of the ‘precise misconduct’ with which the defendants are charged and to prevent false or unsubstantiated charges.”²⁸ “Although Rule 9(b) falls short of requiring every material detail of the fraud such as date, location, and time, plaintiffs must use ‘alternative means of injecting precision and some measure of substantiation into their allegations of fraud.’ ”²⁹ One such alternative measure would have been through satisfaction of the standard set forth by the RICO statute, which “requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. The plaintiff must, of course, allege each of these elements to state a claim.”³⁰

*4 And yet, there is no specific allegation of injury or pattern other than the expense of the drug involved. The Insurers; complaints make only passing references to formularies. They fail to specify, for example: which of Defendants’ misrepresentations Insurers relied on when they placed Suboxone film on their formularies; to whom or by whom those misrepresentations were made; or when they were made. At most, the Insurers state the conclusory allegation that they “reasonably relied on [defendants’] statements and misrepresentations ... and included Suboxone film on [their] formularies.”³¹

To comply with Rule 9(b), Insurers’ must at least describe, with particularity, how they were induced by Defendants. Instead, they merely claim that they were induced without pointing to which misrepresentations caused their induction. In other words, under Rule 9(b), there is no indication which “circumstances constitute[ed] the fraud” they complain of. If this Court cannot say how defendants’ fraud caused Insurers’ injury, it cannot say that Fed. R. Civ. P. 9(b) was satisfied.³²

III.

For the reasons stated above, we will affirm the District Court’s order, dismissing the Insurers’ complaints.