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Federal Appeals Court Rejects Class Action Challenge to Pharmaceutical Marketing Practices

Insurance companies, labor unions and other organizations that provide third-party coverage of prescription drugs sued Eli Lilly, the maker of psychotropic drug Zyprexa, alleging that the company understated side effects, overstated efficacy, overcharged for, and improperly promoted the drug for uses unapproved by the FDA. The plaintiffs alleged that as a result of company practices, third-party payers overpaid for the drug and they sought $6.8 billion in damages.


The U.S. Court of Appeals for the Second Circuit held in UFCW Local 1776 v. Eli Lilly that the case could not proceed as a class action — a significant setback for consumers, as it requires case-by-case consideration rather than allowing adjudication in one single proceeding.

Plaintiffs in UFCW Local 1776 argue that the aggressive marketing combined with misleading and inaccurate information — including information about off label uses — artificially inflated their costs as drug purchasers. The marketing campaign leads doctors to prescribe the expensive brand name drugs rather than generics that would have been just as effective and suitable. Because brand name drug companies can spend more money to market their products than others, it is probably not surprising that prescriptions for brand name drugs are written more than twice as often as for readily available generic drug alternatives.

Unfortunately, the FDA acknowledges it is ill-equipped to monitor the marketing and use (including off-label use) of prescription drugs after entry to the marketplace. This makes private enforcement of illegal conduct all the more important. A critical tool for private enforcement is the availability of class action lawsuits. By allowing numerous claims to be aggregated in one lawsuit, class actions are an efficient and effective way to stop widespread practices in a single legal action and they often provide the only means by which aggrieved plaintiffs can find justice since proceeding on an individual case-by-case basis may be out of the reach of an individual's means.

Moreover, in this case plaintiffs alleged that many of the marketing efforts are focused on off-label uses of drugs — prescribing the drugs for uses other than those which the Food and Drug Administration (FDA) approved. While the practice is illegal, studies show that doctors subject to marketing of these uses are far more likely to engage in it, and in fact this lawsuit alleges extensive inappropriate marketing of Zyprexa for unapproved uses.

Amicus Brief

AARP Foundation Litigation attorneys filed AARP's "friend of the court" brief in conjunction with Prescription Access Litigation. AARP's brief cited study after study that documented the link between marketing tactics and doctors' decision making. One 2003 study of Medicaid prescription drug spending concluded that almost $230 million could have been realized by a more frequent reliance on generic rather than brand name drugs.

In this case, many of the class members are nonprofit health and welfare funds created for the benefit of workers and retirees. These funds have seen resources dwindle as health care costs have risen and the economy stalled. As the brief notes, "For these funds, which are already cutting benefits, the only realistic possibility for a remedy against drug overcharges brought on by illegal marketing practices is through the class action device."

What's at Stake

Prescription drug spending has skyrocketed over the last decade and a half, and national health expenditures on prescription drugs have quadrupled. Misleading, aggressive marketing is part of the problem, and this decision will do nothing to help.


While the trial court had allowed the dispute to proceed as a class action, the federal appeals court ruled that class-wide relief is not possible where each plaintiff had to show that Zyprexa was purchased in reliance on the manufacturer's marketing misrepresentations. This means that every individual and entity claiming harm will need to offer proof that but for the marketing of the product, the victim of the misinformation would not have been induced to purchase Zyprexa. Plaintiffs are petitioning the U.S. Supreme Court to review the appellate decision.

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