Opinion
MDL NO. 1430, Master File No. 01-CV-10861, Case No. 1:04-CV-10176-RGS
April 1, 2004
Elizabeth K. Ainslie, Theresa E. Loscalzo, Jonathan S. Liss, O. Scott Barber, SCHNADER HARRISON SEGAL LEWIS LLP, Philadelphia, Pennsylvania, for Plaintiff Aetna Health, Inc.
Donald R. Frederico, McDermott Will Emery, Boston, MA, OF Counsel for Abbott
Joshua T. Buchman, McDermott Will Emery, Chicago, IL, of Counsel for Abbott
Joseph F. Savage, Jr., Testa, Hurwitz Thibeault, Boston, MA, of Counsel for TAP Pharmaceuticals, Inc. and TAP Pharmaceutical Products, Inc.
Tina M. Tabacchi, Jones Day, Chicago, IL, of Counsel for TAP Pharmaceuticals, Inc. and TAP Pharmaceutical Products, Inc.
Robert R. Stauffer, Jenner Block, LLC, Chicago, IL, of Counsel for Takeda Chemical Industries, Ltd.
Thomas M. Sobol, Hagens Berman LLP, Boston, MA, Plaintiffs' Counsel
Jeffrey Kodroff, Spector, Roseman Kodroff, Philadelphia, PA, for Plaintiffs' Counsel
Michael Hefter, Dewey Ballantine LLP, New York, NY, for Plaintiffs' Counsel
Richard W. Cohen, Lowey, Dannenberg, Bemporad Selinger, P.C., White Plains, NY, for Plaintiffs' Counsel
Joseph Saveri Lieff, Cabraser, Heimann Bernstein LLP, San Francisco, CA, for Plaintiffs' Counsel
Lisa Mezzetti, Cohen, Milstein, Hausfeld Toll, Washington, DC, for Plaintiffs' Counsel
J. Hoke Peacock, Susman Godfrey, Houston, TX, for Plaintiffs' Counsel
Gregory C. Cox, Provost Umphry, L.L.P., Beaumont, TX, for Plaintiffs' Counsel
Joseph D. Jackson, Baxley, Dillard, Dauphin, McKnight Barclift, Birmingham, AL, for Plaintiffs' Counsel
AETNA HEALTH INC.'S MEMORANDUM IN OPPOSITION TO TAP PHARMACEUTICAL PRODUCTS INC.'S MOTION TO DISMISS
Aetna Health, Inc. (Aetna) and other providers of health insurance services have filed suit alleging that TAP Pharmaceuticals Products, Inc. (TAP) intentionally and fraudulently caused insurers to be overcharged for Lupron®. There is no real question regarding what happened. For a decade, TAP: (1) controlled a pervasive scheme through which it fraudulently inflated the reimbursement costs of its drug Lupron® to Aetna and others; (2) encouraged health care providers to falsely bill Medicare and private insurers for free samples of the drug; (3) admitted to criminal liability for its actions in late 2001; and (4) agreed to pay an unprecedented $875 million fine to resolve the government's criminal charges and civil claims.
In the face of its admitted and undisputable course of conduct, in its present motion TAP nonetheless takes the position that Aetna has failed to allege a single valid cause of action. TAP moves to dismiss Aetna's Amended Complaint on the grounds that the Amended Complaint's fraud claims are insufficiently pleaded and because it suffers from various other legal defects. For reasons discussed below, TAP's motion should be denied.
I. WHEN DISCUSSED ACCURATELY, AETNA'S ALLEGATIONS MAKE CLEAR THAT IT HAS STATED VALID CLAIMS
TAP's basic approach is to omit vast amounts of what Aetna has alleged and then to contend-based on TAP's extremely limited and selective discussion-that Aetna has not alleged enough. Obviously, this is not the proper approach in a motion to dismiss.
TAP purports to summarize Aetna's allegations in a single paragraph ( see Def. Br. at 2), and then argues that Aetna's Amended Complaint is deficient, vague and insufficiently particular. ( See Def. Br. at 5-6, 8.) A review of what Aetna has alleged makes clear that the Amended Complaint is adequately pleaded.
TAP's Memorandum in Support of its Motion to Dismiss refers to and relies upon the Joint Memorandum of TAP, Abbott and Takeda to Dismiss The Blues Plans' Consolidated Complaint. ( See Def. Br. at 3-4 and 15 citing Joint Mem. at 2-3 and 5-14.) The referenced Joint Memorandum in turn refers to an extensive collection of attached exhibits and outside sources not attached to the subject complaint nor expressly incorporated therein. Because the referenced portions of the Joint Memorandum rely upon factual "background" materials that should not be considered in connection with a motion to dismiss, this Court should decline to consider TAP's present arguments that are based on those same materials. See Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993) ("consideration of documents not attached to the complaint, or not expressly incorporated therein, is forbidden").
As alleged in the Amended Complaint, TAP (a wholly-owned joint venture of Abbott Laboratories (Abbott) and Takeda Chemical Industries, Ltd. (Takeda)) markets and distributes Lupron®, a drug used to treat advanced prostate cancer, endometriosis and precocious puberty. (Am. Compl. ¶ 15.) Lupron® is an injectable that generally is administered in physicians' offices by a licensed health care professional. (Am. Compl. ¶ 18.)
Generally, physicians purchase Lupron® directly from TAP, administer the drug to the patient, and then seek reimbursement for all or some of the cost of the drug from the patient's insurer (third-party payors like Aetna or the Medicare program), depending on the patient's insurance coverage. (Am. Compl. ¶ 34.) Either the patient or a private insurance company like Aetna (pursuant to a supplemental insurance plan) pays any remaining cost. ( Id.)
Medicare and Aetna based reimbursement rates for physicians' administering Lupron® upon or in reference to the drug's national average wholesale price (AWP), which was in turn derived from drug industry pricing compendia such as Red Book, Price Alert or Medispan. (Am. Compl. ¶¶ 35, 38.) The AWP for Lupron® as it appeared in these publications was supplied by TAP. (Am. Compl. ¶ 20.) During the period relevant to the Amended Complaint, TAP manipulated and raised the AWP for Lupron® without regard to its actual price — it went from $437 in 1993 to $595 in 1999, but during this same time period TAP decreased the average sales price of the drug to physicians from $340 to $207. (Am. Compl. ¶ 48.) The resulting difference between the published AWP and the actual sales price was marketed by TAP as the "Return to Practice" or "Spread" that providers could enjoy if they prescribed and administered Lupron® to their patients. (Am. Compl. ¶ 43.) TAP knew that if it falsely inflated AWP while maintaining or even reducing physicians' actual acquisition cost, the larger difference between the published AWP and the actual acquisition cost meant a larger profit "spread" for the providers, which meant more incentive to prescribe Lupron® instead of less expensive alternatives. (Am. Compl. ¶¶ 46-51.)
Under TAP's "Return to Practice" or "Spread" scheme, physicians were reimbursed for Lupron® at amounts far higher than what the physicians paid TAP for the drug. ( Id.) TAP provided unlawful financial incentives to induce providers to purchase and administer Lupron®. As summarized in the Amended Complaint, TAP's extensive improper sales and marketing practices were designed to increase market share at the expense of third party payors like Aetna. Among TAP's improper tactics were:
(a) setting actual wholesale prices at which it sold Lupron®
(b) listing the AWP of Lupron® in Red Book, Price Alert and other publications at an amount materially greater than the actual average wholesale price;
(c) contacting Red Book, Price Alert and other publications for the purpose of falsely setting and controlling the listed AWP;
(d) providing information to health care providers about Red Book and Price Alert — quoted AWP and the actual average wholesale price for Lupron®
(e) creating and disseminating marketing and sales materials that showed the spread between the actual average wholesale price on the one hand, and the AWP reported in Red Book, Price Alert and other publications for the purposes of Medicare reimbursement rates on the other;
(f) creating and disseminating marketing and sales materials for health care providers discussing how the use of free samples could increase their profits;
(g) creating and disseminating marketing and sales materials for health care providers discussing other financial inducements available from the Defendant for the usage of Lupron® [and]
(h) inducing patients and third-party payors, such as Aetna, to pay inflated direct reimbursements, co-payments, coinsurance and deductibles for Lupron® in reliance on the inflated AWP.
(Am. Compl. ¶ 44.)
TAP used an array of fraudulent tactics to further its goals of defrauding third party payors like Aetna. As a means of securing a larger market share and offering an even larger spread, TAP gave thousands of free samples of Lupron® to physicians and instructed them to bill Aetna and other third party payors for the samples, further reducing physicians' actual acquisition cost for the drug. (Am. Compl. ¶¶ 53-55.) TAP also gave physicians illicit financial incentives to choose Lupron® over its rival drug Zoladex® including sham educational grants, debt forgiveness, and all expense-paid trips to exotic locations where physicians listened to and gave talks on the profits to be gained from administering Lupron®. ( Id. at ¶¶ 56-65.)
Far from being unwitting participants, health care providers knowingly furthered TAP's Return to Practice scheme. The providers' complicity is evident from their attendance at meetings sponsored by the Defendant, including "TAP into the Future" trips during which the Lupron® scheme was discussed with large numbers of providers, and at meetings of professional organizations-such as the American Urology Association-at which the Defendant established booths and exhibits discussing the spread and return to practice schemes. (Am. Compl. ¶¶ 77(b) — (c).) The providers willfully failed to inform government regulators (including HCFA and CMS), and third-party payers including Aetna, of the existence of the spread and return to practice schemes, and even went so far as to lobby government officials not to switch to a reimbursement protocol based on figures other than AWP. ( Id. at ¶¶ 77(d), (f).)
TAP cloaked its Lupron® marketing scheme in secrecy. It went to great lengths to cover up the true prices it charged for Lupron® — requiring that providers keep confidential their acquisition cost, and insisting that they not disclose to third party payors like Aetna the price discounts and rebates which TAP provided in connection with Lupron®. (Am. Compl. ¶ 66.) TAP closely guarded its actual pricing and sales figures for Lupron®. ( Id. at ¶ 67.) The only pricing information ever publicly released was the AWP reported to industry compendia-TAP did not provide Lupron® pricing data to "true cost" publications like IMS, which routinely collect and report sales data for the pharmaceutical industry. ( Id. at ¶ 68.)
TAP's efforts at secrecy succeeded for years, and prevented Aetna from knowing what the actual prices or costs for Lupron were. TAP also prevented Aetna from knowing it was encouraging providers to seek reimbursement for the illegal numbers of free samples it was providing. (Am. Compl. ¶ 66.) Aetna also had no way of knowing that TAP was providing illicit financial incentives such as free television sets and unrestricted "research grants" to health care providers to induce them to use Lupron®. ( Id.) As a means of ensuring that money would continue to pour in from the scheme, TAP also retained lobbyists and attorneys to actively discourage government agencies from investigating the true prices charged for Lupron® and to discourage any agencies from switching to a reimbursement protocol based on figures other than AWP. ( Id. at ¶ 69.) In sum, TAP's fraudulent conduct was self-concealing, and its concerted efforts to conceal its true pricing for Lupron® demonstrate that it knew its conduct was fraudulent. ( Id. at ¶ 70.)
TAP, its corporate parents Abbot and Takeda, and the participating health care providers all enjoyed tremendous financial gain as a result of the fraudulent scheme. Aetna now seeks to recover from TAP the difference between what it paid for Lupron® as a result of the fraudulently inflated AWP and the actual price paid by physicians for the drug, along with punitive damages.
II. STANDARDS APPLICABLE TO TAP'S MOTION TO DISMISS
When reviewing a motion to dismiss, the Court must accept the allegations of the complaint as true, and, if under any theory the allegations are sufficient to state a cause of action in accordance with the law, must deny the motion to dismiss. Vartanian v. Monsanto Co., 14 F.3d 697, 700 (1st Cir. 1994). All reasonable inferences permitted by the factual averments of the complaint are to be drawn in plaintiffs' favor. Garita Hotel Ltd. Pshp v. Ponce Fed. Bank, F.S.B., 958 F.2d 15, 17 (1st Cir. 1992).
III. THE AMENDED COMPLAINT SATISFIES THE PLEADING REQUIREMENTS OF RULE 9(b)
TAP asserts that that Counts I-V and VII-IX should be dismissed because Aetna supposedly has failed to allege TAP's fraudulent conduct with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure. According to TAP, the Amended Complaint is deficient in two ways: (1) "Aetna fails to allege the time, place, or contents of any allegedly fraudulent statements;" and (2) "Aetna fails to explain how the alleged misstatements are false." (Def. Br. at 6.) A review of Aetna's detailed Amended Complaint demonstrates that, contrary to TAP's assertions, the Amended Complaint more than satisfies Rule 9(b)'s heightened pleading requirements.
Rule 9(b) is satisfied because Aetna has pleaded with particularity the circumstances of the alleged fraud in a manner that places TAP on notice of the precise misconduct with which it is charged. See Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984). Courts in both the First and Third Circuits have cautioned against an overly rigid reading of Rule 9(b). A fraud claim is adequately pleaded so long as plaintiffs use some means of "injecting precision and some measure of substantiation into their allegations of fraud." Rolo v. City Investing Co. Liquidating Trust, 155 F.3d 644, 659 (3d Cir. 1998) (citing Seville, 742 F.2d at 791); Federal Sav. Loan Ins. Corp. v. Shearson-American Express, 658 F. Supp. 1331, 1337 (D. P.R. 1987) (citing Seville, supra). "In applying Rule 9(b), focusing exclusively on its `particularity' language is too narrow an approach and fails to take account of the general simplicity and flexibility contemplated by the rules." Seville, 742 F.2d at 791 (citing Christidis v. First Pa. Mortg. Trust, 717 F.2d 96, 100 (3d Cir. 1983)). Thus, while "it is certainly true that allegations of date, place or time fulfill these functions, nothing in the rule requires them." Seville, 742 F.2d at 791. A claim is sufficient if it "pleads with particularity the `circumstances' of the alleged fraud in order to place the defendants on notice of the precise misconduct with which they are charged." Id. In short, "[a] claim satisfies the requirements of Rule 9(b) if it adequately delineates the acts and transactions constituting the fraud to apprise defendants fairly of the claim, and its allegations are sufficiently clear to enable defendants to answer." Jairett v. First Montauk Sec. Corp., 203 F.R.D. 181, 186 (E.D. Pa. 2001).
Aetna's Amended Complaint fulfills this standard because it clearly puts TAP on notice of the precise fraudulent conduct with which it is charged. Indeed, as this Court noted in its Memorandum and Order on the motion to dismiss the consolidated and class action complaints, "the defendants' claim that they lack the required notice is somewhat incredulous given the criminal investigation, TAP's guilty plea, and the civil settlement with the government. . . . " (Nov. 25, 2003 Order at 23.) Specifically, the Amended Complaint provides concrete examples of how, over the course of a decade, TAP artificially inflated the AWP for Lupron® by "deliberately and intentionally charg[ing] health care providers across the United States a price substantially less than the AWP that [TAP] had reported to Red Book, Price Alert and other publications." (Am. Compl. ¶ 43.) Aetna alleges TAP's primary fraudulent conduct in numerous places in the Amended Complaint. See, e.g., id. at ¶¶ 44(b), (c), (d), (e), (f), (g), (h), (i), (1), 46, 47. TAP has ample notice of Aetna's core theory: that TAP fraudulently inflated the reported AWP and that third party payors like Aetna suffered damages as a result. The Amended Complaint not only alleges the time period of the fraud as 1992 through October 2001 ( Id. at ¶ 2), but also identifies several specific instances where TAP engaged in some of the deceptive conduct giving rise to Aetna's claims. See, e.g., id. at ¶¶ 50, 51, 56, 60. The Amended Complaint also contains numerous allegations regarding the manner in which TAP, through its agents and employees, manipulated the AWP for Lupron® by deliberately and repeatedly disseminating misinformation on Lupron®'s pricing to the public; concealed and failed to disclose the truth about the actual cost of Lupron® and created and implemented such schemes as the "Return to Practice" and "TAP into the Future" program, all in an effort to create, and then perpetuate, an artificially high return in Lupron®. See e.g., id. at ¶¶ 43-47, 51, 53-55, 57-58, 61-64, 66-71. Aetna has more than adequately described the nature and subject of the fraudulent acts TAP committed in furtherance of its scheme and has made TAP abundantly aware of the nature of the claims against it.
TAP includes Aetna's civil conspiracy claim (Count VII) among those that should be subject to the heightened pleading requirements of Rule 9(b). However, courts generally have held that conspiracy to defraud is subject only to the notice pleading standards of Rule 8. See, e.g., Jairett, 203 F.R.D. at 187-88; U.S. ex rel. Atkinson v. Pa. Shipbuilding Co., 2000 U.S. Dist. LEXIS 12081, at® 39-40 (E.D. Pa. Aug. 24, 2000); Smith v. Berg, 1999 U.S. Dist. LEXIS 18298, at® 2 n. 1 (E.D. Pa. Dec. 1, 1999) (applying Rule 9(b) to fraud allegations in civil RICO claim, but not to related conspiracy claim). See § V(D), infra.
As far as Aetna's RICO claims are concerned, Aetna has alleged that TAP engaged in the predicate acts of mail and wire fraud with the specificity required by Rule 9(b). The elements of wire and mail fraud are: (1) a scheme to defraud; and (2) use of the mails or wires for the purpose of executing the scheme. See Schmuck v. United States, 489 U.S. 705, 711 (1989). The actual violation is the use of the mails or wires. See id. Accordingly, a defendant is liable for mail or wire fraud even if it sends true statements by mail or wire transmission in furtherance of a scheme to defraud. See id. at 714-15. The mailings or wire transmissions need not be sent to the victim of the scheme, so long as they are sent in furtherance of the scheme. See id. Moreover, a defendant can be held liable for mail or wire fraud even if the defendant did not personally initiate the mailing or wire, and even if the defendant had no prior knowledge of the mailing. See State Farm Mut. Auto Ins. Co. v. Makris, 2003 U.S. Dist. LEXIS 3374, at® 21 (E.D. Pa. Mar. 4, 2003).
Here too, Aetna has more than adequately described the nature and subject of the predicate acts TAP committed in furtherance of its scheme and has made TAP abundantly aware of the nature of the claims against it. Aetna alleges "thousands of communications" by TAP in furtherance of its fraudulent scheme, including (1) the distribution of marketing materials and free samples to physicians; (2) statements of the AWP made to national publications; (3) the issuance of credit memos and invoices reflecting a zero charge for Lupron® (4) communications with government and private insurers that fraudulently represented the AWP for Lupron® and (5) communications with health insurers and patients intended to induce payments for Lupron® to be made in reliance on the published AWP. (Am. Compl. ¶ 73.) In light of these allegations, this Court's holding from the class action case is equally applicable here: "[W]hether or not the Amended Complaint is faithful in [e]very respect to the requirements of Rule 9(b), a dismissal for failure to comply with the Rule at this point in the litigation would be inappropriate." (Nov. 25, 2003 Order at 23 (citing New England Data Servs., Inc. v. Becher, 829 F.2d 286, 290-91 (1s Cir. 1987)). See also Seville, 742 F.2d at 790 ("It is the function of discovery to fill in the details, and of trial to establish fully each element of the cause of action."); Husco Inc. v. Southern Bleacher Co., 268 B.R. 441, 452-53 (Bankr. W.D. Pa. 2001) (holding that plaintiff's wire fraud allegations "provide defendants . . . with notice of the precise misconduct of which they are accused. Further specifics can be obtained through discovery.").
In sum, because the Amended Complaint gives TAP ample notice of the facts upon which Aetna's bases its claims, TAP's Rule 9(b)-based arguments fail. IV. THE AMENDED COMPLAINT STATES ACTIONABLE RICO CLAIMS
To state a claim under the federal RICO statute, 18 U.S.C. § 1962, a plaintiff must plead four elements: "(1) conduct (2) of an enterprise (3) through a pattern of (4) of racketeering activity." Sedima, S. P. R. L. v. Imrex Co., 473 U.S. 479, 496 (1985). An enterprise may be a legal entity like a business, a governmental unit, or a union, or it may be an informal grouping of individuals associated in fact. United States v. Turkette, 452 U.S. 576, 580-81 (1981). "RICO liability is not limited to those with primary responsibility for the enterprise's affairs, just as the phrase indirectly or directly [in 1962(c)] is not limited to those with a formal position in the enterprise, but some part in directing the enterprise's affairs is required." Reves v. Ernst Young, 507 U.S. 170, 179 (1993).
The Amended Complaint sets forth two alternative theories of TAP's liability under RICO. Count I alleges that Aetna was harmed by an association-in-fact enterprise consisting of TAP, Abbott and Takeda. (Am. Compl. ¶¶ 79-93.) Count II alleges that the enterprise consisted of an association-in-fact comprised of TAP and the various health care providers involved in the submission of fraudulent Lupron® reimbursement claims. ( Id. at ¶¶ 94-108.) Count III alleges a conspiracy in violation of 18 U.S.C. § 1962(d). ( Id. at ¶¶ 109-114.) In its November 25, 2003 ruling on similar RICO claims presented by plaintiffs in MDL 1430, this Court denied defendants' motion to dismiss the TAP enterprise and conspiracy counts but granted it as to the provider enterprise count. TAP does not reargue the TAP enterprise and RICO conspiracy claims already addressed by the Court, but argues that Aetna's provider enterprise allegations fail for the same reasons as those raised in the previous motion to dismiss. For reasons now discussed, Aetna respectfully submits that its provider enterprise allegations are sufficiently pleaded to withstand TAP's motion to dismiss Count II.
Supreme Court precedent requires that Aetna allege that the provider enterprise is an on-going organization, formal or informal, and that the association functions as a continuing unit. Turkette, 452 U.S. at 583. Contrary to TAP's arguments, Aetna has done so, alleging that the providers and TAP are an on-going organization that functions as a "continuing unit." ( See Am. Compl. ¶¶ 96-97.)
Turning to the Court's stated area of concern in its November 25th Opinion and Order — that the provider enterprise is an unworkable "hub and spoke" conspiracy that lacks a recognizable structure — Aetna submits that, viewing the Amended Complaint in the light most favorable to the plaintiff, the provider enterprise is viable under RICO.
The provider enterprise is valid under RICO though it may appear to be a hub and spoke structure. Aetna has alleged that TAP operated an organized and integrated scheme through which it used illegal financial incentives to recruit health care providers to participate in its fraudulent AWP scheme. The providers in turn administered Lupron® (even if less expensive alternatives were appropriate), and submitted hugely inflated reimbursement requests to insurers and Medicare — the scheme's victims. The providers were essential to TAP's scheme and were well aware of the involvement of other providers. (Am. Compl. ¶ 74.).
These allegations suffice because a RICO plaintiff is permitted to cast a wider net than was possible under traditional conspiracy principles. See United States v. Tashjian, 660 F.2d 829, 834 (1st Cir. 1981) (citing United States v. Elliott, 571 F.2d 880, 902-03 (5th Cir. 1978)) (permitting government more latitude in describing association-in-fact enterprise and borrowing from civil RICO liability standards). See also United States v. Marino, 277 F.3d 11, 33 (1st Cir.), cert. denied 536 U.S. 948 (2002) (approving jury instruction stating that "although a person's role in the enterprise may be very minor, a person will still be associated with the enterprise if he knowingly joins with a group of individuals associated in fact who constitute the enterprise"). A review of the Amended Complaint shows that Aetna has amply detailed the basis for its allegations that TAP and the providers were collectively involved in a structured scheme to defraud Medicare and insurers like Aetna.
First, there was a "wheel" around the "spokes" providing sufficient structure because the providers clearly knew that others were involved in the scheme. Providers attended meetings such as "TAP Into the Future" junkets sponsored by TAP at which the scheme — and the profits to be made from administering and overbilling for Lupron® — was discussed with groups of providers. (Am. Compl. ¶ 77(b).) Moreover, providers attended trade association meetings at which TAP set up booths and exhibits discussing the scheme with other providers. ( Id. at ¶ 77(c).) The presence of hundreds of other providers at these meetings and trade shows made it inescapably clear that there was a structure to the scheme — a large community of providers who were profiting from and furthering TAP's fraudulent scheme.
Second, there was a wheel around the spokes because providers furthered the scheme through affirmative acts and material omissions. Providers kept secret their actual acquisition costs for Lupron® and abided by TAP's requirements that they not disclose their true costs to the government or to insurers. (Am. Compl. ¶ 77(d).) Secrecy was an important part of the scheme — without it, insurers and government agencies would have required that providers only submit reimbursement requests for what the drug cost them. For years, providers refused to report the scheme to relevant authorities such as HCFA and CMS, thus allowing TAP to reap unlawful profits for a decade. ( Id.) Moreover, despite knowing that AWP was fraudulently inflated, providers employed professional trade associations to aggressively lobby federal and state policy makers to ensure that AWP remained the reimbursement yardstick for drugs like Lupron®. ( Id. at ¶ 77(f).) The providers' concerted efforts to keep the scheme secret and ensure its survival provides additional evidence that there was a structure to the scheme.
Even assuming arguendo that not every provider that administered Lupron® during the relevant period knew every aspect of TAP's fraudulent scheme, Aetna's allegations nonetheless are sufficient. The law does not require perfect sameness of knowledge within an enterprise. Rather, it is commonplace in RICO conspiracies for the members of the enterprise to engage in separate schemes or conspiracies, not all of which involve all participants in the enterprise. See United States v. Mauro, 80 F.3d 73, 77 (2d Cir. 1996) (association-in-fact enterprise allegations sufficient despite change in membership of enterprise); Zito v. Leasecomm Corp., 2003 U.S. Dist Lexis 17236 at® 24-25 (S.D.N.Y. Sept. 30, 2003) citing Mauro, supra (denying defendant's Rule 12(b)(6) motion to dismiss "hub and spoke" enterprise despite fact that not every participant was involved in or even specifically aware of the activities of other participants). All that is required is circumstantial evidence that the nature of the conspiracy was such that each participant must necessarily have known that others were also conspiring to violate RICO. See United States v. Sutherland, 656 F.2d 1181, 1194-95 (5th Cir. 1981).
Here, it was obvious to the participating providers that they were not operating alone — they well knew that other providers were carrying out TAP's instructions and were conspiring with TAP to defraud Medicare and insurers. They also took steps to ensure that they, and TAP, would continue to get rich from the scheme. In short, the providers were an essential part of the scheme and executed TAP's design to near perfection. The enterprise is sufficiently pleaded to supply the wheel around the individual spokes and is viable under RICO and case law interpreting that statute. Accordingly, TAP's motion to dismiss Count II should be denied.
V. THE AMENDED COMPLAINT STATES ACTIONABLE STATE LAW CLAIMS A. The Amended Complaint's Insurance Fraud Claim is Actionable
Under Pennsylvania's insurance fraud statute, a plaintiff must allege that the defendant: (1) knowingly and with the intent to defraud any insurer; (2) presents or causes to be presented to any insurer; (3) any statement forming a part of, or in support of a claim; (4) that contains any false, incomplete or misleading information concerning any fact or thing material to the claim. 18 Pa. C.S. § 4117(a)(2) (emphasis added).
Aetna has pleaded the requisite elements, alleging that — through falsely inflating the Lupron® AWP and encouraging physicians to defraud insurers — TAP caused many thousands of materially false reimbursement requests to be submitted to third party payers like Aetna. (Am. Compl. ¶¶ 115-126.) As detailed in the Amended Complaint, TAP's fraudulent conduct was a proximate cause of the submission of millions of dollars worth of false reimbursement claims: TAP published inflated AWPs knowing and intending that they would be used as instruments of fraud; distributed marketing materials to physicians encouraging them to overbill for Lupron® and provided improper financial incentives to physicians to induce them to continue administering Lupron®. (Am. Compl. ¶ 73.) Far from standing idly by while urologists submitted thousands of fraudulent reimbursement requests, TAP took an active interest in the submission of these false claims, which were the lifeblood of its scheme to defraud insurers and Medicare.
TAP attempts to add a "privity" requirement into the insurance fraud statute, asserting that the statute does not apply because TAP is not involved in the "claims submission process." (Def. Br. at 11.) This proposed interpretation would lead to the absurd result of permitting TAP to commit fraud indirectly, in direct violation of the intent of the Pennsylvania legislature.
The role of courts in interpreting a statute is to give effect to the legislature's intent. It presumed that the enacting legislature expresses its intent through the ordinary meaning of its language. Thus every exercise of statutory interpretation begins with the plain language of the statute. Idahoan Fresh v. Advantage Produce, Inc., 157 F.3d 197, 202 (3d Cir. 1998) (citing Negonsott v. Samuels, 507 U.S. 99, 104 (1993)). See also Eastern Mountain Platform Tennis, Inc. v. The Sherwin-Williams Co., Inc., 40 F.3d 492, 499 (1st Cir. 1994) (no need to resort to alternative means of interpretation where statute's plain language is unambiguous). Courts should attempt to give meaning to every word used and should avoid an interpretation which makes an element of the statute superfluous. Idahoan Fresh, 157 F.3d at 202 (citing United States v. Alaska, 521 U.S. 1 (1997)); Commonwealth of Pennsylvania v. Dietterick, 429 Pa. Super. 180, 186, 631 A.2d 1347 (1993) (citing 1 Pa. C.S. § 1921(e)) (every statute is construed to give effect to all of its provisions).
The broad language of Pennsylvania's insurance fraud statute clearly prohibits TAP's fraudulent conduct described in the Amended Complaint. The statute makes it illegal to defraud an insurer like Aetna either directly or indirectly. The legislature's decision to include the "causes to be presented" clause signals an intent to penalize the submission of fraudulent statements to insurers, whether the defrauder submits the information itself, or causes its submission through an intermediary. See 18 Pa. C.S. § 4117(a)(2). Moreover, contrary to TAP's position, the statute sweeps more broadly than simply prohibiting the submission of "false claims." It also makes it unlawful to cause the submission of any statement that forms a part of a false claim. See id. Here, Aetna has amply alleged that TAP caused the submission of such false information by inflating the Lupron® AWP and implementing its fraudulent marketing scheme.
In sum, Aetna need not show that TAP directly submitted fraudulent claims to Aetna. Interpreting the insurance fraud statute to include TAP's conduct within its sweep is in keeping with Pennsylvania's policy of broad interpretation of fraud statutes. See Commonwealth v. Monumental Properties, 459 Pa. 450, 479-480, 329 A.2d 812 (1974) (consumer fraud statute should be broadly construed). It is adequate to allege, as Aetna has, that TAP caused fraudulent information to be included in claims presented to Aetna. TAP's motion to dismiss Count IV should be denied accordingly. B. The Amended Complaint States a Valid Claim of Fraud
Under the statute, an insurer may recover treble damages if the defendant has engaged in a "pattern" of insurance fraud. 18 Pa. C. S. § 4177(g). TAP makes the disingenuous argument that its acts cannot constitute a "pattern" of insurance fraud because all of its fraudulent acts pertain to the "same subject matter," i.e. Lupron®. (Def. Br. at 12.) The single case TAP cites for this proposition dealt with misrepresentations made in connection with an insurance claim for a vanished antique clock, and did not address whether the claims constituted a "pattern." See Savadove v. Vigilant Ins. Co., 1999 WL 236602 (E.D. Pa. Apr. 21, 1999), aff'd in part., vac. in par., 215 F.3d 1315 (3d. Cir. 2000) (table). Here, the Amended Complaint alleges a course of fraudulent conduct that endured for a decade — "from the introduction of Lupron to the American market to TAP's guilty plea in 2001." (Nov. 25, 2003 Order at 22.) If a decade-long course of conduct involving thousands of fraudulent communications does not constitute a pattern, nothing does.
Construing the Amended Complaint in the light most favorable to plaintiff, Count V sets forth all of the necessary elements of common law fraud under Pennsylvania law. The essential elements of a cause of action for fraud are: (1) a misrepresentation of an existing fact; (2) that the misrepresentation was innocently made and related to a matter material to the transaction, or that it was knowingly made; (3) actual knowledge of the falsity of the misrepresentation, reckless ignorance of its falsity, or mere false information where a duty to know is imposed on a person by reason of special circumstances; (4) justifiable reliance on the misrepresentation; and (5) damage. Glanski v. Ervine, 269 Pa. Super. 182, 191, 409 A.2d 425, 460 (1979).
Aetna specifically addresses each of the required elements of fraud. (Am. Compl. ¶¶ 128-132), alleging: (1) TAP made knowingly false, misleading, and or fraudulent misrepresentations and/or omissions or made misrepresentations and/or omissions with reckless indifference to the truth; (2) the misrepresentations and omissions were material to the amounts Aetna reimbursed for prescriptions of Lupron® (3) the misrepresentations and omissions were made to induce Aetna to make higher payments; (4) Aetna reasonably relied on the misrepresentations or omissions made by or on behalf of TAP; (5) but for TAP's material misrepresentations and omissions, Aetna would not have overpaid for Lupron®, and would not have suffered the financial loss arising from TAP's deceptive schemes; and (6) by reason of and as a proximate cause of the fraud and acts committed in furtherance thereof, Aetna has suffered grievous injury and has been damaged. Id. These allegations are sufficient to state a cause of action for fraud.
1. The Amended Complaint Alleges Multiple False Representations
TAP asserts that Aetna has not identified "a single misrepresentation by TAP," (Def. Br. 13), but this is not the case. To the contrary, the Amended Complaint is replete with examples of TAP's misrepresentations. (Am. Compl. ¶¶ 2, 5, 22-24, 41-49, 66, 70, 100, 118, 120). Aetna states throughout that TAP's primary misrepresentation was the deliberate and false inflation of the price of Lupron®. ( Id.)
TAP supplied leading industry publications with false and inflated AWPs for Lupron®. ( Id. at ¶¶ 19-24; 41-49.) TAP knew and understood that third-party payors such as Aetna relied on these industry publications to determine reimbursement amounts to providers. ( Id. at ¶¶ 45.) Indeed, Aetna relied on TAP's misrepresentations about the price of Lupron® to its detriment. By manipulating the AWP of Lupron®, TAP caused Aetna to substantially overpay for Lupron®. ( Id. at ¶¶ 24, 42, 131-32.)
2. The Amended Complaint Alleges TAP Owed Aetna a Duty
Not only does Aetna allege numerous misrepresentations made by TAP, it also described an elaborate scheme to conceal the true price of Lupron ® via affirmative misrepresentations. (Am. Compl. ¶¶ 44, 66-71.) Aetna may base a claim for fraud on TAP's "concealment of that which should have been disclosed." See Delahanty, 318 Pa. Super, at 107-08. Concealment is "any affirmative act likely to prevent knowledge of a fact." Henry v. Babecki, 65 Pa. D. C.2d 4, 13 (Phila. Cty. 1974) (quotations omitted). Where the concealment is intentional and calculated to deceive, there is no need to show a duty to disclose information. Piper v. Am. Nat'l. Life Ins. Co. of Texas, 228 F. Supp.2d 553, 558 n. 4 (M.D. Pa. 2002).
As the Court concluded in its Memorandum and Order on the motion to dismiss the consolidated and class action complaints, "this is not a case of nondisclosure." (Nov. 25, 2003 Order at 42.) Indeed, "[d]efendants did not stand mute," but instead "trumpeted a lie by publishing the inflated AWPs, knowing (and intending) them to be used as instruments of fraud." ( Id.) Because TAP engaged in affirmative acts to conceal its true pricing of Lupron®, its conduct is actionable under common law fraud.
3. The Amended Complaint Alleges that TAP Intended to Mislead Aetna
Aetna also adequately alleges that TAP intended to deceive insurers by misrepresenting facts, and that Aetna actually relied on those misrepresentations. (Am. Compl at ¶¶ 3, 14, 19-24, 41-42, 43-47, 66, 88-89, 99-100, 104, 129-30). TAP's return-to-practice scheme would not have worked if it had not believed that third-party payors such as Aetna would reimburse providers according to the inflated rate. TAP knew that if it falsely inflated the AWP of Lupron® while reducing the average sale price to providers, physicians would be reimbursed by Aetna at amounts far higher than what they paid TAP for the drug. ( Id. at ¶¶ 3, 6, 19-24, 43-51.) TAP also knew and understood that Aetna based reimbursement rates for Lupron® upon or in reference to the drug's AWP. ( Id. at ¶ 45.) Without reimbursement at the inflated AWP, TAP's marketing and sales plans for providers would have been worthless. ( Id. at ¶ 44.) As such, TAP fully intended that third party payors like Aetna would rely upon the fraudulently inflated AWP. ( See November 25, 2003 Order at 42.)
4. The Amended Complaint Alleges That Aetna Relied Upon TAP's Misrepresentations
Finally, TAP argues that Aetna has not sufficiently pleaded that Aetna relied upon TAP's misrepresentations and omissions or that these falsehoods proximately caused Aetna's injuries. (Def. Br. at 15.) Accepting all of the allegations in the complaint as true, however, it is clear that Aetna has adequately pleaded reliance and causation. Through the numerous examples cited by Aetna it is evident that the inflated AWP distorted the reimbursement rate Aetna paid. ( See, e.g., Am. Compl. ¶¶ 48-50.)
The Amended Complaint's fraud count is distinguishable from the fraud counts dismissed in the Court's November 25th Order in that it clearly alleges that TAP intended that Aetna would be deceived by its fraudulent misrepresentations, and that Aetna actually relied upon these misrepresentations. ( See Am. Compl. ¶¶ 19-24, 43-47, 130-131.)
For every provider who was reimbursed by Aetna under TAP's return-to-practice scheme, there is evidence that Aetna relied to its detriment on TAP's misrepresentations of the AWP for Lupron®. Aetna does more than simply aver that it reasonably relied on the veracity of TAP regarding the AWP. The Amended Complaint provides examples of how it actually relied on the information TAP provided to prevailing industry publications, and how such reliance caused it to overpay for Lupron ®. (Am. Compl. ¶¶ 19-24, 43-47.) For instance, the Amended Complaint provides the following billing scenario for Lupron® under TAP's return-to-practice scheme:
After receiving an injection of Lupron® Depot 7.5 mg at his urologist's office on April 16, 1996 . . . Patient A's provider sent Aetna a bill for $600. Aetna subsequently reimbursed the provider $496.25, which . . . was equal to the published AWP for early 1996. The provider's actual acquisition cost for this dose was approximately $356. Aetna relied upon the Defendant's fraudulently inflated AWP figure as the benchmark for what it cost the provider to obtain the injection. In reality the Defendant's fraudulent conduct reduced the provider's actual acquisition cost to $356, a difference of $140.75.
( Id. at ¶ 50.)
As explained above, to calculate the proper amount to reimburse treating providers for administering Lupron®, Aetna used the AWP provided by TAP to industry compendia. ( Id. at ¶¶ 19-23.) For every reimbursement it made to a provider based on the falsely inflated AWP of Lupron®, Aetna actually relied on the misrepresentations of TAP and was harmed thereby.
In sum, all the elements of common law fraudulent concealment are well pleaded. Aetna alleges that TAP concealed material facts regarding Lupron ® pricing and the unlawful financial inducements TAP gave to providers; that these facts were material; that they were concealed with the purpose of inducing Aetna to pay inflated prices for the drug; and that Aetna relied upon and suffered damages as a result of TAP's misrepresentations. Accepting all of the Amended Complaint's allegations as true and construing all reasonable inferences in Aetna's favor, TAP's motion to dismiss Count V should be denied.
C. The Amended Complaint States a Valid Claim of Negligent Misrepresentation
To state a claim of negligent misrepresentation, the plaintiff must allege: 1) a misrepresentation of a material fact; 2) made under circumstances under which the misrepresenter ought to have known of its falsity; 3) with intent to induce another to act upon it; and 4) which results in injury to a party acting in justifiable reliance upon the misrepresentation. There also must be a duty owed by the misrepresenter to the party acting upon the misrepresentation. See Bortz v. Noon, 556 Pa. 489, 491, 729 A.2d 555, 561 (1999). "Under Pennsylvania law, which incorporates the Restatement (Second) of Torts § 552, contractual privity is not necessary to maintain a claim for negligent misrepresentation." Borough of Lansdowne v. Sevenson Envtl Servs., 2000 U.S. Dist. Lexis 18732 (E.D. Pa. Dec. 12, 2000).
TAP argues that Aetna's negligent misrepresentation count fails to allege a duty, but this argument mirrors TAP's attack on Aetna's fraud count and there is no need to repeat the relevant counter-arguments here. Moreover, TAP's attempt to raise the economic loss doctrine as a defense to Aetna's negligent misrepresentation count is misplaced. ( See Def. Br. at 18.) The essence of TAP's argument is that since Aetna seeks to recover monetary damages for the harm TAP has caused it, those damages are "economic." This misses the point of the doctrine.
In Pennsylvania, the purpose of the economic loss doctrine is to maintain the separation of tort and contract law. See New York State Electric Gas Corp. v. Westinghouse Electric Corp., 387 Pa. Super. 537, 550, 564 A.2d 919 (1989). To achieve this objective, "the economic loss doctrine precludes recovery in tort for economic losses arising from breach of contract." Valley Forge Conv. and Visitors Bur. v. Visitor's Servs., Inc., 28 F. Supp.2d 947, 951 (W.D. Pa. 1998) (citing Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 618 (3d Cir. 1995); Gen. Pub. Utils. v. Glass Kitchens of Lancaster, 374 Pa. Super. 203, 209-210, 542 A.2d 567, 570(1988).
Here, the Amended Complaint is not an attempt to bring a tort claim in lieu of a contract claim. Aetna's Negligent Misrepresentation count alleges that TAP recklessly or negligently misrepresented material facts concerning the cost of Lupron® and encouraged physicians to submit fraudulent reimbursement claims to third party payors like Aetna, and that Aetna suffered damages as a result. Because Aetna seeks to recover millions of dollars in actual damages proximately caused by TAP's misrepresentations, the economic loss doctrine does not apply.
By contrast, in the case cited by TAP, Pflumm Paving Excavating, Inc. v. Foundation Services Co., 2003 PA Super 41, 816 A.2d 1164 (Pa.Super. 2003), the doctrine applied because the contractor-plaintiff's only damages were cost overruns it suffered as a result of hitting a layer of rock not detected by the defendant engineering firm.
Because Aetna has adequately pleaded its allegations of negligent misrepresentation, TAP's motion should be denied with respect to Count VI.
D. The Amended Complaint States a Valid Claim of Conspiracy
TAP's arguments concerning Aetna's conspiracy count also fail. In order to state a claim for civil conspiracy, a plaintiff must allege that "`two or more persons combined or agreed with intent to do an unlawful act or do an otherwise lawful act by unlawful means. Proof of malice, i.e. an intent to injure, is essential.'" Skipworth v. Lead Indus. Ass'n, Inc., 547 Pa. 224, 235, 690 A.2d 169 (1997) (quoting Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 211, 412 A.2d 466 (1979)). Aetna has met its burden of pleading these elements, notwithstanding TAP's attempts to add pleading requirements that do not exist. TAP's attack on Aetna's conspiracy claim fails for three main reasons.
First, TAP argues the wrong pleading standard. TAP argues that Aetna has "failed to identify or describe with particularity" the health care provider co-conspirators. As noted previously, however, the notice pleading standard of Rule 8, Fed.R.Civ.P. applies to Aetna's conspiracy count, so particularity is not required at this juncture. ( See n. 3, supra.) Nevertheless, the Amended Complaint provides ample notice of the nature of its conspiracy claim, which is that TAP conspired with various health care providers to defraud Aetna and other third party payers by (1) overstating the cost of Lupron®, and (2) submitting fraudulently inflated reimbursement requests. ( See Am. Compl. ¶ 147.) Nothing more is required at this stage.
TAP cites a single, inapposite case for the proposition that Aetna must name all co-conspirators at this stage. ( See Def. Br. at 19 citing Fresh Made, Inc. v. Lifeway Foods, Inc., 2002 WL 31246922 at® 10 (E.D. Pa. Aug 9, 2002).) The Fresh Made plaintiff alleged the existence of an antitrust conspiracy. The court dismissed the complaint for failure to allege the relevant market, not because the conspiracy claim was inadequately pleaded. See Lifeway Foods, supra, at® 10 n. 10.
Second, TAP misreads the law concerning the malice requirement. TAP argues that Aetna's allegations of malice are insufficient because they (1) are cursory and (2) do not suggest that TAP acted solely to injure Aetna. (Def. Br. at 20.) The correct rule is that allegations of malice are adequate if it can be inferred that the plaintiff's injuries resulting from the conspiracy were not simply a side-effect of the defendant's otherwise legitimate business interests. See Daniel Boone Area Sch. Dist. v. Lehman Bros., Inc., 187 F. Supp.2d 400, 412 (W.D. Pa. 2002) (denying motion to dismiss civil conspiracy claim). Here, Aetna's damages were no accident. The Amended Complaint alleges that Aetna's injuries were caused by TAP's fraudulent scheme, which was designed to injure insurers like Aetna who necessarily wound up subsidizing TAP's marketing approach for its product.
The cases relied upon by TAP are consistent with the rule set out in Daniel Boone and in no way suggest that Aetna's conspiracy claims against TAP are insufficiently pleaded. Jeter v. Brown Williamson Tobacco Corp., 294 F. Supp.2d 681 (W.D. Pa. 2003), was a personal injury action in which plaintiff's decedent was injured by the use of defendant's cigarettes, an inherently dangerous product. Spitzer v. Abdelhak, 1999 WL 1204352 (E.D. Pa. 1999), involved a wide-ranging scheme to operate a group of hospitals in which plaintiffs were injured because defendants purchased plaintiffs' medical practices and ultimately went bankrupt. Thompson Coal Co. v. Pike Coal Co., 412 A.2d 466 ( Pa. 1979), was a case in which the Court held that the facts showed only an attempt to advance legitimate business interests. Thus, in all of these cases, plaintiffs' injuries were side effects of defendants' actions, and were properly found not to be actionable as conspiracies. Here, by contrast, defrauding entities in Aetna's position was the raison d'etre of TAP's conspiratorial scheme.
Finally, Aetna has adequately alleged the torts underlying its conspiracy claim. TAP's argument in this regard is simply a rehash of its attack on Aetna's fraud and negligence claims. If at some point Aetna is unable to establish facts proving its claims of negligence and fraud, then the conspiracy count also will fall away. A summary judgment motion, not a threshold motion to dismiss, is the appropriate means of testing Aetna's evidence of conspiracy.
The case TAP cites in this vein is inapposite. In Sprinturf, Inc. v. Southwest Recreational Indus., Inc., 281 F. Supp.2d 784, 786 (E.D. Pa. 2003), the plaintiff's fraud claim was invalid on its face because the complaint alleged that plaintiff knew the defendant's fraudulent statements were false. As the court held, there can be no reliance where the falsity is obvious to the recipient. Id., 281 F. Supp.2d at 785-786. Because the fraud claim was clearly deficient, the plaintiff was not permitted to amend its complaint to add a conspiracy count based upon the same misrepresentation theory. Id. Here, as discussed above, Aetna's fraud claims are adequately pleaded and do not suffer from the sort of fatal reliance defect noted in Sprinturf.
Because Aetna has adequately pleaded its civil conspiracy claim, TAP's motion to dismiss should be denied with respect to Count VII. E. The Amended Complaint States Valid Directing and Aiding/Abetting Tortious Conduct Claims
1. Aiding and Abetting
The cause of action for aiding and abetting tortious conduct is set out in § 876(b) of the Restatement (Second) of Torts: " For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he . . . knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so as to conduct himself . . . " (emphasis added). Pennsylvania's courts have recognized a cause of action based on
§ 876(b). See Burnside v. Abbott Labs., 351 Pa. Super. 264, 281, 505 A.2d 973 (1985) (stating that cause of action under § 876 has been recognized by Pennsylvania's courts); Kline v. Ball, 306 Pa. Super. 284, 287, 452 A.2d 727 (1982) (acknowledging that plaintiff's cause of action under § 876 "has merit").
Here, Aetna has set forth a valid claim under § 876. TAP knew that health care providers were submitting millions of dollars worth of fraudulent Lupron® reimbursement requests, and gave providers substantial assistance and encouragement in the valuable gifts, sham grants, debt forgiveness and all expense-paid trips to exotic locations. (Am. Compl. ¶¶ 160-62.) These various forms of assistance were designed to ensure the continued success of TAP's fraudulent marketing scheme and to enrich TAP at Aetna's expense. Contrary to TAP's arguments, Aetna is not required to identify all persons acting in concert without the benefit of discovery. Cf. Skipworth v. Lead Indus. Ass'n, Inc., 547 Pa. 224, 690 A.2d 169, 175 (1997) (plaintiff required at summary judgment stage to identify persons acting in concert).
2. Directing Tortious Conduct
The cause of action for directing tortious conduct is set out in § 877(a) of the Restatement (Second) of Torts: "For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he . . . orders or induces the conduct , if he knows or should know of circumstances that would make the conduct tortious if it were his own. . . . " (emphasis added). While Pennsylvania's courts have not had occasion to decide whether to adopt a cause of action based upon § 877(a), it is likely that they would do so if presented with a complaint that adequately set forth a cause of action under this theory. See Welc v. Porter, 450 Pa. Super. 112, 123, 675 A.2d 334 (1996) (assessing adequacy of plaintiff's § 877(a) claim that defendant induced another to commit tortious act but finding allegations insufficient). Unlike the plaintiff in Welc, Aetna has pleaded facts sufficient to state a valid claim under § 877(a). TAP induced health care providers to submit fraudulent reimbursement claims to Aetna through a decade-long course of conduct designed to defraud Aetna and enrich TAP at Aetna's expense. (Am. Compl.
¶ 46.) TAP also induced providers to choose Lupron® over less costly alternative therapy through a program of improper financial incentives. ( Id. at ¶ 51.)
In short, Aetna has stated actionable directing and aiding/abetting claims. A defendant who induces another through improper financial incentives to harm a third party should be held accountable for its actions. While TAP may contest the merits of these allegations, they are sufficiently pleaded to permit Aetna to take discovery in support of Counts VIII and IX. F. The Amended Complaint States A Valid Claim of Negligence Per Se
TAP asserts that Aetna may not recover under a negligence per se theory for an admitted violation of the Food, Drug and Cosmetics Act ("FDCA") because the FDCA does not provide for a private cause of action. (Def. Br. at 23.) TAP does not provide a thorough analysis of Pennsylvania law on this issue, which clearly states that plaintiffs may recover for negligence per se under the FDCA — even though the FDCA does not provide for a private cause of action.
As TAP suggests, Pennsylvania courts have recognized that the "absence of a private cause of action in a statutory scheme is an indicator that the statute did not contemplate enforcement of an individual harm." Wagner v. Anzon, Inc., 453 Pa. Super. 619, 623, 684 A.2d 570, 575 (1996). "However, it is just a factor to consider and `does not necessarily preclude [the statute's] use as the basis of a claim of negligence per se.'" Sharp v. Artifex, Ltd., 110 F. Supp.2d 388, 392 (W.D. Pa. 1999) (quoting Fallow field Dev. Corp. v. Strunk, No. 89-8644, 1990 WL 52745, at® 19 (E.D. Pa. Apr. 23, 1990)). "A statute may still be used as the basis for a negligence per se claim when it is clear that, despite the absence of a private right of action, the policy of the statute will be furthered by such a claim because its purpose is to protect a particular group of individuals." Id. Courts have found negligence per se claims to be precluded only where the statute allegedly violated was not intended to protect a group of individuals. See, e.g., Fallowfield, 1990 WL at 52745® 20 (holding that purpose of Pennsylvania Clean Streams Law was to ensure clean streams and only incidentally benefits individuals).
Pennsylvania courts consistently have found that the FDCA was enacted to protect the interests of a particular group of individuals — those who may be receiving some type of drug or medical device. These courts accordingly have permitted plaintiffs to assert claims for negligence per se based on violations of the FDCA. See Sharp, 110 F. Supp.2d at 393-94; Murray v. Synthes U.S.A., Inc., No. 95-7796, 1999 WL 672937, at® 8 (E.D. Pa. Aug. 23, 1999); Taylor v. Danek Medical, Inc., No. 95-7232, 1998 WL 962062, at® 10 (E.D. Pa. Dec. 29, 1998); Cabiroy v. Scipione, 2001 PA Super 29, 767 A.2d 1078, 1081 (2001).
TAP cites Mellon v. Barre-National Drug Co., 431 Pa. Super. 175, 636 A.2d 187, 189 (1993) to support its argument that the absence of a private cause of action in the FDCA precludes a claim for negligence per se. The court in Mellon, however, dismissed the plaintiff's negligence per se claim not because the FDCA does not provide a private cause of action, but because there was no evidence that any federal statute had been violated. Id. In the case at bar, TAP pleaded guilty to conspiring to violate sections 333(b) and 331(t) of the FDCA. Thus, unlike the situation in Mellon, there can be no question that there is a basis for Aetna's negligence per se claim.
VI. AETNA'S CLAIMS ARE NOT TIME BARRED
Finally, TAP argues that Aetna's claims must be dismissed because of a lack of diligence in discovering the facts addressed in the Amended Complaint. The statute of limitations for RICO is four years. (Nov. 25, 2003 Order at 44 citing Agency Holding Corp. v. Medley-Duff Assocs., Inc., 483 U.S. 143, 156 (1987)). The limitation period for the Pennsylvania Insurance Fraud statute, 18 Pa. C. S. § 4117, is six years. Pennsylvania's common law fraud/negligence statute of limitations is two years. 42 Pa. C.S. § 5524(7). For conspiracy claims, the limitation period is the same as the underlying offense, thus it is two years for conspiracy to commit fraud. See Kingston Coal Co. v. Felton Mining Co., 456 Pa. Super. 270, 277 n. 1 (1997).
The insurance fraud statute does not contain a limitation period and thus is subject to the six-year "catchall" provision of 42 Pa. C. S. § 5527(6). Pennsylvania's courts have found that a similar fraud-based statute not containing a limitation period is subject to a six-year limitation. See Gabriel v. O'Hara, 368 Pa. Super. 383 (1987) (overruling trial court's determination that two-year statute of limitation applies to Pennsylvania's Unfair Trade Practices statute, and finding that the legislature's failure to include a specific limitation period means the Act is subject to the six-year "catchall" provision of 42 Pa. C. S. § 5527(6)).
Aetna seeks damages for TAP's conduct from 1992 through October 2001. Because TAP's conduct was self-concealing, Aetna did not become aware of TAP's fraudulent conduct until October 3, 2001, after the government announced TAP's guilty plea and released the results of its grand jury investigation concluding that the price differential between the AWP and actual cost of Lupron® was of fraudulent proportions. ( See November 25, 2003 Order at 46.) Aetna's initial complaint was timely filed on October 2, 2003.
Aetna has alleged the requisite elements of fraudulent concealment tolling the applicable statutes of limitation: (1) wrongful concealment of their actions by the defendant (Am. Compl. ¶¶ 66-70); (2) failure of the plaintiff to discover the operative facts that are the basis of its cause of action (Am. Compl. ¶ 71); and (3) plaintiff's due diligence until discovery of the facts ( id.).
In short, Aetna has adequately pleaded that it was unaware of TAP's self-concealing conduct until October 2001, and that it diligently pursued the available facts before that time, which is all that is required at this early stage. TAP's highly fact-intensive statute of limitations arguments are simply not appropriate for determination on a motion to dismiss. See Haugh v. Allstate Ins. Co., 322 F.3d 227, 231-33 (3d Cir. 2003).