MSP Recovery Claims, Series LLC v. Jazz Pharmaceuticals, PLC

Background

MSP Recovery Claims, Series LLC (MSP) sued Jazz Pharmaceuticals, PLC, Jazz Pharmaceuticals, Inc., Jazz Pharmaceuticals Ireland, LTD, Express Scripts entities, Caring Voice Coalition, and Adira Foundation. MSP brought the action as a class action on behalf of seven Medicare and Medicaid health insurance coverage companies that assigned claims to MSP.

MSP alleged that Jazz funded Caring Voice Coalition to help patients pay copayments for Xyrem and Prialt. According to MSP, the assistance allowed patients to obtain the drugs without paying those copayments, increased demand, and enabled Jazz to raise prices. MSP also alleged that Jazz paid pharmacies, including Express Scripts, to refer patients to Caring Voice Coalition. The pharmacies then submitted claims to Medicare and Medicaid health plans, which MSP alleged paid artificially inflated prices.

MSP asserted claims under the Racketeer Influenced and Corrupt Organizations Act, known as RICO, and under various state consumer-protection and tort laws. In its amended complaint, MSP alleged approximately $3 million in damages from January 1, 2011, through 2020.

Procedural History

The court had previously dismissed MSP’s original complaint because MSP could not bring claims for unnamed assignors and had not shown that the one named assignor suffered an injury. The court had allowed MSP to amend. MSP then added six assignors, but defendants moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(1), which addresses subject-matter jurisdiction, and Rule 12(b)(6), which addresses failure to state a legally sufficient claim.

Standing

The court ruled that MSP still had not established Article III standing. Standing is the requirement that a plaintiff show a concrete injury connected to the defendant’s conduct and a remedy that the court can provide.

The court held that MSP could not pursue claims for unnamed assignors. Although the amended complaint identified seven assignors, it also described them as “exemplar” or “representative” assignors, indicating that MSP continued to assert claims for additional unnamed entities. The court stated that MSP had to identify each assignor and establish standing for each claim and requested form of relief. The court therefore dismissed all claims brought on behalf of unnamed assignors with prejudice.

As to the seven named assignors, the amended complaint added facts about when claims were paid and to whom they were paid. But the court found that MSP still did not adequately identify the injury suffered by each assignor. The court cited several problems: the complaint did not show that any assignor paid a claim for Prialt; it used inconsistent theories about whether the damages represented inflated prices, inflated quantities, or all payments for the drugs; it did not explain how the alleged $3 million injury was divided among the assignors; and it did not explain why the damages amount increased while the alleged injury period became shorter.

Other Issues

Because MSP had not established standing, the court did not decide defendants’ other arguments. The court discussed two additional threshold issues only to guide possible future briefing.

First, the court said that, if MSP adequately alleged an injury, it would also need to establish that its claims were assignable. The court stated that it was inclined to conclude that assignees such as MSP, which were not themselves injured in their business or property, could not bring RICO claims under the statute. The court did not enter a final ruling on that issue and invited future briefing if the parties disputed it again.

Second, the court discussed statutes of limitation. It was inclined to find that MSP had at least inquiry notice of the alleged scheme by September 2018, based on MSP’s filing of a bill of discovery in a prior related proceeding. But the court noted that the relevant question generally concerned what each assignor knew and when, and it directed the parties to address the limitation period for each claim and assignor in any future briefing.

Disposition

Judge Edward J. Davila granted defendants’ motion to dismiss with leave to amend. The court dismissed the claims brought on behalf of unnamed assignors with prejudice. It allowed MSP another opportunity to amend the remaining pleading deficiencies and set August 12, 2024, as the deadline for an amended complaint.