In Humana Inc. v. Teva Prescribed drugs USA, Inc., the District Court docket for the Center District of Florida (the “Court docket”) dismissed claims introduced by Humana underneath the Racketeer Influenced and Corrupt Organizations Act (“RICO”) in opposition to Teva Prescribed drugs USA and some specialty pharmacies (collectively, “Teva”). The Court docket dominated that Humana lacked standing to sue because of the oblique purchaser rule. Regardless of the case’s dismissal, it’s necessary for hospitals and well being care suppliers to give attention to compliance with payors as insurance coverage firms proceed to discover utilizing RICO to deal with claims points.
Background
RICO, codified at 18 U.S.C. §§ 1961-1968, criminalizes the usage of revenue derived from racketeering exercise in interstate or international commerce. Racketeering exercise encompasses many types of felonious conduct, akin to fraud, bribery, extortion and different crimes. To be able to show a RICO violation, “a plaintiff should plead: ‘(1) conduct (2) of an enterprise (3) via a sample (4) of racketeering exercise.’” Defendants might be charged with a RICO offense even when they didn’t commit the legal exercise themselves, as long as they had been a part of an enterprise and benefited from that enterprise. Non-public people can carry a civil RICO declare to hunt compensation for cash misplaced attributable to a legal RICO offense.
Humana filed a lawsuit in opposition to Teva alleging it was concerned in a scheme from 2007 to 2015 to induce insured sufferers to buy Copaxone. Teva, a producer of Copaxone, allegedly made contributions to 2 copayment help foundations. When sufferers had been prescribed Copaxone and confronted copayment obligations, Teva directed the sufferers to 2 specialty pharmacies, which, in flip, helped the sufferers get copayment help from the 2 copayment help foundations. By way of this alleged kickback association, extra sufferers had been induced to buy Copaxone, which led Teva to extend the worth of Copaxone past the inflation fee. Finally, insurance coverage firms, akin to Humana, had been pressured to pay these elevated costs.
Teva argued that Humana lacked standing underneath RICO because of the oblique purchaser rule, an idea taken from antitrust regulation. The difficulty of whether or not to increase the oblique purchaser rule to RICO claims was one in every of first impression within the Eleventh Circuit.
Oblique Purchaser Rule
The oblique purchaser rule, first established by the U.S. Supreme Court docket in Illinois Brick Firm v. Illinois (“Illinois Brick“), 431 U.S. 720 (1977), states that solely those that buy straight from an alleged wrongdoer have standing to sue underneath the Clayton Act. Basically, underneath this concept, an oblique purchaser lacks standing to sue and can’t get better in an antitrust lawsuit primarily based on a “pass-on concept” of damages. Whereas the holding in Illinois Brick was initially restricted to antitrust fits, a number of circuits have held that the rule additionally applies to civil RICO claims.
The Court docket discovered that the oblique purchaser rule does prolong to RICO claims. The Court docket primarily based its conclusion on the truth that each circuit court docket that has thought-about this concern has discovered the oblique purchaser rule applies to civil RICO instances. Additional, the civil RICO provision was modeled after the Clayton Act, supporting the conclusion that the oblique purchaser rule must also apply. The Court docket additionally decided that the oblique purchaser rule facilitated efficient enforcement of RICO, averted advanced injury calculations and eradicated duplicative damages, which had been additionally rationales discovered by the Supreme Court docket to use in Illinois Brick.
Humana argued that even when the oblique purchaser rule applies, Humana nonetheless has direct-purchaser standing as a result of it bought Copaxone for its enrolled members. Humana contended it was a direct purchaser as a result of it made funds on to Teva’s specialty pharmacies on behalf of sufferers. The Court docket disagreed, concluding that insurance coverage firms, when appearing as third-party payors, “aren’t direct purchasers, no matter artistic pleading.” It additional acknowledged that for a plaintiff to efficiently plead a civil RICO declare, it have to be a direct purchaser and should show proximate trigger. As a result of Humana was not a direct purchaser of Copaxone, it didn’t have standing for a civil RICO declare.
Different RICO Claims by Insurance coverage Corporations Towards Well being Care Entities
This case represents a rising pattern of insurance coverage firms bringing RICO claims in opposition to well being care firms. Insurance coverage firms have introduced claims alleging, amongst different issues, fraudulent billing, unlawful kickback schemes and conspiracy. Whereas many of those instances had been dismissed early—for failing to satisfy RICO’s demanding pleading requirements or for operating into procedural points akin to standing—some courts have thought-about whether or not well being care entities could also be civilly liable to insurance coverage firms for RICO violations. Under is an inventory of a number of current RICO instances introduced by insurance coverage firms in opposition to well being care entities:
- Allstate Insurance coverage Co. v. First Provide, Inc., No. 1:25-cv-04739 (E.D.N.Y. Aug. 26, 2025) (ongoing).
- Allstate Insurance coverage Co. v. SMK Pharmacy, Corp., No. 1:24-cv-04627-NRM-PK (E.D.N.Y. July 1, 2024).
- GEICO v. Apex Backbone & Orthopaedics, PLLC, 2024 WL 2820370 (W.D.N.C. June 3, 2024).
- Metropolis of Plaquemine v. Workforce Well being Holdings, Inc., 2024 WL 1346986 (E.D. Tenn. Mar. 29, 2024).
- Humana v. Indivior, Inc., 2022 WL 17718342 (3d. Dec. 15, 2022).
- Horizon Healthcare Servs., v. Regeneron Pharms., Inc., No. 1:22-cv-10493-FDS (D. Mass. Apr. 4, 2022) (ongoing).
- GEICO v. SMK Pharmacy Corp., 2022 WL 541647 (E.D.N.Y. Feb. 23, 2022).
Sensible Takeaways
- Extra Give attention to Payor Compliance is Needed: As insurance coverage firms are exploring methods to make use of RICO to deal with claims points, it’s necessary for hospitals and well being care suppliers to give attention to compliance with personal payors, not solely with federal and state governments.
- Oblique Purchaser Rule Applies to Civil RICO Claims: The Humana court docket adopted different circuits and held that the oblique purchaser rule applies to civil RICO instances.
- Insurance coverage Corporations Can not Carry RICO Claims as Oblique Purchasers: Insurance coverage firms can’t carry RICO claims in opposition to well being care entities except they’re direct purchasers of the entity, and insurance coverage firms that make funds on behalf of their insureds aren’t direct purchasers.
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