United States District Court, D. Maryland
K. BREDAR CHIEF JUDGE
dispute arises out of the pricing of a drug, Acthar. Over the
course of fifteen years, Acthar's price rose from $40 per
vial to $40, 000 per vial. The plaintiff in this action, the
Washington County Board of Education ("Plaintiff), paid
almost $3 million over a three-year period for two of its
employees to receive Acthar. Plaintiff contends the entities
involved in raising Acthar's price violated numerous
Maryland state laws; it brings this action against
Mallinckrodt(Acthar's manufacturer), Express
Scripts (Acthar's distributor), and Gregg
Lapointe (a former board member of Mallinckrodt's
subsidiary, Questcor) (collectively, "Defendants").
alleges violations of the Maryland Consumer Protection Act
("MCPA") (Count I); negligent misrepresentation
(Count II); fraud (Count III); unjust enrichment (Count IV);
and conspiracy to defraud/concerted action (Count V).
Plaintiff asserts all five claims against Mallinckrodt and
Express Scripts, and all but the unjust enrichment claim
pending before the Court is Plaintiffs motion to remand the
case to state court (ECF No. 34) and Defendants' motions
to dismiss the amended complaint (ECF Nos. 50, 51,
56)The motions are fully briefed. No. hearing
is required. See Local Rule 105.6 (D. Md. 2018). The
Court will deny Plaintiffs motion to remand, dismiss Lapointe
from the case, and grant Mallinckrodt and Express
Scripts' motions to dismiss.
employs 2, 500 people in Washington County, Maryland. (Am.
Compl. ¶¶ 34-35, ECF No. 36.) Plaintiff provides
its employees healthcare benefits through a contract with
Cigna Health and Life Insurance Co. ("Cigna").
(Id. ¶ 36.) In the world of prescription drugs,
this makes Plaintiff a private third-party payor.
(Id. ¶ 225.) Two of Plaintiff s employees were
prescribed Acthar in 2016 to treat their rheumatoid
arthritis. (Id. ¶ 37.) Between 2016-2018,
Plaintiff paid $2, 841, 747 for these employees to receive
Acthar. (Id. ¶ 29.) At the time of the filing
of this suit, Plaintiff continues to pay for Acthar on their
is an Irish public limited company with corporate
headquarters in the United Kingdom. (Id. ¶ 43.)
It has manufactured Acthar since 2014, when it acquired
Questcor, Acthar's former manufacturer. (Id.
¶¶ 38-39.) At the time of the acquisition, Questcor
became a wholly owned subsidiary of
Mallinckrodt. (Id. ¶ 39.)
Scripts is a pharmacy benefits manager. (Id. ¶
26.) Pharmacy benefits managers serve as intermediaries
between drug manufacturers, like Mallinckrodt, and patients
and third-party payors, like Plaintiff. (Id. ¶
156.) Express Scripts and its various subsidiaries facilitate
the distribution of Acthar. (Id. ¶26.)
Lapointe was a former member of Questcor's board of
directors. (Id. ¶ 13.) Lapointe is a resident
of the state of Maryland. (Id. ¶ 31.) Lapointe
was on Questcor's board in 2007 at the time Questcor
launched a controversial "new strategy" to increase
Acthar's profitability. (Id. ¶¶
alleges that Defendants were able to raise Acthar's price
to unconscionable levels through three complementary schemes
that collectively reduced competition, increased profits, and
deflected negative attention. These three schemes constitute
the heart of Plaintiff s complaint, and the Court summarizes
The Distribution Scheme
2001, Questcor acquired Acthar for $100, 000. (Id.
¶ 75.) At the time, Acthar was primarily used to treat
Infantile Spasms ("IS"), a rare condition with a
patient population of about 2, 000 children per year.
(Id. ¶¶ 77-78.) At the time of the
acquisition, Questor was struggling financially.
(Id. ¶ 79.) In an effort to get the company on
a more profitable track, Questcor's largest shareholder,
Sigma Tau Finanziaria, installed one its executives, Gregg
Lapointe, on Questcor's board of directors. (Id.
¶¶ 79, 85, 86.) Lapointe would become the
"mastermind" of a new strategy to increase
Acthar's profitability. (Id. ¶ 13.)
Lapointe was on Questcor's board, the company decided to
adopt an "orphan drug strategy" for Acthar, which
involved centralizing the drug's distribution channels
and raising its price. (Id. ¶¶ 91, 110.)
Because Acthar was the only drug available to treat IS, this
strategy would allow Questcor to "leverage its monopoly
power" against a "fragile, powerless patient
population" in a narrow market. (Id. ¶
carry out this strategy's first step-centralizing the
distribution channels-Questcor made Express Scripts
Acthar's exclusive distributor. (Id. ¶ 90.)
The companies publicly announced the exclusive relationship
in July 2007. (Id.) Moving forward, Questcor
explained at the time, patients and doctors would need to
submit all Acthar prescriptions though the Acthar Support
& Access Program ("ASAP"). (Id.)
Through the coordination of various Express Scripts
subsidiaries, the ASAP would serve as a hub for the
distribution and payment of Acthar. (Id. ¶
166.) Patients and their doctors could initiate the
distribution process by submitting the Acthar Start Form,
which contained the requisite patient information and
permissions. (Id. ¶¶ 166, 403.)
there was some pushback within Questcor about the new
strategy; several board . members and one executive departed
shortly after the announcement of the exclusive relationship
with Express Scripts. (Id. ¶¶ 101-02.)
Lapointe also departed shortly after the announcement.
(Id. ¶ 103.)- But Questcor's COO made clear
in an email to senior staff that Lapointe's departure was
not due to his disagreement with the strategy; to the
contrary, Lapointe was "a big supporter of the pricing
strategy from the very beginning." (Id.
The Pricing Scheme
the exclusive distribution scheme was in place, Questcor
began "aggressively" raising Acthar's price.
(Id. ¶¶ 100, 183.) When Questcor acquired
Acthar in 2001, Acthar's average wholesale price
("AWP")-the price third-party payors like Plaintiff
paid for the drug- was $40.00 per vial. (Id.
¶¶ 179, 213.) Over the next six years, Questcor
gradually raised Acthar's AWP, but it was not until the
launch of the new strategy in the summer of 2007 that
Questcor made its most aggressive price hikes: it raised
Acthar's AWP from $2, 062.79 to $29, 086.25.
(Id. ¶¶ 181-83.) Questcor continued to
raise Acthar's AWP in the ensuing years, and by December
2014, it had raised Acthar's AWP to $40, 325.00.
(Id. ¶ 208.)
Scripts reviewed and approved each of these price increases
in writing. (Id. ¶ 187.) But when asked about
the price increases, Express Scripts laid the blame with
Questcor. (Id. ¶¶ 232-35.) For example, in
a conference call with investors in May 2017, an Express
Scripts senior vice president denied Express Scripts was
involved in setting Acthar's price. (Id. ¶
228 ("I think everybody in our company would agree, that
[Acthar] is vastly overpriced for the value. We don't set
the price.")) In a television interview, Express
Scripts' CMO also criticized Acthar's high price
without disclosing that Express Scripts had approved
Acthar's price increases. (Id. ¶ 251.)
never disclosed the reasons for the price increases.
(Id. ¶ 215.) But on June 29, 2018, in response
to the filing of litigation relating to Acthar, the company
issued a press release stating the price of Acthar was not as
high as was being reported because both public and private
payors received discounts. (Id. ¶ 212.)
Plaintiff and other private payors, however, did not receive
any discounts. (Id. ¶ 213.)
The Marketing Scheme
2011, Questcor decided to move beyond the "captive"
IS market, and it began marketing Acthar as a treatment for
other conditions, including rheumatoid arthritis.
(Id. ¶ 298.) Although the FDA had approved
Acthar to treat "acute exacerbations" of conditions
like rheumatoid arthritis, the FDA had never approved it as a
"long-term treatment" for the disease.
(Id. ¶ 318.) In fact, Questcor did not have a
clear understanding of how the drug treated diseases other
than IS; Acthar's "mechanism of action" was
unknown to Questcor. (Id. ¶ 122.)
overcome the lack of clinical data demonstrating Acthar's
ability to effectively treat rheumatoid arthritis, Questcor
hired Medical Science Liaisons ("MSLs") to
encourage doctors to prescribe the drug for "unapproved
uses and doses." (Id. ¶ 264.) Questcor
also engaged doctors, known as Key Opinion Leaders
("KOLs"), to promote the use of Acthar.
(Id. ¶¶ 270-71.) Questcor paid these KOLs
"handsomely" to promote Acthar for
"off-label" uses, such as the long-term treatment
of rheumatoid arthritis. (Id. ¶¶ 114,
302.) Some of the KOLs delivered "false, misleading, and
deceptive promotional messages about the safety, efficacy and
value" of the drug. (Id. ¶ 23.) The
payments, however, proved effective at incentivizing doctors
to prescribe Acthar: a study published in JAMA Network Open
concluded that "most nephrologists, neurologists, and
rheumatologists who frequently prescribe[d] Acthar received
Acthar-related payments." (Id. ¶¶
growth in Acthar sales, however, also brought a potential for
increased pushback from patients who struggled to afford the
drug's high co-pays. Initially, Questcor sought to
minimize pushback by working with the National Organization
for Rare Diseases ("NORD"), an organization that
provided free Acthar to patients who could not afford it.
(Id. ¶ 92.) Lapointe was a member of NORD's
Corporate Council. (Id.) Later, Questcor created a
Patient Assistance Program ("PAP"), which
subsidized patient co-pays with tens of millions of dollars.
(Id. ¶ 18.) The PAP, however, did nothing to
subsidize the payments third-party payors like Plaintiff had
to pay for Acthar. (Id.¶113.)
final step in its efforts to promote Acthar was to eliminate
the competition. In 2013, Questcor acquired the rights to
another drug, Synachten, from Novartis. (Id.
¶¶ 255-56.) Synachthen was a synthetic alternative
to Acthar that was used internationally but had not yet been
approved by the FDA for use in the United States.
(Id. ¶ 254.) After acquiring the rights to
Synacthen, Questcor shelved the drug and never brought it to
market. (Id. ¶ 259.) The goal of the
acquisition had been to "eliminate the nascent
competitive threat," so that Questcor would continue to
raise Acthar's price. (Id. ¶¶ 256-57.)
Express Scripts, as the largest pharmacy benefits manager in
the United States, had leverage to force Questcor to bring
Synacthen to market, but took no steps to do so.
(Id. ¶¶ 261-62.)
2014, Mallinckrodt acquired Questcor, making it a wholly
owned subsidiary. (Id. ¶¶ 38-39.)
Motion to Remand
initially filed this suit in the Circuit Court of Washington
County, Maryland. (Not. Removal at 1, ECF No. 1.) Defendants
promptly removed it to federal court on the basis of
diversity. (Id. at 2.) Although Defendants concede
that both Plaintiff and Lapointe are residents of the state
of Maryland, Defendants contend Lapointe's citizenship
should be disregarded for the purpose of jurisdiction because
Lapointe was fraudulently joined. (Id. at 3.)
Specifically, Defendants assert the sole reason Plaintiff
joined Lapointe was to defeat complete diversity and avoid a
potential MDL. (Opp'n Mot. Remand at 1, ECF No. 52.)
support their contention that Lapointe was fraudulently
joined, Defendants point to Lapointe's departure from
Questcor's board in 2007, years before most of the
conduct described in the complaint occurred. (Id. at
6.) Defendants also point to the initial decision by
Plaintiffs counsel not to name Lapointe as a defendant in the
other Acthar-related lawsuits it has filed. (Id. at
1-3.) Plaintiff counters that its claims against Lapointe are
viable and it has every intention of recovering against him,
as Lapointe was the "mastermind" behind the
distribution scheme, pricing scheme, and marketing scheme,
which collectively constitute the heart of the complaint.
(Am. Compl. ¶¶ 13, 105; Mot. Remand at 2, ECF No.
Fraudulent Joinder Standard
the doctrine of fraudulent joinder, a district court may
"disregard, for jurisdictional purposes, the citizenship
of certain nondiverse defendants, assume jurisdiction over a
case, dismiss the nondiverse defendants, and thereby retain
jurisdiction." Mayes v. Rapoport, 198 F.3d 457,
461 (4th Cir. 1999). The doctrine is an exceptional one,
applying only where a removing party can show either,
"'outright fraud in the plaintiffs pleading of
jurisdictional facts' or that 'there is no
possibility that the plaintiff would be able to establish a
cause of action against the [non-diverse] defendant in state
court."' Johnson v. Am. Towers, LLC, 781
F.3d 693, 704 (4th Cir. 2015) (quoting Hartley v. CSX
Transp, Inc., 187 F.3d 422, 424 (4th Cir. 1999)). Mere
doubts about the strength of a claim are insufficient.
Riverdale Baptist Church v. Certainteed Corp., 349
F.Supp.2d 943, 948 (D. Md. 2004). Rather, to establish
fraudulent joinder, it must be clear that, "the facts
asserted by the plaintiff... could not possibly create ...
liability[, ] [such] that the assertion of the cause of
action is as a matter, of local law plainly a sham and
frivolous." Id. (quoting Parks v. N.Y.Times
Co., 308 F.2d 474, 477 (5th Cir. 1962)).
party alleging fraudulent joinder bears a heavy burden-it
must show that the plaintiff cannot establish a claim even
after resolving all issues of law and fact in the plaintiffs
favor." Johnson, 781 F.3d at 704 (quoting
Hartley, 187 F.3d at 424). The standard
"heavily favors" plaintiffs, who must show only a
"glimmer of hope" of succeeding. Id.
(quoting Mayes, 198 F.3d at 466). The standard for
assessing fraudulent joinder is "even more favorable to
the plaintiff than the standard for assessing a motion to
dismiss. Id. (quoting Hartley, 187 F.3d at
Defendants do not assert that Plaintiff committed outright
fraud in its pleading of jurisdictional facts, the issue here
is whether Plaintiff has any "glimmer of hope" of
recovering against Lapointe under the claims
alleged. See Mayes, 198 F.3d at 466. For
the reasons explained in`Part III, each of Plaintiffs claims
is legally deficient and leaves Plaintiff without a
"glimmer of hope" of recovering against any of the
Defendants, including Lapointe. Although these legal
deficiencies are a sufficient basis on which, to conclude
Plaintiff has no hope of recovering against Lapointe, the
Court will also review the factual allegations against
Lapointe given the exceptional nature of fraudulent joinder.
See Johnson, 781 F.3d at 704.
Plaintiffs preferred framework for evaluating Defendants'
conduct, the Court discerns the following ...