RICO claims brought against GlaxoSmithKline for its marketing of the diabetes drug Avandia have cleared a hurdle in federal court in Philadelphia.

U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania held that the claims brought as a potential class action by the benefit funds of three labor unions under the Racketeer Influenced and Corrupt Organizations Act can proceed against the pharmaceutical giant. She dismissed claims for unjust enrichment.

“In short, all three complaints allege that through its public statements and marketing efforts, GSK engaged in deceptive behavior with regard to the safety of Avandia, even after the Nissen study was published, and it took steps to avoid detection of their deceptive behavior,” Rufe said, referring to an article published by Steven Nissen and Kathy Wolski in the New England Journal of Medicine.

In 2007, the study reported the likelihood of heart problems associated with people taking Avandia in order to control their blood-sugar levels, according to the opinion. Later that year, the U.S. Food and Drug Administration required GSK to include a “black box” warning to the Avandia label alerting people to a possible increased risk of heart attacks.

GSK’s effort to minimize the potential risks associated with its drug ultimately caused the unions to pay more for diabetes medication because they had covered Avandia, which was more expensive than alternative medications, the plaintiffs argued.

“The complaints allege that GSK intended to mislead PBMs and TPPs, so that they would include and prioritize Avandia on their formularies and cover prescriptions for Avandia without restrictions,” Rufe said.

TPPs are third-party payors, like the unions, and they typically have PBMs, or pharmacy benefit managers, that prepare a list of drugs that should be covered, called a formulary. Formularies are based on research about the safety and efficacy of various drugs, according to the opinion, so if pharmaceutical companies conceal information about a drug’s side effects, the PBM won’t be able to take that into account when creating a formulary.

“Here, the TPPs opted to include Avandia on their formularies, sometimes at a higher preference level than competing drugs, and covered Avandia prescriptions at the favorable, formulary rate,” Rufe said, explaining that GSK had marketed Avandia, first approved by the FDA in 1999, as a safe and effective treatment for Type 2 diabetes. Heart disease is a major cause of death for patients with Type 2 diabetes, so reducing that risk is one of the primary goals for diabetes medication, she said.

Since Avandia was first introduced, GSK had been aware of and the FDA had been keeping track of research into heart problems associated with the drug.

“Early on, plaintiffs allege, it was clear that certain adverse events, such as fluid retention, edema, and congestive heart failure, were associated with Avandia use,” according to the opinion, and in 2001, the FDA requested that a warning that fluid retention could occur be attached to Avandia’s packaging, the opinion said.

It wasn’t until six years later when the Nissen article was published, before which GSK had gotten a copy of the report and prepared a marketing campaign to restore consumer confidence in Avandia, according to the opinion.

“Despite acknowledging, in internal documents, that the results of the Nissen study were similar to the results of GSK’s own findings, GSK publicly challenged the methodology of and the conclusions reached by the Nissen study,” according to the opinion.

It is that kind of concealment that led to Avandia’s inclusion on many third-party payors’ formularies, the plaintiffs argued, which led to them paying a premium for that drug over other diabetes drugs.

“Absent GSK’s conduct, plaintiffs allege, many patients would have been prescribed metformin, another effective medication for diabetes treatment, which plaintiffs claim is significantly cheaper and carries less risk than Avandia,” Rufe said.

“The TPPs would then have covered the cost of prescriptions for a less expensive drug, at substantial savings to them,” she said.

The judge addressed in a footnote GSK’s argument that some diabetes drugs are in the same price range as Avandia and some doctors choose to prescribe a combination of two less expensive drugs with the total cost being comparable to Avandia. “While the court recognizes that this may be true, that argument is more relevant to summary judgment or the calculation of damages; here, at the pleading stage, plaintiffs’ claims of injury are sufficient,” Rufe said.

The judge did find, however, that the plaintiffs failed to reach the standard for pleading a claim of unjust enrichment under Pennsylvania law.

While the plaintiffs alleged that GSK’s retention of the money paid to it for Avandia when it hid the risks associated with the drug was unjust, they didn’t allege that Avandia injured a beneficiary, that Avandia didn’t perform as advertised, or that their beneficiaries were told to throw out their Avandia when they learned about the risks, Rufe said.

“Therefore, based on the allegations before the court, it appears that plaintiffs have received the benefit of their bargains,” she said.

Saranac Hale Spencer can be contacted at 215-557-2449 or sspencer@alm.com. Follow her on Twitter @SSpencerTLI.

(Copies of the 23-page opinion in In re Avandia Marketing, PICS No. 13-3052, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.)