                                     PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT
                ____________

                     No. 14-1948
                    ____________

IN RE: AVANDIA MARKETING, SALES PRACTICES &
         PRODUCT LIABILITY LITIGATION

               GlaxoSmithKline, LLC,

                                   Appellant


    On Appeal from the United States District Court
        for the Eastern District of Pennsylvania
      (D. C. Nos. 2-09-cv-00730, 2-10-cv-02475,
            2-10-cv-05419, 2-07-md-01871)
     District Judge: Honorable Cynthia M. Rufe


            Argued on November 18, 2014

 Before: AMBRO, SCIRICA and ROTH, Circuit Judges

          (Opinion filed: October 26, 2015)
John H. Beisner, Esquire             (Argued)
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, DC 20005

Nina M. Gussack, Esquire
Anthony C. Vale, Esquire
Pepper & Hamilton
18th & Arch Streets
3000 Two Logan Square
Philadelphia, PA 19103
                    Counsel for Appellant


Samuel Issacharoff, Esquire            (Argued)
New York University Law School
Room 411J
40 Washington Square South
New York, NY 10012

James R. Dugan, II, Esquire
David B. Franco, Esquire
Douglas R. Plymale, Esquire
The Dugan Law Firm
365 Canal Street
Suite 1000
New Orleans, LA 70130

Arnold Levin, Esquire
Frederick S. Longer, Esquire
Levin, Fishbein, Sedran & Berman
510 Walnut Street
Suite 500




                              2
Philadelphia, PA 19106

                    Counsel for Appellees Allied Services
                    Division Welfare Fund and UFCW Local
                    1776 and Participating Employees
                    Health and Welfare Fund

Tracy D. Rezvani, Esquire
Rezvani Volin & Rotbert
1050 Connecticut Avenue, N.W.
10th Floor
Washington, DC 20036

                    Counsel for Appellee United
                    Benefit Fund

Charles H. Moellenberg, Jr., Esq.
Jones Day
500 Grant Street
Suite 4500
Pittsburgh, PA 15219

                    Counsel for Amicus Appellant Product
                    Liability Advisory Council

Peter D. St. Phillip, Jr., Esq.
Lowey, Dannenberg, Cohen & Hart
One North Broadway
Suite 509
White Plains, NY 10601

                    Counsel for Amicus Appellees Aetna
                    Inc, Louisiana Health Service Indemnity




                              3
                  Co, Premera Blue Cross, Caring for
                  Montanans Inc, Blue Cross & Blue
                  Shield of Minnesota, CareFirst of
                  Maryland Inc, Cambia Health Solutions,
                  Highmark Inc, EmblemHealth Services
                  Co LLC, Group Health Cooperative,
                  Blue Cross & Blue Shield of Rhode
                  Island, Noridian Mutual Insurance Co,
                  Health Net Inc, Government Employees
                  Health Association, Blue Cross & Blue
                  Shield of Florida, Blue Cross & Blue
                  Shield of North Carolina, Wellpoint Inc,
                  Blue Cross & Blue Shield of South
                  Carolina, Blue Cross & Blue Shield of
                  Massachusetts and AvMed Health Plans

Robert N. Weiner, Esq.
Arnold & Porter
601 Massachusetts Avenue, N.W.
Washington, DC 20001

                  Counsel for Amicus Appellee
                  Pharmaceuticals Research and
                  Manufacturers of America



                       OPINION


ROTH, Circuit Judge:




                           4
       This interlocutory appeal involves claims brought
against GlaxoSmithKline LLC (GSK) by third-party payors
(TPPs), based on GSK’s alleged misrepresentation and
concealment of the significant safety risks associated with use
of Avandia, Avandamet, and Avandaryl (collectively,
Avandia), Type II diabetes drugs. GSK argues that the
District Court erred in finding that the TPPs adequately
alleged the elements of standing under the Racketeer
Influenced and Corrupt Organizations Act (RICO).1 We
agree with the District Court’s analysis, finding standing, and
therefore we will affirm.

                              I.

                             A.2

       Plaintiffs, Allied Services Division Welfare Fund,
UFCW Local 1776 and Participating Employers Health and
Welfare Fund, and United Benefit Fund, are TPPs. They are
union health and welfare funds and are suing GSK on behalf
of themselves and other similarly situated TPPs. TPPs
typically provide medical coverage, including prescription
drug coverage, to their members and members’ dependents.




1
  18 U.S.C. § 1961 et seq.
2
  These facts are taken from the Complaints and treated as
true because, in reviewing a denial of a motion pursuant to
Federal Rule of Civil Procedure 12(b)(6), we accept as true
all well-pleaded allegations and construe the complaint in the
light most favorable to the plaintiffs. See Lewis v. Atlas Van
Lines, Inc., 542 F.3d 403, 405 (3d Cir. 2008).




                              5
       Whether a TPP will cover the cost of a member’s
prescription, in whole or in part, depends on whether that
drug is listed in the TPP’s “formulary.” Pharmacy Benefit
Managers (PBMs) prepare TPPs’ formularies of drugs
approved for use by the TPPs’ members. The formularies are
prepared by analyzing research regarding a drug’s cost
effectiveness, safety and efficacy. When a PBM determines
that a drug offers advantages over a competing drug, it will
give that drug preferred status on the formulary. A TPP will
typically cover more of the cost of a particular drug when that
drug has a higher preference status on the formulary. The
greater coverage of cost by the TPP allows the member to pay
a lower co-payment when prescribed that drug.

        Type II diabetes is the most common form of diabetes
and results from the body’s failure to produce enough insulin
or its inability to properly use insulin. Type II diabetes was
first treated with oral medications, primarily metformin and
sulfonylureas, or with injected insulin. In the 1990s,
pharmaceutical companies began to develop a new form of
Type II diabetes treatment known as thiazolidinediones
(TZDs).       On May 25, 1999, the Food and Drug
Administration (FDA) approved Avandia, a TZD, for sale in
the United States. GSK marketed Avandia as a more
effective and safer alternative to the cheaper, existing Type II
oral medications. In turn, TPPs included Avandia in their
formularies and covered Avandia prescriptions at a favorable
rate.

       Soon after the FDA approved Avandia, concerns
regarding its heart-related side effects began to surface. For
example, in 2001, the FDA requested that GSK add a warning
to the prescription label regarding the increased risk of fluid




                               6
retention resulting from Avandia use. Shortly thereafter,
GSK’s sales representatives denied the existence of this risk.
As a result, the FDA instructed GSK to stop minimizing the
risk of heart attacks and heart-related diseases in its
marketing. In 2006, the FDA required GSK to update the
warning to include new data about the potential increased
occurrence of heart attack and heart-related chest pain in
some Avandia patients.
        In May 2007, Steven E. Nissen and Kathy Wolski
published a paper in The New England Journal of Medicine,
documenting the results of forty-two clinical trials of
Avandia. The Nissen study concluded that, compared with
the use of competing diabetes drugs, Avandia use was
associated with a significant increase in the risk of myocardial
infarction and a borderline-significant increase in the risk of
death from heart-related diseases. According to the TPPs,
GSK responded to the Nissen study with a marketing
campaign designed to sway doctors and consumer
confidence. This campaign included publishing full-page
advertisements in more than a dozen newspapers and the
release of promotional materials to prescribing physicians.
Specifically, GSK challenged the Nissen study’s
methodology and conclusions and described the results of its
own favorable study.

       On May 23, 2007, the FDA recommended that GSK
add a “black box” warning to Avandia’s label to warn of the
risk of congestive heart failure in connection with the use of
Avandia. On August 14, 2007, GSK added the warning,
which stated that TZDs “cause or exacerbate congestive heart
failure in some patients. . . . Avandia is not recommended in
patients with symptomatic heart failure.” Three months later,
the FDA added a second black box warning, describing the




                               7
Nissen study’s results as showing “Avandia to be associated
with an increased risk of myocardial ischemic events such as
angina or myocardial infarction.”

       In February 2010, the U.S. Senate Finance Committee
released a report on Avandia. The Committee concluded that
the “totality of the evidence suggests that GSK was aware of
the possible cardiac risks associated with Avandia years
before such evidence became public” and that GSK failed to
notify the FDA and the public of these risks despite its duty to
do so. The report also noted that GSK attempted to minimize
or misrepresent those risks in order to contradict the Nissen
study and to intimidate independent physicians.

       Ultimately, on September 23, 2010, the FDA restricted
access to Avandia in response to increasing evidence of its
cardiovascular risks. Specifically, the FDA limited access to
existing users and to new patients whose blood sugar could
not be controlled with other medications and who had decided
with their doctor not to take Actos, a competing TZD drug.
Doctors were required to advise existing Avandia users of
Avandia’s cardiovascular risks before continuing to prescribe
it.

       Since its release, Avandia has been used on a regular
basis by at least one million individuals in the United States
and has generated billions of dollars in revenue for GSK. A
one-month supply of Avandia has sold for $90 to $220, with
the TPP covering between $135 and $140 per prescription
and the patient paying the balance. This was a dramatic
increase in the cost of Type II diabetes treatment. Previously,
the most prevalent oral drug therapy, metformin, cost
approximately $45 to $55 for a one-month supply, with the




                               8
TPP covering $40 to $50 of that amount. Although plaintiffs
identify Actos as another alternative to Avandia, they do not
provide the price which TPPs typically covered for Actos
prescriptions.

                              B.

        Plaintiffs bring this class action on behalf of
themselves and other similarly situated TPPs that covered the
cost of Avandia after May 25, 1999. They assert that GSK’s
failure to disclose Avandia’s significant heart-related risks
violated RICO based on predicate acts of mail fraud,3 wire
fraud,4 tampering with witnesses,5 and use of interstate
facilities to conduct unlawful activity.6 They also assert
claims for unjust enrichment and violations of the
Pennsylvania Unfair Trade Practices and Consumer
Protection Law7 and other states’ consumer protection laws.

        Plaintiffs allege that GSK deliberately concealed the
significant safety risks associated with the use of Avandia and
continued to promote Avandia as a safer treatment for
diabetes despite the known risks of heart attack and disease.
Specifically, plaintiffs allege that GSK selectively
manipulated data and scientific literature, made false and
misleading statements in its 2007 advertising campaign, and
intimidated physicians to publish false and misleading
articles—all in order to increase Avandia sales. According to

3
  See 18 U.S.C. § 1341.
4
  See id. § 1343.
5
  See id. § 1512.
6
  See id. § 1952.
7
  See 73 Pa. Cons. Stat. §§ 201-1-201-9.3.




                              9
plaintiffs, TPPs and PBMs included Avandia in their
formularies and covered Avandia at favorable rates in
reliance on these misrepresentations by GSK. Plaintiffs
allege that Avandia was worth less than the favorable rates at
which they covered it (their “excess price” theory). Similarly,
they     allege    that   physicians     relied   on    GSK’s
misrepresentations in deciding to prescribe Avandia and
would have prescribed Avandia to fewer patients had GSK
not concealed Avandia’s risks (their “quantity effect” theory).
Plaintiffs seek compensatory, punitive, and statutory damages
for the financial harm they suffered as a result of GSK’s
conduct, and they seek injunctive relief to prevent GSK from
continuing its allegedly unlawful activities.

        On November 3, 2010, GSK moved to dismiss, in
part, because plaintiffs failed to adequately allege standing
under Section 1964(c) of RICO. The District Court rejected
GSK’s arguments, holding that plaintiffs plausibly alleged
that they had suffered a concrete economic injury based on
the substantial savings they would have experienced had they
covered cheaper alternatives to Avandia. This was true
regardless of whether any beneficiary who had ingested
Avandia became ill.

        The District Court also rejected GSK’s argument that
plaintiffs failed to adequately allege proximate causation.
According to the District Court, it is sufficient that plaintiffs
alleged that doctors relied upon GSK’s misrepresentations in
prescribing Avandia and that the TPPs themselves relied upon
those misrepresentations in making formulary decisions. The
District Court noted, however, that plaintiffs may have
difficulty in proving causation at the next litigation stage
because they did not restrict access to Avandia after the




                               10
Nissen study publicized Avandia’s heart-related risks. The
District Court also rejected GSK’s argument that prescribing
doctors’ independent actions broke the chain of causation.
The District Court relied on In re Neurontin Marketing and
Sales Practices Litigation,8 in which the First Circuit Court of
Appeals held that, where a TPP is a primary and intended
victim and the injury is foreseeable, the doctor’s independent
actions do not break the causal chain.9

       On February 19, 2014, the District Court certified its
decision for interlocutory appeal under 28 U.S.C. § 1292(b).
The certified questions are the following:

       1) Did the Court err in its application of Maio
       v. AETNA, Inc. 10

       2)   Did the TPPs sufficiently plead that
       Defendant’s alleged misrepresentation about
       Avandia’s safety caused their injuries, when the
       TPPs continued to include Avandia on their
       formularies and cover the cost of Avandia for


8
  712 F.3d 21 (1st Cir. 2013).
9
   The District Court also made a number of other findings,
including that plaintiffs failed to adequately allege a claim for
unjust enrichment. Because plaintiffs did not allege that
Avandia injured their beneficiaries or failed to perform as
advertised, the District Court held that they “received the
benefit of their bargains” and therefore could not maintain a
claim for unjust enrichment. This holding is not currently on
appeal.
10
   221 F.3d 472 (3d Cir. 2000).




                               11
       their members after the alleged cardiovascular
       risks of Avandia were well-publicized, and

       3) Does the independent judgment of doctors
       and decision-making of the physicians who
       wrote the prescriptions for Avandia render the
       causal chain too attenuated to state a claim?11

We granted permission to appeal on April 15, 2014.

                             II.12

        We exercise plenary review over a district court’s
denial of a motion to dismiss for failure to state a claim under
Federal Rule of Civil Procedure 12(b)(6).13 “A motion to
dismiss pursuant to Rule 12(b)(6) may be granted only if,
accepting all well pleaded allegations in the complaint as true,
and viewing them in the light most favorable to plaintiff,
plaintiff is not entitled to relief.”14 The facts alleged in the
complaint must state a “plausible claim for relief.”15 “The
issue is not whether a plaintiff will ultimately prevail but

11
   We do not address plaintiffs’ state-law claims in this appeal
because they are not explicitly addressed within the questions
that have been certified to us.
12
   The District Court had jurisdiction pursuant to 28 U.S.C. §
1331. We have appellate jurisdiction pursuant to 28 U.S.C. §
1292(b).
13
   See Farber v. City of Paterson, 440 F.3d 131, 134 (3d Cir.
2006).
14
   In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410,
1420 (3d Cir. 1997).
15
   See Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).




                              12
whether the claimant is entitled to offer evidence to support
the claims.”16 We also exercise plenary review over a district
court’s legal determination that plaintiffs have standing to
pursue a civil RICO action.17

                             III.

       The issue on appeal is whether plaintiffs have
adequately pled standing to pursue a civil action under
Section 1964(c) of RICO. Section 1964(c) provides that:

      Any person injured in his business or property
      by reason of a violation of section 1962 of this
      chapter may sue therefor in any appropriate
      United States district court and shall recover
      threefold the damages he sustains and the cost
      of the suit, including a reasonable attorney’s fee
      . . ..18


16
   Maio, 221 F.3d at 482 (quoting In re Burlington, 114 F.3d
at 1420).
17
   See id.
18
   18 U.S.C. § 1964(c). Section 1962 prohibits, in part, “any
person employed by or associated with any enterprise
engaged in, or the activities of which affect, interstate or
foreign commerce” from “conduct[ing] or participat[ing],
directly or indirectly, in the conduct of such enterprise’s
affairs through a pattern of racketeering activity.” Id. §
1962(c). A “racketeering activity” can consist of a variety of
predicate offenses, including, as alleged in this case, mail
fraud, wire fraud, tampering with witnesses, and use of
interstate facilities to conduct unlawful activity, see id. §




                             13
The language of § 1964(c) requires a RICO plaintiff to show
that the plaintiff suffered an injury to business or property and
that the plaintiff’s injury was caused by the defendant’s
violation of 18 U.S.C. § 1962.19 Section 1964(c)’s “limitation
of RICO standing to persons ‘injured in [their] business or
property’ has a ‘restrictive significance, which helps to assure
that RICO is not expanded to provide a federal cause of
action and treble damages to every tort plaintiff.’” 20

                               A.

       We must first determine whether plaintiffs adequately
alleged injury to business or property within the meaning of
RICO. “‘[A] showing of injury requires proof of a concrete
financial loss, and not mere injury to a valuable intangible
property interest.’”21 This requirement “can be satisfied by
allegations and proof of actual monetary loss, i.e., an out-of-
pocket loss.”22

       GSK claims that the TPPs fail to assert a concrete
injury, citing our decision in Maio. In that case, we
considered whether health insurance beneficiaries could
maintain a RICO claim for economic injury against their


1961(1), and a “pattern” of such activity requires at least two
acts, id. § 1961(5).
19
   See Maio, 221 F.3d at 483.
20
   Maio, 221 F.3d at 483 (quoting Steele v. Hospital Corp. of
Am., 36 F.3d 69, 70 (9th Cir. 1994)) (internal citation
omitted).
21
   Id. (quoting Steele, 36 F.3d at 70).
22
   Id.




                               14
insurer, Aetna, based on alleged misrepresentations regarding
the services included in their HMO plans.23 The insured
parties claimed that the insurer’s failure to disclose restrictive
internal policies caused them injury by causing them to “pa[y]
too much in premiums for an ‘inferior’ health care product.”24
They alleged that the internal policies were designed to
improve profitability at the expense of quality of care,
whereas the insurer’s marketing campaign represented that
the purchased policy focused on quality of care.25 The
insured parties also claimed that the internal policies
“restrict[ed] the physicians’ ability to provide the high quality
health care . . . promised.”26

       We rejected the plaintiffs’ claims, finding that the
insured parties suffered no cognizable injury. We construed
the insured parties’ property interests as the intangible
“contractual right to receive benefits in the form of covered
medical services,” and found that the insured parties had
suffered no injury absent allegations that they had received
“inadequate, inferior delayed care, personal injuries resulting
therefrom, or [the] denial of benefits due under the insurance
arrangement.27 Because the insured parties specifically
disclaimed any contractual shortcoming on the part of the
insurer, they “simply c[ould not] establish as a factual matter
that they received anything less than what they bargained
for.”28 Instead, the alleged economic harm was “contingent

23
   See id. at 483-84.
24
   Id. at 484-85.
25
   Id. at 474.
26
   Id. at 475.
27
   Id. at 490.
28
   Id. at 494.




                               15
upon the impact of events in the future” – namely, inadequate
care produced by the insurer’s internal policies.29 We
concluded that plaintiffs could not establish that they had
suffered a tangible economic harm because their theory of
injury was premised solely on the possibility that they might
receive inadequate healthcare in the future.30

        GSK argues that here too, the TPPs’ injury is
predicated on the possibility that future events might occur –
namely, that the drugs purchased by the TPPs will prove to be
unsafe or ineffective. However, because the TPPs do not
allege that they received unsafe or ineffective prescriptions,
GSK argues that they have received exactly what they
bargained for and that they have not suffered a concrete
injury.

       The TPPs respond that their injury is one which has
long been considered concrete: overpayment due to illegal or
deceptive marketing practices. They cite our decision in In re
Warfarin Sodium Antitrust Litigation,31 in which TPPs
alleged that DuPont violated antitrust law by disseminating
false and misleading information about a cheaper generic
drug, causing the TPPs to cover the cost of duPont’s more
expensive brand name drug.32 We held that “TPPs, like

29
   Id. at 494-95.
30
   Id. at 495.
31
   391F.3d 516 (3d Cir. 2004).
32
   Although Warfarin was an antitrust case, it is applicable
here because RICO’s standing requirements were modeled on
antitrust law. In drafting Section 1964(c), Congress “used the
same words [as § 7 of the Sherman Act and § 4 of the Clayton
Act], and we can only assume it intended them to have the




                             16
individual consumers, suffer[] direct economic harm when, as
a result of [a pharmaceutical company’s] alleged
misrepresentations, they pa[y] supracompetitive prices for
[brand drugs] instead of purchasing lower-priced generic
[drugs].”33     According to the TPPs, if allegedly
anticompetitive behavior that leads to overpayment
establishes a concrete injury, then so should allegedly
fraudulent behaviorthat leads to overpayment.

        We agree with the TPPs that Warfarin offers the
closest analogy to the facts of this case and that GSK’s
reliance on Maio is distinguishable in one crucial respect:
unlike the injury suffered by plaintiffs in Maio, the injury
suffered by the TPPs here is not contingent on future events.
The TPPs’ damages do not depend on the effectiveness of the
Avandia that they purchased, but rather on the inflationary
effect that GSK’s allegedly fraudulent behavior had on the
price of Avandia. By contrast, the damages suffered by the
plaintiffs in Maio were entirely dependent on the quality of
the health care they received. Because the plaintiffs in that
case did not allege that they had received inadequate care,
their “theory of present economic loss require[d] a significant
degree of factual speculation,”34 and was thus insufficient to
establish standing.




same meaning that courts had already given them.” See
Holmes, 503 U.S. at 266-68; see also Steamfitters Local
Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d
912, 921, 932 (3d Cir. 1999).
33
   Warfarin, 391 F.3d at 531.
34
   Maio, 221 F.3d at 495.




                              17
       To further illustrate the point, suppose that the
defendants in Warfarin had asserted that the TPPS had failed
to establish standing because they had not alleged that the
drugs they had purchased were ineffective. That argument
would have been rejected by the court: the injury suffered by
the TPPs in that case did not depend on the drug’s
ineffectiveness but rather on the defendant’s anticompetitive
behavior. That same logic would apply here. The injury
suffered by the TPPs in this case does not depend on
Avandia’s ineffectiveness, but rather on GSK’s fraudulent
behavior. As such, the TPPs’ theory of economic loss does
not require factual speculation. If we accept the plausible
allegations in the complaint as true, the fraudulent behavior
alleged in their complaint has already occurred, and its effect
on the price of Avandia is not contingent on future events.

        Reliance on our decisions in In re Schering-Plough
Corp. Intron/Temodar Consumer Class Action,35 and Horvath
v. Keystone Health Plan East, Inc.,36 is similarly misplaced.
In Schering-Plough, TPPs alleged that Schering’s off-label
promotional activities of certain drugs caused them economic
injury. Relying on Maio, the District Court held that the
plaintiffs lacked standing to assert this injury because they
failed to allege that any consumers or beneficiaries received
inadequate drugs or suffered personal injuries.37 On appeal,
we affirmed the District Court on causation grounds. To the




35
   678 F.3d 235 (3d Cir. 2012).
36
   333 F.3d 450 (3d Cir. 2003).
37
   See No. 2:06-cv-5774, 2009 WL 2043605, at *16 (D.N.J.
July 10, 2009).




                              18
extent we agreed with the District Court’s injury analysis in
that case, we did so in dictum, not in binding precedent.38

        Horvath, an ERISA case, is distinguishable on the
same basis as Maio. In Horvath, as in Maio, the plaintiff
alleged that she overpaid for the healthcare provided by an
HMO due to the HMO’s misleading statements.39 But the
plaintiff “d[id] not allege . . . that the care she received from
the Keystone HMO was defective or substandard in any
way.”40 Accordingly, we noted that the plaintiff’’s claims
“rest not only on the troublesome assumption that a factfinder
can accurately determine the amount her [employer] allegedly
overpaid [the HMO], but also on the notion that the
[employer] would have passed these savings on to its
employees in the form of a higher salary or additional
benefits.41 We determined that such a claim was too
speculative to establish standing.42 In this case, however, if
we accept the TPPs’ plausible allegations as true – as we are
required to do at this stage – then no speculation is required to
determine whether they suffered an injury.

      GSK advances one final argument for its position that
the TPPs have not suffered a concrete injury. Relying on the
Eleventh Circuit Court of Appeals’ decision in Ironworkers
Local Union 68 v. AstraZeneca Pharm., LP., 43 GSK argues
that TPPs can statistically anticipate a certain level of fraud

38
   See Schering-Plough, 678 F.3d at 246.
39
   Horvath, 333 F.3d at 452.
40
   Id. at 453.
41
   Id. at 457.
42
   Id.
43
   634 F.3d 1352 (11th Cir. 2011).




                               19
and pass this risk on to their beneficiaries in the form of
higher premiums. In Ironworkers, a case with facts similar to
these, the court found the plaintiff insurance companies
suffered no injury because they “adjust[] their premiums
upward to reflect the projected value of claims” for payment
of “medically unnecessary or inappropriate prescriptions of
formulary drugs” – “even those caused by fraudulent
marketing.44 Although GSK says that the TPPs “presumably”
adjusted their premiums in this way, we are not entitled to
make such a presumption at the motion-to-dismiss stage.
Furthermore, the argument lacks a limiting principle.45

                               B.

       In addition to cognizable injury, a RICO plaintiff must
satisfy RICO’s proximate causation requirements.              In
evaluating the requirement for proximate cause in a RICO
case, we cannot look only to the language of § 1964(c). It is
too broad: “Any person injured in his business or property by
reason of a violation of section 1962 of this chapter . . . shall
recover . . ..” The Supreme Court has been concerned about
this breadth of language, which on its face might “be read to
mean that a plaintiff is injured ‘by reason of’ a RICO
violation, and therefore may recover, simply on showing that
the defendant violated § 1962, the plaintiff was injured, and

44
  Id. at 1364, 1368.
45
   Were it “[t]aken to its ultimate conclusion . . a retailer
would be unable to claim injury from shoplifting, or a bank
from robbery, on the ground that their business models
presumably accounted for such losses in pricing their
products and services.” Br. Amicus Curiae Third Party
Payors at 10.




                               20
the defendant’s violation was a ‘but for’ cause of plaintiff’s
injury.”46
       The Court addressed this overbreadth concern in
Holmes v. Securities Investor Protection Corp.47 Noting that
Congress had modeled the broad language of § 1964(c) on the
language of the federal antitrust laws, the Court pointed out
that historically the lower federal courts had read § 4 of the
Clayton Act with the intent of adopting “the judicial gloss
that avoided a simple literal interpretation . . ..”48 Thus, the
Court had held in the antitrust case of Associated General
Contractors that “the judicial remedy cannot encompass
every conceivable harm that can be traced to alleged
wrongdoing.”49

       The Holmes Court found the remedy for this
overbreadth in the doctrine of “proximate cause.” The Court
specified that “we use ‘proximate cause’ to label generically
the judicial tools used to limit a person’s responsibility for the
consequences of that person’s acts.”50 Because of the
common language of § 1964(c) and of § 4 of the Clayton Act,
the Court in Holmes then discussed the elements of proximate
cause developed in the common law and, in doing so, referred


46
   Holmes v. Securities Investor Protection Corp., 503 U.S.
258, 265-66 (1992) (comparing Associated General
Contractors of California, Inc. v. California State Council of
Carpenters, 459 U.S. 519, 529 (1983).
47
   503 U.S. 258 (1992).
48
   Id. at 267-68 (quoting Associated General Contractors, 459
U.S. at 534.
49
   Associated General Contractors, 459 U.S. at 537.
50
   Holmes, 503 U.S. at 268.




                               21
to Associated General Contractors.51 Among the “many
shapes” that the doctrine of proximate cause took at common
law “was a demand for some direct relation between the
injury asserted and the injurious conduct alleged. Thus, a
plaintiff who complained of harm flowing merely from the
misfortunes visited upon a third person by the defendant’s
acts was generally said to stand at too remote a distance to
recover.”52

       The Holmes Court stated that there are three reasons
behind the requirement of a directness of relationship
between the injury and conduct alleged. First, the directness
of the injury: indirect injuries make it difficult “to ascertain
the amount of a plaintiff’s damages attributable to the
violation, as distinct from other, independent factors.”53
Second, the risk of multiple recoveries: indirect injuries may
present such a risk and courts would have to adopt
complicated rules apportioning damages to guard against this
risk.54 Third, the likelihood of vindication by others: the
need to grapple with the problems presented by indirect
claims may be unjustified “since directly injured victims can
generally be counted on to vindicate the law as private
attorneys general.”55

       In Holmes, the Court concluded that the Securities
Investor Protection Corporation (SIPC) had failed to satisfy

51
   459 U.S. 519.
52
   Holmes at 268-69 (citing 1 J. Sutherland, Law of Damages
55-56 (1882)).
53
   Id. at 269.
54
   Id.
55
   Id. at 269-70.




                              22
the proximate cause requirement.56 The SIPC, as a subrogee,
alleged that the defendant engaged in a stock manipulation
scheme, which caused two broker-dealers to become
insolvent and, in turn, required that the SIPC reimburse the
broker-dealers’ customers’ losses.57 The Supreme Court held
that, even if plaintiffs stood in the shoes of the customers,
“the link is too remote between the stock manipulation
alleged and the customers’ harm, being purely contingent on
the harm suffered by the broker-dealers.”58

        Since Holmes, the Court has found proximate cause
lacking in RICO cases when the conduct directly causing the
harm was distinct from the actions that gave rise to the fraud.
In Anza v. Ideal Steel Supply Corp.,59 plaintiff alleged that a
competing business caused it harm by defrauding the State
tax authority and using the proceeds to offer lower prices to
attract more customers.60 The Court held that the cause of
plaintiff’s harm was “a set of actions (offering lower prices)
entirely distinct from the alleged RICO violation (defrauding
the State.).”61 A plurality of the justices reached a similar
decision in Hemi Group, LLC v. City of New York,62 where
New York City alleged that out-of-state cigarette sellers
failed to file Jenkins Act reports with the State, and asserted
injury in the form of lost taxes from City residents.63 The

56
   See id. at 261-63.
57
   See id.
58
   Id. at 271.
59
   547 U.S. 451 (2006).
60
   Id. at 457-58.
61
   Id. at 458.
62
   559 U.S. 1 (2010).
63
   Id. at 4-5.




                              23
plurality concluded that causation was even more attenuated
than in Anza because “the City’s theory of liability rest[ed]
not just on separate actions, but separate actions carried out
by separate parties.”64 “Put simply, Hemi’s obligation was to
file the Jenkins Act reports with the State, not the City, and
the City’s harm was directly caused by the customers, not
Hemi.”65

        In contrast, however, if there is a sufficiently direct
relationship between the defendant’s wrongful conduct and
the plaintiffs’ injury, the Court has held that a RICO plaintiff
who did not directly rely on a defendant’s misrepresentation
can still establish proximate causation.66 In Bridge v. Phoenix
Bond & Indemnity Co., bidders at a county tax lien auction
alleged that they were directly harmed by other bidders’
fraudulent scheme to win more bids at the auction.67 The
defendants argued that the plaintiffs could not establish
proximate causation because even though the county may
have relied on defendants’ misrepresentations, plaintiffs did
not.68 Rejecting this argument, the Court held that the
“alleged injury—the loss of valuable liens—[was] the direct
result of petitioners’ fraud [because] . . . . [i]t was a
foreseeable and natural consequence of petitioners’ scheme to
obtain more liens for themselves that other bidders would
obtain fewer liens.”69


64
   Id. at 11.
65
   Id.
66
   553 U.S. 639, 657-58 (2008).
67
   See id. at 642.
68
   See id. at 653.
69
   Id. at 658.




                              24
       Keeping in mind that at the motion-to-dismiss stage
we must accept all plausible allegations in the complaint as
true, we view the case before us as more akin to Bridge than
to Holmes, Anza, or Hemi. The Court in Holmes, Anza, and
Hemi was concerned that the conduct causing plaintiffs’
injuries was different than the conduct allegedly constituting
a RICO violation.70 Each of those cases featured plaintiffs
alleging harm that was derivative of harm suffered by a more
immediate victim of the RICO activity. Here, GSK focuses
on the presence of intermediaries—physicians and patients—
in the causal chain. But GSK does not argue that a doctor’s
decision to prescribe Avandia or a patient’s decision to take
Avandia caused plaintiffs’ injuries.       The conduct that
allegedly caused plaintiffs’ injuries is the same conduct

70
    See, e.g., Holmes, 503 U.S. at 272 (“[T]he link is too
remote between the stock manipulation alleged and the
customers’ harm, being purely contingent on the harm
suffered by the broker-dealers . . .. The broker-dealers simply
cannot pay their bills, and only that intervening insolvency
connects the conspirators’ acts to the losses suffered by the
nonpurchasing customers and general creditors.”); Anza, 547
U.S. at 458 (“Ideal asserts it suffered its own harms when the
Anzas failed to charge customers for the applicable sales tax.
The cause of Ideal’s asserted harms, however, is a set of
actions (offering lower prices) entirely distinct from the
alleged RICO violation (defrauding the State).”); Hemi, 559
U.S. at 11 (“[T]he conduct directly responsible for the City’s
harm was the customers’ failure to pay their taxes. And the
conduct constituting the alleged fraud was Hemi’s failure to
file Jenkins Act reports. Thus, as in Anza, the conduct
directly causing the harm was distinct from the conduct
giving rise to the fraud.”).




                              25
forming the basis of the RICO scheme alleged in the
complaint – the misrepresentation of the heart-related risks of
taking Avandia that caused TPPs and PBMs to place Avandia
in the formulary. The injury alleged by the TPPs is an
economic injury independent of any physical injury suffered
by Avandia users.71 And, as far as we can tell, prescribing
physicians did not suffer RICO injury from GSK’s marketing
of Avandia.

       Nor should there be difficulty in distinguishing
between the amount of damages attributable to a defendant’s
violation and to other, independent factors. The amount of
damages is either the difference between what Avandia
coverage cost and the cost of coverage of cheaper, safer drugs
and/or the overvaluation of Avandia caused by GSK’s
misrepresentations. This issue of damages, rather than
demonstrating a lack of proximate causation, raises an issue
of proof regarding the overall number of prescriptions (under
the “quantity effect” theory) or amount of price inflation
(under the “excess price” theory) attributable to GSK’s
actions. This is a question of damages and, more specifically,
a question for another day.

       GSK, however, claims that plaintiffs’ theory of
causation—that TPPs relied on GSK’s misrepresentations
when including Avandia on formularies—fails as a matter of
law. According to GSK, plaintiffs cannot establish causation

71
   See Warfarin, 391 F.3d at 531 (holding that TPPs had
standing to assert antitrust claims because they suffered
“direct and independent harm” as a result of paying
supracompetitive prices for the defendant’s drug regardless of
any injury suffered by the consumer plaintiffs).




                              26
because they continued to cover Avandia prescriptions after
its safety risks were publicly exposed in May 2007. But this
argument is based on two faulty assumptions. GSK first asks
us to assume, in the absence of contrary allegations, that
plaintiffs did not change their coverage of Avandia in 2007.72
At this stage, however, we do not know that this is true.

       In addition, GSK’s argument assumes that plaintiffs
knew the full scope of GSK’s alleged fraud based on the
Nissen study. Other TPPs, however, may have chosen to
remove Avandia from their formularies in May 2007 simply
out of an abundance of caution, not due to knowledge of
Avandia’s full scope of risks. In fact, GSK responded to the
Nissen study with a marketing campaign, which plaintiffs
allege was specifically designed to minimize the report’s
effects on the medical community. Furthermore, the FDA
merely added black box warnings to Avandia in 2007 and did
not restrict Avandia usage until September 2010, over three
years after the Nissen study’s release. Viewing these facts in
the light most favorable to plaintiffs, we cannot conclude at
this stage that Avandia’s cardiovascular risks were fully
known in May 2007.

       GSK further argues that plaintiffs’ claim, that doctors
relied on GSK’s misrepresentations when prescribing
Avandia, fails because there are no allegations that alternative
prescriptions would have been cheaper. As a preliminary
matter, plaintiffs’ injury is not entirely contingent on the

72
   See Oral Arg. Tr. at 9:19-10:2 (“There’s no allegation in
the complaint [Plaintiffs] changed any behavior [in 2007].
And so I think the Court should assume that no change in
behavior occurred.”).




                              27
existence of cheaper alternative drugs. Although these
allegations are central to plaintiffs’ “quantity effect” theory,
they are less important to an “excess price” theory. Under
that theory, plaintiffs may be able to show that Avandia cost
too much regardless of whether cheaper drugs existed on the
market.

        In any event, plaintiffs identify metformin as a cheaper
alternative drug, which they allege was the most prevalent
oral drug therapy for Type II diabetes prior to Avandia and
cost substantially less than Avandia.           Despite GSK’s
contention, it was not necessary for plaintiffs to have included
a price comparison between Avandia and Actos, another Type
II diabetes drug. Although metformin may belong to an older
class of drugs, it is not entirely clear when -- or even if --
Actos was a more popular alternative to Avandia than
metformin. Again, GSK seeks a dismissal as a matter of law
when there is a factual dispute between plaintiffs and GSK on
the existence of alternative therapies. It is sufficient that a
plaintiff identify in the pleadings a specific alternative drug
that doctors would have prescribed and that would have cost
less.

       Finally, GSK argues that the presence of
intermediaries, doctors and patients, destroys proximate
causation because they were the ones who ultimately decided
whether to rely on GSK’s misrepresentations. But Bridge
precludes that argument. The plaintiffs in Bridge were the
“primary and intended victims of the scheme to defraud” and
their injury was a “foreseeable and natural consequence of
[the] scheme,” regardless of whether they relied on the




                              28
misrepresentations.73 The same is true here. Plaintiffs allege
that drug manufacturers are well aware that TPPs cover the
cost of their drugs and describe the alleged RICO scheme as
consisting of “deliberately misrepresenting the safety of
Avandia so that Plaintiff and members of the Class paid for
this drug.”74 This fraudulent scheme could have been
successful only if plaintiffs paid for Avandia, and this is the
very injury that plaintiffs seek recovery for. We conclude
therefore that plaintiffs’ alleged injury is sufficiently direct to
satisfy the RICO proximate cause requirement at this stage.75


        Nor does this decision conflict with our holding in
Steamfitters Local Union No. 420 Welfare Fund v. Philip
Morris, Inc.76 There, we held that proximate causation was
lacking where TPPs sued cigarette manufacturers based on
alleged misrepresentations and sought damages for the money
spent treating beneficiaries’ smoking-related health
conditions.77 Analogizing to Holmes, we concluded that the
smokers, like the broker-dealers there, were the “third party
linking the plaintiffs and defendants.”78 In both cases,
plaintiffs only “suffered a loss because of the harm that the
defendants brought upon th[at] third party.”79 That is not

73
   See 553 U.S. at 650, 658.
74
    J.A.120, ¶ 184 (Allied Services Compl.); J.A.193, ¶ 178
(UFCW Local 1776 Compl.); J.A.265, ¶ 235 (United Benefit
Compl.).
75
   See Neurontin, 712 F.3d at 37-38.
76
   171 F.3d 912 (3d Cir. 1999).
77
   Id. at 930.
78
   Id. at 932.
79
   Id.




                                29
what happened here. Although GSK identifies third parties,
doctors and patients, within the causal chain, plaintiffs did not
suffer economic harm because those third parties were
injured.
        To sum up, this case does not present any of the three
fundamental causation concerns expressed in Holmes. At
least for the purposes of this motion to dismiss, the injury is
sufficiently direct. There is no risk of duplicative recovery
here. And, no one is better suited to sue GSK for its alleged
fraud.80 At this stage in the litigation, plaintiffs “need only
put forth allegations that raise a reasonable expectation that
discovery will reveal evidence” of proximate causation.81
They have done that here.


                              IV.

        Plaintiffs have plausibly alleged the elements of RICO
standing, and GSK has not offered a valid justification for
limiting the claims at this stage of the litigation. While many
of these issues will resurface in the future, we will not opine
on the likelihood of plaintiffs’ success down the road. We
simply hold that it would be premature to dismiss plaintiffs’
well-pled RICO allegations at this juncture. Accordingly, we
will affirm the judgment of the District Court.




80
  See Bridge, 553 U.S. at 658.
81
  See Fowler v. UPMC Shadyside, 578 F.3d 203, 213 (3d
Cir. 2009) (internal quotations omitted).




                               30
