In Humana Inc. v. Teva Pharmaceuticals USA, Inc., the District Court for the Middle District of Florida (the “Court”) dismissed claims brought by Humana under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) against Teva Pharmaceuticals USA and a few specialty pharmacies (collectively, “Teva”). The Court ruled that Humana lacked standing to sue due to the indirect purchaser rule. Despite the case’s dismissal, it’s important for hospitals and health care providers to focus on compliance with payors as insurance companies continue to explore using RICO to address claims issues.
Background
RICO, codified at 18 U.S.C. §§ 1961-1968, criminalizes the use of income derived from racketeering activity in interstate or foreign commerce. Racketeering activity encompasses many forms of felonious conduct, such as fraud, bribery, extortion and other crimes. In order to prove a RICO violation, “a plaintiff must plead: ‘(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.’” Defendants can be charged with a RICO offense even if they did not commit the criminal activity themselves, so long as they were part of an enterprise and benefited from that enterprise. Private individuals can bring a civil RICO claim to seek compensation for money lost due to a criminal RICO offense.
Humana filed a lawsuit against Teva alleging it was involved in a scheme from 2007 to 2015 to induce insured patients to purchase Copaxone. Teva, a manufacturer of Copaxone, allegedly made contributions to two copayment assistance foundations. When patients were prescribed Copaxone and faced copayment obligations, Teva directed the patients to two specialty pharmacies, which, in turn, helped the patients get copayment assistance from the two copayment assistance foundations. Through this alleged kickback arrangement, more patients were induced to purchase Copaxone, which led Teva to increase the price of Copaxone beyond the inflation rate. Ultimately, insurance companies, such as Humana, were forced to pay these increased prices.
Teva argued that Humana lacked standing under RICO due to the indirect purchaser rule, a concept taken from antitrust law. The issue of whether to extend the indirect purchaser rule to RICO claims was one of first impression in the Eleventh Circuit.
Indirect Purchaser Rule
The indirect purchaser rule, first established by the U.S. Supreme Court in Illinois Brick Company v. Illinois (“Illinois Brick“), 431 U.S. 720 (1977), states that only those who purchase directly from an alleged wrongdoer have standing to sue under the Clayton Act. Essentially, under this theory, an indirect purchaser lacks standing to sue and cannot recover in an antitrust lawsuit based on a “pass-on theory” of damages. While the holding in Illinois Brick was originally limited to antitrust suits, several circuits have held that the rule also applies to civil RICO claims.
The Court found that the indirect purchaser rule does extend to RICO claims. The Court based its conclusion on the fact that every circuit court that has considered this issue has found the indirect purchaser rule applies to civil RICO cases. Further, the civil RICO provision was modeled after the Clayton Act, supporting the conclusion that the indirect purchaser rule should also apply. The Court also determined that the indirect purchaser rule facilitated effective enforcement of RICO, avoided complex damage calculations and eliminated duplicative damages, which were also rationales found by the Supreme Court to apply in Illinois Brick.
Humana argued that even if the indirect purchaser rule applies, Humana still has direct-purchaser standing because it purchased Copaxone for its enrolled members. Humana contended it was a direct purchaser because it made payments directly to Teva’s specialty pharmacies on behalf of patients. The Court disagreed, concluding that insurance companies, when acting as third-party payors, “are not direct purchasers, regardless of creative pleading.” It further stated that for a plaintiff to successfully plead a civil RICO claim, it must be a direct purchaser and must demonstrate proximate cause. Because Humana was not a direct purchaser of Copaxone, it did not have standing for a civil RICO claim.
Other RICO Claims by Insurance Companies Against Health Care Entities
This case represents a growing trend of insurance companies bringing RICO claims against health care companies. Insurance companies have brought claims alleging, among other things, fraudulent billing, illegal kickback schemes and conspiracy. While many of these cases were dismissed early—for failing to meet RICO’s demanding pleading standards or for running into procedural issues such as standing—some courts have considered whether health care entities may be civilly liable to insurance companies for RICO violations. Below is a list of several recent RICO cases brought by insurance companies against health care entities:
- Allstate Insurance Co. v. First Supply, Inc., No. 1:25-cv-04739 (E.D.N.Y. Aug. 26, 2025) (ongoing).
- Allstate Insurance Co. v. SMK Pharmacy, Corp., No. 1:24-cv-04627-NRM-PK (E.D.N.Y. July 1, 2024).
- GEICO v. Apex Spine & Orthopaedics, PLLC, 2024 WL 2820370 (W.D.N.C. June 3, 2024).
- City of Plaquemine v. Team Health 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).
Practical Takeaways
- Additional Focus on Payor Compliance is Necessary: As insurance companies are exploring ways to use RICO to address claims issues, it’s important for hospitals and health care providers to focus on compliance with private payors, not solely with federal and state governments.
- Indirect Purchaser Rule Applies to Civil RICO Claims: The Humana court followed other circuits and held that the indirect purchaser rule applies to civil RICO cases.
- Insurance Companies Cannot Bring RICO Claims as Indirect Purchasers: Insurance companies cannot bring RICO claims against health care entities unless they are direct purchasers of the entity, and insurance companies that make payments on behalf of their insureds are not direct purchasers.
If you have questions or would like more information about this topic, please contact:
- David Honig at (317) 977-1447 or dhonig@hallrender.com;
- Kennedy Bunch at (317) 977-1420 or kbunch@hallrender.com;
- Kathryn Daggett at (317) 977-1415 or kdaggett@hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
