Opinion ID: 2710262
Heading Depth: 3
Heading Rank: 2

Heading: adequacy of plaintiffs’ pleadings

Text: Having construed § 17755(2), we turn to whether plaintiffs’ pleadings adequately state a claim for relief for violation of this statute. A motion for summary disposition under MCR 2.116(C)(8) tests the legal sufficiency of a complaint. A motion for summary disposition is properly granted if “[t]he opposing party has failed to state a claim on which relief can be granted.”36 When reviewing a motion brought under MCR 2.116(C)(8), the court considers only the pleadings.37 Moreover, the court must accept to the Legislature.”). 35 Grissinger, Multiple Brand Names for the Same Generic Drug Can Cause Confusion, 38 Pharm & Therapeutics 305 (2013), available at (accessed June 2, 2014) [http://perma.cc/V5MG-DHLF]. For instance, fluoxetine is marketed as both Sarafem and Prozac; finasteride is marketed as both Propecia and Proscar. 36 MCR 2.116(C)(8). 37 MCR 2.116(G)(5). 15 all factual allegations in the complaint as true, along with all reasonable inferences or conclusions that can be drawn from them.38 However, conclusory statements that are unsupported by allegations of fact on which they may be based will not suffice to state a cause of action.39 Because plaintiffs’ claims are based on alleged fraudulent activity, the heightened pleading standard for fraud claims apply. MCR 2.112(B)(1) provides, in full, “In allegations of fraud or mistake, the circumstances constituting fraud or mistake must be stated with particularity.”40 Plaintiffs’ complaints rely on wholesale drug cost data from a single Kroger pharmacy in West Virginia. From that proprietary data, plaintiffs extrapolate thousands of allegedly fraudulent transactions by defendants in violation of § 17755(2). In doing so, plaintiffs rely on various assumptions. These assumptions include (1) each defendant acquires its prescription drugs from just a few wholesalers, (2) the prescription drug purchasing power is substantially the same for all defendants, (3) the wholesale prices each defendant pays are materially the same, and (4) the wholesale prices do not change over time. 38 See Wade v Dep’t of Corrections, 439 Mich 158, 162-163; 483 NW2d 26 (1992). 39 Churella v Pioneer State Mut Ins Co, 258 Mich App 260, 272; 671 NW2d 125 (2003). 40 Generally, fraud “ ‘is not to be presumed lightly, but must be clearly proved,’ ” Cooper v Auto Club Ins Ass’n, 481 Mich 399, 414; 751 NW2d 443 (2008), quoting Palmer v Palmer, 194 Mich 79, 81; 160 NW 404 (1916), and must be proved by “ ‘clear, satisfactory and convincing evidence,’ ” Cooper, 481 Mich at 414, quoting Youngs v Tuttle Hill Corp, 373 Mich 145, 147; 128 NW2d 472 (1964). It is for these reasons that our court rules create an enhanced burden to plead fraud with particularity. 16 When faced with the heightened pleading standard for fraud claims, plaintiffs’ claims of § 17755(2) violations cannot survive. Plaintiffs rely on a small set of cost data from a single out-of-state pharmacy during a brief time period to charge numerous Michigan defendants with systematic fraudulent activity across a multiyear period. The connection drawn between the West Virginia data and pharmaceutical sales in Michigan is simply too tenuous and conclusory to state a claim for relief.41 As the Court of Appeals correctly recognized: “The critical number in plaintiffs’ formula is the acquisition cost of the generic and brand name drugs. This is true because the sale prices of generic and brand name drugs are publicly known and easily identifiable; however, the acquisition cost is proprietary to each defendant.”42 But the Court of Appeals erred by holding that plaintiffs’ allegations were sufficient to survive summary disposition. Without precise allegations of fraud committed by defendants, plaintiffs’ allegations valuing quantity over quality do not meet the heightened pleading standard applicable here.43 Plaintiffs’ complaints are also deficient because they fail to particularly allege a single improper substitution transaction. As discussed earlier, § 17755(2) applies only to transactions in which a generic drug is substituted for a brand-name drug. Defendants 41 Construing the federal analogue to our pleading rules, the United States Supreme Court has held that when the pleaded facts “do not permit the court to infer more than the mere possibility of misconduct,” the complaint fails to state a claim for relief. See Ashcroft v Iqbal, 556 US 662, 679; 129 S Ct 1937; 173 L Ed 2d 868 (2009) (emphasis added); FR Civ P 8(a). 42 Gurganus, unpub op at 17. 43 MCR 2.112(B)(1). 17 claim that plaintiffs have not satisfied the heightened pleading requirement because plaintiffs do not identify substitution transactions in their complaints. Instead, plaintiffs only allege generic drug transactions, regardless of whether they are substitution transactions.44 Without distinguishing substitution transactions from transactions in which a generic was simply dispensed, plaintiffs’ overbroad approach is deficient—especially under the heightened pleading standard. Plaintiffs essentially allege that defendants had a statutory duty to pass on the savings in cost from every sale of a generic drug. Yet as previously discussed, the statute simply does not impose such a duty on pharmacists. By alleging that thousands of generic drug transactions were improper, regardless of whether any of the transactions involved a substitution, plaintiffs failed to plead any transaction proscribed under § 17755(2) because the transactions are not of the type covered by § 17755(2), i.e., substitution transactions.45 In other words, plaintiffs’ allegations assert concern about transactions not prohibited by law.46 44 Plaintiffs alleged at oral argument that this absence of specific substitution transactions stems from plaintiffs’ alleged lack of access to specific instances in which defendant pharmacies engaged in substitution transactions. However, plaintiff Scott Murphy, as a firsthand uninsured purchaser, would have evidence from the receipt at the point of sale whether a pharmacist dispensed a brand-name drug as prescribed by his doctor or whether the pharmacist instead dispensed a generic equivalent. Thus, at least one of the plaintiffs has, or could have, the knowledge of whether, in a specific transaction by a named defendant, a substitution transaction occurred. 45 See White v Beasley, 453 Mich 308, 325; 552 NW2d 1 (1996) (holding that the plaintiff’s tort complaint failed to state a claim because she failed to allege facts showing that the defendant owed her a duty). 46 Because plaintiffs have failed to plead any transaction proscribed under § 17755(2), we need not—and do not—determine whether § 17755(2) contains an implied right of 18