District Court Grants Partial Dismissal in Part D/Medicaid Case Alleging False Comparative Marketing Claims

On August 20, 2015, the District of New Jersey granted in part and denied in part defendants’ motion to dismiss allegations that by making comparative claims regarding an on-label use of a drug, the defendant prevented physicians from making informed decisions about whether resulting prescriptions were eligible for Medicare or Medicaid reimbursement.  See United States ex rel. Dickson v. Bristol-Myers Squibb Co., No. 13-1039 (D.N.J. Aug. 20, 2015).  The case highlights relators’ ever-broader use of the FCA to target sales and marketing activities of pharmaceutical manufacturers.

The relator, a former sales representative who sold BMS’s drug Plavix, alleges she was instructed to promote the drug as having superior safety and efficacy versus aspirin, including by invoking trial data demonstrating non-significant increases in efficacy among certain patient populations.  The defendants moved to dismiss under Rule 12(b)(1), arguing that the court lacked subject matter jurisdiction due to the public disclosure bar.  The court agreed, after relatively brief analysis, that the essential elements of the relator’s claims—the allegation that the defendants represented Plavix as more effective and safer than aspirin, and the assertion that Plavix is not more effective or safer than aspirin—were based on public disclosures.  However, the court went on to find the relator an original source of those allegations.  Although she lacked direct knowledge as to any false statements made to particular physicians, the court concluded she “had direct knowledge of Defendants’ alleged fraudulent scheme because she was involved in it.”

The court then moved to the merits of the relator’s allegations that defendants’ marketing campaign caused claims to be submitted for payment for on-label uses of Plavix that nonetheless failed to meet conditions for Medicare or Medicaid reimbursement.  First, as to Medicare Part D, the relator alleged that the prescriptions failed to meet the statutory coverage criteria of being “reasonable and necessary.”  In response, the court observed that while caselaw is replete with discussion as to the meaning of “reasonable and necessary” in the off-label context, it could not find any caselaw discussing the meaning of this term for on-label drugs.  After analyzing applicable statutory provisions, the court concluded that “a reasonable and necessary covered drug under Part D includes a drug prescribed for uses that are approved by the FDA, i.e., on-label uses.”  Furthermore, the court concluded that the FDA approval process endows drugs prescribed for on-label uses with the government’s imprimatur of being “reasonable and necessary.”  As a result, the court dismissed all allegations based on claims submitted to the Medicare Part D program.

Second, the court analyzed the allegations implicating state Medicaid programs.  Federal law requires state Medicaid programs to reimburse for participating manufacturers’ drugs so long as they satisfy the definition of a “covered drug” and do not fit any of the specified exclusion or restriction provisions.  The relator did not allege that Plavix was excluded from coverage in any state, so the court analyzed whether it constitutes a “covered outpatient drug.”  Medicaid defines a “covered outpatient drug” as one that is prescribed for a “medically accepted indication.”  Thus, as with the Medicare claims, the court determined that so long as Plavix is prescribed on-label, it is a covered drug.  The relator further argued that regardless, state Medicaid programs will only cover “medically necessary” drugs, and the defendants’ misrepresentations of trial data regarding the comparative effectiveness of Plavix and aspirin prevented physicians from accurately assessing the medical necessity of Plavix.  For most of the state Medicaid plans cited, the term “medical necessity” went undefined.  Accordingly, absent a specific restriction, the court concluded on-label Plavix prescriptions did not violate any coverage criteria.  However, seventeen states define medical necessity in relation to whether a product is cost-effective, which the court interpreted to be a condition of payment (the so-called “Cost-Imposed States”).  By alleging that defendants “systematically” misrepresented Plavix as superior to aspirin for certain patients, the court ruled that the relator had sufficiently articulated a theory of how defendants caused the submission of false claims.

Finally, the court addressed the relator’s claims that the defendants violated the FCA by misleading various Medicaid and Medicare formulary committees into adding Plavix.  The court dismissed this portion of the relator’s claims for her failure to articulate how defendants’ allegedly false promotional statements affected any specific formulary committee decisions.

A copy of the court’s opinion can be found here.