Fifth Circuit Rules In Favor Of Pharmaceutical Manufacturer Based on Relators’ Failure to Establish Causation

Last week, the Fifth Circuit affirmed summary judgment for Solvay Pharmaceuticals Inc. on allegations that the company violated the False Claims Act as a result of off-label marketing efforts and kickbacks to physicians, emphasizing the relator’s failure to demonstrate a causal link between the alleged improper conduct and any false claims.

As we have previously written about here and here, after the federal government and all implicated state governments failed to intervene in U.S. ex rel. King v. Solvay Pharmaceuticals, Inc., two former marketing employees preceded with their claims alleging that: (1) Solvay marketed three drugs, Luvox, Aceon, and AndroGel, for off-label uses causing reimbursement by Medicaid; (2) Solvay lobbied certain states’ pharmacy and therapeutic committees (P&T committees) to secure preferred status on Medicaid formularies, also causing Medicaid reimbursement because physicians are less likely to use non-preferred drugs; (3) Solvay misled the publisher of the DrugDex Information System (DrugDex) compendia to secure “medically accepted” listings, and therefore Medicaid reimbursement eligibility, for various off-label uses of the products; and (4) Solvay paid physicians kickbacks in the form of consulting fees to induce the purchase of its drugs.  U.S. ex rel. King v. Solvay Pharmaceuticals, Inc., No. 16-20259 at 3-4 (5th Cir. Sept. 12, 2017).  The Fifth Circuit ruled for Solvay on all four sets of FCA claims, and also upheld the lower court’s decisions denying relators’ retaliation claims and awarding certain taxable costs totaling $232,809.92 to Solvay.

On all AndroGel claims, the Court upheld the lower court’s dismissal for lack of jurisdiction under the FCA’s public disclosure bar, finding that the relators were not the original source of the facts they presented, and, instead, had derived their claims from a magazine article.  On all claims related to Luvox and Aceon, the Fifth Circuit reasoned that the relators failed to provide any evidence showing that Solvay’s alleged conduct caused the submission of even a single false claim to any Medicaid program.

With regard to the off-label marketing claims, the Court found that the relators’ few pieces of original evidence (a marketing presentation and limited call notes) failed to “create a genuine issue of material fact that the off-label marketing scheme caused physicians to make off-label prescriptions that were submitted for Medicaid reimbursement.”  Id. at 10 (emphasis added).  Further, economic studies indicating that pharmaceutical marketing efforts result in increased sales on which relators relied “suggest[ed] only the potential for a causal link…but sa[id] nothing about whether the marketing scheme actually caused off-label prescription to Medicaid patients.” Id. at 12 (emphasis in original).

Similarly, the Court doubted relators’ claims that Solvay’s alleged lobbying of state P&T Committees influenced the Committees’ decision to prefer the Company’s drugs; the Court held that relators’ evidence suggested that the Committees relied on available data in making formulary decisions.  In its reasoning, the Court notably highlighted that P&T Committees are composed of medical experts, thereby implying that those experts rely on their independent medical judgment to make off-label use determinations (as pharmaceutical defendants often argue).  Furthermore, the Court held, that even if the P&T Committees were unduly influenced, relators failed to present any evidence showing Medicaid claims “were actually filed because Solvay’s drugs were placed on preferred drug lists.” Id. at 14.

Relators next alleged that in Solvay’s interactions with DrugDex, the Company suppressed negative studies and flooded the medical literature with small, low quality studies that supported used of Luvox for certain off-label uses.  However, the relators failed to provide any evidence that Solvay presented those small company-sponsored studies to DrugDex, let alone any evidence that DrugDex was misled by the studies and relied on them in making its compendia listing determinations.

Finally, with regard to the relators’ kickback allegations, the Court summarily tossed them, finding no evidence that compensation or other benefits provided to physician-consultants caused those physicians to write prescriptions reimbursed by Medicaid.  In siding with Solvay, the court reasoned: “There was nothing illegal about paying physicians for their participation in these types of programs [e.g., promotional speaker programs] and there is no evidence that participation was conditioned upon prescribing Solvay’s drugs to Medicaid patients. Although it is not an unreasonable inference that Solvay intended these programs to boost prescriptions, it would be speculation to infer that compensation for professional services legally rendered actually caused the physicians to prescribe Solvay’s drugs to Medicaid patients.” Id. at 17.

In addition to its rulings on causation, the Fifth Circuit raised two other issues relevant to claims based on allegations of off-label promotion.

First, the Court stated in a footnote that it remains an open question whether Medicaid programs have discretion to reimburse for off-label uses that are not “medically accepted,” as defined by federal statute (i.e., supported by certain compendia such as DrugDex).  Id. at 10, n7.  The Court reasoned that, if such discretion exists, in order to establish an FCA violation, plaintiffs must present evidence showing that the states at issue have chosen to deny reimbursement for non-medically accepted off-label uses.  Id.  This reasoning places the burden on plaintiffs to provide evidence of the reimbursement rules followed by each and every Medicaid program at issue in an FCA case; a significant burden for any FCA case that spans multiple years and includes numerous states.

Second, while the Court did not reach the issue of materiality, it reasoned that a state’s failure to ask about the purpose of a prescription, and to specifically ask whether a prescription was used off-label, (e.g., through a prior authorization process) suggests that use is not material to the state’s payment decisions.  Id. at 10, n9.  Critically, this reasoning extends the Supreme Court’s holding in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 2003-04 (2016), that continued payment of claims “despite actual knowledge that certain requirements were violated” is “strong evidence” that those requirements are not material to the payment decision.  The Fifth Circuit would require much less than actual knowledge and would allow defendants to defeat the FCA’s materiality standard based on a federal payor’s failure to take adequate steps to ensure reimbursement requirements were met.

The Fifth Circuit’s opinion can be found here.