On June 12, 2013, the First Circuit in United States ex rel. Duxbury v. Ortho Biotech Products, L.P., No. 12-2141, held that the district court properly limited discovery on the relator’s FCA claims to only those time periods and regions of the country as to which relator could be considered an “original source.”
Relator, a former employee of manufacturer Ortho Biotech Products, based his FCA claims in part on allegations that OBP delivered kickbacks to doctors in various forms to induce prescriptions of OBP’s anemia drug, Procrit. In 2007, the District of Massachusetts dismissed the kickback-related allegations for failure to plead fraud with sufficient particularity. The First Circuit reversed that decision, finding that the complaint properly set forth allegations of kickbacks that resulted in false claims by eight healthcare providers in the western U.S. between 1992 and 1998. The Court then remanded the case to the district court for consideration of discovery and statute of limitations issues.
On remand, Judge Zobel found that the temporal scope of discovery properly was limited to a roughly seven month period in late 1997 and early 1998. The district court reasoned that claims accruing prior to this time frame were barred by the FCA’s statute of limitations, and claims arising afterwards fell outside the scope of the court’s subject matter jurisdiction, because relator could not be an “original source” of claims arising after his termination. Additionally, the court limited relator’s discovery to the facts arising in the western United States because he only had “direct and independent knowledge” of OBP’s activities there. At the close of discovery, the parties stipulated that relator had not identified and did not possess any admissible evidence to support his remaining claims. OBP moved for summary judgment, which the district court granted.
Relator appealed, contending that the district court erroneously had applied the “original source” rule in determining the scope of its subject matter jurisdiction. Without reaching the merits of the district court’s subject matter jurisdiction, the First Circuit held that the limitations imposed by the district court were well within its “broad discretion in managing discovery.” Specifically, the First Circuit found the district court was not required to “expand the scope of discovery based upon the amended complaint’s bald assertions that the purported kickback scheme continued after [relator’s] termination or was ‘nationwide’ in scope.” Accordingly, the Court found that relator’s claims “evaporated” with the failure to uncover any admissible evidence to support the allegations in the complaint by the close of discovery, and upheld the grant of summary judgment for the defendant.
A copy of the First Circuit’s opinion can be found here.
Posted by Scott Stein and Jessica Rothenberg
A recent opinion by a federal district court in California addressed a competitor’s effort to leverage the outcome of pharmaceutical patent litigation into an FCA suit. The case arose out of Hatch-Waxman litigation between Aventis, manufacturer of Lovenox (enoxaparin) and Amphastar, a generic competitor. After Amphastar filed an Abbreviated New Drug Application with the FDA seeking approval to manufacture a generic form of enoxaparin, Aventis filed a patent infringement suit against Amphastar, which counterclaimed antitrust violations. Ultimately, Aventis’s patents were found unenforceable, and Amphastar’s antitrust counterclaim was dismissed.
Amphastar then filed a qui tam action, claiming that Aventis had made false representations while prosecuting its patents, improperly listed its patents in the FDA’s Orange Book, engaged in baseless litigation against Amphastar in order to delay approval of its ANDA, made false representations and material omissions to the FDA, and thereby attempted to manipulate the approval or marketing of enoxaparin. After the government declined to intervene and the complaint was unsealed, Aventis moved to dismiss the FCA claims on several grounds.
Aventis first argued that the suit was barred because the complaint was based on information publicly disclosed in the prior litigation and regulatory proceedings. The court agreed that the disclosures in the preceding antitrust litigation, FDA submissions public court filings, and judicial decisions predating the present complaint all constituted public disclosures, and that Amphastar’s FCA claims were based on those public disclosures. However, the court found that Amphastar qualified as an original source because it had direct and independent knowledge of the alleged fraud and had a hand in the public disclosure of the allegations.
Aventis separately argued that the complaint should be dismissed for failure to state a claim because it was based on certain conduct (petitioning the FDA) protected under the Noerr-Pennington doctrine. The court rejected this argument, finding that Amphastar was seeking to impose liability on Aventis for the act of overcharging the government, and not for the act of petitioning the government, making the Noerr-Pennington doctrine inapplicable.
However, the Court agreed with Aventis that the complaint failed to plead an FCA violation with the particularity required by Rule 9(b). Although Amphastar sufficiently alleged that Aventis had engaged in certain misconduct, that Aventis had acted with knowledge and intent to deceive, and that the false statements were material, the court concluded that Amphastar failed to allege “the particular details of a scheme to submit false claims and details leading to a strong inference that those claims were submitted.” Accordingly, the complaint was dismissed with leave to replead. A copy of the court’s opinion in Amphastar Pharmaceuticals Inc. v. Aventis Pharma SA, et al., Case No. EDCV-09-0023 MJG (C.D. Cal.) can be found here.
It remains to be seen whether Amphastar can or will seek to replead a viable claim, but it will be interesting to see whether this case is an anomaly, or whether it portends a new strategy for generic manufacturers seeking to leverage victories in Hatch-Waxman litigation into FCA claims.