Nirav Shah

31 March 2014

Supreme Court Denies Certiorari In Nathan

Posted by Jaime Jones and Nirav Shah

Today, the Supreme Court denied certiorari in U.S., ex rel. Nathan v. Takeda Pharmaceuticals, et al. As we previously reported, this case involved the pleading requirements for qui tam cases brought under the FCA. Earlier this month, the Solicitor General filed a brief urging the Court not to grant certiorari.

At issue is whether Rule 9(b) requires a complaint to “allege with particularity” that certain claims false claims were submitted for payment. Circuits are split on the issue, with the Fourth, Sixth, Eight, and Eleventh Circuits requiring stricter pleading while the First, Fifth, Seven, and Ninth adopting a more permissive approach. The Court’s denial of certiorari means that the Fourth Circuit’s ruling that the relator’s complaint “failed to plausibly allege that any false claims had been presented to the government for payment” will stand.

06 March 2014

Solicitor General Weighs In On Pleading Requirements For FCA Cases

We previously reported on the Supreme Court’s invitation to the Solicitor General to weigh in on whether the Court should grant certiorari in an important case involving the pleading standards in FCA cases. U.S. ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., et al., Dkt. No. 12-1349 (Oct. 7, 2013). In a recent brief, the Solicitor General argued that since the issue of whether a relator must identify specific false claims in order to meet the pleading requirements of 9(b) is still being considered by various lower courts, the Court should decline to grant certiorari at this time.

The brief sheds light on the government’s view of the overarching role of 9(b) and the FCA. The government’s central position is that adoption of a per se rule that a relator must plead the details of particular false claims—rather than plead allegations supporting a “plausible inference” that false claims were submitted—could undercut the FCA’s role as a fraud-fighting tool. The Solicitor General argued that asking relators to identify specific claims is neither plausible or useful, conceding that many relators may not be aware of specific claims. Rather, the Solicitor General argued, the role of a relator is properly to “bring[] to light other information that shows those claims to be false.”

Thus, the government’s position appears to be 9(b) should be construed so as to aid the government’s fraud-fighting efforts. This approach is difficult to square with the longstanding view of 9(b) as a means to provide notice to defendants of potential fraud claims and prevent frivolous or vexatious litigation. We will continue to monitor this important case.

19 December 2013

Government Seeks to Limit Application of Caronia To FCA Cases

Posted by Scott Stein and Nirav Shah

As we reported last year, the Second Circuit held in U.S. v. Caronia that truthful, non-misleading off-label promotion is constitutionally-protected commercial speech. Recently, the United States filed a Statement of Interest in U.S. ex rel. Cestra, et al. v. Cephalon, Inc., 10 Civ. 6457 (SHS) (S.D.N.Y.) setting forth the government’s views on the application of Caronia to an FCA claim based on alleged off-label promotion. The Statement was filed in connection with Cephalon’s motion to dismiss the relator’s complaint alleging that Cephalon promoted two of its drugs, Treanda and Fentora, for off-label uses.

In its Statement, the government begins by acknowledging that “the FCA does not prohibit off-label promotion of prescription drugs.” However, the government continues, Caronia does not “preclude a cause of action under the False Claims Act based on a manufacturer’s off-label marketing.” According to the government, the First Amendment is “not implicated in the context of an FCA claim . . . where the defendant causes others to submit false claims for payment to the Government for non-reimbursable prescription drugs.” (emphasis added). The government argues that the “central question” in an FCA case based on off-label marketing allegations is “whether the defendant’s marketing caused the submission of false claims, i.e., claims for off-label uses that are not covered or reimbursable by federal healthcare programs.” (emphasis added) Simply put, the government’s position is that off-label promotion, per se, does not violate the FCA; rather, it is promotion for uses that are not covered by federal healthcare programs (rendering the claims for such uses “false”) that violates the FCA.

First Amendment concerns are not at issue, according to the government, since “the FCA does not prohibit speech” making it “irrelevant whether a party causes the submission of a false claim by words, by conduct, or by a combination of both.” To the extent that the promoted off-label uses would not have been reimbursed by federal healthcare programs, the government concludes, claims for those uses would have been false.

But as Cephalon appropriately notes in its reply to the government’s Statement, the distinction between the submission of “false claims” and protected First Amendment conduct is artificial. The relator seeks to hold Cephalon responsible for “causing” false claims (i.e., claims for non-reimbursable uses) to be submitted, but conduct that is alleged to have “caused” the submission of the claims is (according to Cephalon) truthful, non-misleading promotion—the very conduct that Caronia held to be protected speech. As Cephalon notes, “[b]ecause it is the ‘marketing’ that allegedly ‘causes’ the false claim, and because it is this ‘causation’ that is the alleged violation of the FCA by Cephalon, it is this ‘marketing’ that is sought to be sanctioned.”

It remains to be seen whether the Court will resolve this dispute. It may bypass the question entirely at this stage if it finds that the relator has alleged that the speech at issue was false and misleading (in which case it would not be Constitutionally protected).

The government’s Statement of Interest clearly articulates that “reimbursability” is the crux for determining whether a claim is “false” under the FCA. In doing so, it establishes when certain categories of claims would give rise to FCA liability. It also raises the question of whether, under the government’s approach, claims for uses that would otherwise be reimbursable by federal healthcare programs would present greater challenges for government prosecutors in the FCA arena.

11 October 2013

Supreme Court Invites Solicitor General To Weigh In On The Pleading Requirements For FCA Cases

Posted by Jaime Jones and Nirav Shah

This week, the Supreme Court invited the Solicitor General to file a brief expressing the views of the United States on the pleading standards in FCA cases. U.S. ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., et al., Dkt. No. 12-1349 (Oct. 7, 2013). This move signals that the Court may soon decide whether to grant certiorari and hear a case that has significant implications for the efforts of the whistleblower bar and federal government to leverage the FCA for billions of dollars in recoveries each year.

In the decision at issue, the Fourth Circuit dismissed a complaint by the qui tam plaintiff for his failure to “allege with particularity that specific false claims were presented to the government for payment,” which the court held was necessary to satisfying the heightened pleading requirements of Rule 9(b). Circuits are split on this issue, with the Sixth, Eight, and Eleventh Circuits adopting the standard articulated by the Fourth Circuit, while the First, Fifth, Seventh, and Ninth Circuits have allowed qui tam claims to survive based only on “reliable indicia that lead to a strong inference that claims were actually submitted.” See, e.g., U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009).

It is unclear for which approach the Solicitor General may advocate. In a case involving similar issues three year ago, the Solicitor General merely noted that the First Circuit’s more-relaxed pleading requirement “deepens an existing circuit conflict.” There, the Solicitor General recommended that the Court answer the fundamental pleading question raised by the Circuit split—albeit not in that particular case. See Ortho Biotech Prods., L.P. v. U.S. ex rel. Duxbury, Dkt. No. 09-654.

18 February 2013

Illinois District Court Refuses To Dismiss FCA Claim For Improper Marketing of On-Label Use

Posted by Scott Stein and Nirav Shah

On January 30, 2013, a federal court in the Southern District of Illinois denied a motion to dismiss a relator’s complaint accusing defendants Sanofi-Aventis and Bristol Myers Squibb of allegedly making unsubstantiated efficacy claims about on-label use of the blockbuster drug Plavix. According to the complaint, by overstating Plavix’s efficacy, the defendants caused the federal health care programs to pay for unnecessary Plavix prescriptions, rendering claims for the drug false.

In its ruling, the Court focused on the relator’s allegation that Plavix was not “reasonable and necessary” for the patients to whom it was prescribed. The relator argued that the defendants made overstatements regarding Plavix’s efficacy, and that these statements misled physicians into thinking that Plavix was the only viable treatment option. The court concluded that the relator had met the pleading standard for Rule 9(b), notwithstanding the fact that the relator conceded that Plavix was used for FDA-approved purposes.

This case is unique and reflects the fact that after years of substantial settlements based on allegations of off-label promotion, enterprising relators’ counsel are turning their focus to new theories, including improper marketing of on label uses. Indeed, such theories are consistent with comments last year by Assistant U.S. Attorney Sara Bloom (D. Mass.) that unsubstantiated superiority claims by manufacturers are likely to be an area of increased focus by the government.

28 January 2013

UPDATE: Second Circuit Declares That The First Amendment Shields Off-Label Marketing

Posted by Scott SteinJonathan Cohn and Nirav Shah

UPDATE: On Wednesday, the Food and Drug Administration announced that the government has decided not to seek en banc or Supreme Court review of the Second Circuit’s decision. Presumably, the government did not want to risk an adverse decision by the full Second Circuit or from the Supreme Court that could further restrict the FDA’s ability to bring off-label marketing cases. Instead of seeking further review, the FDA has sought to characterize the Caronia holding as a narrow one. In a statement explaining the government’s decision, the FDA said that it does not believe Caronia will “significantly affect the agency’s enforcement of the drug misbranding provisions of the Food, Drug and Cosmetic Act.” According to the FDA, “[t]he decision does not strike down any provision of the . . . act or its implementing regulations, nor does it find a conflict between the act’s misbranding provisions and the First Amendment or call into question the validity of the act’s drug approval framework.”

This story is still playing out in other Circuits around the country, and the Supreme Court may review the issue in another case. But the government’s decision allowing this precedent to stand is good news for potential False Claims Act defendants in off-label marketing cases in the Second Circuit and elsewhere.


On December 3, 2012, the Court of Appeals for the Second Circuit issued a landmark ruling in United States v. Caronia, No. 09-5006 (2d Cir. December 3, 2012) declaring that truthful, non-misleading off-label promotion is constitutionally-protected commercial speech. In a 2-1 ruling accompanied by a vigorous dissent, the Court vacated the conviction of former Orphan Medical, Inc., sales representative Alfred Caronia for conspiracy to introduce a misbranded drug into interstate commerce. The government alleged that, while Caronia was an Orphan sales rep, he promoted the drug Xyrem for off-label use. In appealing his misdemeanor conviction, Caronia argued that the First Amendment barred the government from convicting him for disseminating truthful and non-misleading information about an FDA-approved drug “where such use is not itself illegal and others are permitted to engage in such speech.” Op. at 25. The majority agreed, in effect “declin[ing] the government’s invitation to construe the FDCA’s misbranding provisions to criminalize the simple promotion of a drug’s off-label use by pharmaceutical manufacturers and their representatives because such a construction . . . would run afoul of the First Amendment.” Op. at 33.

The majority dissected the often-unchallenged notion that off-label promotion, in and of itself, is illegal or renders a drug misbranded. It observed that neither the FDCA nor its implementing regulations expressly prohibit off-label promotion. Op. at 26. Instead, the regulatory scheme permits promotional speech to be used as evidence of a drug’s intended use. Yet despite the absence of a flat prohibition on off-label communication, Caronia argued on appeal that he was being prosecuted for having engaged in truthful, non-misleading speech. The government, by contrast, contended that his speech served to establish evidence of intent to introduce misbranded Xyrem into interstate commerce. The majority disagreed, finding that “the record makes clear that the government prosecuted Caronia for his off-label promotion.” Op. at 20.

The Court then analyzed the extent to which Caronia’s off-label promotional speech was protected by the First Amendment. In arriving at its conclusion that the speech was in fact protected, the Court relied on last year’s Supreme Court decision in Sorrell v. IMS Health, Inc., 131 S. Ct. 2653 (2011). In Sorrell, which also originated in the Second Circuit, the Supreme Court struck down a Vermont law prohibiting pharmaceutical companies from using prescribed-identifying information in their marketing efforts. The Second Circuit used Sorrell as a backdrop and concluded that the government’s prohibition of off-label communication was both content and speaker-based. It then moved to the next step of the analysis and asked whether the government had shown that the restrictions on speech were consistent with the First Amendment. Relying on the Supreme Court’s decision in Central Hudson Gas & Electric Corp. v. Public Service Commission of N.Y., 447 U.S. 557 (1980), the Second Circuit found that the government had satisfied only two of the four prongs necessary to show that commercial speech is not protected by the First Amendment. As part of that ruling, the majority concluded that there were less restrictive ways for the FDA to regulate the provision of information about off-label usage, citing in support an article by Sidley partner Coleen Klasmeier. Accordingly, the Court concluded that the “government cannot prosecute pharmaceutical manufacturers and their representatives under the FDCA for speech promoting the lawful, off-label use of an FDA-approved drug.” Op. at 51.

A spirited dissent authored by Judge Livingston, who also dissented from the Second Circuit’s majority opinion in Sorrell, challenged the majority at almost every turn. Judge Livingston disagreed with the majority’s interpretation that Caronia was convicted for promoting Xyrem off-label, finding instead that “Caronia’s speech was used simply as evidence of Xyrem’s intended uses. . . .” Dissent at 7. Accordingly, she concluded that his “conviction does not run afoul of the First Amendment.” Id.

For now, the ruling applies only in the Second Circuit, which encompasses New York, Vermont, and Connecticut. It remains to be seen whether the United States will seek rehearing by the full Second Circuit or review by the Supreme Court. Regardless, the ruling has broad implications for pharmaceutical manufacturers at a time when DOJ is extracting record settlements in cases premised on allegations of off-label marketing. As the dissent noted, “the majority calls into question the very foundations of our century-old system of drug regulation.” Dissent at 1. Judge Livingston argued that if drug companies “were allowed to promote FDA-approved drugs for nonapproved uses, they would have little incentive to seek FDA. approval for those uses.” Id. at 21. As a result, Judge Livingston feared a scenario where “a drug manufacturer must be allowed to distribute a drug for any use so long as it is approved for one use.” Id. at 23. Under the majority’s view, it’s not clear how, in the Second Circuit, the government could enforce what has long been considered a bright-line rule against off-label promotion.

While the court’s ruling plainly forecloses criminal prosecution under the FDCA for providing truthful, non-misleading promotional information about off-label uses, the impact in civil FCA cases based on off-label promotion is less clear. The opinion appears to undercut any argument that communicating truthful, non-misleading promotional information about off-label uses is sufficient to render a claim “false or fraudulent.” But what if the off-label use is not covered by Medicare or Medicaid because it is not for a “medically accepted indication?” Does Caronia provide a First Amendment shield from FCA liability for engaging in off-label promotion of a drug that is not covered by federal healthcare programs for the off-label use? Can the government or a relator overcome Caronia in a civil FCA case by simply characterizing evidence of off-label promotion as evidence of intent to cause the submission of false claims? These and similar issues will no doubt be hotly contested in future off-label cases, and the impact of the Second Circuit’s ruling will no doubt continue to be explored on this blog and in other forums.

21 December 2012

DOJ Releases Detailed Statistics on FCA Recoveries Through FY 2012

Posted by Scott Stein and Nirav Shah

On December 4, 2012, Acting Associate Attorney General Tony West announced that the Justice Department’s Civil Division had recovered nearly $5 billion in settlements and judgments under the False Claims Act for fiscal year 2012. This represents yet another record recovery, surpassing the previous record by $1.7 billion. Subsequently, DOJ released more detailed statistics on FCA cases from 1986 through FY 2012, accessible here. A few observations on the recovery:

  • Over $3 billion in recoveries from cases involving healthcare fraud, breaking a previous healthcare fraud record set in fiscal year 2011. From January 2009 through the end of fiscal year 2012, the DOJ collected over $9.5 billion from healthcare fraud, setting another record over a four-year period.
  • $3.3 billion in actions filed by whistleblowers, arising from 647 separate qui tam suits.
  • Almost $1 billion ($911 million) consists of the FCA component of DOJ’s $25 billion mortgage settlement with five banks. The numbers indicate increased activity in this area in 2012, a trend that will likely continue into next year.
  • DOJ continues to intervene in roughly the same percentage of cases as in prior years, roughly 22%.
  • The number of new matters is roughly the same in 2011 and 2012. However, the DOJ recoveries are substantially higher in both the non-qui tam and qui tam-initiated categories.
  • The percentage of suits initiated by DOJ is substantially lower in healthcare fraud matters than in other kinds of qui tams. Only about 5% of FCA suits in the healthcare context are DOJ-initiated. Put differently, virtually all healthcare FCA cases are whistleblower-initiated
  • Comparing qui tam cases to settlements and judgments in non-qui tam cases, the non-qui tam cases result in a very high percentage of recoveries relative to their numbers. For example, in 2012, there was over $500 million recovered in non-qui tam cases, which have historically been a very low percent of total healthcare FCA cases.
  • DOJ settlements and judgments in intervened or DOJ-initiated cases hit an all-time high, exceeding last year’s record by nearly one billion dollars.
  • Recoveries in cases in which DOJ did not intervene hit a low-point compared to recoveries in recent years (only $29 million in 2012 compared to at least $100 million in each of the past two years).
22 October 2012

Sixth Circuit Holds That Regulatory Ambiguity Precludes A “Knowing” Violation of the FCA

Posted by Scott Stein and Nirav Shah

A recurring issue in FCA cases based on alleged violations of complex statutory or regulatory requirements is the extent to which, as a practical matter, “regulatory ambiguity” is a viable response to the argument that defendants knowingly submitted false claims to the government. We were encouraged when, this past summer, a Pennsylvania district court dismissed FCA claims against a variety of pharmaceutical manufacturers because the relator failed to show that the defendants acted knowingly or recklessly in light of regulatory ambiguity on a complicated price reporting issue. See U.S. ex rel. Streck v. Allergan, et al., No. 08-5135, 2012 WL 259379 (E.D. Pa. Jul. 3, 2012).

A recent decision from the Sixth Circuit provides additional support for this argument. In United States ex rel. Williams v. Renal Care Group, Inc., No. 11-5779, 2012 WL 4748104 (6th Cir. Oct. 5, 2012), the Court reversed a district court’s grant of summary judgment in favor of the government and ordered summary judgment in favor of the defendant, concluding that the defendants’ good-faith efforts to “sort through ambiguous regulations” precluded the government from meeting the knowledge requirement of the FCA.

The United States alleged that defendant, Renal Care Group, Inc. (“RCG”), formed a wholly-owned subsidiary, Renal Care Group Supply Company (“RCGSC”), for the sole purpose of taking advantage of a higher Medicare payment rate. This rate was available only to certain patients and payable only to specific entities—namely, those that were not “renal dialysis facilities.” Op. at 15. The government alleged that in light of overlapping officers, shared office space, and, concurrent financial management, RCGSC was a sham alter-ego of RCG, making claims submitted by RCGSC ineligible for payment and therefore false. Op. at 6.

The core issue on which liability turned was “the degree of ‘separateness’ demanded under the pertinent Medicare statutory provisions and regulations in order for a supplier to be deemed ‘not a provider of services [or] a renal dialysis facility.'” Op. at 23. The Court first addressed this question in the context of whether the claims submitted were “false.” The government contended that the regulations at issue prohibited a subsidiary (here, RCGSC) from receiving Medicare reimbursement, meaning that claims for services that it rendered were false. The Court disagreed with the Government’s position, concluding that the neither the statute nor regulations was clear on this issue. Given that regulatory scheme was intended “to ensure that home dialysis patients could engage in cost comparisons,” there was no reason that Congress would have barred a wholly-owned subsidiary from being eligible for reimbursement. Op. at 15.

But turning to the issue of “knowledge,” the Court concluded that given the complex regulatory backdrop and the defendants’ diligence in attempting to comply with the letter of the law, the defendants could not possibly be deemed to have “knowingly” violated the FCA. The Court credited the defendants’ diligence in attempting to determine whether its reimbursement arrangement passed legal muster. Op. at 18. Indeed, defendants engaged legal counsel had attempted to obtain some degree of assurance from the government by submitting a letter requesting confirmation of the legality of the defendants’ corporate arrangement (though no response to the letter was received). Defendants also openly disclosed the corporate structure to the government in various regulatory filings. Taken together, these factors showed that the defendants did not act in “reckless disregard” of the truth of falsity of their claims, but rather made, transparent, good-faith efforts to ensure their approach was lawful.

Another aspect of the Court’s opinion is worth noting. As in many FCA cases, the plaintiff(here, the United States) sought to cast aspersions on the defendants by emphasizing that RGC created RCGSC solely out of a desire to increase profits by taking advantage of certain reimbursement advantages. The opinion noted that the government “focuse[d], somewhat obsessively,” on this assertion to argue that claims submitted by RCGSC were ipso facto false. The Court properly rejected the government’s attempt to suggest that a defendant’s desire to generate profit from participating in federal healthcare programs is, in and of itself, an indicator of fraud, stating “Why a business ought to be punished solely for seeking to maximize profits escapes us.” Op. at 9. As the Court’s comment recognizes, the desire of a for-profit company to maximize profits is irrelevant to the question of whether the means it uses to generate profits is lawful. The fact that the defendants set up a separate corporation in which to enroll certain dialysis patients to garner more Medicare revenue could not, without more, establish any intent or knowledge to commit fraud.

20 September 2012

Court Allows Claims of Off-Label Marketing to Proceed Against Part D Plan

Posted by Scott Stein and Nirav Shah

In an area of evolving False Claims Act jurisprudence, a district court in Georgia has found that the Medicare Part D program does not cover off-label uses of drugs that are not supported by a medically accepted indication. U.S. ex rel. Fox Rx v. Omnicare, Inc., No. 1:11-CV-00962 (N.D. Ga. Aug. 29, 2012). In Fox, the relator alleged that Defendants Omnicare and Neighborcare, both of which are specialty pharmacies, submitted false claims in connection with services they provided to long-term care facilities, such as nursing homes. The Complaint alleged that the Defendants were responsible for submitting false claims involving atypical antipsychotic drugs prescribed for dementia to residents of long-term care facilities, some of whom are beneficiaries of the Part D program. Defendants responded with a Motion to Dismiss under Rules 12(b)(6) and 9(b).

Because the relator alleged that the defendant-pharmacies submitted claims for off-label uses of atypical antipsychotics in violation of the False Claims Act, a central plank of Defendants’ rebuttal was that Part D Plan sponsors may cover off-label uses of drugs. By statute, Part D covers drugs that meet the Social Security Act’s definition of “covered Part D drug,” which provides, in part:

Except as provided in this subsection, for purposes of this part, the term “covered part D drug” means—

(A) a drug that may be dispensed only upon a prescription
and that is described in subparagraph (A)(i), (A)(ii), or (A)(iii) of
section 1396r-8(k)(2) of this title . . .

and such term includes . . . any use of a covered part D drug for a medically
accepted indication (as defined in paragraph (4)).

42 U.S.C. § 1395-102(e)(1) (2006 & Supp. IV 2010) (emphasis added). The term “medically accepted indication” is defined as “any use for a covered outpatient drug which is approved under the Federal Food, Drug, and Cosmetic Act or the use of which is supported by one or more citations included or approved for inclusion in any of [three compendia].” 42 U.S.C. § 1396r-8(k)(6). Thus, if any of the uses for dementia had been supported by a compendium listing, they would have been a “medically accepted indication,” and, therefore, the use would have involved a “covered Part D drug.”

Defendants argued that the final clause of the definition of “covered Part D drug” (which the Court dubbed the “includes” clause and is italicized above), creates a floor, not a ceiling, to coverage. That is, Part D Plans must, at a minimum, cover drugs for a “medically accepted indication,” but Plan sponsors may also opt to cover other, potentially off-label uses of drugs absent a medically accepted indication. Relator and the United States, which filed a statement of interest in response to Defendants’ Motion to Dismiss, argued that the “includes” clause sets a coverage ceiling, meaning that Part D plans may cover off-label prescriptions of drugs only when they are accompanied by a “medically accepted indication”—and nothing more.

Although the Court conceded that the statutory definition was “inartfully drafted,” it held that under the relevant canons of construction, the legal meaning was unequivocal: “to be a ‘covered Part D drug’ the drug must be used for a ‘medically accepted indication.'” Op. at 19. According to the Court, in order to give the “includes” clause meaning, it must be read to “limit[] the expansive scope” of the “medically accepted indication” language. Op. at 20. The Defendants’ interpretation, according to the Court, would render the “includes” clause superfluous because off-label use “would be equally covered with our without the ‘includes’ clause.” Id. Accordingly, the Court found that Part D does not cover off-label uses of drugs that are not supported by a medically accepted indication as demonstrated by a listing in one or more of the approved compendia.

Although the underlying counts were ultimately dismissed under Rule 9(b), the Fox court’s analysis is at odds with the ruling of another district court in Layzer v. Leavitt, 77 F. Supp. 2d 579, 584-87 (S.D.N.Y. 2011). The Layzer court interpreted the very same statutory language and found the definition of “covered part D drug” was not limited by whether usage is supported by approved compendia because the “includes” clause is illustrative rather than definitional. Id. Under the reasoning in Layzer, Medicare Part D can be required to cover uses of drugs that are both off-label and “off compendia.” Yet another district court that has looked at the issue came out on the same side as the Fox court. See Kilmer v. Leavitt, 609 F. Supp. 2d 750, 754 (S.D. Ohio 2009). In Kilmer, the court held that the statute requires use for a “medically accepted indication” as part of the definition of “covered part D drug.”

As courts continue to grapple with the construction of the Part D statute, expect manufacturers, relators, and the government to look to additional sources of evidence and policy to support their preferred interpretation.

19 March 2012

FCA Claims Based on “Fraud on the FDA” Dismissed Under Rule 9(b)

Posted by Jaime L.M. Jones and Nirav Shah

Citing the failure to plead claims with particularity, a federal court in the District of Massachusetts recently dismissed a qui tam action brought against Infomedics, Inc. and GlaxoSmithKline. United States ex rel. Arlene Tessitore v. Infomedics, Inc., GlaxoSmithKline, PLC, and GlaxoSmithKline, LLC., No. 08-11775-NMG (D. Mass. Mar. 12, 2012). The case highlights the difficulty in connecting allegations of “fraud on the FDA” to FCA violations.

Tessitore concerns GSK’s antidepressant drug, Paxil, FDA-approved labeling which includes an indication for the treatment of social anxiety disorder (“SAD”). Among other claims, the relator alleged that GSK and its vendor, Infomedics, concealed from FDA information related to certain adverse events that was received through an informational Paxil hotline operated by Infomedics. Relator alleged violations of the FCA based on two theories: (1) that GSK represented in its application to FDA for Paxil that it would report adverse events to the Agency; and (2) that had GSK reported the adverse events to FDA in a timely fashion, FDA would have ordered the company to issue enhanced warnings sooner. Under both theories, relator claimed that the concealment rendered subsequent claims for reimbursement of Paxil false.

With respect to the first theory, Judge Nathaniel Gorton held that relator’s complaint was simply devoid of specifics, including when a misrepresentation to FDA was made, to whom it was made, and why the statements were false. As for the second theory of liability, Judge Gorton found that it failed under Rule 9(b) “because it presumes, without factual support, that submitting the 7,000 adverse reports would have hastened the FDA’s decision to require warnings and that, had such warnings been implemented sooner, physicians would have prescribed Paxil less often between 1999 and 2002.” Id. But, as the government itself pointed out, FDA was aware of the adverse events and did not take any steps to add enhanced warnings. And absent evidence of alternative treatments available at the time, the inference that physicians would have prescribed other treatments is unsupportable. Thus, this decision highlights the difficulty of adequately pleading the causation element of FCA liability when trying to advance qui tam claims based on the theory of “fraud on the FDA.”

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