Court Finds Kickback Allegations Against Clinical Laboratory Not Adequately Pled

Posted by Scott Stein and Bevin Seifert

On May 19, 2015, a federal district court in the Northern District of Georgia dismissed kickback allegations against Laboratory Corporation of America and Laboratory Corporation of America Holdings (“LabCorp”), holding that the allegations fell short of the particularity required by Rule 9(b). The relators—competitors of LabCorp—alleged that LabCorp’s pricing practices violated Georgia’s state false claims act and were independently unlawful under the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)(2)(A). Relators alleged that LabCorp violated the AKS by providing “deeply discounted” prices to customers to induce them to refer (or “pull-through”) large volumes of Medicaid and other business. The court found, however, that relators failed to allege those claims with particularity because they did not identify a single improper referral to a physician, nor a specific Medicaid claim resulting from such referral. Moreover, the court held that relators failed to identify a specific kickback, finding that allegations of specific discounts alone were insufficient to establish a referral or claim resulting from such referral. Having disposed of the federal AKS claims, the court declined to exercise supplemental jurisdiction over plaintiffs’ state law claims and, therefore, remanded the remaining claims to the State Court of Fulton County, Georgia. A copy of the court’s decision can be found here.

Court Holds that Pharmacy Cannot Be Liable Under the FCA for Filling “Off-Label” Prescriptions

Posted by Jaime Jones and Catherine Starks

A federal district court in Georgia recently granted summary judgment in favor of Omnicare, Inc. in a qui tam suit asserting FCA liability against the specialty pharmacy for purportedly dispensing atypical antipsychotics for off-label uses and seeking Medicare Part D reimbursement for those prescriptions. United States ex rel. Fox Rx, Inc. v. Omnicare, Inc., No. 1:11-cv-962-WSD (N.D. Ga. May 23, 2014).

The relator, a Medicare Part D plan sponsor, alleged that Omnicare had actual or constructive knowledge that it was submitting “false” claims for off-label, non-reimbursable, uses because Omnicare’s consultant pharmacists regularly reviewed patient records and recorded diagnosis information in Omnicare’s computer system. In a previous post, we reported that this court earlier ruled that Part D does not cover off-label uses of drugs that are not for “medically accepted indications.” See In ruling on the summary judgment motion, the court rejected the notion that there was evidence that Omnicare acted “knowingly” with respect to the off-label and non-reimbursable nature of the claims, finding that there was no proof that Omnicare’s dispensing pharmacists had actual knowledge of or even access to this patient diagnosis information. The court also held that even if the pharmacists had accessed the diagnosis information, there was still no evidence that they knew the diagnoses were not for medically-accepted indications, and thus not subject to reimbursement by Medicare. Moreover, the court held that there was no duty for Omnicare or its pharmacists to make this determination (such as by reviewing the label for FDA approval of the specific use or referring to Medicare Part D- recognized compendia to determine whether the use was supported and therefore properly reimbursable).

This case has important implications for specialty pharmacies and similarly situated parties that are implicated in cases alleging the submission of claims for off-label use of drugs, and supports the argument that dispensing pharmacists do not have a duty to evaluate whether a drug has been prescribed for an on-label or otherwise medically accepted indication prior to submitting a claim for reimbursement to the federal healthcare programs.

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.