Recent Summary Judgment Decision Highlights Potential AKS Concerns Associated with Promotional Speakers Programs

A recent decision from the Southern District of New York denying defendants’ motion for summary judgment identified a number of characteristics of a pharmaceutical company’s promotional speakers program that may raise concerns under the Anti-Kickback Statute. The opinion highlights the features of the promotional speaker program at issue that persuaded the court that it ran afoul of the AKS.


Court Compels Medicare Advantage Plan to Comply With CID for Testimony in Diagnosis Coding Investigation

On November 13, 2018, a magistrate judge issued a report to the United States District Court for the Southern District of New York recommending that the Department of Justice’s (“DOJ”) petition to compel deposition testimony from Anthem regarding its procedures and processes for verifying diagnoses for Medicare Advantage payments be granted and that a date be set for Anthem’s witness to testify.  DOJ is seeking the testimony in connection with its investigation of Anthem as part of its broader enforcement efforts under the FCA focused on the Medicare Advantage program.  (more…)

District Court Rules that Claims Without Specific Misrepresentations Fail to Meet Escobar’s Test But Can Proceed Based on Fraudulent Inducement

In Escobar, the Supreme Court upheld implied certification claims “at least where two conditions are satisfied,” namely specific misrepresentations and noncompliance with a material requirement.  Some courts have interpreted this phrase as defining two necessary conditions to establish implied certification liability under the FCA.  Other courts view the phrase as introducing one potential path to liability, where the first condition, specific misrepresentations, is not required.  Citing what has emerged as a “majority view” among district courts in the Second Circuit that the two conditions are mandatory, the Southern District of New York recently deepened the divide.  See United States ex rel. Forcier v. Computer Scis. Corp., No. 12-cv-1750 (S.D.N.Y. Aug. 10, 2017).  (more…)

DOJ Weighs in on Materiality Standard Post-Escobar

In a May 8, 2017 statement of interest, DOJ made a bold attempt to strip the heightened materiality standard articulated in Escobar (previously reported here) of all of its meaning.  DOJ’s statement was filed in support of relator’s Rule 59(e) motion to alter or amend the judgment dismissing the underlying declined qui tam case, which took exception to the court’s determination that the government’s continued payment of defendant’s claims “despite its actual knowledge that certain requirements were violated” was “very strong evidence that those requirements are not material.” United States ex rel. Kolchinksy v. Moody’s Corp., – F.Supp.3d –, 2017 WL 825478, at *6 (S.D.N.Y. March 2, 2017) (citing Escobar).  DOJ took aim at the court’s conclusion, arguing that “an agency’s continued payment of claims to a potential FCA defendant who faces public allegations of fraud is insufficient – by itself – to establish that the alleged fraud is immaterial.” (more…)

Five Things To Know About The Amarin Settlement

On March 8, 2016, Amarin Pharma, Inc., advised Judge Paul Engelmayer of the United States District Court for the Southern District of New York that the company had reached agreement with the Government on the resolution of the parties’ dispute over Amarin’s entitlement to engage in certain types of communication to physicians regarding the health benefits of the company’s drug, VASCEPA.[1]  Judge Engelmayer signed the proposed stipulation and order later that day.[2]

The settlement is noteworthy for the obvious reason that it continues the Government’s string of losses in First Amendment cases involving the Federal Food, Drug, and Cosmetic Act.  But it also matters because it entitles Amarin to use a special advisory comment process for off-label materials, and did not condition resolution of the litigation on Amarin’s agreement to vacate the court’s powerful August opinion finding the FDA’s rejection of Amarin’s proposed claims unconstitutional.  It is also important, however, because it appears to qualify Amarin’s victory somewhat, by holding the company accountable for the continued accuracy of its claims and permitting the Government to proceed against Amarin based on shifts in the science supporting those claims.


District Court Holds that First Amendment Bars Prosecution for Misbranding Where Conduct is Truthful, Non-Misleading Speech about Off-Label Uses, Declines to Rule on Potential FCA Liability

On August 7, in the first Caronia progeny case, the United States District Court for the Southern District of New York (Engelmayer, J.) granted preliminary relief to Amarin Pharma, Inc. (“Amarin”) in a highly significant case involving First Amendment limitations on the Government’s entitlement to bring misbranding charges based on manufacturers’ truthful, non-misleading speech about off-label uses of drugs.  See Amarin Pharma Inc. v. Food and Drug Admin., No. 1:15-cv-03588 (S.D.N.Y. Aug. 7, 2015).


District Court Denies Motion to Dismiss in Government’s Groundbreaking Overpayment Suit

On August 3, Judge Ramos of the Southern District of New York denied the motion to dismiss of defendant hospitals (“Continuum”) accused of failing to timely return overpayments in violation of the FCA.  See U.S. ex rel. Kane v. Continuum Health Partners, Case No. 11-2325 (S.D.N.Y. Aug. 3, 2015).  In a decision that provides the first significant judicial guidance on the FCA’s overpayments provision, the court held that the statutory sixty-day clock to repay “identified overpayments” begins running “when a provider is put on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained.”  As such, the decision portends potentially expansive FCA liability for failing to remediate overpayments promptly.


Southern District of New York Rejects Washington State’s Attempt to Amend Qui Tam Complaint

Posted by Gordon Todd and Paul Sampson

The Rule 15(a)(2) threshold for amending a complaint – that “[t]he court should freely give leave when justice so requires” – is not a high one. But from time to time even a State intervenor manages to miss it, as was the case in U.S. ex rel. Kester v. Novartis Pharmaceuticals Corp., No. 1:11-cv-08196, 2015 WL 1650767 (S.D.N.Y. Apr. 10, 2015).

In January 2014, the State of Washington filed a complaint-in-intervention naming only Novartis Pharmaceuticals Corp. (“Novartis”) as a defendant, even though a little over a year earlier the relator’s complaint—which alleged that Accredo Health Group, Inc. (“Accredo”), a specialty pharmacy through which Novartis sells its pharmaceutical products, participated with Novartis in an illegal kickback scheme—was unsealed. Id. at *5. Almost a full year later, in January 2015, Washington filed a motion to amend its complaint, seeking to add claims against Accredo for the alleged kickback scheme. Id.

The district court denied the motion for two principal reasons. First, the district court held that Washington delayed moving for leave to amend without an adequate explanation, noting that “a lengthy delay without a reasonable explanation justifies denying leave to amend.” Id. The district court rejected Washington’s “excuse” that Novartis had produced upwards of 50,000 documents beginning in March 2014, reasoning that “the State should be expected to receive and promptly review large volumes of documents in a complex case such as this one.” Id. at *6. The district court also rejected Washington’s assertion that it did not obtain certain audio recordings of phone calls between Accredo staff and Novartis patients until December 2014, and that those phone recordings “solidified” the extent of the kickback scheme. Id. at *7. The district court explained that “[t]he fact that a party later uncovers additional evidence supporting a theory that it could have raised earlier does not excuse delay in moving to amend.” Id.

Second, the district court held that “Accredo would be prejudiced by granting Washington’s motion to dismiss” because “granting the motion would prolong the disposition of this case and require additional time for discovery.” Id. Among other things, additional discovery would be needed regarding a forum selection clause contained in Accredo’s Medicaid core provider agreement with Washington. Id. at *8. Thus, “granting the motion would burden both Novartis and Accredo with added litigation time and expense—well-established forms of prejudice.” Id. at *7.

The Kester case reminds qui tam litigants that a Rule 15(a)(2) motion to amend a pleading is not automatic, and that plaintiffs must seek to amend their pleadings in a timely manner so as not to unnecessarily delay the expeditious resolution of qui tam actions.

Court Rejects Argument That The FCA Imposes A Higher Standard for Award of Costs Against Unsuccessful Relators

Posted by Scott Stein and Emily Van Wyck

Last week, a district court judge rejected a relator’s argument that the FCA restricts the award of costs against unsuccessful relators to only those cases where the suit was found to be frivolous, vexatious, or harassment, a bar significantly higher than that imposed on all other unsuccessful litigants under Federal Rule of Civil Procedure 54. See United States ex rel. Assocs. Against Outlier Fraud v. Huron Consulting Grp., Inc., No. 09-cv-01800-JSR (S.D.N.Y. Feb. 2, 2015). This decision confirms that relators are liable for costs on the same terms as any other unsuccessful litigant.

After summary judgment was granted against the relator, the clerk of the court awarded over $13,000 in costs to the defendants. Relator appealed the award. At issue was the FCA’s distinction between fees, expenses, and costs. Federal Rule of Civil Procedure 54(d)(1) states that “costs” should be awarded to the prevailing party “[u]nless a federal statute . . . provides otherwise.” The relator argued that the FCA “provides otherwise” because it includes a provision that requires a showing that the relator’s claims were “clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment” before awarding “reasonable attorneys’ fees and expenses.” 31 U.S.C. § 3730(d)(4). Relator argued that the term “fees and expenses” under the FCA is synonymous with “costs” under FRCP 54, and therefore a court must first find that the lawsuit was frivolous, vexatious, or harassment. Given that defendants did not assert that the claims were frivolous, relator argued, the court erred in awarding costs.

The district court disagreed, finding that the language of the FCA “foreclose[d]” this argument. In doing so, the court noted that the FCA treats fees, expenses, and costs as distinct categories. For example, if a relator prevails in a case where the United States declined to intervene, the FCA provides that the defendant must pay the relator “for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees and costs.” 31 U.S.C. § 3730(d)(2). The court upheld the award of costs concluding that any dicta “loosely suggesting” that these terms are interchangeable “cannot overcome the FCA’s conscious distinction between ‘costs’ and ‘expenses.'”

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

Reply Briefs in Continuum Litigation Continue Debate Over Nature of an “Obligation” Under FCA

Posted by Scott Stein and Brenna Jenny

The parties in a closely watched reverse false claims case, United States v. Continuum Health Partners, continued their dispute over when an “obligation” to repay the government arises under the FCA’s reverse false claim provision. (For previous coverage, see here, here, and here). Continuum’s reply brief in support of its motion to dismiss focuses on the government’s assertion that a “potential” overpayment creates an obligation to repay sufficient to trigger the FCA.

Continuum’s reply brief points out an inconsistency between the government’s legislative history arguments and the text of the statute as enacted. In its opposition brief, the government frequently cited a Senate Report of an earlier version of the bill that became the Fraud Enforcement and Recovery Act (“FERA”). The Report states, as the government quoted in its brief, that the term “obligation” for FERA purposes “includes fixed and contingent duties.” However, as Continuum points out, while the text of the bill that was the subject of the Senate Report defined an obligation as “a fixed duty, or a contingent duty arising from…,” the text of FERA, as enacted, does not contain any reference to contingent duties. Rather, the FCA as amended by FERA defines “obligation” as “an established duty, whether or not fixed, arising from….” 31 U.S.C. § 3729(b)(3). Under Continuum’s interpretation, this alteration deliberately narrowed the scope of statutory “obligations” by eliminating contingent duties. Even an “inadequate review of potential overpayments” still equates to only a contingent duty or a potential liability, rather than an established duty to repay.

Continuum also attacks one of the central premises in the government’s opposition brief, namely that the definition of an identified overpayment in the Part C/Part D context—as set forth in the 2014 CMS Medicare Advantage and Part D Plan Sponsor final rule (“MA/Part D Final Rule”)—should apply to this case. Two years earlier, CMS proposed a distinct rule that would have applied to Medicare Part A and Part B providers, but the agency has not yet finalized this rule. Continuum emphasizes the government’s failure to justify its assumption that the policy judgments generating the overpayment regulations in the MA/Part D Final Rule would lead to the same interpretation in the Part A/Part B context, or even in the Medicaid context, which is one step further removed from the purview of the MA/Part D Final Rule.

Finally, Continuum contests the government’s interpretation of the term “avoid an obligation” as being satisfied by one who “refrains from an obligation to pay money to the government.” Continuum criticizes the government’s further reliance on the Senate Report for the un-enacted version of FERA, which stated that the reverse false claims provision is violated “once an overpayment is knowingly and improperly retained, without notice to the Government about the overpayment.” Continuum maintains that an obligation can only be avoided through affirmative action by the defendants. Because the government alleges only that Continuum failed to act by promptly repaying the government, i.e., through inaction, Continuum argues that the reverse false claims provision is not implicated.

A copy of the reply brief can be found here. A decision on Continuum’s motion to dismiss is expected in early 2015.