The Ninth Circuit recently revived a claim in a qui tam lawsuit against a medical device manufacturer based on a “fraud on the FDA” theory of liability under the False Claims Act. See United States ex rel. The Dan Abrams Co. LLC v. Medtronic PLC et al., No. 19-56377 (9th Cir. April 2, 2021).
A recent settlement reinforces the potential liability facing private equity investors in the life sciences industry. As we previously reported, late last year The Gores Group (“Gores”) entered into a $1.5 million settlement agreement with the United States to resolve claims that the alleged off-label promotion by its portfolio company of combination drug-medical device systems for pediatric patients resulted in the submission of false claims to federal healthcare programs. Last month, Gores entered into a separate $1.5 million settlement agreement with certain states to resolve claims that the same alleged conduct resulted in the submission of false claims to state Medicaid programs. See U.S. ex rel. Johnson v. Therakos, Inc., Case No. 12-cv-1454 (E.D. Pa., filed Mar. 22, 2012). The participating states in the more recent settlement have sixty days to agree to the terms of that agreement; thus far at least California has joined. The claims resolved in these settlements arose from a qui tam suit.
Following a recent Florida case allowing an FCA suit to proceed against an individual pharmacy owner (on which we reported here), last week a judge in the District of Massachusetts ruled on a motion to dismiss an FCA action pending against nine individual defendants relating to allegations of off-label marketing of the Aegerion drug Juxtapid, which was approved to treat Homozygous Familial Hypercholesterolemia (“HoFH”). See United States ex rel. Clarke v. Aegerion Pharms., Inc., Case No. 1:13-cv-11785. The individuals filed a joint motion to dismiss, making arguments that applied to the complaint as a whole – such as causation and materiality – and also attacking the claims specific to the individuals. The court denied the motion as to the broadly applicable arguments. Most notable, however, is the Court’s discussion of whether the relators could pursue claims against individual defendants, including board members and executives of the manufacturer.
James Burnham, the Deputy Assistant Attorney General for the Consumer Protection Branch (“CPB”), addressed the annual Food and Drug Law Institute Conference (“FDLI”) on December 13, 2018 about DOJ’s enforcement priorities and tools in the FDA-regulated space. As head of the branch within DOJ that has responsibility for bringing civil and criminal actions for violations of the Federal Food, Drug, and Cosmetic Act (“FDCA”), and that works with DOJ Civil Frauds to bring actions based on those violations under the False Claims Act (“FCA”), Burnham outlined the principles that motivate enforcement action, the CPB’s current enforcement priorities, and some of the “new” enforcement tools CPB has at its disposal with respect to opioids. (more…)
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. (more…)
On April 28, 2017, the District Court for the District of Massachusetts dismissed a qui tam complaint alleging off-label promotion against a pharmaceutical manufacturer. Dismissal was a sanction for relator’s counsel having devised and implemented what the Court called “an elaborate scheme of deceptive conduct in order to obtain information from physicians about their prescribing practices, and in some instances about their patients.”
Relator filed his initial complaint in 2012, alleging that the manufacturer was promoting off-label use of two drugs and paying physicians kickbacks for prescribing those drugs. While the case was under seal, the relator filed an amended complaint adding detail to his allegations and including a reference to a third drug. After the United States declined to intervene and the case was unsealed in April 2014, relator filed a second amended complaint that focused only on alleged off-label promotion of the third drug.
On March 20, 2017, FDA announced a further delay of the effective date of its January 9, 2017, Final Rule entitled Clarification of When Products Made or Derived From Tobacco Are Regulated As Drugs, Devices or Combination Products; Amendments to Regulations Regarding “Intended Uses,” and requested comments on the industry petition filed in February requesting a stay and reconsideration of the Final Rule. 82 Fed. Reg. 14319; 82 Fed. Reg. 2193. The effective date of the Final Rule had already been delayed once by the incoming Administration. As a result of this most recent announcement, the expansive interpretation of intended use proposed by FDA will not be enforceable until at least March 19, 2018, although the controversial accompanying preamble language could be invoked now, including in False Claims Act (FCA) cases based on alleged violations of the Federal Food, Drug, and Cosmetic Act (FDCA).
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. Judge Engelmayer signed the proposed stipulation and order later that day.
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.
A district court granted summary judgment to Solvay Pharmaceuticals on claims that it influenced the public body of scientific research in order to manipulate the compendia DrugDex into supporting off-label uses of its products. U.S. ex rel. King v. Solvay S.A., No. H-06-2662 (S.D. Tex. Dec. 14, 2015). The opinion provides helpful guidance on the high bar that relators must satisfy to pursue FCA claims based on alleged manipulation of scientific research so that ordinary disputes about the weight to be given to scientific research are not challenged as “fraud” under the FCA.
Posted by Jaime L.M. Jones and Brenna Jenny
A court in the Eastern District of Pennsylvania recently ruled that, despite a relator’s publication during an employment retaliation suit of allegations relating to the defendant’s alleged off-label promotion and payment of kickbacks, such allegations were not publicly disclosed, nor was the relator’s execution of a release of liability effective. U.S. ex rel. Gohil v. Sanofi-Aventis U.S. Inc., No. 02-cv-02964 (E.D. Pa. Mar. 30, 2015). This case demonstrates the way policy arguments regarding a perceived congressional intent in favor of private enforcement of the FCA can impact legal arguments in FCA litigation.
The court first considered whether the relator’s claims had previously been publicly disclosed. The relator, a former sales representative employed by the defendant, filed a qui tam suit a month before resigning his position with the defendant in June 2002. Upon resigning, he filed a wrongful termination action pursuant to New Jersey’s Conscientious Employee Protection Act (“CEPA”). While the government weighed whether to intervene, the parties in the CEPA action engaged in discovery. They ultimately settled—with the relator signing a broad release of liability—and the qui tam suit was subsequently unsealed, with the government declining to intervene. The defendant argued that the relator’s Statement of Facts (“SoF”) in the CEPA action constituted disclosure through a “civil hearing,” thereby triggering application of the public disclosure bar. The court ruled that although the SoF “exhaustively details” the alleged off-label promotion of defendant’s cancer drug Taxotere, and corresponding payment of kickbacks, the SoF was not “substantially similar” to the relator’s complaint because the SoF did not state that any provider had submitted a claim to a federal healthcare program (“FHCP”). Accordingly, the court reasoned that the allegedly fraudulent transactions were not previously disclosed, and inferring the allegation of fraud “would impermissibly broaden the scope of the public disclosure bar and restrict private enforcement of the FCA.” The defendant has since filed a motion for reconsideration, arguing that where submission of false claims to the government is a “logical and obvious consequence” of an alleged scheme, all essential elements of the FCA claim are publicly disclosed.
The court next determined whether the relator had nonetheless waived his right to prosecute the qui tam suit through his settlement and release of liability in the CEPA action. Although the Third Circuit Court of Appeals has yet to rule on whether relators can unilaterally settle a qui tam suit post-filing, all of the courts of appeal to consider the issue have held that, based on the statutory language of the FCA, the government’s written consent is a prerequisite. In contrast, several courts of appeal have held that a pre-filing release can wipe out a would-be relator’s attempt to file a later qui tam suit, so long as the release covers the allegations in the suit and there are no countervailing public policy considerations. Consistent with the prevailing approach to post-filing releases, the Gohil court ruled that the relator’s release had no effect on the litigation. The defendant responded by suggesting that the release be effective as to the relator, but that the claims be dismissed without prejudice to the government’s ability to intervene. The court declined to adopt this approach, again invoking the “clear congressional intent of encouraging private enforcement of the FCA.”
As to the merits of the relator’s claims, the court first ruled that, even under the Third Circuit’s more lenient “reliable indicia” standard to the submission of false claims—in place of pleading the details of particular false claims submitted—the off-label promotion allegations did not meet Rule 9(b)’s requirements. This was so because all of the off-label uses related to medically accepted indications, which would have been eligible for government reimbursement. However, the court denied the defendant’s motion to dismiss the kickback allegations, holding that certifying compliance with the AKS is a precondition to payment by the FHCPs and that the relator had provided sufficient examples of kickbacks allegedly offered to providers. Finally, the court refused to dismiss the relator’s conspiracy count, ruling that a conspiracy between the defendant and providers could easily be inferred from examples of kickbacks supposedly paid by the defendant, followed by the recipient physician’s increase in Taxotere prescriptions.
A copy of the court’s opinion can be found here.