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.
Posted by Scott Stein and Brenna Jenny
On March 27, 2015, a federal court in the Southern District of Ohio granted in part and denied in part a motion to dismiss a qui tam suit alleging that Bristol-Myers Squibb Co. (“BMS”) and Otsuka America Pharmaceutical (“Otsuka”) had promoted Abilify for off-label uses and violated the AKS through grants, speaker, and similar programs offered to physicians. See United States ex rel. Ibanez v. Bristol-Myers Squibb Co., No. 11-cv-00029 (S.D. Ohio Mar. 27, 2015). The court’s ruling reiterates that regardless of the particularly with which a scheme is pled, complaints will be dismissed if they fail to, at a minimum, include particular allegations that support a strong inference that a false claim was submitted. However, the court’s partial denial of the motion to dismiss also demonstrates the weight of the expanded protections relators now enjoy when bringing retaliation claims under the FERA-amended definition of protected conduct.
Both BMS and Otsuka previously executed Corporate Integrity Agreements (“CIAs”) relating to alleged off-label promotion of an anti-depressant, Abilify. Relators asserted that both companies violated their CIAs by subsequently promoting Abilify for off-label uses, including for pediatric and geriatric patients, and for offering physicians kickbacks to write off-label prescriptions for Abilify. Relators asserted they could rely on a “relaxed” pleading standard referenced but never applied by the Sixth Circuit Court of Appeals, under which they need not present any samples of false claims actually submitted, so long as they pled a strong inference of such submissions.
The defendants contested that such a standard was appropriate, yet the court ruled that the dispute was moot, because relators failed even to meet the lower pleading standard. In particular, while relators alleged that defendants’ off-label promotion and kickbacks caused physicians to write prescriptions for off-label uses of Abilify, the complaint failed to support a strong-inference that the patients who received those prescriptions participated in federal health care programs, that the patients actually filled the off-label prescriptions, and that an entity submitted claims for reimbursement to the government for those prescriptions.
Relators had argued that they further fell within the ambit of dicta in United States ex rel. Bledsoe v. Community Health Systems, Inc., 501 F.3d 493 (6th Cir. 2007), where the Sixth Circuit left open the possibility that a relaxed pleading standard would be appropriate “where a relator demonstrates that he cannot allege the specifics of actual false claims that in all likelihood exist, and the reason that the relator cannot produce such allegations is not attributable to the conduct of the relator.” According to the relators, they were precluded from identifying specific false claims because such information regarding claims for payment caused to be submitted by BMS and Otsuka lay in the exclusive possession and control of the defendants, pharmacies, and federal and state payors. The court characterized the Sixth Circuit’s dicta as “so broadly worded that [it] could undermine the purpose of the particularity rule,” and refused to allow it to “swallow the existing and well-settled rules for FCA pleading.”
Nonetheless, the court denied defendants’ motion to dismiss the relators’ retaliation claims. The FERA amendments to the FCA expanded protection over lawful acts “in furtherance of an action under [the FCA]” to also protect “other efforts to stop [one] or more violations of [the FCA].” Thus, whereas protected conduct prior to the FERA amendments was generally limited to actions that could lead to a FCA suit, the court noted that post-FERA, employees need only “report alleged misconduct up the chain of command in order to engage in FCA-protected activity.” Because relators had pled that they reported compliance concerns to their management, the court found this standard to be met.
A copy of the court’s opinion can be found here.
On June 6, 2014, FDA sent a letter to counsel for the Medical Information Working Group (MIWG), a coalition of biopharmaceutical and medical technology developers advocating that the Agency clarify its policies on manufacturer dissemination of scientific and medical information and conform those policies more faithfully to constitutional and statutory limitations. The June 6 letter represents a promising development. For one thing, it shows that FDA recognizes the importance of wrestling with recent developments in the case law, including Sorrell, Fox II, and Caronia, which recognize that the First and Fifth Amendments provide a high level of protection for manufacturer speech about medical products. It’s also encouraging to see agency officials both beginning to articulate a rationale for FDA’s approach to speech regulation and putting recent policy developments, such as the recently reissued reprints guidance, into the broader context of a “comprehensive review of . . . regulations and guidance documents.” Such a review is sorely needed.
But FDA’s response to the petition, on balance, is far from encouraging. It doesn’t take much examination of the Agency’s June 6 letter to find a number of reasons to remain skeptical that FDA truly “gets it” (or, if the Agency “gets it,” is willing to “act on it”) when it comes to speech regulation. Below are five such reasons:
1. FDA advances the same rationale for the current regulatory framework that the Agency has provided in defense of First Amendment critiques for many years. The letter describes FDA’s regulation of manufacturer speech as incidental to the Agency’s administration of statutory provisions that have been refined over time to protect the public health. It cites the same historical events—from “Elixir Sulfanilamide” to thalidomide and the Dalkon Shield to ecainide/flecainide—on which FDA has relied for years to justify its expansive approach to regulating manufacturer speech, even about products that have already been through the demanding premarket review process and the speech is accurate. The June 6 letter does not acknowledge the changes in the legal environment, patient expectations, and the healthcare delivery system that call into question the relevance of these old examples.
2. FDA says that its goal in considering the MIWG’s petition is “to harmonize . . . protecting the public health with First Amendment interests.” The First and Fifth Amendment principles recognized and applied by the Court in Sorrell and Fox II do not yield, even to an extraordinarily compelling government interests. Under even the relatively flexible Central Hudson algorithm, a substantial regulatory justification does no more than to enable speech regulation to survive to a subsequent stage of judicial scrutiny. If recent decisions have proven anything, it’s that these constitutional “interests” are not especially amenable to balancing. FDA ignores the heightened scrutiny to which the courts will subject the Agency’s approach at its peril.
3. FDA asserts a broad “intended use” interpretation that does not accord with the totality of the case law and continues to represent the most significant source of unpredictability and dislocation in the current enforcement climate. The response, in a footnote, cites a 1980 D. C. Circuit decision that includes language (“any other relevant source”) on which FDA and the Department of Justice have relied to assert that a broad range of evidence, including internal company documents, can be used against manufacturers in FDCA misbranding actions. If FDA were serious about aligning the regulatory and enforcement framework with statutory limitations, then the June 6 response would not have included this citation.
4. FDA defends its continued reliance on guidance documents to regulate in an area that demands the clarity that notice-and-comment rulemaking provides. Responding to the MIWG’s request for binding regulations rather than guidance, the June 6 letter states that it is FDA’s “judgment that issuing guidance initially to address industry questions is an effective first step” that does not “preclud[e] . . . new or modified regulations.” Despite that assertion, FDA does not issue guidance as an “initial” way of addressing industry questions before regulations are issued. It uses guidance to regulate — and often does not finalize guidance documents at all. Given the processes that FDA uses to generate guidance, and its tendency to leave guidances in draft form as de facto binding legal norms, it is almost certain that FDA will end up making the regulatory climate more ambiguous unless external forces (such as continued congressional oversight, further litigation, and sustained industry engagement) lead to a change in course.
5. FDA’s approach to day-to-day oversight of manufacturer communications has not changed. FDA says that it is granting the MIWG’s request for a review and promises to take certain actions, including issuing guidance before the end of the year. In the meantime, however, it appears nothing has changed. The Office of Prescription Drug Promotion (OPDP), which has primary responsibility for administrative implementation and regulatory enforcement of the FDCA, continues to send warning and untitled letters to manufacturers based on legal theories that would not withstand judicial scrutiny. OPDP also uses the non-public advisory comment process, which is designed to provide manufacturers with a means of obtaining prompt, binding advice on proposed promotional materials, to chill manufacturer speech in two ways—by needlessly dragging the process out for months, and by taking uninformed, punishingly limited positions on the substance of what manufacturers can say. it is hard to take seriously any assertion that FDA cares about honoring legal limitations given OPDP’s “business as usual” stance, to say nothing of the ways in which OPDP’s recent guidance pronouncements have actually made matters worse.
Perhaps agency officials believe, as the Caronia dissent says, that the First Amendment represents an existential threat to FDA’s historical approach to drug and medical device regulation. But the research-based, innovative developers of new therapies have more at stake in preserving the core elements of the regulatory system—especially a high standard for efficacy in the NDA and PMA contexts—than even FDA. The real danger to FDA’s regulatory authority is from other stakeholders, who are considering and will inevitably commence litigation. It is a virtual certainty that such disputes will lead to further judicial decisions that would implicate FDA’s authority in ways far more profound than the MIWG has advocated.
To be sure, continued indiscriminate investigations under the False Claims Act by DOJ and actions by the increasingly aggressive relators bar require manufacturers to assert First Amendment and other constitutional defenses. Industry would much prefer a rational enforcement landscape than a system that makes such defenses necessary.
The most encouraging sign that FDA will change its regulatory ways—one hopes, with DOJ not far behind—is not the June 6 response to the MIWG’s petition. It’s the comments from Janet Woodcock, Director of FDA’s Center for Drug Evaluation and Research, at the Food and Drug Law Institute annual conference in April. Dr. Woodcock recognized not only the recent judicial decisions reflecting manufacturer’s entitlement to clarity and to adequate room in the regulatory scheme to provide scientific and medical information about their products, but also what are perhaps the two most important sources of pressure on FDA’s institutional commitment to business as usual: changing societal expectations, particularly patient demands for greater involvement in their own healthcare, and the profound ways in which the healthcare delivery system itself has changed.
Ultimately, the degree to which the FDA regulatory system, and the accompanying—by now extraordinarily dysfunctional—enforcement scheme, will yield to manufacturers’ requests for clarity and alignment with First and Fifth Amendment values will depend not on lawyers’ arguments and judicial decisions, but rather on the legitimate and increasingly forceful demands of a much changed world.
MIWG is represented by Sidley Austin and Ropes & Gray. However, the views expressed here are the author’s alone and do not necessarily represent the position of any Firm client.