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 http://fcablog.sidley.com/blog.aspx?entry=95&fromSearch=true. 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.
On April 30, the First Circuit held in a case alleging off-label marketing that the first-to-file bar can apply even where the earlier filed-case was based on different off-label uses. See U.S. ex rel. Wilson v. Bristol-Myers Squibb, Inc., Case No. 13-1948 (1st Cir. April 30, 2014) The basic facts were as follows: Relator Wilson, a former pharmaceutical sales representative, alleged that his former employer engaged in off-label promotion of Plavix and Pravachol. The district court granted a motion to dismiss those claims under the first-to-file bar, based on a case that had been filed by a different relator (Richardson) prior to the filing of Wilson’s initial complaint. The Richardson complaint also alleged that the defendants had engaged in a broad, nationwide scheme to promote and prescribe Pravachol and Plavix for off-label uses. The district court held that both the Richardson and Wilson complaints alleged widespread off-label promotion of the same drugs. The only material difference between the two complaints is that the specific off-label uses alleged in the Richardson complaint were different from the off-label uses (and associated disease states) in the Wilson complaint. The primarily issue raised on appeal was whether the Richardson complaint alleged the “essential facts” on which the Wilson complaint was based such that the first-to-file bar applied, notwithstanding the fact that Wilson’s complaint alleged different off-label uses than the Richardson complaint.
The First Circuit held that the first-to-file bar applied, notwithstanding that the two complaints were based on different off-label uses of the same drugs, because “[t]he overlaps among the two complaints were considerable: the same defendants, the same drugs, the assertion of nationwide scheme, and the allegations of specific mechanisms of promotion common to both and leading to common patterns of submission of false claims under the federal Medicaid program.” Op. at 15. The fact that the two cases were based on different off-label uses, the court held, was “not enough to reasonably conclude the earlier Richardson Complaint was not a related claim to the government based on the facts. Whether the first complaint results in there being an actual government investigation and whether any such investigation extends to off-label uses to treat different diseases is not the point.” Id. at 16.
The First Circuit also affirmed the district court’s denial of Wilson’s motion for leave to file an amended complaint. The proposed amended complaint would have added a new co-relator (Allen, another former sales representative), and expanded the scope of the allegations. The First Circuit agreed that to the extent that the new co-relator’s allegations replicated those of Wilson’s earlier complaint, they were barred by the first-to-file rule. And the First Circuit agreed with the district court’s alternative ruling that to the extent that the proposed new complaint added substantively new allegations not previously disclosed to the government, the proposed complaint violated the FCA’s filing and service requirements, 31 USC 3730(b)(2).
This case suggests that the first-to-file bar may have broad application to pharmaceutical marketing cases where there is a previously-filed case involving the same drug, even where the improper uses alleged are different in the two cases. Pharmaceutical marketing cases typically allege nationwide schemes based on the same type of conduct (e.g., training of sales representatives, speaker bureaus, continuing medical education), so the key types of allegations that the First Circuit found triggered the first-to-file bar in Wilson are likely to be present in other pharmaceutical marketing cases. Wilson supports the argument that the first-to-file bar can be applied even where the indications for which a drug is allegedly being marketed improperly are different from the indications that were the subject of an earlier-filed case.
Last week, the Supreme Court of Louisiana reversed a $330 million judgment ($258 million in penalties, $70 million in attorney fees, and $3 million in costs) against Johnson & Johnson and its subsidiary, Janssen Pharmaceutical, because there was no evidence that “any defendant made or attempted to make a fraudulent claim for payment against any Louisiana medical assistance program within the scope of [the Louisiana Medical Assistance Programs Integrity Law (‘MAPIL’)]”—a state statute based on the federal False Claims Act. Caldwell ex rel. State v. Janssen Pharmaceutical, Inc., Nos. 2012-C-2447, 2012-C-2466, 2014 WL 341038, slip op. at 1-2, 19-20 (La. Jan. 28, 2014)
The case centers on a narrow set of facts related to defendants’ antipsychotic drug Risperdal. In September 2003, the FDA told all manufacturers of so-called atypical antipsychotics to amend their labels to warn about potential adverse side effects associated with the drugs, and to issue letters about the change to healthcare providers around the country. Defendants did so, but their letter also reported that Risperdal had been associated with lower risks than other atypical antipsychotics. The FDA took issue with those statements and directed defendants to issue a “corrective” letter, which they did in July 2004. Just a couple of months later, the Louisiana Attorney General brought suit, alleging that the original letter contained off-label statements misrepresenting Risperdal’s safety and efficacy and that defendants were subject to civil penalties under Louisiana law as a result. In 2010, a jury returned a verdict for the state, finding that the defendants had violated Louisiana’s MAPIL 35,146 times (based on the number of letters mailed and sales calls made) and assessed a civil penalty of $7,250 per violation. The verdict was affirmed by the intermediate appellate court.
The Louisiana Supreme Court found no evidence to support that judgment based on its reading of the state’s false-claims act. Proceeding through each of the statute’s three subsections one-by-one, the court explained the law’s scope and why the conduct at issue did not fall within it. First was subsection (A), which provides that “[n]o person shall knowingly present or cause to be presented a false or fraudulent claim.” La. Rev. Stat. § 43:438.3(A). Because the statute elsewhere defined a “false or fraudulent claim” as one that a provider submits “knowing” it to be false or misleading, the court focused the responsibility for policing falsity on the person or entity actually making the claim for payment. The AG was thus required to “show that a Louisiana doctor who prescribed Risperdal for his patient, or a healthcare provider who dispensed the drug to the patient, knew that the defendants had made misleading statements about their product, but nonetheless prescribed or dispensed the drug to the patient knowing that there may be drugs that are equally safe, and less expensive, or safer than Risperdal, and notwithstanding that knowledge, prescribed or dispensed Risperdal.” Put another way, the “doctor or healthcare provider would have had to have knowingly committed malpractice, prescribing or dispensing Risperdal despite knowing there were better, cheaper, or safer, more efficacious drugs available, for the defendants to be liable under this provision.” No evidence supported such a finding.
Next, the court turned to subsection (B), which provides that “[n]o person shall knowingly engage in misrepresentation to obtain, or attempt to obtain, payment from medical assistance programs funds.” Again requiring a tight nexus between the claim for payment and the allegations, the court found “no showing the defendants knowingly attempted to obtain payment from the medical assistance programs pursuant to a claim.” In addition, the court read the “misrepresentation” requirement to “logically place the obligation of truthful and full disclosure on the healthcare provider or any person seeking to obtain payment through a claim made against medical assistance program funds or entering into a provider agreement,” in light of the “absurd consequences” that would arise if “potentially any information required by any federal or state agency or source, which is not fully disclosed by any person who ultimately receives Medicaid funds, directly or indirectly, could, if not truthfully or fully disclosed, subject that person to civil penalties under MAPIL.”
The third subsection states that “[n]o person shall conspire to defraud, or attempt to defraud, the medical assistance programs through misrepresentation or by obtaining, or attempting to obtain, payment for a false or fraudulent claim.” La. Rev. Stat. § 43:438.3(C). Here, too, the gap between the allegedly misleading statements and the claims for payment doomed the state’s case: “Even if the defendants were attempting to gain a competitive edge over other manufacturers of atypical anti-psychotics through the use of misleading off-label statements,” and “even if the defendants’ conduct was intended to influence the prescribing decisions of doctors treating schizophrenia patients,” there could be no liability because there was “no showing the defendants failed to truthfully or fully disclose or concealed any information required on a claim for payment made against the medical assistance programs” or that any such statements “were made to the department relative to the medical assistance programs,” and there was “no causal connection” between any such conduct and “any false or fraudulent claim for payment to a healthcare provider or other person.”
The thrust of the Louisiana court’s reasoning is straightforward but powerful: a statute designed to prevent false or fraudulent claims requires a close connection between the allegedly fraudulent conduct and the claim for payment from the state, and liability will not necessarily attach to any allegation of wrongdoing that ultimately winds its way to a Medicaid claim. Because the Louisiana statute bears similarities with false claims act statutes in other jurisdictions, this is a significant ruling for manufacturers defending false marketing claims elsewhere.
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.
Posted by Gordon Todd and Jeff Beelaert
In Watson v. King-Vassel, No. 12-3671 (7th Cir. Aug. 28, 2013), the Seventh Circuit had stern words for a relator’s unsavory litigation tactics, but also declined to endorse a rule mandating expert testimony on certain issues in every case.
The Relator, Dr. Watson, alleged that defendant Dr. King-Vassel’s off-label prescription of psychotropic drugs to a minor caused the submission of false claims to the Medicaid program. The defendant sought summary judgment because, inter alia, Relator had failed to adduce any expert testimony, including to explain how Medicaid claims are submitted, to prove that by prescribing off-label the defendant knowingly caused the submission. The district court granted summary judgment, holding that expert testimony would be required to explain whether defendant actually caused the claims to be filed, and also holding that expert testimony would be required to explain pharmaceutical data including information in medical compendia, i.e., whether a submitted claim was false.
The Seventh Circuit reversed. As to the first issue, the Court held that expert testimony was not required to prove either how the Medicaid system works, or the defendant doctor’s knowledge regarding the submissions. Instead, a relator need only show that the defendant “had reason to know of facts that would lead a reasonable person to realize that she was causing the submission of a false claim,” or that she “failed to make a reasonable and prudent inquiry into that possibility.” The minor’s mother had testified that she had provided defendant with the minor’s Medicaid billing information and had never paid for the services out-of-pocket. This, the Circuit held, was sufficient for a reasonable juror to extrapolate the defendant’s state of mind. The Circuit rejected the district court’s characterization of Medicaid as a “grand mystery” and “black box,” instead analogizing it to a car: even though “most people could not explain every step turn-key and ignition, the cause-effect relationship is commonly appreciated.” In light of this analogy, a reasonable juror could find, without the aid of expert testimony, that the doctor’s prescription caused a Medicaid claim to be filed.
The Court also rejected as “premature and overbroad” the District Court’s blanket statement that “medical documents typically are not readily understandable by the general public,” thereby requiring expert testimony to explain medical compendia in every case. Instead, the Circuit held that whether such testimony is required turns on a more case-specific analysis as to whether a particular off-label use is supported by one or more compendia. On remand, the Court noted, a more specific analysis may show that the lack of expert testimony is indeed fatal.
While reversing summary judgment, the Court disapproved sternly of the Relator’s “unsavory” litigation generation tactics. The Relator had never treated or even met the patient, but had instead advertised for minor Medicaid patients to “participate in a possible Medicaid fraud suit.” Relator then secured the minor’s medical records by soliciting the minor’s mother to lie to the defendant doctor about their intended use. The Court approved of the District Court’s use of its inherent powers to impose monetary sanctions on Relator and his counsel for their conduct, which the Circuit hoped would dissuade the future use of such tactics.
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.
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.
Posted by Scott Stein and Catherine Kim
In August, we wrote about a decision in which a court rejected the government’s theory that submission of claims for services that failed to comply with industry guidelines were “false.” Last week, another plaintiff seeking to impose FCA liability based on violation of voluntary guidelines suffered a similar defeat.
On November 14, Judge Brian Cogan of the Eastern District of New York dismissed the relator’s Fifth Amended Complaint in United States ex rel. Polansky v. Pfizer, Inc., No. 04-cv-0704 (E.D.N.Y. Nov. 14, 2012) alleging that Pfizer engaged in off-label marketing of its popular statin Lipitor in violation of the False Claims Act. The complaint alleged that Pfizer engaged in off-label marketing by encouraging physicians to prescribe Lipitor to lower the cholesterol of patients whose risk factors for heart disease and cholesterol levels did not fall within the National Cholesterol Education Program (“NCEP”) Guidelines. Specifically, the relator contended that the publication of an NCEP Guidelines chart in Lipitor’s 2005 label prohibited Pfizer from marketing the drug to physicians for use on patients who fell outside the parameters of the guidelines. Though such guidelines were not republished in the 2009 label, the relator noted that they were still referenced in the Dosage and Administration section.
Concluding that “[o]ff-guideline use does not equate to off-label[,]” the court dismissed the complaint, holding that the NCEP Guidelines did not constitute a legal restriction, but were “merely informational and advisory[.]” The court noted that had the FDA desired to limit Lipitor use to patients falling within the NCEP guidelines, it could have done so expressly. Yet the 2009 label, as read by the court, contained no restrictions regarding the appropriate patient population for Lipitor. Indeed, the only reference to the guidelines appeared in a four-word parenthetical in the label’s dosage instructions.
For these reasons, the court held that the relator’s off-label claims failed under the 2009 label. And since the relator conceded that the changes to the 2009 label from the earlier label were not substantive, the court concluded that the relator’s claims must fail under the 2005 label as well.
“The False Claims Act, even in its broadest application, was never intended to be used as a back-door regulatory regime to restrict practices that the relevant federal and state agencies have chosen not to prohibit through their regulatory authority,” wrote Judge Cogan. “I cannot accept plaintiff’s theory that what the scientists at the [NCEP] clearly intended to be advisory guidance is transformed into a legal restriction simply because the FDA has determined to pass along that advice through the label.”
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.
On June 1, Judge Rya Zobel issued a decision dismissing most of relators’ claims against pharmaceutical manufacturer Organon and two long-term care pharmacies, Pharmerica and Omnicare, concerning the antidepressant drug Remeron. Relators’ complaint was premised on allegations that defendants (1) received and/or paid kickbacks in exchange for switching patients to Organon’s preferred drugs, (2) misreported pricing and rebates associated with Organon drug sales to the federal government, and (3) promoted Organon drugs for off-label use in order to switch more patients to those drugs. The complaint alleged kickback claims against all defendants and pricing and off-label claims against Organon only.
Judge Zobel’s decision leaves little of the complaint standing. First, the court found that it lacked jurisdiction over all claims against Pharmerica and all kickback and pricing claims against Organon under the FCA’s first-to-file and public disclosure bars. Two aspects of this ruling are particularly noteworthy: (1) Following the D.C. Circuit, the court rejected relators’ contention that a first-filed complaint must satisfy Rule 9(b) because such a requirement would “frustrate the purpose of the first-to-file bar by raising the threshold for it to apply,” Slip Op. 12 n.17, and (2) It was enough for the first-filed complaint to list the Organon drug Remeron, and expressly naming defendant Organon was not necessary, id. at 15. The two complaints alleged the same essential elements of fraud and that was “sufficient to put the government on the trail.” Id. at 16. It did not matter that that these relators provided “additional details and types of kickbacks.” Id.
Second, the court dismissed off-label marketing claims brought under 31 U.S.C. § 3730(a)(1)-(3) because “if a state Medicaid program chooses to reimburse a claim for a drug prescribed for off-label use, then that claim is not ‘false or fraudulent,’ and liability cannot therefore attach for reimbursement.” Id. at 26. Relators alleged only that a state “may” deny coverage for an off-label prescription, not that any states actually did or that states must do so under the Medicaid statute. The allegation that states had a choice whether to cover such prescriptions and did, the court found, could not establish FCA liability for reimbursement claims purportedly filed because of an off-label marketing scheme. Id. at 27-28.
Third, the court dismissed claims against Omnicare premised on so-called “collateral kickbacks”—that is, incentive payments “such as research grants, sponsorship of annual meetings, data purchasing agreements, nominal-price transactions, and participation in corporate partnership programs”—because they failed to satisfy Rule 9(b). Id. at 28-33. The court found, for example, that “budget[ing] for payments to Omnicare does not confirm that such payments were actually made, that Omnicare solicited them, or that the payments were inducements to participate in the conversion or therapeutic interchange scheme alleged,” and the “conclusory allegation that ‘Omnicare actively pursued Organon to participate in corporate partnership programs, which were mainly ways to funnel money to Omnicare in exchange for Remeron prescriptions'” would not do. Id. at 33. (The court did not say whether dismissal was with or without prejudice.)
Although the court did not dismiss relators’ claims entirely, each of these rulings is critically important to limiting the scope of FCA liability that is frequently pursued in analogous cases against pharmacy providers and pharmaceutical manufacturers.