18 December 2015

Alleged Manipulation of Compendia Process Held Insufficient to Withstand Summary Judgment on Off-Label Marketing 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.


15 April 2015

District Court Refuses to Uphold Release of Liability or Apply Public Disclosure Bar Based on State-Law Employment Suit, Dismisses Off-Label Promotion Claims Under Rule 9(b)

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.

02 April 2015

Court Rejects Off-Label Promotion Allegations Due to Failure to Cite Actual False Claim Submissions; Allows Retaliation Claims to Proceed

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.

18 June 2014

Decoding FDA: Five Things To Know about the FDA’s June 6 Response to the MIWG Citizen Petition Concerning Off-Label Promotion

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.

12 June 2014

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.

07 May 2014

First Circuit Issues Important Ruling on First-to-File Bar as Applied to Pharmaceutical Marketing

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.

04 February 2014

Supreme Court of Louisiana Overturns $330 Million Judgment In Off-Label Marketing Case

Posted by Jonathan Cohn and Josh Fougere

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.

19 December 2013

Government Seeks to Limit Application of Caronia To FCA Cases

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.

05 September 2013

Seventh Circuit Slams Relator’s Unsavory Tactics; Declines to Mandate Use of Expert Testimony on Claims and Causation Issues

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.

18 February 2013

Illinois District Court Refuses To Dismiss FCA Claim For Improper Marketing of On-Label Use

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.

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