Category

Rule 9(b)

06 July 2016

FCA Charges Dismissed Against Wal-Mart, Kmart, and Rite Aid Pharmacies for Relator’s Failure to Plead Specific Allegations

The U.S. District Court for the District of Massachusetts recently dismissed a False Claims Act (“FCA”) lawsuit against Wal-Mart, Kmart, and Rite Aid pharmacies (collectively, “the defendants”), alleging, among other things, that the companies dispensed expired prescription drugs that were reimbursed by Medicare and Medicaid.  In short, the court granted, in part, defendants’ motion to dismiss in U.S. ex. rel. Verrinder v. Wal-Mart Corp., Case No. 13-11147-PBS [here], holding that the relator’s allegations were not sufficiently connected to specific false claims for payment.

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28 June 2016

First Circuit Upholds Dismissal of FCA Claims with Prejudice Taking Middle-Ground Approach to Particularity Requirement

The First Circuit, in United States ex rel. Garcia v. Novartis AG, upheld the dismissal of a FCA claim with prejudice against Novartis Pharmaceutical Corporation, Novartis Corporation, Genentech, Inc. and Roche Holdings, Inc. (collectively “Defendants”) on the basis that the complaint did not include sufficient specific allegations regarding the who, what, where, and when of the fraud to satisfy Federal Rule of Civil Procedure 9(b).  In so doing, the First Circuit appears to have taken a fact-specific middle-ground approach to the Rule 9(b) particularity standard, rather than wholly following either side of the Circuit split on the particularity standard.

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11 January 2016

District Court in the Seventh Circuit Distinguishes Sanford-Brown, Finds Room for Implied Certification Claims Against Pharmaceutical Manufacturers

Although the Seventh Circuit last year became the first circuit court clearly to reject the “implied certification” doctrine of FCA liability, a district court in that circuit recently sought to cabin the impact of the ruling.  See United States ex rel. Kroening v. Forest Pharm., No. 12-cv-00366 (E.D. Wisc. Jan. 6, 2016).  As reported here, the Supreme Court will review the viability of the implied certification theory later this year.  While the Kroening court ultimately dismissed the relator’s claims under Rule 9(b), the opinion highlights the divergence of the viewpoints around the implied certification theory that the Supreme Court has been asked to help resolve.

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02 October 2015

District Court Denies Home Health Assessment Company’s Motion to Dismiss in Medicare Advantage Fraud Case, Dismisses Health Plan Defendants

A court in the Central District of California recently granted in part and denied in part the motions to dismiss of defendants—multiple Medicare Advantage (“MA”) plans and a home health assessment company—in a suit alleging that the sickness of patients had been inflated through illegitimate in-home assessments.  See United States ex rel. Silingo v. Mobile Med. Examination Servs., No. 13-cv-01348 (C.D. Cal. Sept. 29, 2015).  The case is one further development in the broader ongoing enforcement effort against private Medicare insurers (as reported here), and highlights the scrutiny by CMS of the role in-home assessments play in the MA program.

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07 August 2015

Fifth Circuit Affirms Dismissal of False Certification Claim For Failure to Plead A Specific Contract Provision or Regulation Violated

In a recent unpublished decision, the Fifth Circuit affirmed without oral argument the dismissal of an FCA implied certification claim for failure to comply with Rule 9(b).  The relators alleged that a defense contractor submitted certifications to the government falsely certifying that they “calibrated the government’s electromagnetic-energy-measuring instruments in accordance with applicable industry standards and specifications.”  The Fifth Circuit emphasized, however, that a false certification theory can succeed only “only when certification is a prerequisite to obtaining payment from the government.”  Because the relators’ complaint failed to identify any specific statute, regulation, or contract provision providing that compliance with the applicable standards, “let alone certification of compliance,” was a prerequisite to the government’s payments, the Fifth Circuit affirmed dismissal of the complaint.  A copy of the Fifth Circuit’s unpublished decision can be found here.

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08 July 2015

District Court Allows Medicare Advantage Upcoding Case To Proceed

Posted by Scott Stein and Brenna Jenny

A district court in the Southern District of Florida recently denied motions to dismiss filed by a Medicare Advantage (“MA”) plan and MA providers in a case alleging upcoding through fraudulent diagnosing. See United States ex rel. Graves v. Plaza Med. Ctrs. Corp., No. 10-cv-23382 (S.D. Fla. July 6, 2015). The case is one of a growing number of qui tam cases in the Medicare Advantage sphere, mirroring heightened congressional pressure on CMS and DOJ to take steps to combat Medicare Advantage fraud (as previously reported here).

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28 May 2015

Court Finds Kickback Allegations Against Clinical Laboratory Not Adequately Pled

Posted by Scott Stein and Bevin Seifert

On May 19, 2015, a federal district court in the Northern District of Georgia dismissed kickback allegations against Laboratory Corporation of America and Laboratory Corporation of America Holdings (“LabCorp”), holding that the allegations fell short of the particularity required by Rule 9(b). The relators—competitors of LabCorp—alleged that LabCorp’s pricing practices violated Georgia’s state false claims act and were independently unlawful under the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)(2)(A). Relators alleged that LabCorp violated the AKS by providing “deeply discounted” prices to customers to induce them to refer (or “pull-through”) large volumes of Medicaid and other business. The court found, however, that relators failed to allege those claims with particularity because they did not identify a single improper referral to a physician, nor a specific Medicaid claim resulting from such referral. Moreover, the court held that relators failed to identify a specific kickback, finding that allegations of specific discounts alone were insufficient to establish a referral or claim resulting from such referral. Having disposed of the federal AKS claims, the court declined to exercise supplemental jurisdiction over plaintiffs’ state law claims and, therefore, remanded the remaining claims to the State Court of Fulton County, Georgia. A copy of the court’s decision can be found here.

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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.

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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.

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30 March 2015

New Cert Petition Asks Supreme Court to Weigh in on FCA Pleading Standards

As we previously reported, the Supreme Court last year declined an invitation to resolve a circuit split regarding how much detail about particularized false claims must be pleaded in an FCA case in order to satisfy Rule 9(b)’s particularity requirement. A new cert petition filed this month asks the Court to take up the issue this term. Last year, in an opinion we wrote about here, the 11th Circuit affirmed in part and overruled in part the dismissal of an FCA complaint under Rule 9(b). The court held that while the relator had not pleaded, and was not required to plead facts regarding specific false claims, he had pleaded other facts that provided sufficient “indicia of reliability” with respect to his claims based on conduct allegedly occurring during his employment by the defendants. By contrast, the court held, the relator had failed to plead sufficient “indicia of reliability” that the conduct continued after his employment ended, and therefore affirmed the dismissal of the post-employment claims. It is the latter ruling with which the cert petition, filed by the relator, takes issue. The question presented in the cert petition is “[w] hether, under Rule 9(b), it is sufficient for a relator under the False Claims Act to plead “particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted” to the government, or whether Rule 9(b)’s particularity requirement precludes the drawing of reasonable inferences that claims were actually submitted”

In the petition considered last year, the Supreme Court requested the Solicitor General’s views. The SG’s brief, while recognizing a circuit split, encouraged the Court to deny cert, and the Court did just that. It remains to be seen whether the Solicitor General will, or will be asked to by the Court, weigh in on the petition. In any event, we will continue to monitor this case and report on important developments.

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