U.S. EX REL. FRANKLIN v. PARKE-DAVIS No. 96-CV-11651-PBS.
147 F.Supp.2d 39 (2001)
UNITED STATES of America ex rel. David FRANKLIN, Plaintiff, v. PARKE-DAVIS, DIVISION OF WARNER-LAMBERT COMPANY, Defendant.
United States District Court, D. Massachusetts.
June 25, 2001.
Thomas G. Hoffman, Greene & Hoffman, PC, Thomas M. Greene, Greene & Hoffman, P.C., Boston, MA, for David Franklin.
Robert B. Fiske, Jr., James P. Rouhandeh, James E. Murray, Barbara D. Diggs, Davis Polk & Wardwell, New York City, David B. Chaffin, Hare & Chaffin, Boston, MA, for Parke-Davis.
Thomas E. Kanwit, United States Attorney's Office, Boston, MA, for United States.
MEMORANDUM AND ORDER
SARIS, District Judge.
In this qui tam action under the False Claims Act ("FCA"), 31 U.S.C. § 3729-33, Relator Dr. David Franklin alleges, among other things, that his former employer engaged in a fraudulent scheme to promote the sale of the drug Neurontin for "off-label" uses (i.e., uses other than those approved by the Food and Drug Administration) and that this illegal marketing campaign caused the submission of false claims to the Veterans Administration and to the federal government for Medicaid reimbursement.
After hearing, Defendant's motion to dismiss is
As it must on a motion to dismiss, the Court takes the facts alleged in the complaint and disclosure as true:
A. The Parties
Relator David Franklin ("Franklin" or "Relator") is a former employee of Defendant Parke-Davis, a division of Warner-Lambert Company. Franklin, who holds a doctorate degree in biology, was employed by Parke-Davis as a "medical liaison" for a period of approximately five months during 1996. He has co-authored five scientific publications, is an author of a pending patent application, and received a two-year research fellowship with Harvard Medical School and the Dana Farber Cancer Institute in Boston in 1992.
At the time of the events in question, Warner-Lambert Company was a corporation engaged in the manufacture and sale of pharmaceutical and consumer products. Defendant Parke-Davis was the company's pharmaceutical products division, which manufactured, marketed, and conducted research relating to prescription drugs.
B. "Off-label" usage of pharmaceuticals
Under the Food, Drug, and Cosmetics Act ("FDCA"), 21 U.S.C. §§ 301-97, new pharmaceutical drugs cannot be distributed in interstate commerce unless the sponsor of the drug demonstrates to the satisfaction of the Food and Drug Administration ("FDA") that the drug is safe and effective for each of its intended uses. See 21 U.S.C. § 355(a) & (d). Once a drug is approved for a particular use, however, the FDA does not prevent doctors from prescribing the drug for uses that are different than those approved by the FDA. Allowing physicians to prescribe drugs for such "off-label" usage "is an accepted and necessary corollary of the FDA's mission to regulate [pharmaceuticals] without directly interfering with the practice of medicine." Buckman Co. v. Plaintiff's Legal Comm.,
Whether a drug is FDA-approved for a particular use will largely determine whether a prescription for that use of the drug will be reimbursed under the federal Medicaid program. Reimbursement under
C. Defendant's products
Neurontin, which is the brand name for the drug gabapentin, was approved by the FDA in 1994 for use as an adjunctive treatment for epilepsy in doses from 900 to 1800 mg per day. Neurontin is also used for a number of off-label purposes. For example, Neurontin is prescribed for pain control, as mono-therapy for epilepsy, for control of bipolar disease, and as treatment for attention deficit disorder. According to Relator, 50% of Neurontin's sales in 1996 are attributable to off-label uses. Of those sales, Relator estimates that 50% (or 25% of Neurontin's total sales) were reimbursed by the government either indirectly through Medicaid or directly through purchases by the Veterans Administration.
Accupril, which is the brand name for the drug quinipril, is an angiotensin converting enzyme (ACE) inhibitor that has been approved for the control of hypertension and as a treatment for heart failure.
During the events in question, neither Neurontin nor Accupril were eligible for reimbursement from Medicaid when prescribed for an off-label use because neither drug's off-label uses were included in one of the compendia specified by 42 U.S.C. § 1396r-8(g)(1)(B)(i).
D. Allegations regarding marketing of Neurontin and Accupril
The crux of Relator's allegations is that the Defendant engaged in an extensive and far-reaching campaign to use false statements to promote increased prescriptions of Neurontin and Accupril for off-label uses which caused the filing of false claims for reimbursement by the federal government.
Relator alleges that he was hired by Parke-Davis onto a team of "medical liaisons." While medical liaisons are ordinarily connected to the research divisions of the manufacturer, Parke-Davis's medical liaisons were exclusively employed as sales and promotion personnel.
Parke-Davis's medical liaisons, including Relator, were instructed to make exaggerated or false claims concerning the safety and efficacy of Parke-Davis drugs for off-label uses. They were also trained to convey that Neurontin could be prescribed for its various off-label uses in amounts of up to 4800 mg per day—far above the maximum dosage of 1800 mg per day approved by the FDA. To bolster their representations to physicians, medical liaisons were encouraged to misrepresent their scientific credentials and to pose as research personnel, rather than as sales representatives.
Relator also alleges the doctors were rewarded with kickbacks for prescribing large quantities of Parke-Davis drugs.
According to Relator, when questions arose concerning the availability of reimbursement for prescriptions for off-label uses of Parke-Davis drugs, medical liaisons were instructed to coach doctors on how to conceal the off-label nature of the prescription. Relator also alleges that Parke-Davis took numerous actions to conceal its activities from the FDA, including shredding documents, falsifying documents, and encouraging medical liaisons to conduct their marketing activities without leaving a "paper trail" that might be discovered by the FDA.
E. Present action
Relator filed this nine-count qui tam action under seal on August 13, 1996. The case remained in limbo and under seal for several years while the United States mulled over its option to intervene. The seal on the complaint was finally lifted on December 21, 1999, and the litigation began in earnest. To date, the government has elected to participate only in the capacity of amicus curiae while reserving its right to intervene as a plaintiff at a later point.
A. Failure to plead fraud with particularity
1. Application of Rule 9(b) to FCA qui tam claims
Qui tam actions under the FCA must comply with Fed.R.Civ.P. 9(b), which requires that "the circumstances constituting fraud ... shall be stated with particularity." See United States ex rel. Walsh v. Eastman Kodak Co.,
The requirements of Rule 9(b), however, must be read in conjunction with Fed.R.Civ.P. 8(a), which requests "a short and plain statement of the claim" for relief. Thus, while Relator must allege the circumstances
In addition, strict application of requirements of Rule 9(b) may be relaxed in certain circumstances. For instance, where facts underlying the fraud are "peculiarly within the defendants' control," a plaintiff may be excused from pleading the circumstances of the fraud with a high degree of precision. Boston & Me. Corp. v. Hampton,
2. The Disclosure
Although Relator's complaint alleges a general framework of what might be actionable FCA claims, those allegations standing alone lack the specificity required under Rule 9(b). The complaint does not disclose the "who, what, when, where, and how" of the alleged fraud. Recognizing the likely faults of the complaint, Relator has urged this Court to consider the more specific information concerning Parke-Davis's alleged FCA violations contained in Relator's disclosure to the government pursuant to 31 U.S.C. § 3730(b)(2).
Although Section 3730(b)(2) does not displace the pleading requirements in Fed.R.Civ.P. 9(b), it does serve many of the same salutary policy objectives (i.e., precluding strike suits, permitting the preparation of meaningful defenses, etc.). "A court should hesitate to dismiss a complaint under Rule 9(b) if the Court is satisfied (1) that the defendant has been made aware of the particular circumstances for which she will have to prepare a defense at trial, and (2) that plaintiff has substantial prediscovery evidence of those facts." Harrison, 176 F.3d at 784. In light of this admonition, it is appropriate to look to disclosure to determine whether the Relator has supplied sufficient allegations concerning the circumstances of the fraud to permit this action to go forward. This approach makes sense because the disclosure is referenced in the complaint, and documents referenced in the complaint are routinely considered as part of the pleadings. See, e.g., United States ex rel. Wilkins v. North Am. Constr. Corp.,
3. Sufficiency of the Allegations
Viewed in light of the disclosure, Relator's complaint contains allegations of fraud sufficient to satisfy Rule 9(b): Counts II and IV describe a scheme of fraud designed to increase the submission of off-label prescriptions for Neurontin for payment by Medicaid; and Count VI describes false statements made to physicians to induce off-label prescriptions for Neurontin. As far as the "who" in these counts is concerned, the disclosure identifies by name the individuals at Parke-Davis who instructed the medical liaisons on how to fraudulently promote off-label use of Neurontin. It also lists the medical liaisons by name. In addition, the disclosures and exhibits identify the physicians who were contacted and allegedly given false information and kickbacks in return for increasing their off-label use of Neurontin. Relator adequately identifies the "what" by alleging that Defendant's conduct resulted in the submission of numerous Neurontin prescriptions that were ineligible for reimbursement under Medicaid because they were prescribed for an off-label use. The "when" of Relator's complaint is confined to the time-frame during which Relator was employed as a Parke-Davis medical liaison in its Northeast Customer Business Unit. Finally, the "how" of the alleged fraud is detailed in the portions of the complaint and disclosure that describe a fraudulent marketing campaign conducted by Parke-Davis in which kickbacks and unlawful and misleading marketing were allegedly used to encourage doctors to increase their use of Neurontin for unapproved purposes.
Dr. Franklin cites at least eleven specific examples of fraudulent statements which medical liaisons (including himself) were trained to give to physicians, and did give to physicians, to induce the purchase of Neurontin for off-label uses, including the following:
Defendant contends that the pleading of the basic scheme of fraud or the identification of certain instances of fraudulent conduct does not satisfy Rule 9(b). Indeed, Defendant goes so far as to argue that Rule 9(b) requires no less than the identification of every ineligible prescription submitted to the government for payment. This view of Relator's pleading obligation may fit a scenario where the alleged fraud is confined to a small number of transactions about which Relator had knowledge. However, where the alleged scheme of fraud is complex and far-reaching, pleading every instance of fraud would be extremely ungainly, if not impossible. Courts facing similar claims under the FCA have not placed the bar so high as to require pleading with total insight. See United States ex rel. Thompson v. Columbia/HCA Healthcare Corp.,
To be sure, when a relator has access to the information regarding the alleged false claims, merely alleging a fraudulent scheme may not be sufficient. See, e.g., Eastman Kodak Co., 98 F.Supp.2d at 147-148 (holding that the chief financial officer of a hospital had sufficient access to the allegedly false cost reports resulting from the false invoices to require him to plead at least one example of a false claim with particularity). Although the Relator here does not identify specific prescriptions for Medicaid patients for off-label uses made by doctors in reliance on the fraudulent representations, Franklin (unlike the relator in Eastman Kodak) does not reasonably have pre-discovery access to that patient-specific information.
When considered alongside the disclosure, the complaint amply details both a general framework of the purported Medicaid fraud and provides more specific information on the individuals, locations, the precise statements alleged to be false and time-frames involved. The complaint therefore satisfies the requirements of Rule 9(b) with respect to the off-label sale of Neurontin for Medicaid reimbursement (Counts II, IV, and VI).
b. Veterans Administration
Even when read alongside Relator's disclosure, Count I, which generally describes an FCA claim for promoting offlabel
Count IX alleges the illegal promotion of Accupril. According to Franklin, the medical liaisons were told to tell physicians, including those at the Veterans Administration, that if a patient is on any other ACE inhibitor but Accupril, the studies showed that these patients would have more heart attacks, require more procedures, and die sooner. Relator alleges there was no credible scientific data to support these claims. (Disclosure at 28.) However, unlike the claims involving Neurontin, the Disclosure does not identify the liaisons involved in the fraud, the doctors who were given false information, or any false claims made. It is dismissed.
B. Failure to state a claim
1. Motion to dismiss standard
"Like a battlefield surgeon sorting the hopeful from the hopeless, a motion to dismiss invokes a form of legal triage, a paring of viable claims from those doomed by law." Iacampo v. Hasbro, Inc.,
2. Causing submission of false Medicaid claims
The FCA provides:
31 U.S.C. § 3729(a) (emphasis added). An action may be brought under the False Claims Act only if there is "(1) ... a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money or to forfeit moneys due (i.e., that involved a `claim')." Harrison, 176 F.3d at 788. As stated in United States v. Neifert-White Co.,
Id. at 232-33, 88 S.Ct. 959 (quotations and footnote omitted).
Here, the Relator has alleged in Counts II, IV, and VI that Parke-Davis has caused the submission of numerous off-label prescription for Neurontin to the Medicaid program through both its fraudulent statements about the safety and efficacy of Neurontin and its system of unlawful financial incentives and kickbacks to doctors who prescribe Neurontin.
Defendant does not dispute that an off-label prescription submitted for reimbursement by Medicaid is a false claim within the meaning of the FCA. Cf. Peterson v. Weinberger,
First, Defendant argues that Relator cannot use the FCA as an end-run around the enforcement provisions of the FDCA by creating a cause of action for money damages. Although the FDCA forbids the marketing of drugs for off-label uses, see 21 U.S.C. § 331(a) & (d), it does not provide the government with a civil damage remedy to enforce the ban on off-label marketing.
It is true that the FCA cannot be used to enforce compliance with every federal law or regulation. See United States ex rel. Cantekin v. Univ. of Pittsburgh,
Nonetheless, the FCA can be used to create liability where failure to abide by a rule or regulation amounts to a material misrepresentations made to obtain a government benefit. See, e.g., United States v. White,
Second, Defendant argues that an impermissible off-label promotion does not necessarily include a false statement or fraudulent conduct. For example, it points out, off-label promotion of a drug might simply consist of a representative of a pharmaceutical company distributing the finding of one doctor's experience with an off-label use of a particular drug to other physicians. However, Relator alleges more than a mere technical violation of the FDA's prohibition on off-label marketing. The gravamen of Relator's claim is that Parke-Davis engaged in an unlawful course of fraudulent conduct including knowingly making false statements to doctors that caused them to submit claims that were not eligible for payment by the government under Medicaid. Thus, the alleged FCA violation arises—not from unlawful off-label marketing activity itself— but from the submission of Medicaid claims for uncovered off-label uses induced by Defendant's fraudulent conduct. Cf. United States ex rel. Marcus v. Hess,
Third, Defendant argues that Relator has not stated a claim because he has not accounted for the independent actions of the physicians who wrote the off-label prescriptions and the pharmacists who accepted and filled the off-label prescriptions. In other words, Defendant argues that—as a matter of law—Relator's allegations cannot establish the causation requirement of the FCA because the actions of these professionals were an intervening force that breaks the chain of legal causation. See Cantekin, 192 F.3d at 416 (applying intervening cause analysis to claim under the FCA). Under black letter law, however, such an intervening force only breaks the causal connection when it is unforeseeable. See id. Accord D. Dobbs, et al., Prosser and Keeton on Torts § 44, at 303-04 (5th ed. 1984) ("The courts are quite generally agreed that [foreseeable intervening forces] will not supersede the defendant's responsibility."); Restatement (Second) of Torts § 443 (1965) ("The intervention of a force which is a normal consequence of a situation created by the actor's ... conduct is not a superseding cause of harm which such conduct has been a substantial factor in bringing about."). In this case, when all reasonable inferences are drawn in favor of the Relator, the participation of doctors and
Finally, Defendant argues that Relator's claim fails because he does not allege that false statements made by Parke-Davis to doctors were material to the government's decision to pay the claim for off-label prescriptions of Neurontin. Liability under the FCA, however, is not limited only to false statements or claims made directly by the Defendant to the government. The Act "reaches beyond claims which might be legally enforced, to all fraudulent attempts to cause the Government to pay out sums of money." Neifert-White Co., 390 U.S. at 233, 88 S.Ct. 959 (internal quotations omitted). Relator has adequately alleged that Parke-Davis knowingly caused the submission of these false claims through a fraudulent course of conduct in violation of 31 U.S.C. § 3729(a). The fact that such prescriptions are for an off-label use is material because, as the Defendant does not dispute, the government would not have paid the claims if it had known of the use for which they were being submitted. See S.Rep. No. 99-345, at 9 (1986), U.S.Code Cong. & Admin.News 1986, pp. 5266, 5274 (stating that "claims may be false even though the services are provided as claimed if, for example, the claimant is ineligible to participate in the program").
To be sure, Relator's theory of liability takes the parties into territory that is not well charted by the existing decisional law. Nonetheless, the statutory language— which must provide the touchstone for the Court's analysis—supports Relator's somewhat expansive claim. See 31 U.S.C. § 3729(a) ("Any person who ... knowingly ... causes to be presented, to... the United States Government ... a false or fraudulent claim for payment or approval [or] ... knowingly ... causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government ... is liable") (emphasis added). Moreover, the terms of the FCA must be read liberally in accordance with their remedial purpose. See Neifert-White Co., 390 U.S. at 232-33, 88 S.Ct. 959 (noting that "the Court has consistently refused to accept a rigid, restrictive reading" of the FCA and that "[t]his remedial statute reaches beyond `claims' which might be legally enforced, to all fraudulent attempts to cause the Government to pay out sums of money.").
3. Kickback claim
Count V of the complaint alleges a FCA claim based on violations of the Medicaid Antikickback provision, 42 U.S.C. § 1320a-7b(b). Under the antikickback provision:
42 U.S.C. § 1320a-7b(b)(2).
Relator contends that Parke-Davis violated the antikickback provision
Contrary to Relator's argument, a violation of the federal antikickback provision is not a per se violation of the FCA. In order for the antikickback violation to be transformed into an actionable FCA claim, the government must have conditioned payment of a claim upon the claimant's certification of compliance with the antikickback provision. See Thompson, 125 F.3d at 902. That certification may be proven by evidence showing the claimant expressly agreed to abide by the law as a condition of payment. See Gublo v. Novacare, Inc.,
In the absence of an affirmative certification, some courts have found "implied certification" by virtue of the defendant's participation in the federal program. See, e.g., United State ex rel. Pogue v. American Healthcorp, Inc.,
At this point, Relator has not provided allegations regarding two crucial components of its theory. Relator has failed to allege that physicians either expressly certified or, through their participation in a federally funded program, impliedly certified their compliance with the federal anti-kickback statute as a prerequisite to participating in the federal program. This Count fails for a different reason as well. Parke-Davis argues that no False Claims Act anti-kickback case has ever extended the "false certification" or the "false implied certification" theory to cover claims filed, not by the defendant, but by third parties. While Defendant's payment of kickbacks may well be illegal, a claim under the FCA will fail unless Relator alleges that Parke-Davis caused or induced a doctor and/or pharmacist to file a false or fraudulent certification regarding compliance with the anti-kickback statute.
4. Clinical Trials
Count IV alleges that Defendant engaged doctors to perform clinical trials using Parke-Davis drugs in violation of FDA regulations requiring that the drugs for such trials be provided at no cost. Cf. 21 C.F.R. § 312.7 (prohibiting manufacturer from charging for an investigational new drug in a clinical trial without the prior written approval of the FDA). This count is an example of the Relator improperly seeking to use the FCA as a means to enforce various regulatory proscriptions of the FDA. See Pogue, 914 F.Supp. at 1513 (The FCA "was not intended to operate as a stalking horse for enforcement of every statute, rule, or regulation."). It is dismissed. While Parke-Davis may well have violated this regulatory provision, there is no allegation that in doing so it fraudulently caused the submission of a false claim for reimbursement.
III. CONCLUSION AND ORDER
The Defendant's Motion to Dismiss (Docket No. 58)is
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