In the fourth of a related set of qui tam False Claims Act (FCA) suits, the United States District Court for the Northern District of Illinois granted summary judgment in favor of generics manufacturer Par Pharmaceutical Companies (Par). The court’s August 17, 2017, opinion in U.S. ex rel. Lisitza et al v. Par Pharmaceutical Co, Inc. held that the relator had not presented sufficient evidence to support an implied certification theory of FCA liability.

Like its sister cases, the relator in Par Pharmaceutical alleged that the defendant caused the submission of false claims to the Medicaid program via an unlawful prescription-switching scheme. The alleged scheme involved manufacturing generic drugs in forms and dosage strengths that were atypical and not covered by existing Medicaid reimbursement limits, then marketing the drugs to pharmacies based on their higher reimbursement potential. The pharmacies would then fill the scripts with the more expensive forms and dosages manufactured by Par. The relators also alleged that the drugs were dispensed without physician approval and without meeting the medical necessity and economic requirements of governing state and federal Medicaid regulations, in violation of the FCA.

Continue Reading Par Pharmaceutical Beats FCA Prescription-Switch Allegations

On May 17, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a relator’s False Claims Act (FCA) claims predicated on allegations that Pfizer “improperly marketed Lipitor, a popular statin, as appropriate for patients whose risk factors and cholesterol levels fall outside the National Cholesterol Education Program (NCEP) Guidelines.”  In United States ex rel. Polansky v. Pfizer, Inc. the relator, Polansky, claimed that the Guidelines were incorporated into the drug’s FDA label and were thus mandatory.  He further alleged that Pfizer induced doctors to prescribe the drug outside the Guidelines, and induced pharmacists to fill such “off-label” prescriptions that were, in turn, reimbursed by government payors.  Polansky claimed that requests for reimbursement for these prescriptions impliedly, but falsely, certified that the prescriptions were for on-label uses.

The Second Circuit rejected the relator’s theory at its most basic level, finding that the Lipitor label did not mandate compliance with the NCEP Guidelines, which were clearly advisory in nature.  The fact that the Guidelines were mentioned in the label did not render them mandatory.  Quoting the district court, the Second Circuit wrote, “we cannot accept plaintiff’s theory that what scientists at the National Cholesterol Education Program 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.”  In short, the Second Circuit held that prescribing outside of the Guidelines was not an off-label use.

Because the fundamental premise of the relator’s claims disintegrated, the court did not need to wade into other challenges Pfizer had raised to the relator’s claims.  However, the court noted that it was “skeptical” of relator’s theory of liability as a broader legal matter, observing that “it is unclear just whom Pfizer could have caused to submit a ‘false or fraudulent’ claim: The physician is permitted to issue off-label prescriptions; the patient follows the physician’s advice, and likely does not know whether the use is off-label; and the script does not inform the pharmacy at which the prescription will be filled whether the use is on-label or off.  We do not decide the case on this ground, but we are dubious of Polanky’s assumption that any one of these participants in the relevant transactions would have knowingly, impliedly certificated that any prescription for Lipitor was an on-label use.”

The Polansky case is not the first time the Second Circuit has rejected an off-label marketing theory as a basis for liability.  In December 2012, in the case of United States v. Coronia, the court overturned, on First Amendment grounds, the criminal conviction (under the Food, Drug & Cosmetic Act) of a pharmaceutical sales representative for promoting off-label use of a drug.

The Polansky court concluded its May 17 opinion by signaling that future FCA claims predicated on purported off-label marketing theories would receive serious scrutiny:

“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. (quoting the district court).  It is the FDA’s role to decide what ought to go into a label, and to say what the label means, and to regulate compliance.  We agree with [the district court] that there is an important distinction between marketing a drug for a purpose obviously not contemplated by the label . . . and marketing a drug for its FDA-approved purpose to a patient population that is neither specified nor excluded in the label.”

The past three months have seen a flurry of advisory opinion activity from the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG). The majority of this activity focuses on patient assistance programs (PAPs) as donors and organizations continue to have questions about OIG’s most recent PAP guidance. While none of these opinions or modifications are dramatically new on their face, together they provide valuable insight into the types of facts that can mitigate the OIG’s general concerns with tailored disease funds.

Typically, sponsored by pharmaceutical manufacturers and/or independent charity organizations with industry donors, PAPs provide financial assistance or free prescription drugs to low income individuals. Some PAPs are also structured to provide assistance to patients with a specific disease, like cancer or Crohn’s disease. As PAPs have the potential to be used by manufacturers to subsidize the purchase of their own products, or to improperly steer a patient’s drug selection, they can trigger scrutiny under the federal Anti-Kickback Statute (AKS) and Beneficiary Inducement Civil Monetary Penalty (CMP), among other laws. Not surprisingly, the OIG is more comfortable with bona fide charitable programs that are not drug-specific and that reflect other characteristics demonstrating a broad patient focus, rather than those reflecting a drug or pharmaceutical manufacturer focus.

Historically, the OIG has treated PAPs as important safety nets for patients who face chronic illnesses and high drug costs. The OIG issued a special advisory bulletin (SAB) in 2005 confirming that PAPs could help ensure patients had access to and could afford their medically necessary drugs. The OIG’s guidance evolved with its May 2014 SAB, which addressed the growing trend of independent charity PAPs establishing or operating specific disease funds that limit assistance to a subset of available products. The OIG articulated a concern with such PAPs, and indicated that it would view such programs as having a higher baseline risk of abuse when their assistance was limited to only a subset of available FDA-approved products for treatment of the disease. The OIG advised PAPs to define disease funds in accordance with widely recognized clinical standards and in a manner that covered a broad spectrum of products and manifestations of the disease (e.g., without reference to specific symptoms, drug stages, treatment types, severity of symptoms or other “narrowing” factors).

Consistent with this guidance, the OIG began issuing new advisory opinions and modifications of previous opinions in January 2015. The OIG’s opinions and modifications posted in the past three months are also consistent with this standard, but importantly add nuanced factors and exceptions that appear to show a more refined stance on specific disease funds. In December, the OIG posted a modification of Advisory Opinion 07-11, concerning a PAP that provided support for patients experiencing a specific symptom of cancer. In January, the OIG posted two new advisory opinions that addressed a PAP tailored to support patients with two specific diseases (a type of cancer and a type of chronic kidney disease) and a PAP providing support to needy patients with Stage 3 or Stage 4 of a specific disease, respectively. Also in January, the OIG posted a modification of Advisory Opinion 04-15, which addressed a PAP that maintained a disease fund limited to patients with certain metastatic cancers. While all of these specific disease funds may appear inconsistent with the OIG’s 2014 SAB, in each instance the OIG found that the tailored funds presented a low risk of abuse and merited a favorable opinion given the safeguards each employed.

In its Modification of Advisory Opinion 04-15, the OIG noted two factors that minimized the risk that the tailored disease fund could be leveraged by donors. First, the specific symptom of cancer was treatable by 62 different drugs made by 26 different manufacturers, so the program would not be supporting only one specific manufacturer or drug by tailoring its assistance to patients with the symptom. Second, and most importantly to the OIG, the PAP would not limit assistance through the fund just to drugs to treat that symptom; instead, the PAP would provide assistance for all medications prescribed for the qualifying patient’s underlying cancer and related symptoms. By certifying that the PAP would extend its support to underlying and related medical needs of patients with this symptom, the disease fund essentially agreed to expand the practical impact of the fund.

This “broadening” of support from otherwise narrowly defined disease funds can also be seen in the OIG’s other recent advisory opinions on the subject. In Opinions 15-16 and 15-17, for example, the OIG noted its favorable opinion was based in part on the PAPs’ representations that there were several different drugs made by various manufacturers currently available to treat each of the specific diseases and that the PAPs would, at a minimum, assist patients with all FDA-approved drugs to treat each disease (and, for the fund supporting patients with Stages 3 or 4 of the disease, would not limit the financial assistance to drugs expressly approved for advanced stages of the disease). In its Modification of Opinion 07-11, the PAP also noted that its support would not be limited to drugs expressly approved for the metastatic stage of the cancer. These opinions also include PAP certifications that if any of the PAP’s future disease funds would result in supporting only one FDA-approved drug treatment or one manufacturer, the PAP will also support the other medical needs of patients with the disease, including co-payment support for all prescription medication prescribed for the management and treatment of the patient’s disease (like pain and anti-nausea medications).

While the OIG continues to reiterate the potential risks posed by disease funds that are tailored to specific symptoms, severity of symptoms, method of drug administration, stages of a disease, or types of drug treatment, its recent opinions and modifications illustrate several exceptions to this general position. This recent flurry of OIG activity may be a good prompt for organizations with PAPs to review any specific disease funds in light of these most recent opinions.

After a First Circuit Court of Appeals panel restored a relator’s False Claims Act (FCA) suit against PharMerica, a long-term care pharmacy, the First Circuit denied the company’s petition for rehearing and rehearing en banc on Monday, January 25, 2016 in U.S. ex rel. Gadbois v. PharMerica Corp.   As a result, the relator will have another day in district court  to pursue his allegations that the company submitted false Medicare and Medicaid claims by seeking reimbursement for drugs provided without a legal prescription– this time to argue for a chance to supplement his pleading to cure a lack of subject matter jurisdiction under the first-to-file bar.

The December First Circuit panel decision, and the decision to let it stand, is significant because the court addressed a matter of first impression to the First Circuit, deciding that that Federal Rule of Civil Procedure 15(d) is available to cure most defects in subject matter jurisdiction.  Here, the defect in question is triggered by the FCA’s first-to-file rule, which provides that if a lawsuit involving the same subject matter is already pending, “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5).  The First Circuit stated that dismissals under the first-to-file rule should be without prejudice, allowing the claim to be refiled once the first-filed action is no longer pending.  By allowing relators in such situations to supplement their original pleadings, relators can now overcome the lack of subject matter jurisdiction and resuscitate their FCA claims.

In the district court, PharMerica sought to dismiss the amended complaint filed in 2011.  The district court agreed that the first-to-file bar barred the relator’s claims because a pending action in the Eastern District of Wisconsin was filed earlier, and thus dismissed the case for lack of subject matter jurisdiction.  During the appeal briefing, however, as the First Circuit stated, “the tectonic plates shifted”; two events completely changed the legal landscape.  First, the Supreme Court announced its decision in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 135 S. Ct. 1970 (2015), interpreting the phrase “pending action” used in the first-to-file bar. The Supreme Court interpreted the statute to mean that “an earlier suit bars a later suit while the earlier suit remains undecided but ceases to bar that suit once it is dismissed.” Id.  Second, the Wisconsin lawsuit – the first-filed action that had served as the bar to the relator’s amended complaint under the first-to-file bar – was dismissed.

These two events, according to the First Circuit panel, “dissolved the jurisdictional bar that the court below found dispositive. Under the circumstances, it would be a pointless formality to let the dismissal of the second amended complaint stand — and doing so would needlessly expose the relator to the vagaries of filing a new action.”  The court thus held that Federal Rule of Civil Procedure 15(d) – which allows a party to supplement a pleading to address “any transaction, occurrence, or event that happened after the date of the pleading to be supplemented” – could address subject matter jurisdiction defects, and stated that the relator could seek to supplement his complaint to address the dismissal of the Wisconsin case. Given the discretion granted to the district court under Rule 15, however, the panel remanded the case to the district court to decide whether to allow the relator to supplement the complaint.

This decision extends the reach of the Supreme Court’s decision in Carter weakening the first-to-file bar.  Cases dismissed on the basis of the first-to-file bar can potentially be revived months or years later after the first-filed case is dismissed.  The First Circuit’s decision thus increases the lack of finality that companies often face in FCA cases.  On a more general note, it shows the somewhat unique challenges that companies face defending against FCA cases.  Given that cases are often pending for years, the governing rules of the game can change at any point.   Relators are highly incentivized to litigate procedural and jurisdictional issues because of the huge potential recovery that awaits a successful FCA relator.  For this reason, defense against FCA claims should rarely proceed on a singular strategic focus, such as a procedural challenge to the relator’s complaint.

Last summer, we reported on the U.S. District Court for the Southern District of New York’s significant decision in Amarin Pharma, Inc. et al. v. Food and Drug Administration, et al., holding that a drug company may engage in “truthful and non-misleading speech” about off-label uses of an approved drug without the threat of a misbranding action under the Federal Food, Drug, and Cosmetic Act. As we reported, the holding, which narrows the scope of prohibited speech under U.S. Food and Drug Administration (FDA) regulations, has the potential to significantly curtail False Claims Act (FCA) off-label cases. These cases proceed on a theory that, through prohibited marketing, a company caused false claims to be submitted to government health care programs for non-FDA-approved uses. By narrowing the scope of prohibited speech regarding off-label uses, Amarin and its progeny may foreclose FCA cases based on truthful and non-misleading marketing about off-label uses of a drug.

In an indication of Amarin’s influence, on December 15, 2015, the FDA settled a lawsuit filed against it in September by Pacira Pharmaceuticals in the Southern District of New York, which challenged restrictions the FDA placed on the marketing of the post-surgery pain drug Exparel. (Pacira Pharmaceuticals, Inc. et al. v. United States Food and Drug Administration et al., 15-cv-07055 (SDNY)). Though the settlement is a favorable resolution for Pacira, it demonstrates that FDA marketing regulations are in a great state of flux. This uncertainty leaves companies at risk of FCA claims for off-label marketing if not deemed “truthful and non-misleading,” or if other courts do not follow the Southern District of New York’s approach outlined in Amarin.

The FDA originally approved Exparel in 2011 for “administration into the surgical site to produce postsurgical analgesia.” Pacira marketed Exparel to physicians for administration into various surgical sites for postsurgical pain control. However, the FDA warned Pacira in a September 2014 letter that the drug was indicated only for treatment of pain following bunionectomies and hemorrhoidectomies, the surgeries studied in clinical trials. Pacira sued, seeking declaratory and injunctive relief under the First Amendment, Fifth Amendment, and Administrative Procedure Act that Exparel was indicated for other post-surgery pain treatment. After the suit was filed, the FDA withdrew the warning letter, leading to settlement of the lawsuit on December 15, 2015.

Under the settlement agreement, the FDA has agreed to drop restrictions on the marketing of Exparel, and Exparel’s label will be updated to say the drug is indicated for the treatment of pain at any surgical site. Significantly, the FDA agreed in the settlement that the approval for post-surgical analgesia for surgeries other than those studied in clinical trials dates back to the drug’s 2011 approval. This retroactive approval will bar FCA cases based on the theory that marketing for surgeries other than bunionectomies and hemorrhoidectomies was off-label and prohibited.

FCA enforcement in off-label cases has been a huge source of FCA recoveries prior to Amarin. In FY2014, for example, the U.S. Department of Justice (DOJ) recovered over $2.2 billion in FCA actions against pharmaceutical and medical device companies stemming from off-label promotion. However, Amarin and similar cases may significantly reduce the magnitude of FCA recoveries based on off-label use theories. In the DOJ’s recent report for FY2015 though, claims involving the pharmaceutical industry accounted for $96 million in settlements and judgments, most of these claims related to alleged inaccurate price reporting under the Medicaid Drug Rebate Program and prohibited kickbacks to physicians to prescribe drugs, not improper marketing. In other words, the DOJ’s recovery on off-label use theories was significantly lower in 2015 than 2014.

Though the FDA has attempted to limit the implications of the Pacira settlement, stating that the resolution “is specific to the parties involved,” the settlement is another indication that the FDA’s prohibition of off-label marketing, and the resulting potential FCA liability, are at risk. Nevertheless, companies must continue to scrutinize marketing to ensure that statements are truthful and not misleading.  Statements that are too narrowly crafted may be deemed factually incomplete and therefore misleading.  Because of the huge potential for recovery in any successful FCA case against a pharmaceutical company, we anticipate that relators will continue to think creatively and look for any vulnerability in off-label marketing until there is further guidance beyond Amarin and the Pacira settlement.

 

Two decisions from the US District Court for the Southern District of Texas limit the extent to which relators can stretch the use of circumstantial evidence to support a False Claims Act case based on an anti-kickback or off-label marketing theory. In two separate decisions on December 10 and December 14 in US ex rel. King v. Solvay Pharmaceuticals, Inc. (SPI)., the court granted SPI’s summary judgment motion finding insufficient evidence for a reasonable juror to support either theory.

For the anti-kickback claim, relators alleged that SPI engaged in a number of activities, such as speaker programs, preceptorships, honorariums, free continuing medical education, and provided gifts such as dinners and event tickets, as part of a national scheme to illegally induce physicians to prescribe SPI’s drugs. In dismissing this claim on December 10, the court first found that the allegations of a nationwide scheme were unsupported because in relator’s response to interrogatories and expert report, only 46 Texas-based physicians were identified as having prescribed SPI’s drugs and as having allegedly received remuneration from SPI. The court observed:

[t]heoretically Relators could survive summary judgment with examples, the examples would have to be linked to remuneration from SPI, some evidence of intent that the remuneration would lead to claims, and claims for prescriptions written by these physicians that a reasonable juror could believe resulted from the unlawful remuneration.  Additionally, to continue a claim on a national-level scheme, Relators would need to demonstrate that kickbacks were provided to physicians in different areas of the country as part of a nationwide scheme to increase prescriptions of the specific Drugs at Issue to patients who are on Medicaid or part of some other government prescription program.

Since relators provided no physician examples outside of Texas, the court ruled the multi-state claims failed.

The court then examined each of the alleged forms of remuneration and found that the evidence was insufficient to find SPI had the requisite “knowing and willful” intent to induce referrals to support an anti-kickback claim under federal or Texas law. For example, the “physician profile interview program” involved sales representatives interviewing physicians prior to the launch of the drug Aceon to obtain information about the physicians’ practice and treatment of hypertension. Physicians were paid $100 for participating in this 30 minute interview. Sales reps were instructed to not mention Aceon during these interviews. Relators offered no evidence that sales reps failed to follow this instruction. Not surprisingly, the court found that the evidence failed to show that SPI intended the program to induce physicians to write prescriptions for a drug they were not told about. For other forms of remuneration, the court found that relators offered no proof that the physicians who received the remuneration actually prescribed SPI’s drugs.

In a separate ruling on December 14, the court granted SPI’s summary judgment motion dismissing relators’ “fraud-on-DrugDex” theory. To be eligible for government reimbursement for an off-label use of a drug, relators alleged that off-label use has to be listed in one of several drug compendia that evaluate whether sufficient clinical research supports that off-label use (see 42 U.S.C. §§ 1396r-8(d)(1)(B)(I); 1396r-8(k)(6)). DrugDex is one of those compendia. Relators alleged that SPI inappropriately influenced and misled DrugDex to include certain uses for Aceon, AndroGel, and Luvox as medically accepted by allegedly suppressing publication of negative research papers and only publishing “smaller” studies. Relators also alleged that SPI “colluded with” DrugDex “so that the uses listed might be deemed eligible for reimbursement under various government health programs.”

The court, however, found no evidence that SPI had a duty to publish negative studies, much less that the evidence showed SPI suppressed their publication. As far as the “collusion” allegation, relators admitted that they did not have evidence of communications between SPI and DrugDex, but rather that “DrugDex invited undue influence and SPI took advantage” of this invitation. While “relators had substantial time to conduct discovery and obtain proof that SPI and DrugDex communicated and that SPI somehow influenced DrugDex,” the court found no such sufficient evidence in the record to put the question to a jury.

These decisions provide some comfort to defendants, including but not limited to pharmaceutical companies and healthcare providers, that courts will require relators to offer more than innuendo and assumptions to support an FCA claim — a serious allegation with potentially significant consequences. The ability of relators to pursue cases through the costly and lengthy discovery process on flimsy allegations takes some of that comfort away. In this case, the relators filed their original complaint in 2003 — 12 years ago. The Department of Justice decided to decline in 2011.

On October 29, 2015, the United States announced a $125 million settlement with a subsidiary of pharmaceutical manufacturer Warner Chilcott to resolve a sealed qui tam in United States ex rel. Alexander, et al. v. Warner Chilcott plc, et al., Civil Action No. 11-CA-1121 (D. Mass.). The global settlement consisted of $22.9 million in criminal fines, $102 million to resolve civil claims, and the company pleading guilty in federal district court in Boston to felony health care fraud charges related to its marketing practices for various osteoporosis treatment medications.  In particular, the United States alleged that Warner Chilcott paid kickbacks to physicians to induce them to prescribe the company’s osteoporosis drugs and engaged in improper billing practices.

Simultaneous with announcing Warner Chilcott’s resolution of the corporate case, the company’s former president, W. Carl Reichel, was arrested on an indictment charging that he conspired to pay kickbacks to physicians. The Reichel indictment describes the U.S. Department of Justice’s (DOJ’s) allegations that Warner Chilcott sales representatives were directed to entertain health care professionals—in part under the auspices of medical education events—in exchange for increased referrals.

With charges against Warner Chilcott’s former president and a physician who allegedly received illegal kickbacks from the company, last week’s announcement invokes the DOJ’s newly minted guidance articulated in the Yates Memorandum. As we reported last month, the Yates Memorandum outlined DOJ’s vow to more closely focus on individuals in civil and criminal corporate investigations. The DOJ is also touting the resolution of this case as a product of its continued coordination with the U.S. Department of Health and Human Services in the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative.

As many health lawyers know, the government usually only pursues the person or entity that offers or pays allegedly improper remuneration, even though the federal Anti-Kickback Statute (AKS) also applies to those to solicit or receive it.  This uneven enforcement pattern occurs for a variety of reasons — the alleged payor is the focus of the relator’s complaint and resulting investigation, the amount of time that this investigation and resolution takes can create practical and legal problems in pursuing additional defendants, and the increasing number of qui tam cases stretches the government’s limited resources.

However, on October 7, 2015, the U.S. Department of Justice (DOJ) announced a settlement with an alleged kickback recipient over three years after it settled with the alleged payor.  PharMerica Corporation, identified by the DOJ as the nation’s second-largest provider of pharmaceutical services to long-term care facilities, agreed to pay $9.25 million to settle allegations that, from 2001 to 2008, the company knowingly solicited and received kickbacks from Abbott Laboratories in the form of rebates, educational grants and other financial support in exchange for recommending that physicians prescribe Abbott’s anti-epileptic drug Depakote to nursing home patients where PharMerica provided pharmacy services.

PharMerica noted in a press release that it denied the government’s allegations and fully cooperated with the DOJ throughout the investigation.  Of note, the Office of Inspector General (OIG) did not require an amendment to PharMerica’s current corporate integrity agreement to add provisions concerning AKS compliance as part of this resolution.

This settlement comes over three years after Abbott entered into an FCA settlement agreement with the DOJ and several individual states in May 2012, which, along with addressing separate allegations related to the promotion of Depakote, settled allegations related to its arrangement with PharMerica. Abbott also did not admit to any wrongdoing in its settlement.  Both the PharMerica and Abbott settlements are the product of lawsuits filed in federal court in the Western District of Virginia under the whistleblower provisions of the False Claims Act.

The pursuit of the settlement with PharMerica may indicate a growing interest by DOJ in pursuing AKS allegations against both the alleged offeror and the alleged recipient of prohibited remuneration under the FCA.

On September 3, the U.S. District Court for the Southern District of Texas granted summary judgment in favor of Omnicare in United States ex rel. Ruscher v. Omnicare, Inc., and in doing so, made clear that in order to get to a jury, relators must come forth with evidence of intent that is more than merely ambiguous.

The relator alleged that Omnicare violated the False Claims Act (FCA) by writing off debt owed by skilled nursing facilities (SNFs) in exchange for referrals to Omnicare’s pharmacy business, in violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)(2) (AKS). An AKS violation requires a showing that the defendant intended to induce referrals, and the court’s opinion centered on that issue. Omnicare argued that the write-offs were not done in order to induce referrals, but instead were the resolution of legitimate billing disputes with the SNFs.

The court reviewed in detail the evidence the relator claimed supported her allegations of fraudulent intent, many of which were e-mails from Omnicare personnel. For example, one e-mail, concerning one of the eight SNFs at issue, stated that “it behooves [Omnicare] to get [the billing dispute with Avamere] resolved ASAP” because “Avamere has indicated that they will not consider renewal with Omnicare unless this billing reconciliation is complete and they will not pay us either.” The court held that while the e-mail reflected a desire to quickly resolve the billing dispute “to preserve the parties’ business relationship,” it did not evidence an intent to forgive a debt in order to induce referrals.

Another e-mail stated, “I cannot assure Omnicare that we will win the Seacrest business if we reach agreement [on accounts receivable negotiations] but I can assure that we will not win Seacrest if we fail to reach compromise….” While the court observed that this was among the e-mails “coming closest to creating a question of material fact,” the court nonetheless held that it and others could not “be read to suggest a bad purpose, as opposed to an honest, if business-minded, desire to maintain good customer relationships.”

Among other arguments, relator also alleged that prompt-pay discounts that Omnicare had negotiated with many of its customers, including those whose payments had been late in the past, were evidence of fraudulent intent. The court rejected this argument because “a customer would be entitled to take the discounts only for future, timely payments. This seems to the court to be a completely reasonable effort to reduce Omnicare’s future collections costs by encouraging previously delinquent customers to make timely payments.”

In the end, the court held:

In order to reach a jury, an accusation of a multimillion-dollar fraud must be supported by more than a few ambiguous e-mails.  An accusation of fraud should be made cautiously, and only when there is evidence to support it.

Omnicare is a somewhat lengthy decision and it covers more than the issues set forth above. But the court’s willingness to dig into the evidence and grant summary judgment on the question of intent is a clear win for FCA defendants, and particularly FCA defendants facing claims predicated on alleged AKS violations. It is particularly noteworthy in an era where these cases typically involve massive document productions of hundreds of thousands, and sometimes millions of e-mails. Relators routinely isolate a needle from the massive e-mail haystack, ascribe to it a purportedly nefarious meaning even if a benign explanation is equally plausible, and hope that it will allow them to get past summary judgment and force a favorable and lucrative settlement. Omnicare stands as a check on this approach.

The Southern District of New York recently ruled in Amarin Pharma, Inc. et al. v. Food and Drug Administration, et al. that a drug company may engage in “truthful and non-misleading speech” about off-label uses of an approved drug without the threat of a misbranding action under the Federal Food, Drug, and Cosmetic Act. No. 1:15-cv-03588 (S.D.N.Y., Aug. 7, 2015). This important decision—which arose out of Amarin’s constitutional challenge seeking to make certain statements about unapproved uses of a triglyceride-lowering drug, Vascepa—builds on recent Second Circuit precedent that allows drug makers more regulatory latitude, at minimum in the Second Circuit, to provide truthful and non-misleading scientific information about unapproved uses for their products. However, the ruling also serves as a reminder of potential False Claims Act (FCA) liability associated with off-label marketing of pharmaceuticals and devices.

Amarin filed its complaint against the Food and Drug Administration (FDA) after the company received a Complete Response Letter (CRL) from the FDA in connection with its application for approval of a new indication. The CRL indicated that, while clinical studies revealed that Vascepa reduced triglyceride levels, based on its data review, the FDA advised that additional clinical data would be needed before it could approve the drug for additional uses beyond the original approval for “very” high levels of triglycerides. Despite the fact that Amarin sought to make truthful and non-misleading statements about its product to “sophisticated healthcare professionals,” including the physicians who joined Amarin in the lawsuit, the FDA concluded there was insufficient support for approval of the supplemental application for a new indication and stated that any communications about off-label uses of Vascepa could result in enforcement action.

While the FDA described Amarin’s First Amendment claims as a “frontal assault on the framework for new drug approval that Congress created in 1962,” the court rejected all of the government’s counterarguments. Relying on the Second Circuit’s decision in United States v. Caronia, 703 F.3d 149 (2d Cir. 2012), the court held that Amarin could engage in the following activity:

  • Distribute summaries and reprints of the relevant studies in a manner or format other than that specified by the FDA
  • Articulate, in connection with Vascepa, the off-label claim permissible for use on chemically similar dietary supplements
  • Make proactive truthful statements and engage in a dialogue with doctors regarding the off-label use

While the Amarin decision is welcome news for the industry, drug manufacturers must still take care to analyze promotional statements to ensure that the content can be successfully defended as “truthful” and “non-misleading” speech. As the Amarin court acknowledged, manufacturers not only face potential criminal exposure for “false” or “misleading” misbranding, but the promotion of off-label use can give rise to civil claims under the FCA. FCA enforcement in off-label cases—which proceed on a theory that a company caused false claims to be submitted to government health care programs for non-covered and non-FDA-approved uses—have been a huge source of FCA recoveries in recent years. In FY2014, for example, the Department of Justice (DOJ) recovered over $2.2 billion in FCA actions against pharmaceutical and medical device companies stemming from off-label promotion. Regulatory enforcers and qui tam whistleblowers will not hesitate to allege FCA violations where circumstances, for example, allow the inference that narrowly couched promotional statements may have been “truthful” but still factually incomplete and, thus, misleading. The Amarin decision highlights the fact-specific nature of the risk analysis. Amarin relied on truthful statements about Vascepa’s off-label use that were largely derived from an FDA-approved study and writings from the FDA itself on the subject. Rather than shooting from the marketing “hip,” Amarin appears to have invested in building a defensible factual scientific record and preemptively sought an FDA opinion regarding the off-label use of Vascepa before engaging in those communications.

While it remains unclear whether the FDA will appeal the Amarin decision to the Second Circuit, the agency’s decision to let Caronia stand without further appeal suggests that there may be reluctance on the part of regulators to risk a higher court expanding the reach of the Caronia holding across the country. Pharmaceutical and device manufacturers should still proceed cautiously as the FDA determines how it will respond following the Amarin ruling. For example, the FDA updated its draft guidance regarding the dissemination of scientific and medical journal articles following the Caronia decision in February 2014 and agreed in June 2014 to conduct a “comprehensive review [of its] regulatory regime governing communications about medical products,” with the intent of issuing new guidance by June 2015. As the Amarin court noted, this revised guidance is still forthcoming and may be further revised in light of this decision.

We will continue to report on future developments in future posts.