On October 5, 2017, the State of New Jersey sued Insys Therapeutics, Inc. (Insys), alleging that the company improperly marketed and promoted the opioid-fentanyl painkiller drug, Subsys. The civil complaint (Complaint) follows a series of federal indictments (and in some cases guilty pleas), of several Insys employees and executives, as well as lawsuits and ongoing investigations being conducted by several states.

Like many other suits against drug manufacturers for improper marketing and promotion, the Complaint alleges violations of state consumer protection law (here, the New Jersey Consumer Fraud Act). However, representative of a growing trend among the states, especially in the context of the country’s opioid epidemic, the Complaint also alleges a violation of state False Claims Acts (here, New Jersey’s False Claims Act). Manufacturers, physicians, pharmacies and others should closely review their compliance practices to anticipate such claims in light of the increased assertion of False Claims Act violations at the state level.

Echoing the allegations in other complaints against the company, the New Jersey complaint alleges that Insys improperly marketed Subsys in several ways. The Complaint alleges that, although the US Food and Drug Administration (FDA) approved Subsys only for the “single use of managing breakthrough cancer pain in patients who are tolerant to around-the-clock opioid therapy,” Insys directed its sales force to “peddle” Subsys to a broader patient population. For example, the Complaint alleges that Insys provided its sales force with “target lists ranking by deciles healthcare providers, including dentists and podiatrists, who could write prescriptions for controlled dangerous substances.” The Complaint alleges that: oncologists appeared at the bottom of these target lists, that a small percentage of the sales force was “oncology-specific,” and that the small group was disbanded shortly after Insys created it.

The Complaint also alleges that Insys “pushed” prescribers to prescribe Subsys on an inappropriate starting dosage above the FDA-mandated starting dose. For example, the Complaint alleges that: Insys’ tactics included emails from Insys executives requesting that members of the sales force explain lower-dose prescriptions, implementation of a “Switch” program designed to convert patients on high levels of competing products to the same high dosage of Subsys, a “Super Voucher” program to provide free Subsys prescriptions to prescribers, and “bribes” to prescribers alleged to be in the form of “speaker fees.”

In addition to three counts of violations of New Jersey’s Consumer Fraud Act, the Complaint alleges that Insys’ conduct violated the False Claims Act. The Complaint alleges that Insys caused the submission of false claims for reimbursement of Subsys to several New Jersey state-run programs, including New Jersey’s State Health Benefits Program, School Employees’ Health Benefits Program and State Workers’ Compensation Program. The Complaint alleges that these submissions included allegedly false expressed and/or implied certification of compliance with federal and State law and medical necessity.

The case is Porrino v. Insys Therapeutics, Inc., Superior Court of New Jersey, Chancery Division, Middlesex Vicinage.

On May 1, 2017, the US Court of Appeals for the Third Circuit affirmed the dismissal of United States ex rel. Petratos, et al. v. Genentech, Inc., et al., No. 15-3801 (3d. Cir. May 1, 2017). On appeal from the US District Court for the District of New Jersey, the Third Circuit reinforced the applicability of the materiality standard set forth by the US Supreme Court in Universal Health Services v. Escobar. Per the Court, the relator’s claims implicate “three interlocking federal schemes:” the False Claims Act (FCA), Medicare reimbursement, and US Food and Drug Administration (FDA) approval.

The relator, Gerasimos Petratos, was the former head of health care data analytics at Genentech.  He alleged that Genentech suppressed data related to the cancer drug Avastin, thereby causing physicians to certify incorrectly that the drug was “reasonable and necessary” for certain Medicare patients. This standard is drawn from Medicare’s statutory framework: “no payment may be made” for items and services that “are not reasonable and necessary for the diagnosis and treatment of illness or injury.” 42 U.S.C. § 1395y(a)(1)(A) (emphasis added).  In turn, the Centers for Medicare and Medicaid Services (CMS) consider whether a drug has received FDA approval in determining, for its part, whether a drug is “reasonable and necessary.” Petratos claimed that Genentech “ignored and suppressed data that would have shown that Avastin’s side effects for certain patients were more common and severe than reported.” Petratos further asserted that analyses of these data would have required the company to file adverse-event reports with the FDA and could have triggered the need to change Avastin’s FDA label.

Continue Reading Third Circuit Affirms Dismissal of FCA Suit against Genentech Based on Supreme Court’s Materiality Standard

On December 23, 2016, the US Court of Appeals for the First Circuit issued an opinion in United States ex rel. D’Agostino v. ev3, Inc. (Case No. 16-1126), affirming the US District Court for the District of Massachusetts’s denial of a relator’s motion for leave to file a fourth amended complaint under the False Claims Act (FCA).

The relator, a former sales representative at ev3, a medical device developer and manufacturer, alleged that his former employer and its subsidiary, Micro Therapeutics, Inc., violated provisions of the FCA by selling two products, the Onyx Liquid Embolic System (Onyx) and the Axium Detachable Coil System (Axium), to hospitals seeking reimbursements by the government through the Centers for Medicare & Medicaid Services (CMS).

Continue Reading First Circuit Deems Request for Leave to File Fourth Amended Complaint Futile

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.

 

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.

On June 12, 2015, the U.S. District Court for the Northern District of California granted Gilead Science’s second motion to dismiss Relators’ False Claims Act (FCA) claims premised on Gilead’s alleged failure to obtain timely supplemental approval from the U.S. Food and Drug Administration (FDA) for use of a new unapproved manufacturing source. See U.S. ex rel. Campie v. Gilead Sciences, Inc., No. 11-cv-00941 (N.D. Cal. June 12, 2015). In doing so, the court reiterated its unwillingness to allow an FCA claim “to be based on misrepresentations and omissions made to the FDA during the FDA approval process.” The court’s reasoning is noteworthy not only for FCA cases premised on alleged violations of FDA regulations, but for a much broader range of FCA claims based on alleged regulatory non-compliance.

In 2011, Relators filed an FCA action based on various alleged violations by Gilead of the FDA’s Current Good Manufacturing Practices requirements. The government declined to intervene. The court dismissed Relators’ first amended complaint (FAC) in its entirety in January of 2015 in part because Gilead’s alleged fraud in obtaining FDA approval “did not negate the fact that the condition for payment—approval by the FDA—had in fact been obtained.” Relators’ second amended complaint (SAC) largely reiterated the already-rejected factual allegations of the FAC, and more specifically alleged that “even though Gilead got approval through the NDA [new drug application] process for the drugs in question, there was, subsequently, a major change to the drug products which, under the FDCA [Federal Food, Drug, and Cosmetic Act] required Gilead to submit a PAS [prior approval supplement] to the FDA to obtain new approval for the changes. . . The major change that Relators point[ed] to concerned Gilead’s use of an unapproved manufacturing source: Synthetics China.” Relators argued that “because of Gilead’s failure to get supplemental approval…the drug products were not approved drugs under the FDCA, and therefore the drug products were not eligible for payment under the government payment programs.”

The court rejected this argument and concluded that Relators again failed to plead an implied false certification claim under the FCA, because they “failed to cite to, e.g., a statute, rule or regulation that makes payment conditioned on supplemental approval by the FDA (as opposed to NDA approval).” The court emphasized that “the statute makes clear that such payment is conditioned on NDA approval, not PAS approval.”

The court again noted that from a policy perspective it would be “problematic” to permit an FCA cause of action based on a fraud-on-the-FDA theory:

[W]ere the FCA [False Claims Act] construed to allow an FCA claim to be based on misrepresentation and omissions made to the FDA during the FDA approval process, the Court sitting on an FCA case would have to delve deeply into the complexities, subtleties and variabilities of the FDA approval process . . . [T]he Court would be tasked not only with determining whether a falsity was presented to the FDA, but also predicting the institutional response of the FDA and the ultimate outcome of a specialized and complex administrative proceeding…The Court is ill-equipped to make that kind of prediction. Such an inquiry stands in contrast to the inquiry in a more typical FCA case – determining whether a particular statement or certification made to the payor agency is in fact false and material to the decision to pay. Absent a clear directive from Congress, the Court is unwilling to read into the FCA such an expansive sweep.

This decision is important for any implied certification case involving violation of a regulation promulgated by an agency other than a government payor. Regulatory non-compliance can lead to a number of consequences, but if it does not violate a condition of payment, there can be no FCA liability.

The case was dismissed with prejudice, though Relator’s counsel has said she plans on appealing the dismissal. We will continue to monitor any developments in this case.