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Par Pharmaceutical Beats FCA Prescription-Switch Allegations

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.

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Another District Court Dismisses Improperly Pled Implied Certification Claims

On March 27, 2017, the United States District Court for the Eastern District of Pennsylvania dismissed a False Claims Act (FCA) complaint due to failure to satisfy the Supreme Court’s pleading standards for implied certification claims.

In U.S. ex rel. Schimelpfenig v. Dr. Reddy’s Labs. Ltd., the relators alleged that defendant Dr. Reddy’s Labs violated the False Claims Act (FCA) by causing the submission of claims for prescription drugs, which allegedly did not comply with two federal statutes; the Poison Prevention Packaging Act of 1970 (PPPA) and Consumer Product Safety Improvement Act of 2008 (CPSIA). As alleged by the relators, the defendants that manufactured the drugs failed to issue general conformity certificates for the prescription drugs imported and distributed in the United States, in violation of the CPSIA, and failed to test the packaging of the drugs for child-resistance in violation of the PPPA. The relators alleged that as a result of the noncompliance, drug retailers (also joined as defendants) submitted claims to government payers for federal reimbursement of noncompliant drugs. (more…)




FCA Claims Based on Average Wholesale Price (AWP) Theory Barred by Public Disclosure Bar

On January 20, 2016, the U.S. District Court for the Eastern District of Missouri dismissed a complaint based on allegations of Average Wholesale Price (AWP) fraud under the False Claims Act (FCA) against CSL Behring, LLC (Behring) and specialty pharmacies Accredo Health, Inc., (Accredo) and Coram LLC (Coram).  See United States ex rel. Lager v. CSL Behring, LLC, et al., No. 4:14-CV-841CEJ, 2016 WL 233245 (E.D. Missouri 2016).  The Court found that relator’s allegations were barred by the public disclosure bar and did not satisfy the “original source” exception.

Relator, a former Behring employee, alleged that the company reported inflated AWPs for prescription drugs, Vivaglobin and Hizentra, causing government health programs to reimburse specialty pharmacies much more than they paid for the drugs ($133 v. $65 and $151 v. $70).    Vivaglobin and Hizentra are classified as “DME infusion drugs” because they are self-administered by patients through a pump, which is considered durable medical equipment (DME). Unlike most drugs which the government reimburses based on a percentage of the average sales price (ASP), DME infusion drugs are reimbursed based on a percentage of the drug’s AWP.  Unlike ASP, AWP is not defined by law or regulation and is not based on actual sales data.  AWP is based on figures the drug manufacturer reports to third-party publishers and is substantially higher than ASP.  In addition to allegations that Behring reported inflated AWPs, relator claimed that Behring used the “spread” between the actual cost and the AWP-based reimbursement rates to induce their customers, including Accredo and Coram, to buy their products.

Citing multiple government sources and media outlets “[that] have long disclosed that AWP does not represent the actual prices of drugs,” as well as “multiple disclosures that manufacturers used the difference between actual costs and AWPs to influence sales,” the court dismissed the complaint under the public disclosure bar, 31 U.S.C. § 3730(e)(4)(A). Id. at *3-*6 (commenting that “[t]his state of affairs has been labeled as a scam and fraud by the press and in multiple civil lawsuits”). The court was unpersuaded by relator’s argument that the public disclosure bar did not apply because the public disclosures did not “contain[] all of the elements of the alleged fraudulent transactions” (emphasis added), including the defendants and drugs at issue.  The court noted that the prior public disclosures “need not contain every fact or legal consequence to trigger the public disclosure bar” (citation omitted) and explained:

In 2007, the court overseeing the multidistrict litigation found that pharmaceutical companies submitted “false, inflated AWPs” that “caused real injuries.” In re Pharm. Indus. Average Wholesale Price Litig., 491 . Supp. 2d at 31.  In 2013 the OIG disclosed the extreme spread between AWP and ASPs for DME infusion drugs, generally, while publications by the third-party publishers and CMS showed the spread for Viaglobin and Hizentra in particular.  These disclosures are sufficient to identify both the defendants and the drugs.

Relator also failed to adequately allege that he was an “original source” pursuant to 31 U.S.C. [...]

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