Solis v. Millennium Pharmaceuticals, Inc. et al

Filing 213

MEMORANDUM AND ORDER signed by Senior Judge Morrison C. England, Jr. on 3/31/2020 GRANTING Defendants Millennium and Schering 195 and 199 Motions to Dismiss for Lack of Jurisdiction, DENYING 196 Motion to Dismiss, DENYING 197 Motion to Strike, DENYING 198 Motion to dismiss under California's Anti-SLAPP statue, and DENYING as MOOT 200 Motion to Dismiss. CASE CLOSED. (York, M)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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UNITED STATES OF AMERICA,
ex rel. FRANK SOLIS,
Plaintiff,

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No. 2:09-cv-03010-MCE-EFB

MEMORANDUM AND ORDER
v.
MILLENNIUM PHARMACEUTICALS,
INC., SCHERING-PLOUGH CORP.,
and MERCK & CO.,
Defendants.

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This lawsuit was originally filed under seal on November 4, 2009, pursuant to the

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qui tam provisions of the Federal False Claims Act, 31 U.S.C. §§ 3729, et seq. (“FCA”)

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The Defendants, who are pharmaceutical companies, include Millennium

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Pharmaceuticals, Inc., Schering-Plough Corp., and Merck & Co. (“Defendants” unless

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otherwise indicated). The so-called “Relator” plaintiff, Frank Solis, (“Relator” or

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“Plaintiff”) a former sales employee who at various points worked for all three

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Defendants, claims that the companies fraudulently marketed and/or promoted the use

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of two drugs, Integrilin and Avelox. Relator alleges that Defendants promoted so-called

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“off label” uses for Integrilin not approved by the Food and Drug Administration (“FDA”).

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In so doing, according to Relator, Defendants “caused” physicians to improperly
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prescribe the drugs and to submit false claims to Medicare, Medicaid and TRICARE

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(United States Military Healthcare) for federal reimbursement which the government

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allegedly paid without knowing the claims were ineligible for reimbursement. In addition,

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Relator alleges that Defendants paid illegal kickbacks to entice physicians to prescribe

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the drugs. Following a three-year investigation, the United States and all twenty-four

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states named in the initial complaint chose not to intervene, and Relator’s Complaint was

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subsequently unsealed on December 20, 2012.

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Presently before the Court are Motions brought by Defendants Schering-Plough
Corp. and Merck & Co., Inc, (collectively “Schering”) and Defendant Millennium

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Pharmaceuticals, Inc. (“Millennium”). ECF Nos. 195, 199. Both Motions are brought

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pursuant to Federal Rule of Civil Procedure 12(b)(1)1 and allege this Court lacks subject-

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matter jurisdiction over Relator’s allegations, as set forth in his operative Third Amended

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Complaint (“TAC”). Defendants contend that Relator’s Integrilin-related allegations as to

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both off-label promotion and kickbacks are barred by the FCA’s public disclosure bar

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(which divests federal courts of jurisdiction where the alleged fraud has already been

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publicly disclosed) since Relator cannot qualify as an “original source” as to those

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allegations. 31 U.S.C. § 3730(e)(4). In addition, by way of a separate Motion to

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Dismiss, Defendant Schering argues that Relator’s allegations as to the improper

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promotion of Avelox also fail to state a viable claim under Rule 12(b)(6) or to allege fraud

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with the requisite particularity under Rule 9(b).

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As set forth below, Defendants’ Motions under Rule 12(b(1) are GRANTED

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because Relator has not shown he is an original source as to the allegations at issue.

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Because the Court consequently concludes that it has no jurisdiction over Relator’s

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claims, Defendants’ concurrently filed additional motions challenging the TAC are

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All further references to “Rule” or “Rules” are to the Federal Rules of Civil Procedure unless
otherwise noted.
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DENIED2 as moot except for Defendant Schering’s Motion to Dismiss under Rule 9(b),

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which is GRANTED since Relator’s allegations with respect to the fraudulent promotion

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of Avelox remain insufficient.3

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FACTUAL BACKGROUND

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Integrilin helps reduce blood clots and thereby helps to prevent heart attacks and

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death in patients suffering from acute coronary syndrome (“ACS”). ACS is an umbrella

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term that covers a variety of diseases related to clotting in the coronary arteries that

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supply blood to the heart muscle, including unstable angina, mild heart attacks known as

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non-ST-segment elevation myocardial infarctions, and more severe heart attacks called

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ST-segment elevation myocardial infarctions (“STEMI”). Avelox, on the other hand, is an

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antibiotic approved by the FDA for treating adult patients with infections caused by a few

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susceptible strains of microorganisms.

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With respect to Integrilin, FDA approval was first obtained in May 1998 by a

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company named COR Therapeutics, Inc. (“COR”), which thereafter promoted the drug

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along with Defendant Schering-Plough. In February of 2002, Defendant Millennium

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acquired COR and thereby obtained the right to co-promote Integrilin. In September of

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2005, Defendant Millennium transferred its right to market Integrilin within the United

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States to Defendant Schering-Plough, thereby relinquishing any responsibility for the

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drug after a period of less than four years. Schering-Plough later merged with Merck in

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November of 2009 to form a new company, also known as Merck.

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Those Motions include Motions to Dismiss brought by Defendants Millennium, Schering-Plough
and Merck to dismiss pursuant to Rules 9(b) and 12(b)(6) (ECF Nos. 196, 200); a Joint Motion to Strike
portions of the TAC under California’s so-called “anti-SLAPP” statute, Cal. Code Civ. Proc. § 425.16 (ECF
No. 198) brought by both Defendants; and a Motion to Strike portions of the TAC pursuant to Rule 12(f)
(ECF No. 197), also brought by both Defendants.
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Having determined that oral argument was not of material assistance, the Court ordered this
matter submitted on the briefs in accordance with Local Rule 230(g).

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Relator Solis was a pharmaceutical sales representative for Millennium covering

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the Los Angeles area between July 2003 and September of 2005. At that time he

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transitioned to employment for Schering-Plough. Then, in November of 2009, after the

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Schering/Merck merger, he became a Merck sales representative. Relator was

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terminated by Merck on March 9, 2010.
Relator’s operative TAC alleges that Defendants promoted improper uses of

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Integrilin, including its early use for STEMI patients, despite the fact that such early use

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is “extremely dangerous, off-label and fraudulent.” TAC, ¶¶ 5, 11. Relator further claims

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that Defendants violated the so-called Anti-Kickback Statute (“AKS”), which prohibits a

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drug company from knowingly and willfully offering or paying remuneration to purchase

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goods or services for which payment may be made by a federal healthcare program.

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See 42 U.S.C. § 1320a-7(b)(2)(B). Relator alleges that Defendants violated the AKS by

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“funnel[ing] millions of dollars” in grants, honoraria, and meals to physicians in order to

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induce Integrilin prescriptions and to drive “off label” sales, all in violation of the AKS.

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See TAC, ¶¶ 7-8.4

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While most of the TAC focuses on allegations pertaining to the use and promotion

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of Integrilin, Relator also includes more limited averments concerning Avelox, which

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Schering marketed and Relator claims he also promoted. Id. at ¶ 32. Those allegations

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are based solely on alleged kickbacks; no off-label claims pertaining to Avelox are

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asserted.

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PROCEDURAL HISTORY

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As indicated above, Relator’s initial lawsuit was filed on November 4, 2009. After

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a three-year investigation, the United States and the twenty-four states named in the

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Off-label use of a drug occurs when it is used either for a purpose not approved by the FDA, of
where non-indicated dosing regimens for the drug are promoted.

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initial complaint chose not to intervene, and Relator’s complaint was unsealed on

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December 20, 2012.

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In response to earlier Motions to Dismiss filed on behalf of each of the

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Defendants, Relator filed a First Amended Complaint (“FAC”) on June 27, 2013. The

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viability of Plaintiff’s FAC was attacked through three separate motions. Defendant

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Schering filed a Motion to Dismiss for lack of subject matter jurisdiction under Federal

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Rule of Civil Procedure 12(b)(1) on grounds that Relator’s complaint was barred by the

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FCA’s so-called “public disclosure” limitation. Defendant Millennium subsequently joined

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in that motion. Additionally, two other motions, one filed jointly by Schering and Merck

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and the other by Millennium, argued that the various causes of action pled in the FAC

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were substantively deficient in contravention of Rule 12(b)(6). By Memorandum and

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Order filed March 26, 2014 (ECF No. 105), this Court granted Defendants’ Rule 12(b)(1)

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motion agreeing that the public disclosure bar applied to Relator’s “combination use”

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allegations. Because Relator’s FAC contained other allegations beyond combination

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use, however, including assertions pertaining to a completely different drug, Avelox, as

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well as allegations of fraud, improper billing, and impermissible kickbacks, the Court

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permitted Relator to file a Second Amended Complaint (“SAC”) omitting the combination

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use allegations.5

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Relator’s SAC was also met by motions to dismiss. The Court again granted

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Millennium’s motion to dismiss for lack of subject matter jurisdiction and denied as moot

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Millenium’s concurrently filed dismissal request under Rules 12(b)(6) and 9(b). See

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March 26, 2015 Mem. and Order, (ECF No. 157) at 15. It held that both the kickback

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and off-label claims brought under federal law were substantially similar to allegations

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first raised in civil actions filed in 2007. Id. at 11-15. The Court further found that Relator

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was not an “original source” so as to escape the FCA’s public disclosure bar as to those

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Because the Rule 12(b)(6) motions challenged the sufficiency of the FAC’s allegations at a point
when the question of the Court’s jurisdiction over this qui tam action had not yet been determined, and
since the parameters of a SAC without the combination use allegations would likely be far different than its
predecessor, the Court denied those motions without prejudice to being renewed following submission of
the SAC.

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allegations because he “presented no evidence that he ‘had a hand’ in the prior 2007

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litigation.” Id. at 15. Finally, the Court dismissed Relator’s state law claims through

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application of the same analysis and because the Court declined to exercise

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supplemental jurisdiction over the state law claims in any event.” Id. at 16. Although the

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Court denied Schering’s initial motion under Rules 12(b)(6) and 9(b) challenging the

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SAC (Mar. 30, 2015 Mem. and Order, ECF No. 158), it ultimately dismissed Relator’s

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claim against Schering following a subsequently filed Rule 12(b)(6) motion, ruling that

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the prior public disclosures were “equally applicable” to both Schering and Millennium,

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and that consequently Schering’s dismissal was proper for the same reasons set forth in

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the Court’s earlier March 26, 2015 Memorandum. Sept. 1, 2015 Mem. and Order, ECF

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No. 164.

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Relators appealed from the Rule 12(b)(1) dismissal of his claims, and Defendants

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cross-appealed the Court’s denial of their substantive motions to dismiss. On March 15,

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2018, the Ninth Circuit affirmed in part and vacated in part, remanding the case with

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instructions. United States ex rel. Solis v. Millennium Pharm., Inc. (“Solis”), 885 F.3d

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623 (2018). The Ninth Circuit affirmed this Court’s determination that Relator’s claims as

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to Integrilin were “substantially similar to those in . . . prior public disclosures” and found

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that they were then precluded by the FCA’s public disclosure bar unless Relator can

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show he qualified as an “original source” of the claims. Id. at 627. Although this Court

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had found that Relator did not so qualify, the Ninth Circuit pointed out that intervening

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circuit law had in fact undercut the basis for that determination by repudiating an earlier

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recognized requirement that the Relator must have “had a hand” in the disclosure in

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order to qualify for the original source exception to the public disclosure bar. Id. at 628,

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citing United States ex rel. Hartpence v. Kinetic Concepts, Inc., 792 F.3d 1121, 1129

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(9th Cir. 2015) (en banc). Consequently, the Ninth Circuit remanded for consideration of

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whether Relator had satisfied the original source test as articulated in Hartpence, which

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requires, in pertinent part, that Relator have “direct and independent knowledge” of the

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information on which his allegations are based in order to qualify as an additional
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source. Moreover, with regard to Relator’s Avelox claims, while the Ninth Circuit

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rejected the notion that those claims had been previously disclosed, it nonetheless

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affirmed dismissal of the Avelox allegations under Rule 9(b), finding that Relator had

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failed to plead them with the requisite particularity. Id. at 629. The Ninth Circuit’s

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decision instructed this Court to decide upon remand whether leave to amend should be

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permitted so as to give Relator another opportunity to make viable allegations

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concerning Avelox.

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Following remand of the matter this Court held a Status Conference on April 4,

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2019, at which time it directed Relator to file a TAC. Relator’s TAC alleges causes of

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action for false claims based on the AKS (Counts One and Two), false claims for causing

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the submission of off-label billings (Counts Three and Four), and false claims for the

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fraudulent promotion of Integrilin (Count Five). Plaintiff’s claims are all rooted in the

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federal FCA, but additional causes of action based on corresponding state law statutory

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provisions are also made on behalf of both California (Count Six) and twenty-seven other

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states (Counts Eight through Thirty-Two).6

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Although counsel for Relator indicated during the Status Conference that the

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Avelox claims would not be pursued, the May 10, 2019, TAC continues to make Avelox

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related claims stemming from alleged kickbacks, albeit with a few additional allegations

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to remedy the earlier deficiencies identified by the Ninth Circuit. Relator also attempts to

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augment allegations pertaining to his own knowledge of Defendant’s alleged fraudulent

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activities in order to shore up his claim that he qualifies as an “original source” of those

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allegations.

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In his TAC, Relator drops some states (New Hampshire and Wisconsin) and adds others
(Colorado, Connecticut, Maryland, Minnesota, North Carolina, and Washington)

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STANDARD

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A.

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Federal courts are courts of limited jurisdiction and are presumptively without

Dismissal under Rule 12(b)(1)

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jurisdiction over civil actions. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,

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377 (1994). The burden of establishing the contrary rests upon the party asserting

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jurisdiction. Id. Because subject matter jurisdiction involves a court’s power to hear a

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case, it can never be forfeited or waived. United States v. Cotton, 535 U.S. 625, 630

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(2002). Accordingly, lack of subject matter jurisdiction may be raised by either party at

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any point during the litigation, through a motion to dismiss pursuant to Federal Rule of

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Civil Procedure 12(b)(1). Arbaugh v. Y&H Corp., 546 U.S. 500, 506 (2006); see also Int’l

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Union of Operating Eng’rs v. Cnty. of Plumas, 559 F.3d 1041, 1043-44 (9th Cir. 2009).

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Lack of subject matter jurisdiction may also be raised by the district court sua sponte.

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Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999). Indeed, “courts have an

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independent obligation to determine whether subject matter jurisdiction exists, even in

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the absence of a challenge from any party.” Id.; see Fed. R. Civ. P. 12(h)(3) (requiring

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the court to dismiss the action if subject matter jurisdiction is lacking).There are two

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types of motions to dismiss for lack of subject matter jurisdiction: a facial attack, and a

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factual attack. Thornhill Publ’g Co. v. Gen. Tel. & Elec. Corp., 594 F.2d 730, 733

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(9th Cir. 1979). Thus, a party may either make an attack on the allegations of jurisdiction

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contained in the nonmoving party’s complaint, or may challenge the existence of subject

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matter jurisdiction in fact, despite the formal sufficiency of the pleadings. Id.

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When a party makes a facial attack on a complaint, the attack is unaccompanied

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by supporting evidence, and it challenges jurisdiction based solely on the pleadings.

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Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). If the motion to

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dismiss constitutes a facial attack, the Court must consider the factual allegations of the

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complaint to be true, and determine whether they establish subject matter jurisdiction.

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Savage v. Glendale High Union Sch. Dist. No. 205, 343 F.3d 1036, 1039 n.1 (9th Cir.
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2003). In the case of a facial attack, the motion to dismiss is granted only if the

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nonmoving party fails to allege an element necessary for subject matter jurisdiction. Id.

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However, in the case of a facial attack, district courts “may review evidence beyond the

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complaint without converting the motion to dismiss into a motion for summary judgment.”

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Safe Air for Everyone, 373 F.3d at 1039.

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In the case of a factual attack, “no presumptive truthfulness attaches to plaintiff’s

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allegations.” Thornill, 594 F.2d at 733 (internal citation omitted). The party opposing the

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motion has the burden of proving that subject matter jurisdiction does exist, and must

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present any necessary evidence to satisfy this burden. St. Clair v. City of Chico,

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880 F.2d 199, 201 (9th Cir. 1989). If the plaintiff’s allegations of jurisdictional facts are

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challenged by the adversary in the appropriate manner, the plaintiff cannot rest on the

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mere assertion that factual issues may exist. Trentacosta v. Frontier Pac. Aircraft Ind.,

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Inc., 813 F.2d 1553, 1558 (9th Cir. 1987) (quoting Exch. Nat’l Bank of Chi. v. Touche

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Ross & Co., 544 F.2d 1126, 1131 (2d Cir. 1976)). Furthermore, the district court may

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review any evidence necessary, including affidavits and testimony, in order to determine

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whether subject matter jurisdiction exists. McCarthy v. United States, 850 F.2d 558, 560

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(9th Cir. 1988); Thornhill, 594 F.2d at 733. If the nonmoving party fails to meet its

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burden and the court determines that it lacks subject matter jurisdiction, the court must

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dismiss the action. Fed. R. Civ. P. 12(h)(3).

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A court granting a motion to dismiss a complaint must then decide whether to

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grant leave to amend. Leave to amend should be “freely given” where there is no

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“undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice

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to the opposing party by virtue of allowance of the amendment, [or] futility of the

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amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v.

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Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to

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be considered when deciding whether to grant leave to amend). Not all of these factors

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merit equal weight. Rather, “the consideration of prejudice to the opposing party . . .

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carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183,
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185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that

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“the complaint could not be saved by any amendment.” Intri-Plex Techs. v. Crest Group,

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Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006,

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1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir.

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1989) (“Leave need not be granted where the amendment of the complaint . . .

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constitutes an exercise in futility . . . .”).

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B.

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Rule 9(b) requires that “in all averments of fraud or mistake, the circumstances

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Pleading Fraud Claims

constituting fraud or mistake shall be stated with particularity. To meet the requisite

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particularity standards on a case like the present one, which asserts claims under the

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federal FCA, Relator’s allegations must be accompanied by the “who, what, when,

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where, and how of the misconduct charged.” Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d

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993, 998 (9th Cir. 2010) (quoting Vess v. Ciba-Geigy Corp., U.S., 317 F.3d 1097, 1106

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(9th Cir. 2003)). In the Ninth Circuit, “it is sufficient to allege ‘particular’ details of a

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scheme to submit false claims paired with reliable indicia that lead to a strong inference

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that claims were also submitted.” Ebeid, 616 F.3d 998-99.

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ANALYSIS

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A.

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If a public disclosure has occurred and the Relator cannot qualify as an “original

The “Public Disclosure” Bar: Initial Considerations

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source” of the false claim allegations, this Court lacks jurisdiction under the FCA over the

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previously disclosed allegations. See Rockwell Int’l Corp. v. United States, 549 U.S.

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U.S. 457, 472-73 (2007); United States ex rel. Meyer v. Horizon Health Corp., 565 F.3d

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1195, 1199 (9th Cir. 2009). This “public disclosure” bar seeks to “strike a balance

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between encouraging private persons to root out fraud and stifling parasitic lawsuits” in

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which “opportunistic plaintiffs who have no significant information to contribute of their

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own” seek to collect a share of the government’s recovery. Graham Cnty. Soil & Water

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Conservation Dist. v. U.S. ex rel. Wilson, 559 U.S. 280, 295 (2010).

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By its Memorandum and Order filed March 26, 2014, (ECF No. 105) this Court

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determined that the statutory bar in effect at the time Relator’s initial complaint was filed

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on November 4, 2009, governs here. As amended in 2006, that public disclosure bar

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precludes jurisdiction over a qui tam action “based upon” previously disclosed

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allegations, unless the party bringing the action qualifies as an “original source of the

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information already disclosed:

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No court shall have jurisdiction over an [FCA qui tam]
action . . . based upon the public disclosure of allegations
or transactions in a criminal, civil, or administrative hearing, in
a congressional, administrative, or Government Accounting
Office report, hearing, audit or investigation, or from the news
media, unless the action is brought by the Attorney General
or the person bringing the action is an original source of
the information.

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31 U.S.C. § 3730(e)(4)(A) (2006) (emphasis added).
The 2006 statute goes on to define the term “original source” as follows:

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For purposes of this paragraph, “original source” means an
individual who has direct and independent knowledge of the
information on which the allegations are based and has
voluntarily provided the information to the Government before
filing an action under this section which is based on the
information.

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Id. at § 3730(e)(4)(B) (2006).

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B.

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As indicated above, by Memorandum and Order dated March 26, 2015, this Court

The Original Source Exception

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determined that a public disclosure occurred. Therefore, Plaintiff can avoid the

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jurisdictional bar posed by public disclosure only upon a showing that he is an “original

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source” as defined by the statute and case law. A-1 Ambulance Ser., Inc. v. California,

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202 F.3d 1238, 1243 (9th Cir. 2000) (under a two-part test, a court need only address

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the original source issue if it first determines a prior public disclosure has occurred).

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Relator bears the burden of establishing that he qualifies as an original source. See
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United States ex rel. Harshman v. Alcan Elec. & Eng’g, Inc., 197 F.3d 1014, 1018

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(9th Cir. 1999) (holding that a relator bears the burden of establishing subject matter

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jurisdiction, including whether he is an “original source” under the statute).

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Ninth Circuit law makes it clear that to qualify as an original source, Relator must

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demonstrate (1) “direct and independent knowledge” of the information on which his

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allegations rest; and (2) that he “voluntarily provided” that information to the government

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before filing his action. Hartpence, 792 F.3d at 1128.7 In order to show the requisite

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direct knowledge, Relator must demonstrate “firsthand knowledge of the alleged fraud,

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and that he obtained this knowledge through his ‘own labor unmediated by anything

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else.’” Harshman, 197 F.3d at 1020; United States ex rel. Aflatooni v. Kitsap Physicians

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Servs., 163 F.3d 516, 524-25 (9th Cir. 1999). Former employment with a defendant

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does not automatically make a Relator an original source with direct knowledge of

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fraudulent behavior alleged to have occurred while Relator was employed. See, e.g.,

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United States ex rel. Bly-Magee v. Premo, 470 F.3d 914, 917 (9th Cir. 2006) (rejecting

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as insufficient mere fact of employment as executive director absent “specifics”);

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Harshman, 197 F.3d at 1021 (rejecting argument that “status as a member of the union”

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sufficed to show direct knowledge); United States v. Scan Health Plan, No. CV 09-5013,

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2015 WL 12778776 at *7 and n. 9 (rejecting assertion that everything “learned during the

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course of [a relator’s] employment . . . constitutes ‘direct knowledge’” as “contrary” to

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“Ninth Circuit authority”).

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To the contrary, courts have made it clear that a former employee does not

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qualify as an original source absent direct knowledge of instances where a defendant

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caused a false claim to be submitted. See, e.g., Harshman, 197 F.3d at 1021 (holding

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relator failed to satisfy his burden in proving original source status, explaining that that

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relator did “not allege that he played any role in submitting false claims to the

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government”); United States ex rel. Green v. Serv. Contract Educ. & Training Trust

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Defendants do not dispute, for purposes of these motions, that Relator provided information to
the government before filing this action. See Schering Mot., ECF No. 199, p. 10, n. 6; Millennium Mot.,
ECf No. 195, p. 7, n.2.

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Fund, 843 F. Supp. 2d 20, 36 (D.D.C. 2012) (finding original source averments lacking

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where relator “ha[d] not pled that he observed first-hand the pay vouchers or supporting

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documentation allegedly submitted”). Relators must possess first-hand knowledge that

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“make[s] a genuinely valuable contribution to the exposure of the alleged fraud.” United

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States ex rel Devlin v. California, 84 F.3d 358, 362 (9th Cir. 1996).8 Moreover,

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particularly given the presumption against federal jurisdiction, conclusory allegations will

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not suffice. See. e.g., Bly-Magee, 470 F.3d at 917 (affirming dismissal despite “lengthy

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explanation of [relator’s] involvement” and former employment where allegations made

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were “short of specifics”); United States ex rel. Casady v. Am. Int’l Grp., Inc.,

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No. 10CV0431, 2013 WL 1702777 at * 5 (S.D. Cal. 2013) (finding no direct knowledge

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where allegations made only in a “conclusory fashion”); Scan Health Plan, 2015 WL

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12778776 at * 6 (conclusory statements or allegations” insufficient for purposes of

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satisfying original source requirement). Instead, Relator must demonstrate facts that, if

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accepted as true, show that he is an original source by a preponderance of the

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evidence. Aflatooni, 163 F.3d at 525; United States ex rel. Hastings v. Wells Fargo

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Bank, N.A., No. CV 12-03624, 2014 WL 3519129 at * 7 (C.D. Cal. July 15, 2014); aff’d,

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656 F. App’x 328 (9th Cir. 2016).

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C.

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With this background in mind, the Court looks to what Relator claims he knew

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concerning the submission of fraudulent claims as a result of Defendants’ purported

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misconduct. The focus must necessarily be on his knowledge concerning the improper

22

claims themselves since that is the relevant inquiry: “the FCA ‘attaches liability, not to the

23

underlying fraudulent conduct or to the government’s wrongful payment, but to the

24

claims for payment.’” United States ex rel. Kelly v. Serco, Inc., 846 F.3d 325, 333

25

(9th Cir. 2017) (quoting United states ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc.,

Whether Relator Qualifies as an Original Source

26
27
28

8
While Hartpence abrogated earlier decisions finding that to qualify under the original source
exception, a Relator also had to show that he “had a hand” in the original disclosure, it did not change the
“direct and independent knowledge” component of the exception and earlier caselaw remains viable as to
that component.

13

1

637 F.3d 1047, 1055 (9th Cir. 2011). As the Ninth Circuit has observed, “[i]t is not

2

enough . . . ‘to describe a [fraudulent scheme] in detail but then to allege simply and

3

without any stated reason . . . that claims requesting illegal payments must have been

4

submitted.’” Id. at 1058 quoting United States ex rel. Clausen v. Laboratory Corp. of

5

America, Inc., 290 F.3d 1301, 1311.

6

Relator points to various steps taken by Defendants while he was employed as a

7

sales representative to support the fraudulent practices he alleges. He claims he “lived

8

through the fraud” by speaking with other sales employees as well as physician clients

9

during the period of his employment with Defendants. Omnibus Opp., ECF No. 204:

10

3:27-4:1. As indicated above, however, the mere fact of employment is not enough

11

absent direct knowledge of instances where a qui tam defendant caused a false claim to

12

be submitted. Harshman, 197 F.3d at 1021. Nor can conversations with third parties

13

establish direct knowledge. Moreover, while Relator points to his participation “in regular

14

company training events” as well as “national and sales training conferences” at which

15

he purportedly received “training, communications and feedback” geared towards his

16

participation in the fraud he alleges,” and while he claims those activities “clearly

17

establish” a basis for his direct and independent knowledge of Defendants’ sales

18

scheme (see Omnibus Opp., 2:22-27), knowledge of a sales scheme is insufficient for

19

purposes of qualifying as an original source unless Relator can also show that actual

20

fraudulent claims were submitted as a result of the scheme. Mr. Solis has failed to set

21

forth any such claims here. Finally, Relator’s identification of aspirational business plans

22

enumerating sales objectives for Integrilin use also do not suffice in the absence of any

23

showing that those plans were actually executed, let alone that Relator had any role in

24

such execution or caused any false claims to be sumitted as a result. See TAC, ¶¶ 68,

25

124.

26

Given the foregoing, this case is analogous to Aflatooni, where a former employer

27

alleged that defendants submitted false claims to Medicare for treatment and services

28

that were not performed or were unnecessary. 163 F.3d at 519-20, 525. The relator in
14

1

that case simply claimed, much as Mr. Solis does here, that he was an original source

2

simply “[b]y virtue of his position” as a treating physician at a facility operated by one of

3

the defendants where he discovered that “over 50 percent of Medicare radiology claims”

4

were missing information about the referring physician.” Id. at 525. The Ninth Circuit

5

found these allegations insufficient to qualify as an original source since the relator could

6

not identify any specific patient charged for unnecessary medical services. Id. at 526.

7

Without such information, the relator could not demonstrate knowledge of the

8

defendant’s “involvement in the submission of false Medicare claims.” Id.

9

Also on point is United States ex rel. Meyer v. Horizon Health Corp., 565 F.3d

10

1195 (9th Cir. 2002). There the Ninth Circuit found that two nurses did not qualify as

11

original sources where they had no “direct access” to the fraudulent invoices occasioned

12

by a patient who allegedly could not benefit from the care for which charges were being

13

submitted. Id. at 1205. In upholding dismissal under Rule 12(b)(1), the Ninth Circuit

14

held that there was “an important distinction” between “kn[owing] about alleged fraud”

15

and demonstrating “direct and independent knowledge of [defendants’] alleged

16

fraudulent billing . . . ” Id. at 1202. As Defendant Millenium points out, “not all

17

knowledge equates to “direct and independent” knowledge sufficient to qualify as an

18

original source.” Def. Millennium’s Mot., ECF No. 195, 9:11-12.

19

It is therefore clear that the Relator in this case cannot simply rely upon the fact of

20

his employment and must instead point to specific facts demonstrating his direct and

21

independent knowledge of fraudulent behavior. He has failed to do so. Turning first to

22

his off-label allegations, Relator makes no real attempt to show his own involvement in

23

the fraudulent scheme so as to show his direct and independent knowledge of the

24

scheme, let alone whether he had knowledge of actual claims submitted because of the

25

fraud. Indeed, his best argument is that Schering’s Medical Science Liaison (“MSL”)

26

provided letters and material which summarized publicly available studies about off-label

27

use of Integrilin in combination with other drugs. TAC, ¶¶ 51-58. Relator claims that

28

MSL letters also provided physicians with reprints of scientific studies published in
15

1

medical journals between 2001 and 2008 that discussed improper off-label “early use of

2

Integrilin.” See id. at 77-79. He does not allege, however, that he had any personal role

3

in preparing those letters, and he does not even identify any specific doctors to which

4

they were directed.

5

Moreover, even assuming Plaintiff had the requisite direct and independent

6

knowledge of these activities, he concedes that is was only later studies published in

7

2009 that called into question the reasoning of that prior research. Consequently, the

8

alleged “falsity” of those earlier studies was, at best, only apparent in hindsight. This is

9

insufficient. “[A]n actual false claim is the sine qua non of a[n FCA] violation.” Cafasso.,

10

637 F.3d at 1055. Importantly, with respect to dissemination of false information after

11

the 2009 studies were published, only two paragraphs contend that such practices,

12

continued, and both of those allegations are made only on “information and belief,”9

13

probably because Relator ceased his employment with Defendants in March of 2010,

14

shortly after the 2009 studies were published.

15

Additionally, whether a use is on- or off-label is not dispositive of whether

16

Medicare properly reimburses providers in any event; the salient issue is instead

17

whether treatment is “reasonable and necessary for the diagnosis or treatment” of an

18

illness.” 42 U.S.C. § 1395y(a)(1)(A). Relator’s TAC, however, sweepingly alleges that

19

“bills for Integrilin . . . were ineligible for reimbursement under Medicaid and Medicare

20

because the drugs were used for off-label purposes.” TAC ¶ 45. As Defendants point

21

out, that is incorrect. The FDA itself has “long recognized that in certain circumstances,

22

new (off-label) uses are appropriate, rational, and accepted medical practices.” Schering

23

Mot., ECF No. 200, 12:2-6, citing Dissemination of Information on Unapproved/New

24

Uses for Marketed Drugs, Biologics, and Devices, 63 Fed. Reg. 31,143, 31,153 (June 8,

25

1998) (codified at 21 C.F.R. pts. 16, 99). The FDA accordingly protects certain off-label

26
27
28

9
See TAC, ¶ 65 (“On information and belief, Defendants’ promotion of Integrilin off-label as an
early treatment for ACS patents and as an off-label treatment for STEMI patients continue to this day.”); Id.
at ¶ 100 (“[U]pon information and belief, Merck continues to promote Integrilin for off-label use in off-label
patient populations in the same manner as set forth in this Complaint today.”).

16

1

use by physicians as “not merely legitimate but important to the practice of medicine.”

2

Carson v. Depuy Spine, Inc., 365 F. App’x 812, 815 (9th Cir. 2010). There must be

3

allegations that distinguish between bona fide prescribing decisions for off-label use and

4

improper use. U.S. ex re. Rost v. Pfizer, 253 F.R.D. 11, 16-17 (D. Mass. 2008) (alleging

5

off labels marketing as criminal “is not sufficient, without more, to plead a false claims act

6

violation”).

7

Relator’s TAC is silent as to this crucial distinction, since he seemingly

8

characterizes all off-label use and promotion as fraudulent. He assumes that

9

Defendants’ off-label promotion of Integrilin, for example, would necessarily “cause

10

hospitals to submit false claims to Medicare, Medicaid, and TRICARE.” Omnibus Opp.,

11

6:23-25. That sweeping characterization cannot carry the day. Without showing direct

12

and independent knowledge of an actual false claim being made as a result of such

13

activities, Relator cannot qualify as an original source. Speculation that a false claim

14

“must have been submitted” as a result of Defendant’s activities cannot suffice.

15

In addition to these off-label allegations, Relator thus further alleges that

16

Defendants provided kickbacks to physicians in connection with Integrilin and Avelox. In

17

support of his sweeping allegation that Defendants “illegally provided monetary and

18

other incentives for physicians who were willing to prescribe the drugs” (TAC, ¶ 15),

19

Relator primarily points to meals allegedly paid for by Defendants, as well as some

20

speaker fees and travel expenses provided to those physicians. Relator exhaustively

21

lists at least twenty separate and specific meals which he claims were kickbacks to

22

doctors prescribing Integrilin and Avelox.

23

Again, however, Relator does not identify payments that were actually intended

24

to, or did, induce doctors to prescribe Integrilin. At most, Relator alleges that the

25

“dramatic increase in Integrilin prescriptions at hospitals with a large number of Medicare

26

and Medicaid patients that Defendants specifically targeted creates a highly plausible

27

inference that the government reimbursed claims that were the direct results of

28

kickbacks, or were influenced by improper marketing.” ECF No. 204 at p.15. However,
17

1

Relator provides no factual support for that conclusory statement. Indeed, nowhere

2

does the TAC allege that attendees at the events hosted by Defendants were actually

3

asked, or agreed, to use Integrilin as a quid pro quo. Relator fails to identify even a

4

single claim submitted by anyone who attended the meals hosted by Defendants.

5

Indeed, the TAC fails to, at the very least, specifically allege that those meals

6

themselves had any concrete effect on physicians’ prescribing practices for Integrilin. To

7

the contrary, Relator concedes that the physicians who attended those meals had

8

already prescribed Integrilin extensively before the meals alleged.

9

Paying for a client’s meals in order to strengthen business relationships is, in and

10

of itself, hardly an unusual sales strategy. Relator consequently provides no indicia,

11

much less reliable indicia, that could give rise to a strong inference that claims for

12

Integrilin were submitted to the government as a result of an unlawful quid pro quo

13

arrangement between Defendants and any of the medical professionals attending the

14

events they hosted. More specifically, Relator makes no showing that he played any

15

independent role either in formulating a fraudulent promotion scheme or, more critically,

16

in knowing that the scheme actually resulted in false claims. Without such showing

17

Relator cannot qualify as an original source. He simply cannot sweepingly assert that

18

such activities must necessarily have resulted in false claims when none have been

19

identified. As the court in Aflatooni made clear, Relator must point to “information, as

20

opposed to speculation” concerning the submission of false claims. Aflatooni, 163 F.3d

21

at 526. Given the many opportunities the Court has granted Relator, he apparently

22

cannot do so.

23

Like the relators in Meyer and Aflatooni, the Relator here has not identified even a

24

single instance of a false claim for reimbursement allegedly caused by Defendants. As in

25

Aflatooni, Relator does not provide “the name of any [M]edicare patient who was

26

allegedly charged for” an Integrilin prescription purportedly caused by off-label promotion

27

or kickbacks allegedly received from Defendants. Id. at 526. And, as in Meyer, Relator

28

does not allege that he ever personally observed “allegedly fraudulent billing” by a
18

1

physician due to such off-label promotion or kickbacks. 545 F.3d at 1198-99, 1202.

2

While Relator does set forth conclusory allegations that the TAC rests “entirely upon [his]

3

personal observations” and that those allegations “were not learned through external

4

public disclosures” (TAC, ¶ 33), he offers little beyond such broad and unsubstantiated

5

declarations to support his claims. That is insufficient. See Bell Atl. Corp v. Twombly,

6

550 U.S. 544, 545 (2007) (holding mere “labels and conclusions” or “a formulaic

7

recitation of a cause of action’s elements” as insufficient).

8

To reiterate, there is “an important distinction” between “kn[owing about alleged

9

fraud” and demonstrating “direct and independent knowledge of ‘defendants’ allegedly

10

fraudulent billing”, which is necessary to qualify as an original source. Meyer, 565 F.3d

11

at 1198-1292 (overturned on other grounds by Hartpence, supra); see also Aflatooni,

12

163 F.3d 525. Relator must do more than simply provide a “lengthy explanation of [his]

13

involvement” while employed by Defendants; he must supply specifics to prove his direct

14

and independent knowledge of actual false claims. Bly-Magee, 470 F.3d at 917.

15

Instead here, Relator provides no specifics about his purported direct and independent

16

knowledge of actual false claims for reimbursement. His bid for original source status

17

accordingly still falls short.

18

This is four times in over ten years that Relator has been given the opportunity to

19

plead these fundamental jurisdictional facts, but he still has been unable to do so. As

20

such, the TAC is DISMISSED without leave to amend because it is “fatally short of

21

specifics” as to how Relator has direct and independent knowledge of false claims

22

allegedly caused by Defendants. Bly-Magee, 470 F.3d at 917; see also Casady,

23

2013 WL 1702777 at *5.

24

B.

25

To reiterate, the Ninth Circuit affirmed dismissal of Relator’s claims pertaining to

Avelox Allegations

26

Avelox on grounds that they were not pled with the requisite specificity to survive

27

challenge under Rule 9(b), which requires claims grounded in fraud to be pleaded with

28

particularity. That court explained that because “FCA claims are subject to Federal Rule
19

1

of Civil Procedure 9(b),” a relator “must state with particularity ‘the who, what, when,

2

where, and how of the misconduct alleged.’” Solis, 885 F.3d at 628. Application of this

3

heightened Rule 9(b) pleading standard is particularly justified in FCA cases “because

4

the FCA is geared primarily to encourage insiders to disclose information necessary to

5

prevent fraud on the government.” Ebeid, 616 F.3d at 999. In order to satisfy that

6

exacting standard, then, a relator must set out “what is false or misleading about a

7

statement, and why it is false.” Id. at 998.

8
9

As previously stated, once the matter was remanded to this Court, a status
conference was held to address, among other things, whether or not to afford Relator

10

the opportunity to amend in order to rectify that shortcoming. Although counsel for

11

Relator indicated in open court that he no longer intended to pursue allegations

12

pertaining to Avelox, amendment was nonetheless permitted with respect to Relator’s

13

alleged status as an original source of fraudulent allegations levied against Defendants.

14

The TAC as filed ran counter to Relator’s representations inasmuch as it

15

continued to include averments that Avelox was improperly marketed by Defendants

16

through the use of the same kickbacks identified above with respect to Integrilin. While

17

the Court would be within its authority to disregard any Avelox allegations under these

18

circumstances, because substantive examination of the TAC shows squarely that the

19

deficiencies identified by the Ninth Circuit have still not been rectified, dismissal of the

20

Avelox claims is nonetheless warranted in any event.

21

The TAC fails to meaningfully add to its allegations pertaining to Avelox so as to

22

address the Ninth Circuit’s concerns. Although the Ninth Circuit found that Relator

23

violated Rule 9(b) in failing to either “identify a single claim” submitted pursuant to

24

Defendants’ alleged scheme or to set forth “reliable indicia supporting a strong inference

25

that such claims were submitted” (Solis, 885 F.3d at 629), Relator makes virtually no

26

attempt to augment his allegations beyond a new one-sentence-long paragraph and

27

exhibit. TAC, ¶ 146, Ex. 52. The new sentence contained in the TAC simply avers that

28

a “sales spreadsheet from 2004 tracked 18,794,263 California patients who were
20

1

covered by Medicaid or Medicare Part D plans in order to determine the effectiveness of

2

Defendants’ efforts to put Avelox on Medicaid and Medicare formularies (Exhibit 52).” Id.

3

As Defendant Schering points out, however, whether or not Avelox was placed on

4

a hospital’s formulary still says nothing about whether actual “claims were submitted.”

5

ECF No. 200, 19:3-5, citing Solis, 885 F.3d at 629. Indeed, Solis had already rejected

6

Relator’s allegations pertaining to formularies as insufficient to show that actual claims

7

were submitted, since “[b]eing ‘on formulary’ merely means that the drug is available to

8

be used or prescribed” and does not prove in itself that actual false claims were

9

submitted. Id. Consequently, Relator’s claims pertaining to Defendant’s promotion of

10

Avelox still fail to satisfy Rule 9(b) standards, and Defendant Schering’s Motion to

11

Dismiss on that basis will be granted.

12
13

CONCLUSION

14
15

For all the reasons stated above, the Motions to Dismiss submitted by Defendants

16

Millennium and Schering asserting lack of subject matter jurisdiction under Rule 12(b)(1),

17

ECF Nos. 195 and 199, are GRANTED. Because Relator has not met his burden of

18

proof in showing that he was an original source of allegations made pertaining to

19

Integrilin, the public disclosure bar applies and prevents Relator from maintaining any of

20

the three causes of actions rooted in the federal FCA.

21

In addition, although Relator goes on to assert some additional claims predicated

22

on the false claim laws of some twenty-seven states, because those claims also hinge

23

on the same false claim analysis set forth above, they too fail. Moreover, even were the

24

state law claims to have some viability apart from the merits of the federal FCA claims,

25

which the Court believes they do not, in the absence of any predicate federal claim the

26

Court declines to exercise supplemental jurisdiction over the state law claims in any

27

event.

28

///
21

1

Because the Court does not believe that the jurisdictional infirmities of Relator’s

2

claims against Defendants can be rectified through further amendment, no additional

3

leave to amend will be permitted. Relator has already had three opportunities to correct

4

the fatal deficiencies in his pleadings, including a trip to the Ninth Circuit. That is enough.

5

Defendant Schering’s Motion to Dismiss pursuant to Rules 12(b)(6) and 9(b) (ECF

6

No. 200) is also GRANTED to the extent that the TAC fails to state any claims pertaining

7

to Avelox with the particularity required for claims sounding in fraud. Since the TAC

8

makes virtually no attempt to remediate the deficiencies of its predecessor with respect

9

to the promotion of Avelox, no further leave to amend will be permitted.

10

The remainder of Defendant Schering’s Motion to Dismiss (ECF No. 200) is

11

DENED as moot. In addition, since the Court concludes that it lacks jurisdiction over

12

Relator’s claims pertaining to Integrilin in the first instance, Defendants’ other motions

13

challenging the substance of Relator’s claims are moot. Defendant Millennium’s Motion

14

to Dismiss (ECF No. 196), as well as Defendants’ Joint Motion to Strike (ECF No. 197),

15

and Motion to Dismiss under California’s Anti-SLAPP statue (ECF No. 198) are

16

accordingly DENIED on that basis.

17
18
19

Since this now concludes the Court’s handling of this matter, the Clerk of Court is
directed to close the file.
IT IS SO ORDERED.

20
21

Dated: March 31, 2020

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22