United States of America et al v. Bristol Myers Squibb Company et al
OPINION filed. Signed by Judge Freda L. Wolfson on 8/20/2015. (kas, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
In re PLAVIX MARKETING, SALES :
PRACTICES AND PRODUCTS
LIABILITY LITIGATION (No. II)
MDL No. 13-2418 (FLW)
Civ. Action No: 13-1039 (FLW)
UNITED STATES et al., ex rel. ELISA :
BRISTOL-MEYERS SQUIBB CO.,
WOLFSON, District Judge:
This qui tam action, a member case of the Multi-District Litigation, In re:
Plavix Marketing, Sales Practices and Products Liability Litigation, involves the
alleged wrongful marketing and sales of Plavix (clopidogrel bisulfate), a prescription
blood thinner manufactured by Defendant Bristol-Myers Squibb Company (“BMS”)
and marketed in the United States by BMS and Defendants Sanofi-Aventis U.S. LLC,
Sanofi U.S. Service Inc., and Sanofi-Synthelabo Inc. (collectively “Sanofi”)
(collectively “Defendants”). Relator Elisa Dickson (“Relator”) brought this case on
behalf of the United States and various states, asserting claims under the following
statutes: (Count 1) the federal False Claims Act (“FCA”), 31 U.S.C. §§ 3729–3733;
(Count 2) Conspiracy under the FCA, 31 U.S.C. § 3729(a), as well as 26 separate state
law claims. 1
Defendants move to dismiss the Third Amended Complaint (“TAC”) on the
basis that Relator’s allegations—namely, that Defendants engaged in false
marketing causing physicians to submit claims to Medicaid and Medicare Part D that
were not “medically necessary” or “reasonable and necessary”— are insufficient to
state a claim under the FCA and the state statutes. As a threshold issue, however,
Defendants maintain that Relator’s state and federal claims are barred by the
Those causes of actions include: (Count 3) Illinois Whistleblower Reward and
Protection Act, 740 ILCS 175 et seq.; (Count 4) California False Claims Act, Cal. Gov’t
Code §§ 12650-12655; (Count 5) Delaware False Claims and Reporting Act, Del. Code
Ann. Tit. 6, § 1201(a)(1) and (2); (Count 6) District of Columbia Procurement Reform
Act, D.C. Code §§ 2-308.13 to .15; (Count 7) Florida False Claims Act, Fla. Stat. §
68.081–68.090; (Count 8) Hawaii False Claims Act, Haw. Rev. State. §§ 661-12 to 29; (Count 9) Nevada False Claims Act, Nev. Rev. Stat. Ann. § 357.01 to .250; (Count
10) Tennessee Medicaid False Claims Act, Tenn. Code. Ann. § 71-5-181 to -185;
(Count 11) Texas Medicaid Fraud Prevention Act, Tex. Hum. Res. Code Ann. § 36.001
to .132; (Count 12) Virginia Fraud Against Taxpayers Act, VA Code Ann. §§ 8.01216.1 to -216.19; (Count 13) Georgia False Medicaid Claims Act, Ga. Code Ann § 494-168 et seq.; (Count 14) Indiana State False Claims and Whistleblowers Protection
Act; Ind. Code. Ann §§5-11-5.5-1 to -18; (Count 15) Michigan Medicaid False Claims
Act, Mich. Comp. Laws § 400.601 to .613; (Count 16) Montana False Claims Act,
Mont. Code Ann. § 17-8-401 to -412; (Count 17) New Mexico False Claims Act, N.M.
Stat. Ann. § 27-14-1 to -15; (Count 18) New York False Claims Act, N.Y. State. Fin.
Law § 187 et seq.; (Count 19) Massachusetts False Claims Act, Mass. Gen. Laws. Ch.
12 § 5(A); (Count 20) City of Chicago False Claims Act, Municipal Code of Chicago §§
1-22-010 to -060; (Count 21) New Jersey False Claims Act, N.J. Stat. Ann. § 2A:32C1 to -17; (Count 22) Rhode Island State False Claims Act, R.I. Gen. Laws § 9-1.1-1 to
1-8; (Count 23) Wisconsin False Claims Act, Wis. Stat. § 20.931; (Count 24) Oklahoma
False Claims Act, Okla. Stat. tit. 63 § 5053 to 5053.7; (Count 25) North Carolina False
Claims Act, N.C. Gen. Stat. §§ 1.605 to -618, 108A-63; (Count 26) Minnesota False
Claims Act, Minn. Stat. § 15.C01 et seq.; (Count 27) Colorado Medicaid False Claims
Act, Colo. Rev. Stat. § 25.5-4-304 et seq.; and (Count 28) Connecticut Medicaid False
Claims Act, Conn. Gen. Stat. § 17b-301a et seq.
applicable statute of limitations, and by the doctrine of public disclosure set forth in
For the reasons expressed herein, Relator’s Motion to Dismiss is GRANTED in
part and DENIED in part. Specifically, the following categories of Relator’s claims
are dismissed: (1) federal FCA claims based on Medicare Part D; (2) federal FCA
claims based on the Medicaid plans of thirty-three states, including the District of
Columbia; 2 and (3) claims based on state formularies. The only surviving federal
claims are Relator’s FCA claims related to the Medicaid plans of the following states:
Connecticut, Delaware, Idaho, Kansas, Maryland, Massachusetts, Mississippi,
Montana, Nebraska, North Carolina, Ohio, Oklahoma, Rhode Island, South Dakota,
Utah, Washington and Wyoming. Additionally, all claims arising under state law are
dismissed, except for the following states: Delaware, Montana, Massachusetts, Rhode
Island, Oklahoma, North Carolina, and Connecticut. Moreover, Relator has also filed
a Motion for Reconsideration of this Court’s previous denial of her Motion for
Suggestion of Remand. For the reasons stated herein, this motion is DENIED.
The relevant facts alleged in the Third Amended Complaint, which I must take
as true for the purpose of this Motion, are as follows.
For the sake of brevity, the Court will not expand upon this aspect of the
Court’s decision here, as it will be discussed extensively infra.
Plavix, clopidogrel bisulfate, is a FDA-approved prescription blood thinner,
which is marketed for the treatment of Acute Coronary Syndrome, and used by
patients following the occurrence of myocardial infarction, stroke or established
peripheral artery disease. See TAC at ¶ 1. While under patent, Plavix was BMS’s topselling product, with sales accounting for 30% of its gross revenue ($1.67 billion). Id.
BMS and Sanofi market Plavix jointly. Id. at ¶ 2. Plavix costs approximately four
dollars per pill. Id. at ¶ 3. Since 1998, the FDA has sent three letters to Sanofi
involving the allegedly misleading promotion of Plavix. Id. at ¶¶ 4–14.
Relator worked in the pharmaceutical industry for twelve years, and was
employed by Sanofi as a sales representative specializing in selling Plavix. Id. at ¶
16. Relator alleges that she was instructed by Sanofi to promote Plavix as having
certain characteristics that Sanofi knew were not true. Id. at ¶ 19. For example, while
trial data found non-significant efficacy in stroke victims, Relator was instructed to
promote Plavix as superior to aspirin in stroke patients. Id. at ¶ 20. Relator also
promoted Plavix as comparably safe to aspirin, based on a study which compared
Plavix to a more toxic dose of aspirin not normally prescribed today. Id. Relator
further alleges that she was instructed to focus sales calls on physicians who wrote
significant numbers of prescriptions submitted to government payors. Id. at ¶ 22.
In that regard, according to Relator, Defendants engaged in a comprehensive
scheme to defraud federal and state governments by illegally and deceptively
promoting Plavix. Id.at ¶ 23. Relator claims that Plavix is no more effective than
aspirin, while being many times more expensive. Id. at ¶ 24. Thus, Relator alleges,
Defendants’ actions caused states to include Plavix on their Medicaid formularies for
indications for which Plavix was not medically necessary. Id. Plaintiff further asserts
that Medicare Part D requires prescriptions to be “reasonable and necessary” to be
reimbursable, and that Medicaid requires prescriptions be “medically necessary” to
be reimbursable. Id. at ¶ 26. According to Relator, Defendants’ false marketing
prevented physicians from making an informed decision as to Plavix’s reasonable or
medical necessity, and therefore caused physicians to submit numerous false claims
for reimbursement to Medicaid and Medicare Part D. Id. at ¶¶ 27–28.
Relator filed the original complaint in the United States District Court for the
Southern District of Illinois on March 30, 2011. First and Second Amended
Complaints were filed in that court in 2011 and 2012, respectively. Defendants moved
to dismiss the Second Amended Complaint in December 2012. On January 30, 2013,
the Hon. David R. Herndon, U.S.D.J., denied the Motion in part, and granted it in
part, dismissing only a claim on which Relator had requested a voluntary dismissal.
On February 14, 2013, the case was transferred to this Court by the Judicial Panel
on Multidistrict Litigation. Defendants then filed a Motion for Reconsideration before
this Court on the denial of their Motion to Dismiss, on the basis that Judge Herndon’s
January 30 Order incorrectly assumed that a “reasonable and necessary” standard
applied to Medicaid and Medicare Part D. Following a hearing on August 22, 2013,
this Court granted the Motion for Reconsideration, vacated the prior denial of the
Order to Dismiss with respect to the FCA claims under Medicaid and Medicare Part
D, and granted the Motion to Dismiss with respect to the FCA claims under those
programs. The Court granted Relator leave to amend her Complaint. Relator filed the
TAC on September 20, 2013; this Motion to Dismiss followed.
Standard of Review
When considering a motion to dismiss a complaint for failure to state a claim
upon which relief can be granted, pursuant to Fed. R. Civ. P. 12(b)(6), a court must
accept all well-pleaded allegations in the complaint as true and view them in the light
most favorable to the plaintiff. Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 2005).
It is well settled that a pleading is sufficient if it contains “a short and plain statement
of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
However, “[a]lthough the Federal Rules of Civil Procedure do not require a claimant
to set forth an intricately detailed description of the asserted basis for relief, they do
require that the pleadings give defendant fair notice of what the plaintiff’s claim is
and the grounds upon which it rests.” Baldwin Cnty. Welcome Ctr. v. Brown, 466 U.S.
147, 149–50 n. 3 (1984) (quotation and citation omitted). A district court, in weighing
a motion to dismiss, asks “‘not whether a plaintiff will ultimately prevail but whether
the claimant is entitled to offer evidence to support the claim.’” Bell Atlantic v.
Twombly, 550 U.S. 544, 583 (2007) (quoting Scheuer v. Rhoades, 416 U.S. 232, 236
(1974)); see also Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009) (“Our decision in Twombly
expounded the pleading standard for all civil actions.”) (internal citations omitted);
Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (“Iqbal . . . provides the
final nail-in-the-coffin for the ‘no set of facts’ standard that applied to federal
complaints before Twombly.”).
Following the Twombly/Iqbal standard, the Third Circuit applies a two-part
analysis in reviewing a complaint under Rule 12(b)(6). First, a district court must
accept all of the complaint’s well-pleaded facts as true, but may disregard any legal
conclusions. Fowler, 578 F.3d at 210. Second, a district court must determine whether
the facts alleged in the complaint are sufficient to show that the plaintiff has a
“plausible claim for relief.” Id. A complaint must do more than allege the plaintiff’s
entitlement to relief. Id. However, this standard “‘does not impose a probability
requirement at the pleading stage,’ but instead ‘simply calls for enough facts to raise
a reasonable expectation that discovery will reveal evidence of’ the necessary
element.’” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting
Twombly, 127 U.S. at 1965); see also Covington v. Int'l Ass'n of Approved Basketball
Officials, 710 F.3d 114, 118 (3d Cir. 2013) (“[A] claimant does not have to set out in
detail the facts upon which he bases his claim . . . . The pleading standard is not akin
to a probability requirement, . . . to survive a motion to dismiss, a complaint merely
has to state a plausible claim for relief.” (citations omitted)). Nonetheless, a court
need not credit either “bald assertions” or “legal conclusions” in a complaint when
deciding a motion to dismiss. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410,
1429–30 (3d Cir. 1997). The defendant bears the burden of showing that no claim has
been presented. Hedges v. U.S., 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr
Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)).
Finally, a court in reviewing a Rule 12(b)(6) motion must only consider the
facts alleged in the pleadings, the documents attached thereto as exhibits, and
matters of judicial notice. Southern Cross Overseas Agencies, Inc. v. Kwong Shipping
Grp. Ltd., 181 F.3d 410, 426 (3d Cir. 1999).
A defendant may move to dismiss a claim for lack of subject matter jurisdiction
under Fed. R. Civ. P. 12(b)(1). There is no presumption of truthfulness that attaches
to the allegations of the complaint when determining a challenge to the court's subject
matter jurisdiction. Mortensen v. First Federal Sav. & Loan Ass'n, 549 F.2d 884, 891
(3d Cir. 1977). Once a 12(b)(1) challenge is raised, the plaintiff bears the burden of
demonstrating the existence of subject matter jurisdiction. See McCann v. Newman
Irrevocable Trust, 458 F.3d 281, 286 (3d Cir. 2006). A Rule 12(b)(1) motion to dismiss
is treated as either a “facial or factual challenge to the court's subject matter
jurisdiction.” Gould Electronics, Inc. v. United States, 220 F.3d 169, 176 (3d Cir.
2000). Under a facial attack, the movant challenges the legal sufficiency of the claim,
and the court considers only “the allegations of the complaint and documents
referenced therein and attached thereto in the light most favorable to the plaintiff.”
Id. Under a factual attack, however, “the challenge is to the actual alleged
jurisdictional facts.” Id. “Because at issue in a factual 12(b)(1) motion is the trial
court's jurisdiction -- its very power to hear the case -- there is substantial authority
that the trial court is free to weigh the evidence and satisfy itself as to the existence
of its power to hear the case.” Mortensen, 549 F.2d at 891.
Public Disclosure Bar 3
At the outset, I note that Defendants’ motion to dismiss for lack of subject
matter jurisdiction is based on the public disclosure bar of the FCA, 31 U.S.C. §
3730(e)(4). This is an attack on the “actual alleged jurisdictional facts,” and therefore,
the Court is permitted to weigh the evidence presented. The FCA bars qui tam
actions where the allegations have previously been publically disclosed. However, the
public disclosure bar was amended in 2010 by the Patient Protection and Affordable
Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010). The original statute contained a
jurisdictional limitation, stating “No court shall have jurisdiction over an action
under this section based upon the public disclosure of allegations or transactions . . .
.” 31 U.S.C. § 3730(e)(4). The amended statute, however, merely mandates dismissal:
“The court shall dismiss an action or claim under this section, unless opposed by the
Government, if substantially the same allegations or transactions as alleged in the
action or claim were publicly disclosed . . . .” 31 U.S.C. § 3730(e)(4)(A). Additionally,
changes were made to the sections defining the sources that constitute a public
disclosure, see id. at § 3739(e)(4)(A)(i)–(iii), and to the definition of “original source.”
Id. at § 3739(e)(4)(B).
This issue was raised in Defendants’ Motion to Dismiss the Second Amended
Complaint; Chief Judge Herndon, however, declined to address the issue, stating that
“the record in this case is not adequate to make such a factual determination at this
stage in the proceedings.” January 2013 Memorandum and Order at 7. I will,
nevertheless, resolve this issue here.
Both parties primarily analyze their respective arguments under the pre-2010
statute, though Defendant asserts that “the result is the same under the post-2010
FCA because Relator has failed to allege sufficient facts to demonstrate that she had
knowledge independent of the publicly disclosed allegations.” Def. Br. at 22. On the
other hand, Relator briefly discusses “claims governed by the post-PPACA statute,” 4
Rel. Opp. at 31 n. 82. To the extent that the TAC alleges conduct which resulted in
false claims being made prior to the 2010 amendments, I agree that the pre-2010
statute should apply.
The Supreme Court has declined to apply the amended statute in cases filed
prior to the Amendment because “[t]he legislation makes no mention of retroactivity,
which would be necessary for its application to pending cases given that it eliminates
petitioners' claimed defense to a qui tam suit.” Graham Cnty. Soil and Water
Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 283 n. 1 (2010).
While Relator’s case here was filed after the 2010 amendment, the question of a
statute’s retroactive effect looks to the date of the underlying conduct, not the date a
complaint was filed. United States ex rel. May v. Purdue Pharma L.P., 737 F.3d 908,
916 (4th Cir. 2013) (citing Landgraf v. USI Film Prods., 511 U.S. 244, 265 (1994)
(“[T]he legal effect of conduct should ordinarily be assessed under the law that existed
when the conduct took place . . . .”). For that reason, the Fourth Circuit declined to
Specifically, Relator argues that “for claims governed by the post-PPACA
statute, Defendants’ primary reference” namely, the Complaint filed in Hall v.
Bristol-Myers Squibb Co., Civ. No. 06-5203 (D.N.J. May 1, 2009), “along with
Defendants Exhibits H and I do not constitute a public disclosure because they are
not federal cases where the Government is a party.”
apply the 2010 amendment to a case where the underlying conduct took place prior
to the amendments. Id. Similarly, with regard to false claims which occurred prior to
2010, I find that the pre-amendment statute applies. However, I note that the
allegations in the TAC appear to also include conduct by Defendants which occurred
after the 2010 amendment to the FCA. See Compl. ¶¶ 118–19 (discussing studies
published in 2010). I therefore also must discuss the application of the post-2010
According to Defendants, the allegations in Relator’s complaints are supported
by, or substantially similar to, allegations which were previously disclosed by the
news media, federal government reports, or previously filed lawsuits. Defendants
further contend that Relator is not an original source of the information, because she
has not pleaded how and when she obtained direct and independent knowledge of the
In response, Relator maintains that she is an original source of the
information, because she was a sales representative who participated in Defendants’
alleged scheme to defraud the government. Rel. Opp. at 29. Relator additionally
argues that there was no public disclosure because the “critical element” of fraud was
not disclosed in the publicly disclosed sources. Id. at 30. Finally, Relator contends
that the allegations in the TAC are not “based on” or “substantially similar” to the
prior disclosures because her “eyewitness accounts provide far more than the general
notion of misconduct that can be gleaned from public sources.” Id. at 34–35.
The pre-2010 statute provided that
[n]o court shall have jurisdiction over an action under this
section 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.
31 U.S.C. § 3730(e)(4). The statute further defined “original source” as “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
According to the Third Circuit, the public disclosure bar requires a court to
determine whether a disclosure “issue[d] from a source or occur[ed] in a context
specifically recognized by the Act” and is “sufficient to support the conclusion that the
information contained therein is now public within the meaning of the Act.” United
States ex. rel. Paranich v. Sorgnard, 396 F.3d 326, 332–33 (3d Cir. 2005). A disclosure
is “sufficiently public” if the information therein “would have been equally available
to strangers to the fraud transaction had they chosen to look for it as it was to the
relator.” Id. (internal quotation marks and citation omitted). In addition, the Third
Circuit has held that “a complaint in a civil action falls into the context of ‘criminal,
civil, or administrative hearings’ and is sufficiently public within the meaning of the
Act to constitute a public disclosure.” Id. at 334.
Defendants argue that the following public disclosures bar Relator’s claims:
the Second Amended Complaint filed in Hall v. Bristol-Myers Squibb Co., Civ. No.
06-5203 (D.N.J. May 1, 2009), Watson Cert., Ex. B; a newspaper article published in
the Madison-St. Clair Record on November 4, 2010, id. at Ex. C; a report by the
American Association for Justice, published online March 1, 2007, id. at Ex. E; a
newspaper article published in the St. Petersburg Times and Associated Press on
January 20, 2005, id. at Ex. F; and an article published in Internal Medicine News
on March 1, 2005, id. at Ex. G. As to the first inquiry—whether a document
constitutes a public disclosure—I find that the Hall Complaint is a public disclosure
as defined by the Third Circuit in Paranich. Similarly, the remaining documents
clearly fall within the “news media” category of the statute, and the information
contained therein was available to strangers to the fraud.
The next question is whether the TAC is “based on” these disclosures; “based
on” is defined as “supported by” or “substantially similar to.” United States ex rel.
Atkinson v. PA Shipbuilding Co., 473 F.3d 506, 519 (3d Cir. 2007). The Third Circuit
has followed the D.C. Circuit in using “an algebraic representation of the nature and
extent of disclosure required to raise the jurisdictional bar.” Id. That is “[I]f X + Y =
Z, Z represents the allegation of fraud and X and Y represent its essential elements”;
then, in order to “draw an inference of fraud, both a misrepresented [X] and a true
[Y] state of facts must be publicly disclosed.” Id. Thus, “if either Z (fraud) or both X
(misrepresented facts) and Y (true facts) are disclosed by way of a listed source, then
a relator is barred from bringing suit under § 3730(e)(4)(A) unless [s]he is an original
The public sources, including the Hall Complaint, cited above, discuss the
findings of a study known as “CAPRIE,” which compared Plavix to aspirin, and the
“Chan study,” which compared the effects of Plavix and aspirin on patients who
previously had stomach ulcers, as well as FDA letters sent to Defendants; all the facts
from the sources are presented in the TAC. 5 See Watson Cert, Ex. D (comparing Hall
Complaint, TAC, and media reports). Essentially, these sources indicate that Plavix
is no more effective or safer than aspirin. Id. To use the algebraic formula presented
by the Third Circuit, the misrepresented facts (X) are Defendants’ representations
that Plavix is more effective and safer than aspirin; the true facts (Y) are that Plavix
is neither more effective nor safer than aspirin. 6 Both sets of facts are alleged in the
public disclosures provided by Defendants. Thus, I find that the TAC is substantially
similar to, and therefore based on, these public disclosures. 7
The Court makes no comment on the merits of Relator’s allegations regarding
Relator asserts that the “critical elements” of fraud were not alleged in these
sources, namely that Defendants acted knowingly. Rel. Opp. at 30–31. However, the
formulation given by the Third Circuit does not require that the public disclosures
reveal any knowledge to implicate the public disclosure bar, nor does Relator cite to
any cases to support her position.
I note that the TAC alleges additional fraudulent conduct not present in the
public disclosures, namely that Defendants instructed Relator to present data from a
different study, entitled “PRoFESS” (TAC Ex. E) in such a way as to make physicians
believe that another drug, Aggrenox, was inferior to Plavix. TAC at ¶ 21. However,
as discussed further infra, these allegations do not alter the determination that
Although Relator’s complaint is substantially similar to the information in the
public disclosures, Relator argues that she is an original source of the information.
“To be an original source, a relator's knowledge must be both direct and independent.”
Atkinson, 473 F.3d at 520. “Independent knowledge” is defined as “knowledge that
does not depend on public disclosures,” while “direct knowledge” is defined as
“knowledge obtained without any intervening agency, instrumentality or influence:
immediate.” Id. (internal quotation marks and citation omitted). A party has direct
knowledge of a fraudulent scheme when the party was involved in the scheme.
Paranich, 396 F.3d at 336. However, “[i]f the relator's knowledge of the element is
based solely on a § 3730(e)(4)(A) public disclosure, the relator is not an original
source.” Id. Moreover, “[t]o establish original source status knowledge, a qui tam
plaintiff must allege specific facts—as opposed to mere conclusions—showing exactly
how and when he or she obtained direct and independent knowledge of the fraudulent
acts alleged in the complaint.” Id.
Here, Relator alleges that she had direct and independent knowledge of
Defendants’ alleged fraud because she was involved in it. Specifically, the TAC states
that Relator worked as a sales representative at Sanofi beginning in 2003. TAC at ¶
16. Relator alleges that she was trained and instructed “to confuse physicians and to
focus sales calls on physicians and prescribers whose patients relied on Medicaid and
Medicare.” Id. at ¶ 110. Relator specifically alleges that she received the CAPRIE
Relator’s allegations are substantially similar to the information revealed in the
Road Map for training purposes, “which revealed Plavix’s non-significant efficacy
data, and yet was instructed by BMS/Sanofi to promote Plavix in direct contradiction
to its results.” Id. at ¶ 111. She also states that she was “instructed to present the
data from yet another study [the PRoFESS Study, TAC, Ex. E] in a manner designed
to confuse physicians and make them believe that [another drug] was inferior to
Plavix.” Id. at ¶ 21.
Based on these allegations, Relator has sufficiently alleged that she is an
independent source of the information revealed in the public disclosures. Indeed,
Relator had direct knowledge of Defendants’ alleged fraudulent scheme because she
was involved in it. Moreover, Relator was given the CAPRIE study independently of
the public disclosures—in fact, she claims to have been given the study by Defendants
themselves, as part of her training. While Defendants argue that Relator “does not
claim direct or independent knowledge of any false statements made to any particular
physician,” Def. Repl. at 8, this does not undermine Relator’s status as an original
source. See Atkinson, 473 F.3d at 520.
Thus, while the TAC is “based on” public disclosure of allegations within the
meaning of the pre-2010 version of 31 U.S.C. § 3730(e)(4)(A), I find that Relator is an
original source of the information. As such, the public disclosure bar does not apply
to prohibit allegations of Defendant’s conduct prior to 2010, and therefore the 12(b)(1)
motion is denied on that basis.
Because the TAC also alleges that Defendants’ allegedly fraudulent conduct
continued after 2010, I also determine whether Relator’s claims based on that conduct
must be dismissed under the updated public disclosure bar.
The post-2010 statute states that:
The court shall dismiss an action or claim under this
section, unless opposed by the Government, if substantially
the same allegations or transactions as alleged in the
action or claim were publicly disclosed—
(i) in a Federal criminal, civil, or administrative hearing in
which the Government or its agent is a party;
(ii) in a congressional, Government Accountability Office,
or other Federal report, hearing, audit, or investigation; or
(iii) 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
31 U.S.C. § 3730(e)(4)(A). An individual may be an “original source” in two ways:
first, if the individual “prior to a public disclosure under subsection (e)(4)(A), has
voluntarily disclosed to the Government the information on which allegations or
transactions in a claim are based” or, second, if the individual “has knowledge that is
independent of and materially adds to the publicly disclosed allegations or
transactions, and . . . has voluntarily provided the information to the Government
before filing an action under this section.” Id. at § 3730(e)(4)(B).
The first question, again, is whether the sources cited by Defendants are
“public disclosures.” Under the current definition of public disclosure, all of the news
articles cited by Defendants remain public disclosures, as they are “from the news
media.” The Hall complaint, however, is not a public disclosure as that term is
currently defined, because the Government was not a party to that action.
The second question, under the amended statute, is whether those public
disclosures contain “substantially the same allegations or transactions as alleged in
the action or claim.” Again, as discussed above, both the public disclosures and the
TAC describe the findings of the CAPRIE and Chan studies. These claims are
“substantially the same.” The TAC additionally alleges that Defendants instructed
Relator to present data from the “PRoFESS” study (TAC, Ex. E) in such a way as to
make physicians believe that another drug, Aggrenox, was inferior to Plavix. TAC at
¶ 21. However, the statute does not require that the allegations be identical. See
United States ex rel. Osheroff v. Humana Inc., 776 F.3d 805, 814 (11th Cir. 2015)
(stating that “the significant overlap between [the relator’s] allegations and the public
disclosures is sufficient to show that the disclosed information . . . is substantially
similar to the allegations in the complaint.”). I therefore find that the addition of the
PRoFESS study does not alter the conclusion that Relator’s allegations are
“substantially the same” as those made in the prior disclosures.
The final question, then, is whether Relator is an “original source.” Relator
does not allege that she informed the government of the information contained in the
TAC prior to the public disclosures. Thus, only the second ground applies and,
correspondingly, Relator must show that her knowledge “is independent of and
materially adds to the publicly disclosed allegations or transactions.” I have already
found that Relator’s knowledge was independent of the public disclosures. I must
therefore determine whether Relator’s information “materially adds” to the
information in the public disclosures.
There is scant case law on the definition of the phrase “materially adds” in the
amended FCA statute. The Eleventh Circuit has found that a relator is not an original
source where the information in the public disclosures was “sufficient to give rise to
an inference” of illegality without the Relator’s additional facts. Osheroff, 776 F.3d at
815. Similarly, the Eighth Circuit has held that where the “key facts” to an FCA claim
have already been “thoroughly revealed,” the relator’s knowledge, “even if gained
early and independently,” does not “materially contribute anything of import to the
public knowledge about the alleged fraud.” United States ex rel. Paulos v. Stryker
Corp., 762 F.3d 688, 694 (8th Cir. 2014). The Eastern District of Virginia applied the
public disclosure bar where “all essential elements of the . . . scheme were disclosed,”
and “relators’ knowledge appears to add only illustrative examples of the specific
behavior that the [prior disclosure] describes with specificity.” United States ex rel.
Beauchamp v. Academi Training Ctr., Inc., 933 F. Supp. 2d 825, 843 (E.D. Va. 2013).
In contrast, the District of Massachusetts found that a relator qualified as an original
source when prior disclosures had focused on “the fraud committed on patients and
doctors,” and the relator’s suit “provided information on the alleged fraud on the
government for the first time.” United States ex rel. Hagerty v. Cyberonics, Inc., ___
F. Supp. 2d ___, ___, 2015 WL 1442497, at *16 (D. Mass. Mar. 31, 2015).
Here, Relator asserts that she “is the first person to inform the government
that Defendants affirmatively defrauded the government, knew the truth about
Plavix, [and] disregarded that truth.” Rel. Opp. at 33. Indeed, Relator’s Complaint,
unlike the news articles, alleges that Defendants were aware that the claims their
salesforce were making about Plavix were false. See TAC at ¶ 21. Moreover, the TAC
states that Defendants explicitly instructed their sales force to “focus sales calls on
physicians who wrote significant numbers of prescriptions for patients covered by
certain Government Payors.” Id. at ¶ 22. Indeed, based on Relator’s allegations,
Relator has “provided information [regarding] the alleged fraud on the government
for the first time.” Hagerty, 2015 WL 1442497, at *16. These allegations, which tend
to show that Defendants had knowledge that their claims were false and were
intended to have physicians make false claims to the government involving Plavix
prescriptions, provide “essential elements of the fraudulent scheme” which were
missing from the prior disclosures. See id. Taken together, these facts materially add
to the previously disclosed information. In addition, Relator sufficiently alleges in the
Complaint that she voluntarily provided the information contained in the TAC to the
Government prior to filing the action, as required by 31 U.S.C. §§ 3730(b) and (e). See
TAC at ¶ 108. Accordingly, Relator also qualifies as an original source under the post2010 statute.
Having determined that Relator is an original source under both the pre- and
post-2010 statutes, I find that the public disclosure bar does not apply in this case.
The False Claims Act
Defendants advance several arguments in support of their dismissal motion
regarding Relator’s claims under the FCA: first, Defendants argue that, on their face,
Relator’s allegations that Defendants’ marketing caused physicians to make false
certifications about Plavix’s efficacy or necessity for treatment is insufficient to state
a claim; second, Defendants argue that Medicaid and Medicare Part D cannot deny
reimbursement of a covered prescription because FDA approval of a particular drug
is sufficient to render a drug “reasonable and necessary” under these government
programs when such a drug is prescribed for its on-label use; and finally, Defendants
assert that Relator’s allegations regarding the state formularies are insufficient to
state a claim under the FCA. After discussing the law applicable to the False Claims
Act, I will address each argument in turn.
The FCA imposes civil liability on any person who “(A) knowingly presents, or
causes to be presented, a false or fraudulent claim for payment or approval” or “(B)
knowingly makes, uses, or causes to be made or used, a false record or statement
material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1). This Act was amended
in 2009; prior to the amendment, the statute imposed liability on any person who “(1)
knowingly presents, or causes to be presented, to an officer or employee of the United
States Government or a member of the Armed Forces of the United States a false or
fraudulent claim for payment or approval” or “(2) knowingly makes, uses, or causes
to be made or used, a false record or statement to get a false or fraudulent claim paid
or approved by the Government.” 31 U.S.C. § 3729(a)(1)–(2) (amended 2009). 8
“A plaintiff, in order to establish a prima facie FCA violation under section
3729(a)(1), must prove that “(1) the defendant presented or caused to be presented to
an agent of the United States a claim for payment; (2) the claim was false or
fraudulent; and (3) the defendant knew the claim was false or fraudulent.” United
States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 304–05 (3d Cir. 2011).
A false claim under the FCA may be either “factually false”—“when the claimant
misrepresents what goods or services that it provided to the Government”— or
“legally false”—“when the claimant knowingly falsely certifies that it has complied
with a statute or regulation the compliance with which is a condition for Government
payment.” Id. at 305. Additionally, within the false certification context, there are
two categories, express and implied. Id. An entity makes an express false certification
when it “falsely certif[ies] that it is in compliance with regulations which are
prerequisites to Government payment in connection with the claim for payment of
federal funds,” while an entity makes an implied false certification when it “seeks
and makes a claim for payment from the Government without disclosing that it
violated regulations that affected its eligibility for payment.” Id.
I note that the TAC asserts only legally false claims, as the claimants provided
the goods or services for which the claims were made, and the TAC relies on an
implied false certification theory. In that regard, The Third Circuit has stated that
The amendments to the statute do not affect the analysis here.
the implied false certification theory of liability “should not be applied expansively,
particularly when advanced on the basis of FCA allegations arising from the
Government's payment of claims under federally funded health care programs.” Id.
at 307. Furthermore, in order to make a claim for an implied false certification, “it is
necessary to allege not only a receipt of federal funds and a failure to comply with
applicable regulations, but also that payment of the federal funds was in some way
conditioned on compliance with those regulations.” Id. (citing Rodriguez v. Our Lady
of Lourdes Med. Ctr., 552 F.3d 297, 304 (3d Cir. 2008)). That is, “a plaintiff must
[allege] that if the Government had been aware of the defendant's violations of the
Medicare laws and regulations that are the bases of a plaintiff's FCA claims, it would
not have paid the defendant's claims.” Id.
Facial Viability of the FCA Claims
I first address the parties’ arguments based on the holding in United States ex
rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295 (3d Cir. 2011). Defendants
assert that the allegations in the TAC are insufficient on their face to state a claim
for a violation of the FCA. According to Defendants, Medicaid and Medicare Part D
are required to reimburse for Plavix prescriptions which are prescribed for
indications approved by the FDA, regardless of marketing or the doctor’s reasons for
the prescription; indeed, Relator concedes that the Plavix prescriptions here were for
indications approved by the FDA. Therefore, because the submitted claims were for
prescriptions for indications which were FDA-approved, Defendants argue, there can
be no FCA liability. On the other hand, Relator argues that the marketing techniques
did not themselves constitute false claims, but that the marketing caused claims to
be submitted for payment which did not comply with the federal and state conditions
Both parties rely on the Third Circuit’s decision in Wilkins. In that case, a
relator filed a qui tam action alleging that the defendants, organizations which
provided services under Medicare, violated the FCA by offering physicians illegal
kickbacks and that the defendants there violated Medicare marketing rules. Wilkins,
659 F.3d at 300. The circuit court held that the allegations that the defendants
“violated the [marketing] regulations do not state a plausible claim for relief under
the FCA inasmuch as the Government's payments of appellees’ Medicare claims were
not conditioned on their compliance with the marketing regulations.” Id. at 308. In
that regard, the court “distinguished between regulations which are conditions of
participation in the Medicare programs and conditions of Government payment of
Medicare funds.” Id. at 309. “‘Conditions of participation . . . are enforced through
administrative mechanisms, and the ultimate sanction for violation of such
conditions is removal from the government program,’ while ‘[c]onditions of payment
are those which, if the government knew they were not being followed, might cause
it to actually refuse payment.’” Id. (quoting United States ex rel. Conner v. Salina
Reg'l Health Ctr., Inc., 543 F.3d 1211, 1220 (10th Cir. 2008)). The court reasoned that
“the fundamental flaw in appellants’ allegations is that the amended complaint does
not cite to any regulation demonstrating that a participant’s compliance with
Medicare marketing regulations is a condition for its receipt of payment from the
Government.” Id. at 309–10.
Here, in contrast, Relator has alleged that Defendants caused physicians to
make implied false certifications about the medical necessity of Plavix. According to
the Complaint, prescription drugs must be “reasonable and necessary” to be covered
by Medicare Part D, see TAC at ¶¶ 44–45, and all fifty states have established limits
on Medicaid requiring services to be medically necessary. See id. at ¶¶ 52–102. As
alleged, the limits on Medicare and Medicaid regarding medical necessity are
necessarily conditions of payment, not conditions of participation. Wilkins, 659 F.3d
at 309. Thus, contrary to Defendant’s contention, Plaintiff’s allegations, on their
face 9, are different from those asserted in Wilkins.
“Reasonable and Necessary” or “Medically Necessary” Conditions for
Medicare Part D
The thrust of Relator’s position with respect to her FCA claims under Medicare
Part D is that Defendants’ fraudulent marketing of Plavix caused physicians to make
false certifications when requesting reimbursements in connection with prescribing
Plavix for its on-label use. Specifically, Relator argues that Defendants represented
to physicians that Plavix was the “only option for effective patient care in a host of
contexts.” However, Relator alleges that there were other drugs, such as Aspirin, as
effective – if not more effective – than Plavix at a far lower cost. Thus, prescribing
Defendants’ argument that Medicare and Medicaid do not, in fact, place such
limits on services will be addressed infra.
Plavix for its on-label use, Relator reasons, was not “reasonable and necessary” or
“medically necessary.” To illustrate, Relator names four 10 Medicare Part D plans
which require that a drug be “medically necessary,” which is defined as “reasonable
and necessary for treatment” in order to be covered. TAC at ¶ 45.
On other hand, Defendants argue that under Part D, prescription drug plans
are permitted to exclude from coverage drugs which are not “reasonable and
necessary,” but argue that Relator has not alleged that any such plan has restricted
coverage of Plavix. Def. Br. at 10. Absent any exclusions, Defendants argue, when
physicians prescribed Plavix for its on-label, FDA approved use, such a prescription
should be considered “reasonable and necessary” under Medicare. In light of the
parties’ arguments, the question before the Court centers on the definition of
“reasonable and necessary” in the Medicare statute.
It is true that the Medicare statute permits reimbursement only for medical
treatments which are “reasonable and necessary.” 42 U.S.C. § 1395y. Relator cites to
a number of cases that dealt with the reasonableness of prescribing off-label drugs in
the context of Medicare, but, as I will discuss further, infra, none of those cases
address how “reasonable and necessary” is defined for on-label prescription drugs.
Tellingly, the Court’s research did not reveal any case law on that issue, nor has
Relator supported her position with any authority. As a result, this Court must
examine the statutory language of Medicare and the FDA approval scheme, to
Although the TAC only names four plans, it also notes that “[b]ecause Medicare
Part D is privatized, the number of sponsor plans is extremely voluminous.” TAC at
¶ 45 n. 37.
determine whether there is any circumstance in which a prescription drug would not
be “reasonable and necessary” when that drug is prescribed by a physician for a FDA
approved, on-label use.
To begin, Medicare is a federally funded and administered health insurance
program for certain groups, primarily elderly and disabled persons. See Heckler v.
Ringer, 466 U.S. 602, 605 (1984). The Department of Health and Human Services
(“HHS”) administers the Medicare program through the Centers for Medicare and
Medicaid Services (“CMS”). See id. Four major components make up the Medicare
program: (1) Part A, the hospital insurance benefits program, 42 U.S.C. §§ 1395c,
1395d; (2) Part B, the supplemental medical insurance benefits program, which
generally pays for a percentage of certain medical and other health services, including
physician services, 42 U.S.C. §§ 1395j, 1395k, 1395l; (3) Part C, the Medicare
Advantage program, which allows CMS to contract with public and private entities
to provide, at a minimum, Medicare Part A and B benefits to certain Medicare
beneficiaries, 42 U.S.C. § 1395w–21–28, et seq.; and (4) Part D, the voluntary
prescription drug benefit program. 42 U.S.C. § 1395w–101, et seq. Here, Relator’s
FCA claims are premised on Medicare Part D.
Medicare Part D was established in 2003 by the Medicare Prescription Drug,
Improvement, and Modernization Act, Pub. L. 108–173, 117 Stat. 2066, which set up
a voluntary prescription drug benefits program for Medicare enrollees. United States
ex rel. Spay v. CVS Caremark Corp., 913 F.Supp.2d 125, 131 (E.D. Pa. 2012). Unlike
Parts A and B, Medicare Part D is based on a private market model, wherein
Medicare contracts with private entities, known as Part D “sponsors” to administer
prescription drug plans. See United States ex rel Fox Rx, Inc. v. Omnicare, Inc., 38
F. Supp. 3d 398, 402-403 (S.D.N.Y. 2014). Part D benefits are provided by a Part D
plan sponsor, which is either a prescription drug plan (“PDP”), a Medicare Advantage
organization that offers a Medicare Advantage prescription drug plan (“MA–PD
plan”), a Program of All–Inclusive Care for the Elderly (“PACE”) organization offering
a PACE plan including qualified prescription drug coverage, or a cost plan offering
qualified prescription drug coverage. See 42 C.F.R. § 423.4; Spay, 913 F. Supp. 2d at
Part D plan sponsors subcontract with pharmaceutical entities to provide
drugs to beneficiaries, including pharmacy benefit managers (“PBM”) who provide
drugs through mail order and pharmacies. See Spay, 913 F. Supp. 2d at 133.
condition for payment from CMS, the sponsor must certify the accuracy, completeness
and truthfulness of all data related to the payment, which may include enrollment
information, claims data, bid submission data, and any other data specified by CMS.
See 42 C.F.R. § 423.505(k)(1). A subcontractor entity must “similarly certify” that
the claims data it has generated is accurate, complete and truthful, and must
acknowledge that it will be used to obtain federal reimbursement. See 42 C.F.R. §
423.505(k)(3). Indeed, the sponsors and their subcontractors must contractually
agree to comply with all federal laws and regulations designed to prevent fraud,
waste, and abuse. See 42 C.F.R. § 423.505(h)(1); 42 C.F.R. § 423.505(i)(4)(iv).
With respect to coverage, a plan sponsor must provide qualified prescription
drug which includes “standard prescription drug coverage” or “alternative
prescription drug coverage” with at least actuarially equivalent benefits. See 42
U.S.C. § 1395w–102; 42 C.F.R. § 423.104(c). The requirements for standard or
alternative prescription drug coverage relating to deductibles, benefit structure,
initial coverage limits, out-of-pocket expenditures, etc., are set out in the Medicare
Statute and its regulations. See 42 U.S.C. § 1395w–102(b); 42 C.F.R. § 423.104(d)(3).
Plans may also provide supplemental prescription coverage, which can include
reductions in cost-sharing (such as deductibles or coinsurance percentages) or
covering certain drugs that would qualify as covered Part D drugs if they were not
among the drugs described at 42 U.S.C. § 1396r–8(d)(2), (d)(3) and excluded from the
definition of a Part D drug at 42 U.S.C. § 1395w–102(e)(2)(A).
More specifically, Part D covers a range of outpatient prescription drugs,
which previously had been covered only in select instances. Kilmer v. Leavitt, 609 F.
Supp. 2d 750, 751 (S.D. Ohio 2009). However, a Part D plan sponsor need not provide
coverage for a Part D drug that is “not reasonable and necessary” for circumstances
specified in the statutory framework or that is not prescribed in accordance with the
plan or the Medicare Act. See 42 U.S.C. §§ 1395w-102(e)(3) and 1395y(a); Kilmer,
609 F. Supp. 2d at 751. Rather, to qualify for coverage, an outpatient prescription
drug must be used for a medically accepted indication, see 42 U.S.C. §§ 1395w102(e)(1), (e)(4), which means that it can be used for treatment purposes, inter alia,
approved under the Federal Food, Drug, and Cosmetic Act (“FDCA”), 21 U.S.C. § 301
et seq. See 42 U.S.C. § 1396r-8(k)(6)(“The term ‘medically accepted indication’ means
any use for a covered outpatient drug which is approved under the [FDCA] or the use
of which is supported by one or more citations included or approved for inclusion in
any of the compendia described in subsection (g)(1)(B)(i) of this section.”). Indeed,
under Medicare, “Covered part D drug” is defined as “a drug that may be dispensed
upon a prescription,” 42 U.S.C. § 1395w-102(e)(1)(A), that is “approved for safety and
effectiveness as a prescription drug under section 505 or 507 of the [FDCA].” 42
U.S.C. § 1396r-8(k)(2)(A)(i).
Moreover, regulations promulgated by the Secretary further clarify the scope
of what is considered a Part D drug. Title 42, Code of Federal Regulations, section
423.100, states, in relevant part:
Part D drug means—
(1) Unless excluded under paragraph (2) of this definition, any of
the following if used for a medically accepted indication (as
defined in [42 U.S.C. § 1395w-102(e)(4)])(i) A drug that may be dispensed only upon a prescription and
that is described in sections [42 U.S.C. § 1396r-8(k)(2)(A)].
42 C.F.R. § 423.100 (emphasis added).
Based on the above-outlined statutory scheme, a reasonable and necessary
covered drug under Part D includes a drug prescribed for uses that are approved by
the FDA, i.e., on-label use. See Planned Parenthood Ariz., Inc. v. Humble, 753 F.3d
905, 907 (9th Cir. 2014). Indeed, a drug prescribed for its on-label use -- by definition
-- means that the prescription is medically reasonable for its intended purpose by
virtue of the FDA approval process. As the Supreme Court has explained, the FDA
approval process of a new drug is “both onerous and lengthy.” Mut. Pharm. Co. v.
Bartlett, 133 S. Ct. 2466, 2471 (2013). Under the FDCA, 21 U.S.C. § 301, et seq.,
drug manufacturers must gain FDA approval before marketing any drug in interstate
commerce. See 21 U.S.C. § 355(a). In the case of a new brand-name drug, such as
Plavix, FDA approval can be secured only by submitting a new-drug application
(“NDA”). The application is a compilation of materials that must include “full reports
of [all clinical] investigations,” 21 U.S.C. § 355(b)(1)(A), relevant nonclinical studies,
and “any other data or information relevant to an evaluation of the safety and
effectiveness of the drug product obtained or otherwise received by the applicant from
any source,” 21 C.F.R. §§ 314.50(d)(2) and (5)(iv); see Bartlett, 133 S. Ct. at 2470-71
(explaining the FDA approval process). The NDA must also include “the labeling
proposed to be used for such drug,” 21 U.S.C. § 355(b)(1)(F); 21 CFR § 314.50(c)(2)(i),
and “a discussion of why the [drug’s] benefits exceed the risks under the conditions
stated in the labeling,” 21 C.F.R. § 314.50(d)(5)(viii); § 314.50(c)(2)(ix).
Importantly, the FDA may approve an NDA only if it determines that the drug
in question is “safe for use” under “the conditions of use prescribed, recommended, or
suggested in the proposed labeling thereof.” 21 U. S. C. § 355(d); Bartlett, 133 S. Ct.
at 2470. In order for the FDA to consider a drug safe, the drug’s “probable therapeutic
benefits must outweigh its risk of harm.” FDA v. Brown & Williamson Tobacco Corp.,
529 U. S. 120, 140 (2000). In that regard, “Congress made its ‘purpose’ plain in
authorizing the FDA--not  tort juries--to determine when and under what
circumstances a drug is ‘safe.’” Wyeth v. Levin, 555 U.S. 555, 607 (2009). And, in that
connection, “[w]here the FDA determines, in accordance with its statutory mandate,
that a drug is on balance ‘safe,’ [the] conflict preemption cases prohibit any State from
countermanding that determination.” See, e.g., Buckman Co. v. Plaintiffs' Legal
Comm., 531 U.S. 341, 348 (2001) (after the FDA has struck "a somewhat delicate
balance of statutory objectives" and determined that petitioner submitted a valid
application to manufacture a medical device, a State may not use common law to
Significantly, after the FDA approves a drug, “the manufacturer remains
under an obligation to investigate and report any adverse events associated with the
drug, see 21 C.F.R. § 314.80, and must periodically submit any new information that
may affect the FDA's previous conclusions about the safety, effectiveness, or labeling
of the drug.” Wyeth, 555 U.S. at 608 (citing 21 U.S.C. § 355(k)). If the FDA finds that
the drug is not "safe," the agency “shall” withdraw its approval of the drug. See 21
U.S.C. § 355(e). The FDA also “shall” deem a drug “misbranded” if “it is dangerous to
health when used in the dosage or manner, or with the frequency or duration
prescribed, recommended, or suggested in the labeling thereof.” 21 U.S.C. § 352(j).
From a plain reading of the Medicare statute regarding the Part D prescription
drug coverage, I find that a FDA approved drug that is prescribed for its on-label use
is “reasonable and necessary.” I come to this conclusion because, for one, the statute
is explicit in stating that one of the “medically accepted indications” for a prescribed
drug includes any use that has been approved by the FDA. See 42 U.S.C. § 1396r8(k)(6)(“The term ‘medically accepted indication’ means any use for a covered
outpatient drug which is approved under the [FDCA] . . . .”). And, the Regulations
accompanying the Medicare requirements in this context mirror the definition of
“medically accepted indication” as it appears in § 1396r-8(k)(6). See 42 C.F.R. §
423.100. Moreover, the hallmark of the “reasonable and necessary” requirement
under Medicare Part D is the effectiveness and safety of a particular prescription
drug. See 42 U.S.C. § 1396r-8(k)(2)(A)(i). 11 The FDA approval process -- as outlined
above -- ensures that an approved drug meets the “reasonable and necessary”
standard. Thus, by operation of the Medicare statute, this Court holds that a FDA
approved drug that has been prescribed for its on-label use is necessarily covered
under Medicare Part D. 12
See United States ex rel. Rostholder v. Omnicare, Inc.,
745 F.3d 694, 701 (4th Cir. 2014)(“[t]o qualify as a ‘covered outpatient drug’ as defined
in the Medicare and Medicaid statutes, a drug merely must be approved by the
Relator cites to Almy v. Sebelius, 749 F.Supp. 2d 315, 330 (D. Md. 2010), for
the general proposition that “just because a drug is ‘FDA-approved’ does not mean
that it is ‘reasonable and necessary.’” Relator’s reliance on Almy is misplaced,
because that case dealt with CMS’s determination whether a particular piece of
medical equipment is covered under Medicare Part B. This is significant since Part
B explicitly provides CMS with the discretion to make certain safety determinations
as to medical equipment and CMS does not have the same type of discretion under
Part D for prescription drugs.
Of course, if a doctor were to give a prescription to a patient who did not require
medication at all, such a prescription would not be “reasonable and necessary.”
Plaintiff, however, has not alleged that Defendants’ marketing caused Plavix to be
prescribed to patients who did not need such a drug.
My conclusion in this regard in consistent with the findings of those courts that
have dealt with Part D drugs that have been prescribed for “off-label” purposes. At
the outset, I note that “off-label” use is the use of a particular drug “for some other
purpose than that for which it has been approved by the FDA.” Buckman Co. v.
Plaintiffs’ Legal Comm., 531 U.S. 341, 350 (2001); In re Neurontin Mktg. & Sales
Practices Litig., 712 F.3d 21, 27-28 (1st Cir. 2013)(“[o]ff-label use marketing is for
those conditions or diseases not included in the official label approved by the FDA.”).
In the context of Medicare Part D, numerous courts have been called upon to resolve
the issue whether drugs prescribed for their off-label uses are “reasonable and
necessary.” See, e.g., United States ex rel. Bergman v. Abbot Labs., 995 F. Supp. 2d
357, 369 (E.D. Pa. 2014); United States ex rel. Cestra v. Cephalon, Inc., Civ. No. 141842, 2015 WL 3498761, at *8 (E.D. Pa. June 3, 2015); United States ex rel. Petratos
v. Genentech, Inc., Civ. No. 11-3691, 2014 WL 7331945, at *4 (D.N.J. Dec. 18, 2014);
United States ex rel. Simpson v. Bayer Corp., Civ. No. 05-3895 JLL, 2013 WL
4710587, at *11 (D.N.J. Aug. 30, 2013); see also United States ex rel. Brown v.
Celgene Corp., Civ. No. 10-3165-GHK SSX, 2014 WL 3605896, at *4 (C.D. Cal. July
10, 2014); United States ex rel. Nathan v. Takeda Pharm. N. Am., Inc., Civ. No. 1:091086 (AJT), 2011 WL 2182422, at *3 (E.D. Va. May 4, 2011). These courts’ decisions
are in unison that if the particular use of the drug is supported by a listing in a major
drug compendium, 13 -- even if the use is for an off-label purpose -- that drug may fall
42 U.S.C. § 1396r-8(k)(6) cites to § 1396r-8(g)(1)(B)(i), which lists three
approved compendia: “(I) American Hospital Formulary Service Drug Information;
within the “reasonable and necessary” standard of Medicare. See, e.g., Simpson, 2013
U.S. Dist. LEXIS 124928, at *35-*36. Significantly, this finding is taken from, and
supported by, the definition of “medically accepted indication,” under 42 U.S.C. §
1396r-8(k)(6), see Bergman, 995 F. Supp. 2d at 369, which definition also includes
any drug approved by the FDA. See 42 U.S.C. § 1396r-8(k)(6). Simply put, in those
courts’ view, a “reasonable and necessary” prescription is equivalent to one given for
“a medically accepted indication.” See, e.g., Cestra, 2015 WL 3498761, at *8
(“Whether prescribing a drug for a particular condition is reasonable and necessary
is typically determined by considering whether the drug is prescribed for a ‘medically
accepted indication’ that is reimbursable under Medicare and Medicaid.”). And,
because a medically accepted indication is also equivalent to a use of a drug that is
approved by the FDA, by definition, any on-label drug prescription is, under the
statute, reasonable and necessary.
Accordingly, because Relator has not alleged that Plavix is excluded from
Medicare Part D coverage, or that Plavix was not prescribed for any purpose other
than its on-label use, this Court finds that as a matter of law, any prescription of
Plavix, written for its on-label use during the time period alleged, was reasonable and
necessary under Medicare Part D. Consequently, Plaintiff cannot a state a claim
under the FCA in this context.
(II) United States Pharmacopeia-Drug Information (or its successor publications);
and (III) the DRUGDEX Information System.” See Bergman, 995 F. Supp. 2d at 369.
Under Medicaid, Relator’s position is two-fold; first, Relator argues that
Medicaid requires that drugs be “medically necessary” in order to be covered, and
that Defendants’ misrepresentations caused physicians to falsely write prescriptions
for Plavix under circumstances that did not comply with Medicaid’s requirements.
Second, Relator argues that each of the fifty states’ Medicaid plans also imposes a
“medically necessity” requirement. To counter, Defendants maintain -- just as they
did under Medicare -- that Medicaid does not deny the reimbursement of a FDA
approved prescription drug for its on-label use.
Defendants submit that in the
absence of kickbacks, reimbursement for a drug prescribed for an FDA-approved
indication, i.e. an on-label prescription, cannot also be the basis for a claim under the
FCA in the context of Medicaid. Moreover, Defendants contend that the states’
Medicaid plans do not impose an additional “medically necessary” requirement as a
precondition for payment for on-label drug prescriptions.
To begin, the Medicaid Act, 42 U.S.C. § 1396 et seq., established the Medicaid
program which is separate from the Medicare program. Under the Medicaid Act, the
federal government and the states jointly fund the Medicaid program, with the
federal government contributing approximately between 50% and 83% of the funding,
with the states responsible for the rest. 42 U.S.C. § 1396d(b); Pennsylvania Medical
Soc. v. Snider, 29 F.3d 886, 888-89 (3d Cir. 1994). Eligibility for Medicaid benefits is
based on need. Id. “A state is not required to participate in the Medicaid program,
but if it decides to participate, it must comply with the Medicaid Act and its
implementing regulations.” Snider, 29 F.3d at 889 (citing 42 U.S.C. § 1396c). A
participating state must propose a plan that meets certain statutory requirements
set forth in § 1396a(a). For such a plan to become effective, the plan must be approved
by the Secretary of the HHS. See 42 U.S.C. § 1396a(b).
“To gain payment under Medicaid for covered drugs, a manufacturer must
enter a standardized agreement with HHS; in the agreement, the manufacturer
undertakes to provide rebates to States on their Medicaid drug purchases.” Astra
USA, Inc. v. Santa Clara County, 131 S. Ct. 1342, 1346 (2013) (citing 42 U.S.C.A. §
1396r-8(a)); see United States ex rel. Schumann v. AstraZeneca Pharms. L.P., 769
F.3d 837, 841 (3d Cir. 2014).
”Once a drug manufacturer enters into a rebate
agreement, the law requires the State to provide coverage for that drug under its plan
unless the State complies with one of the exclusion or restriction provisions in the
Medicaid Act.” Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 652 (2003)
(citing 42 U.S.C. § 1396r-8(d)). For example, a State may exclude coverage for drugs
such as “agents . . . used for cosmetic purposes or hair growth.” 42 U.S.C. § 1396r8(d)(2)(C). Here, Relator has not alleged that Plavix, during the relevant time period,
was on any state or federal exclusion lists.
Importantly, similar to Medicare’s requirement, the Medicaid statue is clear
that a plan participant will receive reimbursements only for a “covered outpatient
drug.” United States ex rel. Campie v. Gilead Sci., Inc., No. 11-941, 2015 U.S. Dist.
LEXIS 77261, at *17 (N.D. Cal. Jun. 12, 2015).
Identical to Medicare’s definition,
all drugs approved as safe and effective by the FDA since 1962 qualify as “covered
outpatient drugs” under Medicaid. See 42 U.S.C. § 1396r-8(k)(2); United States ex
rel. Conrad v. Abbott Labs., Inc., No. 02-11738, 2013 U.S. Dist. LEXIS 26048, at *10
(D. Mass. Feb. 25, 2013) (finding that “[a]ll drugs approved as safe and effective by
the FDA since 1962 qualify as covered outpatient drugs” under Medicaid); Campie,
2015 U.S. Dist. LEXIS 77261, at *17; In re Rezulin Products Liab. Litig., 524 F. Supp.
2d 436, 439 (S.D.N.Y. 2007); United States v. Ortho-McNeil Pharm., Inc., No. 038239, 2007 WL 2091185, at *2 (N.D. Ill. Jul. 20, 2007); United States ex rel. Conrad
v. Healthpoint, Ltd., No. 02-11738, 2012 WL 1004775, at *1 (D. Mass. Mar. 26, 2012);
Rostholder, 745 F.3d at 701.
Indeed, also like Medicare, Medicaid reimburses
“covered outpatient drugs” that are prescribed for a “medically accepted indication,”
which is defined as “any use for a covered outpatient drug . . . approved under the
[FDCA].” See 42 U.S.C. § 1396r-8(k)(6). Accordingly, during the relevant time period,
Plavix was considered a “covered outpatient drug” reimbursable under Medicaid.
Therefore, I reject Relator’s argument that under the federal Medicaid act, a drug
prescribed for its on-label, FDA-approved use can be found to be not “medically
Relator nonetheless argues that the requirement that a drug be a “covered
outpatient drug” is merely a prerequisite to payment coverage, and that state
Medicaid plans additionally require, pursuant to 42 C.F.R. § 440.230(d), that a
prescribed drug also be “medically necessary.” Indeed, the TAC cites to authority 14
Relator cites to statutes and regulations, and also to manuals provided by state
agencies to Medicaid providers. Defendants have not argued that such manuals are
non-binding and therefore cannot be used as a basis to show that a state requires
medical necessity before a Medicaid service is covered. Such an argument would be
fruitless, however, as such manuals are “interpretive rules,” and similar Medicare
from all fifty states indicating that each state’s Medicaid plan will only cover
services 15 which are medically necessary. See TAC at ¶¶ 52–102. “Medical necessity,”
Relator alleges, is to be determined in the first instance by the treating physician. In
that regard, Relator argues that Defendants’ misrepresentations of the effectiveness
of Plavix prevented physicians from making this determination accurately, and that
these misrepresentations caused physicians to falsely conclude that Plavix was a
medically necessary drug eligible for Medicaid coverage.
In response, Defendants maintain that states do not possess the authority to
impose a “medical necessity” requirement under Medicaid, and therefore, a medical
necessity requirement would violate federal law. Rather, Defendants submit that
Medicaid only authorizes the states to limit the “amount, duration, and scope” of
coverage, and in that connection, the state Medicaid provisions relied upon by
Relator, only allow for limitations that are consistent with federal law, but do not
supersede the federal requirement that on-label prescriptions of FDA approved drugs
are reimbursable under Medicaid. 16 In support of their position, Defendants rely on
Edmonds v. Levine, 417 F. Supp. 2d 1323, 1330–31 (S.D. Fla. 2006), for the
manuals have been the basis for “numerous cases imposing FCA liability, and even
criminal false claims liability.” In re Cardiac Devices Qui Tam Litigation, 221 F.R.D.
318, 351 (D. Conn. 2004).
42 C.F.R. § 440.1 et seq. defines various “services” within the Medicaid law;
“services” includes “prescribed drugs.” 42 C.F.R. § 440.120(a).
Notably, Defendants do not, however, claim that the state requirements are
preempted; rather, Defendants maintain that the states’ requirements compliment
the federal standard under Medicaid.
proposition that a state imposed “medical necessity” requirement would violate
federal law and that states may only remove Medicaid-eligible drugs from coverage
in four specific circumstances detailed in the Medicaid statute.
Before I discuss Edmonds, I must first discuss the states’ authority in limiting
prescription drug coverage under Medicaid. Under federal law, states choosing to
participate in Medicaid must provide a core set of mandatory services to qualified
beneficiaries. See id.; 42 U.S.C. §§ 1396a(a)(10)(A), 1396d(a). For example, state
Medicaid plans must provide coverage to qualified beneficiaries for "inpatient
hospital services" and "laboratory and X-ray services." Id. at §§ 1396a(a)(10)(A),
1396d(a)(1), (3). In addition to those mandatory services, “a state may also elect to
cover other categories of services.” NB v. District of Columbia, No. 14-7054, 2015 U.S.
App. LEXIS 12351, at *3-4 (D.C. Cir. Jul. 17, 2015). Those optional services then
become part of the state's Medicaid plan, in which event the optional services become
subject to the requirements of federal law. Doe 1-13 ex rel. Doe, Sr. 1-13 v. Chiles,
136 F.3d 709, 714 (11th Cir. 1988). Indeed, prescription drug coverage is one of those
optional services. See 42 U.S.C. §§ 1396a(a)(10)(A), 1396d(a)(12); NB, 2015 U.S. App.
LEXIS, at *4.
When a state elects to cover prescription drugs, it can limit or condition
coverage in certain ways. First, Medicaid permits participating states some leeway
to determine which classes of prescription drugs to cover. Id. at *5. The statute
specifies categories of drugs that a state may entirely “exclude from coverage.” 42
U.S.C. § 1396r-8(d)(2). Second, for non-excluded drugs, Medicaid enables a state to
limit the circumstances under which it will provide coverage. A state may, for
example, subject a drug to "prior authorization" requirements. 42 U.S.C. § 1396r8(d)(1)(A). Additionally, states may exclude or otherwise restrict a covered outpatient
drug if: (1) the prescribed use is not for a medically accepted indication (as defined in
subsection (k)(6)); (2) the drug is contained in the list referred in 42 U.S.C. § 1396r8(d)(2); (3) the drug is subject to such restrictions pursuant to an agreement between
a manufacturer and a State authorized by the Secretary; or (4) the State has excluded
coverage of the drug from its formulary. See 42 U.S.C. § 1396r-8(d)(1)(B)(i) – (iv).
The district court in Edmonds was confronted with the issue whether a state’s
imposition of certain requirements restricting prescription drug coverage exceeded
the state’s authority under Medicaid. In that case, the plaintiffs sued the Florida
Agency for Health Care Administration, which had determined that Neurontin, a
drug used to treat, inter alia, seizures, was only covered for “two FDA-approved uses,
and [only] for off-label uses . . . [which were] substantiated as being safe and effective
by double-blind, placebo-controlled, randomized clinical trials.” Edmonds, 417 F.
Supp. 2d at 1331.
All other off-label uses were excluded from Medicaid coverage
entirely. Id. Referring to states’ authority provided in 42 U.S.C. § 1396r-8(d)(1)(B) -as outlined above -- the Edmonds court first explained that “the [Medicaid’s] statutory
scheme is carefully constructed in such a way to precisely circumscribe the only
methods by which a state may remove a Medicaid-eligible drug from coverage and
prevent it from either arbitrarily removing a drug or adopting its own ad hoc
procedure for removing a drug from coverage.” Id. at 1330–31. In that regard, the
court dealt only with the question of “whether the disputed uses are for medically
accepted indications.” Id. at 1327. The court found that the state’s interpretation of
“medically accepted indication” -- which completely excluded from Medicaid coverage
all off-label uses that were not substantiated by clinical trials -- was not congruent
with federal law, and therefore, could not be used to categorically exclude a drug from
coverage. Id. at 1337.
I do not find Edmonds applicable here. First, unlike the State of Florida in
Edmonds, which attempted to place certain restrictions on a particular drug in
violation of federal law, there are no allegations here that Plavix was restricted, or
excluded, from coverage by any states’ Medicaid plans. Indeed, Relator does not
allege that the state statutes or regulations categorically exclude Plavix, or certain
uses of Plavix, from Medicaid coverage. Rather, Relator alleges that Plavix was not
“medically necessary” under those states’ plans and that, absent Defendant’s false
marketing, physicians would have concluded that Plavix was unnecessary and not
That said, there is no dispute that federal law permits states to place
reasonable restrictions on prescription drugs covered by Medicaid. 42 U.S.C. §§
1396r-8(d)(1), (5); 42 C.F.R. § 440.230(d); NB v. District of Columbia, 34 F. Supp. 3d
146, 153 (D.D.C. 2014), rev. on other grounds, NB v. District of Columbia, 2015 U.S.
App. LEXIS 12351 (D.C. Cir. July 17, 2015). However, “[a] State plan for medical
assistance must . . . include reasonable standards . . . for determining eligibility for
and the extent of medical assistance under the plan . . . which are consistent with the
objectives of this subchapter [of Medicaid],” 42 U.S.C. § 1396a(a)(17), and the
implementing regulation requiring that each provided service, including prescription
drugs, "must be sufficient in amount, duration, and scope to reasonably achieve its
purpose.” 42 C.F.R. § 440.230(b); Detgen v. Janek, 752 F.3d 627, 631 (5th Cir. 2014).
That requirement has been interpreted by the Supreme Court to include certain
reasonable restrictions relating to costs, see Walsh, 538 U.S. at 666 and Beal v. Doe,
432 U.S. 438, 444 (1977), albeit budgetary considerations cannot be “the conclusive
factor in decisions regarding Medicaid.” Arkansas Med. Soc., Inc. v. Reynolds, 6 F.3d
519, 531 (8th Cir. 1993); Bontrager v. Indiana Family & Soc. Servs. Admin., 697 F.3d
604, 611 (7th Cir. 2012); Tallahassee Mem'l Reg'l Med. Ctr. v. Cook, 109 F.3d 693, 704
(11th Cir. 1997).
Here, the TAC cites to authority from all fifty states indicating that each state’s
Medicaid plan will only cover services which are medically necessary. See TAC at ¶¶
52–102. The majority of the states, as alleged, simply include “medical necessity” as
a condition for reimbursement. 17 However, Relator has not alleged how those states
have defined “medical necessity”; in other words, there are no allegations relating to
the types of restrictions that have been placed on prescription drug coverage by those
According to Relator, thirty-three states, including the District of Columbia,
have added the term “medical necessity” to their state Medicaid statutes. However,
Relator has specifically alleged that the following state Medicaid statutes include in
their definition of “medically necessary” a requirement that treatment additionally
be cost effective: Connecticut, Delaware, Idaho, Kansas, Maryland, Massachusetts,
Mississippi, Montana, Nebraska, North Carolina, Ohio, Oklahoma, Rhode Island,
South Dakota, Utah, Washington and Wyoming. See TAC ¶¶ 58, 59, 64, 68, 72, 73,
76, 78, 79, 85, 87, 88, 91, 93, 96, 99, 102. I will refer to these states as the “CostImposed States.”
states during the relevant time period. Indeed, as I have explained above, without
any specific restrictions by a state, on the face of the federal Medicaid statute, a drug
that has been approved by the FDA, such as Plavix, is considered a “covered
outpatient drug” reimbursable under Medicaid when that drug is prescribed for its
on-label use. In that connection, while Relator asserts that Plavix may not be as safe
or effective as other drugs, such as aspirin, she does not explain why this distinction
would exclude Plavix from coverage as medically unnecessary, particularly since the
FDA has approved Plavix for the uses prescribed by doctors here.
Relator has not sufficiently alleged a FCA claim as to any of the thirty-three states,
including the District of Columbia.
The allegations based on the Medicaid plans of the Cost-Imposed States stand
on a different footing. Relator alleges that the Cost-Imposed States have included in
their Medicaid statutes a cost effective requirement. In that connection, Relator
alleges that Plavix is no more effective than aspirin, which is significantly less costly.
See TAC at ¶¶ 115–120. Because, as Relator avers, “Plavix was regularly and
systematically presented to physicians as superior to aspirin for [certain] patients,”
see id. at ¶ 152, Defendants caused these physicians to submit false claims. At this
stage of this litigation, I find that Relator has stated plausible claims under the CostImposed States’ Medicaid regime.
Relator alleges that cost-effectiveness is a
“condition of Government payment”—that is, a condition “which, if the government
knew they were not being followed, might cause it to actually refuse payment.”
Wilkins, 659 F.3d at 309. Indeed, the state statutes and regulations cited by Relator,
on their face, indicate that services and treatments must be cost-effective in order to
be covered by Medicaid. In response, Defendants summarily argue that the states
cannot override the federal mandate that on-label prescriptions be reimbursed.
Again, for support, Defendants rely on the Edmonds decision, which I have already
distinguished. Other than Edmonds, Defendants have not relied on any other case
law to support their position. As I have outlined above, states have the authority to
impose certain restrictions based on cost, albeit those impositions must not be the
sole consideration under the states’ Medicaid plans. It appears, pursuant to Relator’s
allegations, that the Cost-Imposed States have included not only a cost-based
restriction, but rather, those states have also mandated that the cheaper alternative
must be equally effective as Plavix. See, e.g., Detgen ex rel. Detgen v. Janek, 752
F.3d 627, 632 (5th Cir. 2014). And, these restrictions, as alleged, appear to be
consistent with the limitations authorized by Medicaid.
That said, however, I note that the Medicaid statutory scheme – particularly
with respect to the states’ authority – is complex. Indeed, Relator’s claims in this
context may not survive scrutiny should, for example, evidence show that Plavix was
placed on certain states’ Preferred Drug Lists. See Iowa Dep't of Human Servs. v.
Ctrs. for Medicare & Medicaid Servs., 576 F.3d 885, 887 (8th Cir. 2009) (explaining
that doctors may prescribe to Medicaid patients [drugs on a state’s Preferred Drug
List] without having to obtain prior authorization from the state.”); NB, 2015 U.S.
App. LEXIS 12351, at *4. As such, I make no comment on the ultimate viability of
Relator’s claims in this regard. Simply, I find here that Relator’s allegations in this
context are sufficient to pass Rule 12(b)(6) muster.
Accordingly, with respect to Medicaid in the states of Connecticut, Delaware,
Idaho, Kansas, Maryland, Massachusetts, Mississippi, Montana, Nebraska, North
Carolina, Ohio, Oklahoma, Rhode Island, South Dakota, Utah, Washington, and
Wyoming, Relator has stated a claim under the FCA. As to the remaining states,
including the District of Columbia, however, Relator’s FCA claims are dismissed for
failure to state a claim.
In connection with the FCA claims, the TAC additionally alleges that
Defendants violated the FCA by “dup[ing] each state’s Medicaid program into
including Plavix on its formulary.” TAC at ¶ 49. A formulary is “a list of Medicaideligible drugs for which the state will provide reimbursement when prescribed for
medically accepted indications.” Edmonds, 417 F. Supp. 2d at 1328; see 42 U.S.C. §
1396r-8(d)(4). The formulary must be “developed by a committee consisting of
physicians, pharmacists, and other appropriate individuals.” 42 U.S.C. § 1396r8(d)(4)(A). Generally, a formulary is required to include “the covered outpatient drugs
of any manufacturer which has entered into and complies with an agreement under
subsection (a) of this section.” 18 Id. However, the committee may exclude a Medicaideligible drug from the formulary “with respect to the treatment of a specific disease
Subsection (a) requires manufacturers to “enter into and have in effect a
rebate agreement” with the state for each covered drug as a precondition of Medicaid
coverage. 42 U.S.C. § 1396r-8(a).
or condition for an identified population (if any) only if, based on the drug's labeling .
. . the excluded drug does not have a significant, clinically meaningful therapeutic
advantage in terms of safety, effectiveness, or clinical outcome of such treatment for
such population over other drugs included in the formulary.” 42 U.S.C. § 1396r8(d)(4)(B). The TAC asserts that “each states’ Medicaid program would have excluded
Plavix . . . from its Medicaid formulary, but for the false marketing scheme
perpetuated by DMS/Sanofi to mislead the states into believing Plavix was more
effective than aspirin for certain indications.” TAC at ¶ 132. Thus, according to the
TAC, “[e]ach time a claim was submitted to the federal government for Plavix on the
basis of Plavix being on a state Medicaid formulary, it constituted a false claim.” Id.
at ¶ 186.
Defendant argues that, with regard to the formulary allegations, Relator “has
not and cannot identify any false certification which actually was a prerequisite to
payment.” Def Br. at 11. Additionally, Defendant contends that “Relator’s assertions
about hypothetical decisions by Medicaid or Medicare Part D P&T committees fail to
state a claim because they are wholly speculative.” Id. at 12. Because the committees
are required to “evaluate independently the clinical data and information,”
Defendants contend that Relator has not alleged how the purportedly false marketing
was material to the committees’ decisions on formularies. To counter, Relator insists
that her claims are not hypothetical, because the Pharmacy and Therapeutics
Committees ‘are comprised of doctors and pharmacists—the very individuals
targeted by Defendants in their scheme.” Rel. Opp. at 14. In that respect, Relator
reasons that the facts “about how Defendants misled the doctors and pharmacists are
equally applicable in this context.” Id. I disagree with Relator’s position.
Crucially, in order to state a claim under the FCA, a plaintiff must first allege
that a false claim was made. See Wilkins, 659 F.3d at 305. Here, while Relator alleges
that a false claim was made by a physician each time that a prescription for Plavix
was reimbursed on the basis of Plavix’s status on a state formulary, these
reimbursement claims could not be false because Plavix was already placed on each
state’s formulary. Put differently, Relator cannot identify any false certification
which actually was a prerequisite to payment.
Equally deficient, Relator’s
speculative allegations with respect to Medicaid P&T Committees also do not state a
There are simply no allegations how any of Defendants’ allegedly false
promotional statements were material to, or had any bearing on, the decisions made
by these committees.
Nevertheless, in her opposition papers, Relator maintains that the false claim
arose when “Plavix was reimbursed because of its status on the formulary, and thus
deemed ‘medically necessary’ by the Medicare or Medicaid program.” Rel. Opp. at 15;
see also TAC at ¶ 24–25 (alleging that Defendants’ scheme “caused states to include
Plavix on their state’s Medicaid formularies for indications for which Plavix is not
medically necessary,” thus causing reimbursements pursuant to a formulary to be
false claims). However, this additional allegation is substantively the same with
regard to Relator’s theory of liability under Medicaid and Medicare Part D elsewhere
in the TAC – which theory I have already rejected. Hence, the additional averments
that Plavix is medically unnecessary under these Medicaid formularies do not create
a separate claim. Thus, to the extent that Relator’s claim is based solely on the
formularies’ inclusion of Plavix as a result of Defendants’ allegedly false or
misleading marketing, Relator has not sufficiently alleged that a false certification
was made. To the extent that Relator alleges that reimbursements pursuant to a
formulary were not “medically necessary,” Relator’s allegations have been rejected.
Having dismissed all claims except for those brought with respect to Medicaid
coverage in those states which include a requirement that treatment be costeffective—namely, Connecticut, Delaware, Idaho, Kansas, Maryland, Massachusetts,
Mississippi, Montana, Nebraska, North Carolina, Ohio, Oklahoma, Rhode Island,
South Dakota, Utah, Washington, and Wyoming—the remainder of this opinion will
apply only to those claims remaining. In addition, Defendants have argued that
Relator’s claims under the conspiracy provision of the FCA, and the state FCA claims
must be dismissed for the same reasons. I agree, except, again, for the states which
include a cost-effectiveness provision in their Medicaid requirements. Of these states,
Relator has asserted claims under the state-equivalent FCAs of Delaware, Montana,
Massachusetts, Rhode Island, Oklahoma, North Carolina, and Connecticut; these
claims are not dismissed. All the remaining state law counts are dismissed for failure
to state a claim.
Pleading Deficiencies under Rules 8 and 9(b)
Defendants argue that the TAC “suffers from fatal pleading deficiencies that
should mandate dismissal pursuant to Rules 8(a) and 9(b) of the Federal Rules of
Civil Procedure.” Def. Br. at 13. Defendants assert that Relator
fails to identify: (i) a single physician to whom a
misrepresentation was made; (ii) a single instance (date,
time, and location) in which she or any other sale
representative made an alleged misrepresentation; (iii) a
single physician that prescribed Plavix as a result of such
a misrepresentation; or (iv) any Medicaid or Medicare
beneficiary that that received and filled such a
Id. at 14. Defendants additionally assert that “Relator fails to provide a single well
pleaded factual allegation that even one doctor submitted a prescription for an FDAapproved indication for Plavix that was not necessary for a patient. Id. Finally,
Defendants argue that Relator’s formulary allegations are deficient, because they are
“based on ‘information and belief’” but do not set forth the factual basis for such belief.
Id. at 15.
In their Motion to Dismiss the Second Amended Complaint, filed in the
transferor court, Defendants argued that Relator failed to identify:
misrepresentation was made, any instance in which she or
any other sale representative made any alleged
misrepresentation, any physician that prescribed the drug
as a result of such a misrepresentation, any Medicare
beneficiary that that received and filled such a
prescription, or any pharmacist that filled such a
Motion to Dismiss Second Amended Compl., Def. Br. at 24. Defendants also argued
in that Motion that “Relator’s failure to allege any detail identifying a claim
submitted by a doctor or pharmacy for reimbursement of Plavix under Medicare or
Medicaid thus requires dismissal here.” Id. at 23.
Chief Judge Herndon denied Defendants’ Motion to Dismiss under Rule 9(b).
See January 2013 Memorandum and Order. With regard to Defendants’ assertions
that the Second Amended Complaint was insufficient under Rule 9(b), Chief Judge
Herndon stated that “Relator’s instant allegations are sufficient to comport with the
requirements of Rule 9(b) in this instance,” and that “[a]s to which specific physicians
such misrepresentations were allegedly made, and further which specific employees
of defendants’ instructed relator to make such misrepresentations, such details can
be fleshed out in discovery.” Id. at 8–9. In response to Defendants’ arguments that
“relator is required at this stage in the proceedings to identify specific claims actually
submitted which relator alleges were false,” the court stated that it “does not feel such
specificity is required in this instance.” Id. at 9 n.6.
While the Third Amended Complaint has added significant details as to the
states’ limitations on Medicaid and Medicare, see TAC at ¶¶ 52–102, and as to the
states’ formulary programs, see TAC at ¶¶ 132–183, the factual allegations otherwise
remain the same as alleged in the Second Amended Complaint. Thus, with the
exception of the Defendants’ new arguments regarding the formulary allegations,
Chief Judge Herndon’s decision regarding the adequacy of Relator’s pleading remains
the law of the case.
“The law of the case doctrine directs courts to refrain from re-deciding issues
that were resolved earlier in the litigation.” Pub. Interest Research Grp. of New
Jersey, Inc. v. Magnesium Elektron, Inc., 123 F.3d 111, 116 (3d Cir. 1997). The rule
was developed “to maintain consistency and avoid reconsideration of matters once
decided during the course of a single continuing lawsuit.” In re Pharmacy Benefit
Managers Antitrust Litig., 582 F.3d 432, 439 (3d Cir. 2009) (internal quotation marks
and citation omitted). Law of the case is a matter of a court’s discretion, but a court
faced with revisiting a prior decision in the case “should be loathe to do so in the
absence of extraordinary circumstances such as where the initial decision was clearly
erroneous and would make a manifest injustice.” Id. (quoting Christianson v. Colt
Indus. Operating Corp., 486 U.S. 800, 816 (1988)). In addition, a court may revisit its
own decisions or one of a coordinate court where (1) new evidence is available; (2) “a
supervening new law has been announced”; or (3) “whenever it appears that a
previous ruling, even if unambiguous, might lead to an unjust result.” Id. The law of
the case doctrine, however, only applies “to issues that the court actually decided,
whether expressly or by implication.” Coca-Cola Bottling Co. of Shreveport v. Coca-
Cola Co., 988 F.2d 414, 429 (3d Cir. 1993).
Here, two of Defendants’ arguments were previously argued and expressly
decided by the transferor court in this case. Indeed, these arguments were not raised
in Defendants’ previous motion for reconsideration before this Court, and therefore,
the section of the transferor court’s opinion on these issues was not disturbed. None
of the “extraordinary circumstances” which merit a court revisiting a prior decision
apply here. Thus, I decline to revisit this issue, and hold that, in accordance with
Chief Judge Herndon’s previous decision, Relator’s claims are adequate under Rule
Defendants have raised one new issue, namely that Relator’s formulary
allegations are insufficient. However, I have already determined that Relator’s
formulary allegations fail to state a claim, supra. Therefore I need not address this
Statute of Limitations
Federal Statute of Limitations
The FCA states that:
A civil action under section 3730 may not be brought—
(1) more than 6 years after the date on which the violation
of section 3729 is committed, or
(2) more than 3 years after the date when facts material to
the right of action are known or reasonably should have
been known by the official of the United States charged
with responsibility to act in the circumstances, but in no
event more than 10 years after the date on which the
violation is committed
whichever occurs last.
31 U.S.C. § 3731(b).
I note, moreover, that when applying the standard of Rule 9(b) to claims under
the FCA, the Third Circuit, like the First, Fifth, and Ninth Circuits, uses a “nuanced”
version of the heightened pleading standard. Foglia v. Renal Ventures Mgmt., LLC,
754 F.3d 153, 157 (3d Cir. 2014). Under this reading “it is sufficient for a plaintiff to
allege particular details of a scheme to submit false claims paired with reliable indicia
that lead to a strong inference that claims were actually submitted.” Id. at 156. The
court also repeated the statement from Wilkins that “we ha[ve] never held that a
plaintiff must identify a specific claim for payment at the pleading stage of the case
to state a claim for relief.” Id. Thus, Defendants’ argument that the Complaint must
identify specific false claims is misplaced.
Defendants argue that the six-year statute of limitations requires that the
“allegations regarding Defendants’ alleged false statements . . . be limited to conduct
occurring after March 30, 2005.” Def. Br. at 24. Relator argues that the three year
provision applies to claims brought by relators, and that there “is no indication on the
face of the complaint that the Government should have known about the fraud more
than three years before this action was brought.” Rel. Opp. at 36. Defendants, in
response, contend that the three-year provision “does not apply when, as here, the
Government declines to intervene.” Def. Repl. at 8.
The Third Circuit has not stated definitively whether the three-year tolling
provision applies to claims brought by relators. But see United States ex rel. Malloy
v. Telephonics Corp., 68 Fed. App’x 270, 273 (3d Cir. 2003) (stating that the time a
relator became aware of fraud “is important, because it determines whether we apply
the six year statute of limitations in § 3731(b)(1), or the three year limitation in §
3731(b)(2)”). Other circuit courts have divided on the issue. Compare United States
ex rel. Sanders v. North Amer. Bus Indus., Inc., 546 F.3d 288, 293–96 (4th Cir. 2008)
(holding that three-year tolling provision does not apply where Government does not
intervene); United States ex rel. Sikkenga v. Regence Bluecross Blueshield, 472 F.3d
702, 725 (10th Cir. 2006) (same) with United States ex rel. Hyatt v. Northrop Corp.,
91 F.2d 1211, 1216 (9th Cir. 1996) (holding that three-year tolling provision applies
“to qui tam plaintiffs as well as to the government”). 20 However, district courts in this
Where the tolling provision has been held to apply to suits brought by qui tam
plaintiffs, “the three-year extension of the statute of limitations begins to run once
circuit have held that the three-year tolling provision only applies when the
Government chooses to intervene in a FCA case. United States ex rel. Silver v.
Omnicare, No. 11-1326, 2014 WL 4827410, at *8 (D.N.J. Sept. 29, 2014) (“A plain
reading of the statute compels the conclusion that a FCA claim must be filed within
six years, or if the U.S. government intervenes, the limitations period is extended for
three years”); United States ex rel. Simpson v. Bayer Corp., No. 05-3895, 2014 WL
1418293, at *12 (D.N.J. April 11, 214) (applying only the six year limitation period to
qui tam action); United States ex rel. Bauchwitz v. Hollomon, 671 F. Supp. 2d 674,
694–95 (E.D. Pa. 2009) (“we conclude that the three-year tolling period in § 3731(b)(2)
does not apply in cases where the government does not intervene.”). These cases have
followed the logic of the United States Supreme Court, in United States ex rel.
Eisenstein v. City of New York, 556 U.S. 928 (2009), which held that, for the purposes
of Fed. R. App. P. 4, the United States is not a party to a qui tam FCA action unless
it chooses to intervene.
I agree with the other courts in this Circuit. As the Fourth Circuit noted:
“Section 3731(b)(2) refers only to the United States—and not to relators.” Sanders,
546 F.3d at 293. To read the statute as permitting the three year tolling provision to
apply to relator’s suits would “produce the bizarre scenario in which the limitations
qui tam plaintiff knows or reasonably should have known the facts material to his
right of action.” Hyatt, 91 F.2d at 1217–18; see also Malloy, 68 Fed. App’x at 273
(asking when relator knew of fraud for purpose of determining whether six year or
three year provisions applied). Relator’s statement that the statute of limitations had
not run because the Government could not have known about the fraud more than
three years before she brought suit is incorrect in any jurisdiction.
period in a relator's action depends on the knowledge of a nonparty to the action.” Id.
I, therefore, find that the six year statute of limitations applies here, as the United
States has declined to intervene. Thus, to the extent that Relator alleges that
Defendants’ conduct resulted in the filing of false claims prior to March 30, 2005, six
years prior to the filing of the initial Complaint, such claims are dismissed.
State Statute of Limitations
The only remaining state law FCA claims are those of Delaware, Montana,
Massachusetts, Rhode Island, Oklahoma, North Carolina, and Connecticut. Of these,
the following states have statutes of limitations which track the language of the
Federal False Claims Act in providing a six year statute of limitations, and a tolling
provision based on when a state official knew or should have known of the facts
underlying the action: Delaware (Del. Code. tit. 6 § 1209(a)(1)); Massachusetts (Mass.
Gen. Laws ch. 12, § 5K); Montana (Mont. Code Ann. § 17-8-404(1)); North Carolina
(N.C. Gen. Stat. § 1-615(a)); Oklahoma (Okla. Stat. Ann. § 63-5053.6(B)(1)); and
Rhode Island (R.I. Gen. Laws § 9-1.1-5(b)). 21 Neither party has argued that any of
these statutes should be read differently than the federal statute; accordingly, as with
the federal claims, to the extent that Relator alleges that Defendants’ conduct
resulted in the filing of false claims prior to March 30, 2005, six years prior to the
filing of the initial Complaint, such claims are dismissed.
Defendants have not raised the statute of limitations for any other state to
which the remaining claims apply.
Defendants argue, in vague terms, that Relator’s remaining state FCA claims
should be dismissed for several reasons. First, Defendants argue that Relator’s claims
under the state or local statutes that “are substantially similar to and/or track the
language of the federal FCA must likewise be dismissed,” on the basis of the public
disclosure bar. Def. Br. at 25 and n. 21. However, as described supra, I have
determined that Relator is an original source within the meaning of the federal
statute, as applied to conduct occurring before 2010, but that Relator’s claims
involving conduct after 2010 must be dismissed under the federal public disclosure
bar. As Defendants have not suggested that the state claims would be analyzed
differently, the same result applies.
Next, Defendants assert that Relator failed to comply with the qui tam
provisions of the various state false claims acts because she “fails to allege she
provided all material evidence in support of her claims or served her complaint on
any state other than Illinois.” Id. at 25–26. Indeed, where “plaintiffs here have failed
to comply with every pre-condition required by state false claims acts,” the state
claims must be dismissed. United States ex rel. Fowler v. Caremark RX, Inc., Civ.
No. 03-8714, 2006 WL 1519567, at *5 (N.D. Ill. May 30, 2006). However, the statutes
cited by defendant are not pleading requirements, but procedural requirements. The
statutes require that the Complaint be served upon the states after filing. See, e.g.,
Del. Code Tit. 6 § 1203(b)(2), Mass. Gen. Laws ch. 12 § 5C(3), N.C. Gen. Stat. § 1608(b)(2). However, there is no evidence on this record that Relator has not complied
with these state procedural requirements. In fact, the docket of this case reflects that
Summonses were returned executed by various states. See Docket # 30-33. That
being said, should Defendants discover that Relator has failed to comply with these
service provisions, Defendants may then move to dismiss on that basis.
Third, Defendants argue that Connecticut, Delaware, Massachusetts, and
North Carolina permit a relator to bring qui tam actions only in the states’ own
courts. However, 31 U.S.C. § 3732(b) provides that “[t]he district courts shall have
jurisdiction over any action brought under the laws of any State for the recovery of
funds paid by a State or local government if the action arises from the same
transaction or occurrence as an action brought under section 3730.” Furthermore, the
Eastern District of Pennsylvania has squarely rejected Defendants’ argument, based
on 31 U.S.C. § 3732(b) and the principles of supplemental jurisdiction. United States
ex rel. Galmines v. Novartis Pharmaceuticals Corp., No. 06-3213, 2013 WL 5924962,
at *2–6 (E.D. Pa. Nov. 5, 2013). Finally, there are numerous federal actions which
have been brought under these states’ false claims provisions; Defendants have not
pointed to any cases that have been dismissed because the state statute does not
permit the suit to be brought in federal court. See United States ex rel. Ruscher v.
Omnicare, Inc., No. 08-3346, 2014 WL 2618158, at *28 (S.D. Tex. June 12, 2014)
(Defendants’ sole support for their assertion that state FCA claims must be filed in
state courts was withdrawn, motion therefore denied).
Fourth, Defendants assert that nineteen of the state law claims should be
dismissed to the extent that the counts are based on “allegedly false claims submitted
prior to the relevant state law’s effective date where the statutes do not permit
retroactive application” or “where applying the laws retroactively would violate the
ex post facto clause of the United States Constitution.” Def. Br. at 26–27. Of these
nineteen state law claims, the claims under the laws of Connecticut, Delaware,
Montana, Massachusetts, North Carolina, Oklahoma, and Rhode Island remain.
Initially, Defendants do not explain why retroactive application of the False
Claims Act would violate the Ex Post Facto Clause. In order to determine whether a
law violates the Ex Post Facto Clause, United States Const. Art. 1, § 10, cl. 1, a court
must determine whether a law intended to establish civil or criminal proceedings.
Smith v. Doe, 538 U.S. 84, 92 (2003). If the law provides for civil, nonpunitive
proceedings, the court must determine whether the law is “so punitive either in
purpose or effect as to negate the State’s intention’ to deem it ‘civil.’” Id. On their face,
all of the state False Claims Acts are civil. Defendants have provided no evidence that
any of the state laws are punitive in either purpose or effect. I therefore decline to
address this argument further.
Moreover, Defendants merely cite to the state statutes and their effective
dates. The cited statutes do not state whether they are retroactive, and Defendants
do not point to case law or other authority explaining whether these statutes can or
cannot be applied retroactively. Defendants, as the moving party, have “the burden
of showing that no claim has been presented.” Hedges v. United States, 404 F.3d 744,
750 (3d Cir. 2005). This argument is therefore denied without prejudice.
Motion for Reconsideration
During the pendency of this Motion to Dismiss, Relator also filed a Motion for
Reconsideration of this Court’s denial of Relator’s Motion for Suggestion of Remand
to the United States District Court for the Southern District of Illinois. Relator
suggests that because two similar cases, Hood ex rel. Mississippi v. Bristol Myers
Squibb Co., Civ. No. 13-5910, and West Virginia ex rel. McGraw v. Bristol Myers
Squibb Co., Civ. No. 13-1603, have been transferred to other jurisdictions, her action
“now stands alone in stark contrast to the eighty-three other personal-injury actions
that . . . are now consolidated before this Court for pretrial proceedings.” Mot. for
Recon. at 4.
The multidistrict litigation statute provides that “[w]hen civil actions involving
one or more common questions of fact are pending in different districts, such actions
may be transferred to any district for coordinated or consolidated pretrial
proceedings” 28 U.S.C. § 1407(a). The judicial panel on multidistrict litigation may
transfer such a case “upon its determination that transfers for such proceedings will
be for the convenience of parties and witnesses and will promote the just and efficient
conduct of such actions.” Id.
The MDL panel which transferred this case to the District of New Jersey noted,
in response to Relator’s opposition to the transfer, that, like the present case, “[t]he
complaints in the personal injury actions also contain numerous allegations that
defendants improperly marketed Plavix.” In re Plavix Mktg., Sales Practices &
Products Liab. Litig. (No. II), 923 F. Supp. 2d 1376, 1379 (U.S. Jud. Pan. Mult. Lit.
2013). Similarly, this Court, when deciding Relator’s Motion for Suggestion of
Remand, found that between this case and the personal injury cases, “[t]here is an
overlap of factual issues and there is no doubt about that.” Mot. Hearing Aug. 21,
2013, at 8-12 to -13. The inclusion of this case as part of the MDL proceedings was
not based on the other qui tam marketing suits, but rather on the commonalities
between this action and the personal injury suits. These commonalities have not
Moreover, the other two qui tam suits were remanded because this Court
lacked subject matter jurisdiction over the state law parens patriae claims. West
Virginia ex rel. McGraw v. Bristol Myers Squibb Co., 2014 WL 7 93569 (D.N.J. June
3, 2014); Hood, Civ. No. 13-5910, Dkt No. 100 (July 22, 2014). There is no such issue
in this case.
Accordingly, the Motion for Reconsideration is denied.
For the reasons expressed above, Defendants’ Motion to Dismiss is granted in
part and denied in part, as follows: Relator’s claims under the federal FCA are
dismissed, except to the extent the claims relate to state Medicaid plans, which have
imposed a cost effective requirement, in the following states: Connecticut, Delaware,
Idaho, Kansas, Maryland, Massachusetts, Mississippi, Montana, Nebraska, North
Carolina, Ohio, Oklahoma, Rhode Island, South Dakota, Utah, Washington, and
Wyoming. However, to the extent that Relator’s remaining claims are based on
allegations that Defendants’ deceptive marketing practices caused Plavix to be placed
on state Medicaid and Medicare formularies, those portions of the claims are
dismissed. In addition, pursuant to the statute of limitations, the federal claims are
restricted to conduct which resulted in the making of false claims after March 30,
2005. All claims arising under state law are dismissed, except for the following states:
Delaware, Montana, Massachusetts, Rhode Island, Oklahoma, North Carolina, and
Connecticut. Those remaining state law claims are, like the federal claims, limited
to conduct which resulted in the making of false claims after March 30, 2005.
Additionally, Relator’s Motion for Reconsideration of this Court’s denial of the
Motion for Suggestion of Remand is denied.
An appropriate Order shall follow.
Date: August 20, 2015
Freda L. Wolfson
Hon. Freda L. Wolfson
United States District Judge
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