United States of America et al v. Astrazeneca Biopharmaceuticals, Inc. et al

Filing 109

MEMORANDUM AND ORDER: The defendants Rule 12(b)(1) motion is GRANTED and the Rule 12(b)(6) motion is DENIED as to the QT/QTc federal claim in Count One and GRANTED as to Count Two. Ordered by Judge Frederic Block on 4/17/2017. (Innelli, Michael)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------x
UNITED STATES OF AMERICA; THE
COMMONWEALTHS OF
MASSACHUSETTS AND VIRGINIA; THE
STATES OF CALIFORNIA, DELAWARE,
CONNECTICUT, MARYLAND,
COLORADO, FLORIDA, GEORGIA,
ILLINOIS, INDIANA, HAWAII,
LOUISIANA, MICHIGAN, MONTANA,
NEW HAMPSHIRE, NEW MEXICO, NEW
YORK, NEVADA, TENNESSEE, NEW
JERSEY, RHODE ISLAND, OKLAHOMA,
WISCONSIN, NORTH CAROLINA,
MINNESOTA AND WASHINGTON, THE
CITY OF CHICAGO AND THE DISTRICT
OF COLUMBIA ex rel. ALLISON ZAYAS,

MEMORANDUM AND ORDER
14-1718 (FB)

Plaintiff-Relator,
-againstASTRAZENECA BIOPHARMACEUTICALS,
INC., ASTRAZENECA PLC,
ASTRAZENECA, LP, and ASTRAZENECA
PHARMACEUTICALS, LP,
Defendants.
--------------------------------------------------x
Appearances:
For the Plaintiff-Relator
Meredith Tavenner Shepherd-Demings
Kenney & McCafferty, P.C.
1787 Sentry Parkway West
Suite 410, Building 18
Blue Bell, PA 19444

For the Defendants
John C. Dodds
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921

BLOCK, Senior District Judge:
Plaintiff-relator Allison Zayas (“plaintiff”) brought a qui tam suit under the False
Claims Act (“FCA”) and multiple related state-law causes of action against defendants
Astrazeneca Biopharmaceuticals, Inc.; Astrazeneca PLC; Astrazeneca, LP; and Astrazeneca
Pharmaceuticals, LP (together, “defendants”). In her Amended Complaint, plaintiff alleges
that defendants (1) marketed Seroquel IR and Seroquel XR (together, “Seroquel”) as safe
to be prescribed with QT/QTc prolonging medications when they knew of the risks of such
concomitant prescriptions, and (2) engaged in off-label promotion of Seroquel, and that
both of these actions led to the submission of false claims for payments to state and federal
governments. Defendants now move to dismiss plaintiff’s off-label promotion claims
pursuant to Federal Rule of Civil Procedure 12(b)(1), and all of plaintiff’s claims under
Rule 12(b)(6). For the following reasons, the Rule 12(b)(1) motion is GRANTED and the
Rule 12(b)(6) is DENIED as to the QT/QTc federal claim in Count One and GRANTED
as to Count Two.1
A. Rule 12(b)(1) Motion.
The first-to-file rule under the FCA bars any new claim if it is “related” to an FCA
1

As discussed at the March 31, 2017 oral argument plaintiff agreed to withdraw her state law
claims without prejudice to re-instate with a letter application. On April 6, 2017, the New York
Attorney General’s office filed a letter claiming that plaintiff did not have the authority to withdraw
those claims and requesting three weeks “to confer with all of the Plaintiff States and decide whether
to seek reinstatement of the State law claims.” April 6 Letter at 2. Plaintiff subsequently filed a
letter “withdrawing consent to the dismissal of those claims.” April 12 Letter at 1. The Court will
revisit this issue should the states implicated in this matter timely seek reinstatement.
2

claim in an already-pending action. See 31 U.S.C. § 3730(b)(5) (“[N]o person other than
the Government may intervene or bring a related action based on the facts underlying the
pending action . . . .”). When considering a challenge under that rule, a court must
therefore determine if a new FCA claim is related to an already-pending FCA claim. To do
so, the Court will apply the test used by the majority of Circuits—the essential claim
test—which looks not to whether the more recently-filed FCA claim is identical to an FCA
claim in an already-pending action, but to “whether the complaints allege the same material
facts, i.e. whether they involve the same core conduct, and would give rise to separate
recovery.” Id. at 76.
Defendants argue that plaintiff’s off-label promotion claim is barred by the first-tofile rule—and this Court therefore does not have subject matter jurisdiction over such
claim—because it is based on the same facts as an earlier-filed case in Delaware, which also
alleges off-label promotion. In rebuttal, plaintiff argues that her claim is distinct because
(1) she alleges off-label promotion to treat different diseases than those alleged to have
been promoted off-label in the Delaware action, (2) she alleges off-label promotion of
Seroquel IR, whereas the Delaware action concerns off-label promotion of Seroquel XR,
a different drug, and (3) the Delaware action is no longer pending.
Plaintiff’s first argument is unavailing. The False Claims act bars any person from
bringing a related action based on the facts underlying an already-filed action. To find that

3

plaintiff could avoid the first-to-file bar by enumerating different diseases for which
defendants promoted the same prescription drug off-label would mean transforming the
statute’s language from “related action” to “identical action.” See 31 U.S.C. § 3730(b)(5).
It would also mean disregarding the First Circuit’s well-reasoned application of the
essential element test, which concluded that “promotion of off-label uses of the two same
drugs, but tied to [different] diseases and symptoms . . . [is] not enough to reasonably
conclude the earlier . . . Complaint was not a related claim to the government based on the
facts.” See U.S. ex rel. Wilson v. Bristol-Myers Squibb, Inc., 750 F.3d 111, 119 (1st Cir.
2014).
Plaintiff’s second argument is factually incorrect. The Third Amended Complaint
in the Delaware action expressly alleges that “AstraZeneca’s off-label promotion of
Seroquel IR and Seroquel XR caused physicians to prescribe both drugs for non-medically
accepted uses . . . .” U.S. ex rel. Tracey Miksell-Branch v. AstraZeneca, et al., No. 10-cv154 (D. Del.), Third Amended Complaint at ¶¶ 112-135.
Plaintiff’s final argument is that the Delaware case is no longer pending because the
parties agreed to stay the case. After such agreement, the district court stayed and
administratively terminated the case “in a way that preserves the status quo of [the a]ction
as of the date of the stay.” U.S. ex rel. Tracey Miksell-Branch v. AstraZeneca, et al., No.
10-cv-154 (D. Del.), Joint Stipulation Requesting Stay of Action at 4. However, the
Delaware case was never dismissed. And as the Supreme Court recently instructed, “a qui
4

tam suit under the FCA ceases to be ‘pending’ once it is dismissed.” Kellogg Brown &
Root Servs., Inc. v. U.S., ex rel. Carter, 135 S. Ct. 1970, 1979 (2015) (emphasis added).
As the pending Delaware action alleges off-label promotion of Seroquel IR and
Seroquel XR, plaintiff’s off-label promotion allegations are barred by the first-to-file rule.
Therefore, pursuant to Rule 12(b)(1), the Court dismisses those claims.
B. Rule 12(b)(6) Motion.
1. Count One.
Count One in the Ninth Amended Complaint alleges a violation of the False Claims
Act. An entity is liable under the False Claims Act when it “‘knowingly presents, or causes
to be presented, a false or fraudulent claim for payment or approval’ to the U.S.
government; or . . . ‘knowingly makes, uses, or causes to be made or used, a false record
or statement material to a false or fraudulent claim.’” U.S. ex rel. Polansky v. Pfizer, Inc.,
822 F.3d 613, 618 (2d Cir. 2016) (quoting 31 U.S.C. § 3729(a)-(b)).
The Court, taking the allegations as true and viewing the complaint in the light most
favorable to plaintiff, finds she has met this burden with regards to the QT/QTc interval
prolongation claims. Plaintiff alleges that federal Medicare paid for Seroquel prescriptions
that were prescribed concomitantly with QT/QTc prolonging medications from 1997 to
2009. NAC at ¶¶ 259, 815. She alleges those claims were factually false because
defendants misrepresented the risk of drug interaction between Seroquel and QT/QTc
prolonging medications in the requisite drug utilization review so that the Seroquel
5

prescriptions would be filled and the government would pay those claims. Id. at, e.g. ¶ 106;
see also Mikes v. Straus, 274 F.3d 687, 697 (2d Cir. 2001) (abrogated on other grounds by
Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 195 L. Ed. 2d 348 (2016))
(“[A] factually false’ certification, . . . involves an incorrect description of goods or services
provided or a request for reimbursement for goods or services never provided.”).
Plaintiff also alleges the claims were legally false. Defendants were party to two
Corporate Integrity Agreements with the federal government that required compliance with
all relevant laws to participate in federal health programs. However, they allegedly
disregarded these agreements when they failed to disclose the risk of prescribing Seroquel
with QT/QTc prolonging medications—as required by federal regulations—so that they
could continue to participate in federal health programs. See Mikes, 274 F.3d at 697 (A
legally false certification is “a false representation of compliance with a federal statute or
regulation or a prescribed contractual term.”).
The Court is satisfied that plaintiff has met the pleading standard for False Claims
Act cases under Rule 9(b). She alleges facts throughout her complaint that establish a
fraudulent scheme in each instance where Seroquel was prescribed with QT/QTc
medications without warning from defendants, who allegedly knew of the risk in
concomitantly prescribing such medications. In this way, plaintiff appropriately alleges a
“complex fraudulent scheme . . . occurring over a lengthy period of time and involving
thousands of billing documents,” which relaxes the Rule 9(b) pleading standard. U.S. ex
6

rel. Mooney v. Americare, Inc., 2013 WL 1346022, at *3 (E.D.N.Y. Apr. 3, 2013).
2. Count Two.
Count Two in the Ninth Amended Complaint alleges that defendants violated the
Corporate Integrity Agreements. In oral argument, plaintiff acknowledged that Count Two
was not intended to be a breach of contract claim—for which she would lack standing—but
rather an inartfully pleaded reverse false claim. A reverse false claim would be extant when
an individual “knowingly conceals or knowingly and improperly avoids or decreases an
obligation to pay or transmit money or property to the Government.” 31 U.S.C. §
3729(a)(1)(G).
Plaintiff reasons that defendants’ failure to disclose the risks of concomitantly
prescribing Seroquel with QT/QTc prolonging medications enabled them to avoid paying
stipulated damages to the federal government for this breach of the Corporate Integrity
Agreements. This argument is unpersuasive for the same reason the Massachusetts district
court dismissed a plaintiff’s reverse false claim in U.S. ex rel. Booker v. Pfizer, Inc., 9 F.
Supp. 3d 34, 50 (D. Mass. 2014): the stipulated penalties themselves are not an obligation
owed to the federal government.

They are not automatically imposed; rather, the

government must choose to impose stipulated penalties and defendants may appeal such
imposition with an administrative law judge. As the district court in Booker convincingly
reasoned:
The mere fact that [defendant’s] failure to report “might result in a fine or
penalty is insufficient” to establish an “obligation” to pay the government
7

under § 3729(a)(1)(G). U.S. ex rel. Bahrani v. Conagra, Inc., 465 F.3d 1189,
1195 (10th Cir.2006). When “potential fines depend on intervening
discretionary governmental acts, they are not sufficient to create ‘obligations
to pay.’” U.S. ex rel. Marcy v. Rowan Companies, Inc., 520 F.3d 384, 391
(5th Cir.2008). Without an obligation, [defendant] had nothing to avoid, and
relators’ claim under § 3729(a)(1)(G) must fail.
Id. at 49-50.
CONCLUSION
For the aforementioned reasons, defendants’ Rule 12(b)(1) motion is GRANTED and
the Rule 12(b)(6) motion is DENIED as to the QT/QTc federal claim in Count One and
GRANTED as to Count Two.
SO ORDERED
/S/ Frederic Block________
FREDERIC BLOCK
Senior United States District Judge
Brooklyn, New York
April 17, 2017

8