Health Law Daily Plavix® suit dismissed, failed Escobar materiality requirement
Thursday, June 29, 2017

Plavix® suit dismissed, failed Escobar materiality requirement

By Jeffrey H. Brochin, J.D.

A relator’s qui tam action against manufacturer and marketer of Plavix blood thinner for alleged wrongful marketing and sales was dismissed because she failed to properly plead materiality in her Prescriber Allegations as required under Universal Health Servs., Inc. v. United States and Massachusetts, ex rel. Escobar, and because her fraud-in-the-inducement theory was not a recognized theory for supporting her Formulary Allegations, a federal district court in New Jersey has ruled (U.S. ex rel. Dickson v. Bristol-Myers Squibb Co., June 27, 2017, Wolfson, F.).

Background. The relator brought an action against Bristol-Myers Squibb Co., the manufacturer and marketer of Plavix, a prescription blood thinner, alleging violations of the False Claims Act (FCA) by virtue of their having promoted Plavix as a superior drug to plain aspirin in the treatment of Acute Coronary Syndrome and following a myocardial infarction, stroke, or for peripheral artery disease. Plavix costs approximately $4 per pill whereas aspirin costs about $0.04 per pill, a hundred-fold difference in price. She alleged that Plavix was no more effective than aspirin in treating those conditions. More than half of state Medicaid programs contain cost-based restrictions that limit coverage under Medicaid to cost-effective treatments.In those states, Medicaid only pays for cost-effective drugs, and where an equally effective but cheaper treatment is available for a particular course of treatment, the more expensive drug is not cost effective and cannot be reimbursed. Bristol-Myers moved to dismiss her fourth amended complaint (4AC) citing issues of materiality and failure to state a claim.

Prescriber Allegations vs. Formulary Allegations. The court broke down the relator’s complaint into two distinct categories of claims: Prescriber Allegations and Formulary Allegations. The former category alleged that the manufacturer caused physicians to submit prescriptions to Medicaid for payment by fraudulently marketing Plavix to those physicians as being more effective than aspirin. The relator contended that the claims contained an implied false certification that Plavix complied with the state Medicaid program requirements that all prescriptions submitted for payment be for drugs that were cost-effective treatments. Because Plavix cost one-hundred times more than aspirin--but the relator alleged it to be no more effective—she alleged that Plavix was not cost-effective and was therefore not eligible for reimbursement under the laws of the thirty-six states imposing cost-effectiveness requirements in their Medicaid program.

In the latter category of claims, she alleged that the manufacturer fraudulently induced state Medicaid formulary committees to place Plavix on their respective state PDLs—or formularies—by marketing Plavix to those committees as more effective than aspirin when it was not. This again resulted in Plavix not meeting the state law requirements for cost-effectiveness, a prerequisite to being included on the formularies of the thirty-six states imposing such requirements.

Alleged bases for dismissals. Bristol-Myers argued that the Prescriber Allegations must be dismissed because (1) the law of the case barred the relator from reviving federal FCA claims that the court had previously dismissed in an earlier decision concerning the 3AC; (2) the Prescriber Allegations were deficient under Fed. R. Civ. P. 9(b); and (3) the Prescriber Allegations failed to meet the heightened pleading standard for materiality established by the Supreme Court in Escobar. They further argued that the Formulary Allegations should be dismissed because (1) the law of the case bar as noted above; and (2) the Formulary Allegations failed to state a claim under case law cited by the relator or any other identified authority.

Types of fraud applicable to FCA claims. The court noted that there are two categories of false claims that may form the basis of an FCA qui tamsuit: (1) factually false claims; and (2) legally false claims. A claim is factually false when the claimant has knowingly misrepresented what goods or services it provided to the government; and a claim is legally false when the claimant has knowingly falsely certified that it has complied with a material statute, regulation, or contractual provision. Such certification may be express or implied. Under the express false certification theory, a claimant is liable under the FCA for falsely certifying that it is in compliance with a material statute, regulation, or contractual provision. By contrast, implied false certification liability attaches when a claimant has made specific representations about the goods or services provided and the claimant's failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths. Under this theory a relator must show that if the government had been aware of the violations of the Medicare or Medicaid laws and regulations that are the bases of an FCA claim, it would not have paid the claims.

Fraud-in-the-inducement. In addition to factually false and legally false claims, the federal courts have recognized a narrow, third category of false claims obtained by fraud-in-the-inducement, whereby a fraudulently induced contract may create liability under the FCA when that contract later results in payment thereunder by the government, whether to the wrongdoer or someone else. In 4AC, the relator based her claims under both implied false certification and fraud-in-the-inducement theories of liability.

Pleading materiality under Escobar. The court noted that the materiality standard is a demanding one, and that a misrepresentation cannot be deemed material merely because the government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment. Nor is it sufficient for a finding of materiality that the government would have the option to decline to pay if it knew of the claimant’s noncompliance. Materiality, in addition, cannot be found where noncompliance is minor or insubstantial.

In the instant case, the relator alleged that government payors would not have reimbursed for Plavix had they been aware of the alleged false certification of cost-effectiveness, however, the court found that the relator’s other, more specific allegations, belied these conclusory facts because the relator conceded that Plavix was listed on each state’s preferred drug lists (PDL) and that a PDL-listing alone was sufficient to compel government Medicaid payors automatically to reimburse claims for Plavix. Accordingly, the court ruled that the relator failed to satisfy the materiality standard necessary for her FCA complaint.

Lack of fraud-in-the-inducement recognition. Next, the court examined the relator’s fraud-in-the-inducement theory which she sought to apply to the Formulary Allegations by attempting to establish the connection between the fraud on the formulary committee and the payment by the government of false claims through the manufacturer’s alleged separate fraud to falsely market Plavix to prescribing physicians. They noted that none of the Supreme Court or circuit court precedents recognizing the fraud-in-the-inducement theory, including those binding decisions of the Third Circuit, had ever recognized the relator’s novel ‘fraud-on-the-formulary-committee’ theory. Furthermore, the court found that the relator would have the court second guess the decisions of state formulary committees to list Plavix on their respective state PDLs, and, they made note of the fact that the complaint did not allege that any state formulary had delisted Plavix in the wake of the instant litigation.

Accordingly, the court ruled that the relator’s Formulary Allegations in the 4AC did not state a claim for fraud-in-the-inducement or any other cause of action under the FCA, and therefore both the Formulary Allegations and the Prescriber Allegations were dismissed.

The case is No. 3:13-cv-01039-FLW-TJB.

Attorneys: Blair R. Loocke (Bracewell LLP) for the United States. Gavin J. Rooney (Lowenstein Sandler LLP) and Theodore J. MacDonald, Jr. (HeplerBroom LLC) for Bristol-Myers Squibb Co., Sanofi-Aventis U.S. LLC, and Sanofi U.S. Service Inc. a/k/a Sanofi-Aventis U.S. Inc.

Companies: Bristol-Myers Squibb Co.; Sanofi-Aventis U.S. LLC; Sanofi U.S. Service Inc. a/k/a Sanofi-Aventis U.S. Inc.

MainStory: TopStory CaseDecisions CMSNews DrugBiologicNews FCANews MedicaidPaymentNews PaymentNews PartDNews PrescriptionDrugNews QuiTamNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More
Health Law Daily

Health Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on health legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More