A motion to dismiss a qui tam action filed against Teva Pharmaceuticals USA, Inc. and two of its subsidiaries by two former pharmaceutical sales representatives (relators) was denied by a federal district court. The relators allege that the drug manufacturer was involved in a kickback scheme to bribe physicians through honoraria for sham speaker programs to prescribe their neurological drugs, Azilect and Copaxone. As a result of this scheme, the relators allege that false claims were submitted to federal, state, and local healthcare programs for payment. The court refused to dismiss the claims, but found that the relators need to amend their complaint either to add specificity to their assertion that certain claims are false and fraudulent or drop those claims from the lawsuit. The relators' corresponding claims under state law were stayed by the court pending resolution of the federal claim and the motions to dismiss those corresponding claims were denied without prejudice to renewal (U.S. ex rel. Arnstein v. Teva Pharmaceuticals USA, Inc., February 22, 2016, McMahon, C.).
Background. Charles Arnstein and Hossam Senousy (relators) filed a qui tam action asserting claims arising under the False Claims Act (FCA), 31 U.S.C. § 3729 et seq., and related state and local laws against Teva Pharmaceuticals USA, Inc. and two of its subsidiaries, Teva Neuroscience, Inc. and Teva Sales and Marketing, Inc. (collectively Teva). The relators allege that Teva violated the FCA and the Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b(b), in connection with a bribery and kickback scheme.
The relators originally filed this action in May 2013. Before the court was Teva’s motion to dismiss a second amended complaint filed by the relators on behalf of the United States, 29 states, and three cities. Neither the federal government nor any state governments chose to intervene in the action.
General allegations. The relators allege that, from 2003 through the present, Teva violated the AKS by bribing physicians through honoraria for sham speaker programs relating to the drugs Azilect and Copaxone, which treat serious neurological diseases. At the same time, Teva allegedly caused downstream pharmacies, which were dispensing Azilect and Copaxone, possibly because of the physicians' bribe-addled judgment, to submit claims to federal, state and local healthcare programs for reimbursement of the cost of those drugs. By causing downstream entities to submit claims for reimbursement for Azilect and Copaxone while at the same time paying physicians to prescribe those drugs, the relators allege that Teva caused the government to pay false claims, in violation of federal, state and local FCAs. The relators further allege that, by failing to take its kickback payments into account when reporting its best price and average manufacturer price to government healthcare programs, which reports were used to calculate rebates owed to the government and to make Teva drugs eligible for purchase by certain government entities, Teva itself submitted false claims.
Analysis. In response to Teva’s motion to dismiss, the court found that relators’ complaint sufficiently alleges: (1) the relationship between Teva Pharmaceuticals USA, Inc. and its subsidiaries and the role of each had in the alleged kickback scheme; (2) the false claims at issue; (3) a plausible kickback scheme in violation of the AKS; and (4) that Teva willfully and knowingly caused the submission of false claims.
The court also decided, however, that while the relators have sufficiently alleged the falsity of some claims, they must amend their pleading with respect to other claims. Specifically, the court explained that the relators may bring a claim under the FCA for violation of the AKS only if (1) submission of a claim was factually false or (2) submission of a claim was legally false because a party (a) expressly certified compliance with the AKS or (b) impliedly certified compliance with the AKS.
However, because until March 23, 2010 (the date of enactment of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148)) the world was not on notice that a claim tainted by an implied certification of compliance with the AKS was a "false or fraudulent" claim, the relators can only prevail on a theory of implied certification with respect to claims that were submitted after March 23, 2010. Therefore, any claims arising prior to that date would have to be accompanied by express certifications in order to be actionable under the FCA. As such, the court found that the relators would have to amend their pleadings to reflect this change in order to sustain the following claims:
- Medicare Part D claims. The court found that the submission of prescription drug events (PDEs) to the government cannot be the basis of a FCA violation because PDEs contain no certifications and the relators failed to allege factual falsity as to any PDE data. The court decided that should the relators wish to proceed with a claim based on the submission of PDEs they must amend their complaint to allege precisely what aspect of the PDE forms are inaccurate.
- TRICARE claims. Because the relators failed to allege any express or implied false certifications made in connection with the claims submitted to TRICARE prior to the enactment of the ACA on March 23, 2010, the relators' FCA claim may not go forward unless in it contains express or implied certification for those claims for repayment.
- Medicaid claims. The court held that should the relators wish to proceed with their Medicaid-based allegations on a certification other than that contained in Form CMS-64 (which is certified), they must amend their complaint to state the express certifications from the enrollment agreement or billing certifications upon which they rely. The court stated that they may do so by providing exemplar certifications for each relevant state, as they have done for New York.
Finally, the court held that the relators’ state and municipal FCA claims are stayed and the motion to dismiss those claims is denied without prejudice to refiling.
The case is No. 13-cv-03702.
Attorneys: Randall Wade Jackson (Boies, Schiller & Flexner LLP) for the United States. Eric Wilson Sitarchuk (Morgan Lewis & Bockius, LLP) for Teva Pharmaceuticals USA, Inc., Teva Neuroscience, Inc. and Teva Sales and Marketing, Inc.
Companies: Teva Pharmaceuticals USA, Inc.; Teva Neuroscience, Inc.; Teva Sales and Marketing, Inc.
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