Monthly Archives: February 2015

New Case Against Pharmaceutical Company Unsealed in Colorado-Presents Key Legal Question on Rule 9(b)

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On January 12, 2015, the Colorado district court unsealed the operative pleadings in United States ex rel. Prough v. Sunovion Pharmaceuticals, Inc., Case No. 13-cv-02336-PAB. The complaint alleges that the defendant, a pharmaceutical manufacturer, promoted its drug Latuda, “for off-label, non-approved uses.” The complaint alleges that Sunovian’s representatives both marketed the drug for uses not approved by the Food and Drug Administration and at doses that were not approved.

According to the recently unsealed complaint, Latuda’s only FDA approved use is the treatment of schizophrenia in adults. The complaint alleges that sales representatives were specifically instructed to target practitioners with patient populations outside of the approved demographic–specifically children–and that the sales representatives were given bonuses for successfully marketing the drug to these types of practitioners. The relator alleges that her “target list” included practitioners whose primary practice involved treatment of disorders for which Latuda was not an approved treatment. The complaint alleges that the defendant’s target list for physicians generally included a large number that rarely, if ever, treated patients for schizophrenia. According to the complaint, the company coached sales representatives to avoid mentioning schizophrenia when attempting to market the drug and instead told them to use a broader, more-inclusive label that implied greater approval.

According to the complaint, the relator witnessed one manager tell a doctor during a sales call that he knew that other doctors would diagnose their patients with schizophrenia, rather than other psychotic ailments, just so they could use Latuda and get it reimbursed by Medicaid.

The complaint alleges that the relator complained about the off-label promotion to numerous superiors, none of whom took any corrective action. Eventually, the defendant terminated the relator, which she believes was in retaliation for raising concerns about the off-label marketing of the drug.

While the complaint contains numerous specific examples of discussions the relator had with various key witnesses, identified by specific date, the complaint does not contain any specific allegations about reimbursement requests submitted to a government program. It will be interesting to see how the district court handles the expected Rule 9(b) motion–it will pose the repeated issue of a complaint that is rife with details about the actual fraud, but lacks any specific example of a false claim because that information is under the control of third parties.

The law is unsettled in the Tenth Circuit on this precise point. As one law review article recently explained, on this issue, “the Tenth Circuit is somewhere in the middle because it has embraced the more permissive standard of not requiring an allegation about a specific false claim, without explicitly disavowing its more stringent precedents.” (citing United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1172–73 (10th Cir. 2010)). This case may require the Tenth Circuit to pick a side: either follow the “Fifth, Seventh, and Ninth Circuits[, which] have not required a relator to provide details of an ‘actually submitted false claim’ at the outset of FCA litigation,” or follow the “Fourth, Sixth, Eighth, and Eleventh Circuits[, which] have required factually specific claims.”

Flash Post: Settlement Announced in U.S. ex rel Baker v. Community Health Systems

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This week brought news of a settlement in United States ex rel. Baker v. Community Health Systems, Inc., a long-standing case we previously reported about hereherehere and here.

According to media reports of the settlement and the Department of Justice’s own press release, the defendants–three New Mexico hospitals and Tennessee-based Community Health Systems–have agreed to pay $75 million to settle the claims against them. As explained in earlier posts, the defendants were accused of causing the state of New Mexico to misreport funds to Medicaid that the defendants had provided to the state, which allegedly resulted in more Medicaid funds flowing to the defendants. According to the relator’s allegations, for every misreported dollar the defendants provided to the state, they received 3 dollars in Medicaid funds in return.

CHS manages more than 200 hospitals in 29 states. The three New Mexico hospitals involved served rural communities in the state under the now-discontinued Sole Community Provider (SCP) program.

The settlement highlights the significant disincentives that defendants in False Claims Act cases have to take cases all the way to trial. Following the trial court’s denial of the defendants’ summary judgment motions (or large parts of them at least), which we reported on previously, the case was headed to trial. Defendants in such circumstances are often faced with bet-the-company jury trials, since adverse verdicts will often result in the defendants becoming ineligible to participate in government programs. Given the risks of a jury trial, defendants in these cases often have no choice but to settle since the risks of submitting the case to a jury are just too great.