United States District Court, D. Maryland
UNITED STATES, et al., Plaintiffs, ex rel. JEROME PALMIERI, Relator,
ALPHARMA, INC., et al., Defendants.
ELLEN LIPTON HOLLANDER, District Judge.
Jerome Palmieri, the relator, filed this qui tam action on behalf of the United States of America and various individual states (collectively, the " Qui Tam States") against his employers, Alpharma, Inc. and Alpharma Pharmaceuticals, LLC (collectively, "Alpharma"); King Pharmaceuticals, Inc. ("King"); and Pfizer, Inc. ("Pfizer"), defendants,  pursuant to the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq. and analogous state statutes of the Qui Tam States. The suit concerns defendants' marketing of Flector Patch, a topical pain medication delivered by a transdermal patch, approved by the United States Food and Drug Administration ("FDA") for the treatment of acute pain due to "minor strains, sprains, and contusions.'" Second Amended Complaint ("SAC, " ECF 77) ¶ 126 (citation omitted in original).
The relator filed his initial Complaint (ECF 2) on April 20, 2010. Pursuant to the initial sealing provisions of the FCA, the suit was filed under seal in order to provide time to the United States and the Qui Tam States to decide whether they wished to intervene. See 31 U.S.C. § 3730(b)(2). None of the governmental plaintiffs intervened, and the suit was unsealed on July 5, 2011. See ECF 20. On October 25, 2011, the relator filed the First Amended Complaint (ECF 43).
The False Claims Act permits a private party, as relator, to sue on behalf of the government to recover damages from defendants who have caused fraudulent claims for payment to be submitted against the public fisc. As an incentive to bring such suits, a successful relator is entitled to share in the government's recovery from the defendants. See generally ACLU v. Holder, 673 F.3d 245, 246-51 (4th Cir. 2011) (describing history and current provisions of FCA).
Palmieri alleges that defendants engaged in a program of aggressive and illegal marketing of Flector Patch to physicians, which encouraged physicians, sometimes by way of unlawful "kickbacks, " to prescribe Flector Patch to their patients, including prescriptions for "off-label" uses and at excessive dosages. According to the relator, some of the resulting off-label, excessive, or unlawfully-induced prescriptions of Flector Patch were submitted to federal and state health care programs for reimbursement, such as Medicaid and Medicare. However, such programs generally do not permit reimbursement for a medication that is prescribed for a so-called "off-label" use- i.e., a use other than the use for which the medication has been approved by the FDA.
Defendants moved to dismiss the First Amended Complaint. ECF 70. In particular, defendants argued that the "first-to-file" rule, 31 U.S.C. § 3730(b)(5), precluded this Court from exercising subject matter jurisdiction. In addition, they contended that the First Amended Complaint failed to state a claim on which relief could be granted, in light of the heightened pleading requirements applicable to fraud claims under Fed.R.Civ.P. 9(b).
In United States ex rel. Palmieri v. Alpharma, Inc., 928 F.Supp.2d 840 (D. Md. 2013) (ECF 75, " Palmieri I "), I concluded that the first-to-file rule did not bar the relator's claim, but that his allegations failed to meet the Rule 9(b) standard for pleading fraud with particularity. Specifically, the relator's First Amended Complaint failed to identify any particular instance in which an off-label or excessive prescription for Flector Patch was submitted to a government health program for reimbursement. Nor did the First Amended Complaint identify any instances in which doctors to whom defendants allegedly gave illegal kickbacks prescribed Flector Patch to patients covered by government prescription programs. Instead, the relator's charges relied on a crucial factual inference: the First Amended Complaint recounted the total volume of Flector Patch prescriptions submitted to Medicaid and Medicare since 2008, and the amounts of money paid in reimbursements for those prescriptions, to suggest that at least some of these prescriptions must have been off-label, excessive, or illegally induced prescriptions resulting from defendants' alleged scheme. See Palmieri I, 840 F.Supp.2d at 846. Those allegations, I concluded, plainly failed to meet the Rule 9(b) pleading standard under United States ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., 707 F.3d 451 (4th Cir. 2013) (petition for cert. pending). See Palmieri I, 928 F.Supp.2d at 856-57. Nevertheless, I granted leave to amend. Id. at 857-58.
On April 2, 2013, the relator filed his Second Amended Complaint. ECF 77. As discussed, infra, it includes new allegations regarding prescriptions written for nine patients by two Pennsylvania physicians, Dr. Daniel Rubino and Dr. Kenan Aksu. See SAC ¶¶ 275-85.
Defendants again moved to dismiss (ECF 84, the "Motion" or "Mot."), challenging the Second Amended Complaint on three grounds: the "first-to-file" rule under 31 U.S.C. § 3730(b)(5); the Rule 9(b) heightened pleading standard; and the public disclosure bar under 31 U.S.C. § 3730(e)(4)(A). See ECF 84. The relator has filed an Opposition (ECF 85, "Opp."), and defendants have filed a Reply (ECF 86). No hearing is necessary to resolve the issues. See Local Rule 105.6. For the reasons that follow, I conclude that the Second Amended Complaint fails to state a claim upon which relief can be granted under the Rule 9(b) standard. Therefore, I shall grant the Motion.
Defendants manufacture and market Flector Patch, a transdermal patch that delivers, via absorption through the patient's skin, a topical application of 1.3% diclofenac epolamine. See SAC ¶¶ 88-89. Diclofenac epolamine is a non-steroidal anti-inflammatory drug ("NSAID"), in the same family as ibuprofen and naproxen. See id. Flector Patch is the only prescription NSAID topical patch on the market. Id. ¶ 89.
The FDA approved Flector Patch for prescription use in December 2007, id. ¶ 93, as a "topical treatment of acute pain due to minor strains, sprains, and contusions.'" Id. ¶ 95 (citation omitted in original). However, the use was approved only for up to fourteen days. Id. ¶¶ 102, 115-16. Like other NSAIDs, Flector Patch entails risks of cardiovascular and gastrointestinal side effects that increase the longer the drug is used. Id. ¶ 91. Therefore, Flector Patch's FDA-approved label contains a warning that a patient should use only "the lowest effective dose for the shortest duration consistent with individual treatment goals.'" Id. (citation omitted in original).
Flector Patch is marketed in Europe under the name "Flector Tissugel, " and is approved in Europe for treatment of chronic pain and inflammatory conditions such as osteoarthritis, rheumatoid arthritis, menstrual pain, bursitis, ankylosing spondylitis, and tendonitis. Id. ¶ 100. However, defendants have not sought FDA approval for these indications. Id.
Palmieri has been employed since 2001 as a sales representative for Alpharma (and later, King and Pfizer), to market defendants' prescription pain medications, including Flector Patch, to physicians who treat chronic pain. SAC ¶ 23. As noted, he alleges that defendants engaged in a comprehensive scheme to promote the prescription of Flector Patch for off-label uses and in excessive dosages.
It is salient that federal law does not prohibit a physician from prescribing an approved drug for a non-approved, or "off-label, " use. See 21 U.S.C. § 396. However, "it is unlawful for a manufacturer to introduce a drug into interstate commerce with an intent that it be used for an off-label purpose, and a manufacturer illegally misbrands' a drug if the drug's labeling includes information about its unapproved uses." Washington Legal Found. v. Henney, 202 F.3d 331, 332-33 (D.C. Cir. 2000) (citing statutes) (internal citations omitted). Furthermore, "a manufacturer's direct advertising or explicit promotion of a product's off-label uses is likely to provoke an FDA misbranding or intended use' enforcement action." Id. at 333; see also 21 C.F.R. § 202.1(e)(4)(ii) (stating that an advertisement for an FDA-approved prescription drug generally "may recommend and suggest the drug only for those uses contained in the [FDA-approved] labeling thereof"). Therefore, the relator contends that defendants' scheme to promote off-label use of Flector Patch was unlawful.
The alleged unlawful scheme had many facets, according to the relator. For one, defendants allegedly instructed their sales representatives to market Flector Patch aggressively to physicians, such as pain management specialists, rheumatologists, and neurologists, who by the nature of their specialties treated only chronic pain and not the acute, localized pain for which Flector Patch was approved. See SAC ¶¶ 200-07. In addition, defendants allegedly promoted Flector Patch for continuous use, rather than for short-term use. See id. ¶ 212. According to the relator, defendants specifically promoted a 60-patch/30-day prescription as the standard, appropriate prescription for Flector Patch, despite its FDA approval for usage for up to fourteen days. See id. ¶¶ 212-28. Defendants also instructed their sales representatives to discourage shorter prescriptions as "subtherapeutic, " and to cease promotional efforts toward physicians, such as emergency room and urgent care physicians, who routinely treat patients for acute pain and who often resisted prescribing Flector Patch at the 60-patch level. See id. Defendants also marketed Flector Patch as an alternative to other prescription medications that are FDA-approved only for the treatment of chronic pain. See id. ¶¶ 239-54.
In addition, the relator alleges that some of defendants' promotional activities with respect to Flector Patch violated the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b). See SAC ¶¶ 305-14. In pertinent part, the Anti-Kickback Statute provides criminal penalties for
knowingly and willfully offer[ing] or pay[ing] any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person... to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program.
Id. § 1320a-7b(b)(2)(A).
Specifically, the relator avers that defendants distributed benefits to physicians who were high prescribers of Flector Patch through membership in a "Flector Patch Speakers' Bureau" and "Flector Patch Speaker's Training" program, by which the physicians received paid speaking engagements and access to lucrative referral networks. See SAC ¶¶ 138-70. Palmieri also contends that defendants provided samples of Flector Patch to physicians in such a manner as to qualify as "inducements" under the Anti-Kickback Statute. See SAC ¶¶ 171-192.
Although Palmieri contends that many of defendants' activities, summarized above, were unlawful, the promotional activities would not, by themselves, violate the False Claims Act or its state law analogs. However, Palmieri also alleges that, by engaging in the conduct described above, defendants knowingly caused false claims to be presented to federal and state government health care programs, in the form of reimbursement claims for prescriptions for off-label uses or for excessive dosages of Flector Patch. The presentment of such claims for payment to government programs constitutes the basis for the relator's assertion of qui tam liability.
As indicated, government-funded health care programs generally do not pay for drugs that are prescribed for off-label uses. For instance, the Medicaid program provides funds for health care for low-income persons through a combination of federal and state funding. Federal reimbursement for a prescription drug under Medicaid is limited, with some exceptions, to a drug prescribed for a use for which the drug has been approved by the FDA. See 42 U.S.C. § 1396r-8(k)(2)-(3), (6). Moreover, the relator alleges that most states, including the Qui Tam States, that provide state funds for reimbursement for prescription drugs under Medicaid limit coverage in the same way. See SAC ¶ 53. The same limitation applies to coverage for prescription drugs for the elderly and disabled under the Medicare Part D program. See 42 U.S.C. § 1395w-102(e)(4)(A)(ii) (incorporating § 1396r-8(k)(6) by cross-reference). Ordinarily, other programs that provide federal funding for health care also limit prescription drug coverage to ...