United States District Court, D. Maryland
UNITED STATES, et al., Plaintiffs, ex rel. JEROME PALMIERI, Relator,
ALPHARMA, INC., et al., Defendants.
Lipton Hollander United States District Judge.
Palmieri filed a qui tam action on April 20, 2010,
on behalf of the United States and various states
(collectively, the “Qui Tam States”),
pursuant to the False Claims Act (“FCA” or the
“Act”), 31 U.S.C. §§ 3729 et
seq., and analogous state statutes. ECF 2. Initially,
Palmieri sued Alpharma, Inc. and its subsidiary, Alpharma
Pharmaceuticals, LLC (collectively, “Alpharma”)
as well as King Pharmaceuticals, Inc. (“King”).
Palmieri added Pfizer, Inc. (“Pfizer”) as a
defendant in his First Amended Complaint (sometimes referred
to as “FAC”), filed on October 25, 2011. ECF
“imposes liability on individuals and entities who
defraud government programs.” United States ex rel.
Bunk and Ammons v. Government Logistics N.V., 842 F.3d
261, 2016 WL 6695787, at *2 n. 3 (4th Cir. Nov. 15, 2016). It
permits a private party, as relator, to sue on behalf of the
United States to recover damages from a defendant who has
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 defendant. See
generally Schindler Elevator Corp. v. United States ex rel.
Kirk, 563 U.S. 401, 404 (2011); ACLU v. Holder,
673 F.3d 245, 246-51 (4th Cir. 2011) (describing history and
current provisions of FCA).
April 26, 2011, about a year after suit was filed, the
government and the Qui Tam States gave notice of
their decision not to intervene. ECF 11. Palmieri elected to
pursue the suit on his own, and the case was unsealed on July
5, 2011. As noted, Palmieri filed his FAC on
October 25, 2011. He filed his Second Amended Complaint
(sometimes referred to as “SAC”) on April 2,
2013. ECF 77. The SAC includes conduct that allegedly
occurred before and after 2010 - the year that the Act was
amended. See Graham Cnty. Soil & Water Conservation
Dist. v. United States ex rel. Wilson, 559 U.S. 280, 283
opinion issued on March 21, 2014, I dismissed the suit,
concluding that the SAC failed to plead fraud with the
particularity required by the heightened pleading standard
under Fed.R.Civ.P. 9(b). See ECF 88 (Memorandum
Opinion); ECF 89 (Order); see also N. Am. Catholic Educ.
Programming Found., Inc. v. Cardinale, 567 F.3d 8, 13
(1st Cir. 2009); Harrison v. Westinghouse Savannah River
Co., 176 F.3d 776, 783-84 (4th Cir. 1999).
Palmieri noted an appeal to the United States Court of
Appeals for the Fourth Circuit. On April 26, 2016, the Fourth
Circuit vacated and remanded. U.S. ex rel. Palmieri v.
Alpharma, Inc., 647 F. App'x 166 (4th Cir. 2016)
(per curiam); see also ECF 94; ECF 98 (Mandate). In
its ruling, the Fourth Circuit determined that I erred
because I “did not address Defendants' arguments
that Palmieri's claims were precluded by the FCA's
first-to-file bar . . . and public-disclosure bar, ”
and “[u]nder the pre-2010 version of § 3730 that
governs Palmieri's action…both the first-to-file
and public disclosure defenses are jurisdictional in
nature…” Palmieri, 647 F. App'x at
166 (citations omitted). Accordingly, the Fourth Circuit
remanded to this Court for “consideration in the first
instance of whether the FCA's first-to-file bar
or public-disclosure bar deprived the district court
of subject-matter jurisdiction.” Id. at 167
manufacture and market Flector Patch, a transdermal patch
that delivers, via absorption through the patient's skin,
a topical pain application of 1.3% diclofenac epolamine.
See SAC, ECF 77, ¶¶ 88-89. The Food and
Drug Administration (“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. Flector Patch carries
risks of cardiovascular and gastrointestinal side effects
that increase with drug usage. 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).
2001, Palmieri began working for Alpharma, and later King and
Pfizer, as a sales representative to market prescription pain
medications, including Flector Patch, to physicians who treat
patients with chronic pain. SAC, ECF 77, ¶ 23.
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) (internal citations omitted).
“[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”).
Moreover, government-funded health care programs, such as
Medicare and Medicaid, generally do not permit reimbursement
for off-label uses. See 42 U.S.C. §
alleges that defendants engaged in an illegal scheme to
promote off-label use of Flector Patch. According to the
Relator, defendants 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, ECF 77, ¶¶
200-07. In addition, defendants allegedly promoted Flector
Patch for continuous use, rather than for short-term use.
See Id. ¶¶ 212-28. Defendants also
allegedly instructed their sales representatives to
discourage shorter prescriptions as “subtherapeutic,
” and to cease promotional efforts toward 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. In addition,
defendants allegedly 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. According to the Relator, some of these
prescriptions were submitted to federal and state government
agencies for reimbursement, thereby causing the presentment
of false claims. See generally SAC, ECF 77.
Furthermore, Palmieri alleges that some of defendants'
promotional activities with respect to Flector Patch violated
the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b).
Id. ¶¶ 305-14.
Second Amended Complaint (ECF 77), the Relator added
allegations concerning prescriptions provided by two
Pennsylvania doctors to nine patients. Specifically, the
Relator alleged that for eight Medicare patients, Dr. Daniel
Rubino prescribed Flector Patch off-label and, “upon
information and belief, ” these eight persons
“filled their prescriptions which were submitted to
Medicare for payment because they returned to Dr. Rubino for
one or more refills.” Id. ¶ 274.
Similarly, the Relator alleges that a Medicare patient of Dr.
Kenan Aksu received an off-label Flector Patch prescription
and, based on a subsequent refill request, it would have been
submitted to Medicare for reimbursement. See Id.
facts are included in the Discussion.
indicated, Palmieri filed suit on April 20, 2010. In April
2011, about a year after the suit was filed, the government
declined to intervene. Palmieri filed his First Amended
Complaint in October 2011, which defendants moved to dismiss.
ECF 70 (the “First Motion”). In particular, they
argued that the first-to-file rule, 31 U.S.C. §
3730(b)(5), deprived this Court of subject matter
jurisdiction. In addition, they contended that, in light of
the heightened pleading requirements applicable to fraud
claims under Fed.R.Civ.P. 9(b), the FAC failed to state a
respect to the first-to-file rule, the defense pointed to the
case of United States ex rel. Littlewood, ELH-10-973
(D. Md.) (“Littlewood”), which alleged
essentially the same fraudulent scheme set forth by Palmieri.
Littlewood was filed four days before Palmieri filed
his suit. But, as in this case, the government
declined to intervene in Littlewood. Id.,
ECF 16; ECF 18. And, the relator chose not to exercise her
right to litigate the suit on her own. Rather, on August 17,
2011, she voluntarily dismissed the case, with the
government's consent, and without prejudice.
Id., ECF 19; ECF 21; see also United States ex
rel. Littlewood, 806 F.Supp.2d 833 (D. Md. 2011).
Palmieri filed his First Amended Complaint in October 2011,
after Littlewood had been voluntarily dismissed.
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 in
§ 3730(b)(5) did not bar the Relator's claim. I
relied, inter alia, on United States ex rel.
Chovanec v. Apria Healthcare Grp. Inc., 606 F.3d 361
(7th Cir. 2010) (Easterbrook, J.). See Palmieri I,
928 F.Supp.2d at 847; 849; 850-51. Because
Littlewood was no longer pending when Palmieri filed
his FAC, I recognized that Palmieri could simply file a new
action if I dismissed the case. Given that circumstance, I
concluded that it would “elevate form over
substance” to require dismissal, only to have Palmieri
refile his case. Id. at 851-52. Instead, I allowed
the case to proceed, as amended, and I then considered the
merits of defendants' First Motion in the context of the
FAC. I determined that Palmieri failed to state a claim,
because he did not satisfy the Rule 9(b) standard for
pleading fraud with particularity. Id. at 851-52,
light of the pleading deficiencies, I granted the First
Motion and dismissed the FAC, without prejudice. ECF 76
(Order). I also directed the Clerk to close the case, with
the right to reopen if plaintiff submitted an amended
complaint. Id. However, I did not require plaintiff
to file an entirely new suit. Palmieri I, at 857-58.
April 2, 2013, the Relator filed his Second Amended
Complaint, using the original case number. ECF 77. As noted,
the SAC included new allegations regarding prescriptions
written for nine patients by two Pennsylvania physicians, Dr.
Rubino and Dr. Aksu. See SAC, ECF 77, ¶¶
275-85. Although the Complaint, the FAC, and the SAC referred
to conduct that occurred prior to 2010, the SAC also referred
to conduct that occurred after 2010. See SAC, ECF
77, ¶¶ 274-295 (including allegations as early as
2008 and as late as fall 2011).
moved to dismiss the SAC (ECF 84), supported by a memorandum
(ECF 84-1), (collectively, the “Second Motion”).
They challenged the SAC on jurisdictional grounds, based on
the “first-to-file” bar under 31 U.S.C. §
3730(b)(5), and also based on the public disclosure bar under
31 U.S.C. § 3730(e)(4)(A). In addition, they argued that
the SAC did not satisfy the Rule 9(b) heightened pleading
standard. See ECF 84. The Relator filed an
Opposition (ECF 85, “Opposition”), and defendants
submitted a Reply. ECF 86.
United States ex rel. Palmieri v. Alpharma, Inc.,
ELH-10-1601, 2014 WL 1168953 (D. Md. Mar. 21, 2014) (ECF 88)
(“Palmieri II”), I concluded that the
SAC failed to satisfy the Rule 9(b) standard. I also said
that, “[b]ecause the relator's allegations fail
under Rule 9(b), it is unnecessary to reach defendants'
arguments concerning the first-to-file rule and the public
disclosure bar.” ECF 88 at 4 n.8. Cf. United States
ex rel. Brooks v. Lockheed Martin Corp., 423 F.Supp.2d
522, 528 (D. Md. 2006) (stating that because a relator
“failed to satisfy the requirements of Rule 9(b), it is
not necessary to examine [defendants'] arguments”
related to the first-to-file rule), dismissed in part,
aff'd in part on other grounds, 237 Fed. App'x
802 (4th Cir. 2007). Thus, by Memorandum Opinion (ECF 88) and
Order (ECF 89) of March 21, 2014, I granted the Second Motion
and dismissed the case, with prejudice, as to the FCA claims,
and without prejudice as to the related state law claims.
Palmieri noted an appeal.
indicated, on April 26, 2016, the Fourth Circuit vacated
Palmieri II It concluded that both the first-to-file
bar and the public disclosure bar are jurisdictional under
the “pre-2010 version” of the FCA, and that the
pre-2010 version of the Act “governs” this case.
Palmieri, 647 F. App'x at 166. Moreover, it
concluded that I should have determined whether this Court
has jurisdiction before deciding the Rule 9(b) issue.
Accordingly, the Fourth Circuit remanded to this Court for a
determination as to jurisdiction.
Order of the same date (April 26, 2016), I directed counsel
to inform the Court as to “whether I should review the
[jurisdictional claims] based on existing filings or,
instead, whether the parties wish to supplement and update
their submissions.” ECF 95. In a status report filed on
May 16, 2016, the parties advised that “they jointly
believe that the Court should evaluate these jurisdictional
issues based on the pre-existing briefing and that no
evidentiary hearing is necessary to resolve these
jurisdictional issues.” ECF 97. The parties referred
the Court to the following submissions and case law,
id. at 1-2:
• Memorandum of Law in Support of Defendants' Motion
to Dismiss Second Amended Complaint, ECF 84-1 at 14-26
• Relator's Memorandum of Law in Opposition to
Defendants' Motion to Dismiss Second Amended Complaint,
ECF 85 at ...