Life Science Compliance Update

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April 18, 2013

US Court of Appeals Rules that Off Label Promotion May Be Treated as Racketeering in Civil Litigation

Courtroom Picuture
Earlier this month, as reported by Reuters, the U.S. Court of Appeals for the First Circuit issued an opinion that may allow third-party payers, such as private insurers, to bring “class-action racketeering claims” against Pfizer for its illegal off-label marketing of Neurontin.  The off-label chargers stem from a $240 million criminal fine in 2004 paid by Pfizer’s Warner-Lambert unit, as well as a $190 million civil fine paid by Pfizer in connection with the off-label marketing.  “Neurontin, developed by a Warner-Lambert unit, was approved in 1993 to treat seizures at a maximum dose of 1800 milligrams per day. Warner-Lambert was later acquired by Pfizer,” Reuters notes. 

The Neurontin settlement, one of the earlier off-label cases, was also notable because the settlement provided a $21 million Consumer and Prescriber Education grant program to be administered by a Special Committee of State Attorneys General pursuant to an Oregon Court Order.  This Program funds organizations such as PharmedOut, the National Physicians Alliance, and the Institute for Medicine as a Profession. 

The First Circuit’s ruling means that Pfizer may have to pay $142 million (unless it appeals to the U.S. Supreme Court) to cover costs of private insurers, such as Kaiser Foundation Health Plan, which brought one of the cases.  Kaiser claimed that “it had been damaged after prescribing Neurontin for conditions it did not effectively treat, based on fraudulent marketing by Pfizer, the largest U.S. drugmaker.”  The case name is Kaiser Foundation Health Plan et al v. Pfizer Inc et al. 11-1904 and 11-2096 (1st Cir. 2013). 

“In related appeals, the panel also revived similar claims from insurer Aetna and class action allegations from Harden Manufacturing Corp, restoring lawsuits that had been thrown out by a lower court,” reported Reuters.  That case name is In RE Neurontin Marketing and Sales Practices Litigation, 11-1806 (1st Cir. 2013). 

This case has the potential for monumental implications in the life sciences industry.  Similar to the actions brought by the federal government under the False Claims Act (FCA), and state-related false claims statutes, private insurers may be able to allege—using predicate federal or state settlements, convictions, please or disclosures—that their payment for off-label or unapproved uses was improper due to the off-label marketing.   

In the context of physicians and companies, this means that if private insurers catch wind of an off-label investigation, they may begin to deny or delay the payment of claims until the investigation is resolved.  This approach may be difficult for private insurers to implement, but is nonetheless possible, particularly given this recent court opinion and the larger cost cutting requirements and efficiencies that are being demanded of the private health insurance market.   

This is particularly troubling given the recent reports that patient adherence to medication is already at all-time lows, which continue to cost the government and states significant amount of money.  Even more problematic, a 2011 National Health Interview Survey, recently released by the US Centers for Disease Control and Prevention (CDC), showed that people between the ages of “18 and 64 were twice as likely to not have taken medication as prescribed to save money compared with adults aged 65 and over - 12.6 percent compared with 5.8 percent,” reported by Pharmalot.  With the federal government tinkering with Medicare Part D and private insurers seeking to save money any way they can, this court opinion may add even more fuel to the fire. 

Moreover, with the upcoming implementation of the Physician Payment Sunshine Act, this case may have significant repercussions from an increased transparency standpoint.  Specifically, insurers will be able to use the Sunshine Act database published by the Centers for Medicare & Medicaid Services (CMS), and similar to state and federal prosecutors, they may use a physician’s reported specialty to determine if payments are being made to a physician for an off-label use (e.g., a psychiatrist receives a payment related to an anti-epileptic drug). 

Then, based off this recent opinion, they could deny, delay, or dispute these claims using the Sunshine database, and call into question the individual physician, hospital, or group practice’s clinical treatment of patients.  Further, private payers may call into question the medical necessity of treatment provided and to analyze claims tied to physicians, “including the number of surgeries conducted, and prescriptions for off-label use of medications or high cost drugs,” which could lead to further fraud or racketeering charges by private payers.  This could also lead to increased questioning over when a physician prescribes a brand name medication instead of a generic, even when drugs may be reimbursable by CMS because they are listed in one of the three CMS-recognized compendia. 

Although uncertain to what extent this opinion will generate such practices based on the recent opinion, the recent Amgen settlement eluded to this type of alleged fraud.  Specifically, the government alleged that Amgen used journal articles that were insufficient to support the safety and efficacy of the off-label uses at issue, and improperly obtained listings in medical compendia in an effort to establish that the off-label uses were medically accepted, and thereby eligible for coverage by federal health care programs.  It is possible that private payers may make similar allegations. 

Finally, while it is not clear whether private insurers will be able to request or have access to NPI numbers (which CMS said academic researchers likely will have access to), on CMS’ database, they likely have such information already.  As a result, private payers may be able to use NPI numbers to to link information on providers’ financial relationships to private claims data (e.g., drugs) to evaluate the impact of these interactions on prescribing practices.   

Kaiser said it was “very pleased” and that “justice has been achieved for our members and the physicians, pharmacists and staff who care for them.”  David Frederick, an attorney for Kaiser, said he was “gratified by the court's carefully crafted decision.”

Pfizer was less satisfied, saying in a statement it believes “there was no basis in fact or law” for the awards in the Kaiser case.  In the Aetna and Harden cases, Pfizer said it believed the lower court’s dismissals were the right move and that it “disagrees with the conclusions” of the appeals court.

“There is so much here and so many negative implications for pharma that a certiori petition to the U.S. Supreme Court seems almost inevitable,” attorney Arnie Friede (Arnold I. Friede & Associates) told FDA Webview, former counsel to Pfizer.

The primary evidence used to support the appeals ruling was the expert testimony by Harvard professor Meredith Rosenthal, who used aggregate data and statistical approaches to link patterns in promotional spending to patterns in Neurontin’s prescribing. “Her regression analysis found a causal connection between the fraudulent marketing and the quantity of prescriptions written for off-label indications,” the court said.

The ruling is “exceptionally important because it is the first time a court has held that a third-party payor may recover for the ‘damages’ it incurred in paying for prescriptions for off-label use of a drug that were caused by a pharmaceutical company’s promotional activities,” Friede said. “If accepted in other circuits, the reasoning of the First Circuit panel in this case (which included retired Supreme Court Justice Souter) could open up a mass of litigation by third-party payors relating to all other drugs that were heavily promoted off-label. Subject to statute of limitation concerns, this result would effectively open the floodgates to actions by third party payors to recover the ‘damages’ they incurred in paying for prescriptions for off-label use.”

Previously, courts that have reviewed such claims held that third-party payors could not maintain a damages action for off-label use, “primarily because they could not establish on a doctor-by-doctor basis that the off-label prescribing was caused, as a legal and factual matter, by the company’s off-label promotional activity,” Friede continued.  “Here, the court allowed causation to be proved by aggregate statistical evidence from an expert (Dr. Rosenthal) and did not require doctor-by-doctor proof to establish causation.”

 

Friede said Pfizer will undoubtedly seek Supreme Court review of this decision because of the contingent liability it creates for the company and industry.Previously, courts that have reviewed such claims held that third-party payors could not maintain a damages action for off-label use, “primarily because they could not establish on a doctor-by-doctor basis that the off-label prescribing was caused, as a legal and factual matter, by the company’s off-label promotional activity,” Friede continued. “Here, the court allowed causation to be proved by aggregate statistical evidence from an expert (Dr. Rosenthal) and did not require doctor-by-doctor proof to establish causation.”  Friede said Pfizer will undoubtedly seek Supreme Court review of this decision because of the contingent liability it creates for the company and industry.

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