Novartis must continue to litigate over its speaker programs, District Court Judge Paul G. Gardephe ruled earlier this month. Judge Gardephe denied Novartis’s Motion to Dismiss the U.S. Government’s allegations that the company's cardiovascular division violated Federal and New York anti-kickback statutes. The case started out in 2011, when a former Novartis sales rep, Oswald Bilotta, targeted lavish Novartis-sponsored speaker programs in a qui tam whistleblower case the government later joined.
As we have written about on many occasions, kickbacks to doctors constitute per se “false claims” for purposes of the False Claims Act. In this case, the U.S. Government reasoned that by providing kickbacks to physicians in the form of speaker fees for sham programs and expensive meals, Novartis illegally induced them to prescribe Novartis’s products. These meals and fees in turn caused false claims to be submitted to federal health care programs in the form of claims for reimbursement for prescriptions for those drugs.
Low Hanging Fruit
The False Claims Act levels hefty fines and treble damages against companies who violate it and has been the basis for many million and billion dollar healthcare fraud settlements. Private plaintiffs and the government have been increasingly pointing out alleged kickback schemes to get to these hefty payouts.
A number of aspects of the Novartis complaint and court opinion jumped out as low hanging fruit for plaintiffs looking to bring False Claims Act cases based on the Anti-Kickback Statute. Importantly, in a motion to dismiss, the judge must view the allegations in the light most favorable to the non-moving party (the government here).
Many companies have robust compliance programs in place to assure these arrangements don't happen, but it is useful to go through and point out what facts the court really seized upon in their decision.
** (1) Expensive meals. The court (and the press) targeted the cost of the meals per physician attendee. Among these meals from 2005 included a $2,016 dinner for three at Smith & Wollensky in Washington, D.C. and a $9,750 dinner for three at Nobu in Dallas. While these fees may have included the cost of renting out a conference room or the cost of doctors who ended up skipping the event, which would bump the cost higher, the complaint lists many expensive meals, one after the other, and the judge definitely took note. Furthermore, because Novartis employed a "modest meals" policy capped at $125, the complaint accused sales reps of repeatedly taking advantage of Novartis’s “unmet minimum” exception, where a restaurant would have a minimum charge for an event--which might be $2,000. “This practice, among others, permitted Novartis to spend lavishly on food and alcohol well beyond the purported 'modest meal' caps in its written policies,” the complaint argues
** (2) Same few speakers and attendees repeatedly went to the same programs in a short time span. The complaint alleged that the programs typically had an average of only three or four people in attendance and sometimes as few as two. “The programs were usually attended by the same people, even if, as was often the case, they had attended the same program only weeks earlier.” For example:
"In metropolitan Baltimore, Maryland, the same four doctors attended a speaker program together on the same two Lotrel topics…collectively 27 times during the period for August 2005 through May 2007, with one of the doctors as the speaker at all but one of the events. The speakers gave little or no presentation at these events and often would just give the drug at issue a token mention at the programs. According to the complaint, the Novartis sales representatives who were present did not object."
**(3) Use slide decks and go through the slides. The opinion was critical of the fact that the speaker would use either no slides or would only present a “truncated version” of the slides during a dinner event. While the doctors may have indeed talked extensively about drugs at these meals, going through the slides insures that the program stays on label.
**(4) Big spikes in prescriptions. The complaint alleged that "the highest levels of prescriptions correspond[ed] to the periods" where doctors "received the largest payments from Novartis.” The court noted: “While it is true that the doctors identified in the pleadings allegedly prescribed [these] drugs before they attended sham speaker events, the [plaintiffs] allege that the doctors’ prescriptions for Novartis drugs significantly increased after they began attending and/or receiving honoraria for these events.” FDA regulated promotional educational events are meant to introduce doctors to new therapies and modify their behavior in ways that are beneficial to patients. However, the complaint also alleges that after speaking engagements ended, a number of doctors’ prescribing habits decreased.
**(5) Don’t bring doctors to Hooters. No press release, media outlet, or even Judge Gardephe could resist writing “Hooters” into the list of restaurants that were not conducive to educational events, which also included sports bars with big TVs. The complaint also alleged that some educational events took place on fishing trips.
Reps' Speaker Events Tied to Company Scheme
The allegations also made sure to link the sales representatives’ conduct to Novartis senior management: the complaint alleges that Novartis “encouraged its sales representatives to host sham events" by:
(1) Basing sales rep compensation on doctors’ prescription writing;
(2) Failing to monitor events- Novartis had no limit on the number of programs and no system to prevent reps from repeatedly selecting the same doctors;
(3) Imposing no discipline when sales reps were reported for non-compliance with Novartis policies and anti-kickback laws.
Court demands high pleading requirement, but still sides with government
Novartis asked the court to dismiss the kickback claims because the government did not satisfy the particularity requirement of Rule 9(b) of the Federal Rules of Civil Procedure. Rule 9(b) provides that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.”
The 9(b) issue has come up a fair amount, with some split in interpretation. In this case, the government and relator argued that the Fifth Circuit’s relaxed pleading standard, set forth in the 2009 case Grubbs v. Kanneganti should apply. That standard requires simply that allegations about the “particular details of a scheme paired with reliable indicia that lead to a strong inference that claims were actually submitted.”
The District Court held, however, that Grubbs was too lenient. Many courts have reached a similar conclusion. The Novartis court noted that: “Courts in this Circuit have held that ‘to satisfy Rule 9(b), an FCA claim must allege the particulars of the false claims themselves.’” A plaintiff “must plead both the particular details of a fraudulent scheme and ‘details that identify particular false claims for payment that were submitted to the government.’”
Ultimately, although the district court agreed with Novartis that the pleadings had to allege that particular claims for reimbursement were false, they held that the government had indeed pleaded the anti-kickback violations and FCA claims with adequate particularity.
The court believed that the complaint showed sufficient “particularized examples and the specificity with which the pleadings describe the manner in which sham speaker events were conducted,” as well as the fact that the alleged fraudulent scheme involved “numerous transactions that occurred over a long period of time.” Furthermore, at this early stage in the proceedings, the Government was not required to "demonstrate with precision that every prescription written by every doctor was written in exchange for a kickback. To the extent that there is evidence that a prescription was written appropriately, that issue may be raised at summary judgment and/or at trial.”
The court also found that the government sufficiently alleged that the doctors who wrote prescriptions for Novartis drugs possessed the requisite “scienter” for an anti-kickback violations. The complaint alleges that doctors repeatedly attended similar events, and speakers were aware that if they prescribed more drugs they would be invited back to speak.
It will be interesting to follow this case as it moves forward. Notably, the qui tam whistleblower in this case--Bilotta--filed his lawsuit four months after Novartis in September 2010 agreed to pay $422.5 million to resolve criminal and civil liability over its marketing of several drugs, including the epilepsy drug Trileptal. Novartis entered into a Corporate Integrity Agreement with HHS-OIG in addition to the fines. It is unclear whether Novartis will be found to have violated its CIA in this case. Back in 2009, Pfizer paid a $1.3 billion criminal fine--the biggest criminal penalty ever--for being a repeat offender. Notably, this case alleges almost identical conduct and with many of the same drugs as the previous settlement and during the same time frame--mid 2000s.
The plaintiffs didn't necessarily allege any new conduct that Novartis hasn't already paid for in its previous settlement. We hope this case does not create a precedent for attorneys filing new cases soon after companies enter into CIAs, switching up the facts slightly, and then causing companies to litigate expensive cases on old, already settled and corrected, practices.
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