Can you bring a False Claims Act case based on a drug company’s off-label marketing, even if you don’t have evidence that a particular doctor wrote a prescription to a Medicare or Medicaid patient based on the drug company’s marketing?
Many drug reps are very disturbed to realize that their company is blatantly pushing a drug for an off-label use – and largely depending on the sales reps to participate in this activity. This is clearly impermissible conduct, even though doctors are permitted to prescribe drugs for off-label uses. Because the doctor could have chosen to write a prescription based on her own reading, rather than the drug company’s sales efforts, it is possible that the drug company didn’t “cause” any given false claim.
Often, a drug rep will know about the intense marketing that a drug company is doing, because the drugs reps are primary players in the illegal marketing. They have details about the way in which the company is recruiting physicians to promote the drug, the “sponsored” studies of new usages, the bonuses the sales reps are given to increase sales, and the identification of doctors in various fields who might be receptive to pitches for off-label uses.
When faced with a False Claims Act lawsuit alleging that its off-label marketing caused the submission of false claims to the government, the drug company will argue that the case must be dismissed because there is no evidence that its off-label marketing can be tied to any particular claim for reimbursement to a government healthcare program. Obviously, the company will raise numerous other arguments also, such as whether an off-label usage would have been reimbursed, whether the marketing activities are protected by the First Amendment as commercial speech, and many other points. This discussion, however, is only addressing the argument about whether the off-label marketing caused the submission of any false claims.
Since the drug company does not actually seek reimbursement from the federal healthcare programs, and thus doesn’t directly submit a claim to the government, the portion of the False Claims Act that can be applied is the section that holds someone liable for “causing” the submission of a false claim.
Liability for Causing False Claim Submissions
The argument made by a whistleblower or the government is that a drug company that illegally markets its drugs for off-label uses knows – and intends – that physicians will be influenced to prescribe the drug for off-label uses and knows, at least in a statistical sense, that some of the prescriptions will be paid for by a government healthcare program such as Medicare or Medicaid. If the off-label use is for a medical condition that is particularly prevalent among the elderly, for example, such as a drug being used off-label to treat patients with Alzheimer’s, then it is virtually inconceivable that no claims for the off-label usage would be submitted to Medicare. Often, a drug company will even have projected sales that identify government healthcare programs as likely payors. Given the high percentage of prescriptions that are reimbursed by a government healthcare program, it is a fair assumption that almost any usage will result in some claims submitted to the federal government for payment.
But the drug companies have argued that those assumptions are not sufficient to allege causation – that they caused physicians to submit false claims to a federal healthcare program. Instead, they argue that any given prescription could have been written based on a physician’s independent judgment, or that the inability of the relator or government to allege at least some specific claims that can be tied back to the company means that the allegations must be dismissed. In a decision by a federal district court in California, the court soundly rejected those arguments, relying in part on a persuasive Statement of Interest submitted by the United States.
U.S. ex rel. Brown v. Celgene Corp.
In U.S. ex rel. Brown v. Celgene Corp., 2014 WL 3605896 (C.D. Cal. July 10, 2014), the whistleblower alleged that Celgene had been promoting its Thalomid and Revlimid drugs for oncologic uses that they were not approved for.
By way of background, Thalomid is the branded version of the pharmaceutical thalidomide, which was banned in the United States in the 1960s in connection with horrific birth defects. Revlimid is a derivative of Thalomid. In 1998, the FDA approved Thalomid for a very narrow indication: treatment of a skin disease associated with leprosy. An additional indication was added in 2006, for a specific plasma cell cancer, but only in combination with another drug and a strict black box warning of the risk of birth defects and other dangerous side effects. Revlimid was approved in 2005 for a fairly uncommon subtype of the blood disorder myelodysplastic syndrome.
These were very expensive drugs, costing between $5,000 – $13,000 per month for their approved uses. Celgene’s sales of over $20 billion for the two drugs since 2006 demonstrates huge off-label sales, since the very limited on-label indications could not generate anywhere near that volume, even with the high cost per patient.
Although the United States did not join the whistleblower’s lawsuit, it submitted what is called a “Statement of Interest” to inform the Court of the government’s position on certain issues. The United States disputed Celgene’s contention that, to establish an FCA claim, a whistleblower must provide direct evidence that a doctor’s off-label drug prescriptions were caused by a company’s drug marketing. Instead, the government wrote,
“Causation can be established by circumstantial evidence…The critical issue with respect to causation is whether it is reasonably foreseeable that a fraudulent scheme would result in false or fraudulent claims being submitted.”
(U.S. Statement of Interest 13).
As the Government explained,
“a defendant drug manufacturer could reasonably foresee that a comprehensive marketing scheme involving [a] large number of salespeople furnishing large numbers of physicians with information about off-label use of a drug in a manner which is not a medically accepted indication could cause providers to prescribe the drug for those off-label indications.”
Id. at 14).
The court reiterated the accepted notion that causation under the FCA follows general principles of tort causation, often referred to as a substantial factor test.
“Under these principles, Celgene may be liable for false claims submitted by others if its conduct was a substantial factor in bringing about the false claims and such claims were a foreseeable and natural consequence of its conduct.”
2014 WL 3605896 at *8.
As the court explained,
“[t]he causal chain is straightforward: (1) Celgene allegedly fraudulently promoted Thalomid and Revlimid for non-reimbursable, off-label uses to physicians, (2) this off-label marketing caused physicians to write off-label prescriptions, and (3) many of these non-reimbursable prescriptions were submitted to government payors for reimbursement.”
Finally, given that
“a large percentage of Revlimid and Thalomid prescriptions are paid for by Medicare, Celgene could … reasonably foresee that these off-label prescriptions would result in false claims for reimbursement.”
Id. See also id. at *9 (noting plaintiff’s allegations that Celgene itself estimated that the government paid for the majority of Talomid and Revlimid prescriptions and that Celgene targeted government payors because of the drugs’ high costs).
The court expressly rejected Celgene’s argument that physicians might have simply exercised their independent judgment, noting that plaintiff had specifically alleged that Celgene had manipulated physicians’ judgment with its misleading studies and articles. Id. at 8.
While the Celgene court was by no means the first court to utilize this reasoning to sustain an FCA claim for off-label marketing, see, e.g., In re Neurontin Mktg. & Sales Prac. Litig., 712 F.3d 21, 39 (1st Cir.2013); U.S. ex rel. Nathan v. Takeda Pharms. North Am., Inc., 2011 WL 3911095, at *5 (E.D.Va. Sept.6, 2011), aff’d,707 F.3d 451 (4th Cir.2013), the court wrote a particularly persuasive opinion explaining and supporting its conclusions.
The question remains, however, how courts will deal with this issue at trial, particularly with regard to showing damages.
Celgene left this open:
“[r]ather than showing a lack of proximate causation, [Celgene’s] argument presents a question … regarding the total number of prescriptions that were attributable to [Celgene’s] actions.”
2014 WL 3605896 at *8. See also In re Neurontin Mktg. & Sales Prac. Litig., 712 F.3d 21, 39 (1st Cir.2013)(question of damages); Strom ex rel. US v. Scios, Inc., 676 F. Supp. 2d 884 (N.D. Cal. 2009)(noting that plaintiff clearly bears burden of proof as to damages and “there may indeed be factual disputes as to which claims, if any, were the result of Defendants’ fraudulent activity”).
While many off-label marketing cases have been settled, often for very substantial amounts, there is no clear law addressing how to approach damages. Presumably this will be dealt with in a manner that allows statistical proof of damages, as was recently applied in a different context in another case. See United States ex rel. Martin, et al., v. Life Care Centers of America, Inc., No. 1:08-cv-251, Order (E.D.Tn. Sept. 29, 2014)(extensive discussion of how various elements of False Claims Act claims can be satisfied through statistical sampling); see also United States v. Cabrera-Diaz, 106 F. Supp. 2d 234, 240 (D.P.R. 2000) (providing an overview of federal circuit courts that have permitted statistical sampling in this context); United States v. Fadul, 2013 WL 781614, at *14 (D. Md. Feb. 28, 2013) (“Courts have routinely endorsed sampling and extrapolation as a viable method of proving damages in cases involving Medicare and Medicaid overpayments where a claim-by-claim review is not practical”).
The bottom line? Drug reps should continue to actively report the off-label marketing activities of drug companies and seek to enforce the law through FCA lawsuits. The causation issue, at least, will be easier to establish based on the Celgene decision.
If you have discovered evidence of government fraud, contact an experienced False Claims Act attorney before blowing the whistle. You may be entitled to a substantial reward and the legal protections afforded to whistleblowers under state and federal laws. The attorneys of Berger Montague are nationally recognized experts in Whistleblower/Qui Tam actions with over a decade of experience pursuing these complex fraud cases. For more information or to schedule your confidential consultation, use the form on this page or call us at 888-647-9292.