Ninth Circuit Court Limits False Claims Act Liability for Alleged Unlawful Marketing of Pharmaceuticals
A U.S. District Court recently issued a wide-ranging opinion that pharmaceutical companies should consider when evaluating whether their speaker programs comply with the Anti-Kickback Statute (AKS). The ruling also provides one of the first judicial interpretations of the “recommendation” prong of the AKS, an interpretation that contradicts the government’s position on the statute.
In United States ex rel. Brown v. Celgene Corp., No. 10-cv-03165, 2016 U.S. Dist. LEXIS 180628 (C.D. Cal. Dec. 28, 2016), the relator alleged, among other things, that a pharmaceutical company violated the False Claims Act (FCA) by paying physicians to perform promotional speaking services in violation of the AKS and by promoting its drugs for off-label purposes. The court granted summary judgment to the pharmaceutical company on the relator’s AKS allegations, but denied summary judgment on the off-label promotion allegations.
The court’s opinion also implies (but does not precisely state) that FCA cases based on off-label promotion allegations must be limited to where the off-label usage is not covered by Medicare or Medicaid. The logic of the opinion indicates that if the off-label promotion concerned Medicare or Medicaid-covered uses of the drug, then claims submitted to those programs would not be false, notwithstanding any off-label promotion.
Summary Judgment Granted as to Whether Company’s Speaker Program Violated the Anti-Kickback Statute
The relator alleged that the company violated the AKS by paying physicians, under the guise of a promotional speaker program, to induce them to write prescriptions of two of the company’s drugs. Further, the relator alleged that the company violated the AKS for the additional reason that the payments were allegedly made to induce the physician-speakers to recommend that other physicians prescribe the company’s drugs. The AKS makes it illegal to knowingly and willfully provide remuneration to induce a person to “order” a Medicare/Medicaid-covered drug, as well as to induce the person to “recommend … ordering” such a drug.
The relator introduced evidence that she argued would support a jury finding that the payments to physician speakers was intended to induce them to prescribe the company’s drugs. Specifically, she presented evidence that: (i) the amount paid to a physician-speaker per hour was several times the amount of money the same doctors charged to perform other tasks ($3,000 versus $500); (ii) the company’s cap on the amount a doctor could earn was high – up to $200,000 in certain years whereas other companies had $50,000 to $100,000 caps; and (iii) the company did not limit the number of times a speaker could speak in a single day. For example, one doctor spoke more than 10 times in a single day and frequently spoke six or more times a day. In opposition, the company introduced evidence that the speaker events were organized by a third party, that speakers were paid a flat fee, and that the hourly compensation for speaking was comparable to that provided by other drug companies.
The court granted summary judgment for the pharmaceutical company, finding that there was no triable issue of fact as to whether the speaking payments were intended to induce the physician-speakers to write prescriptions of the two drugs. According to the court, “the relevant question is whether [the] payments were excessive compared to honoraria provided by other physician speaker programs,” and the “[t]he undisputed evidence shows that they were not.” Id. at *50. According to the court, the lack of a cap “does not give rise to the inference that speakers were being compensated for writing prescriptions.” Id. at *49. The fact that there was no cap was “unexceptional” and merely meant that the company allowed its speakers to work more.
As to the physician who frequently spoke at least six times in a single day, and 10 times on one occasion, the court found that “there is nothing in the records to indicate that [he] gave more speeches than could be justified by the number of physicians who wanted to attend them.” Further, a “reasonable jury could hardly find a company-wide kickback scheme based on the behavior of one individual.” Id. at 50.
The court distinguished the speaker program from those where courts have held that the allegations could support a finding of an Anti-Kickback Statute violation. In those other cases, pharmaceutical companies allegedly: (i) paid exorbitant amounts to speakers or on speaking events; (ii) repeatedly invited the same physicians to speak on the same topic within a short span of time; (iii) paid “speakers” to attend social events rather than bona fide educational events; (iv) hosted “speaker” events at inappropriate venues such as crowded sports bars, Hooters restaurants or fishing trips; (v) recruited physicians to speak without doing an analysis to determine whether it needed more speakers to staff its presentations; (vi) or made eligibility to serve as a speaker contingent on the number of prescriptions that a physician wrote. Id. Here, the court emphasized that there was no evidence that the company considered the number of prescriptions that a physician wrote in deciding whether to employ the physician as a speaker. Instead, the company selected doctors based on “such unremarkable factors as the size of the doctor’s practice and the doctor’s interest in working with [the company].” Id. Likewise, there was no evidence that the speeches were given at “unconventional venues” or “in the absence of bona fide attendees.” Nor was there any evidence that the company tracked the number of prescriptions written by speakers although the company did track the number written by attendees. Id.
The court also granted summary judgment to the company on the relator’s alternate theory that the company violated that AKS by paying physician-speakers to recommend to other physicians that they prescribe its drugs. The court saw “no evidence” that the company’s speakers “suggested” that audience members prescribe the company’s drugs. Although the relator introduced evidence that the company intended its speaker program to increase prescriptions, there was “no evidence that speakers did anything other than convey truthful scientific information about the drugs.” Id. at *53.
The court stated further that even if some speakers generally encouraged audience members to prescribe the company’s drugs, “that would not be enough to establish liability under the AKS.” The court explained that if “such generalized promotion” were viewed as “recommending” under the AKS, then the AKS would effectively criminalize all promotion of medical goods and services, including televisions ads and magazine inserts. Rather, according to the court, “the term ‘recommendation’ was only intended to encompass recommendations that pertain to specific patients.” Id. at *54. Because there was no evidence that the company’s speakers made recommendations pertaining to specific patients, the company was entitled to summary judgment as to the claim that its payments to speakers were unlawfully made to induce recommendations to other physicians to prescribe the company’s drugs.
The government, however, does not share the court’s interpretation of the recommendation prong of the AKS as applying only to recommendations concerning a specific patient. See, e.g., OIG Compliance Program Guidance for Pharmaceutical Manufacturers, 68 Fed. Reg. 23731, 23739 (May 5, 2003).
Summary Judgment Denied as to Whether Off-Label Promotion Caused the Submission of False Claims
Although it prevailed on the AKS allegations, the company’s motion for summary judgment on the off-label allegations was denied.
Based on the factual record presented, the court held that a jury could conclude that off-label marketing caused the submission of claims to Medicare Part D for off-label uses. The two drugs in question were approved by the FDA for a narrow indication – to treat a rare complication of leprosy which is itself a rare disease. There are only a few hundred new leprosy cases diagnosed each year and the relevant complication occurs in only approximately 25% of those cases.
The relator introduced evidence that, despite the narrow leprosy-related approved indication, the company had developed a written marketing plan to promote the drugs to oncologists and hematologists (i.e., physicians who treat cancer and not leprosy), to display exhibits at oncology professional societies, and to advertise in journals targeting oncologists. The company also employed a large sales force that marketed to oncologists. In addition, the company sold more than 800,000 capsules per month, almost entirely to oncologists, and tens of thousands of claims were subsequently presented to Medicare Part D for off-label cancer uses of the drugs.
The relator also introduced expert testimony that physicians who receive more promotional contacts generally prescribed at a higher rate than those who receive fewer contacts, as well as evidence that the company evaluated its sales force based in part on their success in convincing physicians to prescribe the drug and compensated them based on sales volume. Notwithstanding testimony from physicians that the company’s marketing did not influence their prescribing decisions, and despite legitimate medical reasons to prescribe the drug, the court held that the evidence was sufficient to support a jury finding that the company’s off-label promotional efforts caused physicians to prescribe the drug for non-leprosy indications.
In reaching this decision, the Court applied a “substantial factor” test, asking whether the presentment of claims to Medicare was a “foreseeable and natural consequence” of the company’s marketing activities. Id. at *11. Further, the court did not require the relator to connect the company’s marketing efforts to specific claims submitted to Medicare Part D. Id. at *23-25.
The court also rejected the company’s argument that even if it did cause the submission of claims to Medicare Part D, the claims were not “false” under the FCA. The court held that the claims were false because they were allegedly not covered under Medicare Part D. Based on its lengthy analysis of the Medicare statute, the court held that Part D coverage required either that the drugs be FDA-approved for the indication or that certain compendia specified by statute support the use of the drugs for the indication. Because neither condition applied, the court held that claims submitted for the use of the drugs to treat cancer were not covered by Medicare and, therefore, “false” under the FCA.
Significantly, the court’s decision implies that a claim to Medicare or Medicaid should not be viewed as false because it was used off-label. Rather, the claim is false only because it was not Medicare-covered. Otherwise, the court’s lengthy analysis of Medicare coverage rules would have been unnecessary. Thus, although the court denied summary judgment on the off-label issues, the decision may be helpful in the future to drug companies arguing that off-label promotion did not cause the submission of false claims if the off-label uses were for indications covered by Medicare or Medicaid.
The court’s summary judgment decision in United States ex rel. Brown v. Celgene Corp., No. 10-cv-03165 (C.D. Cal. Dec. 28, 2016), addressed many crucial issues relating to the marketing of pharmaceutical products. The decision may give relevant guidance to companies evaluating their physician speaker programs.
In addition, the decision lends support to the defense argument that claims for Medicare/Medicaid-covered indications are not “false” even if the company engaged in off-label promotion. On the other hand, however, the Court sided with the relator regarding how much proof is required to establish that a company’s marketing activities caused physicians to make prescription decisions and therefore also caused the subsequent submission of claims to Medicare or Medicaid for those prescriptions.