Drug Distributor and Pharmacies Obtain Partial Dismissal of State and Federal FCA Claims

On June 10, 2014, a New York federal court dismissed, in part, state and federal False Claims Act (FCA) claims brought against Novartis Pharmaceuticals Corporation and pharmacies to which it distributed (CVS Caremark Corp., Accredo Health Group Inc. and Curascript Inc.) in United States ex rel. Kester v. Novartis Pharmaceuticals Corp., No. 11 Civ. 8196 (CM) (S.D.N.Y.).

A former Novartis employee filed the lawsuit, alleging that Novartis routinely paid kickbacks to the pharmacy defendants as rewards for promoting the following Novartis drugs which the relator alleged caused serious side effects: Myfortic, Exjade, Gleevac, Tasigna and TOBI. The relator further alleged that the pharmacy defendants submitted false reimbursement claims to Medicare, Medicaid, Tricare and other government health coverage providers. Specifically, they allegedly falsified claim forms by certifying compliance with the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b[b]). According to the complaint, the false anti-kickback representations rendered the claims false under the federal False Claims Act (31 U.S.C. § 3729, et seq.) and similar state False Claims Acts, including those of New York (State Finance Law § 187, et seq.), California (Government Code § 12650, et seq.), Virginia (Code § 8.01-216.1, et seq.), and Texas (Human Resources Code § 32.039, et seq.). The United States intervened April 2013 and New York and California intervened in January 2014. The defendants moved to dismiss.

The court issued an order granting the dismissal motions as to the allegations involving the drugs Gleevac, Tasigna and TOBI. The court found that the relator’s allegations were “conclusory” and did not provide any specifics (such as dollar amounts or the number of claims) . . . that were submitted to the government by any particular defendant” (id.). It held that “the Relator does not provide any factual basis to support his assertion that Novartis actually caused any pharmacy to submit claims for Gleevac, Tasigna or TOBI to the government” (Decision & Order at 16). But the court differentiated allegations involving the drugs Myfortic and Exjade, “which were based on actual Medicare and Medicaid claims data and broken down by pharmacy” (id., at 14), and, thus, denied the defendants’ motions to dismiss as to those allegations. (That split disposition was adhered to by the court in a June 26, 2014 order denying a motion for reconsideration by the pharmacy defendants, seeking dismissal of all the claims.)

Notably, a co-defendant– BioScrip Corp. (another drug distributor) – had settled similar claims in January for $15 million. This case provides an important reminder to both relators and FCA defendants – courts will dismiss FCA claims that do not detail the alleged fraud.

For more information, see the federal complaint-in-intervention and the relator’s second amended complaint.


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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