Reproduced with permission from Pharmaceutical Law & Industry Report, 12 PLIR 247, 02/21/2014. Copyright  2014 by The Bureau of National Affairs, Inc. (800.372.1033) http://www.bna.com.
On January 28, 2014, the Supreme Court of Louisiana set aside a judgment of $257 million in civil penalties that a lower court had entered in favor of the state against Janssen under the Louisiana Medicaid false claims act, known as MAPIL.1 The decision split the court 4-3. Although the court assumed evidence existed that Janssen had made misleading statements to Louisiana doctors about its antipsychotic Risperdal, the court entered judgment for Janssen on the ground that the Attorney General (AG) had not proved that Janssen had caused any false claims for Risperdal to be submitted for payment to Louisiana Medicaid. Caldwell ex rel. State v. Janssen Pharmaceutica, Inc., 2014 La. LEXIS 203 (La. Jan. 28, 2014) (12 PLIR 132, 1/31/14).
The decision is remarkable because the court took away a huge verdict in favor of the AG. The decision also has broad implications, not just for other lawsuits brought by the Louisiana AG, but for lawsuits brought by other states under similar false claims statutes.2 AGs cannot use these false claims acts to penalize pharmaceutical companies for alleged fraudulent conduct that is not proved to have caused the submission of false claims to Medicaid. In addition, the Louisiana decision is notable because the trial court prohibited the use of aggregate proof that the AG was going to offer to show that Janssen's alleged misleading marketing led to more Risperdal claims being submitted for payment to Medicaid. The AG did not appeal this ruling because he abandoned all claims for damages and restitution before trial.
State Medicaid Fraud Statutes
Many states have statutes modeled on the federal False Claims Act. These statutes are intended to combat fraudulent conduct that leads to false claims being paid by state Medicaid agencies. Examples of such conduct would include physicians seeking reimbursement for unnecessary medical procedures, or pharmacists submitting claims for drugs that were not actually dispensed.
Over the past decade, some state AGs have sued pharmaceutical manufacturers under state false claims statutes asserting that, if a pharmaceutical company made misleading statements in selling a drug reimbursed by Medicaid, the AGs could get an award of restitution and civil penalties on the ground that every claim to Medicaid for reimbursement of the drug was tainted, and therefore “false.” A related theory was that every time a sales representative talked to doctors about a drug without disclosing a safety risk, the company was making a statutory “misrepresentation” in an attempt to get a claim paid by Medicaid.
The Louisiana Risperdal Litigation
The Louisiana Risperdal case originally included allegations that Janssen made misleading statements in promoting Risperdal for off-label uses, and suppressed information about an alleged diabetes risk. The AG asserted causes of action not just under MAPIL, but also under the Louisiana consumer protection statute (LUTPA), and under the Louisiana Civil Code for fraud, negligence and redhibition.3 Shortly before trial, the AG simplified the case by dismissing most of the causes of action, leaving only the claims under MAPIL. The AG limited his MAPIL claims to the distribution by Janssen of what the AG called a misleading letter to health care professionals regarding a class-wide label change in November 2003 (the dear health care provider or DHCP letter).
The state relied entirely on the distribution of the DHCP letter, without introducing evidence from any Louisiana physicians or pharmacists that they were misled by the DHCP letter or that they would have written or filled fewer prescriptions of Risperdal, had the DHCP letter not been sent to them. The jury determined that all 7,604 distributions of the DHCP letter, and all 27,542 sales calls made while the DHCP letter was in circulation, were violations of MAPIL, and awarded a fine of $7,250 for each of the 35,146 violations: a total of $257 million. In a separate proceeding, Judge Donald Hebert awarded the AG's private counsel $70 million in attorneys' fees and $3.2 million in costs under MAPIL. Janssen appealed to Louisiana's Third Circuit Court of Appeal, which affirmed.
The Supreme Court's Opinion
The Louisiana Supreme Court based its decision on the absence of any evidence that (a) Janssen caused any Medicaid claims for Risperdal to be submitted and reimbursed; (b) any claims that were submitted were “false claims” punishable by civil fines under MAPIL; or (c) Janssen made any “misrepresentations” in connection with claims submitted to Medicaid as defined by MAPIL. The court held: “Even if the defendants' conduct was intended to influence the prescribing decisions of doctors treating schizophrenia patients, there has been no causal connection between this conduct and any false or fraudulent claim for payment to a health care provider or other person.” Janssen, 2014 La. LEXIS 203, at *37.4
In addition, the court held that no evidence showed any “false claims,” as the definition of “false claim” under MAPIL requires the person who submitted the claim (the dispensing pharmacist) to have knowledge that the claim was “false, fictitious, untrue or misleading in regard to any material information.” La. Rev. Stat. Ann. §46:437(8). As the court pointed out, this requires the doctor or pharmacist to have knowingly committed malpractice by “prescribing or dispensing Risperdal despite knowing there were better, cheaper, or safer, more efficacious drugs available ….” Janssen, 2014 La. LEXIS 203, at *26. The AG had no such testimony.5
The Louisiana AG also asserted that Janssen had violated MAPIL's prohibition on making “misrepresentations.” La. Rev. Stat. Ann. §46:438.3(B). But the court found no evidence that Janssen made any “misrepresentations” under MAPIL, because the “misrepresentation” must have been made on a claim form submitted to the Medicaid agency, on a provider agreement submitted to Medicaid, or have been made directly to the Medicaid agency in order to be a basis for MAPIL liability. Janssen, 2014 La. LEXIS 203, at *32-33. Janssen, as a pharmaceutical company, had no provider agreement with Medicaid and submitted no claims for payment to Medicaid.6 And the AG offered no proof that Janssen made any misrepresentations directly to the Medicaid agency. Any supposed misrepresentations were made to physicians in the DHCP Letter and in sales calls.
The Supreme Court's interpretations of MAPIL are consistent with its true purpose, as the court itself described it: “The purpose of MAPIL is to prevent false or fraudulent claims from being presented to and paid by the medical assistance programs. Thus, there must be a causal link between the misleading marketing statement and a false or fraudulent claim for payment to a health care provider or other person to establish liability under MAPIL.” Id. at *37.
Implications of the Decision
The Supreme Court's ruling in effect prevents the use of MAPIL to penalize alleged fraudulent marketing by pharmaceutical companies in Louisiana, although other causes of action may exist. First, the Louisiana AG will not be able to demonstrate that a pharmacist submitted a claim to Medicaid for payment that s/he knew was false. Second, the AG will not be able to show that a pharmaceutical manufacturer made any misrepresentations to the Medicaid department connected directly to the submission of claims to Medicaid. At most, the manufacturer will have made presentations to the Medicaid P&T Committee or its advisor.
But the implications of the decision are broader. The court's statements about the purpose of MAPIL can and should be applied to Medicaid fraud statutes in other states. Even if other states' statutes are not as explicit as Louisiana's about the need to prove that the submitting doctors or pharmacists knew the claims were false, the decision affirms the need for AGs to connect the defendant's alleged misleading marketing statements with the submission of claims to Medicaid. This causation requirement comports with the False Claims Act, which subjects any person to liability who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” 31 U.S.C. §3729(a)(1)(A) (emphasis added). Medicaid fraud statutes in other states include language requiring a causal connection to a claim for reimbursement in order for liability to attach. See e.g. Ark. Code Ann. §20-77-902(A); (B) (2013).
The claims submitted also must have been false. As the Louisiana Supreme Court found, even where the pharmaceutical defendant makes fraudulent statements about its drug, the Medicaid reimbursement claims are not false where the doctor “medically determined that Risperdal is the more appropriate drug for a particular patient, despite the misleading statements … .” Janssen, 2014 La. LEXIS 203, at *26. Where the doctor has made this determination, and prescribed the drug for a medically necessary purpose, the claim cannot be false under any formulation of a “false claim.”
State AGs can pursue claims under consumer protection statutes and at common law, which do not require proof of “false claims.” To recover damages, however, these causes of action require proof that the alleged misleading marketing caused more prescriptions to be written and paid by Medicaid. Most courts have held that aggregate proof will not suffice to establish such causes of action. The trial judge in Janssen rejected the AG's attempts to show causation by aggregate statistical proof. See Reasons for Ruling, Foti ex rel. Louisiana v. Janssen Pharmaceutica, Inc., Docket No. 04-C-3967-D, 04-C-3977-D (27th Jud. Dist. Ct. Jan. 7, 2010) (Hebert, J.). In its opinion on Janssen's motion for summary judgment, the trial court followed Judge Weinstein's decision in the Zyprexa litigation, Hood ex rel. Mississippi v. Eli Lilly & Co., 671 F. Supp. 2d 397 (E.D.N.Y. 2009). There, Judge Weinstein held that individualized proof would be required to establish causation and for damages to be available under the Mississippi Medicaid Fraud Control Act or Consumer Protection Act. Id. at 456, 458. Judge Weinstein cited numerous appellate court cases requiring individualized proof. Id. at 434 (“Together, this large body of case law constitutes a now widely held view of aggregate litigation, particularly in the products liability or fraud context, that statistical proof is in most instances insufficient to show reliance, loss-causation, or injury on the part of individual class members or claimants (the ‘Individualized Proof Rule’)”).7
The insufficiency of aggregate proof applies equally to civil penalties. In entering summary judgment in favor of Lilly on Mississippi's penalty claims under the Mississippi Consumer Protection Act, Judge Weinstein explained that “imposition of civil penalties on a per-violation basis would entail separate examination of each of hundreds of thousands of claimed violations for purposes of determining the appropriate fine. Such an inquiry is impractical and beyond the resources of any court.” Hood, 671 F. Supp. 2d at 459.
If the Louisiana Supreme Court's Janssen decision is followed in other states, AGs will not be able to bring actions under Medicaid fraud statutes for civil penalties against pharmaceutical companies based on alleged fraudulent marketing, because the AGs will not be able to provide individualized proof of Medicaid claims submitted as a result of the companies' conduct. This result is the correct one in light of the true purposes of state Medicaid fraud statutes. Although the AG may pursue other causes of action, any award of damages or restitution is likely to require individual proof from physicians that the alleged misleading marketing caused additional prescriptions.
1 Louisiana Medical Assistance Programs Integrity Law, La. Rev. Stat. Ann. §§46:437.1-46:440.3.
2 The Attorney General of Louisiana has been a prolific filer of lawsuits against pharmaceutical companies, bringing suits regarding Adderall, Avandia, Depakote, Plavix, Vioxx, and Zyprexa, in addition to Risperdal.
3 Redhibition is a Louisiana-specific cause of action that permits the purchaser of a defective product to receive a full or partial refund of the purchase price.
4 Accord United States ex rel. Ge v. Takeda Pharm. Co., 737 F.3d 116, 124 (1st Cir. 2013)(The relator “made no attempt in her complaints to allege facts that would show that some subset of claims for government payment for the four subject drugs was rendered false as a result of Takeda's alleged misconduct. And any theory that all claims submitted during this period were false has even less basis to survive.”).
5 In East Baton Rouge Parish, Judge Janice Clark granted partial summary judgment on this ground in an action the Louisiana AG brought involving Avandia. Louisiana v. GlaxoSmithKline LLC, No. 599353 (19th Jud. Dist. Ct. May 1, 2013).
6 See also Commonwealth v. Ortho-McNeil-Janssen Pharms, Inc., 52 A. 3d 498, 513 (Pa. Commonw. Ct. 2012) (holding in Risperdal action brought by Pennsylvania AG that “because a drug manufacturer is not a ‘provider’ of medical goods and services to Medicaid recipients, its conduct does not support civil remedies pursuant to the [Pennsylvania Medicaid Fraud Control Act].”).
7 See also Louisiana v. Merck & Co., 2010 U.S. Dist. LEXIS 142767, at *23 (E.D. La. Mar. 31, 2010) (“[I]t is not sufficient for Plaintiff to generally assert that Merck's misrepresentations led to the prescription of Vioxx. Each decision by each doctor and each patient was different. The effect that any alleged misrepresentations had on each decision is unique.”). But cf. Neurontin Mktg. & Sales Practices Litig., 712 F.3d 51 (1st Cir. 2013) (approving use of aggregate proof by Kaiser in claim for damages).