Bristol-Myers, Otsuka Secure Win in Whistle-Blower Case

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By Eric Topor

Two pharmaceutical companies have cemented an earlier court victory over a pair of whistle-blowers who alleged improper marketing of the antipsychotic drug Abilify.

The U.S. Court of Appeals for the Sixth Circuit affirmed Oct. 27 the dismissal of a False Claims Act lawsuit brought against Bristol-Myers Squibb Co. (BMS) and Otsuka America Pharmaceutical Inc. because the whistle-blowers, two former BMS sales representatives, didn’t plead their allegations with the detail required under the FCA ( United States ex rel. Ibanez v. Bristol-Myers Squibb Co. , 2017 BL 385870, 6th Cir., No. 16-3154, 10/27/17 ).

The decision could make it more difficult for whistle-blowers to pursue lawsuits against drugmakers accused of improper off-label marketing to physicians if they only have knowledge of the marketing aspects of a scheme. FCA lawsuits alleging off-label marketing have been hit and miss for both pharmaceutical companies and whistle-blowers recently, with Solvay Pharmaceuticals beating similar claims in a Sept. 12 federal appeals court decision, while Celgene settled an off-label FCA case for $280 million in June.

Whistle-blowers Joseph Ibanez and Jennifer Edwards alleged that BMS and Otsuka engaged in an illegal scheme to market Abilify for off-label uses, those not approved by the Food and Drug Administration, to pediatric and geriatric psychiatrists and paid kickbacks to pediatric psychiatrists to increase Abilify prescription rates.

A divided appeals court panel decided 2-to-1 that the whistle-blowers failed to provide examples of alleged false claims for Abilify that were induced by improper off-label marketing tactics.

Limited Impact?

Claire M. Sylvia, a partner with Phillips & Cohen LLP in San Francisco, told Bloomberg Law Oct. 30 that the decision likely wouldn’t affect pharmaceutical marketing, as "[t]he FCA has been extremely effective at enforcing off-label restrictions and calling attention to abuses and the associated harms to public health.” Sylvia represents whistle-blowers in FCA litigation and said the effect of the decision would be limited because it only applies to cases in the Sixth Circuit, and that drugmakers would be unwise to “ignore past substantial penalties that have been paid for violating the False Claims Act.”

The Sixth Circuit has recognized a relaxed FCA pleading standard in which one whistle-blower was allowed to advance FCA allegations without representative false claim examples. But the court said that particular whistle-blower was involved in the defendant’s billing department and had direct knowledge of alleged false claim submissions made to the government.

That direct knowledge from billing submissions was missing from the complaint filed by Ibanez and Edwards, as they weren’t involved in billing or claim submissions, and the court said those missing details were fatal to their claims.

The whistle-blowers’ attempt to amend their complaint with additional detailed claim submissions was rejected as well. The court said the additional details regarding patient claim submissions for Abilify for off-label use still weren’t enough to link any alleged false claims to the off-label marketing efforts of BMS or Otsuka.

Counsel for neither party responded to Bloomberg Law’s requests for comments on the decision.

One Judge Dissents

In a bit of intra-court tension, the majority characterized the FCA as “an awkward vehicle” to prosecute improper off-label drug promotion, while dissenting Judge Jane B. Stranch said a relaxed pleading standard should have been applied given the whistle-blowers’ personal knowledge of BMS’s marketing tactics.

Sylvia said Stranch’s dissenting opinion represented the trend in FCA pleading standard decisions, and that requiring a whistle-blower to have firsthand knowledge of a defendant’s billing practices to utilize a relaxed pleading standard is unnecessary and undermines the intent behind the law.

Stranch noted the tens of billions of dollars in estimated annual Medicare and Medicaid fraud, the out-sized role that whistle-blowers have played in FCA recoveries over the past 30 years, and Congress’s intent to broaden the FCA’s reach in 2009 FCA amendments. Stranch said the whistle-blowers’ direct knowledge of the alleged off-label marketing, in some instances having personally interacted with physician practice groups that later wrote off-label Abilify prescriptions, should have been enough to sustain FCA claims at this stage of the litigation.

Morgan Verkamp LLC and Goldberg Kohn represented the relators. Vorys, Sater, Seymour and Pease LLP; Hogan Lovells US LLP; and Pepper Hamilton LLP represented Bristol-Myers Squibb. Keating Muething & Klekamp PLL and Skadden, Arps, Slate, Meagher & Flom LLP represented Otsuka America Pharmaceutical.

To contact the reporter on this story: Eric Topor in Washington at etopor@bna.com

To contact the editor responsible for this story: Peyton Sturges at psturges@bna.com

For More Information

The opinion is at http://src.bna.com/tM0.

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