CSL Behring Beats Back Whistle-Blower’s Drug Pricing Fraud Claims

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By Eric Topor

Allegations of fraudulent drug price reporting against drugmaker CSL Behring and specialty pharmacies Accredo Health Inc. and Coram LLC won’t be revived by a federal appeals court ( United States ex rel. Lager v. CSL Behring, LLC , 2017 BL 150509, 8th Cir., No. 16-1452, 5/5/17 ).

The U.S. Court of Appeals for the Eighth Circuit affirmed dismissal of whistle-blower Shane Lager’s False Claims Act lawsuit May 5, agreeing with the trial court that Lager’s action ran afoul of the FCA’s public disclosure bar. Lager alleged that CSL falsely reported inflated wholesale prices of two durable medical equipment infusion drugs (Vivaglobin and Hizentra), allowing Accredo and Coram to charge Medicare higher prices for the drugs.

A whistle-blower can get around the public disclosure bar if he is the original source of the allegations, which requires bringing the allegations to the attention of the government prior to any public disclosure, or has independent knowledge of the allegations that materially adds to what has been publicly disclosed. This standard is a high bar to meet even for a whistle-blower who is a former insider like Lager, who worked in sales at CSL for 14 years.

Lager said the alleged scheme resulted in $280 million in Medicare overpayments, but the court said the facts behind the alleged pricing spread scheme were publicly disclosed in government reports and litigation years before Lager filed his lawsuit. The court said the government would have been alerted to the alleged pricing fraud scheme based on the combined public information sources, which triggered the public disclosure bar and necessitated the dismissal of Lager’s lawsuit.

Counsel for the parties didn’t respond to Bloomberg BNA’s requests for comment.

Prior Case, OIG Reports

Lager’s allegations concerned the difference between the average wholesale prices (AWPs) CSL reported and the actual average sale prices (ASPs) of the drugs. Lager alleged that CSL reported inflated AWPs to create a large “spread” between the AWP and ASP of its infusion drugs, thereby boosting Medicare and Medicaid reimbursements.

The court, however, said the problems with AWP and ASP drug pricing spreads were well known to the government. There was extensive litigation on this issue in In re Pharm. Indus. Average Wholesale Price Litig. from 2007, though it involved different defendants. However, the Department of Health and Human Services Office of Inspector General issued a report in 2013 on drug pricing spread practices specifically for infusion drugs, in which the OIG said the AWP was susceptible to manipulation and recommended that Medicare base its reimbursements on ASPs.

Lager argued that the defendants weren’t specifically named in the public disclosures cited, and therefore the public disclosure bar wasn’t triggered as to the specific pricing spread scheme that Lager alleged.

The court said the public disclosure bar can still be triggered if the public disclosures “provide enough information about the participants in the scheme” to identify the defendant. The court said that when “viewed collectively,” the public disclosures provided enough information to identify CSL, Accredo and Coram, triggering the public disclosure bar.

RiezmanBerger and Siprut PC represented Lager. Hogan & Lovells LLP and Thompson Coburn LLP represented CSL Behring. Husch & Blackwell LLP and Latham & Watkins LLP represented Acredo. Williams & Connolly LLP and Dowd Bennett LLP represented Coram.

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

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

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