Trends and Analysis

• We have identified 21 health care–related qui tam cases unsealed since last month’s Qui Tam Update. Of those, two were filed in 2013, 15 were filed in 2011 or 2012, and four were filed in 2010 or earlier.

• The cases unsealed in September were filed in 14 different states, and several cases were filed in historically active jurisdictions for False Claims Act (FCA) cases, including the Eastern District of Pennsylvania, the District of Massachusetts, and the Eastern District of New York.

• The government intervened in one case and declined to intervene in 14 of the health care cases unsealed in September. In three of the remaining cases, the relator dismissed the case. In two other remaining cases, it is unclear from the dockets (which appear to remain partially sealed) whether the government has made a decision regarding intervention. In the final remaining case, the government declined to intervene, but the relator appears to be moving forward with the case. It remains to be seen whether this high declination rate is due to limited government resources with which to pursue qui tamcases, the relative weakness of the relators’ cases, the government’s confidence that the relators will proceed with the cases on their own, or some combination of these possibilities. We will continue to monitor this trend in the coming months.

• Subject matter of claims:

• A number of cases involve both federal and state claims.

• Several cases allege “off-label” promotion of pharmaceuticals and violations of the Anti-Kickback Statute (AKS), both of which are longstanding theories on which countless FCA cases have been based.

• Two cases are based on claims that the providers who actually rendered the services at issue were improperly credentialed. For example, in one case, the relator alleges that the defendant submitted claims for services rendered by physicians when, in fact, those services were provided by physician assistants and nurse practitioners.

• One case involves a company that provides staffing and charting/billing services to Emergency Departments (ED) and urgent care centers. The relator accuses the defendants of engaging in upcoding and falsifying patients and billing records, requiring ED physicians to send charts to defendant coding/billing companies which would review them and select coding to maximize profit (which the relator alleged resulted from upcoding), and instructing physicians to engage in certain upcoding practices and falsifying of medical records.

• Identity of relators:

• The majority of cases unsealed in September were filed by either current or former employees of the defendant or individuals who had formerly contracted with the defendant. In one case, discussed in more detail below, the complaint is the relator’s second filed against his former employer alleging similar conduct.

• One case was filed by a relator who was performing an audit on behalf of the New York State Office of the Medicaid Inspector General.

Selected Cases Unsealed in September 2013

United States ex rel. Boise v. Cephalon, Inc. et al., 2:08-cv-00287-TON (E.D. Pa.)

Complaint filed: June 30, 2009

Complaint unsealed: September 13, 2013

Intervention status: Declined

Claims: False claims to Medicare, Medicaid, CHAMPUS / TRICARE, CHAMPVA, and the Federal Employee Health Benefits Program in violation of the Civil False Claims Act, 31 U.S.C. § 3729 et seq., as well as FCA analogues in 25 states and the District of Columbia. The complaint also alleges a conspiracy between Cephalon and Takeda Pharmaceuticals North America, Inc. under 31 U.S.C. § 3729(a)(3).

Name of relator(s): Bruce Boise, a former Cephalon sales representative and sales manager

Defendant’s business: Cephalon is a biopharmaceutical manufacturer; Takeda is a pharmaceutical company.

Relator’s counsel: Philips & Cohen, LLP, and Weinstein, Kitchenoff & Asher, LLC

Summary of case: The complaint is the relator’s second complaint against Cephalon. The relator successfully brought FCA claims against Cephalon related to off-label marketing of three drugs (Actiq, Gabitril, and Provigil), which were settled in September 2008 for $375 million through a settlement agreement covering the time period from January 1, 2001 through December 31, 2006. In addition, Cephalon entered into a Corporate Integrity Agreement (CIA). At the same time, Cephalon pleaded guilty to criminal misbranding under 21 U.S.C. §§ 331(a), 333(a)(1), and 352(f)(1) and paid $50 million (the 2008 Resolution). The current complaint alleges that Cephalon utilized sales and marketing strategies to promote off-label uses for four drugs (Fentora, Nuvigil, Amrix, and Provigil) and that Cephalon embarked on a co-promotion agreement and conspiracy with Takeda.

Current status: The United States declined to intervene; the relators may proceed on their own.

Reasons to watch: The case is the second FCA claim brought by the same relator against the same defendant for similar off-label marketing conduct. The current complaint was filed and covers the time period after resolution of relator’s first case and includes some additional products. Although these are important differences, it is interesting that the federal government declined to intervene notwithstanding the fact that the complaint alleges conduct similar to that which was the subject of the 2008 case. The case is also notable because we have not seen many cases where relators have filed a new case against their former employers, especially after obtaining a favorable settlement in the first case. Of particular note, the relator was terminated in 2003 and thus was not employed by the company from 2006 to the present, the time period covered by the complaint. Further, Cephalon’s defense strategy and its success are worth watching to see whether a relator can successfully bring additional claims against his former employer for similar conduct during a time period in which the relator was no longer employed by the company. Notably, Cephalon faces a second, separate FCA case (discussed below) in which relators allege off-label marketing of three drugs.

United States ex rel. John Doe v. Cephalon, Inc., 2:09-cv-02926-MSG (E.D. Pa.)

Complaint filed: June 30, 2009

Complaint unsealed: September 13, 2013

Intervention status: Declined

Claims: False claims to Medicare, TRICARE, Medicaid, and “other federally funded government health care programs” in violation of the Civil False Claims Act, 31 U.S.C. § 3729(a)(1)-(a)(2), as well as FCA analogues in 27 states, the District of Columbia, and in Chicago and New York City; relators also allege a conspiracy between Cephalon and WebMD Health Corp. in violation of 31 U.S.C. § 3729(a)(3).

Name of relator(s): John Does 1-3, each of whom is a former employee of Cephalon

Defendant’s business: Cephalon is a biopharmaceutical manufacturer; WebMD provides health information online.

Relator’s counsel: Duane Morris, LLP

Summary of case: The complaint alleges that Cephalon engaged in off-label promotion of three drugs: Fentora, Provigil, and Nuvigil. Some of the drugs at issue in the 2008 Resolution, which is described in the complaint, are allegedly predecessors to the drugs at issue in the current litigation. The complaint further alleges that Cephalon paid kickbacks to speakers, speaker-trainers, and meeting participants in violation of the AKS, 42 U.S.C. § 1320a-7b. As to WebMD, the complaint alleges that Cephalon and WebMD conspired to locate certain patient populations and promote Cephalon’s drugs for off-label uses to those populations. For example, relators allege that when a WebMD user “clicks on the WebMD medical dictionary definition of ‘fatigue’, [the user] immediately sees two bright orange Nuvigil page inserts, each promoting Nuvigil to ‘Rediscover Wakefulness’ [an alleged off-label use…] and offering a 7- or 14-Day Free Trial of Nuvigil by clicking to print the free trial voucher.”

Current status: The United States declined to intervene, the case has been unsealed, and the court issued a summons to defendants Cephalon and WebMD.

Reasons to watch: The case is notable for at least two reasons. First, the relator’s theory that WebMD is liable for conspiracy under the FCA based on advertisements placed on its website allegedly promoting off-label uses could, if ultimately proven, have a wide-ranging impact on the placement of pharmaceutical and medical device advertisements online. Second, pharmaceutical companies and defense attorneys will monitor Cephalon’s defense strategy because the conduct alleged in the complaint appears to be the same or similar conduct alleged in prior lawsuits which Cephalon settled and during portions of which period it was operating under a CIA.

United States ex rel. Edwards v. Amerigroup Corporation et al., No. 1:12-cv-02399-WMN (D. Md.)

Complaint filed: August 13, 2012

Complaint unsealed: No date provided in the docket.

Intervention status: Declined

Claims: Several violations of the Federal False Claims Act, 31 U.S.C. § 3729 et seq., as well as conspiracy to violate the Federal False Claims Act and violations of FCA analogues in 12 states

Name of relator(s): Mary Edwards, a former Amerigroup employee (Outpatient Team Utilization Management Nurse Reviewer from August 2011 to February 2012, a period of seven months)

Defendant’s business: Managed Care Organization (MCO)

Relator’s counsel: Kenney & McCafferty P.C., and Hanley and Grason, LLC

Summary of case: Amerigroup is a multi-state MCO that is contracted to administer benefits under several federal health care programs including Medicare, Medicaid, and Medicare Advantage. The relator alleges that Amerigroup systemically approved claims that were not medically necessary and lacked clinical support in an effort to maintain its contract with the state of Maryland. Specifically, the relator claims that in connection with Amerigroup’s productivity goals and an upcoming audit, Amerigroup pressured its Utilization Management staff to process and approve 20 to 25 cases per day, without exception, and to maintain a low denial rate. The relator also alleges that she was removed from her position reviewing requests for home health care services because Amerigroup believed that her practice of asking providers for additional information regarding the medical necessity of such services created difficulty with its providers, thereby jeopardizing the company’s MCO contract with the state of Maryland.

Current status: The government declined to intervene on July 5, 2013.

Reasons to watch: This case is worth watching because of the relator’s brief tenure at Amerigroup. In recent months, a number of FCA cases have been unsealed involving relators who join a company for a short period of time (less than one year) and then file a qui tam complaint based on limited and vague information. For example, Stephen Mullen has filed qui tam complaints against at least four health care companies, including Ascencion Health and HCA Holdings, Inc. Mr. McMullen filed both cases in May 2012, and the defendants moved to dismiss each case in June and September 2013, respectively, noting that Mr. McMullen was a serial relator who had demonstrated a pattern of working for providers for a short time and then accusing them of technical regulatory violations. Here, the relator worked for Amerigroup for only seven months before leaving the company and ultimately filing the instant complaint, based on events that occurred over a four-month period of time. The government’s refusal to intervene might suggest that this case, like those filed by Mr. McMullen, is based on alleged technical violations for which the relator lacked sufficient factual and legal support given her short tenure with Amerigroup.