Twenty months later, the FCA relator separately moved the district court to award her a share of the FDCA Settlement, arguing that the FDCA Settlement was an “alternate remedy” under the False Claims Act, 31 U.S.C. § 3730(c)(5), and so she was statutorily entitled to a share of that recovery as part of the FCA settlement. 230 The D.C. Circuit reviewed de novo the meaning of the FCA’s provision governing alternate remedies and held that the provision only allows a relator to recover a share with the claim pursued if the alternate remedy is of the type that could have been pressed under the FCA. The D.C. Circuit reasoned that “misbranding bears little resemblance to the types of fraudulent behavior that the FCA identifies and proscribes,” and a misbranding claim “seeks to protect the public from being misled by the drug company's marketing tactics…by pursuing equitable relief and penalties or fines,” as opposed to seeking to recover damages for any use of falsity or fraud to deprive the government of its money or property, which is the hallmark of litigation under the FCA. REMUNERATION UNDER AKS In U.S. ex rel. Musachia v. Pernix Therapeutics, LLC , the relator, a former sales representative at Pernix, claimed to have been instructed to advertise and market a prescription direct fulfillment program for ZoHydro to physicians and their office staff. 231 The relator alleged that by providing free overnight delivery and waiving co-payments of ZoHydro to patients, including those whose prescriptions are paid or partially paid by government healthcare programs, the defendants induced patients to order ZoHydro prescriptions and caused claims to be submitted for payment to the government in violation of the AKS and FCA. The district court ultimately dismissed the complaint, holding that the exhibits submitted by the plaintiff did not reference free shipping to federally insured patients, nor did they support that co-payments were improperly waived. OPEN PAYMENTS PROGRAM In U.S. ex rel. Frain v. Medicrea USA Corp. , Medicrea International, a French medical device manufacturer, and its American affiliate Medicrea USA Inc., agreed to pay $1 million to the United States and participating states to resolve allegations that the companies violated the AKS and FCA in connection with entertaining U.S.-based physicians during a 2013 conference in France. 232 The companies also agreed to pay another $1 million to resolve related allegations that they violated the physician Open Payments Program for failing to fully report those physician-entertainment expenses to CMS. The settlement resolved allegations that Medicrea: (1) provided items of value in the form of meals, alcoholic beverages, entertainment and travel expenses to U.S.-based physicians at events surrounding the 2013 conference; (2) induced physicians to purchase or order Medicrea’s spinal devices, and that this resulted in false claims to federal healthcare programs; and (3) 230 By way of reminder, the alternate-remedy provision of the FCA provides in relevant part: Notwithstanding subsection (b), the Government may elect to pursue its claim through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty. If any such alternate remedy is pursued in another proceeding, the person initiating the [False Claims Act] action shall have the same rights in such proceeding as such person would have had if the action had continued under this section. 31 U.S.C. § 3730(c)(5). 231 2021 WL 2826429 (N.D. Ala. July 7, 2021). 232 https://www.justice.gov/usao-edpa/pr/french-medical-device-manufacturer-pay-2-million-resolve-alleged- kickbacks-physicians.
failed to properly report the expenses to CMS as required by the Open Payments Program, which requires manufacturers and others to disclose certain payments and other transfers of value to physicians, including indirect payments. This was among the first settlements to resolve allegations under both the FCA and Open Payments Program. CO-PAYMENT ASSISTANCE PROGRAMS In Pfizer, Inc. v. U.S. Dep’t of Health and Hum. Servs ., Pfizer filed suit against HHS, seeking a declaratory judgment that one, or both, of two co-payment assistance programs, would not violate the AKS. 233 Under the first assistance program (the Charity Program), Pfizer would make donations to an existing independent charity to develop a co-payment assistance fund specifically for patients with a particular heart condition for which Pfizer’s drug is the only FDA-approved pharmacological treatment (the Drug). Under the second assistance program (the Direct Program), Pfizer would directly subsidize co-payments for the Drug for eligible Medicare Part D beneficiaries who had been prescribed the Drug. Before filing suit, Pfizer requested an advisory opinion from OIG with respect to both proposed co-payment assistance programs. OIG rejected Pfizer’s request for an advisory opinion for the Charity Program because the same or substantially the same course of conduct was under investigation. OIG accepted Pfizer’s advisory opinion request relating to the Direct Program but told Pfizer the result likely would be unfavorable. Pfizer filed suit before OIG issued the unfavorable opinion, asking the court to declare that both the Charity Program and the Direct Program did not violate the AKS. The government moved to dismiss Pfizer’s claim or for summary judgment. The district court dismissed Pfizer’s claims. 234 With respect to the Charity Program, the district court held that Pfizer’s claim did not satisfy prudential ripeness criteria, stating that “the prudent approach is the one envisioned by the law, permitting Pfizer and OIG to review the program and reach definitive conclusions.” With respect to the Direct Program, Pfizer had asserted that AKS liability requires either that the Direct Program be administered with corrupt intent, or that the payments made through the Direct Program otherwise constitute an improper quid pro quo, where Pfizer directly influences a doctor’s or patient’s decision to prescribe or purchase the Pfizer drug. The district court rejected Pfizer’s argument, noting that the text of the AKS makes clear that the mental state elements do not include corrupt intent and stating that, “in other words, the AKS means what it says.” Pfizer has appealed the decision.
SPEAKER PROGRAMS AND INTERACTIONS WITH PHYSICIANS
The government’s focus on the relationship between manufacturers and physicians will certainly continue following HHS-OIG’s Special Fraud Alert issued in November 2020. The industry and its trade associations provided updated ethical guidance for members in 2021. For example, the PhRMA Code on Interactions with Health Care Professionals (PhRMA Code) is a voluntary code of ethics that applies to pharmaceutical company interactions
233 No. 1:20-cv-04920 (S.D.N.Y. Jun. 26, 2020). 234 2021 WL 4523676 (S.D.N.Y. Sept. 30, 2021).
PHARMACEUTICAL AND MEDICAL DEVICE DEVELOPMENTS BASS, BERRY & SIMS | 41
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