The False Claims Act & the Policing of Promotional Claims about Drugs

The False Claims Act and the Policing of Promotional Claims about Drugs: A Call for Increased Transparency A White Paper by The Center for Health & Pharmaceutical Law & Policy September 2015

Seton Hall University School of Law One Newark Center Newark, NJ 07102 law.shu.edu

The Center for Health & Pharmaceutical Law & Policy

AUTHORSHIP This White Paper was produced by the Seton Hall University School of Law faculty identified below.

Kathleen M. Boozang Dean and Professor of Law Charles A. Sullivan Interim Associate Dean for Finance and Administration and Professor of Law Kate Greenwood* Research Fellow and Lecturer in Law

*Kate Greenwood served as Research Fellow and Lecturer in Law at Seton Hall University School of Law through July 24, 2015.

The False Claims Act and the Policing of Promotional Claims about Drugs: A Call for Increased Transparency

ACKNOWLEDGEMENTS On April 28, 2014, the Center for Health & Pharmaceutical Law & Policy at Seton Hall Law School hosted an invitation-only Forum to discuss the intersection of the False Claims Act and the ban on off-label promotion. Entitled The Ban on Off-Label Promotion and the False Claims Act: Analyzing a Decentralized, Public-Private Enforcement Regime, the Forum brought together leaders from academia, government—including the Department of Justice, the Food and Drug Administration, and a state Medicaid Fraud Control Unit—the plaintiffs’ and defense bars, and the life sciences industry. The Center wishes to thank all of the individuals who participated in the Forum for their time and for the lively, insightful discussion they made possible. Special thanks are due to Professor David Freeman Engstrom of Stanford Law School, who keynoted the Forum with a presentation on the empirical analyses of False Claims Act litigation he has conducted.

The Center would also like to thank Amarilys Cattafi, Edward Hartnett, John Jacobi, Stephen Lubben, Simone Handler-Hutchinson, and a number of anonymous interviewees and reviewers for sharing their insights with us during the production of the White Paper. Phillip DeFedele and Nina Trovato provided able research assistance.

All views and recommendations contained in this White Paper are solely those of the authors. They do not necessarily reflect the perspectives of the Forum participants, the experts with whom we spoke during the research and writing process, other members of Seton Hall Law School’s faculty or staff, or members of the Seton Hall Law School Board of Visitors or other Advisory Boards.

The Center for Health & Pharmaceutical Law & Policy

The False Claims Act and the Policing of Promotional Claims about Drugs: A Call for Increased Transparency

TABLE OF CONTENTS I.

Introduction ....................................................................................................................1

II.

The Changing Model of Prescription Drug Promotion .................................................5

III.

The Source of the Ban on Off-Label Promotion: The Federal Food, Drug, and Cosmetic Act and Its Implementing Regulations .....................................................................................12

IV.

Direct Enforcement of the Ban on Off-Label Promotion ...........................................23

V.

The Ban on Off-Label Promotion and the False Claims Act: The Legal Landscape ....................................................................28

VI.

The False Claims Act and the Ban on Off-Label Promotion: The Mechanics of Enforcement ...............................................................41

VII.

Empirical False Claims Act Evidence ........................................................................52 A. Critiques of Relator Suits .......................................................................................52 B. Analysis of the Critiques .......................................................................................54

VIII.

Off-Label Promotion and the False Claims Act: Shining a Light on an Enforcement Regime ...............................................................57 A. Transparency in Reimbursement ..........................................................................57 B. Establish Clearer and More Explicit Rules of the Road for Pharmaceutical Promotion ...........................................................60 C. Enhance the Transparency of the Enforcement Process and the Terms of Settlement ....................................................................64

Appendices ..............................................................................................................................68

The Center for Health & Pharmaceutical Law & Policy

I.

INTRODUCTION

In recent years, it has begun to seem commonplace for pharmaceutical companies accused of promoting their products for unapproved “off-label” uses to enter into settlements with the government in excess of a billion dollars. In 2009, Eli Lilly settled with the government for $1.415 billion;1 Pfizer settled for $2.3 billion later that year.2 In 2012, GlaxoSmithKline entered into the largest healthcare settlement ever, for $3 billion;3 and in 2013, the government settled with Johnson & Johnson for $2.2 billion.4 The advocacy organization Public Citizen reports that between 1991 and mid-2012, there were a total of 239 settlements reached between federal and state governments and pharmaceutical companies, for a total of $30.2 billion.5 While the allegations underlying these settlements covered a range of violations, “the unlawful promotion of drugs was associated with the highest penalties.”6 Many observers have concluded that these high-profile, high-dollar settlements indicate that there is something wrong with either the governing laws or with their enforcement. Some argue that the statutes, regulations, and sub-regulatory guidance governing pharmaceutical and medical device promotion are ill-advised as a policy matter, unconstitutional, or both.7 Others Press Release, U.S. Dep’t of Justice, Eli Lilly and Company Agrees to Pay $1.415 Billion to Resolve Allegations of Off-label Promotion of Zyprexa (Jan. 15, 2009), available at http://www.justice.gov/archive/opa/pr/2009/January/09-civ-038.html.

2 Press Release, U.S. Dep’t of Justice, Justice Department Announces Largest Health Care Fraud Settlement in Its History (Sept. 2, 2009), available at http://www.justice.gov/opa/pr/justice-department-announces-largest-healthcare-fraud-settlement-its-history.

3 Press Release, U.S. Dep’t of Justice, GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data (July 2, 2012), available at http://www.justice.gov/opa/pr/glaxosmithkline-plead-guilty-and-pay-3-billion-resolve-fraud-allegations-and-failurereport.

4 Press Release, U.S. Dep’t of Justice, Johnson & Johnson to Pay More Than $2.2 Billion to Resolve Criminal and Civil Investigations (Nov. 4, 2013), available at http://www.justice.gov/opa/pr/johnson-johnson-pay-more-22billion-resolve-criminal-and-civil-investigations.

5 SAMMY ALMASHAT & SIDNEY WOLFE, PHARMACEUTICAL INDUSTRY CRIMINAL AND CIVIL PENALTIES: AN UPDATE, PUBLIC CITIZEN 4 (SEPT. 2012).

6 Id. at 5.

7 In a 2010 article in the YALE JOURNAL OF HEALTH POLICY, LAW & ETHICS, John E. Osborn summarized the competing views as follows: 1

The enforcement of off-label promotion restrictions has precipitated far more controversy and consternation than off-label prescribing. Although the commercial motivations of drug manufacturers are readily apparent, some believe there is no need to restrict off-label promotion as manufacturers ultimately are deterred from advertising off-label uses by the threat of substantial tort liability for misrepresentation and harm to patients. Others point out that while labeling may be amended to include new information about a drug, invariably there will be occasions in which

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criticize the current enforcement process, with some arguing that it is characterized by “limited rulemaking and broad enforcement by threat of criminal prosecution.”8 Others criticize it for being ineffective, arguing that it allows companies to treat settling with the government as a cost of doing business.9 Given the divide in opinion, it is perhaps unsurprising that neither statutory nor regulatory reform has been forthcoming. This white paper does not address the wisdom of the ban on offlabel promotion. Instead, it suggests a number of ways in which the current regime could be improved simply by making it more transparent, to the benefit of all parties. This call for transparency is timely because, as Section II documents, the enforcement picture may be changing as a result of an important shift in the way that life sciences companies promote their products -away from individual physicians and toward formulary committees and other decision-makers at managed care plans, hospitals, nursing homes, and multi-specialty physician groups.10 Section III

the company is in possession of truthful, non-misleading scientific and medical information that will not be included in the current, approved labeling. The most extreme position contends that the current ban on off-label promotion should be modified substantially or even scrapped, since it significantly increases the cost of drug development, inhibits the rate of adoption of effective new uses of approved products, and limits the full dissemination to prescribing physicians of useful medical information. Others contend that restricting off-label promotion ensures public safety by preventing pharmaceutical companies from spreading false or misleading information about their products in the pursuit of profits.

John E. Osborn, Can I Tell You the Truth? A Comparative Perspective on Regulating Off-Label Scientific and Medical Information, 10 YALE J. HEALTH POL’Y L. & ETHICS 299, 305-6 (2010).

8 Id. at 307.

9 Katherine A. Blair, In Search of the Right Rx: Use of the Federal False Claims Act in Off-Label Drug Promotion Litigation, HEALTH LAWYER, Apr. 2011, at 44 (explaining that many have criticized the use of the False Claims Act to enforce the ban on off-label promotion and “encouraged the use of alternate enforcement mechanisms that more closely meet the FDA’s regulatory and policy objectives”). Compare, e.g., Ralph Hall & Robert Berlin, When You Have a Hammer Everything Looks Like a Nail: Misapplication of the False Claims Act to Off-Label Promotion, 61 FOOD & DRUG L. J. 653, 653 (2006); Vicki W. Girard, Punishing Pharmaceutical Companies for Unlawful Promotion of Approved Drugs: Why the False Claims Act Is the Wrong Rx, 12 HEALTH CARE L. & POL’Y 119, 121 (2009), and Michael K. Loucks, Pros and Cons of Off-Label Promotion Investigations and Prosecution, 61 FOOD DRUG L.J. 577, 579 (2006) (“Some have argued that the off-label investigations and prosecutions stifle innovation and use of products to help patients. Others have argued quietly that the government and government prosecutors are engaged in the practice of medicine.”) with Kevin Outterson, Punishing Health Care Fraud—Is the GSK Settlement Sufficient?, 367 N. ENGL. J. MED. 1082, 1083 (2012) (reporting that “questions remain about the efficacy of fines and corporate integrity agreements in deterring corporate misbehavior” and suggesting that companies “might well view such fines as merely a cost of doing business – a quite small percentage of their global revenue and often a manageable percentage of the revenue received from the particular product under scrutiny”) and Aaron S. Kesselheim, et al., False Claims Act Prosecution Did Not Deter Off-Label Drug Use in the Case of Neurontin, 30 HEALTH AFF. 2318, 2325 (2011) (“Our finding that sales of a drug that was the subject of a federal fraud prosecution remained robust . . . raises fundamental questions about the deterrent role of the False Claims Act.”).

10 See Sue Sutter, Economic Superiority Claims, Manufacturer/Payer Relationships Ripe for Enforcement Scrutiny, THE PINK SHEET (Feb. 6, 2012).

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then reviews the source of the ban on off-label promotion in statutory, regulatory, and decisional law, including Section 114 of the Food, Drug, and Cosmetic Act (FDCA), which allows companies to use health care economic information that does not appear on a drug’s approved label in presentations to payers.

Section IV describes the direct enforcement of the ban by the FDA and the Department of Justice (DOJ), while Section V turns to the False Claims Act and explains the link that courts have drawn between a statute passed to protect the government from procurement fraud and the legal regime governing drug and device promotion. Section V also analyzes the pleading standards governing FCA litigation, which has important implications for when FCA suits can be brought.

Section VI then explores the complicated, multi-jurisdictional enforcement process. Qui tam relators and their counsel, the DOJ, United States Attorneys’ Offices, the Department of Health and Human Services (including the FDA, the Office of the Inspector General (OIG), and the Centers for Medicare and Medicaid Services (CMS)), the Department of Defense, the Veterans Administration, the Bureau of Prisons, and state Medicaid Fraud Control Units (MFCU) all play a role in the investigation, litigation, and settlement of FCA cases. Section VII reviews empirical evidence developed by Professor David Freeman Engstrom testing some of the most commonlymade criticisms of FCA enforcement across the various types of government fraud.

Finally, in Section VIII, the paper identifies aspects of the intersection of the ban on offlabel promotion and the False Claims Act that have proven controversial and suggests ways in which enhanced transparency might respond to the concerns that have been raised. 

Transparency in Reimbursement The government should consider requiring that diagnosis information be added to claims for reimbursement under Medicare Part D and Medicaid, as it is for claims under Medicare Part B. This would give federal and state regulators the ability to use standard utilization management tools such as prior authorization to reduce medically unjustified prescribing and, a fortiori, false claims.

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

Transparency About What Is and Is Not “Promotion” Where possible, the government should consider making the law governing product promotion clearer and more granular, including by passing legislation, promulgating regulations, issuing guidance documents, developing safe harbors, or implementing an advisory opinion process.



Transparency in Enforcement o

So that meritorious cases do not founder due to purely procedural hurdles, the government should in appropriate circumstances share information about claims for reimbursement with qui tam relators.

o

When an off-label promotion case is resolved, the government should provide information about its reasoning in negotiating and arriving at the settlement amount. This could include an explanation of the damages model used and the calculations performed. This would dispel the sense that the settlement amounts are arbitrary; it would also provide non-parties with helpful guidance.

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II.

The Changing Model of Prescription Drug Promotion

In 2012, Sara Miron Bloom, the well-known Assistant United States Attorney for the District of Massachusetts, told a conference audience that she was “optimistic that the era of ‘really big, corporate-wide, off-label’ promotional activity has passed.”11 At the same conference, Jill Furman, the Deputy Director of the Department of Justice’s Consumer Protection Branch, agreed with Bloom “that the big off-label promotion cases are on the decline.”12 Perhaps indicative of such a decline, in 2014, the DOJ announced just two settlements with companies accused of offlabel promotion, one for $56.5 million and one for $192.7 million.13 Since False Claims Act cases typically remain under seal for at least two years after filing, however, confident assessment of such trends is difficult.

There are likely multiple causes for the slowdown—if there is one—in very large settlements founded on off-label promotion to prescribers. For one, the increasingly robust compliance programs that companies have implemented, both voluntarily and as a condition of a Corporate Integrity Agreement (CIA) or other settlement with the government, may be reducing the amount of non-compliant promotion engaged in by their salesforces.14 This would of course be a vindication of the present regime. However, other reasons may explain the perceived behavioral changes. The Centers for Medicare and Medicaid Services’ (CMS) implementation of the Physician Payments Sunshine Act, for example, has caused many companies to rethink their

11

Id. See also The Partnership for Public Service, Sara Bloom: Fighting Drug Maker Health Care Fraud, WASHINGTON POST (Oct. 11, 2010).

12 Sutter, supra note 10.

13 Press Release, U.S. Dep’t of Justice, Shire Pharmaceuticals LLC to Pay $56.5 Million to Resolve False Claims Act Allegations Relating to Drug Marketing and Promotion Practices (Sept. 24, 2014), available at http://www.justice.gov/opa/pr/shire-pharmaceuticals-llc-pay-565-million-resolve-false-claims-act-allegationsrelating-drug; Press Release, U.S. Dep’t of Justice, Endo Pharmaceuticals and Endo Health Solutions to Pay $192.7 Million to Resolve Criminal and Civil Liability Relating to Marketing of Prescription Drug Lidoderm for Unapproved Uses (Feb. 21, 2014), available at http://www.justice.gov/opa/pr/endo-pharmaceuticals-and-endohealth-solutions-pay-1927-million-resolve-criminal-and-civil.

14 Heather McCollum, Chuck Bell & Elise Roth, Compliance on the Road: Government and Industry Efforts to Monitor Field Force Compliance, 7 ABA HEALTH ESOURCE (May 2011), https://www.americanbar.org/newsletter/publications/aba_health_esource_home/aba_health_law_esource_1105_mc collum.html. See also Sutter, supra note 1010 (quoting Assistant United States Attorney Sara Miron Bloom as follows, “I think the message is out there . . . There’s been compliance around these issues now in the major corporations for several years, and if you don’t already have it you really ought to get it because you’re behind.”

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promotional practices.15 As discussed below, companies have also reduced the size of their salesforces, as many hospitals and physicians’ offices have restricted or eliminated access to sales representatives. An increase in the proportion of specialty drugs approved, which are often promoted with smaller salesforces, may also be a cause

Dramatic changes in promotional practices due to changes in healthcare payment and delivery have been predicted for many years, but only now seem to be beginning to take place.

of this downshift, as may be changes in healthcare payment and delivery that reduce physicians’ decisionmaking authority.

Dramatic changes in promotional practices due to changes in healthcare payment and delivery have been predicted for many years,16 but only now seem to be beginning to take place. Writing in 1990 in HEALTH

AFFAIRS, Michael Pollard explained that in the 1980s, employers and government programs began to monitor health costs more closely and adopted incentives for or imposed restrictions on drug product selection. This process began in hospitals through the use of drug product formularies, which are lists of drugs approved for use in a hospital by a pharmacy and therapeutics committee. The growth of HMOs expanded the use of drug formularies to ambulatory care outside of an institutional setting.17 In addition, “utilization review of prescription drugs also came of age in the latter half of the 1980s[.]”18 As a result of these changes, Pollard wrote, “tried and true marketing efforts targeted on individual physicians are becoming less effective in moving products because physicians often do not make the ultimate decisions in selecting drugs.”19 The trends Pollard identified did not immediately lead pharmaceutical manufacturers to change their marketing or sales strategies. The pharmaceutical sales force increased by 50%

Charles Ornstein, Eric Sagara & Ryann Grochowski Jones, As Full Disclosure Nears, Doctors’ Pay for Drug Talks Plummets, PROPUBLICA (Mar. 3, 2014) (“Some of the nation’s largest pharmaceutical companies have slashed payments to health professionals for promotional speeches amid heightened public scrutiny of such spending, a new ProPublica analysis shows. . . . GlaxoSmithKline announced in December that it would stop paying doctors to speak on behalf of its drugs. Its speaking tab plummeted from $24 million in 2011 to $9.3 million in 2012.”).

16 See, e.g., Nicole Gray, Is There Still a Place for the Mighty Pharmaceutical Sales Force?, BIOPHARMA DIVE (Feb. 23, 2015) (“For the better part of the last decade, the diminishing role of the pharmaceutical sales representative as an integral part of the pharmaceutical sales model has been a hot topic.”).

17 Michael R. Pollard, Managed Care and a Changing Pharmaceutical Industry, 9 HEALTH AFFS. 55, 57 (1990).

18 Id. 19 Id. 15

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between 1996 and 2005, while the number of practicing physicians rose only 26%.20 At its peak in 2005, the pharmaceutical sales force in the United States numbered over 100,000.21 By 2013, however, that number had fallen to 66,000.22 The steep decline in the pharmaceutical sales force since 2007 is likely in part a function of the decline in the economy as a whole. As the economy has improved, companies have begun hiring again. The Bureau of Labor Statistics has projected that the number of sales representatives of scientific and technical products generally, which includes pharmaceutical sales representatives, will grow 10% between 2012 and 2022;23 CNNMoney.com predicted that the number of pharmaceutical sales representatives will grow 12% between 2006 and 2016.24 Nevertheless, there are reasons to believe that such numbers will not reach their prior levels, and that the economic decline merely accelerated a trend that would have occurred in any event, for the reasons Pollard identified and for other reasons, too. It is increasingly costly for a manufacturer to send a sales representative to visit a physician. Industry observer John Mack reports that “the average cost of making a sales call to a primary care physician, with samples, is $210”, with the average cost of a specialist visit with samples being $285.”25 It costs approximately $160,000 a year to field a single primary care sales representative, rising to $228,000 for a specialty representative, and $243,000 for a hospital representative.26 The cost/benefit calculations may also be shifting, as an increasing number of physicians are choosing not to meet with sales representatives. According to the consulting firm ZS Associates’ 2014 AccessMonitor report, [o]verall access to physicians has declined steadily since . . . 2008, with about half (49 percent) of physicians in the U.S. placing moderate-to-severe restrictions on

20

Mari Edlin, Model Calls for Fewer Drug Reps but More Clinical Backing, MANAGED HEALTHCARE EXECUTIVE (Apr. 2009) (citing PriceWaterhouseCoopers Pharma 2020: Marketing the Future (2009)).

21 Marc Iskowitz, Special Force, MEDICAL MARKETING & MEDIA, Nov. 2011, at 40-41.

22 Emily Wasserman, Pharma Sales Force Took a Hit in North America and Europe in 2013, New Report Shows, FIERCEPHARMAMARKETING (April 15, 2014).

23 Occupational Outlook Handbook, BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR, http://www.bls.gov/ooh/sales/wholesale-and-manufacturing-sales-representatives.htm#tab-6 (last visited July 30, 2015).

24 Press Release, National Association of Pharmaceutical Sales Reps, NAPSRx News: State of the Pharmaceutical Sales Rep Labor Market – 2015 to See Growth (Feb. 23, 2015), available at http://www.prweb.com/releases/2015/02/prweb12520760.htm.

25 John Mack, The Virtual Sales Rep: Ensuring the Survival of a Venerable Species, PHARMA MARKETING NEWS (Mar. 2014) (citing estimate by Cutting Edge Information).

26 Ed Silverman, The Pharmaceutical Sales Rep Lives to Fight Another Day, WALL STREET JOURNAL (Mar. 13, 2014) (citing estimate by Cutting Edge Information).

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visits from pharma sales reps in 2014. This compares to 45 percent of prescribers who restricted rep access in 2013, 35 percent in 2012 and 23 percent in 2008.27 The report attributes the decline in representatives’ access to physicians to, among other factors, “growing payer/provider consolidations.”28 ZS Associates notes that when HealthPartners, a non-profit health insurance company and health care provider in Minnesota, merged with Park Nicollet Health Services in 2013, creating the largest health system in the Twin Cities area, one result was an increase in the number of physicians covered by a policy limiting access by sales representatives.29 Another reason that sales forces may not rebound fully is the shift away from drugs approved to treat primary care conditions affecting large numbers of patients toward specialty drugs, many of which are used to treat relatively rare diseases. In 2011, Marc Iskowitz explained that “[i]t’s been well documented that [pharmaceutical companies] have slashed legions of sales reps once employed to call on general practitioners, as their mass-market brands approach, and fall over, the patent cliff.”30 In a 2014 article in the NEW ENGLAND JOURNAL

OF

MEDICINE, two

physicians who are also venture capitalists discussed what they call the “disproportion” between primary care and specialty drugs.31 In 2013, they report, 8 of the 27 drugs the FDA approved were for orphan diseases affecting fewer than 200,000 people in the United States.32 More than half of the 139 drugs approved by the FDA since 2009 were to treat cancers and orphan diseases.33 A final, and perhaps critical, factor is the increase in external control over physicians and their decision making that Michael Pollard discussed in HEALTH AFFAIRS in 1990. As Professor Jessica Mantel has explained, “the issue of physician decision making must be considered against the backdrop of a rapidly transforming health care system that has seen a steady decline in the

27

Press Release, ZS Associates, Even Traditional Rep-Friendly Specialists Will See Fewer Pharmaceutical Sales Reps This Year (July 22, 2014), available at http://www.zsassociates.com/about/news-and-events/eventraditionally-rep-friendly-specialists-will-see-fewer-pharmaceutical-sales-reps-this-year.aspx.

28 ZS Associates, supra note 27.

29 Id. By contrast, “[p]ayers and providers in some fragmented markets—such as Texas—remain more traditional and independent.” Id. 30 Iskowitz, supra note 21. Cf. Ornstein, Sagara & Grochowski Jones, supra note 15 (“‘The industry’s increased emphasis on expensive specialty medications for such conditions as multiple sclerosis or Hepatitis C, has been striking,’ said Aaron Kesselheim, an assistant professor of medicine at Harvard Medical School. . . . ‘It’s possible the number of physicians they need to support sales of these items is less, leading to lower payments overall,’ Kesselheim said.”).

31 Robert Kocher & Bryan Roberts, The Calculus of Cures, 370 NEW ENG. J. MED. 1473, 1473 (2014).

32 Id. 33 Id.

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number of physicians practicing in solo and small group practices and an increase in physicians affiliating,” with hospitals and other large health care organizations.34 Large health care organizations increasingly exercise influence if not control over the prescribing decisions of their member physicians. In a recent decision, the First Circuit held that the plaintiffs, Kaiser Foundation Health Plan and Kaiser Foundation Hospitals, established that they had a 95% rate of compliance with their pharmaceutical formulary among their affiliated physicians.35 Given this new reality, the number of sales representatives charged with making traditional sales calls on individual doctors in their offices may remain relatively low.36 Concomitantly, the importance of what many manufacturers term their “market access” or “managed markets” department is likely to grow. Such

Large health care organizations increasingly exercise influence if not control over the prescribing decisions of their member physicians.

teams negotiate the prices for payers—whether a government program, a private insurer like Aetna or Cigna, or a pharmacy benefit manager like Express Scripts. Discounts from the list price of a prescription drug take the form of rebates paid

34

Jessica Mantel, The Myth of the Independent Physician: Implications for Health Law, Policy, and Ethics, 64 CASE W. RES. 455, 457 (2013).

35 Kaiser Found. Health Plan, Inc. v. Pfizer, Inc. (In re Neurontin Mktg. & Sales Practices Litig.), 712 F.3d 21, 40-41 (1st Cir.), cert. denied, 134 S. Ct. 786 (2013). The First Circuit explained that [t]he Kaiser Foundation Health Plan and its subsidiaries do not employ physicians themselves, but have exclusive contractual relationships with regional Permanente Medical Groups ("PMGs").

Each PMG has its own Pharmacy and Therapeutics ("P & T") Committee which manages each PMG's formulary, or list of medications that treating physicians may prescribe. Representatives from both entities sit on the P & T Committees and participate in formulary management. Kaiser Foundation Hospitals has a Drug Information Service ("DIS") that researches and communicates information about drugs, including monographs about new drugs or new drug uses, to physicians and P & T Committees. DIS monographs summarize available evidence -- including publicly available evidence and unpublished information obtained from pharmaceutical manufacturers -- on drug safety and efficacy, and P & T Committees rely heavily on these monographs in making formulary decisions.

36 Cf. W. SCOTT EVANGELISTA, MICHELLE POULIN, CHRISTOPHER T. GEISSLER & JUSTIN ANDREW, PHARMA’S NEW U.S. COMMERCIAL MODEL: PROMOTING THE SCIENCE NOT THE SWAG, DELOITTE (2009) (“Despite their ubiquitous presence, a fair question must be asked: What would happen if they all [sales representatives] went away? We believe the answer is simple: Everyone would be better off. Sales reps cost pharma billions of dollars and drain scarce physician time, yet provide little of the results-based information increasingly demanded by providers, patients, payers, and regulators. Their demise could pave the way for the rise of independent, third party drug representatives, who would do just the opposite. In a scenario that could represent the future of pharma, these new ‘non-captive’ reps would pitch prescription drugs for multiple pharma companies devoid of any brand-based messaging. Instead, they would focus on outcomes and price, helping decision-makers without the marketing spin to choose the most appropriate drug.”).

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by the manufacturer to the payer.37 The market access team must also negotiate over the formulary tier in which a new drug will be placed, as well as whether it will be subject to a “step therapy”— also known as “fail first”—requirement,38 to prior authorization, or to other restrictions.39 Notably, these negotiations may involve discussions of a drug’s off-label uses. When these discussions take place prior to FDA approval, the drug does not yet have a label and the entire discussion is offlabel.

Payers are increasingly focused on drugs’ costeffectiveness or value, and providers are beginning to take an interest, too.

As a result of these changes in the promotional model, companies’ health economics and research departments will increase in importance.40 Payers are increasingly focused on drugs’ cost-effectiveness or value, and providers are beginning to take an interest, too.41 As the authors

of

a

2011

article

in

PHARMACEUTICAL

REPRESENTATIVE wrote, manufacturers’ “success these days is increasingly determined by . . . new factors that include up-to-the-minute knowledge of healthcare reform and implications for payers and providers; working with new customers such as integrated healthcare providers; and providing health economic data and analysis that is relevant for customers.”42 Some companies task their medical science liaisons (MSLs), who typically have advanced degrees in science or medicine, with building and maintaining relationships with decision makers at pharmacy benefit managers, 37

Matthew Herper, Inside the Secret World of Drug Company Rebates, FORBES (May 10, 2012).

Michael C. Barnes & Stacey L. Worthy, Achieving Real Parity: Increasing Access to Treatment for Substance Use Disorders Under the Patient Protection and Affordable Care Act and the Mental Health and Addiction Equity Act, 36 U. ARK. LITTLE ROCK L. REV. 555, 568 (2014).

39 Jonathan J. Darrow, Pharmaceutical Gatekeepers, 47 IND. L. REV. 363, 371 (2014).

40 Peter J. Neumann & Cayla J. Saret, A Survey of Individuals in U.S.-Based Pharmaceutical HEOR Departments: Attitudes on Policy Topics, 13 EXPERT REV. PHARMACOECONOMIC OUTCOMES RESEARCH 657, 659 (2013) (“Our new survey of 74 HEOR professionals in drug and device companies suggests continued growth in the function (over 90% of respondents expected to see increases in the use of HEOR at their companies) and also broader internal support (over 80% stated that senior management viewed internal HEOR group as critical).”).

41 Katherine Cohen, Joseph W. Cormier & Mahnu V. Davar, Predictable Materiality: A Need for Common Criteria Governing the Disclosure of Clinical Trial Results by Publicly-Traded Pharmaceutical Companies, 29 J. CONTEMP. HEALTH L. & POL’Y 201, 231 (2013). Cohen and colleagues explain that pharmaceutical companies regularly conduct pharmacoeconomic studies regarding their products.

These studies are designed to examine the cost-effectiveness of a therapy; they do not evaluate safety or effectiveness, per se. ‘Positive’ pharmacoeconomic information, however, is very valuable when seeking drug formulary access. Hospitals and insurance plans, in an effort to increase costefficiencies, seek out interventions that maximize patient benefit while minimizing the overall cost of care. Whether a drug is listed as a preferred intervention drives how much a patient pays for that intervention choice, which, in turn, drives physician prescribing behavior.

42 Mark Dancer, Carrie Fisher, & Ian Wilcox, Hurdling Managed Care Challenges, PHARMACEUTICAL REPRESENTATIVE (April 2011).

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payers, and provider organizations.43 Unlike the number of sales representatives, the number of MSLs has grown in recent years.44 The promotion underlying the large settlements announced in recent years took a number of forms, but all of them arose in part out of sales activity “in the field.” This included conversations about unapproved uses between pharmaceutical sales representatives and physicians, usually in physicians’ offices across the nation, as well as between company-paid physician speakers and their colleagues, often over restaurant meals.45 THE PINK SHEET reports that Assistant United States Attorney Bloom has predicted that the next wave of False Claims Act cases will rest on “false and misleading claims of superior efficacy or safety, and false or unproven claims of economic superiority.”46 While there was previously “less enforcement focus, and therefore probably less industry compliance, when it comes to manufacturers’ relationships with payers and their interactions with P & T committees[,]” Bloom predicts that these relationships are now ripe “for scrutiny and potential prosecution.”47 THE PINK SHEET notes that pharmaceutical industry attorneys, too, have “flagged the manufacturer/payer relationships, particularly with regard to formulary structure, as a growing source of interest for government prosecutors.”48

43

Kate Greenwood & Deborah L. Shuff, Medical Affairs: Effectively and Legitimately Using Medical Science Liaisons, in OFF-LABEL COMMUNICATIONS: A GUIDE TO SALES & MARKETING COMPLIANCE (Food and Drug Law Institute 4th Ed. 2014).

44 Id. 45 Heather McCollum, Chuck Bell & Elise Roth, Compliance on the Road: Government and Industry Efforts to Monitor Field Force Compliance, 7 ABA Health eSource (May 2011), https://www.americanbar.org/newsletter/publications/aba_health_esource_home/aba_health_law_esource_1105_mc collum.html (“Off-label promotion in the context of field interactions can take on many forms, including: [1] Proactive off-label discussions by field representatives during HCP office visits[;] Field representative responses to off-label questions posed by the HCP, made in lieu of forwarding the HCP’s inquiry to the manufacturer’s medical information department[;] Modifications to pre-approved publications that highlight off-label information[;] Use of HCPs as speakers or consultants to deliver off-label messages during peer-to-peer interactions[; and] Field representative call plans which include HCPs with inappropriate specialties (e.g., specialties that are not aligned with approved uses of the drug, or that are aligned with known off-label uses).”

46 Sutter, supra note 10.

47 Id. (“It can be used for off-label promotion. There can be hidden kickbacks. There can be price concessions that are not showing up in ASP.”).

48 Id. (citing Brenda Sandburg, DOJ Bull’s Eye: Off-Label Promotion, Formulary Placements, FCPA Violations Remain Targets, THE PINK SHEET (Dec. 19, 2011).

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III.

The Source of the Ban on Off-Label Promotion: The Federal Food, Drug, and Cosmetic Act and Its Implementing Regulations Enforcement of the laws governing pharmaceutical marketing and promotion is

contentious because the underlying laws and regulations must balance competing priorities. On the one hand, the government regulates the flow of information about drugs to reduce the risk that manufacturers will make false, misleading, or unsupported claims about them.49 To this end, the general rule governing promotional claims about a drug’s safety or efficacy is that any such claims must relate to an FDA-approved use and be supported by “substantial evidence,” which usually means two randomized controlled trials.50 There is a category of information, however, that is truthful but either (1) relates to an unapproved use or (2) relates to an approved use but is not supported by substantial evidence. With regard to the former, manufacturers are in possession of a significant amount of information on unapproved uses of their products. Give the prevalence of such uses—a recent analysis found that in the years 1993 to 2008 more than one in three prescriptions written were for an off-label use— prescribers could benefit from the information manufacturers’ have.51 Similarly, this category could include a substantial proportion of the available information about a drug’s costeffectiveness. Even if such health care economic information relates to an approved use, it is frequently not developed through randomized controlled trials.52

49

Kate Greenwood, The Ban on "Off-Label" Pharmaceutical Promotion: Constitutionally Permissible Prophylaxis Against False or Misleading Commercial Speech?, 37 AM. J. L. AND MED. 278, 279 (2011).

50 Jonathan J. Darrow, Pharmaceutical Efficacy: The Illusory Legal Standard, 70 WASH & LEE L. REV. 2073, 208586 (2013).

51 W. David Bradford, John L. Turner & Jonathan W. Williams, Off-Label Use of Pharmaceuticals: A Detection Controlled Estimation Approach 25-26 (Mar. 2015) (unpublished manuscript, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2230976).

52 Peter J. Neumann, Karl Claxton & Milton C. Weinstein, The FDA’s Regulation of Health Economic Information, 19 HEALTH AFFAIRS 129, 130 (Sept/Oct 2000) (noting that “‘modeling’ exercises . . . lie at the heart of most costeffectiveness analyses”). Cf. Peter J. Neumann, Communicating and Promoting Comparative-Effectiveness, 369 N. ENGL. J. MED. 209, 209 (2013) (explaining that much comparative-effectiveness information “comes from research using retrospective databases and quasi-experimental designs rather than randomized clinical trials”).

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Another purpose of the ban on off-label promotion is to preserve the integrity of the FDA approval process.53 Without the ban, Congress feared a pharmaceutical company with a new drug could seek approval for the single indication for which safety and efficacy was easiest to establish, secure in the knowledge that, once approved, it could promote the drug for other uses.54 The ban gives manufacturers an incentive

Another purpose of the ban on off-label promotion is to preserve the integrity of the FDA approval process.

to study promising new uses for their already-approved drugs. Manufacturers have an incentive to shepherd additional uses through the rigorous FDA approval process because success will allow them to freely promote such new uses.55 This has the salutary effect of encouraging research into new uses, which in turn gives prescribers the evidence they need to practice evidence-based medicine.

On the other hand, there are policy considerations weighing against constraining the flow of information about drugs and devices.56 The First Amendment also limits what the government can do.57 The FDA has repeatedly emphasized that its regulatory and enforcement schemes are not intended to limit the free flow of scientific information, including information about off-label uses and, presumably, about the economic value and impact of medication.58 Similarly, the agency’s efforts to control the content and circumstances of manufacturer communication about off-label

53

Wash. Legal Found. v. Friedman, 13 F. Supp. 2d 51, 66 (D.D.C. 1998).

S. Rep. No. 87-1744 (1962), reprinted in 1962 U.S.C.C.A.N. 2884, 2901-2903 (explaining that without the requirement that manufacturers demonstrate that a new drug is safe and effective “[t]he expectation would be that the initial claims would tend to be quite limited[,]” but that post-approval claims could be extreme); Margaret Z. Johns, Informed Consent: Requiring Doctors to Disclose Off-Label Prescriptions and Conflicts of Interest, 58 HASTINGS L.J. 967, 981 (2007) (explaining that without the ban on off-label promotion, companies would “have no incentive to conduct the rigorous safety and efficacy studies the FDA requires”).

55 Wash. Legal Found., 13 F. Supp. 2d at 71.

56 See Coleen Klasmeier & Martin H. Redish, Off-Label Prescription Advertising, the FDA and the First Amendment: A Study in the Values of Commercial Speech Protection, 37 AM. J. L. & MED. 315, 318 (2011) (concluding that “patients and prescribers would often be aided by the dissemination of information to the medical profession about these valuable off-label uses--uses that health care practitioners may well be unfamiliar with absent such communications.”).

57 Id. at 316-17 (arguing that “the FDA's ban on off-label promotion violates the First Amendment right of free expression”).

58 21 C.F.R. § 312.7(a) (“A sponsor or investigator, or any person acting on behalf of a sponsor or investigator, shall not represent in a promotional context that an investigational new drug is safe or effective for the purposes for which it is under investigation or otherwise promote the drug. This provision is not intended to restrict the full exchange of scientific information concerning the drug, including dissemination of scientific findings in scientific or lay media.

Rather, its intent is to restrict promotional claims of safety or effectiveness of the drug for a use for which it is under investigation and to preclude commercialization of the drug before it is approved for commercial distribution.”).

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uses are not intended to limit physicians’ authority to prescribe drugs to their patients for such uses.59 The FDA frequently disavows jurisdiction over the practice of medicine. It has noted that "unapproved or, more precisely, ‘unlabeled' uses may be appropriate and rational in certain circumstances, and may, in fact reflect approaches to drug therapy that have been extensively reported in medical literature."60 A drug used off-label may represent the standard of care for a given medical condition or patient population.61 Similarly, with regard to devices, the FDCA states that "nothing . . . shall be construed to limit or interfere with the authority of a health care practitioner to prescribe or administer any legally marketed device to a patient for any condition or disease within a legitimate health care practitioner-patient relationship."62 The Supreme Court has held that off-label use "is an accepted and necessary corollary of the FDA's mission to regulate in this area without directly interfering with the practice of medicine."63 While off-label use is permitted, promotion of off-label uses is not. The FDA has explained that an off-label “new” use is one “that would require approval or clearance of a supplemental application in order for it to be included in the product labeling.”64 The FDA has offered a broad range of examples of new uses “[a] completely different indication; modification of an existing indication to include a new dose, a new dosing schedule, a new route of administration, a different duration of usage, a new age group (e.g., unique safety or effectiveness in the elderly), another patient subgroup not explicitly identified in the current labeling, a different stage of the disease, a different intended outcome (e.g., long-term survival benefit, improved quality of life, disease

Wash. Legal Found., 13 F. Supp. 2d at 66 (“FDA does not purport to regulate the practice of medicine, and the agency has long recognized that, in general, physicians may use an approved drug or device for an unapproved use.”).

60 Citizen Petition Regarding the Food and Drug Administration’s Policy on Promotion of Unapproved Uses of Approved Drugs and Devices; Request for Comments, 59 Fed. Reg. 59,820, 59,821 (Nov. 18, 1994).

61 U.S. Food & Drug Admin., Guidance for Industry: Good Reprint Practices for the Distribution of Medical Journal Articles and Medical or Scientific Reference Publications on Unapproved New Uses of Approved Drugs and Approved or Cleared Medical Devices 3 (Jan. 2009), available at http://www.fda.gov/RegulatoryInformation/Guidances/ucm125126.htm (hereinafter “Good Reprint Practices Guidance”) ("Off-label uses or treatment regimens may be important and may even constitute a medically recognized standard of care.").

62 21 U.S.C. § 396.

63 Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 350 (2001) (citing 21 U.S.C. § 396).

64 Dissemination of Information on Unapproved/New Uses for Marketed Drugs, Biologics, and Devices, 63 Fed. Reg. 31,143, 31,145 (1998).

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amelioration), effectiveness for a sign or symptom of the disease not in the current labeling; and comparative claims to other agents for treatment of the same condition.”65 As many observers have noted, the words “off-label promotion” do not appear in the FDCA or in its implementing regulations.66 The ban on off-label promotion arises from the FDCA’s prohibition on introducing a new drug into interstate commerce and from its prohibition on misbranding. A drug is misbranded if, among other things, it is false or misleading67 or it lacks “adequate directions for use[,]”68 which the regulations define as “directions under which the layman can use a drug safely[.]”69 The FDCA exempts a prescription drug from the “adequate directions for use” labeling requirement that their labeling contain “adequate directions for use,” as long as “it bears a label containing the name and address of the dispenser, the serial number and date of the prescription or of its filling, the name of the prescriber, and, if stated in the prescription, the name of the patient, and the directions for use and cautionary statements, if any, contained in such prescription.”70 The regulations go further, also requiring that, to be exempt, a prescription drug must be labeled with “adequate information for its use, including indications, effects, dosages, routes, methods, and frequency and duration of administration, and any relevant hazards, contraindications, side effects, and precautions under which practitioners licensed by law to administer the drug can use the drug safely and for the purposes for which it is intended, including all purposes for which it is advertised or represented[.]”71 Whether a manufacturer “intended” that a drug be used for a given purpose is determined objectively, with reference to the manufacturer’s “expressions” as well as “the circumstances surrounding the distribution of the article.”72 The regulations go on to note that “objective intent may, for example, be shown by labeling claims, advertising matter, or oral or written statements by [manufacturers] or their representatives.”73

65

Id. See, e.g., Klasmeier & Redish, supra note at 56, at 319.

67 21 U.S.C. § 352(a).

68 21 U.S.C. § 352(j).

69 21 C.F.R. § 201.5.

70 Id. 71 21 C.F.R. 201.100(c)(1) (emphasis added).

72 21 C.F.R. § 201.128.

73 Id. 66

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Thus, a manufacturer’s promotional claims about an unapproved use of a drug demonstrate that the use is “intended[.]” And, because the label lacks “adequate information for its use,” the drug is misbranded and banned for sale. Misbranding can be either a felony or a misdemeanor. If the misbranding was made with the “intent to defraud or mislead,” then it is a felony.74 If it was not, it is a misdemeanor, with no criminal intent requirement.75 A manufacturer cannot avoid liability for misbranding by adding “adequate information” about an unapproved use to a drug’s labeling, because to do so would be to run afoul of the FDCA’s ban on the sale of unapproved "new drug[s]."76

Thus, a manufacturer’s promotional claims about an unapproved use of a drug demonstrate that the use is “intended[.]” And, because the label lacks “adequate information for its use,” the drug is misbranded and banned for sale.

When an approved drug is marketed for an unapproved use, the FDA's position is that the drug becomes "an unapproved new drug with respect to that use."77 The agency reasons that the FDCA's definition of "new drug" includes any drug that the FDA has not determined to be "safe and effective for use under the conditions prescribed, recommended, or suggested in [its]

labeling."78 Labeling, in turn, is defined to include "all labels and other written, printed, or graphic matters" on the drug itself, on the drug's "containers or wrappers," or that accompany the drug. 79 The Supreme Court has held that written matters "accompany" a drug when they supplement[] or explain[] it, in the manner that a committee report of the Congress accompanies a bill. No physical attachment one to the other is necessary. It is the textual relationship that is significant.80 Should a company “prescribe[], recommend[], or suggest[]” an unapproved use in a drug’s labeling, the drug would then become a "new drug" for purposes of that use, which would make it illegal under the FDCA to sell the drug for that use.

The ban on off-label of promotion has a number of formal and informal safe harbors, several of which the FDA has taken steps to clarify in recent years. The regulations governing 74

21 U.S.C. § 333(a)(2).

Id. § 333(a)(1).

76 21 U.S.C. §§ 331(d) & 355(a).

77 Good Reprint Practices Guidance, supra note 61.

78 21 U.S.C. § 321(p).

79 21 U.S.C. § 321(m).

80 Kordel v. United States, 335 U.S. 345, 350 (1948).

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investigational new drugs provides that the ban on promoting such drugs “is not intended to restrict the full exchange of scientific information concerning the drug[s], including dissemination of scientific findings in scientific or lay media.”81 Manufacturers may disseminate information on unapproved drugs and unapproved new uses of approved drugs to the physician investigators participating in clinical trials.82 Information can also be disclosed as required by securities and other laws, including, for example, the law requiring disclosure to www.clinicaltrials.gov.83 Manufacturers can disseminate off-label information “through the submission of original research to peer-reviewed publications[,]”84 and by distributing peer-reviewed medical journal articles and other materials about off-label uses directly to prescribers.85 Manufacturers can also respond to unsolicited requests for off-label information.86 Subject to certain limitations, manufacturers are also permitted to fund off-label continuing medical education programs for practicing physicians.87 There is also a provision of the FDCA that governing the presentation of “healthcare economic information” by a manufacturer “to a formulary committee, or other similar entity, in the course of the committee or the entity carrying out its responsibilities for the selection of drugs for managed care or other similar organizations.”88 Known as “Section 114” because of its numeration in the Food and Drug Administration Modernization Act (FDAMA), the statutory provision defines health care economic information as “[a]ny analysis that identifies, measures, or 81

21 C.F.R. § 312.7(a).

Ralph F. Hall & Elizabeth S. Sobotka, Inconsistent Government Policies: Why FDA Off-Label Regulation Cannot Survive First Amendment Review Under Greater New Orleans, 62 FOOD DRUG L.J. 1, 9 (2007) (“FDA permits dissemination of information about investigational uses in order to recruit or educate investigators or clinical trial subjects.”).

83 Id. at 32-33.

84 Citizen Petition Regarding the Food and Drug Administration's Policy on Promotion of Unapproved Uses of Approved Drugs and Devices; Request for Comments, 59 Fed. Reg. 59,820, 59,823 (Nov. 18, 1994) (providing that "information on unapproved uses may be disseminated through the submission of original research to peer-reviewed publications").

85 U.S. Food and Drug Admin., Revised Draft Guidance for Industry Distributing Scientific and Medical Publications on Unapproved New Uses—Recommended Practices (Feb. 2014), available at http://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm387652.pdf. and U.S. Food and Drug Admin., Draft Guidance for Industry Distributing Scientific and Medical Publications on Risk Information for Approved Prescription Drugs and Biological Products—Recommended Practices (June 2014), available at http://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm400104.pdf.

86 U.S. Food and Drug Admin., Draft Guidance for Industry Responding to Unsolicited Requests for Off-Label Information About Prescription Drugs and Medical Devices (Dec. 2011), available at http://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm285145.pdf.

87 Final Guidance on Industry-Supported Scientific and Educational Activities, 62 Fed. Reg. 64,074, 64,093-100 (Dec. 3, 1997).

88 21 U.S.C. § 352(a).

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compares the economic consequences, including the costs of the represented health outcomes, of the use of a drug to the use of another drug, to another health care intervention, or to no intervention.”89 Section 114 does not create a broad exception to the ban on off-label promotion for costeffectiveness information. It applies only to health care economic information directly related to an approved use of the drug at issue. It does, however, provide manufacturers with increased flexibility because it allows them to make promotional claims that are not supported by substantial evidence as long as they are “based on competent and reliable scientific evidence.”90 Observers have noted that the “competent and reliable scientific evidence” standard is used by the Federal Trade Commission (FTC) to evaluate, among other things, claims made about overthe-counter drugs.91 More flexible than the FDA’s “substantial evidence” standard, “competent and reliable scientific evidence” is defined by the FTC to mean “tests, studies or other research based on the expertise of professionals in the field that have been objectively conducted and evaluated by qualified people using procedures that give accurate and reliable results.” 92 This is important because neither cost-effectiveness nor comparative-effectiveness are typically established with randomized controlled trials.93 Instead, as Peter Neumann has explained, “[m]uch of the information comes from research using retrospective databases and quasi-experimental designs[.]”94 The FDA has never promulgated regulations or issued guidance interpreting Section 114 and questions remain, including about the data that can be shared, about the personnel who can share it, and about the manner in which they can share it. In July 2011, the Medical Information Working Group (MIWG), a coalition of pharmaceutical companies, filed a citizen petition calling on the FDA “to clarify FDA regulations and policies with respect to manufacturer dissemination of information relating to new uses of marketed drugs and medical devices.”95 The petition highlighted four areas in which, it argued, clarification was most needed (1) manufacturer responses to unsolicited requests, (2) scientific exchange, (3) interactions with formulary 89

Id. Id. 91 Anne V. Maher & Lesley Fair, The FTC’s Regulation of Advertising, 65 FOOD DRUG L.J. 589, 602 (2010).

92 Linda Goldstein, Regulatory: A New Paradigm in FTC Regulation, INSIDE COUNSEL (Feb. 27, 2013), http://www.insidecounsel.com/2013/02/27/regulatory-a-new-paradigm-in-ftc-regulation.

93 Neumann, supra note 52, at 209; Neumann, Claxton & Weinstein, supra note 52, at 130.

94 Neumann, supra note 52, at 209.

95 Citizen Petition, Docket No. FDA-2011-P-0512 (July 5, 2011).

90

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committees, payers, and similar entities, and (4) dissemination of third-party clinical practice guidelines.96 Since 2011, the FDA has responded to the call from industry for clarity by issuing a number of new and newly-revised draft guidances addressing the concerns the MIWG raised about responding to unsolicited requests and about dissemination of third-party clinical practice guidelines.97 In 2015, the agency indicated it expects to release a draft guidance addressing “manufacturer dissemination of information regarding unapproved uses,” and, following that, a guidance addressing health care economic information, which will be titled “Health Care Economic Information in Promotional Labeling and Advertising for Prescription Drugs Under Section 114 of the Food and Drug Administration Modernization Act.”98 FDA was also expected to hold a public meeting in 2015 “to address drug company concern that restrictions on what they can say about off-label use of drugs violate their First Amendment right to free speech.”99 According to a January 2015 article in THE PINK SHEET, the agency had originally stated that it would release the Section 114 guidance by the end of 2014 but “Center for Drug Evaluation and Research Director Janet Woodcock told [a conference audience] that the document was taking longer to get out than expected because it has been ‘an extremely contentious issue’ internally at FDA and externally.”100 Nevertheless, the agency has given some less formal indications of its position. In a speech given on February 9, 2012, Robert Temple, the Deputy Director of Clinical Science of the FDA’s Center for Drug Evaluation and Research, asserted that the more flexible “competent and reliable

96

Id. Letter from Leslie Kux, Assistant Commissioner for Policy, Food and Drug Administration, to Alan R. Bennett, Ropes & Gray LLP, Joan McPhee, Ropes & Gray LLP, and Coleen Klasmeier and Paul E. Kalb, Sidley Austin LLP 8 (June 6, 2014), available at http://www.regulations.gov/#!documentDetail;D=FDA-2013-P-1079-0004 (“Since the submission of both your petitions, we have been engaged in extensive internal review of the Agency’s approach to the dissemination of scientific information about off-label uses of approved products, and have issued draft guidance documents for comment as we seek to provide industry with more clarity about how it can share scientific information about off-label uses.”)

98 Letter from Leslie Kux, Assistant Commissioner for Policy, Food and Drug Administration, to Alan R. Bennett, Ropes & Gray LLP, Joan McPhee, Ropes & Gray LLP, and Coleen Klasmeier and Paul E. Kalb, Sidley Austin LLP 1 (Dec. 22, 2014), available at http://www.regulations.gov/#!documentDetail;D=FDA-2013-P-1079-0005; U.S. Food and Drug Administration, Guidance Agenda: New & Revised Draft Guidances CDER Is Planning to Publish During Calendar Year 2015 (Apr. 28, 2015), http://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm417290.pdf.

99 Toni Clarke, Under Pressure, FDA to Hold Public Meeting on Off-Label Use, REUTERS (May 6, 2015), http://www.reuters.com/article/2015/05/07/us-fda-pharmaceuticals-constitution-idUSKBN0NS00F20150507.

100 Sue Sutter, FDA Guidance on Health Care Economic Data Is Coming in 2015, THE PINK SHEET DAILY (Jan. 2, 2015).

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evidence” standard applies only to claims about “economic costs and consequences.”101 The underlying clinical assumptions must still be supported by substantial evidence—that is, by two randomized controlled clinical trials in most cases.102 Dr. Temple offered as an example a company that wants to claim that its insulin product would save money because it would control patients’ blood sugar levels, which in turn would prevent certain eye problems from developing.103 Competent and reliable evidence would be sufficient to support a company’s claim regarding the cost savings attributable to preventing the eye problems that can develop as a result of high blood sugar. The underlying claim that the company’s drug controls blood sugar and prevents eye problems from developing, on the other hand, would need to be established with at least two clinical trials.

Dr. Temple’s interpretation of Section 114—that its competent and reliable evidence standard applies only to economic outcomes that are not blended with clinical outcomes—would give it a relatively restricted scope. In an article in HEALTH AFFAIRS, Dr. Peter Neumann and

Assistant United States Attorney Bloom has warned companies against using economic claims to disguise scientific claims.

colleagues have argued that “common approaches in economic evaluation, such as cost-consequence analyses, cost-effectiveness analyses, and cost-of-illness studies… almost always blend clinical and economic outcomes.”104 Assistant United States Attorney Bloom has warned

companies against using economic claims to disguise scientific claims.105 One reason that this issue has been contentious is the ongoing debate over both Congress’s intent with regard to the reach of Section 114 and its scope as a policy matter.

In addition to Section 114, companies also rely on the safe harbor permitting manufacturers to respond to unsolicited requests for off-label information.106 As it explained in a March 2012 letter to the FDA, the Academy of Managed Care Pharmacy (AMCP) has developed a template, the Format for Formulary Submissions, which can be “used by managed care organizations and health systems to formally request that pharmaceutical manufacturers present a ‘dossier’ 101

Presentation, Robert Temple, Communication of CER Findings (Feb. 9, 2012), available at http://f.datasrvr.com/fr1/412/13859/Presentation_by_Dr._Richard_Temple.pdf.

102 Id. 103 Id. (explaining that “a treatment that provides tight control of blood sugar (insulin) in type 1 diabetes could have cost savings attributed to prevention of retinopathy if well-controlled studies show such an effect of tight control.”).

104 Neumann, Claxton & Weinstein, supra note 52, at 130.

105 Sutter, supra note 10.

106 See supra note 86.

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containing detailed information, not only on the drug’s safety and efficacy, but also on its overall clinical and economic value relative to alternative therapies.”107 To benefit from the safe harbor for unsolicited requests, the AMCP explains, the following must be true: 1) the manufacturer does not prompt or encourage requests, 2) responses focus on data rather than company-generated discussions of those data, 3) individuals with appropriate scientific and medical training prepare responses, 4) responses do not deliberately go beyond the scope of the request, 5) responses do not include promotional materials, and 6) responses are objective, balanced and scientifically rigorous.108 The ban on off-label promotion is influenced, to a disputed extent, by the First Amendment right to freedom of speech. The ban was first challenged in a series of legal actions brought against the FDA in the 1990s by the Washington Legal Foundation.109 In 2011 in Sorrell v. IMS Health, the Supreme Court held that it was unconstitutional for a state to bar pharmaceutical companies, but not others, from accessing data on physician prescribing patterns for use in marketing.110 In 2012, in United States v. Caronia, the Second Circuit applied the Supreme Court’s decision in Sorrell and held that it was unconstitutional for the defendant sales representative to be convicted of the crime of misbranding for engaging in truthful off-label promotion.111 In the recent past, two companies, Allergan and Par Pharmaceutical, brought First Amendment challenges to the ban while they were under investigation for engaging in off-label promotion and thereby violating the False Claims Act.112 Both companies dismissed their claims as part of settlements they entered into with the government.113 In May 2015, Amarin Pharma, a company which has not disclosed an active investigation by the government, brought a First Amendment challenge, arguing that it has a First Amendment right to promote its omega-3 fatty acid Vascepa by making the truthful off-label claim that “supportive but not conclusive research

107

Letter from Edith A. Rosato, Chief Executive Officer, Academy of Managed Care Pharmacy, to Food and Drug Administration (Mar. 26, 2012).

108 Id. 109 CENTER FOR HEALTH & PHARMACEUTICAL LAW & POLICY, SETON HALL UNIVERSITY SCHOOL OF LAW, DRUG AND DEVICE PROMOTION: CHARTING A COURSE FOR POLICY REFORM 13 (2009), available at http://law.shu.edu/ProgramsCenters/HealthTechIP/upload/whitepaper_jan2009.pdf (reviewing the six-year course of the litigation).

110 Sorrell v. IMS Health, Inc., 131 S. Ct. 2653, 2670 (2011).

111 United States v. Caronia, 703 F.3d 149, 168 (2d Cir. 2012).

112 John C. Richter & Daniel C. Sale, The Future of Off-Label Promotion Enforcement in the Wake of Caronia – Toward a First Amendment Safe Harbor, 14 SEDONA CONF. J. 19, n. 60 (2013).

113 Id.

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shows that consumption of EPA and DHA omega-3 fatty acids may reduce the risk of coronary heart disease[.]”114 In early June 2015, FDA responded to Amarin’s suit with a letter indicating that the agency “does not have concerns with much of the information you proposed to communicate.”115 Specifically, the agency “would not consider the dissemination of most of that information to be false or misleading, and we do not intend to rely on it as evidence that Vascepa is intended for a use that would render Vascepa a new drug or misbranded.”116 Nevertheless, there remained areas of disagreement between the FDA and Amarin and, as this white paper was going to press, the District Court ruled in favor of Amarin’s …the District Court ruled in favor

challenge. It issued preliminary relief in the

of Amarin’s challenge. It issued preliminary relief in the form of a determination that Amarin “may engage in truthful and nonmisleading speech promoting the off-label use of Vascepa, i.e., to treat patients with persistently high triglycerides, and under Caronia, such speech may not form the basis of a prosecution for misbranding.”

form of a determination that Amarin “may engage in truthful and non-misleading speech promoting the off-label use of Vascepa, i.e., to treat

patients

with

persistently

high

triglycerides, and under Caronia, such speech may not form the basis of a prosecution for misbranding.”117 Further, “[b]ased on the information presently known, the combination of statements and disclosures that Amarin proposes to make to doctors relating to the use of Vascepa to treat persons with persistently

high triglycerides, as such communications have been modified herein, is truthful and nonmisleading.”118 The implications of Amarin remain to be seen, most obviously whether it survives an appeal. But while the case has the potential for a sea change in off-label practices, determining what is false or misleading will itself be a complicated inquiry should this view of the First 114

Complaint at 7, Amarin Pharma v. U.S. Food and Drug Administration, Civil Action No. 15-cv-3588 (PAE) (May 7, 2015).

115 Letter from Janet Woodcock, Director, Center for Drug Evaluation and Research, Food and Drug Administration, to Steven Ketchum, President of Research and Development, Amarin Pharma (June 5, 2015).

116 Id. 117 Amarin Pharma v. United States FDA, 15 Civ. 3588 (PAE), 2015 U.S. Dist. LEXIS 103944, *110 (S.D.N.Y. Aug. 7, 2015).

118 Id.

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Amendment prevail. In addition, much activity now challenged as impermissible will not lend itself to the kind of resolution the court in Amarin employed.

IV.

Direct Enforcement of the Ban on Off-Label Promotion At the federal level, the laws and regulations governing drug and device promotion are

directly enforced by the FDA and the DOJ. The FDCA provides the FDA with a number of enforcement tools, which the agency groups into three categories: advisory actions, administrative actions, and judicial actions.119 Advisory actions include notice of violation letters, which are more commonly known as untitled letters, and, for more significant violations, warning letters.120 As the Government Accountability Office has explained, “[b]oth types of letters request the drug company to take specific actions, such as stopping the dissemination of violative materials and issuing corrections of previously distributed information.”121 Professor Vicki Girard notes that “[i]n most cases, companies comply with the agency’s recommendations and reach some mutuallyagreeable resolution with FDA.”122 Administrative actions include administrative detention of a violative product, which the FDA can order for 20 days, unless the agency needs additional time to initiate a seizure, in which case the detention can extend to 30 days.123 The FDA can also request or, in certain circumstances, require, that a manufacturer recall a violative product.124 While the FDA’s authority to require a recall does not extend to drugs, the agency can withdraw its approval of a drug’s new drug application, which would make selling the drug illegal.125 In addition, the FDA can issue civil

U.S. FOOD & DRUG ADMIN., DEP’T OF HEALTH & HUMAN SERVS., REGULATORY PROCEDURES MANUAL, CHAPTERS 4, 5, AND 6 (August 2012), available at http://www.fda.gov/ICECI/compliancemanuals/regulatoryproceduresmanual/default.htm#_top.

120 Peter J. Neumann & Sarah K. Bliss, FDA Actions Against Health Economic Promotions, 2002-2011, 15 VALUE IN HEALTH 948, 948 (2012).

121 U.S. GOVERNMENT ACCOUNTABILITY OFFICE, PRESCRIPTION DRUGS: FDA’S OVERSIGHT OF THE PROMOTION OF DRUGS FOR OFF-LABEL USES 2 (July 2008).

122 Vicki W. Girard, Reducing Unlawful Prescription Drug Promotion: Is the Public Health Being Served by an Enforcement Approach that Focuses on Punishment?, 2 FOOD & DRUG L. INST. FOOD & DRUG POL’Y FORUM 1-18, 6 (2012).

123 21 U.S.C. § 334(g)(1).

124 U.S. FOOD & DRUG ADMIN., DEP’T OF HEALTH & HUMAN SERVS., REGULATORY PROCEDURES MANUAL, CHAPTER 7 (August 2012), available at http://www.fda.gov/ICECI/compliancemanuals/regulatoryproceduresmanual/default.htm#_top.

125 21 U.S.C. § 355(e).

119

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monetary penalties, although its authority to do so with regard to drugs is limited to those cases in which a direct-to-consumer advertisement is false or misleading.126 The third category of enforcement tools, judicial actions, includes seizures,127 injunctions,128 and criminal prosecutions.129 Judicial actions must be initiated in court by the DOJ acting on behalf of the FDA.130 Statutory penalties upon conviction of a violation of the FDCA include imprisonment of up to three years and criminal fines of up to $10,000.131 Equitable relief such as disgorgement of illegally-obtained profits and restitution for a victim’s injury or loss may also be available. Professor Adam Zimmerman has noted that the FDA rarely sought restitution or other forms of monetary relief until very recently. . . .

Since 1999, however, the FDA has aggressively pursued restitution and disgorgement against businesses that misbrand drugs, sell drugs without authorization, or violate good manufacturing practice requirements. Between 1999 and 2003, the FDA recovered over three-quarters of a billion dollars from pharmaceutical companies for violations of good marketing practices. The FDA's Deputy Chief Counsel for Litigation has stated that the agency will continue to pursue restitution and disgorgement.132 As of 2011, the FDA had funneled all recovered restitution and disgorgement monies to the United States Treasury.133 The FDA includes an Office of Criminal Investigation (OCI), which has investigative agents spread across a headquarters office and field and other offices around the country.134 OCI, with the support of the Food and Drug Division of the HHS Office General Counsel, investigates criminal violations of the FDCA and other statutes including the Prescription Drug Marketing Act and the Federal Anti-Tampering Act.135 When FDA completes its investigation of a case, it decides

126

21 U.S.C. § 333(g)(1).

21 U.S.C. § 334.

128 21 U.S.C § 332(a).

129 Nancy W. Mathewson, Prohibited Acts and Enforcement Tools, 65 FOOD & DRUG LAW J. 545, 546 (2010).

130 By regulation, “All civil and criminal litigation and grand jury proceedings arising under the [FDCA]” shall be “assigned to, and shall be conducted, handled, or supervised by the Assistant Attorney General, Civil Division[.]” 28 C.F.R. c. 0.45(j).

131 21 U.S.C. § 333 (a).

132 Adam S. Zimmerman, Distributing Justice, 86 N.Y.U. L. REV. 500, 537-38 (2011).

133 Id. at 538.

134 History, Inspections, Compliance, Enforcement, and Criminal Investigations, U.S. FOOD AND DRUG ADMINISTRATION, http://www.fda.gov/ICECI/CriminalInvestigations/ucm123041.htm (last visited Aug. 2, 2015).

135 ANNUAL REPORT OF THE DEP’T OF HEALTH AND HUMAN SERVICES AND JUSTICE, HEALTH CARE FRAUD AND ABUSE CONTROL PROGRAM FY 2014 69 (Mar. 19, 2015) (hereinafter “ANNUAL HCFAC REPORT”), available at https://oig.hhs.gov/publications/docs/hcfac/FY2014-hcfac.pdf.

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whether to pass the case on to the DOJ. The DOJ investigates and prosecutes violations of the FDCA through its Civil Division, specifically its Consumer Protection Branch (formerly known as the Office of Consumer Litigation) and its Fraud Section, 136 and through local United States Attorneys’ Offices (USAOs).137 In recent years, the FDA has received funding from the Health Care Fraud and Abuse Control (HCFAC) Account138 for its Pharmaceutical Fraud Program (PFP), the focus of which includes “fraudulent marketing schemes.”139 In DOJ’s and HHS’s most recent annual report on HCFAC, the agencies reported that FDA received $3.4 million in HCFAC funding for the PFP in Fiscal Year 2014.140 DOJ and HHS report that, since the PFP began in Fiscal Year 2010, the OIC has opened a total of 89 criminal investigations.”141 In Fiscal Year 2014, FDA’s fourth full fiscal

CIVIL DIVISION, U.S. DEP’T OF JUSTICE, FY 2013 BUDGET AND PERFORMANCE PLANS 37 (Feb. 2012), available at http://www.justice.gov/about/fy13-budget-and-performance (hereinafter “FY 2013 BUDGET AND PERFORMANCE PLANS”). The Civil Division explains that it 136

is a leading player in the Federal Government’s efforts to combat health care fraud. The Civil Division’s Fraud Section and its Consumer Protection Branch investigate and litigate health care fraud cases under the False Claims Act and the Federal Food, Drug and Cosmetic Act. In many of these matters, the Civil Division works collaboratively with other Department of Justice components, such as U.S. Attorneys, and client agencies, such as the U.S. Department of Health & Human Service’s Office of Inspector General, the Food and Drug Administration, and the Centers for Medicare & Medicaid Services.

Id. 137

Id. See also John R. Fleder, Who Decides Your Fate in FDA Enforcement Matters?, UPDATE MAGAZINE, May/June 2007, at 40, available at http://www.hpm.com/pdf/FlederMayFDLI.pdf. Fleder explains that OCI cannot initiate a criminal case on its own. Instead, it must convince either a U.S. Attorney or [what is now called the Consumer Protection Branch,] to bring a case. Federal regulations provide that OCL has handling or supervising authority for criminal proceedings brought under the FDCA. In instances where OCL is involved, it must obtain approval to initiate the prosecution from the Deputy Assistant Attorney General who supervises OCL, and ultimately from the Assistant Attorney General for the Justice Department’s Civil Division. However, U.S. Attorneys’ Offices commence criminal cases under the FDCA without following these approval policies.

Id. 138

Created by the Health Insurance Portability and Accountability Act of 1996 (HIPAA), HCFAC is a revolving fund used to support the enforcement of the healthcare fraud and abuse laws. ANNUAL HCFAC REPORT, supra note 135, at 1-3. The monies come from the Medicare Hospital Insurance Trust Fund and they flow to DOJ, the FBI, and HHS. 42 U.S.C. § 1395i(k)(3). Some of the funds can be used only by the HHS-OIG. Id. 139 Margaret H. Lemos & Max Minzner, For-Profit Public Enforcement, 127 HARV. L. REV. 853, 866 (2014) (explaining that in many states the attorney general retains a portion of the proceeds of “enforcement of state consumer protection, false claims, and related statutes”).

140 ANNUAL HCFAC REPORT, supra note 135, at 69.

141 Id. at 70.

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year of HCFAC Program activity, the OCI opened 24 criminal investigations, including a number involving promoting drugs or devices for unapproved or uncleared uses.142

Most off-label promotion cases that the DOJ pursues, however, do not begin as an agency investigation or arise from a referral from the FDA. . . . most of the pharmaceutical and medical device off-label promotion cases that the DOJ prosecutes began as a FCA lawsuit filed by a qui tam relator.

The FDA’s response to off-label advertising and promotion, then, ranges from issuing an untitled letter to referring the matter to the DOJ to pursue criminal charges based on, depending on the facts, introducing an unapproved new drug into interstate commerce or misbranding charges,143 healthcare fraud,144 mail, or wire fraud,145 or violations of the criminal False Claims Act.146 Most off-label promotion cases that the DOJ pursues, however, do not begin as an agency investigation or arise from a referral from the FDA. As is discussed at length below, most of the pharmaceutical and medical device off-label promotion cases that the DOJ prosecutes began as a FCA lawsuit filed by a qui tam relator. These cases focus not on off-label promotion as a statutory and regulatory violation but rather on the effect of that promotion on federal and state spending on drugs and devices. The stakes are high.147 In 2013, the three programs administered by CMS— Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP)—spent over $97 billion

142

Id. Allison D. Burroughs, Mark Carlisle Levy, Gregory G. Schwab & Young Paik, Off-Label Promotion: Government Theories of Prosecution and Facts that Drive Them, 65 FOOD & DRUG L.J. 555, 559-69 (2010) (explaining the two theories underlying the criminal prosecution of off-label promotion under the FDCA).

144 18 U.S.C. § 1347 & 42 U.S.C. § 1320a-7b(a).

145 18 U.S.C. §§ 1341 & 1343.

146 18 U.S.C. § 287.

147 Robert S. Litt & Nathan Cortez, Trends in Criminal Enforcement Against Off-Label Promotion, THE ABA’S 21ST ANNUAL NATIONAL INSTITUTE ON WHITE COLLAR CRIME, at L-23 to L-33 (2007) (noting that “a persistent rise in health care spending during the 1990s, particularly on prescription drugs . . . helped trigger a greater government interest in prosecuting all kinds of health care fraud and abuse, using extremely broad laws like the federal antikickback statute and False Claims Act. Moreover, legislation passed in the 1990s both increased the statutory authorities for federal investigation and prosecution, and provided dedicated resources for health care fraud…”).

143

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on prescription drugs.148 The Department of Defense and the Department of Veterans Affairs spent an additional $4.8 and $2.7 billion respectively.149 Not discussed at length in this paper, but worth noting, is that manufacturers that engage in off-label promotion can, depending upon the facts, face liability under a number of federal and state regimes in addition to the FDCA, health care and other fraud statutes, and False Claims Acts.

These include state and federal consumer protection laws, state and federal securities laws, and state and federal Racketeering Influenced and Corrupt Organizations Acts.150 Shareholder derivative suits alleging that a company’s board failed to prevent off-label promotion are also common,151 as are suits bringing common law causes of action, including products liability (where the plaintiff sustained a personal injury) and fraud (where the plaintiff’s alleged injury was economic).152 Some of these lawsuits are brought by consumers, payers, and other private plaintiffs. Others are brought by state attorneys general, sometimes, controversially, by outsourcing to private counsel.153

148

Historical, National Health Expenditure Survey, CENTERS FOR MEDICARE & MEDICAID SERVICES, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/NationalHealthAccountsHistorical.html (last visited Aug. 2, 2015).

149 Id. 150 Douglas Mossman & Jill L. Steinberg, Promoting, Prescribing & Pushing Pills: Understanding the Lessons of Antipsychotic Drug Litigation, 13 MICH. ST. J. OF MED. & LAW 263, 298-313 (2009) (discussing claims that could be brought by state attorneys general, by consumers, and by shareholders).

151 Kathleen M. Boozang, Responsible Corporate Officer Doctrine: When Is Falling Down on the Job a Crime? 6 ST. LOUIS U. J. OF HEALTH LAW & POL’Y 77, 92-98 (2012) (discussing corporate derivative suits brought against the boards of directors of pharmaceutical companies accused of engaging in off-label promotion).

152 Kate Greenwood, Physician Conflicts of Interest in Court: Beyond the ‘Independent Physician’ Litigation Heuristic, 30 GA. ST. U. L. REV. 759, 782-83, 795-98 (2014) (discussing products liability personal injury cases and RICO and other economic injury cases brought against pharmaceutical companies in which allegations of physician conflicts of interest due to physician-industry financial relationships play a role).

153 Ethan Posner, Gerald F. Masoudi, Christopher A Blow To State Encroachment On Federal Turf, LAW360, http://www.cov.com/files/Publication/5cd06f46-cb02-4e64-a00a048cb94f01d0/Presentation/PublicationAttachment/3b760ef4-b3df-47cd-8d2e1088b7692821/Law360_A_Blow_To_State_Encroachment_Federal_Turf.pdf (last visited Apr. 6, 2015) (“Civil justice reform groups and even Congress have expressed concern about [private counsel hired by state attorneys general on a contingency-fee basis to pursue litigation against pharmaceutical companies]. In fact, a congressional committee recently held a public hearing to investigate the potential for conflicts and other harms associated with this practice.”).

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V.

The Ban on Off-Label Promotion and the False Claims Act: The Legal Landscape The False Claims Act allows a private individual, called a relator or, more colloquially, a

whistleblower, who learns of a fraud committed on the government to file a qui tam complaint on the government’s behalf.154 The statute was enacted in 1863 to address fraud by Union Army contractors during the Civil War.155 In 1986, Congress passed amendments that strengthened the statute by making qui tam actions more lucrative. As a result, Joan Krause writes, “[t]his general Civil War-era antifraud law has become a key component of the government’s modern war against health-care fraud.”156 In 2005, to encourage states to join the fight, Congress passed Section 6031 of the Deficit Reduction Act (DRA), which incentivized states to pass their own False Claims Acts.

As CMS has explained, “[i]f a State enacts a False Claims Act that is closely modeled on the federal version of the law, the Federal Government will increase the state share of amounts recovered under that False Claims Act by 10 percentage points.”157 As hoped, many states responded by passing their own False Claims Acts.158

Elements of a False Claim Action: (1) that there was a claim, which is defined as a request for money or property that is presented to the government, (2) that the claim was false in a way that was material to the government’s decision to pay it, (3) that the defendant’s words or actions caused the claim to be presented to the government, and (4) that the defendant had the requisite scienter.

154

31 U.S.C. § 3730(b)(1).

Joan H. Krause, Kickbacks, Self-Referrals, and False Claims: The Hazy Boundaries of Health Care Fraud, 144 CHEST 1045, 1046 (2013).

156 Id. 157 CENTERS FOR MEDICARE & MEDICAID SERVS., U.S. DEP’T OF HEALTH & HUMAN SERVS., THE DEFICIT REDUCTION ACT: IMPORTANT FACTS FOR STATE OFFICIALS, available at http://www.cms.gov/Regulations-andGuidance/Legislation/DeficitReductionAct/downloads/Checklist1.pdf.

158 OFFICE OF INSPECTOR GENERAL, U.S. DEP’T OF HEALTH & HUMAN SERVS., STATE FALSE CLAIMS ACT REVIEWS, https://oig.hhs.gov/fraud/state-false-claims-act-reviews/ (last visited Apr. 6, 2015).

155

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While federal FCA suits have been commonplace in the health care sector for years, the first case in which off-label promotion formed the basis of such a suit was United States of America ex rel. David Franklin v. Parke-Davis,159 which was settled in 2004 for $430 million.160 The district court in Franklin denied the defendant’s motion for summary judgment, holding that an FCA suit could be founded on a defendant’s truthful off-label promotion to the extent that the promotion caused physicians to prescribe, and the government to pay for, a drug for a use not covered by Medicaid.161 Since Franklin, numerous drug and device companies have entered into multi-million—and even multi-billion—dollar off-label promotion FCA settlements.

The elements of a False Claims Act cause of action are: (1) that there was a claim, which is defined as a request for money or property that is presented to the government, (2) that the claim was false in a way that was material to the government’s decision to pay it, (3) that the defendant’s words or actions caused the claim to be presented to the government, and (4) that the defendant had the requisite scienter.162 The FCA’s scienter requirement is “knowingly,” which the statute defines to “mean that a person, with respect to information-- (i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information[.]”163 There is no requirement of “proof of specific intent to defraud[.]”164 The FCA sets forth two routes to establishing that a defendant is civilly liable for a false claim. The first, 31 U.S.C. § 3729(a)(1)(A), the “presentment provision,” makes it illegal for an individual to “knowingly present[], or cause[] to be presented, a false or fraudulent claim for payment or approval.”165 The second, 31 U.S.C. § 3729(a)(1)(B), is the false record or false statement provision, which bars “knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement material to a false or fraudulent claim.”166 Section 3729(a)(1)(B), then, has a “double falsity” requirement, but Section 3729(a)(1)(A) does not.

159

United States ex rel. Franklin v. Parke-Davis, 2003 U.S. Dist. LEXIS 15754 (D. Mass. Aug. 22, 2003).

Press Release, U.S. Dep’t of Justice, Warner-Lambert to Pay $430 Million to Resolve Criminal & Civil Liability Relating to Off-Label Promotion (May 13, 2004), available at http://www.justice.gov/archive/opa/pr/2004/May/04_civ_322.htm.

161 Franklin, 2003 U.S. Dist. LEXIS 15754, at *9-10.

162 United States ex rel. Brown v. Celgene Corp., 2014 U.S. Dist. LEXIS 99815,*6-7 (C.D. Cal. July 10, 2014).

163 31 U.S.C. § 3729(b)(1)(A).

164 31 U.S.C. §3729(b)(1)(B).

165 31 U.S.C. § 3729(a)(1)(A).

166 31 U.S.C. §3729(a)(1)(B). Note that prior to 2009, this section was designated Section 3729(a)(2).

160

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The paradigmatic false claim for purposes of the FCA is a claimant’s billing the government for goods or services that were not provided.167 These so-called “factually false” cases could involve, for example, “billing for services not actually rendered, billing for services that were partially rendered, upcoding, inflating costs, or manipulating pricing[.]”168 In FCA cases that involve pharmaceutical promotion, however, the prescription drugs at issue have typically been prescribed by physicians and provided to patients, and there is therefore not the paradigmatic factually false claim.

A claim can also be false for purposes of the FCA if it is “legally false” because the individual or entity submitting a claim for payment to the government failed to comply with a “condition of payment.” As Kathleen McDermott and Arianne Callender have explained, a condition of payment “is an obligation that is a prerequisite for payment[.]”169 Courts that have addressed the question have concluded that compliance with the ban on off-label promotion is not a condition of payment, which means that a plaintiff does not state a claim for violation of the FCA merely by alleging that the defendant’s off-label promotion resulted in claims being submitted to Medicare or Medicaid.170 Conditions of payments are distinguishable from conditions of participation, which are conditions that providers must meet to be eligible to participate with Medicare or Medicaid.171 However, McDermott and Callender go on to write that, “because the Centers for Medicare & Medicaid (CMS) could choose to continue to pay claims even if a provider

167

Joan H. Krause, Health Care Providers and the Public Fisc: Paradigms of Government Harm Under the Civil False Claims Act, 36 GA. L. REV. 121, 125 (2001) (“As the numbers of health care FCA suits have grown, so too have the types of activities targeted by enforcement efforts. The FCA initially was applied in straightforward cases of fraud, such as physicians who billed the government for services they never performed. But gradually, more creative theories have emerged.”).

168 Kathleen McDermott & Arianne Callender, Practice Resource: Compliance Certifications and the Era of Accountability--A Forecast to Debate, 5 J. HEALTH & LIFE SCI. L. 158 (2012).

169 Id. 170 See, e.g., United States ex rel. Hartwig v. Medtronic, 2014 U.S. Dist. LEXIS 44475, *36-37 (S.D. Miss. Mar. 31, 2014) (holding that “allegations of off-label promotion are insufficient to bring rise to FCA liability” and citing United States ex rel. King v. Solvay S.A., 823 F. Supp. 2d 472, 510 (S.D. Tex. 2011), vacated in part on other grounds, 2012 U.S. Dist. LEXIS 42482 (S.D. Tex. Mar. 28, 2012) ("FCA liability does not attach to violations of federal law or regulations, such as marketing of drugs in violation of the Food, Drug, & Cosmetic Act, that are independent of any false claim." (citations omitted)) and United States ex rel. Bennett v. Boston Scientific Corp., 2011 U.S. Dist. LEXIS 34745, at *94 (S.D. Tex. Mar. 31, 2011) ("[E]ven if a drug or device manufacturer's marketing or promotion activities violate FDA regulations, that is insufficient to plead that the manufacturer caused physicians or hospitals to submit false claims for reimbursement.")).

171 See, United States ex rel. Leysock v. Forest Labs., Inc., 2014 U.S. Dist. LEXIS 151685, at *23-24 (D. Mass. Oct. 27, 2014) (defining conditions of payment as “preconditions that are a prerequisite to a particular payment,” in contrast to conditions of participation).

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fails to comply with a given condition of participation, allegations based on certifications related to conditions of participation likely are not actionable under the FCA.”172 However, a claim can also be legally false if it is accompanied by an express false certification of compliance with laws and regulations that are material to the government’s decision to pay. Courts of Appeals in the Second, Third, Sixth, Ninth, Tenth, Eleventh, and District of Columbia Circuits have gone further, recognizing that there can be liability under a theory of “implied false certification.”173 Neither theory of false certification, express or implied, however, applies to claims for reimbursement for pharmaceuticals when prescriptions were caused by offlabel promotion. Such claims are not accompanied by a certification of compliance with the ban on off-label promotion, and courts have held that no certification of compliance with the ban is implied by a request for reimbursement.

How, then, could a FCA case be founded on the

defendant

having

engaged

in

off-label

promotion? If the off-label promotion was false or misleading, a relator could argue that physicians were defrauded into prescribing drugs that were not medically necessary or were otherwise not eligible for reimbursement under Medicare or Medicaid or

…if the defendant’s off-label promotion caused physicians to prescribe, and the government to pay for, drugs for an off-label use that was not just off-label, but also not reimbursable, the defendant could be held liable under the FCA.

other government health care programs. Even if the off-label promotion was truthful, however, it can form the basis of a false claim. Under Franklin and the cases that followed it, if the defendant’s off-label promotion caused physicians to prescribe, and the government to pay for, drugs for an off-label use that was not just off-label, but also not reimbursable, the defendant could be held liable under the FCA. 174 The Medicare statute sets forth the general rule that an item or service will not be covered unless it is “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member[.]”175 Under Medicare Parts A and B, which pay for drugs that are typically administered by physicians “in hospitals, skilled nursing

172

McDermott & Callender, supra note 168.

United States ex rel. Wilkins v. United Health Group, 659 F.3d 295, 306 (3d Cir. 2011).

174 Franklin, 2003 U.S. Dist. LEXIS 15754, at *9-10.

175 42 U.S.C. § 1395y(a)(1).

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facilities, and outpatient dialysis and oncology clinics,” 176 drugs are covered only for uses that are “safe and effective and otherwise reasonable and necessary.”177 CMS presumes that uses that appear on the FDA-approved label are safe and effective.178 Off-label uses can also be covered, as long as they are “medically accepted.”179 Of relevance to this determination are “the major drug compendia, authoritative medical literature, and/or accepted standards of medical practice.”180 There is a separate definition of “medically accepted” for oncology drugs.181 The Secretary of HHS can promulgate a generally applicable rule that an off-label use is or is not medically accepted, known as a national coverage determination (NCD).182 Much more commonly, though, the Secretary allows individual carriers or fiscal intermediaries to make the determination with regard to a particular drug. Carriers and intermediaries, in turn, can either promulgate a generally applicable rule, known as a local coverage determination (LCD), or make the determination on a case-by-case basis.183 As such, a drug’s off label use can be medically accepted in some areas of the country but not others.

Coverage under Medicare Part D, which pays for drugs that patients administer to themselves, is likewise limited to drugs when used for a “medically accepted indication.”184 The definition of “medically accepted indication” is imported from the Medicaid statute, except that Medicare Part D uses a broader definition if a drug is part of an “anticancer chemotherapeutic regimen[.]”185 The Medicaid statute defines the term “medically accepted indication” to mean “any 176

See, Jennifer L. Herbst, The Short-Sighted Value of Inefficiency: Why We Should Mind the Gap in the Reimbursement of Outpatient Prescription Drugs, 2 CASE WESTERN RESERVE JOURNAL OF LAW, TECHNOLOGY & THE INTERNET 1, 6 (2011).

177 CENTERS FOR MEDICARE & MEDICAID SERVS., U.S. DEP’T OF HEALTH & HUMAN SERVS., MEDICARE BENEFIT POLICY MANUAL, ch. 15, § 50.4.1 (hereinafter “MEDICARE BENEFIT POLICY MANUAL”), available at http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Internet-Only-Manuals-IOMsItems/CMS012673.html.

178 Daniel Meron & Eric C. Greig, Medicare and Medicaid Reimbursement for Off-Label Uses of Pharmaceuticals and Medical Devices, in OFF-LABEL COMMUNICATIONS: A GUIDE TO SALES & MARKETING COMPLIANCE (Food and Drug Law Institute 4th Ed. 2014).

179 MEDICARE BENEFIT POLICY MANUAL, supra note 177177 § 50.4.2.

180 Meron & Greig, supra note 178, at 151.

181 Id. at 151-52.

182 MEDPAC, REPORT TO THE CONGRESS: MEDICARE PAYMENT POLICY 245 (Mar. 2003), available at http://www.medpac.gov/documents/reports/Mar03_Entire_report.pdf?sfvrsn=0.

183 42 U.S.C. §§ 1869(f)(2)(B), 1395ff(f)(2)(B) & 1395u; 42 C.F.R. § 421.200.

184 42 C.F.R. § 423.100.

185 42 U.S.C. § 1395w-102(e)(4)(A) (“For purposes of paragraph (1), the term "medically accepted indication" has the meaning given that term—(i) in the case of a covered part D drug used in an anticancer chemotherapeutic regimen, in section 1395x(t)(2)(B) of this title…”); 42 U.S.C. § 1395x(t)(2)(“For purposes of paragraph (1), the term "drugs" also includes any drugs or biologicals used in an anticancer chemotherapeutic regimen for a medically accepted indication (as described in subparagraph (B)). (B) In subparagraph (A), the term "medically accepted

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use for a covered outpatient drug which is approved under the Federal Food, Drug, and Cosmetic Act or the use of which is supported by one or more citations included or approved for inclusion in any of the compendia” described in the statute:186 “(I) American Hospital Formulary Service Drug Information; (II) United States Pharmacopeia-Drug Information (or its successor publications); and (III) the DRUGDEX Information System[.]”187 With regard to Part D, coverage determinations are made by each individual participating plan’s pharmacy and therapeutics committee, which sets that plan’s formulary.188 Under the Medicaid program, each of the 50 states is authorized to—and has in fact elected to—pay for “covered outpatient drugs.”189 State Medicaid programs “may” decline to cover drugs when used for indications that are not medically accepted.190 Concomitantly, they must, absent special circumstances, cover drugs when used for medically accepted indications. Courts disagree regarding whether the compendium has to merely list an indication or whether it has to support the indication.191

indication", with respect to the use of a drug, includes any use which has been approved by the Food and Drug Administration for the drug, and includes another use of the drug if-- (i) the drug has been approved by the Food and Drug Administration; and (ii) (I) such use is supported by one or more citations which are included (or approved for inclusion) in one or more of the following compendia: the American Hospital Formulary Service-Drug Information, the American Medical Association Drug Evaluations, the United States Pharmacopoeia-Drug Information (or its successor publications), and other authoritative compendia as identified by the Secretary, unless the Secretary has determined that the use is not medically appropriate or the use is identified as not indicated in one or more such compendia, or (II) the carrier involved determines, based upon guidance provided by the Secretary to carriers for determining accepted uses of drugs, that such use is medically accepted based on supportive clinical evidence in peer reviewed medical literature appearing in publications which have been identified for purposes of this subclause by the Secretary. The Secretary may revise the list of compendia in clause (ii)(I) as is appropriate for identifying medically accepted indications for drugs. On and after January 1, 2010, no compendia may be included on the list of compendia under this subparagraph unless the compendia has a publicly transparent process for evaluating therapies and for identifying potential conflicts of interests.”).

186 42 U.S.C. § 1396r-8(k)(6). Most courts have rejected the argument made by some Medicare recipients that an indication can be “medically necessary” even if it does not appear in a compendia. See, e.g., Broome v. Burwell, 2015 U.S. Dist. LEXIS 44040, *9-10 (D. Or. Apr. 1, 2015); Rickhoff v. United States Sec'y for the Dep't of Health & Human Servs., No. CV-ll-2189-PHX-DGC, 2012 U.S. Dist. LEXIS 175206, 2012 WL 6177411, at *2 (D. Ariz.

Dec. 11, 2012); Kilmer v. Leavitt, 609 F. Supp. 2d 750, 753 (S.D. Ohio 2009). But see Layzer v. Leavitt, 770 F. Supp. 2d 579, 582-86 (S.D.N.Y. 2011).]

187 42 U.S.C. § 1396r-8(g)(1)(B)(i).

188 Memorandum Report from Stuart Wright, Deputy Inspector General for Evaluations and Inspections to Donald M. Berwick, Administrator, Center for Medicaid & Medicare Services, Medically Accepted Indications for Part D Drugs, OEI-07-08-00152 (Nov. 14, 2011) (“The Centers for Medicare & Medicaid Services (CMS) charges [Prescription Drug Plan (PDP)] sponsors with ensuring that Medicare reimbursement for Part D drugs is limited to drugs provided for medically accepted indications.”).

189 Medicaid Program; Payment for Covered Outpatient Drugs Under Drug Rebate Agreements with Manufacturers, 60 Fed. Reg. 48,442, 48,451 (Sept. 19, 1995).

190 42 U.S.C. 1396r-8(d)(1)(B)(i).

191 Compare Edmonds v. Levine, 417 F.Supp.2d 1323 (S.D. Fla. 2006) with Ctr. for Medicaid and State Operations, Medicaid Drug Rebate Program Release No. 141, For State Medicaid Directors: Compendia Clarification.

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Other programs are less restrictive than Medicare and Medicaid. TRICARE, for example, which provides benefits to military personnel, military retirees, and their dependents, limits reimbursement of off-label prescriptions to those that are “medically necessary,” but in determining medical necessity it takes into account nationally accepted standards of practice in the medical community.192 Under TRICARE, a prescription is medically necessary when it is ‘generally accepted by qualified professionals to be reasonable and adequate for the diagnosis and treatment of illness.”193 In short, a drug can be off-label and reimbursable or off-label and not reimbursable, a distinction recognized in the case law. In United States ex rel. Bennett v. Boston Scientific, the court found that the plaintiff’s allegations regarding an experimental off-label use of a medical device were not sufficient to state a claim under the

In short, a drug can be off-label and reimbursable or off-label and not reimbursable, a distinction recognized in the case law.

FCA.194 A use that is experimental and off-label, the Bennett court found, could nonetheless be “reasonable

and

necessary”

and

therefore

reimbursable.195 In contrast, in United States ex rel.

Brown v. Celgene Corporation, the court denied the defendant’s motion to dismiss because the relator alleged that the defendant had promoted two of its

drugs for a total of nearly thirty off-label uses that were not adequately supported in the compendia and so were not reimbursable.196 In other cases, relators have argued successfully that, even though an off-label use appeared in the relevant compendia, the claims submitted for that use were nonetheless false because the defendant had improper influence over the compendia’s content.197 Relators have also avoided summary judgment by arguing that claims were false despite being for uses approved by a state

192

32 C.F.R. §199.4(g)(15)(i)(A).

32 C.F.R. § 199.2.

194 United States ex. rel. Bennett v. Boston Sci. Corp., 2011 U.S. Dist. LEXIS 34745, *89 (Mar. 31, 2011).

195 Id. 196 United States ex rel. Brown v. Celgene Corp., 2014 U.S. Dist. LEXIS 99815,*17.

197 See, e.g., United States v. Genentech, 2014 U.S. Dist. LEXIS 175223 at *9 (D.N.J. Dec. 18, 2014) (denying motion to dismiss, explaining that “Relator alleges that Defendant's actions have compromised the reliability of the various drug compendia entries that list the medically acceptable (and therefore reasonable and necessary) off-label uses of Avastin. … For example, Relator alleges that Defendants misled the key opinion leaders whose reviews of Avastin impacted what off-label uses would be listed in the compendia.”).

193

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Medicaid program’s pharmaceutical and therapeutics ("P&T") committee because the defendant had improper influence over the committee’s members.198 Relators have also argued successfully that a claim for payments associated with a reimbursable off-label use of a drug or device was nonetheless “false” for purposes of the FCA because it resulted from promotion that was false or misleading. In United States ex rel. Bui v.

Vascular Solutions, for example, a device case, the court denied the defendant’s motion to dismiss the government’s claim that the defendant misled physicians “into believing the short kit was FDA-approved for treating perforator veins, possibly clouding their judgment as to reasonableness and medical necessity.”199 Note that where a relator or the government can plead or prove that a defendant life sciences company made false or misleading product claims, it does not need to also show that the use at issue was not reimbursable. In United States ex rel. Elisa Dickson v. Bristol-Myers Squibb, the court denied a motion to dismiss the relator’s complaint alleging that the “‘defendants manipulated clinical trial data to support fraudulent claims regarding Plavix’s efficacy compared to cheaper alternatives;’ ‘fraudulently downplayed and misrepresented specific and known health risks of Plavix use compared to cheaper alternatives;’ ‘mischaracterized clinical studies which contradicted the sales campaign;’ and ‘targeted doctors whose patients rely on government payors for health care treatment so as to wrongfully inflate sales and profits at a tremendous cost to American taxpayers[.]’”200 In sum, the court concluded, the relator alleged that the defendants confused physicians and caused them “to feel that Plavix was essentially their only option.”201 The relator’s allegations, the Dickson court held, supported her theory that the defendants’ “fraudulent actions caused physicians and pharmacists to submit claims for reimbursement of prescribed treatment that was not ‘reasonable and necessary’ and thus false.”202 The court rejected the defendants’ argument that the “relator fail[ed] to allege a ‘false or fraudulent’ claim because relator's allegations relate entirely to prescriptions of Plavix for its FDA-approved indications[,]”

198

See, e.g., United States ex rel. Drummond v. Solvay S.A., 2015 U.S. Dist. LEXIS 7692, *14 (S.D. Tex. Jan. 23, 2015) (denying summary judgment without prejudice on the relator’s claim that the defendant "actively targeted doctors who were members of states' Medicaid pharmaceutical and therapeutics (‘P&T’) committees and pushed its off-label messages for its drugs in an effort to obtain placement of its drugs on the state Medicaid formularies.").

199 United States ex rel. Bui v. Vascular Solutions, 2013 U.S. Dist. LEXIS 187974, *12 (W.D. Tex. Mar. 7, 2013).

200 United States ex rel. Elisa Dickson v. Bristol-Myers Squibb et al., Case 3:11-cv-00246-DRH-SCW (S.D. Ill. Jan. 30, 2013).

201 Id. 202 Id.

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noting that “as relator points out, the fact a drug is FDA-approved, does not mean it is ‘reasonable and necessary’ in every instance it is prescribed.”203

“as relator points out, the fact a drug is FDA-approved, does not mean it is ‘reasonable and necessary’ in every instance it is prescribed.”

Relators in FCA cases founded on off-label promotion paradigmatic

confront FCA

a

hurdle suits.

absent

from

Pharmaceutical

manufacturers do not submit claims to the government for reimbursement; rather, physicians, pharmacies,

and

hospitals

do.

In

addition,

pharmaceutical manufacturers do not determine whether a drug is medically necessary for a given beneficiary; physicians do that. Complaints in off-label promotion FCA cases, therefore, must support a chain of causation running from the promotion through the physician’s prescribing decision to the pharmacist or other provider’s submission of a claim for reimbursement.

Assuming such proof, a recent decision in United States ex rel. Brown v. Celgene emphasizes that FCA liability is not limited to claimants.204 The FCA, the court wrote, “has a far broader reach,” broad enough to encompass a manufacturer that does not itself “falsely certify compliance with any legal condition of payment,” but rather “caused claimants to implicitly make such false certifications and thereby caused the submission of false claims.”205 Courts determine whether a manufacturer’s promotional efforts were the legal cause of the submission of a false claim by reference to the common law standard of “reasonable foreseeability.”206 In United States ex rel. Fox Rx v. Omnicare, the court held that pharmacists did not break the causal chain between the promotion at issue in the case and the alleged false claims, because pharmacists “do not have a duty to evaluate whether a drug has been prescribed for an onlabel or otherwise medically accepted indication prior to submitting a claim for reimbursement to the federal healthcare programs.”207 Whether physicians break the chain is a closer question. In Franklin, the court held that they do not, because “the participation of doctors and pharmacists in the submission of false Medicaid claims was not only foreseeable, it was an intended consequence of the alleged scheme of fraud.”208 203

Id. Brown, 2014 U.S. Dist. LEXIS 99815 at *12.

205 Id. 206 United States ex rel. Simpson v. Bayer Corp., 2013 WL 4710587, at *14 (D.N.J. 2013).

207 United States ex rel. Fox Rx v. Omnicare, 2014 U.S. Dist. LEXIS 70902, *19 (N.D. Ga. May 23, 2014).

208 United States ex rel. Franklin v. Parke-Davis (Parke-Davis I), 147 F. Supp. 2d 39, 52-53 (D. Mass. 2001).

204

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Similarly, in United States ex rel. Bui v. Vascular Solutions, the defendant argued that the complaint should be dismissed because the government failed to plead facts that would support a finding of causation.209 The defendant, the court wrote, “focuses on the Complaint's inability to connect a particular doctor to a particular statement and then a particular procedure.”210 This kind of connection, however, was not necessary to establish causation. The government alleged that the defendant’s salespeople discussed with physicians the use of “short kits” in perforator procedures and told them that the procedures would be covered by Medicare and TRICARE.211 Based on these allegations, the court concluded, it was “easily foreseeable” that the physicians “would ultimately submit claims for those procedures to Medicare and TRICARE... By telling their physician customers Medicare and TRICARE would cover the perforator procedures, Vascular Solutions' representatives set in motion a chain of events culminating in the submission of the claims at the heart of this case.”212 By contrast, in a 2014 case interpreting the Louisiana Medical Assistance Programs Integrity Law—which is similar, though not identical, to the federal False Claims Act—the Supreme Court of Louisiana reversed a $330 million judgment against Johnson & Johnson and its subsidiary, Janssen Pharmaceutica, finding that there could be no liability unless the health care providers who actually submitted the claims knew that they were false.213 The court held that “[t]o be liable under this provision, the Attorney General would have had to show that a Louisiana doctor who prescribed Risperdal for his patient, or a health care provider who dispensed the drug to the patient, knew that the defendants had made misleading statements about their product, but nonetheless prescribed or dispensed the drug to the patient knowing that there may be drugs that are equally safe, and less expensive, or safer than Risperdal, and notwithstanding that knowledge, prescribed or dispensed Risperdal.”214 In its recently-filed suit against FDA, Amarin argues that it would not be exposed to False Claims Act liability if it were permitted by FDA to make the off-label claims it desires to make.

This is because, Amarin explained, the company’s claims would be accompanied by a “clear and unambiguous statement that ‘Vascepa® may not be eligible for reimbursement under federal 209

United States ex rel. Bui v. Vascular Solutions, 2013 U.S. Dist. LEXIS 187974, *15 (W.D. Tex. Mar. 7, 2013).

Id. 211 Id. at *12.

212 Id.at 15-16.

213 Caldwell ex rel. State v. Janssen Pharmaceutica, 144 So. 3d 898, 909 (La. 2014).

214 Id. (interpreting La. Rev. Stat. § 43:438.3(A).).

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healthcare programs such as Medicare or Medicaid for treatment of patients with triglyceride levels in the 200–499 mg/dL range. We encourage you to check that for yourself.’”215 Amarin argued that this warning would break the chain of causation between its proposed promotional claims and any government reimbursement of its drug.216 Although the District Court did not reach the FCA issue when it granted preliminary relief in the form …it seems likely that Amarin’s

of a declaration that the proposed claims were

position that it would have no FCA liability if the FDA permitted its off-label claims will prevail if the District Court’s decision survives appeal.

neither false nor misleading and were protected by the First Amendment,217 it seems likely that Amarin’s position that it would have no FCA liability if the FDA permitted its off-label claims will prevail if the District Court’s decision survives appeal.

Even if they adequately allege a chain of causation, FCA relators face another hurdle in the pleading standard governing False Claims Act cases. The federal circuit courts agree that Federal Rule of Civil Procedure 9(b) governs cases brought under the False Claims Act, which means that the underlying fraud needs to be pleaded with particularity.218 The courts, however, are split with regard to what particularity means in practice in FCA cases.219 The more rigorous standard adopted by some circuits requires that plaintiffs plead “representative examples” of false claims actually submitted to the government. Under this approach, relators who do not have access to billing records will rarely be able to survive a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. In contrast, the more relaxed, or “nuanced,” standard would dispense with pleading actual submissions where

215

Complaint, supra note 114, at 60.

Complaint, supra note 114, at 60.

217 The court found preliminary relief related to potential FCA claims not “a ripe controversy” because “neither Amarin nor the doctor plaintiffs express an intention to be party to any practice that has been the subject of prior FCA actions. It is, at this time, wholly conjectural that (1) a doctor who prescribed Vascepa for an off-label use would falsely claim, in seeking medical reimbursement, to have done so for an approved use, or (2) the FDA would seek to hold Amarin accountable for such conduct by a doctor.” Amarin Pharma v. United States FDA, 15 Civ. 3588 (PAE), 2015 U.S. Dist. LEXIS 103944, *69 n.53 (S.D.N.Y. Aug. 7, 2015).

218 The rule provides as follows: “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Fed. R. Civ. P. 9(b).

219 See generally Emily T. Chen, Note, Depressing Diagnosis: Stringent Particularity Requirement of the Rule 9(b) Pleading Standard as a Critical Bar to Off-Label Promotion Fraud Whistleblowers, 36 CARDOZO L. REV. 333 (2014).

216

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the complaint “allege[s] particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.” A number of circuits have adopted some version of this relaxed approach,220 and it was endorsed by the Solicitor General in an amicus brief.221 Further, even some of the circuits originally taking the representative example view have recognized the possibility of exceptions to such a rigid rule.222 In short, pleading law is very confused in this area. The effects are, of course, mostly felt when the government declines to intervene.223 Should it actually intervene, the United States will have access to claims records sufficient to satisfy the courts that require a “representative example” of a false claim.224 Absent such intervention, it can be difficult in the stricter circuits for relators to plead a False Claims Act cause of action against a pharmaceutical company. Unless they are implicated in the wrongdoing, relators at pharmaceutical companies will not have access to bills, which are submitted by providers and pharmacists. Those at providers or pharmacists who have access to the bills are unlikely to have access to information as to why they are false because the government does not require the submission of the diagnosis for which a drug was administered or prescribed. Since the relator’s complaint will typically be met with a motion to dismiss for failure to state a claim, discovery will not have occurred allowing the identification of examples of the alleged false claims.

220

E.g., Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 156 (3d Cir. 2014); Ebeid ex rel. United States v.

Lungwitz, 616 F.3d 993, 998-99 (9th Cir. 2010).United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 29 (1st Cir. 2009); United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 854 (7th Cir. 2009); Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998-99 (9th Cir. 2010).

221 Brief of the United States in United States Ex Rel. Nathan v. Takeda Pharms. North America, Inc., 2014 U.S. S. Ct. Briefs LEXIS 760 (Feb. 2014).

222 In re Baycol Prods. Litig., 732 F.3d 869, 875-77 (8th Cir. 2013); Chesbrough v. VPA, P.C., 655 F.3d 461, 471 (2011); United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1172 (2010).

223 Declination of intervention should not be interpreted as indicating that the government “considers the evidence of wrong doing insufficient or the qui tam relator's allegations for fraud to be without merit. In any given case, the government may have a host of reasons for not pursuing a claim.” United States ex rel. Atkins v. McInteer, 470 F.3d 1350, 1360 n.17 (11th Cir. 2006).

224 Assuming the government identifies at least some false submissions, it may very well be permitted to prove the extent of the violations by statistical sampling. See United States ex rel. Martin v. Life Care Ctrs. of Am., Inc., 2014 U.S. Dist. LEXIS 142657, *14-54 (E.D. Tenn. Sept. 29, 2014) (approving the use of medical records of a random sample of 400 Medicare beneficiaries to determine whether their therapy was medically unnecessary, with the planned extrapolation of the results across 54,396 patient admissions, comprising 154,621 claims).

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Of course, relators could attempt to obtain claims submitted to the government. In a case in which the government chooses not to intervene, it could nonetheless turn claims information over to the relator, perhaps contingent on the relator having access to sufficient relevant facts to ensure that the case is not a mere fishing expedition. But the government does not, at least not often, take this step. Perhaps the next most obvious method of obtaining relevant information to support an FCA pleading is by making a

Of course, relators could attempt to obtain claims submitted to the government. In a case in which the government chooses not to intervene, it could nonetheless turn claims information over to the relator, perhaps contingent on the relator having access to sufficient relevant facts to ensure that the case is not a mere fishing expedition.

Freedom of Information Act225 request. That, however, has been ruled out of bounds by the Supreme Court: any information so obtained is viewed as within the FCA’s bar of suits based on “public disclosure.”226 Medicaid data obtained from state governments or private organizations, however, apparently would not be within this bar,227 and states have historically been able to access the Medicaid claims data that relators need to make their

cases.228 Further, as more Medicaid beneficiaries have been moved from the traditional fee-forservice program into managed care plans, more of this type of data is in private hands.

Nevertheless, federal and state privacy protections may prevent access to claims for particular patients, which may be essential in representative example jurisdictions. Even in the more liberal circuits, the courts have yet to allow a complaint to survive a Rule 12(b)(6) motion to dismiss for failure to state a claim on the basis of the kind of data that is more likely to be available, which is 225

5 U.S.C. § 552 (2014).

Schindler Elevator Corp. v. United States ex rel. Kirk, 131 S. Ct. 1885, 1890 (2011).

227 The language of the statute seems limited to federal sources insofar as government is concerned: 226

The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) from the news media….

31 U.S.C. § 3730 (e)(4).

228 See, e.g., Connecticut v. Eli Lilly & Co. (In re Zyprexa Prods. Liab. Litig.), 2009 U.S. Dist. LEXIS 39692, *25 (E.D.N.Y. Apr. 24, 2009) (discussing states’ production of databases of Medicaid prescription drug claims).

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data establishing the percentage of a patient population covered by Medicare, Medicaid, and other government programs.229

VI.

The False Claims Act and the Ban on Off-Label Promotion: The Mechanics of Enforcement The vast majority of off-label promotion FCA cases come to the government via qui tam

litigation,230 there are also other sources. Companies sometimes voluntarily disclose issues that they uncover.231 The FDA can refer cases to the DOJ and the DOJ, local USAOs, or state enforcement agencies can also build cases from the ground up. This can involve data mining.232 It can also involve investigating multiple companies to determine if practices the investigating agency learns about from a qui tam filing extend beyond the defendant in the case.

Relators and their counsel choose where to file off-label promotion False Claims Act cases based on a number of strategic factors. Typically, they choose to file in the federal courts, which have more experience with FCA cases and, in particular, with the need to keep them under seal.

Relators’ counsel may base their choice of which federal court on whether the USAO has experience with and expertise in this type of case, on whether USAOs devote adequate resources to investigating FCA cases, and on how quickly such investigations proceed.233 Some USAOs invite relators to file in their districts, touting their experience and promising to devote adequate resources to expeditiously investigating FCA cases.

229

Cf. Martin, supra note 224, at *14-54.

CIVIL DIVISION, U.S. DEP’T OF JUSTICE, FY 2016 BUDGET AND PERFORMANCE PLANS 37 (Feb. 2015), available at http://www.justice.gov/about/fy16-budget-and-performance (“In FY 2014, 94% of new health care fraud cases received by Civil’s Fraud Section were qui tam cases.”); ALMASHAT & WOLFE, supra note 5, at 5 (“Whistleblowerinitiated investigations were responsible for most federal settlements [with pharmaceutical companies] (75%) and financial penalties (78%) during the current study period.”).

231 Publication of the OIG's Provider Self-Disclosure Protocol, 63 Fed. Reg. 58,399 (1998).

232 FY 2013 BUDGET AND PERFORMANCE PLANS, supra note 136, at 27. Writing in 2012, the Civil Division explained that HHS was using a data-mining contractor which “assists over 40 qui tam investigations, including many of the largest pharmaceutical fraud cases.” Id. The information generated by the contractor was shared with local USAOs, enabling government attorneys to: (1) “Access and analyze vast amounts of Medicare and Medicaid claims data more quickly”; (2) “Utilize advanced outlier analysis to initiate new investigations”; (3) “Investigate potential leads more efficiently”; and (4) “Develop damages estimates.” Id. 233 Pitfalls to Avoid When Filing a Qui Tam Case, PHILLIPS & COHEN LLP, http://www.phillipsandcohen.com/QuiTam-Whistleblowers/Pitfalls-to-Avoid-When-Filing-a-Qui-Tam-Case.shtml (last visited Aug. 3, 2015) (recommending that qui tam relators and their counsel consider in deciding where to file (1) how courts in various jurisdictions have interpreted the False Claims Act and (2) “the experience and the resources of the local U.S. attorney's office.”

230

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Another factor is the degree to which a USAO permits relators’ counsel to participate in qui tam litigation. There are some districts in which the USAO does not share information with relators’ counsel or let relators’ counsel assist in building the case. Other offices welcome relators’ counsels’ assistance and put them to work, even, in some cases, allowing relators and their counsel to “assume the bulk of the investigative and litigative duties.”234 Some in government believe that these arrangements are a positive way to make the best use of limited investigative resources,235 while others find them concerning and note that they have the potential to jeopardize any parallel criminal investigation.236 After an FCA complaint is filed, the government is required to investigate the relator’s claims and determine whether it wants to intervene in the case. The FCA directs that “[t]he complaint and a written disclosure of all the relevant information known to the relator must be served on the U.S. Attorney for the judicial district where the qui tam was filed and on the Attorney General of the United States.”237 The United States Attorney Manual elaborates that United States 234

Pamela H. Bucy, Games and Stories: Game Theory and the Civil False Claims Act, 31 FLA. ST. U.L. REV. 603, 610 (2004).

235 Dinesh Kumar, Adverse Events: Ethical Issues in the Prosecution of Qui tarn Health Care Fraud Cases under the False Claims Act, 25 GEO. J. LEGAL ETHICS 661, 667 (2012) (“Parallel investigation has beneficial features that allow prosecutors to work strategically without breaching ethical lines.”).

236 There are legal, ethical, and practical concerns that arise when parallel civil and criminal investigations are conducted. The American Bar Association’s Standards on Prosecutorial Investigations caution that prosecutors “(i) should retain sole control of the criminal investigation and maintain independent judgment at all times; (ii) should be aware of rules that prohibit or restrict the sharing or disclosure of information or material gathered through certain criminal investigative techniques; (iii) should not be a party to nor allow the continuation of efforts by civil investigative agencies or attorneys.” Standards on Prosecutorial Investigations, AMERICAN BAR ASSOCIATION, http://www.americanbar.org/publications/criminal_justice_section_archive/crimjust_standards_pinvestigate.html (last visited Aug. 3, 2015). The United States Attorneys’ Manual cautions prosecutors and agents dealing with qui tam relators and their counsel to (1) “follow Rule 6(e), Federal Rules Criminal Procedure, and its general prohibition against disclosing matters occurring before the grand jury[,]” and (2) to be careful “about sharing information with attorneys and agents or employees working on the civil aspects of criminal cases.” OFFICES OF THE UNITED STATES ATTORNEYS, U.S. DEP’T OF JUSTICE, U.S. ATTORNEYS’ MANUAL, 932 (hereinafter “U.S. ATTORNEYS’ MANUAL”), available at http://www.justice.gov/usam/criminal-resource-manual-932-provisions-handling-qui-tam-suits-filedunder-false-claims-act.

In United States v. Martoma, 990 F. Supp. 2d 458, 461 (S.D.N.Y. Jan. 6, 2014), an insider trading case, the court ruled that the government’s obligation to turn over exculpatory or impeaching information to the defense extended to information in the possession of the Securities and Exchange Commission (SEC), because the court found that the SEC and the United States Attorney’s Office were conducting a “joint investigation.”

237 31 U.S.C. § 3730(b)(2). (“A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the Government pursuant to Rule 4(d)(4) of the Federal Rules of Civil Procedure.”). DOJ Criminal Division Chief Calls on Whistleblowers to Come Forward, THE FCPA BLOG (Oct. 9, 2014), http://www.fcpablog.com/blog/2014/10/9/doj-criminal-division-chief-calls-on-whistleblowersto-come.html# (reporting that Leslie Caldwell, the Chief of the DOJ’s Criminal Division said that “[t]he DOJ's criminal division fraud section employs about 100 lawyers and 70 paralegals and other support staff … It is divided into specialized units, including a 40 attorney health care fraud unit – the largest and most prolific unit of criminal prosecutors dedicated solely to health care fraud in the country," … Prosecutors in the criminal fraud section are

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Attorneys should forward a copy of the complaint and statement of evidence to the Commercial Litigation Branch of the Civil Division, “particularly because relators frequently fail to serve the Attorney General or delay in doing so.”238 FCA complaints are filed in camera and they automatically remain under seal for 60 days.239 False Claims Act cases can be transferred while they are under seal. 240 Sometimes, “Main Justice” in Washington will seek transfers with the goal of “bundling” together in a single jurisdiction some number of cases filed by multiple qui tam relators against a single defendant. As long as the case remains under seal, the government’s motion to transfer can be decided on an ex parte basis with the defendant none the wiser.241 As prominent relators’ counsel Vogel, Slade & Goldstein explain, “[t]he seal on the case is designed to protect the confidentiality of the Government’s investigation, enabling the Government to utilize investigatory techniques that depend upon secrecy and surprise for their success, such as search warrants and consensual monitoring.”242 They also note that “[b]y concealing the identity of the Government’s main source of information, the seal also serves to deter defendants from destroying or altering evidence even after they have become aware that they are under investigation by the Government.”243 The court can and usually does extend this seal period upon a showing of “good cause” by the government.244 As Professor Joel Hesch has explained, practices vary widely across the able to review the complaints immediately to determine whether to open a parallel criminal investigation, … She added that the criminal division has ‘unparalleled experience prosecuting health care fraud, procurement fraud and financial fraud’ and that it will ‘bring that expertise to bear by increasing [its] commitment to criminal investigations and prosecutions that stem from allegations in False Claims Act lawsuits.’”).

238 U.S. ATTORNEYS’ MANUAL, supra note 236, 9-42.440.

239 31 U.S.C. § 3730(b)(2).

240 Keith D. Barber, David B. Honig & Neal A. Cooper, Prolific Plaintiffs or Rabid Relators? Recent Developments in False Claims Act Litigation, 1 IND. HEALTH L REV. 1, 139 (2004) explaining that “[d]uring the time the case is under seal, the government can also conduct extensive pre-trial motions practice (e.g., motions to amend complaint or to transfer the case) ex parte while such motions would otherwise be subject to a defendant's responsive pleadings”).

241 Id. 242 Qui Tam Lawsuits Under the False Claims Act, VOGEL, SLADE & GOLDSTEIN, LLP, http://vsg-law.com/falseclaims-act-lawyers-explain-qui-tam-lawsuits/#18 (last visited Aug. 3, 2015).

243 Id. 244 31 U.S.C. § 3730(b)(3). Compare U.S. ATTORNEYS’ MANUAL, supra note 236, 932 (“Congress indicated that such extensions should not be granted automatically and that it expected the courts to require proof of a serious inquiry and a legitimate need for more time before granting extensions of time.”) with Joel D. Hesch, It Takes Time: The Need to Extend the Seal Period for Qui Tam Complaints Filed Under the False Claims Act, 38 SEATTLE U. L. REV. 901, 906 (2015) (“Although the FCA does not define good cause, the overall structure and goal of the FCA is geared towards permitting the government sufficient time to use the investigative tools and subpoenas for documents and testimony before making a decision to intervene.”).

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country.245 In some jurisdictions, where “courts routinely place qui tam cases on administrative hold so that these unique cases do not count negatively towards judges as long-pending cases[,]” the government can investigate a case for “many years.”246 In other districts, judges keep qui tam

For qui tam cases filed between October 2006 and January 2011, “the average length of time that the case remained under seal was 13 months[.]” cases on their active dockets, but nonetheless allow for ample extensions “provided the government shows that its investigation remains active and ongoing.”247 Finally, there are courts that are much less willing to grant extensions, limiting extra time to “between six and eighteen months.”248 For qui tam cases filed between October 2006 and January 2011, “the average length of time that the case remained under seal was 13 months[.]”249 The average length of time under seal may have been even longer in the past. In recent years, judges have become concerned about the long periods under seal and more aggressive about lifting the seals. The government is concerned by this, believing that it needs these cases to remain under seal for as long as necessary to thoroughly investigate them.

In some cases, one of the parties will request that the seal be partially lifted. The government might, for example, ask the court for permission to disclose the complaint to the defendant so that the defendant can better assist the government with the government’s investigation. Alternatively, as defense attorney John Bentivoglio and his colleagues explain, the government may seek to share the complaint for purposes of negotiating a settlement when its investigation is complete.250 In addition, where multiple relators have filed close in time to one another, the government may seek a partial lift to enable relators’ counsel to enter into negotiations

245

Hesch, supra note 244, at 907.

Id. at 907-8.

247 Id. at 908.

248 Id. 249 John T. Bentivoglio, Jennifer L. Bragg & Michael K. Loucks, False Claims Act Investigations: Time for a New Approach?, SKADDEN (May 12, 2011), https://www.skadden.com/insights/false-claims-act-investigations-time-newapproach.

250 Id. See also Bucy, supra note 234, at 620 n. 107 (noting that it is common for the government to seek to lift the seal to permit discussions with the defendant).

246

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with one another regarding whether any of them is barred from proceeding by the “first to file” rule.

Defense counsel may also request a partial or full lift of the seal. Even if it has not been served with the complaint, a pharmaceutical or medical device manufacturer that receives a civil investigative demand from DOJ can be fairly certain that there is a qui tam action pending against it.251 However, the company does not know exactly what it is alleged to have done, which means that it “cannot look into the allegations in the complaint and is not able to take corrective action to address any misconduct.”252 From the government’s perspective, however, lifting the seal can result in defendants tailoring their proposed proffers to the facts in the complaint, instead of being guided by what their internal investigations uncover. To counter this tendency, the government may provide the defendant with a summary of the issues in the case rather than the complaint itself.

Once a qui tam complaint is received by Main Justice, it is assigned to an attorney in the Commercial Litigation Branch of the Civil Division, which “will contact the agency involved, the Criminal Division, and, frequently, the Inspector General of the agency, to determine if the allegations are known to them and to obtain an assessment of the material evidence furnished by the relator.”253 The Criminal Division is then charged with checking with the relevant USAOs and investigative agencies “to determine if the allegations relate to a pending criminal investigation.”254 DOJ’s contact with the agency that is the victim of the alleged fraud can be both formal— frequently, DOJ sends what is sometimes termed a “call letter” to the affected agency—and informal. In off-label promotion and other health care fraud cases, the call letter is sent to the

251

Gina L. Simms & James P. Holloway, Podcast: Responding to a Government Subpoena or Other Document Demand: Six Helpful Hints (2013), available at http://www.ober.com/files/respondingGovtRequestsForDocspodcast.pdf (explaining that “[a] Civil Investigative Demand, or CID for short, allows the U.S. Department of Justice to compel the production of documents for its investigation of potential fraud committed against the government in a False Claims Act case. “); Ty Howard, Examining the False Claims Act and Civil Investigative Demands, INSIDE COUNSEL (Sept. 5, 2013), http://www.insidecounsel.com/2013/09/05/litigation-examining-thefalse-claims-act-and-civi (last visited Aug. 3, 2015) (explaining that use of civil investigative demands has “increased significantly” since the passage in 2009 of the Fraud Enforcement and Recovery Act, “which enabled the Attorney General to delegate to U.S. attorneys the power to issue CIDs.”).

252 John T. Bentivoglio, Jennifer L. Bragg & Michael K. Loucks, False Claims Act Investigations: Time for a New Approach?, SKADDEN (May 12, 2011), https://www.skadden.com/insights/false-claims-act-investigations-time-newapproach.

253 U.S. ATTORNEYS’ MANUAL, supra note 236, 9-42.440.

254 Id.

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Office of General Counsel at HHS. The agencies within HHS that might be informed of the filing include CMS, FDA, and HHS OIG. CMS is an obvious source for claims data, but it does not typically devote resources to investigating or play a role in settling health care fraud cases unless asked to by the DOJ or the HHS OIG. CMS may be more likely to become involved in cases that are high-profile, in cases that are novel, and in cases that involve the prospect of a significant recovery; off-label promotion cases often fall into one or more of these categories.

Although the ban on off-label promotion is derived from statutes and regulations enforced by the FDA, it is DOJ, not FDA, which determines whether or how a False Claims Act case is pursued, or whether or how it is settled. That said, attorneys at FDA often participate in the investigation of False Claims Act cases founded on violations of the FDCA, including by providing legal counsel, by determining if there are potential criminal violations that should be investigated, and, if there are, by conducting criminal investigations.255 In 2008, officials at the FDA’s Division of Drug Marketing, Advertising and Communications, now the Office of Prescription Drug Promotion, told the Government Accountability Office (GAO) “that they provided input to DOJ, such as information on whether the matter promoted off-label use or was otherwise violative, as well as opinions on the seriousness of the violation.”256 The GAO was also told that FDA was involved in each of the 11 settlements involving allegations of off-label promotion that DOJ reached between 2003 and 2007.257 According to the GAO, “[i]n many of those instances, FDA became involved at DOJ’s request and remained involved from the preliminary investigation through the final settlement.”258 HHS OIG is also often involved in investigating and settling off-label promotion False Claims act cases. HHS OIG can impose civil monetary penalties and has the authority under the Social Security Act to exclude manufacturers from participation in federal health care programs including Medicare and Medicaid.259 Exclusion is mandatory upon conviction of, among other things, felony health care fraud.260 Other convictions, including for misdemeanor health care fraud, UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE, FDA’S OVERSIGHT OF THE PROMOTION OF DRUGS FOR OFF-LABEL USES 30 (July 2008).

256 Id. 257 Id. 258 Id. 259 Civil Monetary Penalties and Affirmative Exclusions, OFFICE OF INSPECTOR GENERAL, U.S. DEP’T OF HEALTH & HUMAN SERVICES, https://oig.hhs.gov/fraud/enforcement/cmp/ (last visited Aug. 3, 2015).

260 42 U.S.C. § 1320a-7(a)(1).

255

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are grounds for permissive exclusion.261 Violations of the FCA are also grounds for permissive exclusion.262 In some cases, particularly those that have involved a criminal investigation, defense counsel will seek a global settlement of all of the matters the government has pending against the defendant. Because of HHS OIG’s exclusion authority, defense counsel might request that HHS OIG be present for and participate in settlement negotiations. One reason for seeking HHS OIG’s participation in the settlement process is to avoid exclusion by negotiating a Corporate Integrity Agreement (CIA).

The DOJ does not view itself as having a traditional lawyer-client relationship with CMS, FDA, or HHS OIG. In both the criminal and civil contexts, the DOJ can pursue or settle a case over the agencies’ objection. Several current and former government attorneys report that DOJ has pursued cases in which the FDA did not believe that the promotion at issue violated the law or in which CMS did not believe that the off-label use at issue was wrongly reimbursed. There is also the potential for disagreement among agencies over whether a case should be brought when the promotion at issue was illegal but the underlying use was the standard of care or important to patient care overall.

Some believe that CMS has more leverage than the FDA over whether a case is brought or settled because the laws governing payment are clearer than the

Some believe that CMS has more leverage than the FDA over whether a case is brought or settled because the laws governing payment are clearer than the laws governing promotion.

laws governing promotion. Because the contours of the ban on off-label promotion are not set forth clearly in black-letter law, there is room for debate regarding whether a given communication is a violation. If CMS finds that a use is covered by a government health care program, it can be difficult for DOJ to pursue a FCA case. The DOJ could still pursue a criminal or other civil case, but any relator would not share in any recovery.

In off-label promotion cases, investigative agents could come from the Federal Bureau of Investigation, the FDA, the Department of Defense, the Office of Personnel Management, the Veterans Administration, and the HHS OIG. Among the decisions Main Justice must make is how much involvement to have with the investigation. Main Justice will delegate some cases to the United States Attorney’s Office; this is the lowest level of supervision. In other cases, Main Justice

261 262

42 U.S.C. § 1320a-7(b)(1).

42 U.S.C. § 1320a-7(b)(7).

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will monitor the litigation, which means it will institute a reporting requirement and exercise close supervision over it. In still other cases, Main Justice and the USAO will work the case together.

The final option is for Main Justice to investigate a case itself.

States are also involved in enforcing the ban on off-label promotion. 263 Relators’ counsel can approach a state if a case does not fit within the priorities of a USAO. More frequently, counsel sues on behalf of one or more states in addition to the federal government. States can also choose to join an action. The states enforce the ban through their MFCUs. A national organization, the National Association of Medicaid Fraud Control Units (NAMFCU) coordinates their efforts.264 The relator’s materials are reviewed by representatives of one or more states. They may also analyze relevant data and perform a damages analysis before making a recommendation regarding whether states should join the case.

In some cases, the MFCUs will participate in aspects of the federal government’s investigation. For example, they may attend the initial interview with the relator. Some or all of the MFCUs have access to claims data, particularly to data from fee-for-service Medicaid. Their access to data may be more limited with regard to Medicaid managed care, because such data belongs to the managed care company. Similarly, the DOJ can relatively easily access data from Medicare Parts A and B, while data from Part D are not as readily available. The states seek to complete their process on the same timetable as the federal government. Coordination is important for a number of reasons, including that an uncoordinated state investigation could compromise the federal qui tam case’s seal. It could also compromise any criminal case. Defendants, too, often favor coordination, since it serves their desire for as global a settlement as possible.

Often, defendants are given the opportunity to prepare what is called a “white paper.” This is the defendants’ attorneys’ first opportunity to make their case. Defense counsel frequently argue,

263

See Lisa Schencker, Anti-Fraud Fervor: States Step up False Claims Actions to Recover Medicaid Dollars, MODERN HEALTHCARE (July 25, 2015), http://www.modernhealthcare.com/article/20150725/MAGAZINE/307259960.

264 National Assoc. of Medicaid Fraud Units, Frequently Asked Questions http://www.namfcu.net/faq/frequentlyasked-questions (last visited Apr. 6, 2015) (explaining that “the federal government, often at the request of defense counsel, turns to the state MFCUs because it cannot settle the Medicaid portion of [a Medicare] case without the Units. Moreover, defense attorneys are unlikely to settle the case without the affected states because each state has the authority to exclude a convicted provider from its health care programs. The Department of Justice typically contacts the National Association of Medicaid Fraud Control Units about a potential settlement, and the President of the Association appoints a settlement team which usually consists of three to four members.”).

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for example, that the alleged off-label promotion was isolated and not directed by headquarters.

They also frequently review their clients’ compliance programs and, presumably, argue that they are meaningful and robust. Sometimes defendants will contend that they should not be held responsible for the actions of a new acquisition. The illegalities may have been discovered during due diligence and reported by the acquiring entity. Sometimes they highlight that new management is in place since the violations occurred, or that the individuals involved with the behavior have been sanctioned.

Once the government’s investigation is complete, it must notify the court of its decision whether to intervene in the suit. The FCA provides that if the government intervenes in a qui tam action, “it shall have the primary responsibility for prosecuting the action.”265 In some cases, the government decides not to decide, notifying the court that it declines to intervene at the present time. For example, the government may want to wait and see if a qui tam complaint survives a motion to dismiss before it decides the intervention question. Even if the government has not intervened in a qui tam case, it may file a “statement of interest” to alert the court to the government’s position on an issue.266 Even if the government decides against intervention when its investigation is complete, it can request permission to intervene later. The statute provides that “[w]hen a person proceeds with the action, the court, without limiting the status and rights of the person initiating the action, may nevertheless permit the Government to intervene at a later date[.]”267 If the government chooses to wait until a later date, however, it loses its automatic right to intervene and is required to make a “showing of good cause.”268 Regardless of whether the government chooses to take over the prosecution of an FCA case, “[i]t can dismiss the action, even over the objection of the relator, so long as the court gives the relator an opportunity for a hearing and it can settle the action even if the relator objects so long as the relator is given a hearing and the court determines that the

265

31 U.S.C. § 3730(c)(1).

A provision of Title 28 of the United States Code, which relates to the judiciary and judicial procedure, authorizes the Department of Justice to inform judges of the government’s position in a case using the statement of interest mechanism. 28 U.S.C. § 517 (“The Solicitor General, or any officer of the Department of Justice, may be sent by the Attorney General to any State or district in the United States to attend to the interests of the United States in a suit pending in a court of the United States, or in a court of a State, or to attend to any other interest of the United States.”).

267 31 U.S.C. § 3730(c)(3).

268 Id. 266

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settlement is fair.”269 The relator cannot settle or dismiss an FCA case without the consent of both the government and the court.270 If a defendant is found liable, it is subject to a civil penalty of between $5,500 and $11,000 for each false claim.271 In addition, the Secretary of HHS can issue a civil monetary penalty in the amount of $50,000 for each false record or statement where the defendant “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim for payment for items and services furnished under a Federal health care program[.]”272 Finally, violators must pay the government three times the amount of the government’s damages.273 In cases involving off-label promotion, the damages calculation can be complex and contested, with room for debate over the percentage of prescribing that was off-label, the percentage of off-label prescribing that constituted a false claim, and the percentage of false claims that were caused by the manufacturer’s off-label promotion.

Relators are entitled to a percentage of the damages recovered from the defendant, as well as to reimbursement of their attorneys’ fees and costs and other reasonable expenses. If the government intervenes in a case, the court must award the relator “at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action.”274 If the government does not intervene, the relator is entitled to “not less than 25 percent and not more than 30 percent of the proceeds of the action or settlement[.]”275 As noted, whether off-label promotion FCA cases trench on defendants’ First Amendment rights is a hotly-debated question and another complicating factor. The Amarin decision finding a 269

31 U.S.C. § 3730(c)(2)(A) & (B).

31 U.S.C. § 3730(b)(1).

271 31 U.S.C. § 3729(a)(1); 28 C.F.R. § 85.3(a)(9).

272 42 U.S.C. § 1320a-7a.

273 31 U.S.C. § 3729(a)(1)(G). Note that “where a person who has violated the FCA reports the violation to the government under certain conditions, the FCA provides that the person shall be liable for not less than double damages.” U.S. DEP’T OF JUSTICE, THE FALSE CLAIMS ACT: A PRIMER, http://www.justice.gov/sites/default/files/civil/legacy/2011/04/22/C-FRAUDS_FCA_Primer.pdf (last visited Aug. 4, 2015) (hereinafter “FCA PRIMER”).

274 31 U.S.C. § 3730(d)(1). An exception to this general rule is made “[w]here the action is one which the court finds to be based primarily on disclosures of specific information (other than information provided by the person bringing the action) relating to allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government [General] Accounting Office report, hearing, audit, or investigation, or from the news media[.]” Id. Where that is the case, “the court may award such sums as it considers appropriate, but in no case more than 10 percent of the proceeds, taking into account the significance of the information and the role of the person bringing the action in advancing the case to litigation.” Id. 275 FCA Primer, supra note 273.

270

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First Amendment right to make statements that are not false and misleading,276 has the potential to change the ground rules, but even that case involved a heavily litigated question about whether the proposed statements were false or misleading.277 In a recent court filing, the government argued that, even if the ban on off-label promotion violates the First Amendment, off-label promotion can still form the basis of a FCA action.

According to the government, “[b]ecause off-label promotion by a pharmaceutical company can be evidence of that defendant’s having caused physicians to submit false claims, the First Amendment is not implicated, even where the defendant’s promotional message is factually true.”278 It is not surprising that the government is focusing on this argument, because, if accepted, it would allow a court to bypass the questions raised by Sorrell and Caronia about the level of scrutiny that applies when off-label promotion or other commercial speech is restricted. However, the District Court in Amarin gave the argument short shrift.279 The government has also argued that, as a practical matter, it rarely, if ever, pursues a criminal prosecution or FCA or other civil case where the manufacturer limited itself to truthful off-label statements. There is, the government claims, always a “plus” factor such as false or misleading statements or kickbacks, which makes the First Amendment challenge moot.

276

Amarin Pharma v. United States FDA, 15 Civ. 3588 (PAE), 2015 U.S. Dist. LEXIS 103944 (S.D.N.Y. Aug. 7, 2015). See text supra at nn.113-118 and nn.216-218.

277 Id. 278 United States’ Statement of Interest Regarding Certain Issues Raised in Defendants’ Motions to Dismiss the Relator’s First Amended Complaint Pursuant to F. R. Civ. P. 12(B)(6) at 10, U.S. ex rel. Frank Solis v. Millenium Pharmaceuticals and Schering-Plough, Civil Action No. 2:09 - CV - 3010 MCE JFM (Oct. 24, 2013) (citing cases exempting speech used for evidentiary purposes from First Amendment scrutiny).

279 Amarin Pharma. *83-84 (“the proposition that speech can be admissible in evidence to prove intent or motive in a criminal case is beside the point here. Amarin's lawsuit is directed instead to the act requirement—the situation in which a misbranding action takes aim at truthful, non-misleading speech. And Caronia construed the misbranding statute, categorically, not to reach a manufacturer or its representative under those circumstances. That construction applies no matter how obvious it was that the speaker's motivation was to promote such off-label use. Promoting such use, in fact, was transparently Caronia's intent.”).

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VII.

Empirical False Claims Act Evidence

A.

Critiques of Relator Suits

Critiques of the False Claims Act are legion, and many of the criticisms are of the core enforcement mechanism of the Act – the enlistment of private citizens as relators through the qui tam process. The criticisms range from highly theoretic to intensely practical. On the theoretic side are concerns for democratic values, as private parties, driven at least in part by profit motives, shape the enforcement agenda for wide-ranging federal enactments. Such concerns are especially acute where, as with “implied certification” claims,280 relators have essentially used the FCA to create a private cause of action to enforce laws that Congress originally entrusted solely to government enforcement. The acceptance of such theories by the Department of Justice through intervention,281 the courts,282 and, in some cases by Congress itself,283 may or may not be a persuasive response to the democratic values concerns.

As for more practical criticisms, one example is the U.S. Chamber’s Institute for Legal Reform report,284 entitled Fixing the False Claims Act: The Case for Compliance-Focused Reforms.285 The Chamber identifies one major problem as an incentive structure that it believes “systematically overpays relators and their counsel,”286 which incentivizes frivolous relator suits.

But the report is also concerned with “irrationally excessive penalties, sometimes for technical 280

See note 173, supra, and accompanying text.

See David Freeman Engstrom, Private Enforcement Pathways: Lessons from Qui Tam Litigation, 114 COLUM. L. REV. 1913, 1971 (2014) (detailing the belated involvement of Justice in “average wholesale price” litigation followed by proposed rulemaking by CMS).

282 See, e.g., United States ex. rel. Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001). Not all courts recognize the theory, and there is some variation even among those who do. Nevertheless, it remains true that FCA relators have convinced a number of courts that this is a viable theory of recovery.

283 Engstrom, supra note 281, at 1970-71 (detailing how FCA “average wholesale price” claims resulted in new legislation); Id. at 1983-84 (detailing how FCA claims based on violations of the Anti-Kickback Statute resulted in new legislation) 284 The Institute is affiliated with the United States Chamber of Commerce.

285 http://www.instituteforlegalreform.com/uploads/sites/1/Fixing_The_FCA_Pages_Web.pdf (October 2013).

286 Id. at 23. The Report has two major thrusts. One is a set of recommendations intended to incentivize adoption of “industry-specific “state-of-the-art ‘gold standard’” compliance programs, id. at 2, by providing that companies so certified would have “recalibration of the damages multiplier,” immunity from qui tam actions for self-disclosure, no exclusion and debarment for executives absent personal involvement, and the right to fire any employee who failed to report internally 180 days before filing a qui tam. Id. The second set of reforms would apply even to those without gold standard certification, including: reduction of the relator’s share; a bar on qui tam actions by government employees arising out of that employment; the elimination of “implied false certification” liability; proof of all elements of a violation by “clear and convincing evidence”; and recalculation of damages to reflect the government’s “actual loss.” Id. at 23.

281

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violations that occur despite businesses’ good faith efforts to comply with contracts or regulations” and the threat of such large liability as to “coerce businesses that may have done nothing wrong to pay enormous out-of-court settlements based on untested and questionable legal theories.”287 The structure of the liability provisions of the FCA is beyond the scope of this white paper, but we take the theme of Fixing the False Claims Act to be a common critique of its enforcement structure: while enlisting private citizens in law enforcement may be an effective mechanism for increasing enforcement resources, the downside is that the resulting “police” may be motivated, at least in part, by the potential bounty, and thus lack the public enforcer’s inclination to look past “technical violations” or seek recoveries only proportionate to the harm caused.

So viewed, the question becomes the effectiveness of DOJ’s oversight of qui tam relators.

In theory, of course, a relator’s lawsuit may be largely controlled by DOJ intervention in suits it believes are well-founded and by dismissal of those it believes should not go forward. 288 Even failing such intervention, DOJ remains empowered to be involved in any efforts to settle or dismiss the claims,289 thus allowing it to exercise some control over at least some aspects of qui tam suits.

In practice, however, DOJ is presented with far more qui tam filings than it can possibly intervene in, and there is some doubt as to how closely it monitors the cases that it allows relators to pursue by themselves. Critics often point out the widely disparate success rates of cases in which DOJ intervenes and those in which it does not290 as evidence that most relators’ cases are without merit; the obvious argument is that DOJ should far more often move to dismiss such claims when it fails to intervene.291 In any event, if the perception that relators’ claims are not likely to be meritorious is widespread, it may become a self-fulfilling prophecy: courts that view DOJ declination as a statement on the merits of the claim are likely to rule against such claims in

287

Id. at 2.

31 U.S.C. § 3730(c).

289 Id. § 3730(b).

290 Sean Elameto, Guarding the Guardians: Accountability in Qui Tam Litigation Under the Civil False Claims Act, 41 PUB. CONT. L.J. 813, 826 (2012), reports that “Qui tam cases in which the Government has declined to intervene are dismissed at a staggering rate of eighty-six percent.” Government intervention, in contrast, far more often results in liability for the defendant. Elameto reports that only about 5% of cases in which the government intervenes are eventually dismissed. Id. Other data make a similar point: while the government intervened in only 22% of qui tam filings, almost 97% of the total recoveries are in cases in which it intervened. Id. 291 Dayna Bowen Matthew, The Moral Hazard Problem with Privatization of Public Enforcement: The Case of Pharmaceutical Fraud, 40 U. MICH. J.L. REFORM 281, 334-35 (2007) (recommending that Congress amend “the FCA statute to require the Government to evaluate the underlying merits of all cases in which it permits qui tam relators to prosecute in its stead” which “could be done by requiring the Government to either join or move to dismiss each qui tam case within a certain statutory time period.”).

288

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deciding dispositive motions,292 especially motions to dismiss that are subject to a heightened pleading standard.293 Others respond that the disparity in success rates is due not to radical differences in the intervened and declined cases but rather to DOJ leverage when it intervenes and excessive judicial skepticism of qui tam relators.294 Beyond the criticism that DOJ does not often enough put an end to frivolous filings are the related but distinct criticisms (and in considerable tension with each other) that DOJ’s decisions to intervene are either wholly arbitrary or politically partisan rather than merits-based.

B. Analysis of the Critiques Recent studies by David Freeman Engstrom attempt to answer some of these critiques through an empirical review of more than 6,000 unsealed qui tam cases filed between 1986 and 2011.295 Analyzing this dataset, he “confirm[ed] that DOJ rarely uses its termination authority, raising questions about DOJ's will or capacity to play a welfare-maximizing role.”296 In other words, DOJ does not view its role as helping to screen out meritless claims, leaving that to the judicial process and therefore at least partially confirming some criticisms.

On the other hand, Professor Engstrom’s data

[Engstrom] found that “DOJ appears to have substantial merits-screening capacity, contrary to the view that DOJ intervention decisions are wholly arbitrary.”

led him to “reject heated claims about DOJ [partisan] politicization,”297 because “intervention rates appear similar

within

and

across

presidential

administrations.”298 As for the criticisms of the rationality of intervention decisions, he found that “DOJ appears to have substantial merits-screening capacity,

292

See, e.g., United States ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 331 (5th Cir. 2011) (noting that DOJ decision to intervene as to seven defendants but not more than 400 others meant that the unintervened claims "presumably lacked merit"). But see, e.g., United States ex rel. Williams v. Bell Helicopter Textron Inc., 417 F.3d 450, 455 (5th Cir. 2005) (Attorney General may decide not to intervene "for any number of reasons").

293 See supra notes 214-22 and accompanying text 294 This leverage in part derives from the power of the government to threaten debarment of a firm from participating in public programs. In both the defense and health sectors, such a sanction can be a death sentence for a firm.

295 David Freeman Engstrom, Private Enforcement’s Pathways: Lessons from Qui Tam Litigation, 114 COL. L. REV. 1913 (2014).

296 David Freeman Engstrom, Public Regulation of Private Enforcement: Empirical Analysis of DOJ Oversight of Qui Tam Litigation Under The False Claims Act, 107 NW. U.L. REV. 1689, 1696 (2013). Professor Engstrom estimates that dismissal is sought in no more than 4% of cases filed. Id. at 1717. However, he also notes that declination of intervention often meant that there was no further litigation, presumably because the relator was unwilling to proceed without government support. Id. at 1717-18.

297 Id. at 1696.

298 Id. at 1720.

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contrary to the view that DOJ intervention decisions are wholly arbitrary.”299 Further, “DOJ makes intervention decisions strategically, separate and apart from pure ‘merits’ considerations, in response to simple resource constraints, judicial threats to its ability to police collusive relatordefendant settlements, and the identity (and corporate power) of the defendant.” 300 Professor Engstrom does note that DOJ is more likely to intervene in cases filed by “more sophisticated, repeat plaintiff’s counsel,”301 which may be a contributing factor in the greater success rate in intervened cases but raises the obvious question whether such cases might be more efficiently left to private counsel.302 As these findings may imply, Professor Engstrom also found that “specialized relator-side firms” are not “filing mills.”303 They “appear to play a positive role in the system, enjoying higher litigation success rates and surfacing larger frauds compared to less experienced firms.”304 Counsel who had handled 40 or more FCA cases were “roughly 1.5 times more likely to win DOJ intervention (37.1% versus 22.6%) and achieve impositions (40.7% versus 29.0%)” than were counsel handling their first FCA case.305 Moreover, the impositions experienced counsel won were “roughly four to five times that of one-shotter counsel.”306 With regard to repeat relators “who are almost by definition outsiders,” the picture is different. Repeat relators are less likely than oneshotters to secure DOJ intervention or achieve an imposition, but, when they do win, they win more money than those who have never filed a case before.307 With regard to “certain repeat players—namely former DOJ prosecutors turned private sector relator counsel,” Professor Engstrom found that they “are far more likely to persuade the DOJ to exercise its powerful authority under the FCA to intervene in qui tam cases and push them 299

Id. at 1696. This suggests that courts should not infer from a declination that Justice believes the claim to be weak. However, in a more recent article, Professor Engstrom found evidence that the Department “may increasingly be overwhelmed” by filings, as evidenced by the steady increase in the time taken to reach a decision whether to intervene or decline, which has led to some push-back by courts unwilling to approve serial requests for extensions.

Engstrom, Private Enforcement’s Pathways, supra note 295, at 1993-94. In addition, there seems to be growing use by the government of a declination “at this time.” Id. 1994.

300 Engstrom, Public Regulation of Private Enforcement, supra note 296.

301 Id. 302 Engstrom suggests that the FCA’s tiered bounty system, with higher shares for relators when Justice does not intervene, may explain the tendency of the Department to intervene in cases that would be well-litigated in any event. Id. at 1696.

303 David Freeman Engstrom, Harnessing the Private Attorney General: Lessons from Qui Tam Litigation, 112 COLUM. L. REV. 1244, 1249 (2012).

304 Id. 305 Id. at 1299.

306 Id. at 1300.

307 Id. at 1295-97.

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to resolution.”308 On the other hand, “former DOJ lawyers also achieve substantially lower impositions than their nonformer DOJ counterparts.”309 Professor Engstrom suggests that this raises “provocative questions about whether the FCA’s public-private hybrid structure facilitates clientelism or even ‘revolving door’ capture between public prosecutors and specialized qui tam enforcers.”310 In a subsequent study, Professor Engstrom rejected claims of a “gold rush” or “litigation explosion” in the FCA arena.311 Although trending upwards, rather than a consistent increase, filings have “ebbed and flowed” over time,312 what the author calls “a steady maturation.”313 Further, the increases can be linked more directly to increased government spending and unemployment rates than to the FCA’s increased favor among filers.314 Professor Engstrom does, however, note an increase in the mean number of defendants per action, which suggests that “qui tam enforcement efforts have increased over time by pushing into regulatory interstices.”315

308

Id. at 1251-52.

Id. 310 Id. 311 Engstrom, Private Enforcement’s Pathways, supra note 295, at 1922.

312 Id. at 1952.

313 Id. at 1956. In addition, “recoveries have climbed more or less in tandem with filings[.]” Id. at 1957. A substantial portion of the growth in overall recoveries can be attributable to “a handful of especially large settlements of roughly $ 500 million or more (in 2013 dollars), most of them against pharmaceutical companies Abbott Laboratories ($ 582 million in 2012), Eli Lilly ($ 480 million in 2009), GlaxoSmithKline ($ 1.53 billion in 2012 and $ 471 million in 2010), and Pfizer ($ 750 million in 2009).” Id. at 1958.

314 Id. at 1956.

315 Id. at 1964. This interpretation is supported by three case studies, involving: pharmaceutical “average wholesale price claims”; oil and gas royalty claims; and healthcare kickbacks and self-referral claims. Id. at 1968-1991. See also David Freeman Engstrom, Whither Whistleblowing? Bounty Regimes, Regulatory Context, and the Challenge of Optimal Design, 15 THEORETICAL INQUIRIES L. 605, 619 (2014) (“[T]heory and evidence suggest that entrepreneurial qui tam enforcers will relentlessly press law’s boundaries, exploiting regulatory ambiguities in industry-wide lawsuits . . . The presence of a qui tam mechanism can thus drive the law down pathways it would not travel if enforcement was left in purely public hands.”).

309

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VIII. Off-Label Promotion and the False Claims Act: Shining a Light on an Enforcement Regime Many commenters have criticized the use of the False Claims Act to police off-label promotion, arguing that it results in an enforcement regime that is unfairly harsh and unpredictable and that suppresses manufacturers’ truthful speech about their products.316 Others make the opposite argument, that the significant number of large-dollar settlements—and the fact that some companies are repeat offenders—suggests that the ban on off-label promotion is under-enforced.317 In the absence of persuasive empirical evidence of either over- or under-enforcement, it may be impossible to resolve the debate over reforms that would make the regime as a whole more or less harsh. Increased transparency, though, could be a reform that attracts support.

A. Transparency in Reimbursement An alternative way to approach the issues that arise when the ban on off-label promotion is enforced via the False Claims Act is to reduce the number of arguably false claims that are filed.

One reason that promotion of uncovered uses leads to false claims is that the Medicare Part D and state Medicaid programs pay for many prescriptions without requiring the prescriber to provide the patient’s diagnosis. As Jennifer Herbst has explained, “[t]he current billing systems for Medicare Part D and Medicaid…do not require pharmacists submitting claims for outpatient prescription drugs to provide any information regarding the use of the drug beyond the drug name and amount dispensed.”318 However, when physicians submit claims under Medicare Part B, which covers prescription drugs administered in physicians’ offices, they must indicate the applicable diagnosis code on the required paperwork.319 To uncover unreimbursable off-label uses, Herbst writes, “the Government must match a patient‘s treatment history (based on claims submitted for the prescribing physician‘s services) to

316

See, e.g., Girard, supra note 122, at 121; Hall & Berlin, supra note 9 at 653; Sandra H. Johnson, Polluting Medical Judgment? False Assumptions in the Pursuit of False Claims Regarding Off-Label Prescribing, 9 MINN. J. L. SCI. & TECH. 61, 66-67 (2008); Edward P. Landsdale, Used as Directed? How Prosecutors are Expanding the False Claims Act to Police Pharmaceutical Off-Label Marketing, 41 NEW ENG. L. REV. 159, 161 (2006); Christopher D. Zalesky, Pharmaceutical Marketing Practices: Balancing Public Health and Law Enforcement Interests; Moving Beyond Regulation Through Litigation, 39 J. HEALTH L. 235, 247-49 (2006).

317 Outterson, supra note 9, at 1083; Kesselheim, supra note 9, at 2325.

318 See Jennifer L. Herbst, The Short-Sighted Value of Inefficiency: Why We Should Mind the Gap in the Reimbursement of Outpatient Prescription Drugs, 2 CASE WESTERN RESERVE J. OF LAW, TECHNOLOGY & THE INTERNET 1, 3 (2011).

319 Id.

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a claim for reimbursement for an outpatient prescription drug, and show that the patient‘s diagnosis is not a medically accepted indication for the particular drug.”320 Moreover, “[d]ue to the current patchwork of contracted private insurers responsible for administering Medicare Parts A, B, D, and Medicaid, the claims submitted for a physician’s services are processed and paid by different entities than the claims submitted by retail pharmacists for reimbursement of outpatient prescription drugs.”321 This mean that “identification of ineligible claims due to medically inappropriate off-label prescriptions requires side-by-side evaluation of multiple decentralized data sets maintained by private contractors.”322 In 2011, the HHS OIG explained in a memorandum sent to Donald Berwick, then the Administrator of CMS, that plans “must establish a comprehensive fraud and abuse plan to detect, correct, and prevent fraud and abuse as part of a compliance plan[.]”323 The OIG wrote that “[p]ayments for Part D drugs that are not for medically accepted indications are considered potential fraud and abuse” and that to combat the risk of such payments, prescription drug plan (PDP) “sponsors may rely on strategies such as prepayment edits, prior authorization [in some instances], and postpayment reviews.

324

The OIG acknowledged, however, that “many of these

strategies depend on information that is not required for Part D claims[.]”325 In particular, “[d]iagnosis codes are not required data elements of prescription drug data.”326 In its report, the OIG wrote, “CMS stated that it does not have statutory authority to require physicians to include diagnosis information on prescriptions, which are generally governed by State law.”327 In addition, CMS opined, “the current approach, which permits PDP sponsors to use prior authorization to target drugs that are at high risk for being prescribed without a medically accepted indication, is the appropriate balance to control PDP sponsors’ costs and additional

320

Id. at 14.

Id. at 16.

322 Id. at 16-17.

323 Memorandum from Stuart Wright, Deputy Inspector General for Evaluation and Inspections, Office of Inspector General, to Donald M. Berwick, Administrator, Centers for Medicare and Medicaid Services (Nov. 14, 2011), available at https://oig.hhs.gov/oei/reports/oei-07-08-00152.pdf (captioned “Memorandum Report: Ensuring that Medicare Part D Reimbursement Is Limited to Drugs Provided for Medically Accepted Indications, OEI-07-0800152”).

324 Id. 325 Id. 326 Id. 327 Id. 321

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burdens that excessive use of prior authorization would place on pharmacies, prescribers, and beneficiaries of Part D drugs.”

328

The government should consider requiring that diagnosis information be added to claims for reimbursement under Medicare Part D and Medicaid, as it is for claims under Medicare Part B. This will not solve the problem of physicians

The government should consider requiring that diagnosis information be added to claims for reimbursement under Medicare Part D and Medicaid, as it is for claims under Medicare Part B.

prescribing and the government paying for unnreimbursable uses; there have been a number of FCA cases brought involving Part B.329 It will, however, enhance the ability of federal and state regulators and the health insurance plans and other private contractors that would work with them to use standard utilization management tools such as prior authorization to reduce medically unjustified prescribing and, a fortiori, false claims.

The additional information will enable the government, in its capacity as payer, to consider whether, perhaps with the aid of technology, to more effectively police off-label uses that are not evidence-based or medically necessary, without unduly burdening patients or providers. For example, the OIG’s Work Plan for Fiscal Year 2013 indicates that it plans to “review off-label (prescribed for a condition that is not listed on the product’s label) and off-compendia use of certain Medicare Part B prescription drugs and determine the extent to which specified compendia provide support for coverage.”330 This type of review is much more straightforward for Part B drugs than it is for Part D drugs.

328

Id. See, e.g., Press Release, U.S. Dep’t of Justice, Amgen Inc. Pleads Guilty to Federal Charge in Brooklyn, NY; Pays $762 Million to Resolve Criminal Liability and False Claims Act Allegations (Dec. 19, 2012), available at http://www.justice.gov/opa/pr/amgen-inc-pleads-guilty-federal-charge-brooklyn-ny-pays-762-million-resolvecriminal); Press Release, Waters & Kraus LLP, DOJ Intervenes, Settles Novo Nordisk Whistleblower Case (June 10, 2011), available at http://www.myquitamlawsuit.com/index.aspx?id=news_novonordisk_montiel; Press Release, U.S. Dep’t of Justice, Biopharmaceutical Firm Intermune to Pay U.S. Over $36 Million for Illegal Promotion and Marketing of Drug Actimmune (Oct. 6, 2006), available at http://www.justice.gov/archive/opa/pr/2006/October/06_civ_728.html; United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 29-30 (1st Cir. 2009); Strom ex rel. United States v. Scios, Inc., 676 F. Supp. 2d 884, 891-92 (N.D. Cal. 2009).

330 OFFICE OF INSPECTOR GENERAL, U.S. DEP’T OF HEALTH AND HUMAN SERVICES, HHS OIG WORK PLAN FY 013 28, available at https://oig.hhs.gov/reports-and-publications/archives/workplan/2013/WP01-Mcare_A+B.pdf.

329

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Ian Ayres and Ryan Abbott have also written in support of requiring diagnosis information as a condition of payment.331 Their focus is not on reducing the number of false claims, but rather on developing information. They write that with this single step, we would gain the ability to link off-label Medicare/Medicaid prescriptions to those in other areas and thus be able to provide a more complete picture of the evolving (and untested) use of certain drugs. This would result in a very robust dataset, as CMS covers about one hundred million U.S. residents. Not only would this have the additional benefit of potentially saving CMS billions of dollars, but it would also have a substantial impact on the private-insurance market because many private payers follow CMS coverage and reimbursement policies.332 In short, there are multiple reasons to consider this step.

B. Establish Clearer and More Explicit Rules of the Road for Pharmaceutical Promotion Many observers object to what Christopher Zalesky characterizes as the regulation of pharmaceutical promotion “through litigation.”333 Life sciences companies contend that the ban on off-label promotion is one of the gray areas to which Professor Engstrom refers, one that, they believe, has been exploited by qui tam relators, with sub-optimal results that fail to comport with congressional intent. The industry has repeatedly asked the FDA to further delineate the contours of the ban. This would help clarify manufacturers’ exposure to direct enforcement but also to liability under the False Claims Act. To the extent that a company’s speech or actions are clearly permitted by the FDA, whether because they comport with a regulation or guidance document, fall

331

Ryan Abbott & Ian Ayres, Evidence and Extrapolation: Mechanisms for Regulating Off-Label Uses of Drugs and Devices, 64 DUKE L. J. 377, 380 (2014).

332 Id. at 406.

333 Zalesky, supra note 316, at 247-49. See also John N. Joseph, David Deaton, Houman Ehsan & Mark A. Bonnano, Enforcement Related to Off-Label Marketing and Use of Drugs and Devices: Where Have We Been and Where Are We Going?, 2 J. HEALTH & LIFE SCI. L. 73 (2009) (claiming that “the most difficult task for a manufacturer is knowing what distinguishes direct or indirect promotion for off-label uses (which are not permitted

by FDA) as opposed to communicating about off-label uses in a strictly non-promotional and scientific context (which is permitted commercial speech).”) and Vicki W. Girard, Reducing Unlawful Prescription Drug Promotion: Is the Public Health Being Served by an Enforcement Approach that Focuses on Punishment?, FOOD & DRUG L. INST. FOOD & DRUG POL'Y FORUM 1 (2012) (recommending that FDA “partner with companies to efficiently and effectively clarify the rules regarding off-label promotion and address their First Amendment concerns in a comprehensive fashion through informal rulemaking or substantive guidance”).

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into a safe harbor, or are pre-cleared by an agency advisory opinion, they cannot form the basis of an FCA claim.334 Where possible, Congress and the FDA should consider making the law governing product promotion clearer and more granular. This could occur through more FDA-driven enforcement. It could also occur through passing legislation, promulgating documents,

regulations, developing

issuing safe

guidance

harbors,

or

implementing an advisory opinion process. The Amarin decision, which seems to involve a kind of minuet danced by the FDA and the plaintiffs, with both sides coming ever closer to agreement on what was not false and misleading, could point

Where possible, Congress and the FDA should consider making the law governing product promotion clearer and more granular. This could occur through more FDAdriven enforcement.

the way towards such a result. Although Amarin itself was resolved only by judicial decision, the final areas of disagreement were relatively narrow, and might suggest a greater role for advisory opinions to avoid litigation.

Increased enforcement by the FDA rather than the DOJ would allow for more real time corrections to problematic promotional activities and, through publication of FDA’s actions and their bases, more transparency to industry as a whole. Professor Vicki Girard has called for FDA to increase its “oversight of companies’ promotion and advertising activities through its traditional correction and compliance approach.”335 Professor Girard argues that the FDA is in a better position than DOJ to “focus on the delicate balance between lawful and unlawful off-label and other types of promotion.”336 She points to the fact that the FDA can move more quickly than DOJ, reducing the potential risk to the public health. She writes that other “important advantages of 334

See, e.g., United States ex rel. Boise v. Cephalon, Inc., 2015 U.S. Dist. LEXIS 49341, at *20 (E.D. Pa. Apr. 15, 2015) (discussing defendant’s argument that “it is legal for a speaker to respond to questions from the audience about the off-label use of a medication because that does not constitute off-label promotion,” but finding that the relators adequately alleged that the defendant initiated the off-label discussions).

335 Girard, supra note 333, at 2, 6 (“FDA’s traditional approach to unlawful promotion fosters collaboration and communication with regulated companies. When FDA acts as the primary gate keeper, it makes a preliminary assessment as to the lawfulness of certain promotional material. Typically, FDA initiates action with a regulatory compliance (untitled or warning) letter. The letter states FDA’s objection to specific claims being made in the promotional labeling or advertising and provides an opportunity for the company to discuss appropriate marketing messages with FDA. In most cases, companies comply with the agency’s recommendations and reach some mutually-agreeable resolution with FDA. Only if the parties are unable to agree is more formal action sought through FDA’s Office of Chief Counsel or DOJ’s Office of Consumer Litigation.”).

336 Id. at 4.

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FDA’s more traditional correction and compliance approach [include]: (1) fostering collaboration between FDA and companies, (2) leveraging FDA’s expertise, and (3) achieving more immediate and forward-looking results.”337 To facilitate FDA’s

FDA’s enforcement efforts have not filled the gaps in understanding about health economic claims.

increased involvement in enforcement, Professor Girard recommends that the agency “receive a portion of the fines recovered from settlements associated with unlawful drug promotion[.]”338

This is not to suggest that the FDA’s enforcement or guidance activity always achieves the goals Professor Girard extols. FDA’s enforcement efforts have not filled the gaps in understanding about health economic claims. Professors Peter Neumann and Sarah Bliss analyzed all of the warning and untitled letters that FDA sent out from 2002 through 2011, and found that FDA cited health economic claims in just 35 of the letters, which was 12% of the total.339 Professors Neumann and Bliss note that their “study highlights that the FDA has never issued a warning letter or notice of violation pertaining to an infringement of FDAMA Section 114.”340 The need for clear rules of the road governing health economic promotional claims is particularly pressing. According to THE PINK SHEET, the Pharmaceutical Research and Manufacturers of America (PhRMA) has complained about the lack of regulations or guidance from FDA, as a result of which “‘some companies have made the decision not to invest in this research or to disseminate potentially informative data.’”341 In a recent article, Mark Dancer and colleagues explain that companies’ managed markets teams used to be charged with “simply obtaining a formulary listing at an acceptable cost.”342 Now, consistent with the aspirations of the Affordable Care Act, the market demands much more, and life science companies are under pressure to “create value for the complicated eco-system of payers and providers that ultimately

337

Id. at 5.

Id. at 9.

339 Neumann & Bliss, supra note 120.

340 Id. There is “podium policy” about Section 114, derived from presentations made by Dr. Temple as well as by other FDA officials.

341 Sue Sutter, CDER Policy Council Urged to Address Manufacturer/Payer Communications, THE PINK SHEET 21 (Sept. 2, 2013).

342 Dancer, supra note 42. Note that even this is not as easy as it once was. Mason Tenaglia, Out of Control: The Ever Increasing Price of Preferred Formulary Access, PHARMACEUTICAL EXECUTIVE (May 2011) (“Three factors have given the plans more market power: consolidation, Part D, and the ability and willingness to use step edits and prior authorizations (PAs) to manage access.”).

338

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impact patient experiences and outcomes.”343 Similarly, Jonothan Tierce, a senior consultant at IMS Health, recommends that managed care organizations “require manufacturers to demonstrate how an upcoming treatment will compare with existing options, whether through systematic literature reviews or analyses that model clinical trial results into real-world contexts.”344 Another way to move beyond “podium policy” would be for Congress to require that FDA establish an advisory opinion process akin to the one HHS OIG offers with regard to the application of the fraud and abuse laws to business arrangements.345 Other agencies also issue binding advisory opinions, including CMS, on the applicability of the Stark Law, 346 and the DOJ, addressing the applicability of the antitrust laws,347 and the Foreign Corrupt Practices Act.348 The FTC349 and the Securities and Exchange Commission (SEC)350 issue binding advisory opinions as well. The process could be used by companies to obtain “timely binding advice” regarding whether a particular proposed

Another way to move beyond “podium policy” would be for Congress to require that FDA establish an advisory opinion process akin to the one HHS OIG offers with regard to the application of the fraud and abuse laws to business arrangements.

communication or marketing tactic or strategy runs afoul of the ban on off-label promotion.351 In 2011, an FDA task force on transparency declined to recommend that the agency implement an advisory opinion process, noting that companies can already obtain feedback from

343

Dancer, supra note 42.

Jonothan Tierce, Collaborative Efforts Leverage CER into Coverage Strategies, MANAGED HEALTHCARE EXECUTIVE (Jan. 1, 2011).

345 Advisory Opinions, Office of Inspector General, U.S. Dep’t of Health & Human Services, https://oig.hhs.gov/compliance/advisory-opinions/ (last visited July 4, 2015).

346 Advisory Opinions, Centers for Medicare and Medicaid Services, http://www.cms.gov/Medicare/Fraud-andAbuse/PhysicianSelfReferral/advisory_opinions.html (last visited July 4, 2015).

347 Department of Justice, 28 C.F.R. § 50.6 Antitrust Division Business Review Procedure, http://www.justice.gov/atr/public/busreview/201659c.htm (last visited July 4, 2015).

348 Opinion Procedure Releases, Department of Justice, http://www.justice.gov/criminal-fraud/opinion-procedurereleases (last visited July 4, 2015).

349 Advisory Opinions, Federal Trade Commission, https://www.ftc.gov/policy/advisory-opinions (last visited July 4, 2015).

350 Staff No Action, Interpretive and Exemptive Letters, Securities and Exchange Commission, http://www.sec.gov/interps/noaction.shtml (last visited July 4, 2015).

351 TRANSPARENCY TASK FORCE, FOOD AND DRUG ADMINISTRATION, U.S. DEP’T OF HEALTH AND HUMAN SERVICES, FDA TRANSPARENCY INITIATIVE: IMPROVING TRANSPARENCY TO REGULATED INDUSTRY 43 (JANUARY 2011) (hereinafter “TRANSPARENCY REPORT”).

344

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the FDA’s Office of Prescription Drug Promotion on the promotional materials they develop.352 This feedback, however, is not accompanied by a commitment not to pursue enforcement action.

In the opinion of the FDA task force, “the feedback FDA currently provides to pharmaceutical companies on the content of specific promotional pieces is within the agency’s expertise and contributes to FDA’s mission to protect and promote the public health.”353 If the agency were to issue binding advisory opinions, by contrast, it could “place inappropriate restrictions on FDA’s ability to respond to emerging issues to best protect and promote the public health.”354 In an article in the YALE JOURNAL OF HEALTH POLICY, LAW & ETHICS, John Osborn, who was formerly an in-house counsel at a number of pharmaceutical companies, suggested an alternative pathway to enhanced guidance for industry.355 Osborn suggests as an alternative to the “present criminal enforcement approach,” the establishment of “significant, statutory civil penalties for the dissemination of false or misleading information.”356 This could be accompanied by “a legal presumption in favor of liability based upon some showing by the government or private plaintiffs that could then be rebutted by the accused company.”357 Another option would be to establish “an enforcement panel operated by the OIG, with medical, legal, and policy input from the FDA, that metes out civil liability penalties in a streamlined process reminiscent of that used by Britain's PMCPA.”358

C.

Enhance the Transparency of the Enforcement Process and the Terms of Settlement

A final proposed reform with the potential to improve the fairness and efficiency of the enforcement system, without making it more or less harsh across the board, would be to increase the transparency of the process. Osborn argues that “as the DOJ has assumed a higher degree of

21 C.F.R. § 202.1(j)(4) (“Any advertisement may be submitted to the Food and Drug Administration prior to publication for comment. If the advertiser is notified that the submitted advertisement is not in violation and, at some subsequent time, the Food and Drug Administration changes its opinion, the advertiser will be so notified and will be given a reasonable time for correction before any regulatory action is taken under this section. Notification to the advertiser that a proposed advertisement is or is not considered to be in violation shall be in written form.”).

353 TRANSPARENCY REPORT, supra note 351, at 43.

354 Id. at 44.

355 John E. Osborn, Can I Tell You the Truth? A Comparative Perspective on Regulating Off-Label Scientific and Medical Information, 10 YALE J. HEALTH POL'Y L. & ETHICS 299, 354 (2010).

356 Id. 357 Id. 358 Id. 352

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involvement in developing cases alleging civil and criminal violations under the FDCA and the FCA, the investigation, consideration, and resolution of these cases also have become less transparent.”359 He claims that the involvement of local USAOs in the process has led to “an absence of transparency in terms of ascertaining standards as to whether there has been wrongdoing by a company, whether a case is treated as a criminal or civil matter, and what level of financial penalty should be levied if there has been wrongdoing.”360 This problem is exacerbated by the absence of “a comprehensive code of written standards”, the difficulty of obtaining “meaningful review and oversight” from DOJ officials, and the rarity of judicial review.”361

If the government then decides against intervening in the case, for a reason other than that it determines that the case lacks merit, the government should share the claims data with relator’s counsel. Further, the government should more often move to dismiss cases that lack merit or contravene public policy or health.

Qui tam relators likely have similar complaints. So that meritorious cases do not founder due to purely procedural hurdles, the government should in appropriate cases share information about claims for reimbursement with relators. Appropriate cases might be those in which the government has obtained the relevant claims data as part of its own investigation. If the government then decides against intervening in the case, for a reason other than that it determines that the case lacks merit, the government should share the claims data with relator’s counsel.

Further, the government should more often move to dismiss cases that lack merit or contravene public policy or health.

One salutary reform that DOJ has already made was to move away from settlements in which the targeted companies neither admit nor deny the alleged conduct. Now, companies must admit to engaging in wrongdoing, although there is room to negotiate over the description of the conduct. Nevertheless, it is still difficult for anyone other than the government and the company accused of illegal promotion to know how the size and composition of a settlement were derived.

359

Id. at 321-22.

Id. at 323.

361 Id. at 321-22.

360

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Some claim that the government “backs into” the civil and criminal fines. We do not know whether the starting point is the number of patients prescribed the drug who were federal healthcare beneficiaries multiplied by the percentage of prescriptions that were for off-label uses. We also do not know how the parties’ determine the percentage of prescribing that was off-label, or the percentage of off-label prescribing that constituted a false claim, or the percentage of false claims caused by the manufacturer’s off-label promotion. With regard to causation, Osborn writes that, in his experience, there is no evident willingness to engage on the question of whether the allegedly improper promotion has actually led physicians to prescribe off-label. Once counsel enters into settlement discussions, the government will emphasize the statutory bases of criminal and civil liability. For example, the FCA provides a civil penalty of up to three times the amount that was falsely claimed from the government. On the criminal side, the government may apply a multiplier of up to two times the amount of the corporate gain or the government loss. However, these multipliers are only meaningful if the underlying base amount (which represents the alleged level of "inappropriate" off-label prescriptions) is derived in a fair and transparent manner.362 We also do not know how frequently disputes arise whether the uses in question are covered by the relevant government programs. We do not know what role a drug’s coverage status plays in settlement negotiations. Nor do we know what criteria the government employs in determining whether a company has an “effective” compliance and ethics program363 which, under the Federal Sentencing Guidelines,364 while a mitigating factor for sentencing courts, is also claimed by DOJ to be a factor in its settlement negotiations.365 Perhaps it is of minimal significance, given other penalties, or perhaps it is important given the role played by qui tam relators and their counsel, who collect a percentage of the False Claims Act portion of the settlement. Because so few of these cases are litigated, the case law is very limited. By providing

362

Osborn, supra note 355, at 326.

A 2012 Report by the Center for Ethics calls for 1) DOJ to be internally consistent among its divisions and among US Attorneys’ Offices in evaluating ethics and compliance programs by establishing standards for such evaluations and being transparent about what those standards are and 2) that all other executive branch agencies adopt, publicize and apply clear written policies with respect to their assessment of ethics and compliance programs.

Ethics Resource Center, The Federal Sentencing Guidelines for Organizations at Twenty Years: A Call for Action for More Effective Promotion and Recognition of Effective Compliance and Ethics Program at 4, 85-88 (2012) available at http://www.ethics.org/files/u5/fsgo-report2012.pdf.

364 United States Sentencing Commission, Guidelines Manual 8B2.1 (Nov. 2014) available at http://www.ussc.gov/sites/default/files/pdf/guidelines-manual/2014/GLMFull.pdf 365 Id. 363

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more information about its reasoning in negotiating and arriving at settlements, the government could provide companies with helpful guidance.

When an off-label promotion case is resolved, the government should provide information about its reasoning in negotiating and arriving at the settlement amount. This could include an explanation of the damages model used and the calculations performed. This would dispel the sense that the settlement amounts are arbitrary; it would also provide companies with helpful guidance. At a recent conference, a former DOJ official told the audience that there were times when settlements would be presented to him for his review and he would determine that the numbers were not “anchored” to a damages model and that the relevant computations were not clear. It should also be made clear to the public the share of each settlement going to private health insurance companies, to participating states, and elsewhere.366

ALMASHAT & WOLFE, supra note 5, at 7 (explaining that “data were not sufficiently available in the press releases to delineate state shares of financial penalties.”).

366

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APPENDICES

APPENDIX A Center for Health & Pharmaceutical Law & Policy The Center for Health & Pharmaceutical Law & Policy (“the Center”) exists primarily to educate lawyers and health care industry professionals regarding the extraordinarily complex set of laws that govern patients, health care providers, manufacturers and suppliers. Furthermore, Center faculty and research fellows produce scholarship, white papers and recommendations for policy on the varied and complex issues posed by health and pharmaceutical law, health care access, human subject research, mental health issues, and non-profit governance.

Faculty members bring to the Center's work nationally recognized expertise in nanotechnology, health care finance, intellectual property law and bioethics, among other areas.

The Center fosters informed dialogue among policymakers, consumer advocates, the medical profession and industry in the search for solutions to the ethical, legal, and social questions presented in the health and pharmaceutical arena.

The Center offers: 

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Academic Programs. The Center offers three degree programs for JD, LLM and MSJ students, online Graduate Certificates, and certificate programs in Healthcare Compliance.

Health & Public Policy. The Center researches, reviews, and develops policy recommendations on key issues of health and life sciences law and compliance to inform and shape policy at the state and national levels.

Scholarship. The Center produces scholarship through journal publication and white papers on emerging legal, ethical, and social issues in health and life sciences law.

Special Programs. The Center hosts guest speaker programs and educational fora on local, national and international health and life sciences issues by leading experts from the public and private sectors to examine important policy and legal issues.

Certification in Healthcare Compliance. The Center offers intensive life sciences compliance training programs in the US, Europe and Asia-Pacific, that address the research, approval, promotion, and sale of drugs and medical devices in these regions.

The Center operates under the leadership of Faculty Director and Professor of Law John Jacobi and Assistant Dean for Graduate and Professional Education Simone HandlerHutchinson. To contact the Center, please call 973-642-8871 or email simone.handlerhutchinson@shu.edu.

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The Center for Health & Pharmaceutical Law & Policy

APPENDIX B Center Financial Disclosure Statement and Policies The Center for Health & Pharmaceutical Law & Policy (the "Center") of Seton Hall Law School is committed to independent, academic inquiry focusing on health and pharmaceutical law and policy. As a part of Seton Hall University, the Newark-based Law School is a nonprofit 501(c)(3) organization. The University and Law School engage in fundraising from alumni and other contributors. Remaining committed to examining divergent perspectives on policy issues related to health and pharmaceutical law and policy is critical to the mission of the Center.

Law School faculty and Center staff are devoted to academic independence in their research and transparency in their relationships. As such, funding sources are announced on all published materials and on the Law School website. Regardless of whether financial support is received in the form of an endowment, as unrestricted funds or for a specific project, Law School and Center donors are not involved in the academic work of Law School professors or Center staff. Grants and donations are only accepted if they do not limit the faculty's or the Center's ability to carry out research, free of outside influence and consistent with the Center's mission and values.

The Law School funds the salaries of the tenured faculty affiliated with the Center.

Research and administrative support for the Center are jointly funded through a combination of Law School funds and through unrestricted funds provided by pharmaceutical companies and restricted funds provided by a variety of corporations. Companies or entities of regulated industries are not permitted to designate or allocate any portion of their financial contribution to the Center toward scholarships awarded to government employees. Full and partial scholarships for government employees, individuals experiencing hardship, alumni and law students are offered solely by the Center and no external parties will be notified regarding the number of scholarships provided, or the identities or affiliations of scholarship recipients. This information will remain confidential.

The Center and its faculty assume sole responsibility for the content of its publications and position statements. The Center does not issue publications or statements on behalf of any donor or other entity.

The organizations that have provided funding to the Center or to the Law School are listed below. 

Bristol-Myers Squibb provided a $5 million endowment in 2005 in support of The Harvey Washington Wiley Chaired Professorship in Corporate Governance & Business Ethics. This position is filled by Professor Stephen Lubben.

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In 2014, the Robert Wood Johnson Foundation provided $200,000 to support Professor John Jacobi's "QHP Market Behavior: Sentinel Report" designed to examine provision of benefits under the Affordable Care Act. In both 2014 and 2015, Otsuka, Novartis, Johnson & Johnson, and Horizon BlueCross & BlueShield of NJ each provided $10,000 to fund a summer student fellowship.

In 2013, Johnson & Johnson provided $10,000 to fund a summer student fellowship.

In 2014, Johnson & Johnson provided $10,000 to fund “Celebrating Diversity in the Compliance Profession” networking event.

In 2014, Johnson & Johnson provided $100,000 in unrestricted support to the Center in support of its educational mission. The company additionally provided $50,000 in unrestricted support in 2013 and $100,000 in unrestricted support to the Center in each of 2011 and 2012.

In 2010, Johnson & Johnson provided $50,000 in unrestricted funds to the Center. In 2009, the company provided $100,000 as seed funding for two projects: (i) a program on "Strategies for Compliance Professionals: Honing Decision-Making Skills," and (ii) creation and implementation of an international compliance program. In 2008, Ortho-McNeil Janssen Scientific Affairs, a subsidiary of Johnson & Johnson, provided $49,900 in unrestricted funds.

Johnson & Johnson provided $50,000 in 2007 and $100,000 in 2006 in unrestricted funds to support the Center. Two of Johnson & Johnson's subsidiaries, Centocor, Inc., and Ortho Biotech, provided $125,000 in unrestricted funding to the Center in 2007.

In 2013, the New Jersey Health Care Quality Institute provided $21,250 to Professor John Jacobi for research related to the Affiliated Accountable Care Organizations.

In 2013, Microsoft provided $30,000 to support HIPAA related work.

In 2011, the following provided funds in support of “Is a For-Profit Structure a Viable Alternative for Catholic Health Care Ministry” Alvarez & Marsal - $5,000 Ardent Health Services - $25,000 Bass, Berry & Sims, PLC - $5,000 Cardinal Health - $1,000 Catholic Health Partners - $10,000 Catholic Healthcare West - $5,000 Ernst & Young, LLP - $2,500 Saint Peter's Healthcare System - $8,000 SSM Health Care - &7,500 University of St. Thomas - $15,000 In 2006, sanofi-aventis provided $500,000 to the Law School in "support and development of the Center for Health & Pharmaceutical Law and the programs and activities associated with the Center."

The former Schering-Plough Corporation provided the Law School with a $2.5 million endowment to establish the Schering-Plough Professor in Health Care Regulation and Enforcement. The endowment was announced in 2006 and completed in 2010.

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In 2008, Purdue Pharma provided $25,000 in unrestricted funding for the Center.

In 2008, Roche provided $50,000 for a symposium sponsored by the Gibbons Institute of Law, Science & Technology, the Seton Hall Law Review, and the Center on "Preparing for a Pharmaceutical Response to Pandemic Influenza."

For further information about Programs and publications of The Center for Health & Pharmaceutical Law & Policy please visit our website at law.shu.edu

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