Lawton ex rel. United States v. Takeda Pharm. Co.

• Decision Date: 22 November 2016
• Docket Number: No. 16-1382,16-1382
• Citation: 842 F.3d 125
• Parties: Peter P. Lawton, ex rel. United States of America; and The States of California, Colorado, Connecticut, District of Columbia, Delaware, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Louisiana, Massachusetts, Maryland, Michigan, Minnesota, Montana, North Carolina, New Jersey, New Mexico, Nevada, New York, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, Washington, Wisconsin, Plaintiffs, Appellants, v. Takeda Pharmaceutical Company, Ltd. ; Takeda Pharmaceuticals U.S.A., Inc., f/k/a Takeda Pharmaceuticals North America, Inc.; Takeda Pharmaceuticals International Inc. ; Takeda Development Center Americas, Inc., f/k/a Takeda Global Research & Development Center Inc. ; Eli Lilly and Company, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

842 F.3d 125

Peter P. Lawton, ex rel. United States of America; and The States of California, Colorado, Connecticut, District of Columbia, Delaware, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Louisiana, Massachusetts, Maryland, Michigan, Minnesota, Montana, North Carolina, New Jersey, New Mexico, Nevada, New York, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, Washington, Wisconsin, Plaintiffs, Appellants,

v.Takeda Pharmaceutical Company, Ltd. ; Takeda Pharmaceuticals U.S.A., Inc., f/k/a Takeda Pharmaceuticals North America, Inc.; Takeda Pharmaceuticals International Inc. ; Takeda Development Center Americas, Inc., f/k/a Takeda Global Research & Development Center Inc. ; Eli Lilly and Company, Defendants, Appellees.

No. 16-1382

United States Court of Appeals, First Circuit.

November 22, 2016

David E. Kovel , with whom John R. Low-Beer , Of Counsel, and Kirby McInerney LLP were on brief, for appellants.

R. Jeffrey Layne , with whom Jonathan S. Franklin , Sarah M. Cummings , and Norton Rose Fulbright US LLP were on brief, for appellees.

Before Lynch, Stahl, and Barron, Circuit Judges.

STAHL, Circuit Judge.

Relator-Appellant Peter Lawton ("Lawton") brought a qui tam action against Appellees Takeda Pharmaceutical Company, Ltd. and its affiliates ("Takeda") and Eli Lilly and Company ("Eli Lilly") (collectively, "Defendants") under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., and the False Claims Acts of 28 different states and the District of Columbia.¹ Lawton alleges that Takeda and Eli Lilly conspired in a fraudulent marketing campaign that caused third-parties to submit false reimbursement claims to governmententities for off-label uses of Actos

, a treatment for Type 2 diabetes.²

The district court dismissed all of Lawton's claims, holding that Lawton had not pled his claims with the particularity required by Federal Rule of Civil Procedure 9(b). Lawton contests this ruling on appeal, and maintains that his allegations sufficiently plead that false claims were submitted to both federal and state government programs. After thoroughly reviewing these allegations, we affirm.

I. Facts & Background

Since this appeal follows the granting of a motion to dismiss, we recite the relevant facts as they appear in Lawton's Second Amended Complaint. SeeHochendoner v. Genzyme Corp., 823 F.3d 724, 728 (1st Cir. 2016).

Actos

is a brand name drug approved by the FDA for improving blood sugar control in adults with Type 2 diabetes. The drug is manufactured, promoted, marketed, and sold by Takeda.³

In May 2012, Peter Lawton filed a qui tam complaint against Takeda alleging that it had engaged in an illegal off-label marketing campaign for Actos

in violation of 21 U.S.C. § 321 et seq. (the "Food, Drug & Cosmetic Act"), and used illegal kickbacks to support that campaign in violation of 42 U.S.C. § 1320a-7b(b) (the "Anti-Kickback Statute").⁴ Lawton—a former chemist and patent litigator at Takeda competitor GlaxoSmithKline—further alleged that through this campaign, Takeda and Eli Lilly had knowingly caused third-parties to submit false or fraudulent claims for payment to federal and state government programs.⁵

See, e.g., 31 U.S.C. § 3729(a) ; N.Y. State Fin. Law §§ 188 -89.

Lawton made his first amendment to his complaint in February 2014, and after the United States declined to intervene and the action was unsealed, his case began in earnest. In August 2015, the district court allowed Lawton to amend his complaint again ("Second Amended Complaint"), which he filed the following month and is the subject of this appeal.

The Second Amended Complaint alleged that starting in the late 1990s and lasting until 2011, Defendants utilized a marketing scheme designed to develop and promote "quasi-scientific" bases for off-label use of Actos

, specifically the treatment of prediabetes.⁶ The claimed centerpiece of this campaign involved the development of dozens of pro-Actos research studies and subsequent publications substantiating these claims. The most prominent of these studies, Lawton claims, was a 2006 paper ("ACT NOW Study") on the prevention of Type 2 diabetes. Allegedly conceived and funded by Takeda but ostensibly authored by Dr. Ralph DeFronzo, the ACT NOW Study advocated for the use of Actos as an effective treatment for prediabetes. Lawton alleges that Dr. DeFronzo and other "thought leaders" and researchers like him received compensation, kickbacks, and other indirect financial inducements from Takeda for their Actos studies, related speeches, and supporting presentations. Many of these studies, however, were criticized by various academic journals, peer review panels, and the FDA.

Takeda allegedly also established a specialized Actos

sales force to parallel this campaign, and tasked it with encouraging physicians to prescribe Actos as a safe and effective treatment for prediabetes. Takeda also supposedly engaged in direct marketing to the public about the off-label use of Actos and made large contributions to several educational and research organizations to gain influence over their views on prediabetes treatments. These efforts purportedly continued even after Takeda knew that the results of many of these studies were inconclusive.

Based on these allegations, Lawton claimed that Takeda and Eli Lilly violated the FCA and analogous state statutes by causing false claims for Actos

to be presented to both federal and state government healthcare programs.

Lawton first pointed to the dramatic increase in Actos

sales between 2006 ($1.5 billion) and 2011 ($3.6 billion), attributing these increased numbers to greater off-label use of Actos for patients with a prediabetes condition. Lawton then identified three non-diabetic members of the Suffolk County (NY) Health Plan who, between 2011 and 2014, were prescribed a total of 11 scripts for Actos, for which the Health Plan paid a total of $3,170.14. With respect to the federal programs, Lawton cited evidence that public sector programs like Medicaid and Medicare accounted for more than half of Actos purchases between 2003 and 2011. This evidence, he claimed, demonstrated that the Actos marketing campaign had caused violations of the False Claims Act.

Takeda and Lilly moved to dismiss the complaint on multiple grounds. On March 8, 2016, the district court granted the motion, dismissing the federal and pendant state claims with prejudice. The court reached this conclusion after finding that neither Lawton's federal nor state allegations pled fraud with the particularity required by Federal Rule of Civil Procedure 9(b). Lawton now appeals.

II. Analysis

Lawton raises two issues on appeal, arguing that the district court erred in dismissing his federal FCA claim and associated state claims with prejudice. We review each in turn.

A. Federal Claim

Lawton first contends that the court erred when it dismissed the federal claim in Lawton's Second Amended Complaint based on his failure to plead the alleged fraud with enough particularity to satisfy Federal Rule of Civil Procedure 9(b). In such cases, we review de novo the granting of a motion to dismiss, United States ex rel. Gagne v. City of Worcester, 565 F.3d 40, 45 (1st Cir. 2009), "accepting as true all well-pleaded facts, analyzing those facts in the light most hospitable to the plaintiff's theory, and drawing all reasonable inferences for the plaintiff," United States ex rel. Hutcheson v. Blackstone Med. Inc., 647 F.3d 377, 383 (1st Cir. 2011).

Rule 9(b) provides: "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). As we have often said in these cases, relators are "required to set forth with particularity the who, what, when, where, and how of the alleged fraud." See, e.g., United States ex rel. Ge v. Takeda Pharm. Co., Ltd., 737 F.3d 116, 123 (1st Cir. 2013) (internal citation and quotation marks omitted); see alsoUnited States ex rel. Karvelas v. Melrose – Wakefield Hosp., 360 F.3d 220, 228 (1st Cir. 2004), abrogated on other grounds byUnited States ex rel. Gagne v. City of Worcester, 565 F.3d 40 (1st Cir. 2009) (applying Rule 9(b) to FCA claims).

The FCA penalizes persons who present, or cause to be presented, to the federal government "a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a)(1). Thus, Rule 9(b) requires both that the circumstances of the alleged fraud and the claims themselves be alleged with particularity. United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 727 (1st Cir. 2007), overruled on other grounds byAllison Engine v. United States ex rel. Sanders, 553 U.S. 662, 128 S.Ct. 2123, 170 L.Ed.2d 1030 (2008) ("FCA liability does not attach to violations of federal law or regulations, such as marketing of drugs in violation of the FDCA, that are independent of any false claim.").

We briefly note that Lawton cites this Court's decision in Rodi v. Southern New England School of Law for the proposition that the relevant statements about which Rule 9(b) specificity is required are not the claims filed by innocent third-parties, but rather the allegedly fraudulent statements made by Takeda. 389 F.3d 5, 15 (1st Cir. 2004) (stating "the specificity requirement [of Rule 9(b) ] extends only to the particulars of the allegedly misleading statement itself."). Rodi, however, was a case about specific fraudulent misrepresentations made by the defendant, and not one about false or fraudulent claims. Id. at 5. While it made sense for us only to require that the misleading statements be pled with particularity in that case, we will not do so here where the fraudulent act of filing false claims is distinct from actions trying to induce such filing.

That being said, we have also recognized a difference between qui tam actions alleging that the defendant made false claims to the government and those alleging that the defendant induced third-parties to file false claims with the government. SeeUnited States ex rel. Duxbury...