Aetna Inc. v. Insys Therapeutics, Inc.

• Citation: 324 F.Supp.3d 541
• Decision Date: 24 August 2018
• Docket Number: CIVIL ACTION NO. 17-4812
• Parties: AETNA INC. and Aetna Health Management, LLC, Plaintiffs, v. INSYS THERAPEUTICS, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

324 F.Supp.3d 541

AETNA INC. and Aetna Health Management, LLC, Plaintiffs,

v.INSYS THERAPEUTICS, INC., et al., Defendants.

CIVIL ACTION NO. 17-4812

United States District Court, E.D. Pennsylvania.

Signed August 24, 2018

Christina McPhaul, Roland R. St. Louis, III, Lowey Dannenberg PC, White Plains, NY, Gerald Lawrence, Jr., Lowey Dannenberg PC, West Conshohocken, PA, James C. Crumlish, III, John M. Elliott, John P. Elliott, Elliott Greenleaf, P.C., Union Meeting Corporate Center V, Blue Bell, PA, Lynne N. Kolodinsky, Federal Community Defender Office, Philadelphia, PA, for Plaintiffs.

Scott J. Etish, Megan Lagreca, Stephen J. Finley, Gibbons P.C., Jeffrey S. Cianciulli, Weir & Partners, LLP, Stephanie J. Mensing, Mensing Law LLC, Philadelphia, PA, for Defendants.

Mahmood Ahmad, Islamabad Pakistan, pro se.

Sunrise Lee, Byron Center, MI, pro se.

MEMORANDUM OPINION

Rufe, District Judge.

Plaintiffs Aetna Inc. and Aetna Health Management, LLC (collectively, "Aetna" or "Plaintiffs"), filed suit against Insys Therapeutics, Inc., several of its current and former executives, and multiple named and unnamed physicians, alleging a conspiracy to fraudulently induce Aetna into providing reimbursement for off-label prescriptions of Insys's opioid product, Subsys. Insys moves to dismiss Aetna's common law claims on federal preemption and state law grounds and moves to strike certain allegations from the Complaint. Former sales executives Joseph Rowan and Sunrise Lee move to dismiss Aetna's claims against them for lack of personal jurisdiction and failure to state a claim. Lee also moves to dismiss for insufficient service of process. Dr. Steve Fanto moves to dismiss for lack of personal jurisdiction. For the reasons discussed below, Insys's motion will be denied in part and granted in part, and Fanto, Rowan, and Lee's motions will be granted.

I. BACKGROUND¹

Defendant Insys is the Arizona-based manufacturer of Subsys, a formulation of the highly potent opioid, fentanyl

, that is administered to patients sublingually (under the tongue) as a spray. Since its launch in 2012, Subsys has only been approved by the United States Food and Drug Administration ("FDA") for a single narrow indication: breakthrough cancer pain in patients who have failed one or more other opioid therapies. Subsys was classified by the FDA as a transmucosal immediate-release fentanyl ("TIRF") product, and has been subject to special restrictions due to its high potential for addiction and abuse.

Plaintiff Aetna Inc., a Pennsylvania corporation with its principal place of business in Hartford, Connecticut, is a health management organization that provides health payment benefits to members throughout the United States. Plaintiff Aetna Health Management, LLC, a Delaware limited liability company, is a subsidiary of Aetna Inc. that develops and operates group health insurance products and pays claims and benefits incurred by Aetna members, including pharmacy claims for prescription drugs.

Subsys was not listed among the drugs approved for reimbursement in Aetna's formularies. To obtain coverage for prescriptions of Subsys, Aetna required its member patients to obtain prior authorization from its Pharmacy Management Precertification Unit (the "PMPU"), which applied the following criteria, with limited exceptions,² for precertification: (1) documented diagnosis of cancer

and concomitant use of a long acting opioid therapy; and (2) documented contraindication or intolerance or allergy or failure of an adequate trial of one week of a preferred generic fentanyl transmucosal lozenge. Treating physicians could contact Aetna to obtain a medical exception from these requirements based on medical necessity.

Despite Subsys's limited FDA-approved indication, the restrictions placed on its distribution and coverage by the FDA and insurers, and the availability of less expensive generic TIRF alternatives, the drug gained a substantial share of the TIRF market within a few years of its launch. While sales of Subsys in 2012 were only $14.3 million, sales increased more than 700% in 2013 and exceeded more than $300 million by 2014.

Aetna alleges that the rapid increase in Insys's sales was due to a two-pronged scheme in which Insys encouraged physicians to overprescribe Subsys for non-FDA approved (or "off-label") uses and defrauded insurers into providing coverage for the off-label prescriptions. Specifically, Plaintiffs allege that Insys targeted its promotional efforts toward physicians who did not treat cancer

patients but frequently prescribed TIRFs, and recruited physicians willing to write large numbers of Subsys prescriptions into Insys's speaker program, under which speakers received substantial payments as honoraria. To increase the rate of reimbursement for Subsys prescriptions, Insys established a pre-authorization department ("PAD") based in Chandler, Arizona that communicated directly with insurers, including Aetna. Insys distributed "opt-in" forms to medical offices that authorized prescribers to send patients' medical information to the PAD, allowing the PAD staff to discuss patients' medical conditions and histories with the insurers. Aetna alleges that the PAD used this information to impersonate personnel working at physicians' offices and disguised the area code of the PAD facility during phone calls to avoid detection. To meet pre-certification requirements, the PAD staff allegedly misrepresented to Aetna that the patients receiving Subsys prescriptions were suffering from cancer

and had failed other therapies. Insys also hired Area Business Liaisons ("ABLs") to work directly in the offices of certain physician offices to assist the PAD in obtaining prior authorizations for Subsys.

In several state and federal investigations conducted between 2015 and 2017, a number of physicians who had prescribed Subsys to patients admitted that they had prescribed the drug inappropriately and that they had received payments from Insys as part of its speaker program. According to an internal review conducted by Aetna in the fall of 2015, the majority of Aetna members who had received prior authorization for Subsys did not have a cancer diagnosis

.

A. Lee and Rowan

Defendants Lee and Rowan were sales executives at Insys responsible for the promotion of Subsys to potential prescribers. Rowan, who resided in Florida, served as Regional Sales Manager for the Southeast Region and Regional Director for the Eastern Region. Lee, who resided and continues to reside in Michigan, served as Regional Sales Manager for the Mid-Atlantic Region, Regional Director for the Central Region, and Regional Director for the West Region. Plaintiffs allege that Lee, Rowan, and others provided payments and "other forms of kickbacks" through Insys's speaker program to health care providers who agreed to prescribe Subsys off-label. Plaintiffs also allege that some practitioners who received speaking fees and prescribed Subsys for off-label use were located in Pennsylvania, including one prescriber specifically identified in the Complaint as "Prescriber 2."³ In addition, Plaintiffs allege that Lee, Rowan, and others "directed PAD staff to obtain and assist practitioners in obtaining the information required to fill out opt-in forms to the program."⁴

B. Fanto

Fanto is a physician who operated a medical practice in Arizona.⁵ Aetna alleges that Fanto conspired with Insys to defraud Aetna into paying for approximately $96,000 of Subsys for off-label uses.⁶ Specifically, Aetna alleges that Fanto prescribed Subsys to patients who did not have cancer

, and was paid approximately $234,000 for participating in Insys's Speaker Program.⁷ Aetna further alleges that Fanto sent patient medical records to Insys's PAD, which he knew would equip the PAD to defraud Aetna into paying for excessive dosages of off-label Subsys prescriptions.⁸

Plaintiffs assert the following claims against all Defendants: insurance fraud in violation of 18 Pa. C.S.A § 4117(a)(2) (Count I); aiding, abetting, soliciting, and conspiring to commit insurance fraud in violation of 18 PA. C.S.A. § 4117(a)(3) (Count II); civil conspiracy (Count III); common law fraud (Count IV); unjust enrichment (Count V); negligent misrepresentation (Count VI); and negligence (Count VII).

II. LEGAL STANDARDS

A. Federal Rule of Civil Procedure 12(b)(2)

Pursuant to Federal Rule of Civil Procedure 12(b)(2), a court must grant a defendant's motion to dismiss if the court lacks personal jurisdiction over the defendant.

When a defendant files a motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that personal jurisdiction exists.⁹ Once a jurisdictional defense has been raised, "the plaintiff must sustain its burden of proof in establishing jurisdictional facts through sworn affidavits or other competent evidence" of sufficient contacts with the forum state.¹⁰ Such contacts must be established with "reasonable particularity," but need only amount to a prima facie case in favor of personal jurisdiction.¹¹ If the plaintiff meets this burden, the defendant must then establish the presence of other considerations that would render jurisdiction unreasonable.¹²

A district court typically exercises personal jurisdiction according to the law of the state where it sits.¹³ Under Pennsylvania's long arm statute, jurisdiction "may be based on the most minimum contact with th[e] Commonwealth allowed under the Constitution of the United States."¹⁴ As such, "a court may exercise personal jurisdiction over a nonresident defendant if the defendant has ‘certain minimum contacts with [Pennsylvania] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.’ "¹⁵ "Minimum contacts must have a basis in ‘some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.’ "¹⁶

Jurisdiction may...