State v. Amgen Inc.
| Decision Date | 22 July 2011 |
| Docket Number | 10–1634,Nos. 10–1629,10–1635,10–1630,10–1633,10–1954,10–1636,10–1955.,s. 10–1629 |
| Citation | 652 F.3d 103 |
| Parties | State of NEW YORK; Commonwealth of Massachusetts; State of California; State of Illinois; State of Indiana; State of New Mexico ex rel. Kassie Westmoreland; State of Georgia ex rel. Kassie Westmoreland, Plaintiffs, Appellants,United States ex rel. Kassie Westmoreland; State of Delaware; State of Florida; State of Hawaii; State of Louisiana; State of Michigan; State of Nevada; State of New Hampshire; State of Tennessee; State of Texas; Commonwealth of Virginia; District of Columbia, Plaintiffs,v.AMGEN INC.; ASD Healthcare; International Nephrology Network, renamed Integrated Nephrology Network, d/b/a Dialysis Purchasing Alliance, Inc., Defendants, Appellees,AmerisourceBergen Specialty Group; AmerisourceBergen Corporation; Immunex Corporation; Medscape, LLC; WebMD Health Corp.; Wyeth; Wyeth Pharmaceuticals, Defendants. |
| Court | U.S. Court of Appeals — First Circuit |
OPINION TEXT STARTS HERE
Steven C. Wu, Assistant Solicitor General, with whom Eric T. Schneiderman, Attorney General, Barbara D. Underwood, Solicitor General, Richard Dearing, Deputy Solicitor General, Carolyn T. Ellis, Special Assistant Attorney General, Medicaid Fraud Control Unit, Margot Schoenborn, Special Assistant Attorney General, Medicaid Fraud Control Unit, of New York; Eliseo Z. Sisneros, Deputy Attorney General, Kamala D. Harris, Attorney General, Nicholas P. Paul, Deputy Attorney General, of California; Joseph B. Chervin, Assistant Attorney General, Lisa Madigan, Attorney General, of Illinois; Jessica L. Harlan, Deputy Attorney General, Medicaid Fraud Control Unit, Greg Zoeller, Attorney General, of Indiana; Ann B. Ackil, Assistant Attorney General, Medicaid Fraud Division, and Martha Coakley, Attorney General, of Massachusetts; were on brief, for State of New York, Commonwealth of Massachusetts, State of California, State of Illinois, and State of Indiana, appellants.Derek T. Ho, with whom Silvija A. Strikis, Joseph S. Hall, Andrew S. Oldham, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Suzanne E. Durrell, Robert M. Thomas, Jr., and Royston H. Delaney were on brief, for Kassie Westmoreland, appellant.Charles W. Scarborough, Appellate Staff, Civil Division, Department of Justice, with whom Tony West, Assistant Attorney General, Carmen Ortiz, United States Attorney, and Douglas N. Letter, Appellate Staff, Civil Division, Department of Justice, were on brief, for the United States, amicus curiae.Michele Odorizzi, with whom Kenneth S. Geller, Andrew Tauber, Mayer Brown LLP, Brien T. O'Connor, Kirsten V. Mayer, William Dunn, Ropes & Gray LLP, Daniel A. Curto, Michael D. Kendall, and McDermott Will & Emery LLP were on brief, for Amgen Inc., appellee.James M. Becker, with whom Buchanan Ingersoll Rooney PC, Eric W. Sitarchuk, Morgan Lewis & Bockius, LLP, Peter Ball, Ryan M. Cunningham, and Sally & Fitch were on brief, for International Nephrology Network and ASD Healthcare, appellees.Before LYNCH, Chief Judge, LIPEZ and HOWARD, Circuit Judges.LYNCH, Chief Judge.
Relator Kassie Westmoreland and the plaintiff state intervenors in this qui tam action appeal from a Rule 12(b)(6) dismissal of their pendent state False Claims Act (FCA) causes of action against Amgen, Inc. (Amgen), International Nephrology Network (INN), and ASD Healthcare (ASD). The district court exercised jurisdiction over the action, which also alleged violations of the federal FCA, 31 U.S.C. § 3729 et seq., pursuant to 31 U.S.C. § 3732(b), 28 U.S.C. § 1331, and 28 U.S.C. § 1367. We have jurisdiction over this appeal concerning only questions of state law pursuant to 28 U.S.C. § 1291.
This appeal raises a set of questions similar to those that arose recently for this circuit in United States ex rel. Hutcheson v. Blackstone Medical, Inc., 647 F.3d 377 (1st Cir.2011). Like the plaintiffs in Hutcheson, the plaintiffs in this appeal allege that the defendants caused the submission of false or fraudulent claims for government payment. Also like the plaintiffs in Hutcheson, they allege that the claims were false or fraudulent because the claims misrepresented that healthcare professionals had not received certain kickbacks. The plaintiffs in Hutcheson alleged that the defendants in that suit caused the submission of false or fraudulent claims to the federal Medicare agency in violation of the federal FCA. By contrast, the plaintiffs here on appeal allege that the defendants caused the submission of false or fraudulent claims to state Medicaid agencies in violation of state FCAs.
Westmoreland and the state intervenors allege that Amgen, acting in concert with INN and ASD, employed an elaborate kickback scheme to induce medical providers to prescribe Aranesp, a drug Amgen manufactures to treat anemia. This kickback scheme, plaintiffs allege, contained two prongs. First, they allege that Amgen included extra Aranesp in its single-dose vials of the drug and encouraged providers to bill this free product to Medicaid. Second, they allege that Amgen, INN, and ASD channeled improper benefits to providers through sham consulting agreements, honoraria, retreats, and the like to encourage them to purchase Aranesp. Westmoreland and the state intervenors argue that these kickbacks rendered the reimbursement claims at issue in this litigation ineligible for payment, and that for this reason they have stated a claim under the seven relevant state FCAs.
The district court held that the plaintiffs could not survive a 12(b)(6) motion to dismiss because they had failed to identify a false or fraudulent claim for Medicaid payment within the meaning of those state FCAs. United States ex rel. Westmoreland v. Amgen, Inc., 707 F.Supp.2d 123 (D.Mass.2010). In so holding, the district court employed the same legal framework to analyze state FCA claims as it did to analyze federal FCA claims in United States ex rel. Hutcheson v. Blackstone Medical, Inc., 694 F.Supp.2d 48 (D.Mass.2010). We reject that framework, invoked on appeal by the defendants, to the extent that it is inconsistent with our decision in Hutcheson, 647 F.3d 377, concerning what constitutes a false or fraudulent claim for government payment. The state FCA provisions at issue here are not relevantly different from the federal FCA provisions at issue in Hutcheson.
On the merits, we affirm in part and reverse in part. We reverse the district court's dismissal of the plaintiffs' claims under six of the seven state FCAs at issue and affirm on different grounds the district court's dismissal of the plaintiffs' claims under the remaining state FCA. The plaintiffs have more than adequately alleged that providers submitted claims that misrepresented compliance with a precondition of Medicaid payment in New York, Massachusetts, California, Illinois, Indiana, and New Mexico. With respect to the claims under Georgia's FCA, we affirm on different grounds the district court's holding that the plaintiffs have not identified a false or fraudulent claim for payment. The plaintiffs have not adequately alleged that the providers submitted claims to Georgia's Medicaid program that did not comply with a precondition of payment.
Westmoreland initially brought this qui tam action against Amgen, INN, ASD, and two other corporate defendants under the federal FCA and various state FCAs on behalf of the United States, seventeen individual states, and the District of Columbia. Westmoreland worked as an Amgen employee from September 2002 to mid-March 2005 and filed her first complaint on June 5, 2006.1 The United States notified the district court on September 1, 2009 that it was not intervening in the action at that time. Fifteen states and the District of Columbia filed a multi-state complaint in intervention on October 30, 2009.
Westmoreland appeals the district court's dismissal of the state law claims she asserted on behalf of the two non-intervening states, Georgia and New Mexico, but she does not appeal the federal claims she asserted on behalf of the United States.2 California, Illinois, Indiana, Massachusetts, and New York have also appealed the district court's dismissal of their claims. 3 On appeal, the United States has been allowed to participate as an amicus in support of Westmoreland and the state intervenors. Amgen, INN, and ASD are the only remaining defendants on appeal.4
The factual allegations relevant to the claims on appeal are as follows. In 2001, the Food and Drug Administration (FDA) approved Amgen's drug Aranesp for treatment of anemia associated with chronic renal failure. A year later, the FDA approved Aranesp for the treatment of certain chemotherapy-induced anemia as well. Aranesp competes in these markets with Procrit, a drug also manufactured by Amgen but sold and marketed by a different company, Johnson & Johnson. Westmoreland and the state intervenors allege that Amgen, with the help of its co-defendants, employed a two-pronged kickback scheme to encourage providers to prescribe Aranesp rather than Procrit. Between 2001 and 2007, Amgen's revenue from Aranesp rose from $27 million in 2001 to $2.154 billion in 2007, and amounted to $11 billion in the aggregate between 2001 and 2008.
Some kickbacks, plaintiffs allege, took the form of excess product included in Aranesp vials. Aranesp is an injectable drug sold in single-dose vials such that each vial is used for one patient in one administration of the drug. The United States Pharmacopeia (USP) requires that a vial of injectable drug contain an amount of the drug in slight excess of the labeled volume to permit withdrawal and administration of the labeled amount. USP recommends that this “overfill” amount be up to 10% of the dosage. It is undisputed that Aranesp vials contained 19% overfill when the drug entered the marketplace in 2001, and 16.8% overfill between 2002 and 2008. It is also undisputed that medical providers generally may receive reimbursement from...
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