U.S. ex rel. Westmoreland v. Amgen, Inc.

• Citation: 738 F.Supp.2d 267
• Decision Date: 20 September 2010
• Docket Number: Civil Action No. 06-10972-WGY
• Parties: The UNITED STATES of America ex rel. Kassie WESTMORELAND, Plaintiff, v. AMGEN, INC.; International Nephrology Network renamed Integrated Nephrology Network, a d/b/a of Dialysis Purchasing Alliance, Inc.; and ASD Healthcare, Defendants.
• Court: U.S. District Court — District of Massachusetts

738 F.Supp.2d 267

The UNITED STATES of America ex rel. Kassie WESTMORELAND, Plaintiff,

v.AMGEN, INC.; International Nephrology Network renamed Integrated Nephrology Network, a d/b/a of Dialysis Purchasing Alliance, Inc.; and ASD Healthcare, Defendants.

Civil Action No. 06-10972-WGY.

United States District Court,

D. Massachusetts.

Sept. 20, 2010.

Bryan A. Carey, Derek Tam Ho, Jamil N. Jaffer, Joseph S. Hall, Marc A. Wallenstein, Mark C. Hansen, Andrew C. Shen, Kiran S. Raj, Silvija A. Strikis, Kellogg, Huber, Hansen, Todd Evans & Figel, PLLC, Jessica S. Champa, United States Department of Justice, Jane Drummey, District of Columbia Attorney General's Office, Washington, DC, Charles F. Kester, Lawrence M. Isenberg, Kester & Isenberg, Encino, CA, Robert M. Thomas, Jr., Thomas & Associates, Royston H. Delaney, Shannon Kelley, United States Attorneys Office, Ann Burke Ackil, Massachusetts Attorney General Office, Boston, MA, Suzanne E. Durrell, Durrell Law Office, Milton, MA, Eliseo Z. Sisneros, California Department of Justice, San Diego, CA, Dawn S. Shigezawa, Hawaii Attorney General's Office, Michael L. Parrish, Office of the Attorney General, Honolulu, HI, Joseph B. Chervin, Illinois Attorney General's Office, Chicago, IL, Jessica L. Harlan, Indiana Attorney General's Office, Indianapolis, IN, Mark Matus, Michigan Department of Attorney General, East Lansing, MI, George S. Bell, III, Tennessee Attorney General's Office, Nashville, TN, Tracey D.S. Sanders, Virginia Office of the Attorney General, Richmond, VA, Carolyn T. Ellis, New York State Attorney General's Office, New York, NY, Margot P. Schoenborn, New York State Attorney General, Buffalo, NY, for Plaintiff.

Brien T. O'Connor, Kirsten V. Mayer, William J. Dunn, Ropes & Gray, One International Place, Peter E. Ball, Ryan M. Cunningham, Sally & Fitch LLP, Boston, MA, David S. Rosenbloom, Douglas E. Whitney, Holland M. Tahvonen,Jeffrey Baltruzak, Michael Kendall, Daniel A. Curto, Jocelyn D. Francoeur, Joshua T. Buchman, Lauren M. Papenhausen, Matthew Jacobs, William Diaz, McDermott Will & Emery LLP, Chicago, IL, Lauren S. Colton, Hogan Lovells U.S. LLP, Baltimore, MD, William L. Webber, Law Office of William L. Webber, LLC, Bethesda, MD, David J. Kessler, Drinker Biddle & Reath LLP, Eric W. Sitarchuk, Jennifer L. Dereka, Matthew J.D. Hogan, Meredith S. Auten, Nathan J. Andrisani, Thomas J. Sullivan, Bethany N. Wong, Morgan Lewis & Bockius LLP, James M. Becker, Buchanan Ingersoll & Rooney PC, Philadelphia, PA, for Defendants.

MEMORANDUM

YOUNG, District Judge.

I. INTRODUCTION

Relator Kassie Westmoreland ("Relator") brings her Fourth Amended Complaint against Amgen, Inc. ("Amgen"), International Nephrology Network ("INN"), and ASD Healthcare ("ASD") (collectively, the "Defendants"), alleging that the Defendants violated the federal False Claims Act. The Defendants move to dismiss Relator's Fourth Amended Complaint.

A. Procedural Posture

Relator filed the original qui tam action in June 2006. In September 2009, the United States filed a Notice of Non-Intervention At This Time. Fifteen States and the District of Columbia (collectively, the "States"), filed a separate complaint in intervention in October 2009, and filed a First Amended Complaint in December 2009. Several states, subsequently, voluntarily dismissed their cases against the Defendants. In March 2010, the Defendants moved to dismiss both Relator's and the States' complaints.

In a memorandum and order dated April 23, 2010, this Court dismissed parts of Relator's Third Amended Complaint based on the first-to-file bar; dismissed the States' First Amended Complaint and the remainder of Relator's Third Amended Complaint because neither stated a "false claim"; and dismissed AmerisourceBergen Corporation ("ABC") and AmerisourceBergen Speciality Group ("ABSG") as parties to the action. United States ex rel. Westmoreland v. Amgen, 707 F.Supp.2d 123 (D.Mass.2010). The Court entered a final judgment to that effect on April 26, 2010.

Shortly thereafter, Relator filed a motion for reconsideration and a motion for leave to file an amended complaint.¹ On May 26, 2010, 2010 WL 2204603, the Court denied Relator's motion for reconsideration, and amended its previous final judgment with respect to Relator to reflect a dismissal without prejudice and with leave to file a motion for leave to file an amended complaint. The Court also granted Relator's motion for leave to file an amended complaint. On May 27, 2010, Relator filed the Fourth Amended Complaint at issue here.

B. Facts As Alleged ²

First, Relator claims that the Defendants caused legally and factually false claims to be presented to the federal government by encouraging providers to claim reimbursement for dosages of Aranespthat were medically unnecessary or never administered.³

Second, Relator claims that the Defendants induced providers to purchased Aranesp by giving kickbacks to them, which led to the submission of false claims. Such kickbacks caused providers falsely and expressly to certify compliance with the anti-kickback statute in their Medicare Enrollment forms, as providers knew that they were, and would, continue accepting kickbacks from the Defendants. One such kickback was "excess overfill," i.e., dosages of liquid Aranesp in excess of the amount necessary to allow a provider to withdraw the labeled dosage. Amgen's inclusion of excess overfill in its single-dose vials was, in effect, a built-in free sample. The free overfill created the potential for providers to profit from excess reimbursement and constituted an illegal kickback. Relator also alleges that INN and ASD offered other kickbacks to providers in the form of sham consulting agreements, all-expense paid retreats, free services, and discounts.

Third, Relator claims that Amgen reported an inflated Average Sales Price ("ASP") to the Medicare Program by failing to include in its ASP calculation the excess overfill built into Aranesp vials. This omission caused Medicare to overpay reimbursement claims.

Fourth, Relator claims that the Defendants caused providers to make or use false statements material to payment of a claim, including false statements as to: the medical necessity of administered Aranesp, units administered, and compliance with the anti-kickback statute.

Fifth, Relator claims that the Defendants conspired to violate the False Claims Act by agreeing to engage in the above fraudulent conduct with an intent to defraud the government.

II. ANALYSIS

The Defendants move to dismiss the Fourth Amended Complaint (the "Complaint"), contending that Relator's claims are barred by the first-to-file rule ⁴ and fail to meet the requirements of Federal Rules of Civil Procedure 9(b) and 12(b)(6).

A. Legal Standards

1. Motion to Dismiss Standard

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges a complaint on the basis that it fails to state a claim upon which relief can be granted. To survive a motion to dismiss under this Rule, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A pleading that merely offers "labels and conclusions" or a "formulaic recitation of the elements of a cause of action" is insufficient. Id. at 555, 127 S.Ct. 1955. Since the False Claims Actcreates a statutory tort, the inquiry focuses on whether Relator has alleged facts that fit within the specific contours of the statute.⁵

Further, the heightened pleading requirement of Federal Rule of Civil Procedure 9(b) applies to fraud claims brought under the False Claims Act. United States ex rel. Gagne v. City of Worcester, 565 F.3d 40, 45 (1st Cir.2009). Rule 9(b) requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b).

2. Liability Under the False Claims Act

The False Claims Act (the "Act") imposes liability upon persons who knowingly present or cause to be presented to the government a false claim for payment. 31 U.S.C. § 3729(a)(1) (2008), amended by 31 U.S.C. § 3729(a) (2009). To state a federal claim under the so-called "presentment" theory, "an individual must allege that the accused: (1) knowingly presented or caused to be presented, (2) a false claim, (3) to the United States government, (4) knowing its falsity, (5) which was material, (6) seeking payment from the federal treasury." United States ex rel. Hutcheson v. Blackstone Med., Inc., 694 F.Supp.2d 48, 61 (D.Mass.2010) (citing United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 225 (1st Cir.2004) and United States v. Data Translation, Inc., 984 F.2d 1256, 1267 (1st Cir.1992)).

The Act also imposes liability upon persons who knowingly make or cause to be made a false record or statement material to a false claim, as well as persons who conspire to "defraud the Government by getting a false or fraudulent claim allowed or paid." 31 U.S.C. §§ 3729(a)(2) and (a)(3) (2008). Unlike presentment liability under subsection (a)(1), these theories of liability do not require proof that false claims were actually submitted to the government. Gagne, 565 F.3d at 46 (citing Allison Engine Co. v. U.S. ex rel. Sanders, 553 U.S. 662, 128 S.Ct. 2123, 2129-31, 170 L.Ed.2d 1030 (2008)). Instead, liability under subsection (a)(2) requires proof the defendant caused a false statement to be made for the purpose of getting a false claim paid. In addition, conspiracy liability under subsection (a)(3) requires that the defendants intended to defraud the government by getting false claims paid and agreed that the false statement would have a material effect on the government's decision to pay. Gagne, 565 F.3d at 46; see 31 U.S.C. §§ 3729(a)(2) and (a)(3).

Under all theories of liability, however, a "false" claim must be alleged. A claim may be factually false, legally false under an...