United States ex re. Ryan v. Endo Pharm., Inc.

• Decision Date: 23 June 2014
• Docket Number: Civil Action Nos. 05–3450,10–2039,11–7767.
• Citation: 27 F.Supp.3d 615
• Court: U.S. District Court — Eastern District of Pennsylvania
• Parties: UNITED STATES of America, et al., ex rel. Peggy RYAN, Plaintiff, v. ENDO PHARMACEUTICALS, INC., Defendant. United States of America, et al., ex rel. Max H. Weathersby, Plaintiff, v. Endo Pharmaceuticals, Inc., Defendant. United States of America, et al., ex rel. Gursheel S. Dhillon, Plaintiff, v. Endo Pharmaceuticals, Inc., Defendant.

27 F.Supp.3d 615

UNITED STATES of America, et al., ex rel. Peggy RYAN, Plaintiff

v.ENDO PHARMACEUTICALS, INC., Defendant.

United States of America, et al., ex rel. Max H. Weathersby, Plaintiff

v.Endo Pharmaceuticals, Inc., Defendant.

United States of America, et al., ex rel. Gursheel S. Dhillon, Plaintiff

v.Endo Pharmaceuticals, Inc., Defendant.

Civil Action Nos. 05–3450

10–2039

11–7767.

United States District Court, E.D. Pennsylvania.

Signed June 23, 2014.

Order Denying Motion to Set Aside Judgment Aug. 25, 2014.

Christopher Casper, Elaine Stromgren, John Newcomer, James Hoyer Newcomer & Smiljanich, Tampa, FL, Thomas J. Beagan, Jr., Media, PA, for Plaintiff.

MEMORANDUM

ROBERT F. KELLY, Senior District Judge.

Presently before this Court are the Government's “Memorandum on the Eligibility of Relators for a Share of Federal Settlement Proceeds,” Plaintiff Peggy Ryan's “Motion to Determine that Relator Peggy Ryan is the Sole Relator Entitled to a Relator's Share Award,” the Memorandums of Law in Support of their Eligibility to Receive a Relator's Share filed by Plaintiff Max H. Weathersby and Plaintiff Gursheel S. Dhillon, and the Responses filed by all of the parties. For the following reasons, Ryan's Motion is Granted.

I. BACKGROUND

The current proceeding is the product of three separate qui tam actions brought against Defendants, Endo Health Solutions, Inc., and its subsidiary, Endo Pharmaceuticals, Inc. (“Endo”) (collectively “Defendants”)¹ , for violations of the False Claims Act (“FCA”) stemming from Endo's promotion of the drug Lidoderm

for off-label uses.² (See Gov't's Memorandum on the Eligibility of Relators, at 1.) The individual parties who filed the qui tam actions are Peggy Ryan (“Ryan”), Max H. Weathersby (“Weathersby”) and Gursheel S. Dhillon (“Dhillon”) (collectively “Relators”).³ (Id. ) All three actions generally allege that Endo promoted Lidoderm for uses that were not approved by the Food and Drug Administration nor medically accepted, thus causing false claims to be submitted to federal healthcare programs. (Id. )

Procedural History

Ryan was the first Relator to file a Complaint against Defendants on July 5, 2005. (See Ryan Compl.) She subsequently amended this Complaint on March 31, 2009. (See Ryan Am. Compl.) Overall, Ryan amended her Complaint three times between 2005 and 2011. Weathersby was the second Relator to file a Complaint on May 4, 2010. (See Weathersby Compl.) Weathersby has since amended his Complaint three times. The final Relator to file a Complaint was Dhillon on December 21, 2011.

At some point in 2010, when only Ryan and Weathersby had filed qui tam Complaints against Defendants, the Government disclosed the existence of the Complaints to each Relator. In 2012, after Dhillon filed his Complaint, the Government informed Dhillon of the other Relators, and revealed Dhillon's Complaint to Ryan and Weathersby. The following is a general synopsis of each Relator's individual Complaint.

Ryan's Qui Tam Complaint

At all times relevant to this litigation, Ryan worked as a sales representative for Endo. (Id. ) On July 5, 2005, Ryan filed a qui tam Complaint alleging violations of the FCA by Defendants. (Id. at 3; see also Ryan Compl.) At this point in the litigation, the Complaint most relevant to this action is the Amended Complaint filed on March 31, 2009. In this Amended Complaint, Ryan alleged that Endo engaged in off-label promotion of Lidoderm

, causing false reimbursement claims to be submitted to Medicaid and Medicare. (See Ryan Am. Compl.) Specifically, Ryan alleged that Endo: (a) instructed sales representatives to promote the drug for off-label uses; (b) did so, in part, by creating articles and studies touting the effectiveness of Lidoderm for off-label uses, which appeared to be the product of neutral third parties, but was actually funded and prepared by Endo; (c) did not seek FDA approval for off-label uses because the Defendants wanted to maintain Lidoderm's “orphan drug” status,⁴ which resulted in special tax incentives and exclusive status; and (d) paid kickbacks to induce physicians to prescribe Lidoderm. (Id. )

In addition to filing the first Complaint in this matter, Ryan also provided extensive assistance in the investigation of Defendants' fraudulent activities by serving as a confidential source in the Government's covert criminal investigation of Defendants over a several year period beginning in 2005. (See Ryan's Resp. to Gov't's Mem. on the Eligibility of Relators, Ex. A.) According to an affidavit submitted by Chris Mulhall (“Mulhall”), a Federal Bureau of Investigations (“FBI”) agent who was at one time the supervisor in charge of all FBI health care fraud investigations in the Northern District of New York, the FBI initiated the investigation after being contacted by Ryan. (Id. ) At this time, Ryan provided the FBI with evidence of intentional, illegal off-label sales of Lidoderm

. (Id. ) From 2005 through 2012, Mulhall states that Ryan worked closely with the FBI to develop the factual basis of the investigation which led to Defendants' agreement to plead guilty to a criminal mislabeling violation on February 25, 2014. (Id. ) During the course of the investigation, Ryan provided the FBI with Defendants' off-label sales and training materials, and with over two hundred (200) hours of recorded conversations with employees of Defendants concerning off-label sales. (Id. ) In addition, Ryan assisted the FBI and Health and Human Services (“HHS”) in composing the initial subpoena for Defendants' records,⁵ helped interpret the records, apprised the FBI of any developments and performed other tasks in furtherance of the investigation. (Id. )

Weathersby's Qui Tam Complaint

On May 4, 2010, Weathersby, who like Ryan was employed as a sales representative by Defendants, filed the second qui tam Complaint on behalf of the United States and various States including the District of Columbia. (See Weathersby Compl.) Weathersby's Complaint generally alleges that Defendants knowingly engaged in a scheme that disregarded federal laws and FDA regulations relating to prohibitions on sampling, illegal kickback schemes and off-label promotion, and improperly targeted physicians who do not treat PHN in order to promote the off-label use of Lidoderm

.⁶ (Id. at ¶ 8.) Weathersby claims that he is an original source of the off-label promotion allegations in this Complaint, and that these allegations are not based upon publicly disclosed information. (Id. at ¶ 16.) Since the filing of the Complaint in May 2010, Weathersby has amended the Complaint on three separate occasions with the last amendment occurring on December 21, 2012. (See Doc. Nos. 6, 14, 20.)

Dhillon's Qui Tam Complaint

On December 21, 2011, Dhillon, a physician living in Tennessee, became the final Relator when he filed a pro se qui tam action alleging that Defendants engaged in the off-label promotion of Lidoderm

.⁷ (See Dhillon Compl.) In general terms, Dhillon avers in the Complaint that Defendants engaged in a scheme to encourage the off-label use of Lidoderm, while criticizing competing products, by providing bonuses to sales representative who met or exceeded Lidoderm sales goals, and paying speakers to promote the use of Lidoderm for off-label uses. (Id. at ¶¶ 5–10.) Dhillon asserts that he learned this information first hand in his capacity as a physician. (Id. at ¶ 13.)

The Settlement Agreement

On February 21, 2014, the United States of America (the “Government”) elected to intervene on behalf of the Relators for settlement purposes. (See Gov't's Notice of Election to Intervene, Feb. 21, 2014.) On this same day the Relators entered into a Settlement Agreement, whereby Defendants agreed to pay approximately $171.9 million to resolve the alleged FCA violations. (See Gov't's Mem. on the Eligibility of Relators, at 1.) Specifically, the Agreement settled the following claim:

Endo knowingly promoted the sale and use of Lidoderm

for conditions for which it had not been approved by the United States Food and Drug Administration including for use in connection with lower back pain and chronic pain, which were not medically-accepted indications (as defined in 42 U.S.C. § 1396r–8(k)(6) ), and were not covered by Medicare, Medicaid, and other Federal Health Care Programs; and these prescriptions were paid for or reimbursed by Medicaid, Medicare, or other Federal Health Care Programs.

As a result of the foregoing conduct ... Defendants knowingly caused false and fraudulent claims for Lidoderm

to be submitted or caused Lidoderm purchases

by Medicare, Medicaid, and other Federal Health Care Programs. The United States contends that engaging in the covered conduct gives rise to civil liability under the False Claims Act, 31 U.S.C. §§ 3729 –3733, and/or the common law.

See Settlement Agreement.

At the time of settlement, all Relators agreed that the Settlement Agreement was fair, adequate and reasonable. (Id. ) Specifically reserved at the time of the settlement was the issue of the Relators' entitlement to a share of the federal proceeds of the FCA settlement. (Id. ) On March 7, 2014, we consolidated the cases solely with regard to the issue of the Relators' share pursuant to 31 U.S.C. § 3730(d)(1). (See Order Consolidating Cases, Mar. 7, 2014.) On April 11, 2014, the Government filed a Memorandum on the eligibility of the Relators to receive a share of the settlement proceeds. (See Gov't's Mem. on the Eligibility of Relators.) In this document, the Government did not advocate for any one Relator. (Id. ) Rather, the Government set forth the relevant legal framework with the understanding that the individual Relators would respond with arguments supporting their individual eligibility to receive the award. (Id. ) Within the permissible time period to respond, the Relators filed individual memorandums raising arguments for receiving either a portion of or the whole settlement award. The Government subsequently replied to these memorandums, and the Relators...