United States ex rel. Nathan v. Takeda Pharms. N. Am., Inc.

• Decision Date: 11 January 2013
• Docket Number: No. 11–2077.,11–2077.
• Citation: 707 F.3d 451
• Parties: UNITED STATES ex rel. Noah NATHAN, On Behalf of the United States Government and the States, Plaintiff–Appellant, v. TAKEDA PHARMACEUTICALS NORTH AMERICA, INCORPORATED; Takeda Pharmaceuticals America, Incorporated, Defendants–Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

707 F.3d 451

UNITED STATES ex rel. Noah NATHAN, On Behalf of the United States Government and the States, Plaintiff–Appellant,

v.TAKEDA PHARMACEUTICALS NORTH AMERICA, INCORPORATED; Takeda Pharmaceuticals America, Incorporated, Defendants–Appellees.

No. 11–2077.

United States Court of Appeals, Fourth Circuit.

Argued: Oct. 25, 2012.

Decided: Jan. 11, 2013.

ARGUED:Jeffrey A. Lamken, MoloLamken, LLP, Washington, D.C., for Appellant. William F. Cavanaugh, Jr., Patterson, Belknap, Webb & Tyler, New York, New York, for Appellees. ON BRIEF:Michael G. Pattillo, Jr., Martin V. Totaro, Mololamken, LLP, Washington, D.C., for Appellant. Susan R. Podolsky, The Law Offices of Susan R. Podolsky, Alexandria, Virginia; Daniel S. Ruzumna, Sean H. Murray, Aileen M. McGill, Patterson, Belknap, Webb & Tyler, New York, New York, for Appellees.

Before MOTZ and KEENAN, Circuit Judges, and JAMES K. BREDAR, United States District Judge for the District of Maryland, sitting by designation.

Affirmed by published opinion. Judge KEENAN wrote the opinion, in which Judge MOTZ and Judge BREDAR joined.

OPINION

BARBARA MILANO KEENAN, Circuit Judge:

Noah Nathan (Relator), a sales manager for Takeda Pharmaceuticals (Takeda), brought this qui tam action against his employer under the False Claims Act (the Act), 31 U.S.C. §§ 3729 through 3733. Relator alleges that Takeda violated § 3729(a)(1)(A) of the Act by causing false claims to be presented to the government for payment under Medicare and other federal health insurance programs.¹ After allowing Relator to file a third amended complaint (the amended complaint), the district court dismissed Relator's claims under Federal Rule of Civil Procedure 12(b)(6). In this appeal, Relator argues that the district court erred in concluding that Relator did not plausibly allege in the amended complaint that false claims had been presented to the government for payment, or that Takeda caused the presentment of any such false claims. Relator also contends that the district court abused its discretion in denying Relator's request for leave to file a fourth amended complaint.

Upon our review, we hold that the district court did not err in dismissing the amended complaint, because Relator failed to plausibly allege that any false claims had been presented to the government for payment. We further hold that the district court did not abuse its discretion in denying Relator leave to file a fourth amended complaint.

I.

Among other things, the Act prohibits any person from knowingly “caus [ing] to be presented” to the government false claims for payment or approval. 31 U.S.C. § 3729(a)(1)(A). A false statement is actionable under the Act only if it constitutes a “false or fraudulent claim.” Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th Cir.1999) (emphasis added). Importantly, to trigger liability under the Act, a claim actually must have been submitted to the federal government for reimbursement, resulting in “a call upon the government fisc.” Id.; see also Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1325–26 (11th Cir.2009).

Relator alleges in the amended complaint that prescriptions written for certain medical uses, which have not been approved by the Food and Drug Administration (the FDA) or included in statutorily specified compendia, are not reimbursable under federal health insurance programs. Such uses commonly are referred to as “off-label” uses. Relator further alleges that because the cost of prescriptions for off-label uses is not subject to reimbursement by the federal government, the presentment of these types of claims for payment constitutes a violation of the Act.²

In the amended complaint, Relator additionally alleges that Takeda marketed its prescription drug Kapidex, a proton pump inhibitor used to treat various gastric conditions, for off-label uses.³ Relator alleges that two of Takeda's marketing practices caused presentation of false claims to the government. The identified marketing practices were: (1) Takeda's promotion of Kapidex to rheumatologists, who typically do not treat patients having conditions for which Kapidex has been approved; and (2) Takeda's practice of marketing high doses of Kapidex for the treatment of conditions for which only a lower dose has been approved by the FDA.

In particular, Relator alleges that 60 mg doses of Kapidex have been approved by the FDA only for the treatment of the active condition of erosive esophagitis (EE). However, Kapidex has been approved by the FDA at a lower 30 mg dose to treat the more common condition of gastroesophogeal reflux disease (GERD), as well as for the maintenance of already “healed” cases of EE. Relator alleges that Takeda has provided doctors with samples of Kapidex exclusively in 60 mg doses, irrespective whether such physicians treat active cases of EE. As Relator further alleges, by this sampling practice, Takeda improperly implies that a 60 mg dose of Kapidex is the only available dosage of that drug, thereby causing doctors to prescribe 60 mg doses for unapproved conditions.⁴ Relator also alleges that Takeda sales representatives regularly misled physicians by deflecting or dismissing their questions about proper dosages, and by making misrepresentations concerning the available dosages.

Additionally, Relator alleges that the motivation for Takeda's alleged fraudulent marketing stems from Takeda's desire to replicate the success of its previously approved drug, Prevacid, the patent for which was set to expire in 2009. Prevacid has been approved to treat 13 conditions, including GERD. Prevacid also has been approved to provide gastric protection and to treat gastric ulcers, indications relevant to rheumatology patients who regularly take anti-inflammatory pain medications. In contrast, Kapidex is not approved for these two conditions. Relator alleges that because the patent expiration date for Prevacid was approaching, Takeda promoted Kapidex to “fill the Prevacid void.”

The district court dismissed the amended complaint on two independent grounds: (1) the amended complaint failed to allege the “presentment” of a false or fraudulent claim to the government for payment or approval under 31 U.S.C. § 3729(a)(1)(A); and (2) the amended complaint failed to allege adequately that Takeda “caused” the issuance of off-label prescriptions. ⁵ The district court also denied Relator's request to amend his complaint for a fourth time. Because we conclude that the district court properly dismissed the amended complaint based on Relator's failure to allege presentment of a false claim, we do not reach the additional question whether Relator alleged sufficient facts to support the required causation element for a claim asserted under the Act. We further hold that the district court did not abuse its discretion in denying Relator's motion for leave to file a fourth amended complaint.

II.

We review de novo the district court's dismissal of a complaint for failure to state a claim under Fed.R.Civ.P. 12(b)(6). Harrison, 176 F.3d at 783. To survive a Rule 12(b)(6) motion to dismiss, a complaint must “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). Facts that are “merely consistent with” liability do not establish a plausible claim to relief. Id. (citation omitted). In addition, although we must view the facts alleged in the light most favorable to the plaintiff, we will not accept “legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments.” Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir.2012) (citation and internal quotation marks omitted).

Before addressing the substantive allegations in the amended complaint, we first state the pleading requirements for fraud-based claims brought under the Act. In addition to meeting the plausibility standard of Iqbal, fraud claims under the Act must be pleaded with particularity pursuant to Rule 9(b) of the Federal Rules of Civil Procedure. Harrison, 176 F.3d at 783–85.Rule 9(b) provides:

In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.

To satisfy Rule 9(b), a plaintiff asserting a claim under the Act “must, at a minimum, describe the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir.2008) (citation and internal quotation marks omitted).

The parties dispute the proper application of Rule 9(b) in this case. In Relator's view, to meet the requirements for pleading a fraud claim under the Act, a relator need only allege the existence of a fraudulent scheme that supports the inference that false claims were presented to the government for payment. In contrast, Takeda argues that Rule 9(b) requires that a relator plead facts plausibly alleging that particular, identifiable false claims actually were presented to the government for payment.

In view of the rationale underlying Rule 9(b), we decline to adopt Relator's argument for a more lenient application of the Rule. We have adhered firmly to the strictures of Rule 9(b) in applying its terms to cases brought under the Act. See, e.g., Wilson, 525 F.3d at 379–80 (explaining the requirements of Rule 9(b) and affirming dismissal for failing to comply); Harrison, 176 F.3d at 784, 789–90 (same). The multiple purposes of Rule 9(b), namely, of providing notice to a defendant of its alleged misconduct, of preventing frivolous suits, of “eliminat[ing] fraud actions in which all the facts are learned after discovery,” and of “protect[ing] defendants from harm to their goodwill and reputation,” Harrison, 176 F.3d at 784 (citation omitted),...