United States ex rel. Krahling v. Merck & Co., CIVIL ACTION NO. 10-4374
| Decision Date | 04 September 2014 |
| Docket Number | CIVIL ACTION NO. 10-4374,CIVIL ACTION NO. 12-3555 |
| Parties | UNITED STATES OF AMERICA, ex rel. STEPHEN A. KRAHLING AND JOAN A. WLOCHOWSKI, Relators, v. MERCK & CO., INC., Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
In Civil Action No. 10-4374, Relators Stephen A. Krahling and Joan A. Wlochowski ("Plaintiffs") bring this qui tam action in accordance with the False Claims Act ("FCA"), pursuant to 31 U.S.C. §§ 3729-33. Relators allege that their former employer, Defendant Merck & Co., Inc. ("Merck") fraudulently misled the government and omitted, concealed, and adulterated material information regarding the efficacy of its mumps vaccine in violation of the FCA. The United States declined to intervene in this action, filing a Notice of Election to Decline Intervention before this Court on April 27, 2012. (Dkt. No. 14). Defendant moves to dismiss the Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6), 8(a)and 9(b). (Dkt. No. 45).
In Civil Action No. 12-3555, Chatom Primary Care, P.C., Andrew Klein, M.D., John I. Sutter, M.D. (the "Plaintiffs") bring this putative class action alleging monopolization in violation of the Sherman Act under 15 U.S.C. § 2 and violations of various state laws. (Dkt. No.26.) Defendant moves to dismiss the Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). (Dkt. No. 40).
For purposes of deciding the Motions to Dismiss, this memorandum takes as true facts as alleged in the Amended Complaints. See Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008). For the reasons that follow, Defendant's Motions regarding all claims for both cases are granted in part and denied in part.
Stephen A. Krahling and Joan A. Wlochowski (the "Relators") bring this qui tam action against Merck & Co., Inc. ("Defendant"). Relators were employed as virologists in the Merck lab and allegedly witnessed first-hand the allegedly fraudulent efficacy testing. (Dkt. No. 12 ¶ 3, 8-9.)
Chatom Primary Care, P.C., Andrew Klein, M.D., John I. Sutter, M.D. (the "Plaintiffs") bring this putative class action alleging monopolization in violation of the Sherman Act under 15 U.S.C. § 2 and violations of various state laws. (Dkt. No. 26.)
Defendant is a New Jersey corporation with its vaccine division based in West Point, Pennsylvania. (Dkt. No. 12 ¶ 10.) Defendant is the sole manufacturer licensed by the FDA to sell Mumps Vaccine (M-MR®II and ProQuad®) ("Mumps Vaccine") in the United States. (Dkt. No. 12 ¶ 11.)
The Court recites the facts in the light most favorable to the nonmoving parties and draws all reasonable inferences in their favor. According to Relators' Amended Complaint, in 1999, Defendant initiated new efficacy testing of its Mumps Vaccine. (Dkt. No. 12 ¶¶ 22, 25.) Relators allege that Defendant first tested their vaccine with a Mumps Plaque Reduction Neutralization assay comparing pre and post vaccinated blood to test whether the vaccine neutralized the virus. (Dkt. No. 12 ¶ 25-29). Relators note that rather than using the "gold standard" approach and testing the vaccine against a "wild-type mumps virus," Defendant tested it against the attenuatedvirus strain that had created the vaccine in the 1960s. (Dkt. No. 12 ¶ 29). Relators allege that comparing a vaccine to its originator virus strain would likely overstate the vaccine's effectiveness. (Dkt. No. 12 ¶ 29.) According to the Amended Complaint, the results of this first test did not result in the "desired 95 percent threshold," so Defendant abandoned this methodology in subsequent tests. (Dkt. No. 12 ¶¶ 30-32.)
Defendant created a second testing methodology: Enhanced Mumps Plaque Reduction Neutralization Assay. (Dkt. No. 12 ¶ 33.) Defendant allegedly told Relators that the "objective" of this new methodology was to "[i]dentify a mumps neutralization assay format...that permits measurement of a = 95% seroconversion rate in MMR®II vaccines." (Dkt. No. 12 ¶ 34.) Defendant continued to test the vaccine against the virus strain that originated the vaccine. (Dkt. No. 12 ¶ 35.) In addition, Defendant added animal antibodies to pre and post vaccinated blood samples. (Dkt. No. 12 ¶ 35.) Relators allege that this addition was "for the singular purpose of altering the outcome of the test by boosting the amount of virus neutralization counted in the lab." (Dkt. No. 12 ¶¶ 35-39.) Relators claim that the use of animal antibodies created a high number of pre-vaccinated positive results, which Defendant systemically destroyed or falsified in order to legitimize the use of animal antibodies. (Dkt. No. 12 ¶¶ 40-51.) Relators also allege that senior management was aware, complicit, and in charge of this testing. (Dkt. No. 12 ¶¶ 52-58.)
Relators reported these alleged infractions to the FDA, leading to an FDA visit. (Dkt. No. 12 ¶¶ 59-64.) After the FDA visit, Relators were barred from participating in the mumps vaccine testing. (Dkt. No. 12 ¶ 66.) Relators assert that Defendant continued to make the false representations of its inflated 95 percent efficacy rate to the government, while deliberately covering up the results of the tests showing a diminished efficacy.
Relators allege two overall counts of violations of the FCA. First, Plaintiffs allege that Defendant billed the CDC for purchase of its mump vaccines when Defendant knew of the vaccine's diminished efficacy. (Dkt. No. 12 ¶ 152.) Plaintiffs' theory is that because the vaccine's efficacy was diminished, the vaccine was mislabeled and was not the product for which the government paid. (Dkt. No. 12 ¶ 152.) As such, Plaintiffs allege that Defendant knowingly presented a fraudulent claim for payment to the U.S. government in violation of 31 U.S.C. § 3729(a)(1)(A).
Second, Plaintiffs allege that Defendant falsified, abandoned, and manipulated testing data that should have been shared with the government in order to fraudulently mislead the government into purchasing the mumps vaccine. (Dkt. No. 12 ¶ 155.) As such, Plaintiffs allege that Defendant knowingly incorporated falsified records material to their fraudulent claims for payment for the vaccine. 31 U.S.C. § 3729(a)(1)(B).1
Plaintiffs based their Complaint on the qui tam action filed by the Relators. (Dkt. No. 26, p. 5.) Based on the same allegations, Plaintiffs allege that Defendant's manipulation and misrepresentation of the seroconversion rate of the Mumps Vaccine to the United States government , led to Defendant's monopoly of the relevant market in violation of the Sherman Act and violations of various state laws. Plaintiffs allege six counts:
3. Count III: Breach of contract. (Dkt. No. 26 ¶¶ 170-75.) Plaintiffs allege that Defendant entered a contract to provide Mump Vaccine to Plaintiffs and the Class and that part of this standardized contract included the falsified representation of the inflated efficacy rate. (Dkt. No. ¶¶ 171-74.) Plaintiffs allege suffering for the purchase price they paid for the Mumps Vaccine because of this alleged breach of contract. (Dkt. No. ¶ 174.)
4. Count IV: Violation of Pennsylvania's Express Warranty Law. Pa. Stat. Ann. Tit. 13 § 2313. (Dkt. No. 26 ¶¶ 176-87.) Plaintiffs allege that Defendant acted as a Merchant under the Pennsylvania Uniform Commercial Code, made a contract with Plaintiffs and class members to sell the Mumps Vaccine. (Dkt. No. 26 ¶¶ 177-80.) Plaintiffs allege that because the vaccine did not have an efficacy rate of 95, as represented by Defendant, Defendant breached an express warranty. (Dkt. No. 26 ¶¶ 181-87.)
5. Count V: Violation of Pennsylvania's Implied Warranty Law. Pa. Stat. Ann. Tit. 13 § 2315. (Dkt. No. 26 ¶¶ 188-97.) Plaintiffs allege that Defendant violated the warrant of merchantability at the time of the Mumps Vaccine's sale to Plaintiffs because the Vaccine was not 95 percent efficacious as represented by Defendant. (Dkt. No. 26 ¶¶ 188-97.)
6. Count VI: Unjust enrichment. (Dkt. No. 26 ¶¶ 198-205.) Plaintiffs allege that Defendant has benefitted financially because of its "deceptive and wrongful conduct" in misrepresenting the efficacy of the Mumps Vaccine at the expense of Plaintiffs. (Dkt. No. 26 ¶¶ 199-203.) Plaintiffs request compensatory and punitive damage. (Dkt. No. 26 ¶ 204.)
Relators first filed this Complaint under seal on August 27, 2010. (Dkt. No. 20.) The Compliant, docket entries, and related filings were kept under seal until June 20, 2012 during the period to intervene requested by the United States. On April 27, 2012, the United States declined to intervene in the Relators' case. (Dkt. No. 54 at 3.) Relators filed an amended complaint andrequest for jury trial on April 27, 2012, unsealed on June 21, 2012. (Dkt. No. 12.) The original, unredacted complaint remains under seal. On August 31, 2012, Defendant moved to dismiss Relators' Amended Complaint with prejudice. (Dkt. No. 45.)
On September 20, 2012, Plaintiffs filed a Consolidated Amended Class Action Complaint against Defendant. (Dkt. No. 26.)
This Court has jurisdiction pursuant to 28 U.S. § 1331 and 31 U.S.C. § 3732(a).
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