United States ex rel. Hanks v. U.S. Oncology Speciality, LLP

• Decision Date: 12 September 2018
• Docket Number: No. 08-CV-3096 (SJ)(RML),08-CV-3096 (SJ)(RML)
• Citation: 336 F.Supp.3d 90
• Parties: UNITED STATES of America EX REL. Don HANKS, et al., Plaintiffs, v. U.S. ONCOLOGY SPECIALITY, LLP, et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

336 F.Supp.3d 90

UNITED STATES of America EX REL. Don HANKS, et al., Plaintiffs,

v.U.S. ONCOLOGY SPECIALITY, LLP, et al., Defendants.

No. 08-CV-3096 (SJ)(RML)

United States District Court, E.D. New York.

Signed September 12, 2018

Filed September 17, 2018

HENNIG RUIZ & SINGH, 3600 Wilshire Blvd., Ste. 1908, Los Angeles, CA 90010-2623, By: Robert Hennig, Attorneys for Relator Don Hanks

GEYERGOREY LLP, 1220 L Street, NW, Ste. Suite 100, # 418, Washington, DC 20005-4018, By: Hays Gorey, Attorneys for Relator Don Hanks

FOLEY & LARDNER LLP, 111 Huntington Avenue, Ste, 2500, Boston, MA 02199, By: Lawrence M. Kraus, Michael Matthews & Rachel E. Kramer, Attorneys for Defendants Florida Cancer Specialists P.L.; Ayub, Sokoi, Matzkowitz and Sennabaum, M.D.s P.A., d/b/a New Hope Cancer Center; Coastal Oncology, PL; J. Paonessa, M.D., P.A. (sued as Gulfcoast Oncology Associates); Pasco Hernando Oncology Associates, P.A.

MORRISON & FOERSTER LLP, 250 West 55th Street, New York, NY 10019, By: Carl H. Jr. Loewenson, Jr., & Joseph Alexander Lawrence, Attorneys for Defendant U.S. Oncology Specialty, LP

KING & SPALDING, 1180 Peachtree Street, Atlanta, GA 30309, By: James W. Boswell, Michael E. Paulhus & Jennifer S. Lewin, Attorneys for Defendant Northwest Georgia Oncology Centers

CHILIVIS, COCHRAN, LARKINS & BEVER, LLP, 3127 Maple Drive, NE, Atlanta, GA 30305, By: Anthony L. Cochran & John D. Dalbey, Attorneys for Defendant Augusta Oncology Associates, P.C.

CARLTON FIELDS JORDEN BURT, P.A., 4221 West Boy Scout Blvd, Ste. 1000, Tampa, FL 33607, By: Adam P. Schwartz & Natalie Napierala, Attorneys for Defendant David Dresdner, M.D.

POLSINELLI, P.C., 1355 Peachtree Street, N.E., Ste. 500, Atlanta, GA 30309, By: Scott L. Marrah, Sidney S. Welch, & Jeremy P. Burnette, Attorneys for Defendants Georgia Cancer Specialists I, P.C. (sued as Georgia Cancer Specialists Administrative Annex), Central Georgia Cancer Care, P.C. & Southeast Georgia Hematology Oncology Associates, P.C.

SEIGER GFELLER LAURIE LLP, 100 Overlook Center, 2d floor, Princeton, NJ 08540, By: Mark D. Shifton, Attorneys for Stuart Oncology Associates, P.A.

FURGANG & ADWAR, L.L.P., 1325 Avenue of the Americas, 28^th floor, New York, NY 10019, By: Philip Furgang & Armando Llorens, Attorneys for Defendant Cancer Institute of Florida, P.A.

AKERMAN SENTERFITT LLP, 335 Madison Avenue, 26th floor, New York, NY 10017, By: M. Darren Traub & Cindy A. Laquidara, Attorneys for Defendant Integrated Community Oncology Network, LLP

SHUTTS & BOWEN, LLP, 1500 Miami Center, 201 South Biscayne Blvd., Miami, FL 33131, By: Daniel Stabile & Joseph M. Goldstein, Attorneys for Defendants Hematology and Oncology Associates of the Treasure Coast & Mid-Florida Hematology and Oncology Centers, P.A.

K & L GATES LLP, 599 Lexington Avenue, New York, NY 10022, By: Andrew R. Stanton & Mark A. Rush, Attorneys for Non-Party 21 Century Oncology of Jacksonville, LLC

MEMORANDUM AND ORDER

Sterling Johnson, Jr., UNITED STATES DISTRICT JUDGE

Relator Don Hanks, who worked for Amgen, Inc., as a nephrology and/or oncology sales representative for approximately 17½ years prior to his termination on May 23, 2007, brings this qui tam action on behalf the United States and 13 states, alleging that 18 Group Purchasing Organizations ("GPOs") or medical practices (collectively, "Defendants") violated the False Claims Act, 31 U.S.C. § 3729 et seq. , and similar state laws by submitting claims to Medicare, Medicaid and other Government Healthcare Programs for reimbursement for Amgen drugs without reporting that they had accepted discounts, rebates and/or other financial incentives from Amgen in violation of the Anti-kickback Statute, 42 U.S.C. § 1320a-7b. All but one of the Defendants—along with 21^st Century Oncology of Jacksonville LLC ("21^st Century"), which has never been named as a defendant in this action—now move to dismiss the Fifth Amended Complaint (the "FAC") on various grounds, arguing, inter alia , that the "public disclosure bar" and "first-to-file rule" apply to this case and that the FAC fails to allege any of the causes of action with sufficient particularity. For the reasons set forth below, Defendants' motions are granted in part and denied in part and this action is dismissed without prejudice.

BACKGROUND

This is one of at least 11 federal qui tam actions that have been filed nationwide relating to sales practices used by Amgen, Inc., a biotechnology and drug manufacturing company, in marketing Aranesp, a drug which stimulates the production of red blood cells. Except as otherwise indicated, the following facts are drawn from the FAC (Dkt. No. 51) and are assumed to be true for purposes of deciding the instant motions to dismiss (the "Motions").

The Amgen Drugs at Issue

In the 1980s and 1990s, Amgen developed two types of erythropoiesis-stimulating agents or "ESAs"—drugs that stimulate the body's production of red blood cells. The first of these, epoetin alfa, was approved by the U.S. Food and Drug Administration (the "FDA") in 1989 for the treatment for anemia associated with chronic renal failure ("CRF") (66).¹ Thereafter, Amgen marketed the drug under the brand name "Epogen." (68).

In 1985, while epoetin alfa was still in development, Amgen entered into a product licensing agreement which gave the licensee the exclusive right to market the drug for all "indications" other than the treatment of anemia associated with CRF in dialysis patients. (67). In the 1990s, the licensee obtained FDA approval to market the drugs for treatment of anemia in cancer patients undergoing chemotherapy, HIV patients taking the antiretroviral medication Zidovudine, pre-dialysis patients suffering from kidney disease and anemic patients scheduled to undergo elective, non-cardiac, non-vascular surgery. (69). The licensee marketed its product—which was identical to Epogen—under the brand name Procrit. (68).

In 1997, a joint venture owned in part by Amgen produced yet another ESA—darbepoetin alfa—which had a slightly different molecular structure than the first ESA. (71). In September 2001, after fending off a legal challenge from the licensee, Amgen obtained FDA approval to market darbepoetin alfa for use in chemotherapy-induced anemia. (73). Thereafter, Amgen began marketing the drug in the United States under the brand name Aranesp. (73).

Amgen's Marketing Techniques

Overfill, Free Samples, Off-label Uses and Honoraria

Amgen used a variety of methods to promote Aranesp and to compete with Procrit. Beginning in 2001, Amgen used "overfill"—the practice of filling a vial with more product than was reported on the invoice—to provide customers with free products. (185). Amgen also gave each sales representative $50,000 in free samples and encouraged them to distribute them liberally. (195).

Amgen conducted seminars for doctors, their families and their employees at which meals were served free of charge. For example, doctors and their families were invited to dinners billed as "roundtable discussions," even though "it was often the case that no medical discussions took place" at those events. (2d 207).² Doctors were also paid honoraria of $1,000 just for attending. (2d 207). Similarly, the employees of medical practices were invited to "reimbursement roundtables" at which they received meals but no billing advice. (208).

Amgen also touted Aranesp's"off-label" uses—that is, uses other than the FDA-approved use: the treatment of chemotherapy-induced anemia. (211). Amgen provided oncology sales representatives with a "proof source book," which included materials that would enable the salesforce to market Aranesp for a "range of different uses." (211). Although the book contained numerous warnings stating that it was for "information purposes only," the book enabled sales representatives to market the drug for uses, like the treatment of anemia in Zidovudine-treated HIV patients, for which only Procrit had been FDA-approved. (211).

"Marketing the Spread" and "Tying Arrangements"

Amgen also competed with Procrit by offering rebates and/or discounts to reduce the cost of Aranesp to medical providers, while failing to report these rebates and discounts in order to maximize the average wholesale price, the average sales price and other benchmarks used by the Government to calculate the reimbursement providers receive for administering the drug. The salesforce would then market the "spread" between the cost of, and Government reimbursement for, the drugs.

(198). To facilitate this, Amgen provided Relator with a "calculation tool" that enabled him to estimate the profits a customer could realize from the spread, which the salesforce called "over-reimbursement." (197-98).

The size of the rebates, discounts, and other monetary incentives available depended in large part on the amount of Amgen drugs that a customer purchased. (78). The amount was based on the purchases of all Amgen products, including Neupogen and Neulasta—granulocyte colony-stimulating agents, or "GSAs," which stimulate the production of a type of white blood cell. (180). At least initially, Amgen alone produced these GSAs. Since medical providers had no choice but to purchase the GSAs from Amgen, this "tying arrangement" gave the providers a financial incentive to prefer Aranesp to Procrit.

Not all customers were offered the same schedule of rebates, discounts and financial incentives. The schedules varied depending on the customer's potential to make annual purchases of Aranesp, Neupogen and Neulasta (collectively, the "Covered Drugs"). (83). Those customers considered capable of annual purchases of up to $700,000 were placed the "Silver" category, those considered capable of annual purchases between $700,000 and $5 million were "Gold" customers, and those considered capable of annual purchases of more than $5 million were "Platinum" customers, (83). According to the FAC, a typical Gold customer received rebates, discounts and incentives totaling at least 40% of the invoiced charge for Covered Drugs,...