United States ex rel. Simpson v. Bayer Corp.

• Decision Date: 23 April 2019
• Docket Number: Civil Action No.: 05-3895 (JLL) (JAD)
• Citation: 376 F.Supp.3d 392
• Parties: UNITED STATES of America EX REL. Laurie SIMPSON, Plaintiff-Relator, v. BAYER CORP., et al., Defendants.
• Court: U.S. District Court — District of New Jersey

376 F.Supp.3d 392

UNITED STATES of America EX REL. Laurie SIMPSON, Plaintiff-Relator,

v.BAYER CORP., et al., Defendants.

Civil Action No.: 05-3895 (JLL) (JAD)

United States District Court, D. New Jersey.

Signed April 23, 2019

David Andrew Bocian, Joseph H. Meltzer, Michelle M. Newcomer, Tyler Stephen Graden, Kessler Topaz Meltzer & Check LLP, Radnor, PA, James E. Cecchi, Carella Byrne Cecchi Olstein Brody & Agnello, P.C., Roseland, NJ, Charles Scott Graybow, David Edward Dauenheimer, Office of the U.S. Attorney District of New Jersey, Newark, NJ, for Plaintiffs.

State of New York, pro se.

State of California, pro se.

State of Delaware, pro se.

State of Florida, pro se.

State of Hawaii, pro se.

State of Illinois, pro se.

State of Louisiana, pro se.

Commonwealth of Massachusetts, pro se.

State of Nevada, pro se.

State of New Mexico, pro se.

State of Tennessee, pro se.

State of Texas, pro se.

Commonwealth of Virginia, pro se.

District of Columbia, pro se.

State of Michigan, pro se.

State of Montana, pro se.

State of New Jersey, pro se.

State of New Hampshire, pro se.

State of Oklahoma, pro se.

State of North Carolina, pro se.

State of Wisconsin, pro se.

State of Rhode Island, pro se.

State of Georgia, pro se.

Lawrence S. Lustberg, Jason Robert Halpin, Kate Elizabeth Janukowicz, Gibbons PC, Newark, NJ, for Defendants.

LINARES, Chief District Judge.

This matter comes before the Court by way of cross-motions for partial summary judgment by Plaintiff Relator Laurie Simpson, (ECF No. 324), and Defendants Bayer Corporation, Bayer Healthcare Pharmaceuticals, Inc., and Bayer Healthcare, LLC (collectively, "Bayer"), (ECF No. 323). Bayer has opposed Relator's motion, (ECF No. 329), and Relator has opposed Bayer's motion, (ECF No. 330). The United States (the "Government"), though declining to intervene in this matter, (ECF No. 16), has filed a statement of interest. (ECF No. 338). The Court held oral argument on the cross-motions on March 11, 2019. (ECF No. 344). For the following reasons, the Court denies both motions.

I. BACKGROUND ¹

Relator, a former Bayer employee, filed this qui tam action under the whistleblower provisions of the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq. , on August 5, 2005. (ECF No. 1). The Government declined to intervene. (ECF No. 16). As relevant to the present motions, Relator alleges that Bayer caused the submission of false claims to federal health programs related to a Bayer pharmaceutical, Trasylol, (1) by marketing Trasylol for off-label uses that were not reasonable and necessary, and (2) by paying kickbacks to physicians and other healthcare professionals to induce increased use of Trasylol. (See ECF No. 324-1 ("Rel. Br.") at 19–20; 10AC ¶¶ 187–214). The allegations underlying this dispute have been described on several occasions, most recently in the Court's March 16, 2015 Opinion granting in part and denying in part Bayer's motion to dismiss the Ninth Amended Complaint. (ECF No. 208). Accordingly, and in the interest of judicial economy, the Court includes an abbreviated statement of the factual and procedural history to the extent such background is relevant to the instant motions.

A. Medicare Payment System

The present dispute arises in the context of the reimbursement system used by Medicare. Medicare is a federal health insurance program for individuals with disabilities and the elderly. 42 U.S.C. § 1395 et seq. Medicare Part A covers inpatient hospital services and items used during inpatient stays. See 42 U.S.C. § 1395c ; 42 C.F.R. § 409.10(a)(5). With certain exceptions not applicable here, Medicare reimburses hospitals for items and services provided to beneficiaries during inpatient stays "through fixed, bundled payments on a per discharge basis under the Inpatient Prospective Payment System (‘IPPS’)." ( Rel. 56.1 ¶ 5); see also 42 U.S.C. § 1395ww(d) ; 42 C.F.R. §§ 412.1, 412.60. Under the IPPS, "inpatient services are reimbursed a fixed amount based upon the Diagnosis Related Group (‘DRG’) classification of the inpatient stay." ( Rel. 56.1 ¶ 6); see also 42 C.F.R. §§ 412.1, 412.2, 412.60. DRG classifications and payment rates are created by the Centers for Medicare and Medicaid Services ("CMS") based on the aggregation of weighted factors and averagecosts over time. See 42 C.F.R. § 412.60. Congress adopted the IPPS in order to incentivize hospitals to manage operating costs efficiently, as costs above the fixed payment are borne by the hospital. Dist. Hosp. Partners, L.P. v. Burwell , 786 F.3d 46, 49 (D.C. Cir. 2015).

Hospitals submit requests for reimbursement to the Government using a HCFA/CMS-1450 form, also called a UB-92/UB-04 ("UB form"). ( Rel. 56.1 ¶ 10). During the Relevant Time Period,² hospital providers submitted claims for reimbursement for inpatient stays using the UB form or its electronic equivalent. ( Rel. 56.1 ¶ 10). Such claims were based on the assigned DRG classification for the Medicare beneficiary during a given inpatient stay, and reimbursements in turn depended on the DRG classification, "rather than on the costs of the specific items and services provided to the particular patient." ( Rel. 56.1 ¶ 6); see also 42 C.F.R. § 412.60. Nevertheless, the parties agree that DRG payments constitute "payment in full for all inpatient items and services provided" to patients. ( Rel. 56.1 ¶ 8); see also 42 C.F.R. §§ 412.2(b), 412.50(a).

Certain items and services are not reimbursable by Medicare. The Medicare statute provides that "no payment may be made... for any expenses incurred for items or services" which "are not reasonable and necessary for the diagnosis and treatment of illness or injury or to improve the functioning of a malformed body member." 42 U.S.C. § 1395y(a)(1)(A). In order to participate in Medicare, hospital providers submit an enrollment application to CMS called a form CMS-855A. ( Rel. 56.1 ¶ 4; Bayer Reply 56.1 ¶ 4). The form CMS-855A includes the following certification:

I agree to abide by the Medicare laws, regulations and program instructions that apply to this provider. The Medicare laws, regulations, and program instructions are available through the Medicare contractor. I understand that payment of a claim by Medicare is conditioned upon the claim and the underlying transaction complying with such laws, regulations, and program instructions (including, but not limited to, the Federal anti-kickback statute and the Stark law), and on the provider's compliance with all applicable conditions of participation in Medicare.

( Rel. 56.1 ¶ 4); see also CMS-855A § 15 ¶ 3, https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/downloads/cms855a.pdf. Hospitals also submit annual reports to CMS called forms CMS-2552, see 42 C.F.R. § 413.20(b), which require a mandatory certificate of compliance, which includes the following certification:

MISREPRESENTATION OR FALSIFICATION OF ANY INFORMATION CONTAINED IN THIS COST REPORT MAY BE PUNISHABLE BY CRIMINAL, CIVIL AND ADMINISTRATIVE ACTION, FINE AND/OR IMPRISONMENT UNDER FEDERAL LAW. FURTHERMORE, IF SERVICES IDENTIFIED IN THIS REPORT WERE PROVIDED OR PROCURED THROUGH THE PAYMENT DIRECTLY OR INDIRECTLY OF A KICKBACK OR WERE OTHERWISE ILLEGAL, CRIMINAL, CIVIL AND ADMINISTRATIVE ACTION, FINES AND OR IMPRISONMENT MAY RESULT.

CMS-2552-10, https://www.cms.gov/Regulations-and-Guidance/Transmittals/Downloads/R3P240fpdf. The CMS-2552 also requires certification from an officer or administrator of the provider: "I further certify that I am familiar with the laws and regulations regarding the provision of health care services, and that the services identified in this cost report were provided in compliance with such laws and regulations." Id.

B. Trasylol

Trasylol is Bayer's trade name for aprotinin, a drug that was approved by the Food and Drug Administration ("FDA") for intravenous administration to reduce blood loss in patients undergoing cardiopulmonary bypass during the course of coronary artery bypass graft ("CABG") surgery. ( Rel. 56.1 ¶ 1). Trasylol was among the items and services administered during inpatient stays that were reimbursed through bundled DRG payments. (Bayer Reply 56.1 ¶ 9). Beyond this basic background, many facts concerning Trasylol remain disputed by the parties and subject to ongoing discovery.

Relator alleges that "Bayer engaged in unlawful marketing, including off-label marketing and payment of kickbacks, in order to increase the market share" of Trasylol, and "engaged in a campaign of concealment and disinformation concerning Trasylol's safety and efficacy that continued at least until May 2008, when Bayer recalled Trasylol from the market." (10AC ¶ 9). Specifically, Relator alleges that Bayer knowingly promoted Trasylol to physicians and hospitals for potentially harmful off-label uses that lacked sufficient medical support and were not reasonable and necessary. (10AC ¶ 394). Furthermore, Relator raises detailed allegations of a far-reaching kickback scheme through which Bayer invited physicians and other healthcare professionals to attend all-expenses-paid "consulting" trips throughout the United States, paid them "consulting" fees, and lavished them with grants and other gifts in exchange for increased promotion and use of Trasylol. (10AC ¶¶ 15, 187–214). As a consequence of Bayer's alleged conduct, Trasylol's market share grew, resulting in considerable profit to Bayer. (10AC ¶¶ 13, 118–19). Bayer denies many of Relator's factual allegations concerning the kickback scheme and the promotion of Trasylol for off-label uses, (see generally ECF No. 222), but the parties do not raise those underlying factual disputes for purposes of the instant motions, which focus instead on the DRG reimbursement mechanism, (see generally Rel. 56.1; Bayer 56.1).

C. The False Claims Act and the Anti-Kickback Statute

"The False Claims Act is meant ‘to reach all types of fraud ... that might result in financial loss to the Government.’ " U.S. ex rel. Petratos v. Genentech Inc. , 855 F.3d 481, 486 (3d Cir. 2017) (quoting Cook Cty. v. U.S. ex...