United States ex rel. Gardner v. Vanda Pharm., Inc.
| Decision Date | 25 March 2021 |
| Docket Number | Case No. 17-cv-00464 (APM) |
| Citation | 554 F.Supp.3d 146 |
| Parties | UNITED STATES of America, EX REL. Richard GARDNER, Plaintiffs, v. VANDA PHARMACEUTICALS, INC., Defendant. |
| Court | U.S. District Court — District of Columbia |
Bradford W. Muller, Credit Acceptance Corporation, Southfield, MI, Christopher L. Nelson, Pro Hac Vice, The Weiser Law Firm, P.C., West Conshohocken, PA, Robert A. Magnanini, Stone & Magnanini LLP, Berkeley Heights, NJ, Ross M. Wolfe, Pro Hac Vice, Kang Haggerty and Fetbroyt LLC, Philadelphia, PA, for Plaintiffs.
David S. Rosenbloom, Pro Hac Vice, McDermott Will & Emery LLP, Chicago, IL, Paul Whitfield Hughes, III, Andrew A. Lyons-Berg, Jennifer Butler Routh, McDermott Will & Emery LLP, Washington, DC, Edward Diskant, Pro Hac Vice, McDermott Will & Emery, New York, NY, Shamis N. Beckley, Cooley LLP, Boston, MA, for Defendant.
After the court dismissed his First Amended Complaint, Relator Richard Gardner filed a Second Amended Complaint re-alleging that Defendant Vanda Pharmaceuticals, Inc. caused the submission of numerous false claims to the Medicare and Medicaid programs via the promotion and marketing of two of its drugs, Fanapt and Hetlioz. Relator asserts claims under the federal False Claims Act and 31 analogous state laws. Neither the United States nor any state chose to intervene. Before the court is Defendant's motion to dismiss the Second Amended Complaint. For the reasons that follow, the court denies the motion.
Defendant Vanda Pharmaceuticals, Inc. ("Vanda") is a pharmaceutical manufacturer based in Washington, D.C. Second Am. Compl., ECF No. 47 [hereinafter SAC], ¶ 9. Relator worked for Vanda as a regional business leader from November 2015 until August 2016. Id. ¶ 6. Relator's territory included Illinois, Wisconsin, Michigan, Ohio, western Pennsylvania, West Virginia, and Indiana. Id. Regional business leaders are responsible for managing Vanda's sales force. Id. ¶ 110. Relator asserts that his claims are confirmed by another regional business leader, Jeff Bourgeois. Id. ¶ 105. Bourgeois worked at Vanda from November 2015 through June 2018. Id. At different times during his tenure at Vanda, Bourgeois's territory included Louisiana, Arkansas, Texas, and Oklahoma. Id.
Vanda owns and markets the two drugs at issue in this case, Fanapt and Hetlioz. Id. ¶ 9. Fanapt is an "atypical antipsychotic agent" approved for "the acute treatment of schizophrenia in adults." Id. Hetlioz is a circadian regulator, which the FDA approved as a treatment for Non-24-Hour Sleep-Wake Disorder ("Non-24"), id. ¶ 12, a circadian rhythm sleep disorder found mostly in blind individuals, id. ¶¶ 12–13. In the main, Relator alleges that "[Vanda] has, since at least November 2015, engaged in a scheme to promote ... Fanapt and Hetlioz for off-label uses." Id. ¶ 104. "Off-label" refers to uses other than the ones for which the drug was approved. See Wash. Legal Found. v. Henney , 202 F.3d 331, 332 (D.C. Cir. 2000).
The FDA approved Fanapt solely to treat adult schizophrenia patients. Id. ¶¶ 9, 116. Other antipsychotics, by contrast, have a wider variety of uses. Id. ¶ 116. Relator's off-label promotion and messaging allegations regarding Fanapt mirror those in his First Amended Complaint. To increase sales, Relator alleges, Vanda's senior management implemented a plan to promote Fanapt for bi-polar disorder and "other conditions treated by competitors’ antipsychotic medications." Id. ¶ 117. "Specifically ..., Vanda trained its sales force to market Fanapt to providers as an effective substitute for other atypical antipsychotics that have more expansive indications and are commonly prescribed for bipolar disorder rather than schizophrenia." Id. ¶ 118; see also id. ¶¶ 120–146. According to Relator, Vanda was aware that "a significant portion of the prescriptions secured by its sales force were for off-label uses." Id. ¶ 119.
Vanda also allegedly "targeted" competitors’ atypical antipsychotic drugs by setting its representatives’ sales goals for Fanapt on par with other antipsychotic drugs. Id. ¶¶ 147–172. As part of that strategy, Vanda provided "target lists" to its sales representatives, which featured providers who prescribed other atypical antipsychotics. Id. ¶ 163. All the providers on the target lists had at least a few schizophrenic patients, id. ¶ 164, but according to Relator, "the target lists were not useful, as they were in place solely to shield [ ] Vanda from liability, and as a result nearly all of the sales representatives relied almost exclusively on the target lists they personally created," as Vanda's provided lists would not allow representatives to meet sales expectations, id. ¶ 166. Vanda's target lists did not differentiate between providers prescribing atypical antipsychotics for schizophrenia versus other conditions. Id. ¶¶ 167–168. Vanda also declined to remove physicians with no schizophrenic patients from its target lists, even when provided the means to do so, and continued to compensate its sales representatives for off-label prescriptions. Id. ¶ 168. Vanda incentivized and encouraged its sales force to call on doctors to prescribe Fanapt for off-label purposes. Id. ¶¶ 169–171. Finally, internal Fanapt sales projections included off-label prescriptions, Relator says, and Vanda refused to change those projections even when, for example, the Indiana Medicaid program changed its coverage policy so that it no longer reimbursed for off-label uses. Id. ¶¶ 173–175.
Additionally, Vanda allegedly promoted Fanapt for off-label use in pediatric patients. See id. ¶¶ 177–190. As evidence, Relator points to target lists, which include child psychiatrists. See id. "The fact that Vanda included child psychiatrists in its targets lists demonstrates that [Vanda] intended its sales representatives to promote Fanapt to child psychiatrists," as did its failure to remove them from those lists or to stop sales representatives from calling on them to prescribe Fanapt. Id. ¶¶ 184, 186.
Hetlioz is a circadian regulator that is FDA-approved to treat only Non-24. Id. ¶ 12. Non-24 is a serious, rare circadian rhythm disorder ("CRD") that affects a significant portion of totally blind individuals who, due to their lack of light perception, cannot reset their body clocks to the 24-hour day. Id. ¶ 244. Approximately 90,000 totally blind individuals suffer from Non-24. Id. Among sighted individuals, Non-24 is extremely rare. Id. ¶ 246. In 2010, the FDA granted "orphan drug" status to Hetlioz to treat Non-24 in blind patients without light perception. Id. ¶ 242.1 On January 31, 2014, Vanda announced that the FDA had approved Hetlioz 20 mg capsules for treatment of Non-24. Id. Although initially limiting Hetlioz's approval to treatment for Non-24 in blind populations, the FDA later corrected that limitation, allowing Hetlioz to be prescribed to treat sighted individuals with Non-24. Id. ¶ 15.
In his Second Amended Complaint, Relator emphasizes a new, alternative theory of false claims liability regarding Hetlioz. Previously, Relator alleged that Vanda created a marketing scheme intended to produce off-label prescriptions "beyond Hetlioz's sole indication of Non-24." First Am. Compl., ECF No. 20, ¶ 207. "Vanda positioned Hetlioz as a treatment option for all sleep disorders caused by circadian rhythm disruption." Id. (emphasis added). The court rejected that theory for lack of falsity "due to pervasive pre-authorization requirements for the drug," which require physicians to identify the diagnosis for which Non-24 is being prescribed before payment is authorized. United States ex rel. Gardner v. Vanda Pharms., Inc. (Gardner I ), No. 17-cv-00464 (APM), 2020 WL 2542121, at *12 . Put another way, the court found that claims approving the off-label use of Hetlioz—i.e., for diseases other than Non-24—were not plausibly false if physicians were required as part of a pre-approval process to disclose a patient's diagnosis. Now, Relator has amended his Complaint to allege a theory in the alternative: that Vanda "illegally promoted Hetlioz by misrepresenting Non-24 to encompass several additional CRDs, thereby expanding the potential patient population, to mislead prescribers, mainly psychiatrists, into believing their patients had Non-24, when in actuality they did not." SAC ¶ 243. In other words, Relator's new theory is one of fraudulent inducement: Vanda caused physicians to incorrectly diagnose patients with Non-24 and prescribe them Hetlioz.2 Relator alleges that Vanda "misled prescribers to believe that if certain broad criteria were met (i.e. , the criteria for any one of a host of [Circadian Rhythm Sleep-Wake Disorders] generally), then a Non-24 diagnosis (and prescription for Hetlioz) was proper." Id. ¶ 275. "As a result, unsuspecting clinicians misdiagnosed patients and prescribed Hetlioz, thinking they had Non-24, when they did not." Id.
To achieve this end, Relator alleges, Vanda focused heavily on "educating" prescribers, particularly psychiatrists, in the hope that this "education" would hoodwink them into concluding that their sighted patients suffered from Non-24, notwithstanding the low incidence of Non-24 among sighted individuals. Id. According to Vanda's CEO, "2 out of every 3 Hetlioz prescriptions come from psychiatrists and are written for sighted patients." Id. ¶ 262.
Vanda provided its sales team with educational materials purporting to contain the Diagnostic and Statistical Manual of Mental Disorders ("DSM-5") identification and diagnostic criteria for Non-24. Id. ¶ 276. The DSM-5 is a manual published by the American Psychiatric Association and is one of the primary resources used in the field of psychology to classify and define mental health disorders. See id. The DSM-5 discusses 22 broad categories of disorders that are broken down into...
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