United States ex rel. Louderback v. Sunovion Pharm.
| Docket Number | 17-cv-1719 (ECT/LIB) |
| Decision Date | 27 November 2023 |
| Parties | United States of America ex rel. Scott Louderback, Relator, v. Sunovion Pharmaceuticals, Inc., Defendant. |
| Court | U.S. District Court — District of Minnesota |
Jeffrey G. Goulder and Michael Vincent, Stinson LLP, Phoenix AZ, and Sharon Robin Markowitz, Stinson LLP, Minneapolis, MN for Relator Scott Louderback.
Chad A. Blumenfield, United States Attorney's Office Minneapolis, MN for United States of America.
John P. Bueker and Sandra H. Masselink, Ropes & Gray LLP, Boston, MA, and Joseph T. Dixon, III and Devin Driscoll, Fredrikson & Byron, P.A., Minneapolis, MN, for Defendant Sunovion Pharmaceuticals, Inc.
Defendant Sunovion Pharmaceuticals manufactured a drug called Brovana. In this qui tam lawsuit brought under the federal False Claims Act, Relator Scott Louderback claims that Sunovion caused pharmacies to submit fraudulent claims for Brovana to Medicare. Louderback's fraud theory proceeds in three steps: (1) he alleges that Sunovion paid rebates to pharmacies in exchange for the pharmacies' agreements to arrange for Medicare patients to receive Brovana prescriptions in situations where the patients would have received a different drug or therapy; (2) this rebates-for-prescriptions arrangement violated the federal Anti-Kickback Statute; and (3) by law, a claim that includes items or services resulting from a violation of the Anti-Kickback Statute in turn violates the False Claims Act.
Sunovion seeks dismissal on several grounds under Rules 12(b)(6) and 9(b). The motion will be granted because the operative Amended Complaint does not contain particular allegations showing that false claims resulted from Sunovion's violations of the Anti-Kickback Statute. The motion will not be granted on other grounds Sunovion raised. These include Sunovion's arguments that the False Claims Act's public-disclosure bar applies, that the alleged practices fall within the Anti-Kickback Statute's “discount” safe harbors, and that the Amended Complaint fails to allege scienter. Each of these issues will be addressed in turn. First, the facts.
I[1]
Relator is a pharmacist, and Defendant is a pharmaceutical company. Louderback is a pharmacist and serves as President of Neighborhood LTC Pharmacy, Inc. Am. Compl. [ECF No. 92] ¶¶ 1, 20, 61. Sunovion is a pharmaceutical company that manufactured a prescription drug called Brovana. Id. ¶¶ 1, 37.[2] Brovana is used to treat chronic obstructive pulmonary disease (“COPD”). Am. Compl. ¶ 1. According to the Amended Complaint, Brovana is a “nebulized long-acting beta-agonist (‘LABA') inhalation solution.” Id. ¶ 37.[3]
The COPD therapy market includes several competitors. The Amended Complaint describes the market for COPD therapies. “Brovana is one of two branded nebulized LABA drugs currently on the market.” Id. ¶ 38. “The other is Perforomist, which is manufactured by Mylan, Inc.” Id. ¶ 39. Generic versions of these two drugs have been available since 2022. Id. ¶ 40. In addition to these nebulized LABA drugs, non-nebulized LABA therapies and non-LABA therapies are available. Id. ¶¶ 41, 43. These non-nebulized and non-LABA therapies are less expensive than Brovana and Perforomist and “are often appropriate for patients [who are] prescribed Brovana.” Id. ¶¶ 45-46.
Medicare spends a lot on Brovana. Many Medicare beneficiaries are prescribed Brovana, and through Medicare Part B, the United States government spends a lot for these prescriptions. More than ten percent “of the Medicare population has been diagnosed with COPD, and many of these persons are treated with Brovana.” Id. ¶ 2. In 2010, more than $70 million was spent on Brovana through Medicare, and more than ninety “percent of the spending on Brovana was on Medicare beneficiaries.” Id.
Considering just pharmacies' acquisition cost and Medicare's reimbursement rate, pharmacies would lose money on every Medicare-reimbursed Brovana prescription. Ordinarily, Medicare pays eighty percent of a drug's retail price, leaving the beneficiary to pay the remaining twenty percent. Id. ¶ 58. For Brovana, these amounts combined are less than what pharmacies pay to purchase the drug. Id. ¶ 59. This is because Medicare has established a maximum price that pharmacies may charge Medicare for Brovana, and Sunovion “sells Brovana at a wholesale price that exceeds” the maximum price established by Medicare. Id.
Beginning by at least November 2012, Sunovion addressed this problem by paying chargebacks or rebates to pharmacies that signed on to a “Sunovion Part B Agreement.” Id. ¶ 68; Ex. B.[4] Three of the Agreement's terms are central to Louderback's claims. (1) The first-which Louderback calls the “dispense-as-written” provision-reads in relevant part as follows:
2.3 Prescription Fulfillment: Except as provided for below, Customer agrees to dispense as written all prescriptions for [Brovana] presented by Medicare Part B Participants. Customer pharmacists shall have the right, at all times during the term of this Agreement, to contact the physician for a Medicare Part B Participant and request that the prescription for [Brovana] be changed to an alternative therapy if, in the exclusive discretion of the Customer pharmacist, such a change is a matter of medical necessity and in the best health interest of the Medicare Part B Participant.
Id. Ex. B § 2.3. (2) The second prohibits “counterdetailing.” It reads: “As a condition to receiving discounts pursuant to this Agreement, Customer and its participating facilities and pharmacists must refrain from engaging in any counterdetailing activities directed at [Brovana].” Id. Ex. B § 5. According to Louderback, “counterdetailing” means “provid[ing] doctors and patients with positive information about Brovana's competitors.” Id. ¶ 9; see also id. ¶ 76 (defining “counterdetailing” to mean “any effort . . . to control drug costs by educating prescribing physicians on less expensive equivalent or generic alternatives”). (3) The third provision reads: “Customer agrees that Sunovion can identify Customer and utilize any Customer-approved trademark in all materials developed by Sunovion that identify all or a portion of the participants in this program.” Id. Ex. B § 5.
Louderback claims that these provisions reflect remunerations prohibited by the federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)(1). According to Louderback, though pharmacists ordinarily counsel physicians and patients regarding alternative drugs and therapies, Am. Compl. ¶¶ 47-56, § 2.3's “dispense-as-written” requirement and § 5's counterdetailing prohibition show that, in exchange for a rebate, signatory pharmacies “promise to recommend or arrange for physicians to prescribe, and patients to purchase, Brovana in circumstances in which [the pharmacies] would otherwise recommend or arrange for the prescribing or purchasing of another drug, ” Id. ¶ 89. And, Louderback claims, § 5's trademark-use provision amounts to an offer by Sunovion of “free promotional services” (in addition to a rebate) in consideration for signatory pharmacies' promises to promote the prescribing and purchase of Brovana. Id. In other words, Louderback alleges that under the Part B Agreement, Sunovion provides something of value (rebates and promotional services) “to pharmacies in exchange for their agreement to arrange for the prescription (by physicians), dispensing (by the pharmacists) and purchase (by patients and pharmacies) of Brovana in circumstances when, but for the [Part B] Agreement, they would prescribe, dispense, or purchase drugs manufactured by Brovana's competitors.” Id. ¶ 10.
The Amended Complaint includes some allegations describing Louderback's discovery of the Sunovion Part B Agreement. Louderback, “in his capacity as a pharmacist at Neighborhood LTC Pharmacy Inc., receives prescriptions for Brovana to be provided to Medicare Part B beneficiaries.” Id. ¶ 61. Knowing that Brovana's cost exceeded Medicare's reimbursement rate, Louderback asked “colleagues about how they were able to provide Brovana to Medicare Part B beneficiaries without suffering a financial loss.” Id. ¶ 62. One of these colleagues told Louderback about the Part B Agreement and explained that the Agreement was available through Sunovion's website. Id. ¶¶ 63-64. In September 2016, Louderback accessed the Part B Agreement through Sunovion's website and executed it on behalf of Neighborhood LTC Pharmacy. Id. ¶ 66. The Amended Complaint does not describe precisely what steps Louderback took to access the Sunovion Part B Agreement. It alleges the Agreement was “accessible to people who enter specific identifying information into the website, ” but it does not allege the nature or content of this identifying information. Id. ¶ 94(e). A screen shot of a Sunovion web page through which a person would have accessed the Part B Agreement is attached to the Amended Complaint. Id. Ex. A. This page explains that, if a user is a “qualified representative” of an organization, the user need only “click the ENROLL/SIGN IN button and create a login and password” and “complete the required information to request enrollment in the Program.” Id. The process, the web page explains, takes “approximately 20 minutes.” Id.
Louderback asserts four theories under the False Claims Act, 31 U.S.C § 3729, et seq., each derived from alleged violations of the Anti-Kickback Statute. (1) He alleges an “express certification” theory-i.e., that Sunovion “knowingly caused pharmacies to seek reimbursement from the government for Brovana” in contravention of the pharmacies' express certifications that their conduct and claims complied with applicable federal law, including the Anti-Kickback Statute. See Am. Compl....
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