United States v. Alpharma, Inc.

• Decision Date: 05 March 2013
• Docket Number: Civil Action No. ELH–10–1601.
• Citation: 928 F.Supp.2d 840
• Parties: UNITED STATES, et al., ex rel. Jerome PALMIERI, Relator, Plaintiffs, v. ALPHARMA, INC., et al., Defendants.
• Court: U.S. District Court — District of Maryland

928 F.Supp.2d 840

UNITED STATES, et al., ex rel. Jerome PALMIERI, Relator, Plaintiffs,

v.ALPHARMA, INC., et al., Defendants.

Civil Action No. ELH–10–1601.

United States District Court, D. Maryland.

March 5, 2013.

Anna C. Dover, Milberg LLP, New York, NY, Gilbert F. Shelsby, Jr., Shelsby and Leoni, Wilmington, DE, Jaime Walker Luse, John Bucher Isbister, Tydings and Rosenberg LLP, Jamie M. Bennett, Thomas F. Corcoran, Office of The United States Attorney, Baltimore, MD, for Plaintiffs.

State of California, pro se.

State of Delaware, pro se.

State of Florida, pro se.

State of Georgia, pro se.

State of Hawaii, pro se.

State of Illinois, pro se.

State of Indiana, pro se.

State of Louisiana, pro se.

State of Michigan, pro se.

State of Montana, pro se.

State of Nevada, pro se.

State of New Hampshire, pro se.

State of New Jersey, pro se.

State of New Mexico, pro se.

State of New York, pro se.

State of Oklahoma, pro se.

State of Rhode Island, pro se.

State of Tennessee, pro se.

State of Texas, pro se.

State of Wisconsin, pro se.

The District of Columbia, pro se.

Brigham Cannon, Michele Elaine Gutrick, Kirkland and Ellis, Washington, DC, Henry J. DePippo, Steven Menashi, Kirkland and Ellis LLP, New York, NY, Jonathan C. Bunge, Kirkland and Ellis LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION

ELLEN LIPTON HOLLANDER, District Judge.

Jerome Palmieri, the relator, filed this qui tam action on behalf of the United States of America and various individual states (collectively, the “ Qui Tam States”) ¹ against his employers, Alpharma, Inc. and Alpharma Pharmaceuticals, LLC (collectively, “Alpharma”); King Pharmaceuticals, Inc. (“King”); and Pfizer, Inc. (“Pfizer”), defendants, ² pursuant to the False Claims Act (“FCA”), 31 U.S.C. §§ 3729 et seq. and analogous state statutes of the Qui Tam States. These statutes permit a private party, as relator, to sue on behalf of the government to recover damages against defendants who have caused fraudulent claims for payment to be submitted against the public fisc. As an incentive to bring such suits, a successful relator is entitled to share in the government's recovery from the defendants. See generally ACLU v. Holder, 673 F.3d 245, 246–51 (4th Cir.2011) (describing history and current provisions of FCA).³

This suit concerns defendants' marketing of Flector Patch, a topical pain medication delivered by a transdermal patch, which was approved by the United States Food and Drug Administration (“FDA”) for the treatment of “ ‘acute pain due to minor strains, sprains, and contusions.’ ” Complaint ¶ 125 (citation omitted). Federal and state health care programs, such as Medicaid and Medicare, that pay for prescription medications generally do not permit reimbursement for a medication that is prescribed for a so-called “off-label” use— i.e., a use other than the use for which the medication has been approved by the FDA. Mr. Palmieri alleges that defendants engaged in a program of aggressive and illegal marketing of Flector Patch to physicians. The alleged marketing program encouraged physicians, sometimes by way of unlawful “kickbacks,” to prescribe Flector Patch to their patients, including prescriptions for off-label uses and at excessive dosages. According to the relator, some of the resulting off-label, excessive, or unlawfully-induced prescriptions of Flector Patch were submitted to federal and state government agencies for reimbursement.

The relator filed his Complaint (ECF 2) on April 20, 2010,⁴ under seal, pursuant to the initial sealing provisions of the FCA, in order to provide time to the United States and the Qui Tam States to decide whether they wished to intervene. See31 U.S.C. § 3730(b)(2).⁵ None of the governmental plaintiffs intervened, and the suit was unsealed on July 5, 2011. See ECF 20. On October 25, 2011, the relator filed an Amended Complaint (ECF 43), which is the operative pleading.

Defendants have moved to dismiss (ECF 70), arguing that a provision of the FCA known as the “first-to-file” rule precludes this Court from exercising subject matter jurisdiction. In the alternative, they contend that the Amended Complaint fails to state a claim on which relief can be granted, in light of the heightened pleading requirements applicable to fraud claims under Fed.R.Civ.P. 9(b). In their view, the Amended Complaint does not identify any specific instance in which a particular false claim was submitted to the government.

The relator has filed an Opposition (ECF 71), and defendants have filed a Reply (ECF 72). No hearing is necessary to resolve the issues. See Local Rule 105.6. For the reasons that follow, I will grant the Motion. In particular, I conclude that the Court possesses subject matter jurisdiction, but that the Amended Complaint fails to state a claim upon which relief can be granted under the Rule 9(b) standard, as articulated by the Fourth Circuit.

Background⁶

Defendants manufacture and market Flector Patch, a transdermal patch that delivers, via absorption through the patient's skin, a topical application of 1.3% diclofenac epolamine. See Amended Complaint ¶¶ 88–89. Diclofenac epolamine is a non-steroidal anti-inflammatory drug (“NSAID”), of the same family as ibuprofen and naproxen. See id.Flector Patch is the only prescription NSAID topical patch on the market. Id. ¶ 89.

The FDA approved Flector Patch for prescription use in December 2007, id. ¶ 92, as a “ ‘topical treatment of acute pain due to minor strains, sprains, and contusions.’ ” Id. ¶ 94 (citation omitted in original). The use was approved for up to fourteen days. Id. ¶¶ 101, 114–15. Like other NSAIDs, Flector Patch entails risks of cardiovascular and gastrointestinal side effects that increase the longer the drug is used. Id. ¶ 91. Therefore, Flector Patch's FDA-approved label contains a warning that a patient should use only “ ‘the lowest effective dose for the shortest duration consistent with individual treatment goals.’ ” Id. (citation omitted in original).

Notably, Flector Patch is marketed in Europe under the name “Flector Tissugel,” and is approved in Europe for treatment of chronic pain and inflammatory conditions such as osteoarthritis, rheumatoid arthritis, menstrual pain, bursitis, ankylosing spondylitis, and tendonitis. Id. ¶ 99. However, defendants have not sought FDA approval in the United States for these indications. Id.

Mr. Palmieri, the relator, has been employed since 2001 as a sales representative for Alpharma (and later, King and Pfizer), to market defendants' prescription pain medications, including Flector Patch, to physicians who treat chronic pain. Amended Complaint ¶ 23. He alleges that defendants engaged in a comprehensive scheme to promote the prescription of Flector Patch for off-label uses and in excessive dosages.

It is salient that federal law does not prohibit a physician from prescribing an approved drug for a non-approved, or “off-label,” use. See21 U.S.C. § 396. However, “it is unlawful for a manufacturer to introduce a drug into interstate commerce with an intent that it be used for an off-label purpose, and a manufacturer illegally ‘misbrands' a drug if the drug's labeling includes information about its unapproved uses.” Washington Legal Found. v. Henney, 202 F.3d 331, 332–33 (D.C.Cir.2000) (citing statutes) (internal citations omitted). Furthermore, “a manufacturer's direct advertising or explicit promotion of a product's off-label uses is likely to provoke an FDA misbranding or ‘intended use’ enforcement action.” Id. at 333;see also21 C.F.R. § 202.1(e)(4)(ii) (stating that an advertisement for an FDA-approved prescription drug generally “may recommend and suggest the drug only for those uses contained in the [FDA-approved] labeling thereof”). Therefore, the relator contends that defendants' scheme to promote off-label use of Flector Patch was unlawful.

The alleged unlawful scheme had many facets, according to the relator. For one, defendants allegedly instructed their sales representatives to market Flector Patch aggressively to physicians, such as pain management specialists, rheumatologists, and neurologists, who by the nature of their specialties treated only chronic pain and not the acute, localized pain for which Flector Patch was approved. See Amended Complaint ¶¶ 189–96. In addition, defendants promoted Flector Patch for continuous, rather than short-term use. See id. ¶ 201. Defendants specifically promoted a 60–patch/30–day prescription as the standard, appropriate prescription for Flector Patch, despite its FDA approval for usage for up to fourteen days. See id. ¶¶ 201–17. Defendants instructed their sales representatives to discourage shorter prescriptions as “subtherapeutic,” and to cease promotional efforts toward physicians, such as emergency room and urgent care physicians, who routinely treat patients for acute pain and who often resisted prescribing Flector Patch at the 60–patch level. See id. Defendants also marketed Flector Patch as an alternative to other prescription medications that are only FDA-approved for the treatment of chronic pain. See id. ¶¶ 228–43.

Furthermore, Mr. Palmieri alleges that some of defendants' promotional activities with respect to Flector Patch violated the Anti–Kickback Statute, 42 U.S.C. § 1320a–7b(b). In pertinent part, the Anti–Kickback Statute provides criminal penalties for

knowingly and willfully offer[ing] or pay[ing] any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person ... to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program.

Id. § 1320a–7b(b)(2)(A).

Specifically, the relator avers that defendants distributed benefits to physicians who were high prescribers of Flector Patch through membership in a “Flector Patch Speakers' Bureau” and “Flector Patch Speaker's...