United States v. Celgene Corp.

• Decision Date: 28 December 2016
• Docket Number: Case No. CV 10–03165–GHK (SSx)
• Citation: 226 F.Supp.3d 1032
• Parties: UNITED STATES of America, et al., ex rel. Brown v. CELGENE CORPORATION
• Court: U.S. District Court — Central District of California

226 F.Supp.3d 1032

UNITED STATES of America, et al., ex rel. Brown

v.CELGENE CORPORATION

Case No. CV 10–03165–GHK (SSx)

United States District Court, C.D. California.

Signed December 28, 2016

Brent A. Whittlesey, Linda A. Kontos, Office of the US Attorney, Jay Edward Smith, Gilbert And Sackman, Los Angeles, CA, Ali Matin, Michael Roy Williams, Ariana Seldman Hawbecker, Thomas H. Bienert, Jr, Bienert Miller And Katzman PLC, San Clemente, CA, John P. Fisher, Office of the Attorney General, San Diego, CA, Kerry Muldowney Ascher, Texas Office of the Attorney General, Austin, TX, Robert C. Stacy, II, California Department of Justice, Burbank, CA, Christopher P. Kenney, Richard A Harpootlian PA, Columbia, SC, Daniel J. Guttman, Reuben A. Guttman, Traci L. Buschner, Guttman Buschner and Brooks PLLC, Washington, DC, Justin S. Brooks, Guttman Buschner and Brooks PLLC, Philadelphia, PA, Nancy Gertner, Brookline, MA, Richard Harpootlian, Richard A Harpootlian PA, Columbia, SC, for Plaintiffs.

Karen P. Hewitt, Jones Day, San Diego, CA, Brian D. Hershman, Jason Corbitt Wright, Jones Day, Kimberly A. Dunne, Michelle Beth Goodman, Sean A. Commons, Sidley Austin LLP, Frank John Broccolo, Baute Crochetiere & Gilford LLP, Los Angeles, CA, Heidi A. Wendel, Toni–Ann Citera, Jones Day, New York, NY, for Celgene Corporation.

Presiding: The Honorable GEORGE H. KING, U.S. DISTRICT JUDGE

Proceedings: (In Chambers) Order re: Defendant's Motion for Summary Judgment (Doc. 325)

Defendant Celgene Corp. ("Celgene") moves for summary judgment on all claims asserted by Plaintiff–Relator Beverly Brown ("Brown") in her Third Amended Complaint. We have considered the parties' joint brief (Doc. 325), the authorities and record citations referenced therein, the joint statement of uncontroverted facts (Doc. 326), the United States' Statement of Interest ("SOI") and the response thereto (Docs. 328, 338), the State of Texas's SOI and the response and reply thereto (Docs. 340, 345 361), and the notices of supplemental authority filed by the parties (Docs. 342, 364–368). We deem this matter appropriate for resolution without oral argument. L.R. 7–15. We grant the motion in part and deny it in part.

I. BACKGROUND

Celgene is a pharmaceutical company. Two of its drugs are at issue in this case: Thalomid

and Revlimid. Thalomid first received FDA approval in July 1998 for treatment of erythema nodosum leprosum ("ENL"), a complication associated with leprosy. Doc. 329–58. In May 2006, Thalomid received a second approval for use (in combination with dexamethasone ) in patients with newly-diagnosed multiple myeloma ("MM"). Doc. 329–60.¹ Revlimid first received FDA approval in December 2005 for "the treatment of patients with transfusion dependent anemia due to low or intermediate–1 risk myelodysplastic syndromes ["MDS"] associated with a deletion 5qcytogenetic abnormality with or without additional cytogenetic abnormalities." Doc. 329–59.² In June 2006, the FDA approved Revlimid, in combination with dexamethasone, for MM patients who had received at least one prior therapy. Doc. 329–61. In June 2013, the FDA approved Revlimid in mantle cell lymphoma patients "whose disease has relapsed or progressed after two prior therapies, one of which included bortzezombid." Doc. 329–62.

Brown is a former Celgene employee. She was hired in April 2001 as an "Immunology Specialist," although she actually performed sales work. Doc. 333–48, ¶¶ 1, 15. In late 2007, Brown became concerned when her manager instructed her to call physicians' offices to ask them to change billing codes associated with prescriptions of Celgene's drugs. ¶¶ 49–57. Brown sent a letter to management to complain about this practice, which she believed was illegal. ¶ 58. Brown later contacted the FDA and legal counsel. ¶¶ 63–64. As a result of these contacts, Brown came to believe that many of the things she had been required to do at Celgene were unlawful. Id.

On April 27, 2010, Brown initiated this qui tam action against Celgene, on behalf of the United States, twenty-four states, the District of Columbia, and the City of Chicago. Doc. 1. These governmental entities declined to intervene. Doc. 54. The case was unsealed, and the complaint was served on Celgene on October 1, 2013. Doc. 58. Brown filed her Third Amended Complaint ("TAC") on February 5, 2014. Doc. 72. The TAC asserts two claims under the False Claims Act ("FCA"), 31 U.S.C. § 3729, and dozens of other claims under analogous state laws. On July 10, 2014, we denied Celgene's motion to dismiss the TAC, except with respect to three state-law claims, which we dismissed. Doc. 147. On August 29, 2016, Celgene filed this motion for summary judgment. Doc. 325.

The parties' positions are briefly summarized as follows: Brown's claims are predicated on the theory that Celgene engaged in an unlawful campaign to promote Thalomid and Revlimid, which included off-label promotion and payment of illegal kickbacks to physicians. According to Brown, Celgene's off-label promotion mostly involved direct contact with physicians, and was centered on cancer

. Although Celgene's drugs were not approved for any cancer use until 2005 and were approved for a narrow subset of cancers thereafter, the company began promoting Thalomid and Revlimid for a wide variety of cancers as soon as these drugs hit the market. Celgene paid kickbacks—in the form of speaker fees, paid clinical trials, advisory board positions, and authorship of ghost-written articles—to physicians in exchange for prescriptions of its drugs. Celgene's efforts were successful in causing physicians to prescribe Thalomid and Revlimid, and that some of the resulting prescriptions were submitted to, and paid by, Medicare, various state Medicaid programs, TRICARE, and the Department of Veterans Affairs ("VA"). Brown argues that Celgene is liable under the FCA and its state equivalents for these claims because claims for off-label prescriptions or prescriptions tainted by kickbacks are not reimbursable under the relevant programs.

Celgene argues that it did nothing wrong. In its view, off-label promotion is not illegal; in fact, truthful off-label promotion may be protected by the First Amendment. In any case, Brown cannot show that Celgene's promotional activities caused doctors to prescribe Thalomid and Revlimid; physicians exercise independent judgment in deciding what drug to prescribe, and there were legitimate medical reasons for a physician to prescribe these drugs off-label. Celgene disputes Brown's contention that the relevant government programs are required to reject claims for off-label prescriptions; it argues that the programs actually have discretion to reimburse off-label uses that are in a patient's best interest. Even if off-label claims are not reimbursable, Brown has not shown that this prohibition was material to the government or that Celgene knowingly violated the law. As to Brown's kickback claim, Celgene argues that all of the payments it made to physicians were for legitimate services.

II. LEGAL STANDARD

We may grant summary judgment only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). On a motion for summary judgment, the district court's "function is not ... to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id. at 249, 106 S.Ct. 2505.

The moving party bears the initial responsibility to point to the absence of any genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the nonmoving party has the burden of proof at trial, the moving party can carry its initial burden either by submitting affirmative evidence that there is not a triable, factual dispute or by demonstrating that the nonmoving party "fail[ed] to make a showing sufficient to establish the existence of an element essential to that party's case." Id. at 322, 106 S.Ct. 2548. The burden then shifts to the nonmoving party "to designate specific facts demonstrating the existence of genuine issues for trial."

In re Oracle Corp. Sec. Litig. , 627 F.3d 376, 387 (9th Cir. 2010) (citing Celotex Corp. , 477 U.S. at 324, 106 S.Ct. 2548 ). This means that the evidence is such that "a jury could reasonably render a verdict in the non-moving party's favor." Id. (citing Anderson , 477 U.S. at 252, 106 S.Ct. 2505 ). "The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson , 477 U.S. at 255, 106 S.Ct. 2505.

III. OFF–LABEL PROMOTION

The FCA imposes liability where a person "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a)(1)(A). To prevail under § 3729(a)(1)(A), a relator must prove: "(1) a false or fraudulent claim (2) that was material to the decision-making process (3) which defendant presented, or caused to be presented, to the United States for payment or approval (4) with knowledge that the claim was false or fraudulent." Hooper v. Lockheed Martin Corp. , 688 F.3d 1037, 1047 (9th Cir. 2012).

Brown argues that Celgene is liable under the FCA because it engaged in a systematic campaign to encourage doctors to write off-label prescriptions of Thalomid and Revlimid when it knew these prescriptions were not reimbursable under the relevant government programs but would nonetheless be submitted for reimbursement. Celgene argues that Brown cannot prove causation, falsity, materiality, or scienter, in that order.

A. Causation

Brown can establish causation by showing that (1) Celgene's promotional activities caused doctors to write off-label...