United States v. Mckesson Corp.
| Decision Date | 04 February 2019 |
| Docket Number | 12-CV-6440 (NG) (LB) |
| Parties | UNITED STATES OF AMERICA, THE STATES OF CALIFORNIA, COLORADO, CONNECTICUT, DELAWARE, DISTRICT OF COLUMBIA, FLORIDA, GEORGIA, HAWAII, ILLINOIS, INDIANA, IOWA, LOUISIANA, MARYLAND, MASSACHUSETTS, MICHIGAN, MINNESOTA, MONTANA, NEVADA, NEW HAMPSHIRE, NEW JERSEY, NEW MEXICO, NEW YORK, NORTH CAROLINA, OKLAHOMA, RHODE ISLAND, TENNESSEE, TEXAS, VERMONT, VIRGINIA, WASHINGTON, WISCONSIN, THE CITY OF CHICAGO, and THE CITY OF NEW YORK ex rel. OMNI HEALTHCARE INC., Plaintiffs, v. MCKESSON CORPORATION, MCKESSON SPECIALTY CARE DISTRIBUTION CORPORATION, MCKESSON SPECIALTY DISTRIBUTION LLC, MCKESSON SPECIALTY CARE DISTRIBUTION JOINT VENTURE, L.P., ONCOLOGY THERAPEUTICS NETWORK CORPORATION, ONCOLOGY THERAPEUTICS NETWORK JOINT VENTURE, L.P., US ONCOLOGY, INC., and US ONCOLOGY SPECIALTY, L.P., Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Relator Omni Healthcare Inc. ("Omni") brings this qui tam action on behalf of the United States, 30 states, the District of Columbia, and the cities of New York and Chicago against McKesson Corporation ("McKesson") and 7 of McKesson's corporate subsidiaries (collectively "defendants") alleging violations of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq., analogous state statues, and the common law. Defendants move to dismiss the Second Amended Complaint ("SAC") in its entirety under Federal Rule of Civil Procedure 12(b)(6), principally arguing that the FCA's "first-to-file" provision bars the action. Secondarily, defendants argue that any claims involving submissions of false claims by an entity another than Omni should be dismissed as not plead with sufficient particularity, as required under Rule 9(b). Finally, defendants argue that certain claims should be dismissed because they fail to state a claim for relief, and/or are time barred, and/or Omni lacks standing to assert them. For the following reasons, defendants' motion is granted in part and denied in part.
The following facts are drawn from the SAC and are assumed to be true for the purposes of this motion.
Relator Omni alleges that the defendants have engaged in misconduct in the use of "overfill" in vials of injectable drugs intended for the treatment of cancer patients. "Overfill" is the amount of a drug in excess of the amount indicated on the label. Manufacturers of injectable drugs must include some amount of overfill to ensure that the medical provider administering the drug is able to withdraw a full dose from the vial. The central allegation in this action is that defendants intentionally broke into vials of injectable drugs, harvested the dosage and overfill, and then sold syringes, including the overfill, to non-defendant medical providers who wrongfully billed government programs for the overfill. As detailed below, relator Omni alleges that the defendants' conduct not only caused the submission of fraudulent claims, including by Omni itself, but also had negative consequences for patient safety, resulted in the distribution of adulterated and misbranded drugs, and provided an unlawful kickback to medical providers who purchased prefilled syringes. The drugs at issue in this case include Aloxi, Procrit, Aranesp, Neupogen, Taxotere, and Kytril in both the brand and generic forms (the "Oncology Drugs"). Defendants engaged in this conduct from 2001 through at least 2010.
Relator Omni is a professional medical company based in Florida. Through its principals, who are physicians, Omni practices internal medicine with subspecialties in hematology and oncology and regularly treats cancer patients. In connection with its treatment of cancer patients, Omni purchases injectable drugs from pharmaceutical distributors and wholesalers.
Defendant McKesson is a Delaware corporation headquartered in California. McKesson is one of the largest pharmaceutical distributors in North America.
Defendant US Oncology, Inc. is a Delaware corporation headquartered in Texas that provides drug distribution and specialty pharmacy services. McKesson purchased US Oncology, Inc. and its subsidiary, US Oncology Specialty, L.P. in December 2010. US Oncology Specialty, L.P., is a pharmaceutical distributor specializing in oncology drugs.
The remaining defendants are other subsidiaries of McKesson. McKesson Specialty Care Distribution Corporation ("McKesson Specialty") is a health care services company that distributes medical supplies and pharmaceutical products to the health care industry, including to specialty medical providers such as oncologists. McKesson Specialty is the successor to defendant McKesson Specialty Care Distribution Joint Venture, L.P., which is itself the successor-in-interest to defendant Oncology Therapeutics Network Joint Venture, L.P. Defendant Oncology Therapeutics Network Corporation ("OTN") was a specialty pharmaceutical distribution corporation that acted as a general partner of Oncology Therapeutics Network Joint Venture, L.P. In October 2007, McKesson acquired all outstanding shares of OTN and integrated OTN with its existing businesses.
Each of the Oncology Drugs was manufactured by an original manufacturer, whose conduct in producing, handling, packaging, and labeling its drug products was subject to a comprehensive regime of regulation. The following companies manufactured the drugs at issue in this case: Aloxi was manufactured by Eisai, Inc.; Aranesp and Neupogen were manufactured by Amgen, Inc.; Procrit was manufactured by Ortho Biotech, Inc.; Kytril was manufactured by Roche Pharmaceuticals; and Taxotere was manufactured by Sanofi Aventis.
In general, the original manufacturers sold the Oncology Drugs they produced to wholesale distributors who provided the operational infrastructure—such as warehouse facilities, distribution vehicles, and inventory control systems—necessary to distribute the drugs further. The wholesale distributors sold the drugs either to pharmacies or directly to health care providers.
As wholesale distributors and specialty pharmacies in the oncology industry, defendants purchased the Oncology Drugs from the manufacturers and provided the Oncology Drugs to health care providers who administered them to patients and sought reimbursement from government programs. Defendant US Oncology, Inc. maintained affiliations with physicians and submitted its own claims for reimbursement on behalf of those physicians.
The government programs that reimbursed the claims included various federal medical assistance and health care programs and state-administered Medicaid programs. The state-administered programs were financed with a combination of federal and state funds. Although detailed in the SAC, the specifics of each program are not relevant to the resolution of the present motion. For all of the programs at issue, medical services and supplies were reimbursable only if they represented expenses actually incurred by a health care provider. Because health care providers incurred no costs for overfill, it was not reimbursable. Additionally, only FDA-approved drugs were reimbursable. Adulterated or misbranded drugs were not reimbursable.
The Oncology Drugs were subject to regulation by the U.S. Food and Drug Administration ("FDA"), which administers the Food, Drug and Cosmetic Act ("FDCA"), 21 U.S.C. §§ 301 et seq. and promulgates regulations relating to the approval, manufacture, labeling, and distribution of drugs. Before a new drug may be marketed in the United States, the FDA must approve the drug as safe and effective for its intended use. The sponsor of a new drug makes a formal application to the FDA to approve the new drug for use in the United States by submitting, in the case of conventional drugs, a New Drug Application ("NDA"), under 21 U.S.C. § 355(b)(1), or, in the case of biologic drugs, a Biologics License Application ("BLA"), under 42 U.S.C. § 262(a). An NDA must include a description of the methods used in, and the facilities and controls used for, the drug's manufacture, processing, and packaging. The FDA also reviews a new drug's labeling information and container closure system as part of an NDA. Similarly, a BLA must include information concerning manufacturing methods and a sample of the product's label, container, and closure. 21 C.F.R. § 601.2(a). Once it approves a product for marketing, the FDA requires that manufacturers notify it of changes in the conditions established in the NDA or BLA.
The FDA publishes Current Good Manufacturing Practices ("CGMPs") which set forth minimum requirements for processing, packing, and holding drugs. The CGMPs provide standards for, among other things, the personnel engaged in quality control, the maintenance of manufacturing facilities and equipment, and the testing of in-process drugs. Drug manufacturers demonstrate compliance with the CGMPs through written documentation subject to FDA review. Drugs that are not manufactured in compliance with the CGMPs are deemed to be adulterated.
The FDA also regulates repackaging of drugs. Repackaging differs from drug compounding practiced by licensed pharmacists, which is the practice of mixing a drug to create a medication tailored to an individual patient. Drug repackagers must register with the FDA and repackaged drugs are generally subject to the regulations described above, including the CGMPs. When repackagers manipulate drugs beyond the approved intended uses, it results in new products whose safety and effectiveness have not been established, and thus the new drug lacks whatever approval the original drug may have had.
The United States Pharmacopeial Convention is a scientific non-profit organization that publishes the United States Pharmacopeia ("USP"). The USP establishes professional standards for the identity, strength, quality, and purity of drugs, as well as...
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