Recently the U.S. Department of Justice (DOJ) issued a statement that it had intervened in a False Claims Act (FCA) case against Insys Therapeutics, Inc. and consolidated five separate qui tam cases into one case, U.S. ex rel Guzman v. Insys Therapeutics, Inc., filed in the U.S. District Court for the Central District of California. The complaint revealed that multiple states—California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Michigan, Minnesota, Montana, Nevada, Massachusetts, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, and Washington—as well as the District of Columbia, have also joined the case.
In this post, I will be focusing on the intersection of off-label communications with government enforcement of health care fraud through the False Claims Act. Over the past eight years, the U.S. Department of Justice (“DOJ”) has been particularly aggressive in using the False Claims Act to pursue recoveries from individuals, health care providers, and drug manufacturers that participate in federal health benefit programs. In fact, from 2009 to 2016, DOJ collected $19.3 billion from health care False Claims Act settlements and judgments, with $2.5 billion recovered in fiscal year 2016, alone. (More DOJ false claims statistics can be found here.) DOJ’s enforcement efforts are not solely targeted against garden variety billing fraud, but also involve claims arising from alleged violations of health care regulatory requirements. Among other things, the DOJ has been targeting claims for reimbursement for off-label uses of regulated products. DOJ’s aggressive policy of holding manufacturers accountable for off-label claims under the False Claims Act is entirely consistent with FDA’s stance on off-label communications as described in the January memo. However, recent court interpretations of off-label communications as protected First Amendment speech, as well as interpretations of the causality component of False Claims Act claims, have apparently caused DOJ to reconsider its strategy with respect to such cases. Continue Reading The Past, Present, and Future of Government Regulation of Off-Label Communications – Part 5
On Monday, FDA issued a final rule to amend FDA’s established definitions of “intended use” for drugs and devices, the primary consideration in determining whether a product is regulated for a particular use and what regulations apply. The final rule also excludes products derived from tobacco from regulation as “tobacco products” if such products are intended for use as a drug, device, or combination product. (We’ll be discussing the tobacco products portion of the rule in a separate post.) While this rule could have a profound effect on marketing schemes for tobacco products, drugs, and medical devices, Congress’s passage of the Midnight Rules Relief Act could eliminate the rule before it ever takes effect.
On Monday, ML Strategies (MLS) posted its weekly Health Care Update, which provides information from the previous week on a variety of important health care-related topics like implementation of the Affordable Care Act, Congressional initiatives affecting the health care industry, and state and federal health regulatory developments.
In this week’s Update, MLS highlights two major developments for prescription drug manufacturers (among other topics):
- the Medicaid Outpatient Drug Rule went to the White House’s Office of Management and Budget for final review; and
- a federal district court judge ruled in Amarin Pharma, Inc. v. FDA that a drug manufacturer could market to health care professionals off-label uses for a prescription drug provided the manufacturer’s statements were truthful and non-misleading.
The Medicaid Outpatient Drug Rule could set standards for the Medicaid Drug Rebate Program and also provides for significant changes to what is and is not included in the Average Manufacturer Price (AMP) calculation, as well as how “best price” would be calculated for rebates. Modifying the AMP calculation for the Medicaid program appears to be a priority for Congress, as the House also expressed interest in this issue when it passed the 21st Century Cures Act.
The Amarin Pharma decision is another significant victory for the drug industry (following the 2012 United States v. Caronia decision that drug manufacturers should be allowed to share and discuss with providers materials that support off-label claims). Industry stakeholders must now wait to see how the FDA will react to Amarin Pharma and whether it will apply the decision in its off-label oversight framework.
To access past MLS Health Care Updates click here.
Written by Ellyn L. Sternfield
After the Second Circuit’s split decision in U.S. v. Caronia, holding that truthful off-label marketing is protected under the First Amendment and thus cannot be prosecuted under the misbranding provisions of the Food Drug and Cosmetic Act (FDCA), I predicted in a previous post that the government would file a motion for rehearing and would eventually take the case to the U.S. Supreme Court. But the government has apparently has decided to take no action.
Abbott Laboratories (Abbott), an Illinois company, will pay over $1.6 billion in penalties to the federal government and several states related to its alleged illegal promotion of the prescription drug Depakote for off-label uses, as announced by the settling parties on May 7, 2012. Specifically, the government has alleged that the Company:
- marketed Depakote, in nursing homes for the control of agitation and aggression in elderly dementia patients between 1998 and 2006, a use not approved by the the Food and Drug Administration,
- unlawfully promoted Depakote for a broader set of unapproved, non-medically accepted uses for which Medicare and Medicaid could not reimburse providers between 1998 and 2008, and
- made false and misleading statements about the safety, efficacy, dosing and cost-effectiveness of Depakote for some of these unapproved uses.
The proposed settlement includes the following terms:
Civil False Claims Act (FCA) violations: $800 million
- Five-year Corporate Integrity Agreement
- Medicare and other federal health care programs: $291 million
- Medicaid: $239 million to the states and $270 million to the federal government
Criminal Food, Drug and Cosmetic Act (FDCA) violations: $700 million
- Five-year term of probation for pleading guilty to misbranding
- Federal Fine: $500 million
- Criminal Asset Forfeiture Penalties: $198.5 million
- Investigative Costs to the Virginia Medicaid Fraud Control Unit (MFCU): $1.5 million
State Consumer Protection Laws: $100 million
The civil FCA component of the settlement resolves allegations presented in four whistleblower qui tam actions filed in the Western District of Virginia in late 2007; the whistleblowers who filed the suits will share an award of $84 million out of the settlement proceeds. Forty-four states and the District of Columbia will share the proceeds of the state consumer protection settlement.
The settlement is significant for at least two reasons. First, according to the Virginia Attorney General and the Department of Justice, the FDCA component of the settlement is the second largest payment by a drug company for such conduct. Second, the $100 million state consumer protection settlement is the largest settlement paid by a drug company under those laws. This settlement is the latest in a trend toward use of state consumer protection laws to increase recoveries to states, as evidenced most recently by the $1.1 billion judge’s award after a jury trial against a Johnson & Johnson subsidiary for violating the Arkansas Deceptive Trade Practices Act. Moreover, this settlement – specifically, the large number of states that will share in the monetary proceeds – demonstrates that federal and state governments continue to cooperate with each other to pursue health care enforcement cases.