50 F. Supp. 3d 497
S.D.N.Y.2014Background
- Relator (former Novartis sales rep) alleged Novartis paid kickbacks via sham speaker events (lavish dinners, honoraria, inappropriate venues) to induce prescriptions of cardiovascular drugs, and separately alleged off-label promotion of Valturna. The United States and New York intervened on the kickback claims; the U.S. did not intervene on off-label claims.
- Plaintiffs attached extensive spreadsheets identifying specific prescriptions/claims (prescriber, drug, NDC, date, pharmacy, program, payment) and examples of repeated speaker events and prescribing increases after events.
- Novartis previously settled related FCA claims in 2010 and entered a Corporate Integrity Agreement; plaintiffs allege additional unreported and post-settlement misconduct.
- Novartis moved to dismiss (Rule 12(b)(6) and Rule 9(b)): attacking (a) pleading particularity of the kickback scheme and linked false claims; (b) falsity of Medicaid claims predating the 2010 AKS amendment; (c) relator’s off-label claims for lack of particularized false claims; and (d) several state-law timing and retroactivity issues.
- The Court evaluated pleading standards (Twombly/Iqbal), Rule 9(b) in FCA context, and Mikes’s express/implied certification framework for legal falsity; it denied most dismissal arguments as to kickbacks, dismissed federal off-label FCA claims, and limited certain state claims on statute-of-limitations grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the complaints plead the AKS-based kickback scheme with Rule 9(b) particularity? | U.S./NY/Relator: detailed description of sham speaker program, representative examples of speakers/attendees, prescribing increases, and spreadsheets of claims suffice. | Novartis: examples are few relative to nationwide scheme; reliance on internal/PhRMA policies is insufficient; scienter not pled. | Held: Plaintiffs pleaded the underlying AKS violations with sufficient particularity via representative examples and factual allegations; motion denied. |
| Must Relator's federal kickback claims be dismissed because the Government intervened? | Relator: his federal kickback claims are superseded but he retains party rights; dismissal is unnecessary. | Novartis: partial government intervention deprives relator of standing to maintain intervened claims. | Held: Government intervention superseded relator’s federal kickback claims; dismissal of Relator’s duplicative claims was unnecessary/moot — relator remains a party. |
| Are Medicaid claims submitted before the 2010 AKS→FCA amendment legally false absent express/implied certification? | U.S./NY: claims resulting from AKS violations were ineligible for payment; state regulations and provider certification make compliance a payment condition, so claims are legally false (implied/express certification). | Novartis: pre-2010 AKS lacked explicit FCA link; plaintiffs must plead an express or implied certification per Mikes. | Held: Applying Mikes, the complaints sufficiently pled falsity under an implied (and in part express) certification theory given Medicaid rules/certifications that condition payment on compliance with AKS and certifications attached to pleadings; dismissal denied. |
| Were plaintiffs required to tie each false claim to a particular announced speaker-event topic or specific drug? | U.S./NY: sham events induced general prescribing for the cardiovascular division; topic-to-drug linkage is unnecessary. | Novartis: plaintiffs failed to link specific events to prescriptions for the particular drugs at issue. | Held: Not required; representative examples and theory that sham events broadly induced prescribing are adequate at pleading stage. |
| Are Relator’s federal off-label promotion FCA claims pleaded with the particularity required by Rule 9(b)? | Relator: scheme-based pleading (Grubbs approach) suffices where specific submitted-claim details are unavailable. | Novartis: Grubbs is not binding in Second Circuit; relator failed to identify any particular false claims tied to off-label promotion. | Held: Grubbs rejected; Relator failed to plead particular false claims for off-label theory — federal off-label FCA claims dismissed with prejudice. |
| Are New York state claims retroactive/applicable and what statute of limitations applies to NY Executive Law §63(12) and Social Services Law §145-b claims? | NY: NY FCA is retroactive per session law; Executive/SS claims relate to statutory wrongdoing and should be timely under six‑year or otherwise. | Novartis: retroactivity/Ex Post Facto, punitive character, and limits on pre-enactment liability; three-year limitations applies to some NY claims. | Held: NY FCA applies retroactively and Ex Post Facto challenge fails; but NY’s Executive Law §63(12) and Social Services Law §145-b claims are governed by CPLR §214(2) (three-year) as pleaded and are time-barred as to conduct before August 26, 2010; other NY claims survive. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state a plausible claim).
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for Rule 12(b)(6)).
- Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) (express and implied false certification theories under the FCA).
- Grubbs v. Kanneganti, 565 F.3d 180 (5th Cir. 2009) (relaxed pleading standard for FCA where scheme details + reliable indicia of claims submitted)
- United States ex rel. Clausen v. Laboratory Corp., 290 F.3d 1301 (11th Cir. 2002) (Rule 9(b) requires indicia of reliability tying scheme to actual submitted claims).
- Karvelas v. Melrose‑Wakefield Hosp., 360 F.3d 220 (1st Cir. 2004) (plaintiff must identify particular false claims to satisfy Rule 9(b) in FCA suits).
- Kennedy v. Mendoza‑Martinez, 372 U.S. 144 (1963) (Kennedy/Mendoza‑Martinez factors for assessing whether civil sanction is punitive).
- Cook Cnty. v. United States ex rel. Chandler, 538 U.S. 119 (2003) (treble damages in FCA have compensatory and deterrent aspects).