332 F. Supp. 3d 927
D.N.J.2017Background
- Relator Elisa Dickson brought a qui tam action alleging BMS and Sanofi fraudulently marketed Plavix as superior to aspirin, causing Medicaid prescriptions and payments for a drug that was not cost‑effective in many states.
- The 4th Amended Complaint (4AC) asserted federal FCA claims (implied certification and fraud‑in‑the‑inducement theories) and parallel state FCA claims across multiple states; the United States and states declined to intervene.
- Earlier iterations of the complaint led to partial dismissals: claims tied to Medicare Part D and many state claims were dismissed; claims prior to March 30, 2005 were generally time‑barred. The MDL transferee court permitted amendment and the 4AC added allegations that many states placed Plavix on Preferred Drug Lists (PDLs), causing automatic Medicaid reimbursement.
- Defendants moved to dismiss the 4AC in full, arguing (inter alia) failures under Rule 9(b), failure to plead materiality after Escobar, and that law‑of‑the‑case bars revival of previously dismissed state claims.
- The court concluded that (1) Prescriber Allegations fail under Escobar because PDL listing meant Medicaid would pay automatically—so prescribers’ implied certifications were not material to the payors’ decision; (2) Formulary Allegations (fraud‑on‑formulary committee theory) do not fit the Third Circuit’s fraud‑in‑the‑inducement precedent and are not otherwise recognized; and (3) federal and state FCA claims based on those theories were dismissed in their entirety.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Materiality of prescribers' implied certifications under Escobar | Relator: defendants' marketing caused physicians to submit claims certifying cost‑effectiveness; had government known, it would not have paid. | Defendants: once Plavix was on state PDLs, Medicaid paid automatically; alleged physician certifications could not have influenced payors. | Held: Dismissed—alleged automatic PDL reimbursement shows lack of materiality under Escobar; prescriber implied‑certification theory fails. |
| Application of law‑of‑the‑case to revive previously dismissed state claims | Relator: new allegations supply missing state statutory detail showing cost‑effectiveness prereqs; court should allow amendment. | Defendants: law‑of‑the‑case bars relitigation of claims already dismissed. | Held: Court declined to apply law‑of‑the‑case to bar the new pleadings and considered merits; dismissal ultimately on other grounds. |
| Fraud‑in‑the‑inducement (fraud on formulary committees) theory | Relator: Thomas (Third Circuit) supports fraud‑in‑the‑inducement, which can extend to fraudulent inducement of PDL listings causing later payments. | Defendants: Thomas applies to contracts induced by fraud, not to regulatory/formulary decisions; extending it would overbroadly expand the FCA. | Held: Dismissed—court refuses to extend fraud‑in‑the‑inducement beyond contract contexts; fraud‑on‑the‑formulary theory not recognized. |
| Pleading particularity under Rule 9(b) after Escobar | Relator: allegations meet the nuanced FCA/9(b) standard and supply scheme details; materiality is pled. | Defendants: Escobar imposes a heightened materiality pleading requirement and 4AC fails to plead materiality. | Held: Although 9(b) issues were considered, the dispositive defect was failure to plead materiality post‑Escobar; claims dismissed on that basis. |
Key Cases Cited
- Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (establishes demanding, fact‑sensitive FCA materiality standard and permits dismissal for failure to plead materiality)
- United States ex rel. Petratos v. Genentech, Inc., 855 F.3d 481 (3d Cir. 2017) (applies Escobar to dismiss implied false‑certification complaint for failure to plead materiality)
- United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295 (3d Cir. 2011) (explains limits on implied‑certification theory in health‑care FCA cases)
- United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943) (fraudulently induced contracts can give rise to FCA liability under fraud‑in‑the‑inducement theory)
- United States v. Veneziale, 268 F.2d 504 (3d Cir. 1959) (Third Circuit precedent recognizing fraudulent‑inducement FCA liability)
- D'Agostino v. ev3, Inc., 845 F.3d 1 (1st Cir. 2016) (rejects broad "fraud‑on‑agency" FCA theory; emphasizes need for causal link and agency response in such claims)