United States v. CSL Behring, L.L.C.
855 F.3d 935
8th Cir.2017Background
- Relator Shane Lager, a former CSL Behring sales manager, sued CSL Behring, Accredo, and Coram under the False Claims Act, alleging CSL inflated Average Wholesale Prices (AWPs) for Vivaglobin and Hizentra, causing pharmacies to submit false reimbursement claims to Medicare/Medicaid. The government declined to intervene.
- CSL Behring manufactured Vivaglobin (2006–2011) and Hizentra (introduced 2010); Coram and Accredo purchased roughly 70% of those sales. Reimbursement for these DME infusion drugs was tied to 95% of AWP (not ASP).
- Lager alleged CSL reported inflated AWPs to third‑party price compendia while the true selling prices (reflected by ASPs) were substantially lower, producing large "spreads" that generated overpayments exceeding tens/hundreds of millions.
- Defendants moved to dismiss under the FCA public‑disclosure bar, for failure to plead fraud with particularity (Rule 9(b)), and for failure to state a claim. The district court dismissed under the public‑disclosure bar and denied amendment; Lager appealed.
- The district court relied on a body of public materials (congressional hearings, OIG reports, media reports, Red Book and CMS price data, and the In re Pharmaceutical AWP litigation) showing (a) AWPs are not based on actual sales, (b) AWP‑based reimbursement causes inflated payments, and (c) Vivaglobin/Hizentra had substantial AWP–ASP spreads. The court concluded these disclosures put the government on notice of the same essential elements of Lager’s claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether public disclosures identified the defendants such that § 3730(e)(4)(A) bars the suit | Lager: public sources did not specifically identify CSL, Accredo, Coram or tie them to fraud; most disclosures did not mention defendants or the two drugs | Defendants: public disclosures (collectively) revealed industry practices and a narrow class of DME infusion drugs, allowing identification of the manufacturer and drugs | Held: Affirmed — combined disclosures (pre‑ and post‑2006, incl. OIG, Red Book/CMS data) identified a narrow class of DME infusion drugs and put the government on the trail of the defendants’ participation; public‑disclosure bar applies |
| Whether public disclosures revealed the subject matter/essential elements of the alleged fraud (i.e., inflated reported prices and resulting false claims) | Lager: prior disclosures only showed that AWP ≠ actual prices; they did not disclose fraudulent intent or the specific fraudulent scheme he alleges | Defendants: prior disclosures described mechanics and effects of inflated AWPs, industry investigations, and data showing large AWP–ASP spreads for the subject drugs, disclosing the essential elements | Held: Affirmed — essential elements (AWP not based on sales, AWP‑based overpayments, manufacturers/providers profit from spreads, Vivaglobin/Hizentra AWP≈2×ASP) were publicly disclosed before filing |
| Whether Lager qualified as an original source of the information (original‑source exception to public‑disclosure bar) | Lager did not successfully show he was an original source | Defendants: public‑disclosure bar applies and Lager is not an original source | Held: District court found Lager failed to satisfy original‑source exception; Lager did not contest this ruling on appeal |
| Whether the complaint met Rule 9(b) particularity/failure to state claim (alternative grounds) | Lager argued his factual allegations were sufficient | Defendants argued complaint lacked specific instances/representative examples of fraud | Held: District court noted complaint lacked specific instances and failed Rule 9(b), but did not rely primarily on this ground; appeal resolved on public‑disclosure bar |
Key Cases Cited
- Kulkay v. Roy, 847 F.3d 637 (8th Cir.) (standard for accepting complaint allegations on motion)
- In re Pharm. Indus. Average Wholesale Price Litig., 491 F. Supp. 2d 20 (D. Mass.) (MDL litigation describing AWP inflation and "secret mega‑spreads")
- United States ex rel. Paulos v. Stryker Corp., 762 F.3d 688 (8th Cir.) (standard for applying public‑disclosure bar and original‑source analysis)
- United States ex rel. Gear v. Emergency Med. Assocs. of Ill., Inc., 436 F.3d 726 (7th Cir.) (industry‑wide disclosures can bar suits where defendants are directly identifiable)
- United States ex rel. Fine v. Sandia Corp., 70 F.3d 568 (10th Cir.) (public disclosures that reveal mechanics and identify a narrow set of actors can trigger the bar)
- United States ex rel. Cooper v. Blue Cross & Blue Shield of Fla., Inc., 19 F.3d 562 (11th Cir.) (disclosures that do not identify defendant are insufficient to trigger the bar)
- United States ex rel. Rabushka v. Crane Co., 40 F.3d 1509 (8th Cir.) (public disclosure must include the "critical elements" of the fraudulent transaction)
- In re Nat. Gas Royalties, 562 F.3d 1032 (10th Cir.) (public disclosures must set government "squarely on the trail" of specific defendant participation)