On April 1, 2014, the Department of Labor’s Office of Federal Contract Compliance Programs agreed to the dismissal of its December 2008 complaint against Florida Hospital of Orlando. This action follows DOL’s March 11, 2014 agreement to a five-year moratorium on compliance and enforcement actions against Tricare service providers. These developments reflect a significant rollback of OFCCP’s prior position as to the scope of its jurisdiction. In his March 11, 2014 letter to Congress, Secretary of Labor Thomas Perez recognizes that Congress had intended to limit OFCCP’s jurisdictional authority over Tricare healthcare providers.
Pfizer Appeal Targets Fraudulent Drug Marketing Claims Brought Under Civil RICO Statute
Pfizer, Inc. recently petitioned the Supreme Court, seeking review of three companion decisions from the First Circuit Court of Appeals. These decisions found against Pfizer and in favor of multiple third-party payors (TPPs)—the Kaiser Foundation Health Plan, Inc. (an HMO), Aetna, Inc. (a health insurer), and a putative class of employer health plans—on civil Racketeer Influenced and Corrupt Organizations Act (RICO) claims for damages suffered due to Pfizer’s fraudulent marketing of off-label uses for the prescription drug Neurontin, an anti-convulsive approved for the treatment of epilepsy. At the heart of the dispute is causation—the causal chain that runs from a drug manufacturer, such as Pfizer, to third-party payors of prescription drug benefits, such as HMOs, insurers and other health plans.
The First Circuit’s lead opinion—laying the common predicate necessary to understand each of the companion cases—came in the action brought against Pfizer by Kaiser, in which the court affirmed a $142 million jury award to the HMO.
The Development and Marketing of Neurontin
Neurontin was developed during the 1980s and early 1990s as an anti-epileptic drug. In 1993, the Food and Drug Administration approved Neurontin for treatment of partial seizures in adults with epilepsy. A campaign to market Neurontin for off-label conditions—conditions not included on the official label approved by the FDA—began in 1995. These off-label conditions included neuropathic pain (pain from nerve damage), migraine headaches, and bipolar disorder. Neurontin was marketed for treatment of these off-label conditions by way of, among other things: (1) direct marketing to doctors, which misrepresented Neurontin’s effectiveness for off-label indications; (2) misleading information supplements and continuing medical education programs; and (3) articles published in medical journals that touted Neurontin’s off-label effectiveness but suppressed negative information about the drug.
Federal Appeals Court Rejects Whistleblower’s Medical Device Defect Claim
On August 20, the Fifth Circuit Court of Appeals rejected a whistleblower claim by a former employee of Cardinal Health, Inc., affirming dismissal of the former employee’s complaint, which alleged that Cardinal Health sold hospitals run by the U.S. Department of Veterans Affairs defective medical equipment, in violation of the False Claims Act (FCA).
Before her termination from Cardinal Health, the plaintiff marketed Cardinal Health’s “Signature pump”—an electronic device that regulates the rate at which intravenous fluids flow into patients—to various hospitals, including hospitals run by the VA. The plaintiff alleged that the Signature pump had a dangerous defect, causing air bubbles to accumulate and be released into a patient’s intravenous fluids flow, potentially resulting in serious injury or death.
The plaintiff claimed that she became aware of the defect in late 2000 and discussed it with a Cardinal Health area manager in early 2001. In mid-2001, Cardinal Health suspended shipment of the Signature pump for three months and undertook a review of the possible defect. Cardinal Health terminated the plaintiff at the end of the three-month review period. Cardinal Health suspended production and sale of the Signature pump for independent reasons in 2006.
“Implied False Certification” Theory of FCA Product Liability
The crux of the plaintiff’s FCA claim was that Cardinal Health falsely certified to the VA that the Signature pump was in compliance with the warranty of merchantability in the parties’ contract each time it requested payment from the VA for the pumps—a so-called “implied false certification” theory.
Are Name-Brand Drug Makers Liable for Generic Equivalents?
On June 13, the Supreme Court of Alabama issued an order announcing that it will revisit a controversial January ruling, in which the court held that a name-branded drug maker may be held liable, under Alabama law, for injuries caused by a generic version of its drug, manufactured and distributed by a different company.
Courts OK Discounted Subsidies for Branded Prescription Drugs
In recent months, two federal courts have dismissed lawsuits alleging that branded drug manufacturers’ discounted subsidies—coverage of co-payments—for branded drugs violate federal racketeering and commercial bribery laws. The two cases are among a number of similar pending suits, largely coordinated by the healthcare consumer advocacy group Community Catalyst, which concern approximately 20 different branded drugs. Both cases are significant victories for branded drug manufacturers, who face claims that they have defrauded health plans by offering discounted subsidies directly to consumers—nudging those consumers away from cheaper, generic options preferred by the health plans—in order to preserve market share for branded drugs.
The first action, brought by union health plans against the manufacturer Merck & Co. in the United States District Court for the District of New Jersey, was dismissed on April 29, 2013. Judge Michael A. Schipp dismissed the action on grounds that the health plans lacked standing—that the health plans failed to allege that Merck’s discounted subsidies caused the health plans’ members to be prescribed or to purchase drugs that they would not have been prescribed or have purchased otherwise.
A second action against the manufacturer Bristol-Myers Squibb, also brought by union health plans under similar legal theories, was dismissed on substantive grounds by Judge J. Paul Oetken of the United States District Court for the Southern District of New York on June 6, 2013.
As Judge Oetken summarized the crux of the dispute between health plans and branded drug manufacturers: “Insurers are keen to control drug costs, while manufacturers are determined to maintain market share while competing with generics and therapeutic alternatives. In recent years, manufacturers have launched programs through which they offer to cover the cost of co-payment obligations for their branded drugs. Insurers, which create tiered co-pay obligations to encourage plan members to select cheaper drugs, oppose these programs and argue that they increase overall drug costs.”
In other words, health plans use tiered co-payment plans to incentivize consumers to purchase less expensive, generic equivalents of branded drugs. And, against these payment arrangements, branded drug manufacturers endeavor to preserve their market share by countering plan incentives with discounted subsidies.
FDA Bars Generic “Copycat” OxyContin: Will Efforts to Limit Abuse of the Painkiller Also Limit Competition?
On April 16, in a win for Purdue Pharma, the maker of OxyContin, the FDA issued a decision approving updated labeling for Purdue’s reformulated, abuse-resistant OxyContin tablets. The decision places drug makers on notice that the FDA will not accept or approve any abbreviated new drug applications (generics) that rely upon the agency’s December 1995 approval of Purdue’s original OxyContin formulation.
The FDA’s decision was issued just as Purdue was set to lose its patent on the original formulation of OxyContin. Loss of this patent would have opened the opioid-painkiller market to competition from generic drug makers. But now, going forward, new applications for generic “copycat” forms of the drug must meet Purdue’s approved, abuse-resistant standard, without infringing upon Purdue’s patent for reformulated OxyContin, which lasts until 2025.
Concern over abuse of the well-known painkiller was central to the FDA’s decision. The agency explained, in a press release accompanying its decision: Purdue’s “labeling indicates that the [reformulated] product has physical and chemical properties that are expected to make abuse via injection difficult and to reduce abuse via the intranasal route (snorting).” The press release further stated that: The original formulation of OxyContin “was abused, often following manipulation intended to defeat its extended-release properties. Such manipulation causes the drug to be released more rapidly, which increases the risk of serious adverse events, including overdose and death.”
According to the New York Times, the FDA’s decision was pushed by some state attorneys general, as well as pain treatment experts, who argued that the release of generic versions of OxyContin would feed street demand for the narcotic. Critics, however, have argued that the decision will result in higher prices for OxyContin, as the reformulated drug will not face generic competition.