In an opinion today, Judge McMahon denied Novartis’ motion to dismiss the government’s False Claims Act suit (covered in this prior post), which accuses Novartis of giving certain specialty pharmacies “rebates” — which the government considers kickbacks — to have them switch their patients to two Novartis drugs, Exjade and Myfortic. The alleged scheme resulted in Medicare and Medicaid paying for claims that were tainted by the alleged kickbacks. Novartis argued that the complaint did not specify which specific prescriptions were false, but Judge McMahon found the complaint sufficiently detailed:
First, the Government provides enough details for Novartis to be able to reasonably identify which of the Medicare claims submitted were “false.” The Complaint does not contain vague allegations like the following: “All Medicare claims for Novartis drugs tainted by the kickback scheme are false.” Rather, . . . [t]he Complaint defines several small pools of claims — for six specific pharmacies, the “false” claims are all the claims for either Exjade or Myfortic submitted by these pharmacies during the time that it was receiving kickbacks to promote that drug, and yet certifying that it was in compliance with the AKS [Anti-Kickback Statute]. For each pharmacy, the Complaint states the exact time frame, drug, and government program at issue, and it approximates the number of claims submitted and the total reimbursement amount. With this level of detail, it should not be difficult for Novartis to identify which Medicare and Medicaid claims are alleged to be false — it is every single claim in each narrowly defined pool. Second, the Government has provided a strong factual basis for its assertion that claims tainted by the Novartis kickback scheme were actually submitted to Medicare and Medicaid, given that it used actual claims data as the basis for its detailed allegations. It broke down this data by pharmacy and recited the total number and dollar amount of claims submitted for each drug. Thus, the Court has robust assurances that the Government is not speculating that the kickback scheme led to the submission of corresponding claims; the Government obtained the actual Medicare and Medicaid claims data on the back end and summarized it in the Complaint. … The fact that the Complaint does not list every one of the pharmacies’ claims by date, number, and patient — or even provide a list of example claims — would not render this particular Complaint insufficient. The pleading contains enough information to allow Novartis to figure out which claims the Government contends were false.
There was a silver lining for Novartis, however. Judge McMahon allowed Novartis to file a separate motion to dismiss on a separate theory which, apparently at Judge McMahon’s suggestion, was reserved for later. The separate theory concerns whether the allegedly false claims were the cause of the Medicare and Medicaid reimbursements:
Novartis contends that, where an underlying AKS violation is involved, the only claims that can be rendered “false” by the scheme are those that were submitted because the kickback scheme worked — i.e., because the recommendation made by a pharmacy (in exchange for kickbacks) succeeded in producing a sale that would not have otherwise been made. Novartis appears to take this position because of an amendment to the AKS that was passed in March 2010. See 42 U.S.C. § 1320a-7b(g). Prior to this amendment, the AKS did not explicitly state that compliance with the statute was a precondition for Medicare or Medicaid reimbursement, and that claims submitted in violation of the AKS were “false” under the FCA — although a number of courts had so held, at least for certain types of claims. But in 2010, Congress removed any doubt that may have lingered on that score. As part of the Patient Protection and Affordable Care Act (“PP ACA”), it amended the AKS to read: “a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of [the False Claims Act].” 42 U.S.C. § 1320a-7b(g) (emphasis added). Novartis seizes on the phrase “resulting from” to argue a version of “but for” causation — only claims directly caused by (and hence, “resulting from”) an illegal recommendation are inconsistent with the certification of AKS compliance, and so are “false.” If Novartis is correct, then the Complaint is deficient (as to the claims submitted after enactment of the AKS amendment) for not identifying with particularity the “false” Myfortic and Exjade claims that were submitted because of a pharmacy’s recommendation. Because only a subset of the Medicare/Medicaid claims described in the Complaint would qualify as false, Novartis would need more information to be able to identify the false claims at issue. The Government could then satisfy Rule 9(b) by either providing examples of false claims . . ., or by providing sufficient identifying information about the particular false claims. . .
She gave Novartis two weeks to make a motion along these lines.