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United States ex rel. Galmines v. Novartis Pharmaceuticals Corp.

United States District Court, Third Circuit

June 13, 2013



GENE E.K. PRATTER United States District Judge

Pratter, J. June 13, 2013 Qui tam Realtor Donald Galmines has sued Novartis Pharmaceuticals Corporation under the False Claims Act (FCA), 31 U.S.C. § 3729 et seq., and similar state statutes. Specifically, Mr. Galmines alleges that Novartis wrongfully marketed its prescription drug Elidel, thereby causing the submission of false claims to government healthcare systems, including Medicare and Medicaid. Novartis moves to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 9(b). For the reasons that follow, the Court grants the motion in part and denies it in part.

I. Factual Background and Procedural History

A. Factual Allegations

In his complaint, Mr. Galmines alleges that Novartis employed him as a senior sales consultant in its Dermatology and Respiratory Division from 2001 through 2006. His position involved marketing and selling Elidel. The complaint further alleges that Novartis developed Elidel to treat the skin disease atopic dermatitis, and that Novartis sought Food and Drug Administration (FDA) approval for Elidel on December 15, 2000. In its New Drug Application (NDA), Novartis sought approval for the use of Elidel for patients older than three months of age. However, the FDA’s medical review of Elidel allegedly found that the drug posed safety risks to infants. On December 14, 2001, the FDA authorized the marketing of Elidel as a second-line treatment for atopic dermatitis in patients aged two and older.

Shortly after the FDA approved Elidel, Novartis allegedly began a marketing campaign to convince pediatricians and dermatologists to prescribe its drug to children under the age of two and as a first-line treatment, thereby contravening the limitations of the FDA’s approval. As a sales consultant, Mr. Galmines was trained by Novartis personnel on how to convince doctors that Elidel was safe for such young children. Around the same time, Dr. Lawrence Eichenfield, a pediatric dermatologist affiliated with Novartis, made public statements supporting the view that infants could be treated with Elidel, while Dr. Alexander Kapp published a report asserting that Elidel was safe for children over three months old. Novartis allegedly funded this Kapp report, publicly touted it, and distributed copies of the report to sales personnel, including Mr. Galmines. Mr. Galmines’s complaint also appears to allege that Novartis subsequently publicized other studies that promoted off-label uses of Elidel.

The complaint goes on to allege that after Elidel’s product launch proved less successful than Novartis hoped, Novartis personnel allegedly encouraged and trained Mr. Galmines and other sales representatives to engage in off-label marketing of the drug by pushing sales to young children, portraying Elidel as a first-line treatment, and encouraging physicians to prescribe Elidel for chronic use. From 2004 to 2006, Novartis allegedly buttressed these efforts by producing visual aids that encouraged doctors to prescribe Elidel on a long-term basis and as a first-line treatment. On February 28, 2006, Karl Burnitz, Mr. Galmines’s district manager, allegedly reprimanded Mr. Galmines for advising a physician to not prescribe Elidel to young infants.

On February 15, 2005, the FDA Advisory Committee held a hearing regarding the safety of Elidel for children. At the hearing, Dr. Marilyn Pitts of the FDA testified that 14% of Elidel prescriptions were written for children under the age of two. Dr. Carle Paul, Novartis’s Elidel Medical Director, also testified, and stated that Novartis did not engage in off-label marketing of Elidel. Following the hearing, the FDA’s Pediatric Committee recommended adding a warning to Elidel’s approved labeling. The warning allegedly stated that Elidel should only be used for short periods of time, that it is only approved for patients who are unresponsive to other treatments, that it is not approved for children younger than two, that clinical trials of Elidel resulted in children younger than two having a higher rate of respiratory infections than those treated with a placebo, and that animal data shows that the risk of cancer increases with exposure to Elidel. Since the warning was issued, sales of Elidel have dropped substantially.

Mr. Galmines also alleges that Novartis used cash payments, gifts, and seminar sponsorships and opportunities to reward physicians who prescribed high volumes of Elidel. Mr. Galmines was allegedly instructed to pay doctors to speak at seminars where they would encourage the off-label use of Elidel. Additionally, according to Mr. Galmines, Novartis arranged payments to physicians for seminars that never actually took place. At the direction of Mr. Burnitz, Mr. Galmines also allegedly hosted and paid for $1, 000 dinners for physicians who prescribed high amounts of Elidel. Finally, Mr. Galmines was allegedly instructed to use “preceptorships, ” in which he followed a doctor for a few hours and paid that doctor, to reward such high-prescribing physicians.

B. Procedural History

Mr. Galmines filed his complaint in this matter under seal on July 21, 2006. The case remained under seal for an extended period of time while the United States decided whether to intervene in the matter. The United States eventually declined to intervene, and the complaint was unsealed. On May 13, 2011, Novartis filed a 295-page motion to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 9(b). In its motion, Novartis argued that the Court should dismiss the complaint because:

• The Court lacks subject-matter jurisdiction under the “first-to-file” rule.
• The Court lacks subject-matter jurisdiction due to the FCA’s public disclosure bar.
• Mr. Galmines fails to plead facts that adequately state a claim under the FCA.
• The complaint falls short of the specificity required by Rule 9(b).
• The Court should decline to exercise supplemental jurisdiction over Mr. Galmines’s state law claims.

Mr. Galmines filed a 235-page opposition to the motion, to which Novartis responded with a reply brief After oral argument, the parties also submitted supplemental briefs to the Court. Thus, it can be fairly said that the matter has been fully “prepared.”

On October 26, 2012, the Court dismissed Mr. Galmines’s complaint without prejudice due to his failure to sufficiently allege that he voluntarily provided information to the government in a timely manner. Mr. Galmines then filed a first amended complaint, which presents allegations as to how he informed the United States Attorney and various state government officials of his claims prior to filing his initial complaint. The first amended complaint includes counts under the False Claims Act and the laws of California, the District of Columbia, Hawaii, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Nevada, Tennessee, and Virginia.

After Mr. Galmines filed the first amended complaint, Novartis again moved for dismissal under Rules 12(b)(1), 12(b)(6), and 9(b) and repeated the arguments presented in its initial motion to dismiss. On January 14, 2013, Mr. Galmines responded to the second motion to dismiss. Two weeks later, Novartis filed a reply in support of its motion.

C. Moyer Complaint

On June 7, 2005, Gina Moyer and Judith Shelton, two former employees of Novartis, filed a 10-page complaint[1] in the Eastern District of Michigan and alleged that Novartis violated the FCA through its practices pertaining to a pair of drugs, Lamisil and Elidel. With regards to Elidel, the Michigan case relators alleged that Novartis received approval to market the drug as a treatment for atopic eczema, that subsequent research linked Elidel to lymphoma, and that Elidel was not to be used with occlusive dressings. Those relators also alleged that Novartis used kickbacks and false statements to doctors to implement “a scheme to increase the prescriptions for Elidel.” According to the Moyer complaint, Novartis employees awarded “grant money” to physicians who prescribed Elidel. That complaint also alleged that Novartis gave cash payments, gift certificates, entertainment, and other benefits to doctors who prescribed large amounts of Elidel, and that these incentives greatly increased the use of Elidel.

The Moyer complaint also averred that Novartis engaged in off-label marketing of Elidel. As the Court will explain below, these allegations are central to the Court’s analysis here, and, thus, they are recounted in full as follows:

• In paragraph 12, the relators alleged that Novartis encouraged “off label use of Elidel for treatment of psoriasis and seborrhea” and “alternative off label uses of the drug.”
• In paragraph 13, the relators alleged that Novartis employees made false “statements regarding the relationship of the use of Elidel and the complication of lymphoma as well as off label detailing of Elidel for treatment of psoriasis and/or seborrhea a ...

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