United States District Court, E.D. Pennsylvania
UNITED STATES OF AMERICA ex rel. DONALD R. GALMINES, et al., Plaintiffs
NOVARTIS PHARMACEUTICALS CORPORATION, Defendant
For UNITED STATES OF AMERICA EX REL. DONALD R. GALMINES, THE STATES OF BRINGING THIS ACTION ON BEHALF OF THE UNITED STATES OF AMERICA, Plaintiff: FREDERICK M. MORGAN, MORGAN VERKAMP LLC, CINCINNATI, OH; JENNIFER M. VERKAMP, MAXWELL S. SMITH, SARA E. VANN, PRO HAC VICE, MORGAN VERKAMP LLC, CINCINNATI, OH; MARC P. WEINGARTEN, LOCKS LAW FIRM, PHILADELPHIA, PA.
For INDIANA, TENNESSEE, Plaintiffs: FREDERICK M. MORGAN, MORGAN VERKAMP LLC, CINCINNATI, OH; MARC P. WEINGARTEN, LOCKS LAW FIRM, PHILADELPHIA, PA.
For HAWAII, ILLINOIS, MICHIGAN, THE COMMONWEALTH OF VIRGINIA, Plaintiffs: ELIZABETH VALENTINE, ATTORNEY GENERAL'S OFFICE - MI, LANSING, MI; FREDERICK M. MORGAN, MORGAN VERKAMP LLC, CINCINNATI, OH; MARC P. WEINGARTEN, LOCKS LAW FIRM, PHILADELPHIA, PA.
THE COMMONWEALTH OF MASSACHUSETTS, Plaintiff, Pro se.
LOUISIANA, Plaintiff, Pro se.
For NOVARTIS PHARMACEUTICALS CORPORATION, Defendant: RONALD H. LEVINE, LEAD ATTORNEY, POST & SHELL, P.C., PHILADELPHIA, PA; JEFFREY HOROWITZ, MANVIN S. MAYELL, MICHAEL A. ROGOFF, PRO HAC VICE, KAYE SCHOLER LLP, NEW YORK, NY.
GENE E.K. PRATTER, United States District Judge.
Mr. Galmines brings this qui tam action against Novartis Pharmaceuticals Corporation (" Novartis" ) under the False Claims Act, 31 U.S.C. § § 3729, et seq., and the laws of several states. Mr. Galmines asserts that Novartis engaged in " off-label" marketing for the drug Elidel, encouraging
physicians to prescribe Elidel for purposes for which the FDA had not approved Elidel. This marketing campaign resulted in submissions to the Government of false claims for reimbursement for the unapproved prescriptions of Elidel, including Medicare and Medicaid. Mr. Galmines also alleges that Novartis violated state " anti-kickback" statutes by providing various rewards to physicians who prescribed high volumes of Elidel.
The Court now must consider Mr. Galmines's Motion for Leave to File a Fourth Amended Complaint (Doc. No. 106). The need or at least the stated justification for the request for this Fourth Amended Complaint allegedly arises out of a February 2014 discovery dispute between the parties. Mr. Galmines sought discovery relating to Novartis's conduct following the filing of the initial complaint on July 21, 2006. Novartis opposed this discovery request, and the Court ruled that, in order to obtain discovery for conduct after the date of the filing of the initial complaint, Mr. Galmines would need to allege wrongful conduct continuing after July 21, 2006. See Feb. 26, 2014 Order (Doc. No. 104). Mr. Galmines now seeks leave to file a Fourth Amended Complaint that alleges continuing wrongful conduct by Novartis through at least 2009. Novartis opposes permitting Mr. Galmines to amend his complaint a fourth time. Novartis argues that Mr. Galmines unduly delayed in proposing this amendment and that, in any case, the amendment is futile. Specifically, Novartis argues that the amendment is futile not only because the new allegations are not well-pleaded, but also because Mr. Galmines is not an " original source" of the publicly disclosed allegations, which status would bar his claims under the False Claims Act. The Court disagrees, however, and will allow Mr. Galmines file a Fourth Amended Complaint.
I. The Public Disclosure Bar and Original Source Exception
The primary point of contention among the parties is whether Mr. Galmines must meet the " original source" requirements for the new allegations and, if so, whether he does meet those requirements. The False Claims Act allows citizens to sue those making false claims to the federal government, though it bars such actions that are " based upon the public disclosure of allegations . . . unless . . . the person bringing the action is an original source of the information." See 31 U.S.C. § 3730(e)(4)(A) (2006). The statute further defines " original source" as an individual who: (i) " has direct and independent knowledge of the information on which the allegations are based; " and (ii) has " voluntarily provided the information to the Government before filing an action under this section which is based on the information." See 31 U.S.C. § 3730(e)(4)(B). The Court has already determined that Mr. Galmines is an original source of the off-label marketing and kickback schemes in operation when he worked at Novartis, allowing him to bring his lawsuit even though his allegations are based upon publicly disclosed information. The Court must now consider whether the new proposed allegations are barred because they are likewise based on public
disclosures and because Mr. Galmines is not an original source of these new allegations, even though he was an original source of the earlier allegations.
The Court has already grappled with the original-source exception to the public-disclosure bar in this case. In June of 2013, the Court held that Mr. Galmines could qualify as an original source under the False Claims Act even though his direct and independent knowledge concerned only Novartis's practices that caused the false claims and not the false claims themselves. See generally June 13, 2013 Memorandum (Doc. No. 68) available at 2013 WL 2649704. The Court found this case to be distinguishable from the Third Circuit Court of Appeals's opinion in United States ex rel. Mistick PBT v. Housing Authority, 186 F.3d 376 (3d Cir. 1999), in which the Third Circuit Court of Appeals held that a relator was not an original source where the relator lacked direct and independent knowledge of the defendant's false submissions to the Government, " the most critical element of its claims." See id. at 388. The Court determined that because the allegations of Mr. Galmines are merely that Novartis caused others to submit false claims and did not submit false claims itself, the ruling in Mistick did not apply. The False Claims Act does allow claims where the defendant only " causes to be presented" a false claim, see 31 U.S.C. § 3729, and for such claims, the " most critical element of [the] claims" is not the submission to the Government but the conduct causing the false submissions.
a. Public Disclosures
The parties dispute whether the new allegations are based upon public disclosures. The Court agrees with Novartis that they are. Mr. Galmines argues that " [m]any details in Mr. Galmines [sic] Fourth Amended Complaint were provided by Novartis in non-public documents to the U.S. [A]ttorney in the Eastern District of Pennsylvania and/or the state of Texas in response to Civil Investigative Demands." Mot. at 6. However, Novartis points out that Mr. Galmines has already conceded that the fraudulent scheme underlying his claims were publicly disclosed. See Mem. in Opposition 8 (citing Relator's Response in Opposition to Mot. to Dismiss 26-27 (Doc. No. 45)). The question, then, which resonates throughout this present procedural dispute, is whether it is correct to conclude that because the original claims were based on public disclosures, the new allegations are also based on those same public disclosures. To answer this question, the Court has to consider whether the new allegations are " substantially similar" to those which have been publicly disclosed. U.S. ex rel. Paranich v. Sorgnard, 396 F.3d 326, 334-35 (3d Cir. 2005). Here, they are substantially similar, as they allege the same underlying scheme, but as applied to a new time period. See id. at 335 ( " [A] qui tam action is 'based upon' a qualifying disclosure if the disclosure sets out either the allegations advanced in the qui tam action or all of the essential elements of the qui tam action's claims." (citation omitted)); cf. U.S. ex rel. Tahlor v. AHS Hosp. Corp., No. 2:08-cv-02042, 2013 WL 5913627, at *8 (D.N.J. Oct. 31, 2013) (" Finally, a claim can be 'based upon' a public disclosure if the public disclosure concerned similar conduct that occurred in a different time period." ). Therefore, the Court finds that the public disclosure bar applies to the new allegations, and Mr. Galmines will need to qualify as an original source for these new allegations.
b. Original Source
This leads to the crux of this dispute--is Mr. Galmines an original source of the allegations that Novartis continued to ...