United States District Court, E.D. Pennsylvania
UNITED STATES OF AMERICA ex rel. MATTHEW CESTRA, et al.,
CEPHALON, INC., et al.
Plaintiff Matthew Cestra brings this action against defendants Cephalon, Inc. and John Does #1-100 to recover damages and civil penalties on behalf of the United States as a qui tam relator pursuant to the False Claims Act (FCA), 31 U.S.C. §§ 3729, et. seq. and analogous state laws. Presently before me are Cephalon’s motion to dismiss relator’s second amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b) (Dkt. No. 1-34), relator’s opposition (Dkt. No. 1-38), Cephalon’s reply (Dkt. No. 1-45) and the parties’ supplemental briefs. Dkt. Nos. 11, 16, 18. For the reasons that follow, I will grant Cephalon’s motion in part and deny it in part.
Treanda is a chemotherapy drug the FDA approved in October, 2008 as a treatment for indolent non-Hodgkins lymphoma (iNHL). Dkt. No. 1-30 at ¶ 3. Treanda was approved as a second-line treatment, meaning it was FDA approved only for patients whose cancer progressed after treatment with another regimen. Id. Relator is a former employee of Cephalon. Id. at ¶ 19. Relator alleges that as early as December, 2007, Cephalon promoted Treanda off-label for frontline, rather than second-line, treatment of iNHL, a use not approved by the FDA. Id. at ¶ 116. Relator asserts this off-label promotion caused the submission of false claims for reimbursement from government health programs. Id. at ¶¶ 13-14, 75-190. Relator also alleges that Cephalon illegally paid kickbacks to physicians in order to further its off-label promotion scheme, id. at ¶¶ 191-254, violated its obligations to the government under its Corporate Integrity Agreement, id. at ¶¶ 341-377, conspired with physicians to further its off-label promotion scheme, id. at ¶¶ 434-36, and retaliated against him for investigating and reporting his concerns regarding Cephalon’s conduct. Id. at ¶¶ 422-26. I will briefly summarize relator’s factual allegations.
I. Off-Label Marketing Allegations
Relator alleges that Cephalon used a German clinical study, the Rummel study, to promote Treanda off-label even though it knew that the Rummel study was deeply flawed and would be contradicted by Cephalon’s own clinical study, known as the BRIGHT study, that began in April, 2009. Id. at ¶¶ 4-6, 82-114. Relator alleges that the BRIGHT study, while purportedly meant to help Cephalon pursue FDA approval of Treanda for front-line treatment of iNHL, was inadequate for that purpose and instead was meant to “preserve the illusion of [Cephalon’s] confidence in the Rummel study” and justify continued off-label promotion of Treanda. Id. at ¶¶ 88-91. On February 22, 2011, relator allegedly attended a planning meeting where Cephalon senior management agreed to deceive the market regarding Treanda’s effectiveness as a front-line treatment for iNHL. Id. at ¶¶ 93-114.
Relator alleges that Cephalon carried out its off-label marketing scheme through several means: sales force presentations and meetings, including allegations of the specific time, location, individual participants and content of the meetings, in which Cephalon allegedly used the Rummel study to promote Treanda off-label, id. at ¶¶ 118-32; continuing medical education programs (CME’s), including specific allegations regarding slide decks, meetings, individual presenters and funding to promote Treanda off-label, id. at ¶¶ 133-149; speaker programs, including specific allegations regarding the presenting physicians, number of times they presented, amounts paid to presenting physicians and slide decks used to promote Treanda off-label, id. at ¶¶ 150-55; advisory boards through which Cephalon allegedly paid physicians $4, 000 per day to allow Cephalon to promote Treanda to them for off-label use, id. at ¶¶ 156-61; market studies, specifically a study questionnaire and three studies, that were allegedly used to promote the Rummel study to oncologists, id. at ¶¶ 162-72; false and misleading minimization of safety risks associated with using Treanda off-label, id. at ¶¶ 173-78; and filing for FDA approval for front-line use of Treanda as a ruse to continue off-label promotion. Id. at ¶¶ 179-88.
II. Kickback Allegations
Relator alleges that Cephalon also used illegal kickbacks to induce the prescription of Treanda off-label. Id. at ¶¶ 191-254. In particular, relator alleges that Cephalon paid kickbacks through the following means: payments to continuing medical education providers, id. at ¶¶ 191-94; payments to promotional speakers in the form of speaker fees, id. at ¶¶ 195-99; financial inducements to group purchasing organization (GPO’s) and payments to GPO’s to allow Cephalon to market off-label directly to GPO members, id. at ¶¶ 200-14; payments of honoraria and travel, hotels and meals to physicians to attend advisory boards, id. at ¶¶ 215-18; free reimbursement services provided directly to physicians through the Cephalon Oncology Reimbursement (CORE) program, id. at ¶¶ 219-237; payments in the form of advertising expenditures to procure favorable treatment of Treanda in medical journals, id. at ¶¶ 238-41; and payments to drug compendia to conduct clinical studies of Treanda in order to induce changes in the government’s labeling determinations and in order to induce off-label prescription by physicians. Id. at ¶¶ 242-54.
III. Corporate Integrity Agreement Allegations
In 2008 Cephalon entered into a Corporate Integrity Agreement (CIA) with the Office of the Inspector General (OIG) of the Department of Health and Human Services. Id. at ¶ 353. Relator alleges that by failing to report its alleged off-label promotion and payment of illegal kickbacks, Cephalon “engaged in a deliberate plan to knowingly submit false reports to the OIG-as required per the terms of the CIA-that either materially misrepresented the facts concerning its illegal conduct or concealed such conduct altogether.” Id. at ¶ 342. Relator asserts that this conduct “avoided or decreased an obligation to pay or transmit money or property to the Government.” Id. In particular, relator alleges that Cephalon avoided its obligations under the CIA by manipulating internal audits, failing to report the use of off-label promotional slide-decks and failing to report the payment of kickbacks. Id. at ¶¶ 341-377.
IV. Conspiracy Allegations
Relator alleges that Cephalon conspired with the healthcare professionals identified in his second amended complaint to violate the FCA by causing or submitting false claims for reimbursement of Treanda to government programs. Id. at ¶ 435.
V. Retaliation Allegations
Relator contends that Cephalon retaliated against him on two occasions when he internally reported allegedly illegal promotional activities and kickback schemes to Cephalon’s compliance department. Id. at ¶¶ 422-423. Relator alleges he was locked out of meetings he had previously attended and was effectively forced to resign because of his internal reporting. Id. at ¶¶ 423-425.
STANDARD OF REVIEW
I. Rule 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) permits a court to dismiss all or part of an action for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Typically, “a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, ” though plaintiff’s obligation to state the grounds of entitlement to relief “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “Factual allegations must be enough to raise a right to relief above the speculative level . . . on the assumption that all of the allegations in the complaint are true (even if doubtful in fact).” Id. (citations omitted). This “simply calls for enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of” the necessary element. Id. at 556. The Court of Appeals has made clear that after Ashcroft v. Iqbal, 556 U.S. 662 (2009), “conclusory or ‘bare-bones’ allegations will no longer survive a motion to dismiss: ‘threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.’ To prevent dismissal, all civil complaints must now set out ‘sufficient factual matter’ to show that the claim is facially plausible.” Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009), quoting Iqbal, 556 U.S. at 678. The Court also set forth a two part-analysis for reviewing motions to dismiss in light of Twombly and Iqbal:
First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint’s well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a “plausible claim for relief.”
Id. at 210-11, quoting Iqbal, 556 U.S. At 679. The Court explained, “a complaint must do more than allege the plaintiff’s entitlement to relief. A complaint has to ‘show’ such an entitlement with its facts.” Id., citing Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged–but it has not ‘show[n]’–‘that the pleader is entitled to relief.’” Iqbal, 556 U.S. at 679, quoting Fed.R.Civ.P. 8(a)(2).
II. Rule 9(b)
Federal Rule of Civil Procedure 9(b) provides that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed.R.Civ.P. 9(b). “FCA claims must be pleaded with particularity in accordance with [Rule] 9(b).” U.S. ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 242 n.9 (3d Cir. 2004). The Court of Appeals has elaborated that “Rule 9(b) requires plaintiffs to plead with particularity the ‘circumstances’ of the alleged fraud in order to place the defendants on notice of the precise misconduct with which they are charged, and to safeguard defendants against spurious charges of immoral and fraudulent behavior.” Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984). Thus, “the purpose of Rule 9(b) is to provide defendants with fair notice of the plaintiffs’ claims . . . .” Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 156 (3d Cir. 2014) (adopting a more lenient pleading requirement in false claims actions under Rule 9(b) because the touchstone consideration is fair notice).
Plaintiff has filed this action as a qui tam relator under 31 U.S.C. § 3730(b), which provides that a private person may bring an action on behalf of the government to enforce the FCA. “On May 20, 2009, Congress enacted the Fraud Enforcement and Recovery Act of 2009” (FERA), which amended the FCA. Foglia v. Renal Ventures Mgmt., LLC, 830 F.Supp.2d 8, 15 (D.N.J. 2011). Relator alleges violations of § 3729(a)(1)(A) for presenting or causing the submission of false claims to the government, § 3729(a)(1)(B) for making or using a false record or statement to cause the submission of false claims to the government, § 3729(a)(1)(C)for conspiracy, § 3729(a)(1)(G) for avoiding or decreasing an obligation to pay the government, § 3730(h) for retaliation and also ...