United States District Court, E.D. Pennsylvania
UNITED STATES OF AMERICA, et al. ex rel. SALLY SCHIMELPFENIG and JOHN SEGURA, Plaintiffs,
DR. REDDY'S LABORATORIES LIMITED, et al., Defendants.
DARNELL JONES, II J.
bring state and federal anti-fraud claims against Defendants
on behalf of the United States, alleging that Defendants
fraudulently submitted claims for federal reimbursement of
prescription medication packaged and labeled in violation of
federal statutes. Defendants move to dismiss Plaintiffs'
Second Amended Complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6). For the reasons that follow, this Court
will GRANT Defendants' Motions to Dismiss the Second
are qui tam relators who bring the present action on behalf
of the United States under the False Claims Act and related
state statutes pursuant to 31 U.S.C. § 3729. In their
Second Amended Complaint, relators Sally Schimelpfenig and
John Segura allege Defendants collectively dispensed
prescription drugs that were in violation of the Poison
Prevention Packaging Act and the Consumer Product Safety
Improvement Act of 2008. (Dkt No. 26, ¶ 2). For the
purposes of the present action, the defendants (collectively
“Defendants”) are divided into two distinct
categories. Manufacturing Defendants - Defendant Dr.
Reddy's Laboratories and its United States subsidiaries -
are responsible for the manufacture of the allegedly
noncompliant prescription drugs at issue in this case. (Dkt
No. 26, ¶ 14). Retail Defendants - CVS, Walgreens, and
Walmart - are the pharmacies who received the noncompliant
prescription drugs from Manufacturing Defendants, provided
said drugs to the ultimate beneficiaries, and thereafter
sought reimbursement for the drugs from one of numerous
federal health care programs. (Dkt No. 26, ¶ 15). All
Defendants are approved federal health care providers subject
to federal statutes and regulations. (Dkt No. 26, ¶
Poison Prevention Packaging Act (15 U.S.C.
§§1471-77) (hereinafter “PPPA”) was
enacted in 1970 to “provide for special packaging to
protect children from serious personal injury or serious
illness resulting from handling, using, or ingesting,
household substances.” (Dkt No. 26, ¶ 25). The
PPPA requires that any prescription drug for human use that
is in dosage form intended for oral administration be
packaged in special packaging designed to make it difficult
for young children to open and ingest the contents. (Dkt No.
26, ¶32-36). With the passage of the Consumer Product
Safety Act of 1970 (hereinafter “CPSA”), Congress
created the Consumer Protection Safety Commission
(hereinafter “CPSC”), which was charged with the
administration and enforcement of the PPPA and related
regulations. (Dkt No. 26, ¶27-30). In 2008, Congress
passed the Consumer Product Safety Improvement Act
(hereinafter “CPSIA”) to supplement and amend the
CPSA. (Dkt No. 26, ¶ 74). The CPSIA requires
manufacturers of imported goods to certify that their
products comply with all rules and regulations enforced by
the CPSC - which includes the PPPA. (Dkt No. 26, ¶75).
Products without the requisite certification cannot be
imported or distributed in commerce in the United States.
(Dkt No. 26, ¶ 80).
corporation based out of India, Defendant Dr. Reddy's
Laboratories is subject to the CPSIA. (Dkt No. 26, ¶
75). As approved federal health care program participants,
all Defendants are subject to the PPPA. (Dkt No. 26, ¶
113). Manufacturing Defendants did not test the packaging of
the drugs imported and distributed in America for child
resistance. (Dkt No. 26, ¶ 135). For years,
Manufacturing Defendants failed to issue general conformity
certificates for the prescription drugs imported and
distributed in America, in violation of the CPSIA. (Dkt No.
26, ¶ 172). Thereafter, Manufacturing Defendants made
false express representations to Retail Defendants that their
drugs were in compliance with all federal laws. (Dkt No. 26,
¶ 208). Manufacturing Defendants did not disclose their
drugs' noncompliance with the PPPA and CPSIA to the
Retail Defendants. (Dkt No. 26, ¶ 176). Retail
Defendants were responsible for ensuring that Manufacturing
Defendants' products complied with the relevant packaging
and certification statutes. (Dkt No. 26, ¶ 48-50). As a
result of Defendants' collective noncompliance with the
PPPA and CPSIA prescription drugs that were not packaged
according to federal requirements were dispensed to federal
health care recipients. (Dkt No. 26, ¶ 116). As a result
of Defendants collective noncompliance with the PPPA and
CPSIA, Retail Defendants submitted claims to Government
payers for federal reimbursement of the noncompliant drugs
dispensed to patient-beneficiaries. (Dkt No. 26, ¶ 116).
on the above-described conduct, the Second Amended Complaint
brings claims against Manufacturing and Retail Defendants
under the False Claims Act and related state laws. Presently
before this Court are Manufacturing Defendants' and
Retail Defendants' individually filed Motions to Dismiss
and all respective responses and replies thereto.
United States of America declined to intervene in the present
action. (Dkt No. 27).
deciding a motion to dismiss pursuant to Rule 12(b)(6),
courts must “accept all factual allegations as true,
construe the complaint in the light most favorable to the
plaintiff, and determine whether, under any reasonable
reading of the complaint, the plaintiff may be entitled to
relief.” Phillips v. Cnty. of Allegheny, 515
F.3d 224, 233 (3d Cir. 2008) (internal quotation marks
omitted). After the Supreme Court's decision in Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007),
“[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. at 678
(citing Twombly, 550 U.S. at 556). This standard,
which applies to all civil cases, “asks for more than a
sheer possibility that a defendant has acted
unlawfully.” Id. at 678; accord Fowler v.
UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009)
(“[A]ll civil complaints must contain more than an
accusation.”) (internal quotation marks omitted).
the False Claims Act and related state law claims allege
fraud, they are subject to the heightened pleading
requirements of Federal Rule of Civil Procedure 9(b).
United States ex rel. Whatley v. Eastwick Coll., 657
F. App'x. 89, 94 (3d Cir. 2016). “In 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). The aim of this
heightened pleading standard is 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.,
7742 F.2d 786 (3d Cir. 1984). “Rule 9(b) requires, at
minimum, that plaintiffs support their allegations
of…fraud with all of the essential background facts
that would accompany the first paragraph of any newspaper
story - that is the who, what, when, where, and how, of the
events at issue.” In re Rockefeller Ctr. Props.
Sec. Litig., 311 F.3d 198, 217 (3d Cir. 2002) (internal
first four of the thirty-four total claims against Defendants
allege violations of the False Claims Act (hereinafter
“FCA”). (Dkt No. 26, ¶ 206-217). As these
are the only claims over which the Court has original
jurisdiction, the Court begins its analysis there. “The
primary purpose of the FCA is to indemnify the government -
through its restitutionary penalty provisions - against
losses caused by a defendant's fraud.” United
States ex rel. Wilkins v. United Health Grp. Inc., 659
F.3d 295, 304 (3d Cir. 2011). “The FCA makes it
unlawful to knowingly submit a fraudulent claim to the
[G]overnment.” United States ex rel. Whatley v.
Eastwick Coll., 657 F. App'x. 89, 93 (3d Cir. 2016).
“To that end, the Act contains a qui tam provision that
permits private parties (known as ‘relators') to
bring suit on behalf of the United States against anyone
submitting a false claim to the Government, ” and where
the qui tam suit is successful, the relator can share in any
recovery. Id. “In order to establish a prima
facie FCA violation under [§] 3729(a)(1), [a plaintiff]
must prove that (1) the defendant presented or caused to be
presented to an agent of the United States a claim for
payment; (2) the claim was false or fraudulent; and (3) the
defendant knew the claim was false or fraudulent.”
Wilkins 659 F.3d at 304-305 (internal citations
reasons that follow, this Court finds that Plaintiffs fail to
plead sufficient facts to allege violations of the FCA, and
this Court declines to exercise ...