We have always thought that the False Claims Act resides in some sort of alternate universe when it comes to pharmaceutical products. The central concept behind the FCA is easy: The FCA penalizes anyone who presents, or causes to be presented, to the federal government “a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1). In other words, you can’t swindle the government. That is the basic point you need to know to understand the Act, but if you want more detail you can review our recent FCA primer here.
It starts to get fuzzy when a plaintiff (or more accurately the “relator” under the FCA) tries to append the FCA to allegations of off-label promotion of prescription drugs. In the case of truthful off-label promotion, there is no falsity. And, the defendant drug manufacturer has usually made no claim to the government for payment. So where is the eponymous “false claim”? Add to that the increasingly common practice of applying Rule 9(b)’s particularized pleading standard to FCA allegations across the board, and you see an increasing number of opinions holding that plaintiffs cannot use off-label promotion as the basis for their FCA claims.
That is what a divided Sixth Circuit panel decided in United States ex re. Ibanez v. Bristol-Myers Squibb Co., No. 16-3154, 2017 U.S. App. LEXIS 21328 (6th Cir. Oct. 27, 2017). In Ibanez, two former sales representatives brought a qui tam action on behalf of the government alleging that the defendants “engaged in a complex, nationwide scheme” to improperly promote the prescription drug Abilify through off-label promotion and illegal kickbacks to physicians. Id. at *2. Their claims failed, however, for the same reason that most FCA claims fail in this context: The relators could not allege with particularity a connection between the manufacturers’ alleged conduct and a claim for payment made to the government. The court’s synopsis of the pleading standard highlights how a relator has to allege facts linking it all together:
A claim under [the FCA] “requires proof that alleged false or fraudulent claim was ‘presented’ to the government.” At the pleading stage, this requirement is stringent: “where a relator alleges a ‘complex and far-reaching fraudulent scheme,’ in violation of [the FCA] it is insufficient to simply plead the scheme; [s]he must also identify a representative false claim that was actually submitted to the government.”
. . . . Rule 9(b) requires relators to adequately allege the entire chain—from start to finish—to fairly show defendants caused false claims to be filed.
Id. at *9-*10 (citations omitted, emphasis added). When applied to alleged improper promotion of prescription drugs, the causal chain gets sketchy:
First, a physician to whom [the manufacturers] improperly promoted Abilify must have prescribed the medication for an off-label use or because of improper inducement. Next, that patient must fill the prescription. Finally, the filling pharmacy must submit a claim to the government for reimbursement on the prescription.
Id. at *10. According to the Sixth Circuit, this chain “reveals just what an awkward vehicle the FCA is for punishing off-label promotion schemes.” Id.
“Awkward vehicle.” Those are the Sixth Circuit’s words, not ours, but the description is apropos. These relators were unable to allege a single representative false claim, because they could not allege the causal chain from beginning to end. Although they alleged that the defendants made false statements in order increase Abilify prescriptions, they could not allege any connection between the alleged statements and any claim to the government. Id. at *14. They could not allege a conspiracy to violate the FCA either because having a plan to increase prescriptions through improper promotion “may be condemnable,” but it does not amount to an agreement “made in order to violate the FCA.” Id. at *16 (emphasis in original). The court acknowledged an exception to this stringent pleading requirement—the so-called Prather exception—where a relator has personal knowledge directly related to billing practices, supporting a “strong inference that a false claim was submitted.” Id. at *11-*12. But these relators were former sales representatives with no involvement in government billing. The majority held that their lack of personal knowledge negated the Prather exception, although the dissenting judge disagreed. Id. at *13, *34-*37.
The relators therefore failed to state a claim, and the Sixth Circuit also rejected their proposed amended complaint because it had all the same problems as the former complaint: The relators alleged that various pharmacies submitted claims to Medicaid for Abilify prescriptions, but they could not identify the prescribing physicians or otherwise connect the claims to the defendants’ alleged conduct. Id. at *23-*24. They alleged that certain physicians prescribed Abilify covered by Medi-Cal, but could not allege that the prescriptions were off label or resulted from any improper promotion. Id. at *24. They alleged that a certain patient was prescribed Abilify off label, but they could not allege that the prescription was presented to the government for payment or was connected to the alleged improper promotion. Id. at *24-*26.
The proposed conspiracy claim in the amended complaint failed for similar reasons: The claims were not adequately tied to any allegedly false statements made by the defendants. “Thus, the connection between the false statements and claims submitted to the government remains ‘too attenuated to establish liability.’” Id. at *27-*28.
There are other wrinkles in the opinion, but we have covered the essentials. If there is one takeaway from the opinion (and this blogpost), it is this: An FCA claim based on improper promotion of prescription drugs will almost always fail because there are too many links in the causal chain leading from the alleged promotional activity to a claim for payment submitted to the government. The first link may be the most difficult. Physicians exercise their independent medical judgment in writing prescriptions every day, including prescribing drugs for off-label uses. Who is say whether any one decision was actually influenced by off-label promotion? When adding in the patient’s decision to fill the prescription and the pharmacy’s decision to submit a claim for government reimbursement, the connection becomes “too attenuated.” Or, as the Sixth Circuit put it, awkward.