In early 1998, Bayer began marketing Baycol to compete with other cholesterol-lowering “cerivastatin” or “statin” drugs. Certain studies concluded Baycol was less effective at lowering cholesterol than competing drugs when Baycol was prescribed at the dosage initially approved by the FDA. Bayer then sought and obtained approval from the FDA to sell Baycol at higher dosage levels. Doctors began to report, however, that patients who were prescribed Baycol developed rhabdomyolysis, a rare but serious muscle disorder in which destroyed muscle cells release into the bloodstream. The likelihood of this warned-about side effect appeared to increase when Baycol was prescribed at higher doses, or in conjunction with gemfibrozil, another cholesterol-lowering drug. In July 2001, the FDA asked Bayer to address these concerns about Baycol. Bayer voluntarily withdrew Baycol from the market in August 2001.
Laurie Simpson worked at Bayer from 1998 through 2004 as a manager of market research. While at Bayer, Simpson’s work involved marketing Baycol. In October 2006, relying in large part upon information to which she was privy during her time at Bayer, Simpson filed a qui tam lawsuit against Bayer on behalf of the government. Simpson alleged Bayer knew about, but downplayed, the risks of developing rhabdomyolysis through the use of Baycol. She also alleged Bayer misrepresented Baycol’s efficacy when compared to competing cholesterol-lowering drugs sold by other manufacturers (such as Lipitor) and paid illegal kickbacks to physicians to increase Bayer’s share of the market for statin drugs.
Simpson alleged Bayer defrauded the government in two distinct respects. First, she claimed Bayer fraudulently caused the government to make reimbursements for Baycol prescriptions through federal health insurance programs such as Medicare and Medicaid. Second, she claimed Bayer fraudulently induced the Department of Defense to enter into two contracts for the purchase of Baycol. The district court dismissed her claims and Simpson appealed. The Eighth Circuit has now affirmed the dismissal relating to the federal health insurance programs but reversed the dismissal as to the Department of Defense contract claims. In re Baycol Products Litigation, No. 12-2979 (8th Cir October 15, 2013
Simpson alleged that Bayer fraudulently induced the DoD to enter into contracts for Baycol by making allegedly false representations about Baycol’s safety with respect to the risk of rhabdomyolysis. The district court dismissed the claims after concluding that Simpson’s allegations were insufficient because she did not tie her allegations of Bayer’s fraud to specific fraudulent claims for payment submitted to the government. The Eighth Circuit disagreed: “[c]ontrary to the district court’s reasoning, a claim alleging fraud in the inducement of a government contract does focus on the false or fraudulent statements which induced the government to enter into the contract at the outset” and thus “the district court’s reasoning was incorrect as applied to Simpson’s allegations regarding the DoD contracts.” Id.
Simpson’s allegations identified (1) the individuals involved in the exchange between Bayer and the DoD regarding the DoD’s concerns about Baycol’s safety with respect to the risk of rhabdomyolysis (i.e., Casimir Zygmunt for Bayer and Lieutenant Commander Richerson for the DoD); (2) the alleged misrepresentations regarding whether Baycol causes more rhabdomyolysis than other statins, and whether a relationship exists between prescribing Baycol at higher dosages and the frequency or severity of rhabdomyolysis; (3) the dates when the alleged misrepresentations were made (e.g., November 10, 1999 and December 3, 1999) and the manner in which the alleged misrepresentations were made; and (4) the specific reasons why the representations were alleged to be fraudulent (i.e., because Bayer allegedly possessed evidence to know the representations were false at the time they were made).
Simpson’s lawsuit connected her allegations regarding the alleged fraud to the January 2001 contract extension and the February 2001 BPA and alleged that “[i]f the DoD and other prescribers had known the truth (which DoD attempted to discover on multiple occasions), then it is unlikely the DoD would have entered into the contract with Bayer or would have extended the contract.” Finally, Simpson’s complaint alleged the government made payments to Bayer under the allegedly fraudulently induced contracts, claiming there were approximately 400,000 Baycol prescriptions filled in Military Treatment Facilities between October 2000 and the withdrawal of Baycol from the market in August 2001, and the government paid Bayer at least $11,983,305.08 for their supplies of Baycol during that same time period. Id.
The Eighth Circuit determined that such allegations were sufficient to state a claim for relief under a theory of fraud-in-the-inducement. Id. Thus, the court of appeals reversed the district court with respect to her allegations regarding the Department of Defense contracts and remanded the lawsuit back to district court for further proceedings.
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