Federal court refuses to dismiss former Celgene drug sales rep’s whistleblower lawsuit over Medicare fraud

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by Michael Heygood

Beverly Brown has filed a qui tam or whistleblower lawsuit against Celgene Corporation. Brown alleges that Celgene defrauded government-funded healthcare programs such as Medicare, Medicaid, and the VA by systematically promoting the drugs Thalomid and Revlimid for non-reimbursable off-label uses and paying illegal kickbacks to physicians.

Brown was employed by Celgene from 2001 to 2011. She worked as as a pharmaceutical sales representative and alleges that she received bonuses based on the amount of Thalomid and Revlimid sold in her district. According to Brown, Celgene trained its salespeople to market Thalomid and Revlimid for off-label uses to generate more sales.

She alleges that Celgene sales reps were trained to promote unapproved uses by touting studies that Brown says failed to provide adequate scientific evidence to support those uses. For instance, Brown notes that the initial label on Thalomid didn’t include warnings related to its use with cancer patients, which she alleges made the off-label prescriptions “tantamount to ongoing human experimentation.”

Her qui tam suit alleges that Celgene’s unlawful promotion of Thalomid and Revlimid for unapproved uses caused “federal, state, and local government health care programs … to pay for millions of prescriptions that never would have been submitted for reimbursement but for Celgene’s activities.” The whistleblower action asserts claims under the Federal False Claims Act and similar state laws on behalf of the United States, several individual states, the District of Columbia, and the city of Chicago.

The False Claim Act was enacted to help combat fraud on the government. The statute is broadly construed to reach all fraudulent attempts to cause the Government to pay out sums of money. The Act is violated when a person “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A).

Celgene moved to dismiss Brown’s entire lawsuit arguing she had failed to sate viable claim for relief. The district court denied the motion and almost all of Brown’s claims will proceed. U.S. ex rel. Brown v. Celgene Corp., 2014 WL 3605896 (C.D.Cal. July 10, 2014).

Celgene first argued that Brown failed to allege any cognizable “false or fraudulent claims.” The case alleges what are known as “implied false certifications.” An implied false certification claim is based on the notion that the act of submitting a claim for reimbursement itself implies compliance with governing federal rules that are a precondition to payment. In essence, the implied false certification theory is one of fraud by omission—the claim is false because the claimant has failed to disclose a statutory or regulatory violation that would make it ineligible for reimbursement. The court found that Brown sufficiently alleged that Celgene caused claims to be submitted that (a) falsely implied they were for reimbursable, medically accepted uses, and (b) falsely implied compliance with the Anti–Kickback Statute.

The court noted that Brown’s claims do not fail simply because Celgene did not itself itself submit any claims to the government. Liability under the False Claim Act is not limited to actual government claimants. The court ruled that even though Celgene did not itself falsely certify compliance with any legal condition of payment, it is still susceptible to liability because it allegedly caused claimants to implicitly make such false certifications and thereby caused the submission of false claims.

Because it found that Brown plausibly alleged that claims submitted as a result of Celgene’s off-label promotion were, in fact, non-reimbursable, the court accordingly found that Brown sufficiently alleged the falsity element of her False Claim Act claim. In her complaint, Brown identifies 19 off-label uses of Thalomid and 9 off-label uses of Revlimid that Celgene promoted. She alleges that these 28 off-label, non-FDA-approved uses were not covered by federal healthcare programs because they were not “medically accepted” within the meaning of the Medicaid and Medicare statutes.

The court rejected Celgene’s argument that the uses were in fact “medically accepted.” According to the court, the motion to dismiss stage was not the time to make a complex, fact-sensitive decision as to whether any particular use of a drug was “medically accepted” at a given time. Rather, for now, Brown’s allegations were sufficient to give rise to a plausible inference that Celgene promoted off-label uses that were not properly supported.

The court also found that Brown plausibly alleged facts suggesting that Celgene “caused” the submission of false claims. Applying general tort law principles, the court noted that Celgene may be liable for false claims submitted by others if its conduct was a substantial factor in bringing about the false claims and such claims were a foreseeable and natural consequence of its conduct. The court fund there was a plausible causal connection between Celgene’s conduct and the submission of false claims because: (1) Celgene allegedly fraudulently promoted Thalomid and Revlimid for non-reimbursable, off-label uses to physicians, (2) this off-label marketing caused physicians to write off-label prescriptions, and (3) many of these non-reimbursable prescriptions were submitted to government payors for reimbursement. Brown’s allegations sufficiently raise an inference of both proximate and but for causation.

Because the motion to dismiss Brown claims under the federal False Claims Act was denied, the case will now proceed towards trial.

Thinking about blowing the whistle?

Anyone who has information that a business or person has knowingly submitted or caused the submission of false or fraudulent claims to any branch of the United States government can potentially help file and pursue a lawsuit under the False Claims Act. The “whistleblower” (called a “relator”) does not have to have been personally harmed at all. The relator just needs to be aware of the false or fraudulent conduct. If money is recovered—whether from a settlement between the parties or a court judgment—the whistleblower who helped initiate the lawsuit can potentially recover 10% to 30% of the total amount recovered.

The lawyers at Heygood, Orr & Pearson represent clients who have witnessed fraud first-hand and wish to file a “qui tam” or whistleblower lawsuit against the corporations or individuals who were responsible. For example, our lawyers successfully negotiated a $1.75 million award for a whistleblower in a large tax fraud case.

In addition, Heygood, Orr & Pearson is AV-rated, the highest legal and ethical rating available from the leading law firm rating service. Our partners Michael Heygood, Jim Orr, and Eric Pearson are all Board Certified in Personal Injury Trial Law by the Texas Board of Legal Specialization. Mr. Heygood and Mr. Orr are additionally Board Certified in Civil Trial Advocacy Law by the National Board of Trial Advocacy. Our partners been voted by their peers as “Super Lawyers” in the state of Texas for several years in a row.*

The government has recovered billions as a result of False Claims Act lawsuits, and hundreds of millions have been paid to the private whistleblowers that made the lawsuits possible. If you have questions about how to pursue a claim under the False Claims Act, please let us know. You can reach us by calling our toll-free hotline at 1-877-446-9001, or by filling out our free legal consultation form on this website.

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* Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2014.