Pharmaceutical giant AstraZeneca has been released from a whistleblower suit in federal court in Philadelphia.
Because the relator in the qui tam action didn’t satisfy the standard for being an original source with direct and independent knowledge of the company’s alleged violation of the False Claims Act and because essentially identical allegations have already been made in other lawsuits and in newspaper reports, the claims can’t survive the public disclosure bar, U.S. District Judge J. William Ditter Jr. of the Eastern District of Pennsylvania has ruled.
The judge was unconvinced by the relator’s argument that the inclusion of two new health care plans created a new previously-undisclosed claim.
The whistleblower had alleged that the two plans, Highmark Blue Cross Blue Shield and UnitedHealth Group, leveraged their size to get kickbacks from AstraZeneca through Medco, the pharmacy-benefit manager for which the relator worked.
“Where the fundamental allegations of misconduct are substantially similar to prior disclosures, the naming of an additional entity engaged in substantially the same conduct, or which was able to benefit as the result of Medco’s conduct, does not change the nature of the publicly disclosed fraud — that is AZ’s filing of false or fraudulent rebate reports and reporting false and fraudulent best prices,” Ditter said.
Karl Schumann, the relator, is a pharmacist who served as vice president of pharmaceutical contracting for Medco from 1999 to 2003, according to the opinion in Schumann v. AstraZeneca Pharmaceuticals. Because of his position at the company, Schumann argued that he found out that AstraZeneca had been paying kickbacks to Medco in order to sell its heartburn drugs, Prilosec and Nexium.
“AZ entered into sham contracts with Medco to induce it to purchase and dispense to government plan patients its brand-name drugs, rather than the equivalent generic drugs, in violation of anti-kickback laws, causing false reports and false claims for reimbursement of those drugs to be submitted to government plans,” Ditter said, summarizing Schumann’s claim.
The judge agreed with AstraZeneca, which argued that the claims had already been alleged in an earlier suit and that Schumann doesn’t qualify as an original source. In 2010, Ditter released Bristol-Myers Squibb Co. from the same claims.
Ditter wasn’t persuaded by Schumann’s argument that his addition of the scheme involving Highmark and United made his claim fundamentally different from any that had already been publicly disclosed.
Like the reasoning for Ditter’s release of Bristol-Myers Squibb, the evidence Schumann presented against AstraZeneca had already been publicly disclosed to such a degree that the government was already on notice of the fraud before Schumann filed his claims, Ditter said.
The judge cited at least four other cases that preceded Schumann’s. The first that Ditter noted was filed in July 2003, a class action alleging that “AZ, along with BMS and other drug manufacturers, ‘conspired with Medco and other pharmacy-benefit managers “to collect inflated prescription drug payments” by providing “rebates, hidden price discounts and/or other unlawful financial inducements” to encourage the use of their products,’” Ditter said, quoting from the multidistrict litigation case that was consolidated in the U.S. District Court for the District of Massachusetts captioned In re Pharmaceutical Industry Average Wholesale Price Litigation.
After naming three other cases with similar claims, Ditter said in a footnote that they are just some examples of previous public disclosure of Schumann’s claim.
The judge cited news articles from three different publications between 2002 and 2003 that examined the issue.
“Numerous articles specifically discussed how Nexium and Prilosec were promoted over generic alternatives through the use of allegedly secret payments, discounts and rebates,” Ditter said.
Schumann argued that the specificity of his claim regarding Highmark and United elevated his suit beyond the earlier disclosures.
“I find this to be a distinction without consequence because the ‘material transactions giving rise to the alleged fraud were already disclosed in the public domain,’” he said, quoting the U.S. Court of Appeals for the Third Circuit’s 2010 opinion in Feldstein v. Organon.
“It is AZ that is alleged to have violated the FCA and those violations are not changed by the participation of Highmark and United in contract negotiations,” Ditter said.
Similarly, Ditter dismissed Schumann’s argument that he was an original source with independent knowledge of the alleged fraud.
It is not enough to simply argue that information gleaned from work at a company qualified as direct knowledge, Ditter said.
Neither Jeffrey Istvan of Fine, Kaplan and Black in Philadelphia, who represented Schumann, nor Alexander Kerr of McCarter & English in Philadelphia, who represented AstraZeneca, could be reached for comment.
(Copies of the 20-page opinion in Schumann v. AstraZeneca Pharmaceuticals, PICS No. 13-0277, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •