A Pennsylvania federal judge has allowed the majority of claims to proceed against Merck & Co. in a qui tam suit and related antitrust putative class action over the company’s testing and government sales of its mumps vaccine.

U.S. District Judge C. Darnell Jones II of the Eastern District of Pennsylvania issued one opinion Friday in two related suits—United States v. Merck & Co. and Chatom Primary Care v. Merck & Co.

Two former virologists at Merck brought claims as relators under the False Claims Act, alleging Merck, the sole company approved by the U.S. Food and Drug Administration to sell a mumps vaccine, falsified testing of the efficacy of the drug and misstated the drug’s efficacy to the government as having a 95 percent efficacy rate, according to the opinion. The United States declined to intervene in that suit.

The putative class action is based on the claims made in the qui tam action and argues Merck’s alleged “manipulation and misrepresentation” of the vaccine’s efficacy allowed for Merck’s monopoly of the mumps vaccine market, Jones said. The class action raises various Sherman Act violations and violations of state laws, according to the opinion.

Merck moved to dismiss both actions.

Jones denied Merck’s motion as to all of the claims in the qui tam action. In his analysis of those claims, Jones found that relators can plead a fraud-on-the-FDA theory through a False Claims Act suit.

As to the class action, Jones dismissed many of the state law claims, except for some of those involving New York and New Jersey law. He sustained the Sherman Act claim, finding that while it was a “slightly novel theory of liability” that Merck’s alleged deliberate concealing of information secured its monopoly on sales of the vaccine to the government, the unique facts of the case create the basis for an antitrust claim.

Those unique facts were Merck’s 100 percent monopoly on the market and its statutory and contractual duties to disclose information, Jones said.

“Plaintiffs have argued sufficient facts to sustain a claim for proximate causation, detailing the significant barriers that other companies would face to enter the mumps vaccine market,” Jones said.

Merck is represented in the two cases by Dino S. Sangiamo and Sally Bryan of Venable LLP in Baltimore, and Eric W. Sitarchuk and Lisa Dykstra of Morgan, Lewis & Bockius in Philadelphia. Calls to Sangiamo and Sitarchuk were not immediately returned.

Kellie C. Lerner and Hollis Salzman of Robins, Kaplan, Miller & Ciresi in New York are leading the plaintiffs team in the class action suit. They said it was a favorable ruling for the class and they were pleased the judge upheld the federal antitrust claim.

Gordon Schnell of Constantine Cannon in New York is leading the team for the qui tam plaintiffs. He said he was happy with the decision and looked forward to proceeding with the case.

False Claims Act

In the qui tam action, Merck argued the relators’ claims essentially go to the alleged fact that the drug’s label stating a 95 percent efficacy rate was false. Merck argued labeling changes are solely within the purview of the FDA and cannot be disputed through a False Claims Act suit. The relators countered that their claims speak more broadly than arguing the label was false.

Jones upheld all of the relators’ claims in the qui tam suit, rejecting Merck’s argument that it was an issue for the FDA to police. Jones cited the government’s statement of interest it filed in the case on this issue despite choosing not to intervene. In it, the government said holding that only the government and not a relator can litigate a False Claims Act suit arising from allegations of fraud on the FDA would be inconsistent with the purposes of the False Claims Act.

“The court agrees. Relators allege that [Merck] consistently and deliberately withheld pertinent information as to the safety and efficacy of a medication from the government,” Jones said. “It is this alleged omission that is the grounds for FCA liability.”

Jones noted that, in order to survive a motion to dismiss, the relators further had to allege with particularity that the defendant presented or caused to be presented to an agent of the United States a claim for payment, that the claim was false or fraudulent and that the defendant knew the claim was false or fraudulent.

Jones said the relators plainly showed Merck submitted claims to the government for payment for the vaccine on many occasions since 1999. Jones further ruled the relators sufficiently pleaded that there was information about the alleged lessened efficacy of the vaccine that was not reported to the government and that the omission was material to the government continuing to buy the vaccine.

As to Merck knowing the claims were false, Jones said the relators sufficiently alleged their firsthand experience in Merck’s labs in which they allegedly witnessed supervisors and managers instructing staff to withhold information from the government.

The False Claims Act not only provides for counts alleging false claims to the government—submitting the requests for payments—but for false statements, Jones noted. He upheld the relators’ claims regarding false statements, citing their allegations that Merck falsely represented the efficacy of the drug through labels, applications for a labeling change and through not disclosing its knowledge of the weaker efficacy of the drug during mumps outbreaks in 2006 and 2009, according to the opinion.

Class Action

In the proposed class action, the named plaintiffs are Alabama-based Chatom Primary Care and two individual doctors from New York and New Jersey, respectively. They allege Merck’s monopoly on the drug caused them to pay more for the drug. Aside from the plaintiffs’ antitrust claims in the putative class action, which were upheld, Jones had to address the state law claims.

Jones determined that the plaintiffs only have standing to bring state law claims under laws of the states in which they reside—New York, New Jersey and Alabama. He said they did not specify what, if any, injuries they suffered in the 22 other jurisdictions whose laws they invoked. Those claims instead rest on “abstract” injuries suffered by unidentified members of the putative class, Jones said in dismissing those claims.

Jones went on to reject Merck’s argument that the remaining state law claims were preempted by a bar on state fraud-on-the-FDA claims. Jones said other courts have found that, when a claim incorporates but does not rely upon a fraud on the FDA, a state tort claim is not preempted. Jones said the plaintiffs are alleging the fraud was part of a larger scheme to maintain an anti-competitive business regime.

“A ruling in favor of the plaintiffs on these state law claims would not have any effect on the method by which the FDA regulates the defendant, or infringe on any FDA remedy to police fraud,” Jones said.

Jones further rejected Merck’s argument that it would be impossible for it to comply with both federal labeling requirements and state laws.

“This court finds it difficult to accept that [Merck] would be penalized for providing additional information on its warning label,” Jones said.

Jones went on to uphold the plaintiffs’ claim under the New York Deceptive Acts and Practices Statute as well as the New Jersey Consumer Fraud Act. Merck had argued the New Jersey doctor couldn’t be considered a consumer of the vaccine considering he was giving it to his patients, but Jones rejected that argument, ruling the doctor’s use of the vaccine destroys the vaccine’s further utility and isn’t used for resale.

Jones granted Merck’s motion to dismiss the plaintiffs’ breach of contract and unjust enrichment claims.

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.

(Copies of the 42-page opinion in United States v. Merck & Co. and Chatom Primary Care v. Merck & Co., PICS No. 14-1402, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •