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January 28, 2013

Court dismisses whistleblower's lawsuit against pharmaceutical manufacturers due to previous public disclosure of facts

By Sarah E. Baumann, JD

A federal district court in Pennsylvania dismissed the government's federal false claims allegations against two drug manufacturers because the whistleblower's allegations were substantially similar to those that had been previously publically disclosed and the relator was not an original source of information (U.S. ex rel. Schumann v Astrazeneca Pharmaceuticals, LP, January 25, 2013, Ditter, J). The relator alleged that the manufacturers encouraged a pharmacy benefits manager to dispense brand name drugs to government plan patients in lieu of generic drugs and submitted false best price information reports. The court dismissed the claims as to the two manufacturers with prejudice and declined to exercise supplemental jurisdiction over state law claims.

Background. Karl Schumann was a registered pharmacist and former vice-president of pharmaceutical contracting for Medco, one of the nation's largest pharmacy benefit managers. Like other pharmacy-benefits managers, Medco provided a number of services to health plans, including negotiating rebates with manufacturers and managing formularies. AstraZeneca Pharmaceuticals, LP and Astrazeneca, LP (AZ) manufactured, marketed, and sold Prilosec and Nexium, brand name drugs used to reduce gastric acid.

Drug manufacturers who participate in Medicaid, 340B, or other government programs must pay the government rebates to ensure that the government does not pay more than the manufacturer's best price. Schumann, through the United States, alleged that AZ induced Medco to promote Prilosec and Nexium, in lieu of generic drugs, to Highmark Blue Cross Blue Shield (Highmark) and United Health Group (United). AZ did this, in part, by granting lower rates and paying monies only if Highmark and United agreed to carry Prilosec, and later, Nexium, in their formularies. He also alleged that AZ prepared false best price information to hide the actual cost from the government. Schumann alleged that AZ's actions violated the False Claims Act, including the anti-kickback prohibition.

In a qui tam action, the United States filed suit against AZ, Bristol-Meyers Squibb Company (BMS), E.I. du Pont de Nemours and Company, and DuPont Pharmaceuticals Company. The court dismissed the case against BMS because Schumann's allegations were substantially similar to those that had been publically disclosed. AZ filed a motion to dismiss based on the same reasons, also alleging that Schumann was not an original source.

Public disclosure. The False Claims Act prevents the government from filing qui tam suits when whistleblowers' claims are based on allegations that were previously publically disclosed in a hearing or through the media, if the relator was not an original source of the information. The intent is to discourage opportunists from filing claims for monetary rewards that are based on publically available information. Allegations need not be identical, but may be substantially similar, to previously disclosed allegations. The court previously dismissed Schumann's claims against BMS, finding that the allegations were disclosed in previous lawsuits, often including language that was a mirror image to Schumann's. Media outlets, including U.S. News & World Report and the Philadelphia Inquirer, also reported on similar allegations. The addition of Highmark and United did not change the underlying allegations against AZ.

Original source. In a qui tam action under the False Claims Act, a relator's allegations must arise from his or her direct knowledge of the wrongdoing and cannot be derived from others. It is not sufficient that a relator learned about wrongdoing through his or her employment. He or she must instead be able to specify "how, when, where, or from whom he obtained the knowledge." The court determined that the relator's vague allegations that he discussed related issues, participated in negotiations, and attended presentations were insufficient to establish direct knowledge.

The court dismissed the federal allegations against AZ with prejudice, noting that the relator had already been given sufficient time to cure the deficiencies.

The case number is 03-CV-5423.

Attorneys: Nicholas Carl Harbist (Blank Rome, LLP) for the United States of America. Alexander Kerr (McCarter and English, LLP) for AstraZeneca Pharmaceuticals LLP, AstraZeneca LP

Companies: AstraZeneca Pharmaceuticals LLP; AstraZeneca LP

MainStory: TopStory QuiTamNews AntikickbackNews FCANews FraudNews PennsylvaniaNews

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