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From Health Law Daily, March 11, 2013

Relator failed to provide evidence of pharmaceutical companies’ participation in alleged prescription-switching scheme

By Sarah E. Baumann, JD

A relator who alleged that a pharmaceutical marketing company induced pharmacies to dispense drugs in tablet form for non-medical reasons and caused them to make false claims to Medicare in violation of the False Claims Act (FCA) did not provide evidence that the pharmaceutical manufacturers participated in the scheme (U.S. ex rel. Lisitza v Par Pharmaceutical Companies, Inc., March 7, 2013, Tharp, J). The relator essentially alleged that the manufacturers controlled the marketing company and had knowledge of its fraudulent actions. However, because he did not submit evidence of any affirmative fraudulent actions by the manufacturers, the court granted their motion to dismiss with prejudice.

Background. Eli Lilly’s exclusive patent on Prozac® expired in 2001. During the course of the patent, Eli Lilly sold 20-milligram doses in capsule, not tablet form. Medicare regulations provided for a reimbursement cap on the 20-milligram dose only in capsule form, since no other form existed at the time. Alphapharm Pty, Ltd. (Alphapharm), a generic drug manufacturer, and Genpharm ULC (Genpharm), an affiliated generic drug manufacturer and distributor, received Food and Drug Administration approval to make 20-milligram tablets of fluoxetine, the generic equivalent of Prozac, in order to take advantage of the lack of a cap on 20-milligram tablets. Genpharm later granted Par Pharmaceutical Companies, Inc. (Par) the exclusive right to market fluoxetine tablets in the United States.

Allegations. Bernard Lisitza, the relator, alleged that Par, through illegal financial incentives and false statements, induced pharmacies to violate cost efficiency rules by substituting tablets for prescriptions calling for capsules, without physician approval or medical need. It then encouraged the pharmacies to submit false certifications to Medicare alleging that they had complied with all applicable federal and state laws. Lisitza alleged that Alphapharm and Genpharm were aware of the scheme and that Genpharm controlled the marketing campaign. The United States intervened with respect to Par, but declined to intervene with respect to Alphapharm and Genpharm. Alphapharm and Genpharm filed a motion to dismiss.

Lack of evidence. A relator alleging conspiracy under the FCA must allege that a defendant conspired with another party to have a false claim submitted to the United States and that at least one conspirator performed an action that would cause such a claim to be presented, resulting in damages. FCA claims are subject to the heightened standard of pleading for fraud. The court determined that Lisitza did not provide specific evidence indicating that either Alphapharm or Genpharm took any affirmative step to actually participate in fraud. “Parent companies are not generally liable for the misdeeds of their subsidiaries.” Although Lisitza alleged that Genpharm controlled Par’s actions, he did not present any evidence of specific decisions that Genpharm controlled and failed to name any specific agents.

Although he alleged that Alphapharm and Genpharm created and oversaw the marketing campaign for fluoxetine and attempted to exploit the lack of reimbursement cap to their advantage, Lisitza did not provide any evidence that they attempted to take advantage of the lack of a reimbursement cap through fraudulent means. His mention of an executive’s reference to “the capsule tablet dodge” was not sufficient to demonstrate that Alphapharm and Genpharm were aware of illegal activity. Even assuming that the reference was evidence of awareness, the FCA only punishes those who take affirmative steps to conspire in fraud, not those who are merely aware of existing fraud.

For all of these reasons, the court granted Alphapharm and Genpharm’s motion to dismiss. Noting that this was the third version of Lisitza’s complaint and that the United States had declined to intervene on his behalf with respect to Alphapharm and Genpharm, the court dismissed the case with prejudice.

The case number is 06 C 06131.

Attorneys: Linda A. Wawzenski, United States Attorney's Office (NDIL), for United States of America ex rel.; Kristen M. Kemp, Office of the Indiana Attorney General, for the State of Indiana ex rel.; Elizabeth Valentine, Assistant Attorney General for the State of Michigan, for the State of Michigan ex rel.; John C. Ellis (Richard J. Prendergast, Ltd.) for Par Pharmaceutical Companies, Inc.

Companies: Par Pharmaceutical Companies, Inc.

MainStory: TopStory FCANews QuiTamNews IllinoisNews

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