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January 15, 2013

Relator loses appeal the dismissal of his FCA claim against Takeda for allegedly marketing Kapidex™ for "off-label" uses

By Susan L. Smith, JD, MA

The district court did not err in dismissing the amended complaint of Noah Nathan (Nathan), a sales manager for Takeda Pharmaceuticals, Incorporated (Takeda), because Nathan failed to plausibly allege that Takeda had presented false claims for payment to Medicare and other federal health insurance programs (United States ex rel. Nathan v Takeda Pharmaceuticals North America, January 11, 2013, Keenan, B). The 4th Circuit Court of Appeals determined that Nathan's allegations were insufficient because they were inherently speculative in nature and concluded that Nathan failed to plead with particularity a plausible claim that any off-label prescriptions were presented to the government for payment, thus triggering liability under the False Claims Act (FCA). In addition, the district court did not abuse its discretion in denying Nathan's motion for leave to fie a fourth amended complaint.

Background. Nathan's claims include allegations that (1) prescriptions written for certain medical uses, which have not been approved by the Food and Drug Administration (FDA) or included in statutorily specified compendia, referred to as "off label" uses, are not reimbursable under federal health insurance programs; and (2) the presentation of these types of claims for payment violates the FCA because the cost of prescriptions for off label uses is not subject to reimbursement by the federal government. He further alleged that Takeda marketed its prescription drug Kapidex™, a proton pump inhibitor used for various gastric conditions, for off label uses, marketed high doses of Kapidex for treatment of conditions for which only a lower dose has been approved by the FDA, and provided doctors with samples of Kapidex exclusively in a higher dose irrespective of whether the physicians treated active cases of conditions that required the higher dose. The district court dismissed Nathan's third amended complaint because he failed to allege that Takeda presented false or fraudulent claims for payment or approval to the government and caused the issuance of off label prescriptions.

Pleading standard. The FCA prohibits any person from knowingly "caus[ing] to be presented" to the government false claims for payment or approval (31 U.S.C. sec. 3729(a)(1)(A)). Under Federal Rule of Civil Procedure, Rule 9(b), "some indicia of reliability" must be provided in the complaint to support the allegation that an actual false claim was presented to the government, the court said. Citing several courts' reasoning, the court explained that the critical question is whether the Takeda caused a false claim to be presented to the government because liability under the FCA attaches only to a claim actually presented to the government for payment, not to the underlying fraudulent scheme. Therefore, when a relator fails to plead plausible allegations of presentment, the relator has not alleged all the elements of a claim under the FCA, the court said. The court declined to adopt Nathan's argument for a more lenient application of Rule 9(b).

Court's analysis of the allegations. The court found that Nathan's allegations fall short of the pleading standards set forth in Rule 9(b) because the allegations did not constitute plausible allegations that Takeda caused presentment of a false claim to the government. First, concerning Takeda's alleged fraudulent promotion of Kapidex, Nathan did not allege that the targeted physicians wrote any off-label prescriptions that were submitted to the government for payment. Therefore, Nathan did not plausibly allege that Takeda caused the physicians to write Kapidex prescriptions for off-label uses that were actually presented to the government for payment. Although Nathan identified physicians who received samples of the higher dose of Kapidex from Takeda and allegedly wrote prescriptions for the drug that were submitted to the government for payment, he did not plausibly allege that the prescriptions were for off-label uses nor did he allege facts that address the dosage level of the prescriptions. The court concluded that Nathan's allegations concerning the prescriptions attempted to draw inferences from the general statistics that are implausible and unsupported by the stated facts. Moreover, the amended complaint did not include any details about the particular prescriptions certain physicians wrote for Medicare patients, such as approximate dates, patient information, whether the Medicare patients filled the prescriptions, or whether corresponding claims for reimbursement were submitted to the government.

The court also concluded that the district court did not abuse its discretion in denying Nathan the opportunity to file a fourth amended complaint. Nathan had been afforded the opportunity to amend his complaint three times to correct his pleading deficiencies and two years have elapsed between the filing of the original complain and the district court's dismissal of the amended complaint.

The case number is 11-2077.

Attorneys: Jeffrey A. Lamken, Michael G. Pattillo, Jr., Martin V. Totaro (Mololamken, LLP) for Noah Nathan. William F. Cavanaugh, Jr., Daniel S. Ruzumna, Sean H. Murray, Aileen M. McGill (Patterson, Belknap, Webb & Tyler); Susan R. Podolsky (The Law Offices of Susan R. Podolsky) for Takeda Pharmaceuticals North America, Incorporated; Takeda Pharmaceuticals America, Incorporated.

Companies: Takeda Pharmaceuticals North America, Incorporated. Takeda Pharmaceuticals America, Incorporated.

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