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Speculative Allegations Not Sufficient For FCA Pleadings In Fourth Circuit

In United States ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., 2013 U.S. App. LEXIS 765 (4th Cir.), Nathan, a sales manager for Takeda Pharmaceuticals (Takeda), brought a qui tam action against his employer under the False Claims Act (“FCA”), alleging that Takeda violated 31 U.S.C. § 3729(a)(1)(A) by causing false claims to be presented to the government under Medicare and other federal health insurance programs.

The product in question was a prescription drug, Kapidex, which has been approved by the FDA in 30 mg doses to treat gastroesophogeal reflux disease (GERD) and in 60 mg doses only for the treatment of erosive esophagitis (EE). Nathan claimed that Takeda’s marketing practices caused presentation of false claims; however, finding that Nathan failed to allege the required “presentment” of a false claim, the U.S. District Court for the Eastern District of Virginia dismissed the amended complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

On appeal, the Fourth Circuit Court of Appeals considered four categories of allegations in the amended complaint, which Nathan contended stated with particularity that Takeda caused false claims to be presented to the government for payment:

  1. 1. Takeda promoted Kapidex to rheumatologists, who typically do not treat the conditions for which Kapidex has been approved. The court held that the fact that the amended complaint does not allege that the targeted rheumatologists wrote any off-label prescriptions that were submitted to the government for payment was a critical omission in a case brought under the FCA.
  2. 2. Sixteen primary care physicians (PCPs) received 60 mg samples of Kapidex and collectively wrote 98 prescriptions that were submitted to the government for reimbursement, even though PCPs do not typically treat EE, the condition approved for 60 mg dosage. The Relator alleged that physicians tend to prescribe drugs in the same dose as the samples received and that, therefore, the identified PCPs must have prescribed 60mg doses because they received only 60 mg samples. The court ruled that the attempt to draw inferences from general facts were implausible and, thus, such allegations did not state with particularity that any false claims were submitted to the government for payment.
  3. 3. Approximately 9,000 Kapidex prescriptions were submitted to the government for reimbursement in two of Takeda’s sales districts during certain one-year periods. Finding that the amended complaint did not allege the dosages of these prescriptions, did not identify the types of doctors issuing the prescriptions, did not describe the types of illnesses for which the prescriptions were issued, and did not allege whether the doctors were subjected to Takeda’s sample distribution practices, the court determined that the references in the amended complaint did not constitute plausible allegations that Takeda caused presentment of a false claim to the government.
  4. 4. Affidavits of two gastroenterologists and one PCP averred that they prescribed 60 mg dosages of Kapidex to treat GERD in Medicare patients and were unaware that the drug was available in 30 mg dosage due to Takeda’s sampling practices. Noting that the amended complaint contained no allegations that these Medicare patients ever filled their prescriptions or that claims for reimbursement were ever presented to the government, the court found that general allegations regarding unidentified Medicare patients did not identify with particularity any claims that would trigger liability under the FCA.

The Fourth Circuit held “that when a defendant’s actions, as alleged and as reasonably inferred from the allegations could have led, but need not necessarily have led, to the submission of false claims, a relator must allege with particularity that specific false claims actually were presented to the government for payment.” 2013 U.S. App. LEXIS at *15. The court also rejected Nathan’s contention that allegations of a fraudulent scheme, in the absence of an assertion that a specific false claim was presented, is a sufficient basis on which to plead a claim under the FCA in compliance with Rule 9(b). Finding that Nathan’s allegations were insufficient “because they are inherently speculative in nature,” the Fourth Circuit affirmed the district court’s holding that the amended complaint failed to plead with particularity a plausible claim that any off-label prescriptions were presented to the government for payment.

J. Kennedy Turner, III