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United States v. Solvay Pharmaceuticals, Inc.

United States Court of Appeals, Fifth Circuit

September 12, 2017

United States of America, State of Illinois, State of California, State of Florida, State of Tennessee, State of Texas, State of Massachusetts, State of Delaware, State of Nevada, State of Louisiana, State of Hawaii, District of Columbia, State of Virginia, State of Georgia, State of Indiana, State of Michigan, State of Montana, State of New Hampshire, State of New Jersey, State of New Mexico, State of New York, State of Oklahoma, State of Rhode Island, State of Wisconsin, ex rel, JOHN KING; TAMMY DRUMMOND, Plaintiffs - Appellants
v.
SOLVAY PHARMACEUTICALS, INCORPORATED, Defendant-Appellee

         Appeals from the United States District Court for the Southern District of Texas

          Before HIGGINBOTHAM, SMITH, and HAYNES, Circuit Judges.

          PER CURIAM.

         John King and Tammy Drummond (collectively, "Relators") appeal the district court's grant of summary judgment to Solvay Pharmaceuticals, Inc., on their False Claims Act ("FCA") claims and a subsequent ruling that partly granted court costs to Solvay. For the reasons explained below, we AFFIRM.

         I. Background

         Relators are both former Solvay sales and marketing employees. They brought this FCA suit against Solvay claiming that Solvay induced false Medicaid claims through a nationwide off-label marketing and kickback scheme to promote three drugs: Luvox, Aceon, and AndroGel. See 31 U.S.C. § 3729(a)(1)(A)-(B). They allege that this scheme proximately caused physicians to prescribe these drugs for off-label uses to Medicaid patients, the cost of which was reimbursed by the federal government. Relators also claim they were retaliated against for their internal complaints about Solvay's off-label marketing. The district court granted summary judgment to Solvay on all of Relators' claims.

         After final judgment, Solvay sought an award of $961, 380.51 in taxable costs against Relators under 28 U.S.C. § 1920. Relators objected to almost all of those costs, claiming that Solvay was entitled to just $5, 808.17. The district court awarded Solvay $232, 809.92. Relators appealed both the final order granting summary judgment on all of Relators' claims and the order granting taxable costs to Solvay.

         II. Standard of Review

         "We review an order granting summary judgment de novo, applying the same standards as the district court." Cooley v. Hous. Auth. of City of Slidell, 747 F.3d 295, 297 (5th Cir. 2014). Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A disputed fact is material if it has the potential to "affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "[W]e may affirm the district court's decision on any grounds supported by the record." Phillips ex rel. Phillips v. Monroe Cty., 311 F.3d 369, 376 (5th Cir. 2002).

          "The district court has broad discretion in taxing costs, and we will reverse only upon a clear showing of abuse of discretion." Brazos Valley Coal. for Life, Inc. v. City of Bryan, 421 F.3d 314, 327 (5th Cir. 2005) (quoting Migis v. Pearle Vision, 135 F.3d 1041, 1049 (5th Cir. 1998)).

         III. Discussion

         A. FCA Claims

         The FCA imposes civil liability and treble damages on any person who, inter alia, "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" to the United States government; or "knowingly makes, uses, or causes to be made or used a false record or statement material to a false or fraudulent claim." 31 U.S.C. § 3729(a)(1)(A)-(B); see also United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 267 (5th Cir. 2010). An FCA claim consists of four elements: "(1) whether there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money or to forfeit moneys due (i.e., that involved a claim)." United States ex rel. Longhi v. United States, 575 F.3d 458, 467 (5th Cir. 2009) (citation omitted).

         Relators have developed several theories of FCA liability with varying degrees of connectivity between Solvay's off-label marketing of Luvox, Aceon, and AndroGel and the actual filing of false claims. Those theories are that (1) Solvay marketed the three relevant drugs for off-label uses causing physicians to prescribe them to Medicaid patients for those uses; (2) Solvay lobbied members of state pharmaceutical and therapeutic committees ("P&T committees") to list these three drugs on their preferred drug lists; (3) Solvay used misleading scientific literature to lobby the publisher of drug compendium DRUGDEX Information System ("DrugDex") to include the off-label uses of these drugs in the compendium; and (4) Solvay paid doctors kickbacks to prescribe these drugs to Medicaid patients in violation of the anti-kickback statute ("AKS"), 42 U.S.C. § 1320a-7b(b)(2)(A).[1] Relators also brought an FCA retaliation claim challenging their terminations.

         The district court disposed of all of Relators' claims through a series of partial summary judgment orders. Relators' AndroGel claims were dismissed on summary judgment for lack of jurisdiction under the FCA's public disclosure bar. For the remaining two drugs, Luvox and Aceon, the off-label marketing claims failed to survive summary judgment because Relators' evidence of Medicaid claims was inadmissible and, even if it were admissible, did not sufficiently demonstrate causation. Both the lobbying theories of liability relating to state P&T committees and DrugDex and the retaliation claims also failed to survive summary judgment due to insufficient causation evidence. Finally, the AKS claims did not survive summary judgment because there was insufficient evidence that Solvay intended the kickbacks to induce payments from Medicaid. The summary judgment orders in the district court involved additional issues, but Relators do not challenge the district court's judgment on those issues so we do not consider them.[2]

         Because we conclude that Relators failed to produce sufficient evidence to survive summary judgment on any of their briefed claims, we affirm the district court's grant of summary judgment to Solvay.

         1. Public Disclosure Bar

         The district court first determined that it lacked jurisdiction to consider any of Relators' AndroGel claims because they were subject to the FCA's public disclosure bar. The applicable version of the FCA's public disclosure bar, which has since changed, provides that "[n]o court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions . . . from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information." 31 U.S.C. § 3730(e)(4)(A) (2006) (emphasis added).[3] The statute defines original source as "an individual who [1] has direct and independent knowledge of the information on which the allegations are based and [2] has voluntarily provided the information to the Government before filing an action under this section which is based on the information." Id. § 3730(e)(4)(B).

         The district court determined that Relators' AndroGel claims were based on publicly disclosed allegations from a magazine article and that Relators' pre-suit disclosure made the day before filing suit could not satisfy the voluntary disclosure requirement of the original source exception. Specifically, the district court concluded that because Relators' pre-suit disclosure satisfied the mandatory disclosure requirement under § 3730(b)(2), it could not simultaneously satisfy the voluntary disclosure requirement under § 3730(e)(4). Relators appeal only the district court's determination that they are not original sources.

         It is well established that the party invoking federal jurisdiction carries the burden of establishing that jurisdiction is proper. United States ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 327 (5th Cir. 2011). Thus, it was Relators' burden to show that they qualified under the original source exception; otherwise, the public disclosure bar "strips" the court of subject matter jurisdiction. See United States ex rel. Fried v. W. Indep. Sch. Dist., 527 F.3d 439, 441-42 (5th Cir. 2008); see also § 3730(e)(4)(A) (stating that "[n]o court shall have jurisdiction" if the public disclosure bar applies). However, because "[a] challenge under the FCA jurisdictional bar is necessarily intertwined with the merits, " we treat it as a motion for summary judgment. Jamison, 649 F.3d at 326 (quoting United States ex rel. Reagan v. E. Tex. Med. Ctr. Reg'l Healthcare Sys., 384 F.3d 168, 173 (5th Cir. 2004)).

         Assuming without deciding that a single pre-suit disclosure can satisfy both the pre-suit mandatory and voluntary disclosure requirements, Relators still failed to create a genuine issue of material fact as to whether their pre-suit disclosure to the government disclosed "the information on which the allegations are based." 31 U.S.C. § 3730(e)(4)(B). The Supreme Court has interpreted the phrase "information on which the allegations are based" as referring to the "information underlying the allegations of the relator's action." Rockwell Int'l Corp. v. United States, 549 U.S. 457, 470-72 (2007) (abrogating United States ex rel. Laird v. Lockheed Martin Eng'g & Sci. Servs. Co., 336 F.3d 346, 354-55 (5th Cir. 2003) (holding that a relator must have direct and independent knowledge of information on which the allegations in the public disclosure are based)). The Court further indicated that such information includes knowledge of conduct suggesting that false claims were made to the government. See id. at 475 (concluding that relator's knowledge fell short because he was not employed by the defendant during the relevant time period and thus could not have known about the predicate conduct and subsequent false statements to the government). Indeed, without knowledge of conduct that-when placed in the context of all of the other relevant information- suggests that false claims were made to the government, Relators could not allege an FCA claim.[4] See United States ex rel. Spicer v. Westbrook, 751 F.3d 354, 364-65 (5th Cir. 2014) (stating that "the statute attaches liability, not to the underlying fraudulent activity or to the government's wrongful payment, but to the claim for payment" (quoting Longhi, 575 F.3d at 467)); United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 188 (5th Cir. 2009) (stating that proof of a false claim against the government is the "sine qua non" of liability under the FCA). Accordingly, the Fourth Circuit has affirmed a finding that a relator was not entitled to original source status where, inter alia, his pre-suit disclosure never connected information about the alleged fraudulent conduct with the filing of a claim for reimbursement from the government. United States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 353, 355 (4th Cir. 2009).

         Here, Relators failed to present any evidence indicating that their pre-suit disclosure connected the knowledge of Solvay's conduct to false claims made to the government. Relators cite to a declaration of their attorney, Joel Androphy, and a PowerPoint presentation to support the details of their pre-suit disclosure.[5] However, the declaration simply refers to discussions Relators had with the Food and Drug Administration ("FDA") about the off-label marketing and kickbacks associated with AndroGel, as well as Relators' terminations. But the declaration does not indicate that Relators connected this information with any false claims presented to the government. Moreover, the lack of detail about which off-label uses Solvay marketed or how it paid kickbacks to physicians is an additional defect that makes the declaration insufficient to support the voluntary disclosure necessary for the original source exception. See Rockwell, 549 U.S. at 473 (indicating that a relator must satisfy his original source status as to each theory of fraud in the complaint as amended); Jamison, 649 F.3d at 332 (holding that a relator was not an original source of the allegations in his complaint because the information on which the allegations were based described the fraud only generally).

         Although the PowerPoint presentation provides additional details about the information disclosed to the FDA, the presentation does not suggest that any false claims were submitted to the government. It makes no mention of any FCA provisions, never suggests that the off-label marketing or the remuneration caused prescriptions to be reimbursed by the government, and never suggests any false certifications of compliance with the AKS. Instead, the information disclosed in the PowerPoint presentation suggests only Food, Drug and Cosmetic Act ("FDCA") and AKS violations, not FCA violations. For Relators to satisfy the FCA's voluntary pre-suit disclosure requirement of disclosing information underlying their FCA action, their disclosure must-at a minimum-connect direct and independent knowledge of information about Solvay's conduct to false claims submitted to the government, i.e., suggest an FCA violation.[6] Even assuming all of the information in the PowerPoint presentation regarding possible FDCA and AKS violations came from Relators' direct and independent knowledge, the presentation still fails to create a genuine issue of material fact as to its disclosure of information on which the FCA allegations are based because it is completely devoid of any indication connecting such information with false claims presented to the government.

         Accordingly, because Relators' evidence of the information provided to the government in their voluntary pre-suit disclosure does not suggest any FCA violations, it is insufficient to support a finding that Relators disclosed to the government the information underlying their FCA allegations prior to filing suit. Consequently, Relators have failed to meet their summary judgment burden as to their status as original sources under § 3730(e)(4) of the FCA. Because the FCA public disclosure bar applies, the district court correctly determined that it lacked jurisdiction to consider Relators' AndroGel claims.

         2. Alleged Off-Label Marketing to Physicians

         The FDCA prohibits a drug from being introduced in interstate commerce unless the FDA approves the drug as safe and effective for each of the uses suggested on its labeling. 21 U.S.C. § 355(a), (d); see also 21 C.F.R. § 310.303(a) ("[A] new drug may not be approved for marketing unless it has been shown to be safe and effective for its intended use(s)."). The Medicaid Act empowers states to deny reimbursement for a drug if "the prescribed use is not for a medically accepted indication." 42 U.S.C. § 1396r-8(d)(1)(B)(i).[7] A "medically accepted indication" is "any use for a covered outpatient drug which is approved under the [FDCA] or the use of which is supported by one or more citations included or approved for inclusion in any of the compendia described" elsewhere in the statute. 42 U.S.C. ยง ...


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