Issue Of Whether Government Must Allege Specific False Claims In FCA Case Predicated On Alleged Kickbacks Is Teed Up In Southern District Of New York

A motion to dismiss in United States et al. v. Novartis Pharmaceuticals Corp. ("Novartis"), 11 Civ. 0071 (PGG), fully briefed as of December 23, 2013, could have significant consequences for the application of Federal Rule of Civil Procedure 9(b) to cases brought under the False Claims Act ("FCA") in the Southern District of New York. The case, a qui tam in which the United States intervened, alleges that for 10 years, Novartis engaged in a nationwide scheme of fraudulent speaker programs to induce doctors to prescribe Novartis pharmaceuticals in violation of the Anti-Kickback Statute ("AKS"). After the Government filed an amended complaint on August 26, 2013, Novartis moved to dismiss based primarily on Rule 9(b), which requires that fraud be pled with particularity. A key issue raised by the motion to dismiss is whether, in an action brought under the FCA based on AKS violations, the Government is required at the pleading stage to identify particular false claims that were submitted for payment by federal health care programs as a result of the alleged kickback scheme. That issue, which has not yet been decided by the Second Circuit, is one of the most frequently contested in FCA jurisprudence today.

Background

The original qui tam complaint in the Novartis case was filed under seal by Oswald Bilotta, a former sales representative at Novartis, on January 5, 2011. On April 26, 2013, the Government intervened in part and filed a complaint alleging that from 2002 through 2011, Novartis "systematically paid doctors to speak about certain of its drugs, including its cardiovascular drugs Lotrel and Valturna and its diabetes drug Starlix, at events that were often little or nothing more than social occasions for the doctors," including dinners.1 The Government alleged that "[t]he payments to the doctors, and the dinners, were kickbacks to the speakers and the attendees to induce them to write prescriptions for Novartis drugs."2

After Novartis notified the court of its intention to move to dismiss the complaint, the court held a pre-motion conference on July 18, 2013. At the conference, the court indicated that it had "concerns" about whether the Government's complaint satisfied Rule 9(b).3 The court stated that "while the complaint contains substantial details about the alleged kickback scheme, [the court was] concerned that it may not satisfy Rule 9(b) because it lacks sufficient detail about the claims submission process and does not provide examples of specific fraudulent claims that were submitted."4 Citing United States ex rel. Polansky v. Pfizer, Inc., 2009 WL 1456583, at *5 (E.D.N.Y. May 27, 2009), the court noted that "[u]nder the FCA liability attaches 'not to the underlying fraudulent activity or to the government's wrongful payment, but to the claim for payment.'"5 The court further noted that "[a]ccordingly, many courts have held that FCA pleadings are 'inadequate unless they are linked to allegations, stated with particularity, of actual false claims submitted to the government that constitute the essential element of an FCA qui tam action.'"6 The court stated that:

As the Eleventh Circuit stated in the much-[cited] case of United States ex rel. Clausen v. Laboratory Corporation of America, Inc., "the submission of a claim [is] the sine qua non of a false claims act violation." As such, Rule...