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MSP Recovery Claims, Series LLC v. Warner Chilcott PLC

United States District Court, D. Massachusetts

March 22, 2019

WARNER CHILCOTT PLC et al., Defendants.



         Plaintiffs assert that they are the holders, by assignment, of the right to recover for damages that certain Medicare Advantage Organizations (“MAOs”), Independent Practice Associations (“IPAs”), Management Service Organizations (“MSOs”), Health Maintenance Organizations (“HMOs”), and other entities suffered as a result of Defendants' schemes to increase prescriptions for their pharmaceuticals by bribing doctors, making false efficacy claims, and manipulating the process for obtaining prior authorizations. [ECF No. 28 at 3-4 (“Second Amended Complaint” or “SAC”)]. Plaintiffs bring claims on behalf of two putative classes of entities[1] that allegedly incurred costs as a result of Defendants' violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) (Count I), 18 U.S.C. §§ 1962(c) and (d), and violations of the consumer protection laws of Idaho, Texas, North Carolina, West Virginia, New York, Massachusetts, Indiana, Florida, Minnesota, and New Jersey (Count II), [2] as well as for acts of common law fraud (Count III), and based on unjust enrichment (Count IV). [See SAC ¶¶ 241-473]. Before the Court is Defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). [ECF No. 31]. For the reasons explained herein, the motion is GRANTED. Plaintiffs' RICO claim is dismissed with prejudice, and the remaining state law claims are dismissed without prejudice.

         I. BACKGROUND

         The following facts are drawn from the Second Amended Complaint, the well-pleaded allegations of which are taken as true for purposes of evaluating Defendants' motion to dismiss. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014). The Complaint spans 115 pages, and this summary is therefore restricted to pertinent facts.

         Plaintiffs MSP Recovery Claims, Series LLC; MSPA Claims 1, LLC; and MAO-MSO Recovery II, Series PMPI (collectively “Plaintiffs”) claim to hold, by assignment, the rights to recover damages for fraudulently-submitted prescriptions paid for by numerous MAOs, IPAs, MSOs, HMOs, and other Medicare downstream entities across the United States. [SAC ¶¶ 1-3]. The Second Amended Complaint identifies Fallon Community Health Plan, Inc., SummaCare, that she forgot to replace the words “blood glucose test strips” with “Warner Products, ” and wishes to maintain a class action for damages associated with Defendants' products. [ECF No. 30 at 1 n.1]. The first putative class includes MAOs and related entities who incurred costs “pursuant to Medicare Part C and D contracts offering Medicare Part D services, ” while the second putative class includes “MAO MA-PD, or PDP sponsors and related entities” who incurred costs “pursuant to Medicare Part D contracts.” [SAC ¶¶ 232-33]. Inc., Interamerican Medical Center Group, LLC, and Preferred Medical Plan, Inc. (collectively, “Assignors”) as entities that assigned claims “whether based in contract, tort, [or] statutory right” to MSP Recovery LLC. [Id. ¶¶ A1-A4].[3] The Assignors allegedly incurred costs for Warner Chilcott Products pursuant to agreements with the Centers for Medicare and Medicaid Services (“CMS”) or agreements with non-government entities that had taken on the risk of pharmaceutical costs from CMS. [Id. ¶¶ 26, 36; see also ECF No. 33 at 15].

         Defendants Warner Chilcott PLC, Warner Chilcott Sales (US), LLC (together, “Warner Chilcott”), Allergan USA, Inc., Allergan Sales, LLC, Allergan GI, Corp., and Allergan plc (collectively, “Defendants”)[4] are companies engaged in the discovery, development, manufacturing, marketing, and/or distribution of parametrical products in the United States and abroad. [SAC ¶¶ 4-11]. Defendants engaged in illegal schemes to increase purchases of their products, including Actonel, Atelvia, Asacol (400 mg), Asacol HD, Doryx, Enablex, Estrace Cream, Loestrin, and Lo Loestrin products (collectively, “Warner Chilcott Products”). [Id. at 3- 4]. Actonel and Atelvia are osteoporosis drugs, [id. ¶ 95]; Asacol HD treats moderately active ulcerative colitis, which is a bowel disease, [id. ¶ 77]; Doryx treats certain bacterial infections and is used to prevent malaria, [id. ¶ 116]; Enablex treats overactive bladder, [id. ¶ 124]; Estrace Cream treats certain vaginal conditions, [id. ¶ 81]; and Loestrin and Lo Loestrin are contraceptives, [id. ¶ 81].

         Warner Chilcott utilized three schemes to promote prescription of its drugs: (1) kickbacks through its Medical Education, or “MedEd, ” events and other gifts to reward and encourage the prescribing of Warner Chilcott Products; (2) manipulation of prior authorizations for Atelvia and Actonel, and (3) fraudulent promotion of Actonel as “clinically superior” to generics. [Id. ¶¶ 65- 195]. Plaintiffs claim that Warner Chilcott engaged in these schemes to increase prescriptions of Warner Chilcott Products for both approved uses and unapproved or “off-label” uses. [Id. ¶¶ 40- 50, 80, 115, 161, 177]; see 21 U.S.C. §355(a).

         On March 30, 2011, two former employees of Warner Chilcott, James Goan and Lisa Alexander, filed a False Claims Act qui tam action on behalf of the United States as relators. See Complaint, United States ex rel. Alexander v. Warner Chilcott PLC, No. 11-cv-10545-RGS (D. Mass. Mar. 30, 2011), ECF No. 1. Their qui tam complaint was amended on November 19, 2012, ordered unsealed on January 3, 2013, and further amended on April 22 and August 22, 2013, see United States ex rel. Alexander v. Warner Chilcott PLC, No. 11-cv-10545-RGS (D. Mass), ECF Nos. 17, 22, 24, 45. The United States reported on January 2, 2013 that it was not intervening, but that its investigation was ongoing. See Amended Notice of the United States, United States ex rel. Alexander v. Warner Chilcott PLC, No. 11-cv-10545-RGS (D. Mass. Jan. 2, 2013), ECF No. 21. Although the action was ordered unsealed in January 2013, it appears that the qui tam complaint and United States' notice that it did not intend to intervene were not unsealed until March 5, 2013.[5] After several stays, Warner Chilcott agreed to pay $112, 642, 306.00 to resolve that qui tam action in 2015. [SAC ¶¶ 202-10]. The August 22, 2013 third amended qui tam complaint made the same factual allegations that are asserted here. [Id. ¶ 200].

         On June 27, 2011, Relator Chris Wible, a sales representative at Warner Chilcott, filed a second qui tam action that also made similar allegations, although it was restricted to Warner Chilcott's promotion of Actonel and Asacol. Complaint, United States ex rel Wible v. Warner Chilcott, No. 1:11-cv-11143 (D. Mass. June 27, 2011), ECF No. 1. The United States also declined to intervene in that action, and the complaint was unsealed on February 21, 2013. Order, United States ex rel Wible v. Warner Chilcott, No. 1:11-cv-11143 (D. Mass. Feb. 21, 2013), ECF No. 19.

         The qui tam actions were the subject of press attention. See, e.g., Daniel Wilson, Warner Chilcott Misbranded Drugs, FCA Kickback Suit Says, Law 360 (Mar. 8, 2013, 2:19 PM), The actions were also disclosed by Warner Chilcott in its May 2013 10-Q. See Warner Chilcott PLC, Quarterly Report (Form 10-Q) 22 (May 10, 2013).

         The qui tam actions, which proceeded simultaneously, resulted in subpoenas being issued to Warner Chilcott. Warner Chilcott disclosed the subpoenas in its May 2012 10-Q, which stated:

In February 2012, the Company, along with certain non-executive employees in its sales organization, received subpoenas from the United States Attorney for the District of Massachusetts. The subpoena received by the Company seeks information and documentation relating to a wide range of matters, including sales and marketing activities, payments to people who are in a position to recommend drugs, medical education, consultancies, prior authorization processes, clinical trials, off-label use and employee training (including with respect to laws and regulations concerning off-label information and physician remuneration), in each case relating to all of the Company's current key products. The Company is cooperating in responding to the subpoena, but cannot predict or determine the impact of this inquiry on its future financial condition or results of operations.

Warner Chilcott PLC, Quarterly Report (Form 10-Q) 20 (May 4, 2012). The government's investigation, which was also the subject of press attention, [6] culminated in Warner Chilcott's guilty plea to healthcare fraud on April 15, 2016. [SAC ¶ 218].

         Plaintiffs filed this action on February 12, 2018. [ECF No. 1]. On July 25, 2018, Plaintiffs filed the Second Amended Complaint, which acknowledges that the third amended qui tam complaint filed by Relators Goan and Alexander on August 22, 2013 “alleged essentially the same allegations and actions as those alleged herein.” [SAC ¶ 200]. On August 24, 2018, Defendants filed the instant motion to dismiss. [ECF No. 31]. On September 24, 2018, Plaintiffs opposed the motion to dismiss. [ECF ...

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