United States District Court, D. Massachusetts
UNITED STATES OF AMERICA and THE STATES OF CALIFORNIA, COLORADO, CONNECTICUT, DELAWARE, FLORIDA, GEORGIA, HAWAII, ILLINOIS, INDIANA, IOWA, LOUISIANA, MARYLAND, MICHIGAN MINNESOTA, MONTANA, NEVADA, NEW JERSEY, NEW MEXICO, NEW YORK, NORTH CAROLINA, OKLAHOMA, RHODE ISLAND, TENNESSEE, TEXAS, WASHINGTON, and WISCONSIN, THE COMMONWEALTHS OF MASSACHUSETTS and VIRGINIA, and THE DISTRICT OF COLUMBIA, ex rel. MICHELE CLARKE, TRICIA MULLINS, and KRISTI WINGER SZUDLO, Plaintiffs,
AEGERION PHARMACEUTICALS, INC MARC BEER, MELANIE DETLOFF, WILLIAM DULL, GREG FENNER, MARK FITZPATRICK, CRAIG FRASER JAMES FRIGGE, DANIEL RADER, DAVID SCHEER, MARK SUMERAY, and THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA, Defendants.
MEMORANDUM AND ORDER
Talwani United States District Judge.
before the court is Defendants Marc Beer, Melanie Detloff,
William Dull, Greg Fenner, Mark Fitzpatrick, Craig Fraser,
James Frigge, Daniel Rader, David Scheer, and Mark
Sumeray's Joint Motion to Dismiss (the
“Joint Motion”) [#147] all remaining claims in
Relators Michele Clark, Tricia Mullins, and Kristi Winger
Szudlo's Second Amended Complaint [#69]. For the
following reasons, Defendants' Joint Motion
[#147] is ALLOWED as to claims against David Scheer, but is
Clarke, Mullins, and Szudlo are former sales representatives
at Aegerion Pharmaceuticals, Inc. (“Aegerion”).
Second Am. Compl. ¶¶ 8-10 [#69]. Defendants Beer,
Detloff, Dull, Fenner, Fitzpatrick, Fraser, Frigge, and Dr.
Sumeray are former employees of Aegerion; Defendant Scheer
was on Aegerion's Board of Directors. Id.
or 2001, Dr. Daniel Rader, an employee of the University of
Pennsylvania (UPenn), approached Bristol-Meyer Squibb Company
about donating a drug it had been developing to UPenn.
Id. ¶¶ 19, 22, 36-39. Bristol-Meyer Squibb
did so, and Dr. Rader began to develop the drug through the
Food and Drug Administration's (“FDA”) orphan
drug program. See id ¶¶ 40-42. The orphan
drug program incentivizes innovation of drugs for patient
populations below 200, 000 in the United States by allowing a
cheaper and easier FDA approval process that does not require
the same evidence of safety and efficacy as for non-orphan
drugs. Id. ¶ 41.
June 2003 to February 2004, Dr. Rader conducted a study of
the drug on six individuals with Homozygous Familial
Hypercholestrolemia (“HoFH”). Id. ¶
42. HoFH is a life- threatening genetic lipid disorder
inherited from both parents. Id. ¶ 30. The FDA
and others in the scientific community estimate only one in
one million people in the United States, or approximately 300
people, have the disorder. Id. ¶¶ 2, 32. Dr.
Rader proposed expanding use of the drug beyond the HoFH
population, but the FDA informed Dr. Rader and UPenn
“that the expanded use of the product in the additional
groups of patients shifts the risk-benefit profile of the
development program” in an adverse direction.
Rader recruited a former colleague, Defendant David Scheer,
to incorporate Aegerion in 2005 for the purpose of
commercializing the drug. Id. ¶ 46. UPenn
granted Aegerion the exclusive right to “research,
develop, commercialize, make, have made, offer for sale and
sell” the drug, which Aegerion renamed AEGR-733.
Id. ¶¶ 49, 52. Dr. Rader was a member of
Aegerion's Scientific Advisory Board as early as 2007 and
Aegerion sold him a significant amount of stock at a fraction
of its value. Id. ¶¶ 51-52.
acknowledged in a statement filed with the Securities and
Exchange Commission that the HoFH patient population was
approximately 300 people, but also claimed that the drug has
the potential to treat a much larger population with
“severe refractory hypercholesterolemia,
” or approximately 30, 000 people.
Id. at ¶ 50, 54. Aegerion renamed AEGR-733
Lomitapide, commercially known as Juxtapid, and Dr. Rader
proposed to the FDA that his FDA Phase III clinical trial of
Juxtapid be expanded to the “severe refractory
hypercholesterolemia” patient population. Id.
The FDA told Dr. Rader that if he wished to do so, he would
need to expand his then-current trial beyond the thirty-six
subjects being proposed and conduct a second-and possibly
additional-trials in high risk HeFH patients, as there was
“uncertainty regarding the long-term consequences of
Lomitapide-associated hepatic steatosis.” Id.
¶ 54, 57. Aegerion decided not to conduct the additional
trial proposed by the FDA due to “financial
constraints, ” and instead decided to remain with the
smaller HoFH population. Id. ¶¶ 54, 57-58.
October 2007, the FDA formally granted Juxtapid an orphan
drug designation for the treatment of HoFH. Id.
¶ 56. In May 2010, the FDA expressed concern to Aegerion
executives about potential “off-label use” of
Juxtapid. Id. ¶ 58. Aegerion agreed to
implement post-approval supply constraints to protect against
this risk. Id.
September 2010, Aegerion appointed a new CEO, Defendant Marc
Beer. Id. at 59. Aegerion's Chief Medical Office
abruptly resigned, and his position remained vacant until
July 2011. Id. at ¶¶ 59, 65. Late in 2010,
Aegerion announced at a conference that it had adopted a new
estimate that the number of adult patients with HoFH in the
United States was 3, 000 patients instead of 300 patients.
Id. ¶ 60. Dr. Rader endorsed this number, even
though it was contrary to his prior assertions. Id.
¶¶ 61-62. Dr. Rader and Aegerion attempted to
introduce this proposed new “functional” HoFH
population to the FDA, but the FDA responded that this
expanded “functional HoFH” definition too closely
resembled the “severe refractory heterozygous FH
population” for which Aegerion had not sought approval,
“and expand[ed] the target population almost
10-fold.” See id. ¶¶ 54, 57, 62.
2011, Aegerion recruited Defendant Dr. Mark Sumeray as its
Chief Medical Officer. Id. ¶ 65. In February
2012, Aegerion submitted to the FDA a New Drug Application
for Juxtapid limited solely to HoFH. Id. ¶ 66.
In December 2012, the FDA approved Juxtapid for use in
patients with HoFH. Id. ¶ 72. Aegerion
initially priced Juxtapid at $235, 000 for a year's
therapy and increased that price to $329, 587 for a
year's therapy by June 2014. Id. ¶ 163.
receiving approval for the use of Juxtapid in a limited
population, Aegeriontrained their sales
representatives-including Relators-to aggressively market the
drug as an off-label solution for a much larger swath of the
public, including individuals with HeFH or simply with high
cholesterol, and regularly pushed the inflated assertion that
there were 3, 000 potential HoFH patients. See, e.g.
id. ¶¶ 75-81, 83-91, 93, 95-103, 105-07,
109-10, 114, 134. This off-label marketing scheme included
instructing its sales staff that genetic testing was a threat
to Juxtapid sales, and they should not mention HoFH when
speaking with doctors and patients. See id.
¶¶ 76-79, 83, 84, 98, 99. Aegerion directed sales
staff to ask doctors misleading questions to make them think
the drug was suitable for patients with “severe
refractory lipids, ” id. ¶ 76, 91, 98,
107-110; see also id. ¶¶ 87, 99, and to
tell doctors that: there was “no definition” of
HoFH, id. ¶¶ 76, 77, 78, 99, 107; doctors
could determine who had HoFH without genetic testing,
id. ¶ 100; the disease was not one in one
million but rather one in 265, and the one in a
million figure was outdated, see id. ¶¶
76, 81, 84, 90, 91, 102-104, 114; and, Aegerion would not
engage them as speakers unless they prescribed Juxtapid,
see id. ¶¶ 96, 98, 105, 106. Aegerion also
told sales staff to go to patients' homes to obtain
consent form signatures and suggested that sales people
complete medical forms themselves, id. ¶ 80.
Aegerion encouraged its sales staff to “data
mine” patient databases of medical practices for
candidates matching Aegerion's definition of the
“functional equivalent of HoFH.” Id.
¶¶ 83, 85, 86, 88, 89. The sales team further set
up a so-called “hunting” competition amongst
sales staff, aggressively placing pressure on the staff to
track down potential Juxtapid patients using this expanded
use of the drug. See id. ¶¶ 93-95.
2013, Defendant Beer announced that Aegerion would no longer
report metrics other than sales of Juxtapid. Id.
¶ 120. By the late 2013, about a year after the launch
of Juxtapid, Aegerion had 374 Juxtapid patients, over ninety
of whom were Medicare patients (24%). Id.
¶¶ 121, 149, 150.
filed their initial Complaint in this qui
tam action under seal on July 26, 2013.
November 2013, the FDA sent Aegerion a letter warning that
Defendant Beer's public statements “provide
evidence that Juxtapid is intended for new uses, for which it
lacks approval and for which its labeling does not provide
adequate directions for use, ” making it in violation
of the Federal Food and Drug and Cosmetic Act. Id.
¶ 134. The FDA instructed Aegerion to correct the false
impressions made by instituting a “comprehensive plan
of action to disseminate truthful, non-misleading, and
complete corrective messages.” Id.
January 9, 2014, Aegerion announced that it was under
investigation by the United States Attorney's Office in
Boston, and that it was working on responding to a subpoena.
Id. ¶ 135. Defendants Beer and Fraser resigned
effective immediately. Id. ¶ 137.
12, 2016, Aegerion announced that it would pay $40 million
over five years to the United States to settle allegations of
off-label marketing. Id. ¶ 138.
initial sealed Complaint [#3], brought on behalf of
the United States and various states, alleged that
Aegerion's off-label marketing scheme caused false claims
for reimbursement to be submitted to the government, in
violation of the federal False Claims Act
(“FCA”), 31 U.S.C. § 3729, et seq., and
various state analogs. Relators filed a sealed Amended
Complaint [#12] on March 18, 2014, adding Defendants
Beer, Fenner, and Fraser. On September 2, 2017, the court
granted Relators leave to file their Second Amended Complaint
adding Defendants Detloff, Dull, Fitzpatrick, Frigge, Rader,
Scheer, Sumeray, and the Trustee of Pennsylvania.
See Elec. Order [#64].
September 22, 2018, the United States gave formal notice that
the United States, Relators, and Aegerion had reached a
settlement agreement to resolve the claims against Aegerion,
and that the United States was therefore intervening as to
Defendant Aegerion. Notice of Intervention [#63]. Once this
notice was filed, the case was unsealed. See docket.
filed the operative Second Amended Complaint  on
September 27, 2017. The United States subsequently filed a
Stipulation of Dismissal as to Aegerion Pharmaceuticals,
Inc. [#98], and the court entered a corresponding
Order of Dismissal [#103]. The United States and the
Plaintiff States subsequently declined to intervene as to the
individual Defendants. Notice of Election to Decline
Intervention [#99]; Notice of Election
[#110]. Relators dismissed their claims as to Dr.
Rader and UPenn, Stipulation of Dismissal as to
Defendants Daniel Rader and the Trustees of the Univ. of
Pennsylvania [#141]; Order of Dismissal [#142],
and their state claims. Assented to Motion for Voluntary
Dismissal of State Claims [#169]; Order of
Joint Motion to Dismiss [#147] on behalf of the
remaining Defendants followed. The court first address the
common arguments raised as to all remaining Defendants,
before turning to arguments raised on behalf of individual
Joint Motion to Dismiss - Counts 1 and 2
Count 1, Relators allege that the Defendants' marketing
scheme caused health care providers to submit claims for
Juxtapid coverage to Medicare and other government healthcare
programs for unapproved use and non-medically accepted
indications, in violation of the False Claims Act, 31 U.S.C.
§ 3729(a)(1)(A). Second Am. Compl. ¶¶ 2,
200-204 [#69]. In Count 2, Relators allege that the
Defendants have knowingly made, used, or caused to be made or
used, false records or statements which were material to
false or fraudulent claims, in violation of 31 U.S.C. §
3279(a)(1)(B). Id. ¶¶ 205-209.
first argue that Relators have failed to identify a specific
patient who was prescribed Juxtapid for an off-label use
where the government was billed, or even where the claim was
submitted to the government for payment, and therefore fail
to meet the particularity requirement required under
Fed.R.Civ.P. 9(b). Joint Mem. 7-9 [#152]. Moreover,
Defendants argue that the “indirect claim”
standard does not apply in this case because Relators failed
to plead with specificity that any third parties submitted
Juxtapid claims, and even if any such claims were submitted
by third parties, that the Defendants induced submission of
such claims. Id. at 9-10. Finally, even if the
indirect claim standard does apply, Defendants assert that
Relators have failed to provide enough facts to support any
inference of fraud “beyond possibility.”
Id. at 11-13.
Rule of Civil Procedure 9(b) requires claims of fraud to be
stated with particularity in order to give defendants
sufficient notice of plaintiffs' claims, to protect
defendants from damage to their reputation by meritless
claims, to discourage “strike suits, ” and to
prevent the filing of suits that seek to use the discovery
process as a fishing expedition. United States ex rel.
Nargol v. Depuy Orthopaedics, Inc., 865 F.3d 29, 38 (1st
Cir. 2017); Doyle v. Hasbro, Inc., 103 F.3d 186, 194
(1st Cir. 1996). The rule does so by requiring that,
“[i]n alleging fraud . . . a party must state with
particularity the circumstances constituting
fraud.” Fed.R.Civ.P. 9(b) (emphasis added). This
requirement includes “set[ting] forth the ‘who,
what, when, where, and how' of the alleged fraud.”
United States ex rel. Ge v. Takeda Pharm. Co. Ltd.,
737 F.3d 116, 123 (1st Cir. 2013) (citations omitted). To
meet rule 9(b)'s particularity requirement, a
relator's allegations must identify particular false
claims for payment that were submitted to the government, and
include at least some details, such as: dates, content,
identification numbers, amounts, services billed, individuals
involved, and the length of time between the fraud and the
claim submission. Id. (citing United States ex
rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220,
232-33 (1st Cir. 2004), abrogated on other grounds by
Allison Engine Co. v. U.S. ex rel. Sanders, 553 U.S. 662
First Circuit has recognized a distinction between complaints
alleging direct submission of false claims and those alleging
that defendants induced third parties to file false claims.
United States ex rel. Duxbury v. Ortho Biotech Prod.,
L.P., 579 F.3d 13, 29 (1st Cir. 2009); see also
United States ex rel. Rost v. Pfizer, Inc., 507 F.3d
720, 733 (1st Cir. 2007). In the “indirect claim”
cases, the First Circuit has applied a “more flexible
standard” under which “a relator [can] satisfy
Rule 9(b) by providing ‘factual or statistical evidence
to strengthen the inference of fraud beyond possibility,'
without necessarily providing details as to each false
claim.” Duxbury, 579 F.3d at 29. Instead, in
these indirect claim cases, a claim that does not provide
particular details of false claims “may nevertheless
survive by alleging particular details of a scheme to submit
false claims paired with reliable indicia that lead to a
strong inference that claims were actually submitted.
Id. (quoting United States ex rel. Grubbs v.
Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009)).
“[W]hile there is no ‘checklist of mandatory
requirements' that each allegation in a complaint must
meet to satisfy Rule 9(b), ” Lawton ex rel. United
States v. Takeda Pharm. Co., Ltd., 842 F.3d 125, 131
(1st Cir. 2016) (quoting Karvelas, 360 F.3d at 233),
“the evidence necessary to achieve this inference
generally requires the relator to plead, inter alia,
the ‘specific medical providers who allegedly submitted
false claims,' the ‘rough time periods, locations,
and amounts of claims,' and ‘the specific
government programs to which the claims were made,
'” id. (quoting United States ex rel.
Kelly v. Novartis Pharms. Corp., 827 F.3d 5, 13 (1st
allegations in the complaint show that Relators asserted both
direct and indirect claims. Specifically, Relators have
alleged that “Defendants' aggressive off-label
marketing . . . caused patients, pharmacies and others
(including Aegerion sales representatives, like Defendant
Detloff) to claim Medicare payments for Juxtapid used in
unauthorized and/or unacceptable ways.” Second Am.
Compl. ¶ 146 [#69]; see also id. ¶ 1
(“This case arises from Defendants' scheme to
aggressively off-label market Aegerion's core drug,
Juxtapid, and cause false claims to be submitted to
. . . government healthcare programs . . . .”)
(emphasis added). Accordingly, Relators assert that Aegerion
both induced third parties and directly submitted false
claims to the government for reimbursement.
extent that Relators seek relief for claims directly
submitted by Aegerion sales representatives, the more
exacting standard under Rule 9(b) applies. And, because
Relators fail to allege the details of any specific false
claim directly submitted by Aegerion or the Defendants for
reimbursement from the government, any direct claims against
the Defendants are insufficient to state a claim. As to
Relators' indirect claims, however, the court must apply
the more flexible pleading standard. After doing so, the
court finds that Relators have adequately pled a fraudulent
scheme and reliable indicia that lead to a strong inference
that false claims were submitted.
in Rost, Relators have provided at least some
factual or statistical evidence to strengthen the inference
of fraud beyond a possibility. Relators have alleged that the
Aegerion knew-and that it is accepted in the scientific
community-that there are approximately 300 patients in the
United States with HoFH, but that approximately one year
after Juxtapid's launch, Aegerion reported 374 Juxtapid
patients, over ninety of whom were Medicare patients (24%).
Second Am. Compl. ¶¶ 121, 149, 150 [#69]. Moreover,
there were 622 Medicare Part D claims for Juxtapid in 2013,
1, 992 in 2014, 2, 511 in 2015, and 992 in 2016. See
Decl. of Benjamin Towbin in Support of Defs.' Joint Mot.
to Dismiss ¶ 6 [#152-4]. The Second Amended
Complaint further alleges that Aegerion announced that
it would settle allegations of off-label marketing for $40
million dollars in 2016, Second Am. Compl. ¶ 138 [#69],
and that Relators entered into a Settlement Agreement with
Aegerion, which Relators have incorporated by reference into
the Second Amended Complaint, see id. at 8
n.2, that provided further evidence that Aegerion engaged in
a fraudulent off-marketing scheme, and that “Aegerion
knowingly caused false of fraudulent claims for Juxtapid to
be submitted to the Federal health care
other allegations add to the inference of fraud. Chart A
contains redacted information about fifteen patients covered
by government healthcare programs that were prescribed
Juxtapid by March 2013. Id. ¶ 153. The chart
includes patients' (redacted) dates of birth, their
referral dates, prescription details, insurance providers,
shipment dates, and-for some of the patients-their LDL
levels, cholesterol drug history, and whether they previously
received apheresis. Id. Chart B, entitled
“Juxtapid Patients Likely Covered by Government
Healthcare Programs, ” provides much of the same
information included in Chart A for fourteen more patients.
Id. ¶ 159.
allege that average LDL-C levels for patients who been
previously treated for HoFH is between 300-700 mg/dL, and for
untreated patients is between 500-1, 000 mg/dL. Id.
¶¶ 30, 157. Yet, Chart A shows that at least some
Juxtapid patients covered by government healthcare programs
had LDL-C levels significantly below these levels.
Id. ¶ 153. Further, some of ...