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United States v. Aegerion Pharmaceuticals, Inc.

United States District Court, D. Massachusetts

March 31, 2019

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,
v.
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

          Indira Talwani United States District Judge.

         Pending 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 otherwise DENIED.

         I. Background

         a. Factual Background[1]

         Relators 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. ¶¶ 11-21.

         In 2000 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.

         From 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.[2] 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.[3] 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. Id.

         Dr. 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.

         Aegerion 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, ”[4] 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.

         In 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.

         In 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.

         In July 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.

         Despite receiving approval for the use of Juxtapid in a limited population, Aegerion[5]trained 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.

         In July 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.

         Relators filed their initial Complaint in this qui tam action under seal on July 26, 2013.

         In 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.

         On 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.

         On May 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.

         b. Procedural History

         Relators' 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].

         On 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.

         Relators filed the operative Second Amended Complaint [69] 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].[6] 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 Dismissal [#171].

         The 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 Defendants.

         II. Joint Motion to Dismiss - Counts 1 and 2

         In 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.

         a. Rule 9(b)

         Defendants 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.

         Federal 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 (2008)).

         The 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 Cir. 2016)).

         The 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.

         To the 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.

         Unlike 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].[7] 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 programs.”[8]

         Relators' 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.[9] 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.[10]

         Relators 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. ΒΆ 153. Further, some of ...


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