The district court granted the defendants motion to dismiss a qui tam complaint alleging the company engaged in an improper physician kickback scheme, finding the relator failed to plead his allegations with particularity. While the relator alleged that the firm’s speaker events were thinly disguised methods of making payments to doctors who issued a high number of prescriptions for a certain drug, the court found he had not described the events or the alleged fraud at the level of detail that would allow the defendant to respond. The relator failed to show the events were a sham, that the defendant tied speaking invitations to the number of prescriptions issued by a particular physician, or that the number of events was excessive or unnecessary.
Novartis Pharmaceuticals Corporation moved to dismiss a qui tam complaint alleging the firm engaged in an unlawful kickback scheme to induce physicians to prescribe Gilenya, a medication used to treat multiple sclerosis.
Relator Steven Camborn was employed as an executive sales specialist for Novartis between 2010 and 2013. Camborn asserted that during this period, Novartis promoted Gilenya using speaker events, at which a healthcare professional was paid to educate the audience—either physicians or patients—about the benefits and drawbacks of the drug. Novartis paid a per-event honorarium of $1,500 to $3,500 to its speakers. In 2012, four of the five speakers who were able to prescribe medications accounted for 43 percent of Gilenya prescriptions written in the Philadelphia region.
According to the relator, the speaker events did not actually serve their stated purpose, but were instead designed to provide a facially legitimate means for Novartis to funnel kickbacks, in the form of honoraria and lavish meals, to speaker-doctors who prescribed high volumes of Gilenya. According to Camborn, speakers would often present to other paid speakers, their own medical groups, physicians and patients who had previously attended Gilenya events, or to no one at all. Further, the presentation slides generally repeated the drug package label insert information and the information that sales representatives provided to doctors at weekly office visits, and presenters often did not present the full slide deck. Camborn also asserted that the events often exceeded their internal budgets and that records would be altered to conceal the actual amount of spending.
Novartis moved to dismiss for a failure to state a claim with particularity and failure to demonstrate scienter.
First, Novartis argued the complaint failed to plead the existence of a kickback scheme with adequate particularity. The crux of the allegation is that Novartis paid physicians to present uninformative slides to an audience that already knew the information or was not suited to learn from it. According to Camborn, this shows the arrangement was in actuality an unlawful kickback scheme intended to reward physicians to prescribed Gilenya.
However, the court found the complaint lacked detailed allegations and representative examples. The complaint provides five examples of speaker events to illustrate the general allegations, including the dates and the names of the speakers. While the complaint asserted that these events took place at high-end restaurants and exceeded Novartis’ internal budget limits, the court found the relator provided no further details besides a headcount of attendees and the names of the Novartis personnel who organized the events.
For example, the complaint alleged – but did not provide proof – that attendees had attended other Gilenya speaker events. The fact that some events went over budget and that some employees hoped to disguise this situation was not sufficient to demonstrate a kickback scheme. The court noted the complaint did not discuss why sales personnel concealed the excessive spending, whether they were instructed to do so, who the falsification was meant to deceive, or what role the falsification played in the alleged kickback scheme. In short, the key allegations that would show the speakers events were merely disguised kickbacks were unsupported by concrete detail.
While a lack of such specificity is not always fatal, the court found it was in his case. The court held that without specific details and concrete examples of the fraudulent conduct involved in the alleged kickback scheme, Novartis would be hard-pressed to respond to the complaint or even to know which events were allegedly fraudulent. The court likewise found it could not evaluate whether the Gilenya speaker events were fraudulent on the basis of the allegations contained in the complaint.
The court also found the complaint’s allegations about other indicia of fraud also were insufficiently supported. For example, Camborn alleged that Novartis paid doctors honoraria for events that Novartis cancelled, a practice that purportedly shows that the true purpose of the events was to pay honoraria, not to educate. The relator identified three doctors who received payments for canceled events and who wrote high volumes of prescriptions for Gilenya. However, despite alleging there were 250 such canceled events, the relator did not identify a single specific event, let alone the circumstances or timing of the cancellation. He also presented no anecdotal or statistical data from which the court could infer that the cancellations were part of a kickback scheme. Further, while the relator argued Novartis scheduled an excessive number of these events, the court found this allegation provided no context or connect the number of events to fraud.
Although the relator claimed Novartis stopped paying for cancelled programs in 2013, when the United States charged Novartis with conducting sham speaker programs in relation to some cardiovascular drugs, the court found he alleged no connection between those charges and the Gilenya speaker program. This lack of detail left the court unable to evaluate the legitimacy of these cancellations and failed to give Novartis notice of which cancellations were allegedly improper.
The complaint also alleged that Novartis improperly supplied doctors with marketing DVDs to provide to patients, which were intended to help influence patients’ treatment decisions, but the court found the complaint did not say how this advanced the alleged fraud.
The relator also alleged that Novartis conducted return-on-investment analyses comparing the company’s costs for speaker events to the value of the prescriptions issued by each speaker. According to the relator, when a speaker’s prescriptions decreased, Novartis would want to know why and would often discuss whether using a different speaker or reducing a speaker’s commitments was necessary under the circumstances. However, the court found the complaint did not clearly allege what actions, if any, Novartis took on the basis of the ROI analysis or allege that any concrete action was taken. For example, the complaint did not connect any doctor’s prescribing habits and their participation in the speaker program, nor allege that Novartis selected its speakers based on their prescribing habits, or that any speaker prescribed more Gilenya after joining the speaker program.
Finally, while the relator provided statements from Novartis personnel describing the speaker events as a way to “take care of” speakers, the court found this inadequate to support the allegations, as they were not tied to any specific actions or decisions, and none referred specifically to kickbacks.
For these reasons, the court granted the motion to dismiss, but gave the relator leave to amend his complaint to correct the deficiencies.
