United States of America v. Sumitomo Pharma America, Inc.

Background

Sunovion Pharmaceuticals manufactured Brovana, a drug used to treat chronic obstructive pulmonary disease. Scott Louderback, a pharmacist and president of Neighborhood LTC Pharmacy, Inc., brought this qui tam lawsuit under the federal False Claims Act on behalf of the United States. The United States had declined to intervene.

Louderback alleged that Sunovion paid rebates, also called chargebacks, to pharmacies that signed a Sunovion Part B Agreement. He claimed the agreement required pharmacies generally to dispense Brovana as written, prohibited them from promoting competing drugs or therapies, and allowed Sunovion to identify participating pharmacies in promotional materials. According to Louderback, these provisions gave pharmacies something of value in exchange for arranging for physicians to prescribe and patients and pharmacies to purchase Brovana when they otherwise would have chosen a different drug or therapy.

Louderback asserted four False Claims Act theories, all based on alleged violations of the federal Anti-Kickback Statute: express certification, implied certification, presentment of claims resulting from kickbacks, and false records or statements. He alleged that pharmacies submitted false claims to Medicare for Brovana and sought damages of at least $20 billion, along with civil penalties.

Motion to dismiss standards

Sunovion moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim, and Rule 9(b), which requires fraud to be pleaded with particularity. At this stage, the court generally accepts well-pleaded factual allegations as true, draws reasonable inferences for the plaintiff, and may consider documents attached to or necessarily embraced by the complaint.

Public-disclosure bar

Sunovion argued that the False Claims Act’s public-disclosure bar required dismissal because the Part B Agreement and related information had been available on Sunovion’s website. The court explained that the bar can apply when substantially the same allegations or transactions were publicly disclosed in specified sources, including the news media, unless the relator is an original source.

The court held that the information on Sunovion’s website and the Part B Agreement did not fall within the “news media” category. It read controlling Eighth Circuit precedent as recognizing a broad meaning of “news media,” but not one that covers all information on publicly accessible websites. The court found no indication that Sunovion’s website or agreement functioned like a news organization; the materials could instead be viewed as customer-directed communications or contractual information. Because the materials were not news media, the court did not need to decide whether Louderback qualified as an original source.

Discount exception and safe harbor

Sunovion also argued that its arrangement was protected by the Anti-Kickback Statute’s statutory discount exception or a related regulatory safe harbor. The court treated those protections as affirmative defenses, meaning defenses that generally do not support dismissal unless the complaint and properly considered materials establish them beyond dispute.

The court rejected dismissal on this ground. Although the Part B Agreement included provisions directed at compliance with the Anti-Kickback Statute and its discount protections, accepting Sunovion’s view of what occurred in the transactions would require drawing factual inferences in Sunovion’s favor. The court could not make those inferences on a Rule 12(b)(6) motion.

Knowledge requirement

The Anti-Kickback Statute requires that the alleged remuneration be offered or paid knowingly and willfully. Sunovion argued that the amended complaint did not plausibly allege that it knew the Part B Agreement was unlawful, particularly because the agreement was publicly available and Sunovion believed it fell within the discount protections.

The court rejected that argument. It explained that False Claims Act scienter, or the required state of mind, depends on the defendant’s actual knowledge and subjective beliefs, not what an objectively reasonable person might have known. The court found that the amended complaint plausibly alleged scienter and that accepting Sunovion’s proposed inference from the agreement’s public availability would improperly favor Sunovion at the pleading stage.

Causation and particularity

The court agreed with Sunovion that the amended complaint did not adequately plead causation. Under the Eighth Circuit’s decision in Cairns, when a False Claims Act claim relies on an Anti-Kickback Statute violation, the relator must plausibly allege a but-for causal connection between the alleged kickback and the items or services included in the claim. In this case, Louderback needed to allege with Rule 9(b) particularity that participating pharmacies would not have included Brovana prescriptions on Medicare claims without the alleged remuneration.

The court found that the amended complaint’s causation allegations were general and conclusory. Although the complaint identified eleven Brovana claims submitted by a participating pharmacy, it alleged only that the claims were submitted while the Part B Agreement was in effect. It did not identify representative claims that would not have been submitted absent the alleged rebates or other remuneration. The court also rejected Louderback’s and the United States’ argument that they could proceed under a less demanding theory based only on violation of a material reimbursement condition. Because all four theories depended on alleged Anti-Kickback Statute violations, the court held that the statutory causation requirement applied.

Disposition

Judge Eric C. Tostrud granted Sunovion’s motion to dismiss. The court dismissed the amended complaint with prejudice to the extent it alleged that promotional services provided by Sunovion were remuneration prohibited by the Anti-Kickback Statute. The court otherwise dismissed the amended complaint without prejudice because Louderback failed to plead his claims with the particularity required by Rule 9(b).

The court allowed Louderback to file a second amended complaint on or before January 12, 2024. If he did not do so by that deadline, judgment would be entered dismissing the amended complaint with prejudice for the reasons stated in the order.