At the end of December, the Second Circuit joined several other circuit courts in holding that a plaintiff adequately pleads an Anti-Kickback Statute ("AKS") violation when she states with the requisite particularity that at least one purpose of the alleged scheme was to induce fraudulent conduct, the "at-least-one-purpose" rule.
In United States ex rel. Camburn v. Novartis Pharmaceuticals Corp., Relator Steven Camburn alleged that Novartis violated the AKS, and the False Claims Act ("FCA"), in marketing its drug Gilenya, which is prescribed for multiple sclerosis ("MS"). Since approving Gilenya in 2010, the FDA has imposed a first-dose observation requirement for new patients, who must be monitored by a doctor while attached to an electrocardiogram machine for six hours.
First-dose observation is burdensome for physicians, so Novartis sought to market Gilenya through a peer-to-peer speaker program during which physicians shared insights about Gilenya with other healthcare professionals. Camburn alleged that these programs were a pretextual scheme through which Novartis offered remuneration to physicians in exchange for prescribing Gilenya to patients.
The Second Circuit held, as a matter of first impression, that "in relator-initiated actions, a defendant violates the AKS when at least one (rather than the primary or sole) purpose of the remuneration she provides is to induce purchase of a federally reimbursable healthcare product." The Court noted that this rule aligns with that of seven other circuit courts. In addition, the Court held that a plaintiff pleading an AKS violation as a predicate to an FCA claim need not state a quid pro quo exchange. As a result, Camburn needed only to allege that at least one purpose of the remuneration from Novartis was to induce prescriptions, without alleging a cause-and-effect relationship (a quid pro quo) between the payments and the physicians' prescribing habits.
In determining whether the pleadings were sufficient, the Court noted that the analysis is always a "context-specific" exercise. The Court determined that for three alleged categories, the Relator had pled factual claims with the requisite particularity to allow an inference that one of the purposes of Novartis's conduct was to induce physicians to prescribe Gilenya at a higher volume. These allegations involved: (1) speaker events with few or no legitimate attendees; (2) excessive compensation of speakers for canceled events; and (3) the selection of speakers to reward and influence high prescribers. The Court found that "[t]ogether, these allegations give rise to a strong inference that one purpose of Novartis's conduct was to illicitly compensate physicians in order to induce them to write a higher volume of prescriptions for Gilenya."
The Court upheld the district court's dismissal of other factual allegations, because they did not have enough details to satisfy the at-least-one-purpose rule. The Court stressed, however, that "our analysis is necessarily context-specific," so that a future AKS-based FCA action based on similar allegations could survive if greater particularity led to a "strong inference of fraud."
The Second Circuit's AKS decision is an important one, as it confirms that under the AKS: (1) a relator need only allege that one purpose of the remuneration is to induce the purchase of a healthcare product, and not the more demanding requirement of showing it to be the sole or primary purpose, and (2) a relator need not show a cause-and-effect relationship between the payment and the physician's prescription. However, whether a complaint survives a motion will be heavily dependent on the strength and particularity of the allegations, and the court's "context-specific" analysis of the specific facts alleged in each case.
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