ENDO - Ryan Amended Complaint F2F 2009

8/12/2019 ENDO - Ryan Amended Complaint F2F 2009

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UNITED STATES DISTRICT COURTEASTERN DISTRICT OF PENNSYLVANIA

PHILADELPHIA DIVISION

UNITED STATES OF AMERICA;STATE OF FLORIDA; andSTATE OF NEW YORKx rei PEGGY RYAN,

Plaintiff,v.ENDO PHARMACEUTICALS INC

Defendant. ~

CASE NO.: 05-3450FILED IN CAMERA ANDUNDER SEAL PURSUANT TO31 U.S.C. 3730(b)(2)

AMENDED FALSE CLAIMS ACT QUI T M COMPLAINT1 This is an action bronght by the PlaintifflRelator on behalf of the United States of

America pursuant to the False Claims Act, 31 U.S.C. 3729 t s q (the FCA ), and on behalfof the State of Florida and the State of New York under their respective State False Claims Acts.The false claims at issue were caused to be made by the Defendant, Endo Phamlaceuticals Inc .by marketing and promoting the off-label use of the drug Lidode= in violation of federal andstate statutes and regulations.

2. The FCA provides that any person who knowingly submits or causes to besubmitted to the govermnent or recipients of federal funds a false or fraudulent claim forpayment or approval is liable for a civil penalty of between $5,500 and $11,000 for each suchclaim, and three times the amount of the damages sustained by the goVefill11ent. The Florida andthe New York False Claims Acts also provide for treble damages and civil penalties. The FalseClaims Act Statutes permit persons having info=ation regarding a false or fi'audulent claim


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against the goverrunent to bring an action on behalf of the government and to share in anyrecovery. The complaint must be filed under sea l without service on the defendant. Thecomplaint remains under seal while the govemment conducts an investigation of the allegationsin the complaint and determines whether to join the action.

3. Pursuant to the False Claims Acts, plaintiff/relator seeks to recover on behalf ofthe United States, the State of Florida, and the State of New York, damages and civil penaltiesarising from Medicaid and Medicare payments for Lidoderm prescriptions for unauthorized, offlabel use. Defendant , by marketing and promoting Lidoderm for unapproved off- label use,

caused thousands of claims to be submitted to Medicaid and Medicare for reimbursement ofLidoderm prescriptions, when those prescriptions were not eligible for Medicaid or Medicarereimbursement.

P RTIES

4. Relator Peggy Ryan is a resident of the state of New York and an employee ofDefendant Endo Pharmaceuticals Inc. (HEndo ). Ryan is the original source of information andfacts set forth herein concerning the actions of Endo, and the facts set forth herein are based onRyan s personal knowledge.

5. Defendant Endo Phannaceuticals Inc. is a Delaware corporation with its principalplace of business in Chadds Ford, Pennsylvania. Endo manufactures, markets and sellspharmaceuticals. Through a dedicated sales force of approximately 700 sales representatives andan additional 275 contract sales representatives throughout the United States. Endo markets itsbranded pharmaceutical products to high-prescribing physicians in areas including but notlimited to pain management, neurology, surgery, anesthesiology, oncology and primary care.

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Endo s sales force also targets retail pharmacies and other healthcare professionals in statesacross the country including New York and Florida.

JURISDICTION ND VENUE6. This action arises under the False Claims Act, 31 U.S.C. 3729 et seq. This Court

has jurisdiction over this action pursuant to 28 U.S.C. 1331,31 U.S.C. 3730 and 28 U.S.C. 1345. This Court has jurisdiction over the State False Claims Act claims pursuant to 31 U S c 3732(b).

7. This Court has personal jurisdiction over Defendant pursuant to 31 U.S.C.

3732(a), which authorizes nationwide service of process. Defendant can be found in, residesin , or has transacted business in the Eastern District of Petllsylvania.

8. Venue is proper in this District pursuant to 31 U.S.C. 3732(a) becauseDefendant can be found in, resides in or has transacted business in the Eastern District ofPennsylvania and many of the alleged acts occurred in this District.

F CTS9. The Medicaid and Medicare programs tightly restrict the types and uses of drugs

eligible for purchase using Medicaid and/or Medicare funds. Federal regulations further prohibitdrug companies from marketing practices that could lead to unnecessary or ineffectiveprescription of drugs. These regulations are intended to ensure that Medicaid and Medicarefunds are only used to purchase drugs that have been determined to be safe and effective fortreatment of specific conditions.

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10 Relator Peggy Ryan alleges in this qui l m action that Defendant Endo hasundertaken a course of action that it knew would cause numerous violations of federal and statestatutes and regulations relating to reimbursement for Lidoderm, an Endo product. Endo doesnot write the prescriptions or provide Lidodenl1 to the Medicaid and Medicare programs. Rather,El1do intentionally undertook a course of conduct that Endo knew would lead to the submissionofthousands of ineligible Medicaid and Medicare claims for Lidodem1 prescriptions. Many ofthe pham1acists and physicians submitting claims for Lidodem1 prescliptions were likelyunaware that the claims were ineligible for Medicaid and/or Medicare reimbursement, but Endo

was fully aware that its actions would lead to providers submitting false claims to the federal andstate governmentsRegulatory ackground

11 Pharmaceutical drugs cam10t be so ld in the United States until the Food and DrugAdministration ( FDA ) has concluded that a drug is safe and effective at specific dosages. TheFDA-approved indieations and dosages are set forth on an approved drug's label. Physiciansmay prescribe FDA-approved drugs for indications, or at dosages, that vary from those set forthon the label, but drug companies are prohibited under the Food, Drug, and Cosmetic Act frommarketing or promoting approved drugs for us es other than the approved uses set forth on thelabel. 21 U.S.C. 355(a) (d). Distribution of prescription drugs for off-label uses is expresslyprohibited. 21 U.S.C. 331(d).

12 Federal law limits Medicaid reimbursement for prescription drugs to coveredoutpatient drugs. 42 U S c 1396b(I)(10). Only drugs used for medically acceptedindications qualify as covered outpatient drugs . 42 U .S.C. 1396r-8(k)(3). Only an FDA-

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approved use, or one that is supported by express compendia set forth in the Medicaid statute, isa medically accepted indication. 42 U.S.C. 1396r-8(k)(6); 1396r-8(g)(I)(B)(I).

13 . Similarly, federal law limits Medicare reimbursement for covered Part D drugs.42 U.S.c. 1395w-1 02( e). In order for a prescription drug to be a covered Part D drug it mustbe used and sold in the United States and used for a medically accepted indication as definedby 42 U.S.C. I396r-8(k)(6); 42 V S c 1395w- I02(e). s mentioned above, only an FDAapproved use, or one that is supported by express compendia set fOIih in the federal statute is amedically accepted indication. 42 U.S.C. 1396r-8(k)(6).

14. Federal anti-kickback laws, 42 U.S.C. I320a-7b(b), also regulate the marketingof pharmaceuticals to prevent overutilization of prescription drugs. Drug companies areprohibited from offering or paying remuneration, cash or otherwise, to induce physicians orothers to recommend or prescribe drugs that may be paid for by federal programs such asMedicaid or Medicare. 42 U.S .C. 1320a-7b(b). Improper and illegal inducements includepayment of research grants, paying physicians for studies, or any payments that are based onthe volume of prescriptions written.Endo's Marketing of Lidoderm for Off-Label Use

15. n September 1999 Endo introduced a new product, Lidoderm. Lidoderm is apatch that contains 5% lidocaine, an analgesic. The FDA has approved Lidoderm only for use inthe reliefof postherpetic neuralgia ( PHN ). PHN is a complication that afflicts some victims ofherpes zoster commonly known as shingles. Approximately 20% of shingles victims suffer fromPHN, which results in severe pain lasting months or years after the initial shingles rash has

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cleared up. The older the shingles victim, the more likely it is that the victim will suffer fromPHN.

16 Lidoderm treats PHN by allowing for the lidocaine contained in the patch todirectly treat the affected nerves. The patch, consisting of an adhesive material containing 5lidocaine and a polyester backing, is applied to intact skin. The lidocaine is then released into thedenllal and epidenllallayers of the skin, where it reaches the damaged nerves and provides painrelief. The patch delivery system greatly reduces the an10unt of lidocaine entering tbebloodstream and also avoids numbness and the complete loss of sensation in tbe treated area.Lidodenll is the only topical treatment for PHN that has been approved by tbe FDA.

17. The market for Lidodetm is inherently limited by the relatively low numbers ofAmericans who suffer from PHN in a given year, approximately 200,000 . As a result, Endosought to increase the profitability of Lidodetm by encoUTaging its use to treat a variety ofailments, such as cmpal Itttmel syndrome, lower back pain, osteoarthritis and numerous otherconditions.

18. Endo is cunently pursuing studies and clinical trials to determine the effectivenessof Lidoderm in the treatment of conditions other than PHN. Currently, however, Lidodenll basnot been approved by the FDA to treat any conditions other than PHN. Endo's decision not toseek FDA approval for indications other than the treatment of PHN has been motivated, at leastin part, by its desire to maintain Lidodem1 s orphan drug status. n orphan drug is apharmaceutical agent that has been developed to treat a rare medical condition which affectsfewer than 200,000 people in the United States. IfLidoderm were to lose its orphan drug status,Endo would lose certain tax incentives and the right to sell the drug without competition.

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Therefore, in order to increase Lidodernl sales without jeopardizing its orphan drug status, Endodecided t engage in off-label marketing to encourage doctors to use Lidodernl for the treatmentof conditions other than PHN. This improper marketing practice did increase Lidoderm salessignificantly while simultaneously allowing Endo to reap the benefits ofLido de 1m s orphan drugstatus.

19. Endo has sought to exploit a loophole in the FDA rules concerning off-labelmarketing. FDA rules permit drug manufacturers to distribute publications created by neutralthird parties that describe the results of off-label uses when such publications are requested byphysicians. Endo sought to fraudulently misapply these rules through a strategy of creatingaliicles, studies, publications, and programs that touted the effectiveness of Lidoderm in a varietyof off-label uses, but that would appear t be the product of neutral third parties.

20. Endo announced in 2004 that the results of two pilot studies suggested thatLidoderm was effective n treating low back pain and osteoarthritis. The studies and trialsinvolving the off-label use ofLidoderm were not neutral clinical trials, however. Instead, Endohas financed and directed the studies and trials ofLidoderm for the treatment of conditions otherthan PHN. Endo presents and publicizes the results of trials and studies it has controlled as ifthose results were the product of independent, objective, third-party studies and trials. Endo'sintent in publicizing these results is t encourage physicians to prescribe Endo for unapproved,unauthorized, off-label use.

21. Endo also devised a marketing strategy whereby its sales force would promote theoff-label use of Lidoderm to physicians. At a sales conference attended by Endo's salesrepresentatives, the representatives were informed that only 2 of Lidoderm prescriptions are for

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PHN. Endo instructed its sales representatives to infonn physicians that Lidodernl is effective intreating carpal t tmel syndrome, osteoarthritis, low back pain, and several other conditions.Endo further provided its representatives with literature and publications touting Lidodenn's offlabel usage to treat conditions other than PHN.

22. Endo intended for the materials provided to its sales representatives to be used toencourage sales representatives to market Lidodernl to physicians for off-label usage and for thematerials to be provided to physicians in order to encourage physicians to prescribe Lidodernl forthe treatment of conditions other than PHN.

23. In addition, Endo paid kickbacks to physicians in order to encourage them toprescribe Lidodenn for off-label purposes. For exanlple, physicians who were high prescribersof Lidodenn for off-label purposes were given honorariums to present at medical conferencesand round table dinners. The doctors were chosen by the local sales representative once theywere identified as high prescribers. The round table included infonnal discussions whichconcerned the off-label use ofLidodenn.

24. Although the number ofpatients suffering from PHN has remained relativelyconstant, net sales ofLidodernl were $309.2 million in 2004, a 73% increase from 2003. Since2004, Lidodenn's net sales have more than doubled. n 2007, Lidodenn accounted for $705.6million, or 65% ofEndo's total net sales for the year. This dramatic growth in sales is directlyattributable to Endo's aggressive, illegal marketing practices.False laims

25. Endo knows that a substantial amount of the prescriptions for Lidodenn were andcontinue to be paid for y Medicaid programs throughout the United States. Endo also has

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knowledge that a significant number o Lidodem1 prescriptions have been paid for by theMedicare Part D prescription dmg program which went into effect on January 1, 2006.

26 According to the Drug Utilization Reports available through the Florida Agencyfor Health Care Administration, Medicaid Phannacy Services website, the total payments madeby the Florida Medicaid program for Lidodelm prescriptions from 2003 until 2008 amount tomore than $40 million. n the state o New York, Lidodenn prescriptions amounting to morethan $20 million were paid for by Medicaid in the calendar year 2003.

27 Physicians and pharmacists participating in the Medicaid program are required tosign a provider agreement with their resident state. These agreements require providers tocomply with all Medicaid requirements. n the state o Florida, for example, Fla Stat. 409.907governs Medicaid provider agreements and states that each provider agreement shall require theprovider to comply fully with all state and federal laws pertaining to the Medicaid program.Most states also require providers to cel1ify that the provider is in comp liance with all Med icaidrequirements. Even in states without a certification requirement, all providers' participation inthe Medicaid program is conditioned on compliance with all state and federal statutes andregulations

28. Medicaid claims for the payment o o -label Lidodenn prescriptions are filedwith the states by the pharmacists who fill the Medicaid patients' prescriptions. Typically thephannacist filling the prescription does not have knowledge whether the prescription is on-labelor off-label. As a result, a phal111aci st generally would not have knowledge as to whether theprescription is for a medically acceptable use and, accordingly, whether the prescription is underthe circumstances a covered outpatient drug.

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29. Even so, because off-label presc riptions are not eligible for Medicaid or Medicarereimbursement, submission of a Medicaid or Medicare claim for an off-label prescription is afalse claim under the False Claims Act, 31 U.S.c. 3729. The submission of Medicaid claimsfor off-label Lidoderm prescriptions also violates the Florida False Claims Act and the New YorkFalse Claims Act. Because liability under these false claims act statutes arises for any personwho knowingly causes a false claim to be submitted, Endo is liable for the false claims submittedby unwitting pharmacists.

30 Endo knows that off-label prescriptions for Lidoderm are not eligible forMedicaid and/or Medicare reimbursement. Nevertheless, Endo knowingly and intentionallysought to increase the number of off-label prescriptions for Lidodeml. Without Endo s effOlis toencowage and solicit providers to prescribe Lidoderm for off-label uses, most of the ineligibleclaims for payment of off-label Lidodeml prescriptions would not have been filed.

COUNT IViolation of False Claims Act, 31 U.S.c 3729(a)

31 Relator realleges and incorporates by reference the allegations of paragraphs 1-30of this complaint.

32. This connt sets forth claims for treble damages and forfeitures under the federalFalse Claims Act, 31 U.S c 3729-3732, as amended.

33 Through the acts described above, Defendant and its agents and employees

knowingly caused to be presented to the United States Government fraudulent claims, records,and statements in order to obtain reimbursement for off-label prescriptions paid for by theMedicaid and Medicare programs.

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34. Defendant has knowingly violated:a) 31 U.S.c. 3729(a)(1) by knowingly presenting, or causing to be presented, to an

officer or employee of the United States Govemment or a member of the ArmedForces of the United States a false or fraudulent claim for payment or approval;

b) 31 U.S.C. 3729(a)(2) by knowingly making, using, or causing to be made orused, a false record or statement to get a false or fraudulent claim paid orapproved by the Govemment; and/or

(c) 31 U.S.C. 3729(a)(3) by conspiring to defraud the Government by getting a false

or fraudulent claim allowed or paid.35. The United States, unaware of the falsity of the claims, approved, paid, and

participated in payments made by the United States for claims that otherwise would not havebeen allowed.

36. By reason ofDefendant s false claims, the United States has been damaged andpossibly continues to be damaged.

OUNTViolation of lorida False Claims Act, Fla. Stat. 68.082(2)

37. Relator realleges and incorporates by reference the allegations of paragraphs 1-30of this complaint.

38. This count sets forth claims for treble damages and forfeitures under the FloridaFalse Claims Act.


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39. Through the acts described above, Defendant and its agents and employeesknowingly caused to be presented to the Florida Medicaid program fraudulent claims, records,and statements in order to obtain reimbursement for off-label prescriptions paid for by theMedicaid program.

40. Defendant has knowingly violated:(a) Fla. Stat. 68.082(2)(a) by knowingly presenting, or causing to be presented, to

an officer or employee o an agency a false or fi audulent claim for payment orapproval;

(b) Fla. Stat. 68.082(2)(b) by knowingly making, using, or causing to be made orused, a false record or statement to get a false or fraudulent claim paid orapproved by an agency; and/or

(c) Fla. Stat. 68.082(2)(c) by conspiring to submit a false or fraudulent claim to anagency or to deceive an agency for the purpose o getting a false or fraudulentclaim allowed or paid.

41. The State o Florida unaware o the falsity o the claims, approved, paid, andparticipated in payments made by the State o Florida for claims that otherwise would not havebeen allowed.

42. By reason o Defendant s fraudulent activities, the State o Florida has beendanlaged, and possibly continues to be damaged.

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COUNTViolation o New York False Claims Act, N.Y. State Fin. Law 189.143. Relator realleges and incorporates by reference the allegations o pa.ragraphs 1-30

o this complaint.44 This count sets forth claims for treble damages and forfeitures under the New

York False Claims Act.45. Through the acts described above, Defendant and its agents and employees

knowingly caused to be presented to the New York Medicaid program fraudulent claims, records,and statements in order to obtain reimbursement for off-label prescriptions paid for by theMedicaid program.

46 Defendant has knowingly violated:a) N.Y. State Fin. Law 189.1 a) by knowingly presenting, or causing to be

presented, to any employee, officer or agent o the state or a local government, afalse or fraudulent claim for payment or approval;

b) N.Y. State Fin. Law 189.1 b) by knowingly making, using, or causing to bemade or used, a false record or statement to get a false or fraudulent claim paid orapproved by the state or a local govemment; and/or

c) N.Y. State Fin. Law 189.1 c) by conspiring to defraud the state or a localgovernment by getting a false or fraudulent claim allowed or paid.

47. The State o New York unaware o the falsity o the claims, approved, paid, andparticipated in payments made by the State o New York for claims that otherwise would nothave been allowed.

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48. By reason o Defendant s fraudulent activities, the State o New York has beendamaged, and possibly continues to be damaged.

PR YER FOR RELIEF

WHEREFORE, Plaintiff/Relator requests that judgment be entered against Defendant,ordering that:

a Defendant cease and desist from violating the Federal False Claims Act; theFlorida False Claims Act; and the New York False Claims Act;

b Defendant pay an amount equal to three times the amount o damages the UnitedStates, the State o Florida, and the State o New York, have sustained because o Defendant sactions;

c Defendant pay the maximum civil penalties allowable to be imposed for eachfalse or fraudulent claim presented to the United States, the State o Florida, and the State oNew York;

d Plaintiff/Relator be awarded the maximum amount allowed pursuant the FederalFalse Claims Act, the Florida False Claims Act, and the New York False Claims Act;

e Plaintiff/Relator be awarded all costs o this action, including attorneys fees,expenses, and costs; and

f United States and PlaintiWRela tor be granted all such other relief as the COUdeems just and proper.

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REQUEST OR TRI L BY JURYRelator on behalfof herself, the United States, the State of Florida and the State of ew

York, hereby demands a trial by jury.Respectfully submitted,

d > B ~Attorney No. :0888322 State Rd.Media, Pennsylvania 19063Telephone: 610-566-2870Fax: 610-566-4740Local Counsel for Relator

John R. Newcomer, [email protected] [email protected] [email protected], HOYER, NEWCOMER

SMILJANICH, P.A.4830 West Kennedy Blvd., Suite 550Tampa, Florida 33609Telephone: 813) 286-4100Fax: 813) 286-4174Lead Counsel for Relator

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CERTIFIC TE O SERVICE

I HEREBY CERTIFY that a tme and correct copy of the above and foregoing has beenfUl11ished y Certified Mail, Return Receipt Requested, this 2 S ~ a y of March, 2009 to thefollowing:Assistant United States Attomey Margaret L HutchinsonUnited States Attol11ey s OfficeEastern District ofPennsylvania615 Chestnut StreetSuite 1250Philadelphia, P A 19106-4476Assistant United States Attol11ey Thomas A. CapezzaUnited States Attorney s OfficeNorthel11 District ofNew York445 Broadway Room 218Albany, NY 12207-2924Attorney General Bill McCollumOffice ofAttorney General.The Capitol PL O 1Tallahassee, FL 32399-1050Chief Financial Officer Alex SinkFlorida Department ofFinancial Services200 East Gaines StreetTallahassee, FL 32399-0300Attol11ey General Andrew M. Cuomo120 BroadwayNew York, New York 10271-0332

laine Stromgren

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Documents

ENDO - Ryan Amended Complaint F2F 2009