United States District Court, S.D. New York
UNITED STATES OF AMERICA, and THE STATES OF CALIFORNIA, COLORADO, CONNECTICUT, DELAWARE, THE DISTRICT OF COLUMBIA, FLORIDA, GEORGIA, HAWAII, ILLINOIS, INDIANA, LOUISIANA, MARYLAND, MASSACHUSETTS, MICHIGAN, MINNESOTA, MONTANA, NEVADA, NEW JERSEY, NEW MEXICO, NEW YORK, NORTH CAROLINA, OKLAHOMA, RHODE ISLAND, TENNESSEE, TEXAS, VIRGINIA, and WISCONSIN, ex rel. DAVID KESTER, Plaintiffs and Relator,
NOVARTIS PHARMACEUTICALS CORPORATION, et al., Defendants.
MEMORANDUM AND ORDER
JAMES C. FRANCIS, IV, Magistrate Judge.
The United States of America (the "Government") and 11 states (the "Litigating States") each intervened as plaintiffs in this qui tam action, alleging, among other things, that defendant Novartis Pharmaceuticals Corporation ("Novartis") is liable under the False Claims Act, 31 U.S.C. §§ 3729-3733, because it violated the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), and, as a result, was unjustly enriched. Novartis has filed a motion to compel production of documents from the Government and the Litigating States pursuant to Rule 37 of the Federal Rules of Civil Procedure. On the basis of the parties' papers and oral argument, the motion is granted in part and denied in part.
A. Factual Allegations
In a number of prior opinions, including United States ex rel. Kester v. Novartis Pharmaceuticals Co., __ F.Supp.2d __, __, 2014 WL 2324465, at *2-6 (S.D.N.Y. 2014) ("Novartis I"), and United States ex rel. Kester v. Novartis Pharmaceuticals Co., __ F.Supp.2d __, __, 2014 WL 4230386, at *1-2 (S.D.N.Y. 2014) ("Novartis IV"), the Honorable Colleen McMahon, U.S.D.J., has explained the primary theory of liability that the Government and the Litigating States advance. In short, the False Claims Act imposes liability on any person who, "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" to the federal government, 31 U.S.C. § 3729(a)(1)(A); "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim" to the federal government, 31 U.S.C. § 3729(a)(1)(B); or conspires to commit those violations, 31 U.S.C. § 3729(a)(1)(C). The Anti-Kickback Statute "forbids [knowingly and willfully] offering, paying, soliciting, or receiving remuneration' (i.e., kickbacks) in exchange for recommending drugs covered by Medicare and Medicaid." Novartis IV, __ F.Supp.2d at __, 2014 WL 4230386, at *1; 42 U.S.C. § 1320a-7b(b)(1). Each of the Litigating States forbids similar conduct by statute, regulation, or other requirement. (State of California's First Amended Complaint-in-Intervention ("California Compl."), ¶ 20); First Amended Complaint in Intervention of the States of Georgia, Illinois, Indiana, Maryland, Michigan, New Jersey, New York, Oklahoma, and Wisconsin against Novartis Pharmaceuticals Corporation ("Multistate Compl."), ¶¶ 29-62; State of Washington Complaint in Intervention ("Washington Compl."), ¶¶ 19-24). The plaintiffs in this case allege that Novartis paid kickbacks in the form of cash rebates (or discounts) and patient referrals to certain specialty pharmacies in connection with two of its drugs: Exjade, a drug used to reduce iron overload in the blood of patients who receive blood tranfusions,  and Myfortic, an immunosuppressant that helps prevent organ rejection in transplant patients. See Novartis I, __ F.Supp.2d at __, 2014 WL 2324465, at *2; Novartis IV, __ F.Supp.2d __, 2014 WL 4230386, at *1.
The Government and the Litigating States allege that the Exjade scheme exploited Novartis' control over patient referrals through its "exclusive patient distribution network" for the drug, called EPASS. Novartis I, __ F.Supp.2d at __, 2014 WL 2324465, at *3; (Novartis Pharmaceuticals Corporation's Memorandum of Law in Support of its Motion to Compel Further Discovery Responses from the United States and from the States of California, Georgia, Illinois, Indiana, Maryland, Michigan, New Jersey, New York, Oklahoma, Washington and Wisconsin ("Novartis Memo.") at 6). Under this plan, which was instituted after Novartis noticed a "performance gap' between [its] sales targets and actual Exjade sales, " the company conditioned the ability of BioScrip, a specialty pharmacy, to access EPASS and to earn rebates on BioScrip's "increasing the refill rates among its Exjade patients and  convincing patients who had stopped ordering refills to resume doing so." Novartis I, __ F.Supp.2d at __, 2014 WL 2324465, at *3. According to the Government, what Novartis calls "adherence initiatives" (Novartis Memo. at 2) consisted of poorlytrained BioScrip staff calling patients "to offer purported counseling' about Exjade therapy." Novartis I, __ F.Supp.2d at __, 2014 WL 2324465, at *3. The Government asserts that this counseling was actually a strategem involving Novartis marketing personnel "designed to get patients to order refills" notwithstanding certain safety concerns. Id .; (Memorandum of Law of the United States in Opposition to Novartis' Motion to Compel ("Government Memo.") at 6-7).
The Government (but not the Litigating States) contends that in the Myfortic gambit, Novartis offered rebates or discounts to certain pharmacies as a quid pro quo for "us[ing] their influence to recommend that doctors switch  transplant patients from other medications[, particularly Myfortic's main competitor CellCept, ] to Myfortic, " and for dissuading physicians from recommending that patients switch from Myfortic to CellCept or its generic formulation. Novartis I, F.Supp.2d at ___, 2014 WL 2324465, at *2-3.
These violations of the Anti-Kickback Statute assertedly ripened into violations of the False Claims Act when the pharmacies repeatedly certified that they were in compliance with the Anti-Kickback Statute in their claims for reimbursement from government programs. Novartis I, __ F.Supp.2d at __, 2014 WL 2324465, at *4-6; Novartis IV, __ F.Supp.2d at __, 2014 WL 4230386, at *11-16; (California Compl., ¶¶ 117-120; Multistate Compl., ¶¶ 154-158; Washington Compl., ¶¶ 49-50).
B. Discovery Requests
There are two general categories of documents at issue here. In the first, Novartis seeks from the Government documents related to its "own initiatives to promote medication adherence" - that is, a patient's conformance with recommendations regarding medication - specifically:
Adherence-related components or requirements of certain federal health-related programs and grants, and other federal adherence-related policies, activities, programs, plans, or initiatives;
The [Government's] exclusion of communications encompassing adherence-related communications from the definition of "marketing" in certain laws and regulations and its publication regarding refill reminders; and
The [Government's] report regarding the budgetary impact of medication adherence and other documents regarding the savings, costs, and/or patient outcomes associated with medication adherence.
(Novartis Memo. at 10 (internal citations omitted)). Novartis asks the Litigating States for similar documents. (Novartis Memo. at 13). The second category consists ...