In this article, David Caputo along with his co-counsel announced on January 6th 2020, a huge victory in a False Claims Act lawsuit alleging violations of Federal Anti-Kickback Statute brought by two former Teva Pharmaceuticals sales representatives resulting in a $54 million settlement.
The Whistleblower Representation
The allegations that Teva Pharmeceuticals used sham “speaker programs” to pay physicians unlawful compensation to induce them to write prescriptions of two Teva drugs in violation of the federal Anti-Kickback Statute and the United States False Claims Act, were brought by two former Teva sales representatives, Charles Arnstein and Hossam Senousy, under the whistleblower (or qui tam) provisions of the United States False Claims Act and the False Claims Acts of various states.
David Caputo said in response:
“It took courage for Mr. Arnstein and Mr. Senousy to bring this lawsuit challenging their own employer’s conduct, and the settlement announced today is victory not just for them but for the American taxpayers. The result sends a powerful message to the pharmaceutical industry that physicians’ prescription drug choice must remain free from financial influence. I was proud to join Jim Miller and the other exceptional lawyers on our team in representing the whistleblowers in this case, and I am very pleased that we could achieve a result that will return nearly $40 million to federal and state coffers.”
James E. Miller of Shepherd, Finkelman, Miller & Shah, LLP – a Connecticut based firm with an office in Philadelphia — was lead counsel for the whistleblowers (also called “Relators” under the False Claims Act). Miller and co-counsel Eric L. Young of McEldrew Young in Philadelphia, filed the original qui tam complaint on the whistleblowers’ behalf in 2013 in the United States District Court for the Southern District of New York. Caputo joined the whistleblowers’ legal team after the complaint was unsealed in March 2015, and he was slated to try the case with Miller and attorney Heidi A. Wendel of New York City had the case not resolved. Attorney Joseph Trautwein of Trautwein & Associates, LLC in Blue Bell, PA was also co-counsel for the whistleblowers.
The Whistleblowers’ Allegations
The complaint alleged that physicians who participated in sham speaker programs wrote prescriptions for two Teva drugs – Copaxone (a Multiple Sclerosis drug) and Azilect (a Parkinson’s Disease drug). Pharmacies across the country filled and dispensed the prescriptions, then submitted claims for reimbursement to Medicare, Medicaid and other government health care programs. These claims resulted in payments by federal and state governments for prescriptions allegedly induced through fraud, i.e., Teva’s alleged illegal payments to physicians who wrote the prescriptions. The complaint alleged that Teva’s conduct caused the submission of false claims to the government via the dispensing pharmacies, thereby violating the False Claims Act and the Anti-Kickback Statute (“AKS” ), 42 U.S.C. § 1320a-7b, which criminalizes, among other things, “knowingly or willingly” offering or paying a person “remuneration,” in the form of kickbacks, bribes, or rebates, to “induce” that person to “recommend” the purchase of a drug covered by a “Federal health care program.” 42 U.S.C. § 1320a-7b(b)(2).
On March 12, 2015, the Court issued an Order unsealing the complaint and permitting Mr. Arnstein and Mr. Senousy to prosecute claims on behalf of the United States and various states. Teva’s motion to dismiss the whistleblowers’ case was denied and the whistleblowers’ legal team engaged in substantial discovery, including reviewing millions of pages of documents, deposing scores of Teva employees and former employees, and producing expert reports authored by several world-renowned experts in support of the whistleblowers’ claims.
On February 27, 2019, the Honorable Colleen McMahon, the Chief Judge of the United States District Court for the Southern District of New York, issued a thoughtful and comprehensive Memorandum Decision and Order denying Teva’s motion for summary judgment. In a detailed, seventy-page opinion, Judge McMahon rejected numerous arguments raised by Teva and ruled that the case would proceed to trial.
In denying summary judgment, Chief Judge McMahon rejected Teva’s argument that Relators were required to produce evidence of a quid pro quo arrangement: “The [Anti-Kickback Statute] does not require evidence of negotiations with the party receiving the kickback. Rather, the payor must offer or pay ‘with the intent to gain influence over the reason or judgment of a person making referral decisions.’” United States v. Teva Pharm. USA, Inc., No. 13 CIV. 3702 (CM), 2019 WL 1245656, at *10 (S.D.N.Y. Feb. 27, 2019)(“Teva II”). Chief Judge McMahon also rejected the argument that Teva’s written compliance policies could be used to shield it from liability: “The question is whether these policies are worth the paper they are written on.” Teva II at * 12.
Importantly, Chief Judge McMahon found that “Relators … have introduced substantial evidence that Teva did, in fact, track speakers’ prescription writing,” and that “[s]ales representatives linked prescriber habits with their retention as paid speakers for Teva.” Teva II at * 13.
Chief Judge McMahon noted that “Teva has no real answer to this evidence,” and that the evidence included “dozens of examples of sales representatives using speaker prescriptions to see whether the programs were producing tangible results and to suggest working more closely with high volume prescribing speakers.” Teva II at * 14. In denying summary judgment, Chief Judge McMahon also cited to the substantial evidence developed by counsel for Relators in discovery:
“Relators have also submitted evidence showing that the same programs were repeatedly presented to the same attendees. For example, they have introduced evidence showing 1,500 examples of health care providers’ attending three or more events related to the same drug within six months; paid speakers who attended speaker programs on the same topic for which they also serve as a speaker; and health care providers’ ‘rotating’ by attending sequential Teva programs as the speaker at one and audience member at the other.” Teva II at * 16 (record citations omitted).
Chief Judge McMahon likewise rejected Teva’s argument that Relators presented insufficient evidence of sham speaker programs, noting that: “Relators submit that Teva routinely carried out speaker program events in a sham manner, as evidenced by the location at which many programs were held, the amount of alcohol served, and the fact that the audience was frequently made up of either Teva representatives, speakers themselves, repeat attendees, or physicians’ family members,”; that “Relators … offer considerable data showing that events not qualifying as useful … occurred regularly,”; that, “[f]or that data, Teva has no answers”; and, as a result, “Relators have raised a genuine issue of material fact that Teva structured its speaker programs in a sham manner.” Teva II at * 20–21.
After Chief Judge McMahon denied summary judgment, the parties engaged in extensive pre-trial motion practice and trial preparation before the parties reached a settlement agreement in principle (with the Court’s extensive assistance) very shortly before trial was to begin.
Caputo also joined his co-counsel in thanking the lawyers who represented the federal and state governments in this case, including Pierre G. Armand, Co-Chief of Civil Frauds Unit for the U.S. Attorney’s Office for the Southern District of New York, Assistant U.S. Attorneys Li Yu and Jessica Hu, Carrie L. Bashaw, Senior Counsel of the State of Washington Medicaid Fraud Control Unit, and Kathryn M. Heim Harris, Special Assistant Attorney General of the New York Medicaid Fraud Control Unit.
The case caption and docket number are United States ex rel. Arnstein and Senousy v. Teva Pharmaceuticals USA, Inc., No. 1:13-cv-03702-CM-OTW (S.D.N.Y.).