On March 31, 2017, U.S. District Judge Jesse Furman in the Southern District of New York denied, in large part, Allergan’s motion to dismiss a whistleblower case captioned U.S. ex rel. Wood v. Allergan, Inc., 10-cv-05645-JMF.
In this case filed in July 2010, the whistleblower, a former Allergan sales employee, brought claims under the False Claims Act alleging that Allergan had engaged in kickback scheme, in part by providing large quantities of samples to physicians in exchange for their prescribing Allergan drugs to beneficiaries of federal health care programs.
The decision, denying most aspects of Allergan's motion to dismiss, is interesting and potentially problematic for industry in a number of respects. While it can be risky to read too much into a denial of a motion to dismiss given the lower threshold that exists than at summary judgment or trial, there is some troubling reasoning and language in the opinion that bears mention.
The decision in the Allergan case deals with the competing legal constructs in the Anti-Kickback Statute (AKS) and the drug sampling provisions of the Prescription Drug Marketing Act (PDMA). As is well known, the AKS makes it unlawful to knowingly and willfully offer or pay "any remuneration" to induce someone to prescribe a drug for which payment may be made by a federal health care program. However, the PDMA expressly authorizes drug manufacturers to provide samples of their drugs to licensed practitioners who request them, as long as certain recordkeeping requirements are met. Moreover, the PDMA expressly acknowledges that sampling is "intended to promote the sale of the drug."
The primary reasoning employed by Judge Furman in rejecting Allergan's motion to dismiss on the sampling issue was that the free samples could be "remuneration" under the AKS because they provide physicians an opportunity to engage in "profit maximization." Judge Furman explained that the physicians at issue, ophthalmologists, might have had to cover the costs of the free samples, "thus lowering their profits per surgery." This logic is concerning from an industry perspective because it could be applied to just about every drug sampling situation. Do companies really have to analyze whether their samples will or could have an impact on a physician's "profit maximization" before dispensing a sample? How does one define "profit maximization?" Is it whether the physician actually has to go cash out of pocket in the absence of using the sample or could it merely be the good will that she develops by giving patient a sample and increasing the chances that the patient becomes an enduring client? Or something in between? Of course, the PDMA does not contemplate any such analysis.
Certainly, denials of motions to dismiss do not provide clear compliance guidance, but from an industry perspective, let’s hope this one, and the reasoning behind it, is not suggestive of a movement in the direction of evaluating a physician's "profit maximization" before dispensing a sample.