On Tuesday, January 28, 2014, the Louisiana Supreme Court’s ruling in Caldwell ex rel. State v. Janssen Pharmaceutica, Inc., 2012-C-2447, 2012-C-2466 (La. 1/28/14) , --- So.3d ---, 2014 WL 341038, reversed a trial court judgment of US$257,679,000 in civil penalties, US$70,000,000 in attorney fees, and US$3,000,200 in costs and expenses, and granted judgment in favor of Defendants Janssen Pharmaceutica, Inc.1 and its parent company Johnson & Johnson, Inc. This decision has significant implications for lawsuits brought by the Louisiana Attorney General asserting Medicaid fraud claims against pharmaceutical companies under Louisiana’s Medical Assistance Programs Integrity Law, La. Rev. Stat. §§ 46:437.1, et. seq., (MAPIL). Additionally, it could influence how similar Medicaid fraud prevention statutes are construed in other states.
Background on State Attorney General Suits Against Pharmaceutical Manufacturers
In recent years, state attorney generals, often assisted by private counsel retained on a contingency fee basis, have increasingly brought claims against pharmaceutical manufacturers for marketing activities that allegedly violate the Food, Drug and Cosmetic Act under Medicaid fraud prevention and consumer protection statutes. A number of state trial court decisions regarding Janssen and Johnson & Johnson’s promotion of the second generation antipsychotic Risperdal® are reaching state appellate courts. On May 16, 2012, the Commonwealth Court of Pennsylvania upheld the dismissal of claims against Janssen and Johnson & Johnson under the Pennsylvania Medicaid Fraud Control Act, 62 P.S. § 1407(c) because a pharmaceutical manufacturer was not a “provider” from which the Commonwealth could seek civil penalties.2 In addition to the Pennsylvania and Louisiana cases, Janssen and Johnson & Johnson are pursuing an appeal of a US$327 million award of civil penalties under the South Carolina Unfair Trade Practice Act, S.C. Code Ann. §39-5-10 et seq., pending before the Supreme Court of South Carolina and an appeal of a verdict of US$1.2 billion in civil penalties under the Arkansas Medicaid Fraud False Claims Act, Ark. Code Ann. § 20-77-901 et seq., and Deceptive Trade Practices Act , Ark. Code Ann. § 4-88-101 et seq., scheduled to be heard before the Supreme Court of Arkansas on February 27, 2014.3
Procedural History of Caldwell ex rel. State v. Janssen
In Janssen, Louisiana alleged that statements made by sales representatives and contained in a letter sent by defendants to doctors regarding a class-wide Food & Drug Administration (FDA) warning failed to adequately characterize the risks associated with Risperdal® and violated the provisions of MAPIL prohibiting false and fraudulent claims, relying largely on a 2004 “warning letter” from the FDA. Specifically, Louisiana alleged that the defendants violated subsections (A), (B) and (C) of La. Rev. Stat. § 46:438.3 (2006), which provide:
- No person shall knowingly present or cause to be presented a false or fraudulent claim.
- N o p e r s o n s h a l l k n o w i n g l y e n g a g e i n misrepresentation to obtain, or attempt to obtain, payment from medical assistance programs funds.
- No person shall conspire to defraud, or attempt to defraud, the medical assistance programs through misrepresentation or by obtaining, or attempting to obtain, payment for a false or fraudulent claim.4
The trial court ruled that to prove its MAPIL claims “the AG only need prove false, misleading, misrepresentative, deceitful, intent to defraud type statements, attempts to defraud type statements, that in and of itself is the causation  needed” and allowed the case to proceed to the jury without any evidence a false or fraudulent claim was ever submitted. On appeal, defendants argued, among other things, that the trial record was insufficient to find liability under MAPIL because the State provided no evidence that defendants presented or caused to be presented any actual false claim for payment to the Louisiana Medicaid program. The Louisiana Third Circuit Court of Appeal held “that the trial court did not abuse its discretion in interpreting the MAPIL statute” and adopted the trial court’s interpretation of the statute.5 However, the Supreme Court adopted the defendants’ arguments and rejected the trial court’s and intermediate appellate court’s sweeping interpretation of MAPIL, holding that “there was insufficient evidence adduced that any defendant engaged in fraud, misrepresentation, abuse or other ill practices seeking to obtain, pursuant to a claim made against the medical assistance program funds, payments to health care providers or other persons to which the health care providers or other persons were not entitled.”6
The Louisiana Supreme Court’s Decision
The Court addressed each of the three provisions of MAPIL at issue during the relevant time period. First, the Court analyzed Louisiana’s claim under La. Rev. Stat. § 46:438.3(A), which provides “[n]o person shall present or cause to be presented a false or fraudulent claim.” The Court held that there is no evidence that defendants “ever presented a claim for payment from the medical assistance funds.”7 Thus, the Court assessed whether defendants “caused” a false or fraudulent claim to be submitted. Relying on the statutory definition of a “false or fraudulent claim,” La. Rev. Stat. § 46:437.3(8),8 the Court held that Louisiana had not adduced evidence that the alleged misrepresentations “caused any health care provider or his billing agent to knowingly present a claim for payment that is false, fictitious, untrue, or misleading in regard to any material information.”9 Rejecting Louisiana’s argument that a pattern or practice of violating FDA rules constitutes a false claim, the Court held that a person must have “knowingly caused a health care provider or its billing agent to present a claim for payment the health care provider or its billing agent knew to be false or misleading,” even under the portion of the statute making a claim false if it was “part of a pattern in violation of applicable federal or state law or rule.”10 In this case, the Court held that no evidence supported a finding that defendants’ improper marketing statements caused any provider or billing agent to “submit a claim for payment the provider or his agent knew was false or misleading or that violated a federal or state law or rule.”11
Second, the Court rejected Louisiana’s claim under La. Rev. Stat. § 46:438.3(B), which provides “[n]o person shall knowingly engage in misrepresentation to obtain, or attempt to obtain, payment from medical assistance programs.” The Court held that section 46.438.3(B) required a person to attempt to receive payment “directly from medical assistance program funds pursuant to a claim.”12 Because there was “no showing that the defendants attempted to obtain payment to a health care provider directly from medical assistance program funds pursuant to a claim,” this provision did not apply.13
The Court rejected the Attorney General’s broad interpretation of the definition of “misrepresentation” in La. Rev. Stat. § 46:437.3(15)14 to include within its scope the failure to disclose information required by any state or federal requirement. Rather, because MAPIL was intended to “protect the fiscal and programmatic integrity of the medical assistance programs,” the Court limited the definition of “misrepresentation” under the statute to “(1) the knowing failure to truthfully or fully disclose any information required on a claim or provider agreement; (2) the concealment of any and all information required on a claim or provider agreement; or (3) the making of a false or misleading statement to the department relative to the medical assistance programs.”15 The Court found that there was no showing that defendants failed to disclose or concealed information on a claim or made any of the allegedly false statements to the Department of Health and Hospitals “relative to the medical assistance programs in an attempt to obtain payment on a claim made against the medical assistance programs.”16
Finally, the Court held defendants did not violate La. Rev. Stat. § 46:438.3(C), which provides “[n]o person shall conspire to defraud, or attempt to defraud, the medical assistance programs through misrepresentation or by obtaining, or attempting to obtain, payment for a false or fraudulent claim.” Relying on its earlier construction of “misrepresentation,” the Court held that subsection (C) was not violated because there was no evidence defendants “failed to truthfully or fully disclose or concealed any information required on a claim for payment made against the medical assistance programs, or that these statements were made to the department relative to the medical assistance programs.”17 Additionally, the Court held that “there must be a causal link between the misleading marketing statement and a false or fraudulent claim for payment to a health care provider or other person to establish liability under MAPIL.”18
The Attorney General of Louisiana has been particularly aggressive in bringing Medicaid fraud claims against pharmaceutical companies for their promotional and marketing activities, and the Janssen decision considerably limits the State’s ability to bring these claims under MAPIL. The Attorney General currently has cases alleging marketing violations and asserting claims under MAPIL pending against numerous pharmaceutical companies.19 The Janssen decision requires the State to prove a causal connection between marketing or promotional statements and the submission of a knowingly false claim by a health care provider. Additionally, the Louisiana Supreme Court’s decision in Janssen may persuade other state courts to interpret their Medicaid fraud statutes, many of which also require demonstration that misrepresentations caused false or fraudulent claims or unauthorized benefits or payments to be made, in a similar fashion.20 The Court’s decision did not involve claims under the State’s consumer protection statute which are also commonly asserted in attorney general enforcement actions against pharmaceutical manufacturers