Two relators, Bernard Lisitza and David Kammerer, filed separate False Claims Act qui tam actions against Johnson & Johnson, Ortho-McNeil-Janssen Pharmaceuticals, Inc., and Johnson & Johnson Health Care System (collectively, “J & J”). The relators allege that J & J “unlawfully induced Omnicare, the nation’s largest supplier of pharmaceutical drugs to nursing homes, to promote J & J’s branded drugs over less costly alternatives, in violation of the False Claims Act, 31 U.S.C. § 3729 (FCA), the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b (AKS), and various state consumer protection laws.” The United States intervened in the Lisitza action and argued that J & J caused Omnicare to submit false claims to Medicaid by falsely certifying reimbursement claims as compliant with the Anti-Kickback Statute. The Court denied J & J’s motion to dismiss, holding that false certification of compliance with the Anti-Kickback Statute can be a basis for False Claims Act liability. See United States ex rel. Lisitza v. Johnson & Johnson, et al., Civil Action Nos. 07-10288-RGS, 05-11518-RGS, 2011 WL 673925 (D. Mass. Feb. 25, 2011). The Court also rejected J & J’s Rule 9(b) arguments, but granted J & J’s motion to dismiss relator Kammerer’s claims and certain of relator Lisitza’s claims based on the public disclosure and first-to-file bars.

The Allegations

According to a J & J document cited by the court, Omnicare has over 900 consultant pharmacists who make recommendations to nursing homes regarding patients’ medications and those recommendations are accepted more than 80% of the time. The plaintiffs allege that J & J “funneled kickbacks through Omnicare to the consultant pharmacists to induce them to recommend J & J drugs over those of its competitors.” Omnicare pharmacists were allegedly encouraged to develop “intervention” programs” designed to shift market share to J & J drugs, and J & J paid rebates to Omnicare based on the success of these intervention programs. The government also alleges that, when the high level of rebates J & J was paying Omnicare threatened to trigger an obligation that J & J pay rebates to the Medicaid program, J & J began disguising the alleged kickbacks as payments for data previously provided by Omnicare free of charge, “grants,” “educational funding,” and “meeting sponsorship fees.”

The Legal Theory - False Certification

The United States argued that Omnicare certified compliance with the Anti-Kickback Statute by certifying compliance with “all applicable state and federal laws” in the Medicaid provider agreement and in the claims for reimbursement submitted to Medicaid. J & J countered with a line of cases holding that broad certifications like these are insufficient to create liability because they fail to explicitly refer to a statute and make the certification a precondition of payment. The court rejected J & J’s arguments, holding:

The court agrees that in the case of the AKS [Anti-Kickback Statute], compliance is not merely a condition of participation in federal health care programs, but is also material to the government's decision to pay any claim resulting from a kickback…some regulations or statutes may be so integral to the government’s payment decision as to make any divide between conditions of participation and conditions of payment a distinction without a difference.

Dismissal of Relator Claims Based on Public Disclosure And First-To-File Bars

The False Claims Act bars later filed actions based on the same facts, as well as actions where the allegations had been publicly disclosed and the relator is not an “original source” of information. Relator Lisitza filed his qui tam complaint in 2003, and Kammerer filed his complaint two years later.

First, J & J argued that both cases were barred by a False Claims Act case filed in 2002 against Omnicare making, what the court characterized as, “for all practical purposes” “identical” allegations against Omnicare as those made in Lisitza’s and Kammerer’s complaints. The court, however, held that the suit did not put the government on notice of alleged fraud by J & J because no member of the J & J corporate family was named as a defendant. (Omnicare settled that case, which was consolidated with other cases brought against Omnicare by Lisitza and Kammerer, for $98 million. Click here for the DOJ press release.) The court also found that a parallel lawsuit filed by Lisitza in Illinois did not bar the case because Lisitza should not be “penalized for sounding the alarm” in multiple fora.

Kammerer’s lawsuit, in contrast, did not fare as well. The court held that Kammerer’s complaint “simply adds a sprinkle of factual garnish” to what had already been alleged in Lisitza’s complaint. Thus, since Lisitza filed first, Kammerer’s suit was barred. The court also barred Lisitza’s claims regarding “best price” allegations because they were publicly disclosed in other lawsuits previously filed. Lisitza failed to meet the “original source” exception to the public disclosure bar because he did not have “direct and independent knowledge of the information on which the allegations are based.”

Proof of an Actual False Claim

The Court rejected J & J’s Rule 9(b) arguments, but left one interesting argument open for the summary judgment stage. J & J aptly points out that the plaintiff must prove an actual false claim. J & J argues that the implication of plaintiffs’ allegations is that all of the claims for reimbursement for J & J’s drugs were the result of kickbacks, meaning “Plaintiffs would have to take the nonsensical position that no J & J product ever would have been provided to a nursing patient by Omnicare but for the purported ‘kickbacks.’ That claim is belied by the United States’ complaint itself, which acknowledges that, even before the period at issue, Omnicare purchased more than $100 million in J & J product.” In other words, the plaintiffs should have to show on which occasions, if any, J & J drugs were prescribed as a result of the alleged kickbacks.