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United States ex rel. Ibanez v. Bristol-Myers Squibb Co.

United States Court of Appeals, Sixth Circuit

October 27, 2017

United States of America ex rel. Joseph Ibanez and Jennifer Edwards, Relators-Appellants,
Bristol-Myers Squibb Company; Otsuka America Pharmaceutical, Inc., Defendants-Appellees.

          Argued: December 6, 2016

         Appeal from the United States District Court for the Southern District of Ohio at Cincinnati. No. 1:11-cv-00029-William O. Bertelsman, District Judge.


          William C. Meyers, GOLDBERG KOHN LTD., Chicago, Illinois, for Relators. Jessica L. Ellsworth, HOGAN LOVELLS U.S. LLP, Washington, D.C., for Appellee

          Bristol-Myers Squibb. Jennifer L. Spaziano, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Washington, D.C., for Appellee Otsuka.

         ON BRIEF:

          William C. Meyers, David J. Chizewer, Emily D. Gilman, GOLDBERG KOHN LTD., Chicago, Illinois, Jennifer M. Verkamp, Frederick M. Morgan, Jr., Chandra Napora, MORGAN VERKAMP LLC, Cincinnati, Ohio, for Relators. Jessica L. Ellsworth, Mitchell J. Lazris, Eugene A. Sokoloff, HOGAN LOVELLS U.S. LLP, Washington, D.C., for Appellee

          Bristol-Myers Squibb. Jennifer L. Spaziano, Mitchell S. Ettinger, Caroline Van Zile, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Washington, D.C., Daniel E. Izenson, Thomas F. Hankinson, KEATING MUETHING & KLEKAMP, PLL, Cincinnati, Ohio, for Appellee Otsuka.

          Before: McKEAGUE, KETHLEDGE, and STRANCH, Circuit Judges.


          McKEAGUE, Circuit Judge.

         Relators Joseph Ibanez and Jennifer Edwards, former employees of Bristol-Myers Squibb Co. (BMS), bring this qui tam action alleging that BMS, together with Otsuka America Pharmaceutical, Inc. (Otsuka), engaged in a complex, nationwide scheme to improperly promote the antipsychotic drug Abilify. Relators assert that this scheme caused claims for reimbursement for the drug to be submitted to the government, in violation of the False Claims Act (FCA), 31 U.S.C. § 3729 et seq., and several state-law analogues. The district court dismissed the complaint in part and subsequently denied relators' motion to amend. Because neither the second amended complaint nor the proposed third amended complaint satisfies Rule 9(b)'s pleading requirements, we affirm the district court's orders.


         A. Factual Background

         Since 1999, BMS and Otsuka have sold and marketed the drug Abilify. Both relators Joseph Ibanez and Jennifer Edwards worked as BMS sales representatives marketing Abilify from 2005 to 2010.

         Abilify is an antipsychotic drug approved for various prescriptive uses by the FDA. It has three approved adult uses. It was approved to treat schizophrenia in 2002; to treat symptoms related to Bipolar I Disorder in 2004; and as a supplemental treatment for major depressive disorder in 2007. Abilify also has three approved uses for pediatrics. It was approved to treat schizophrenia in 13 to 17 year-olds in 2007; to treat symptoms associated with Bipolar I Disorder in patients 10 to 17 years old in 2008; and to treat irritability associated with autistic disorder for patients 6 to 17 years old in 2009. There are no expressly disapproved treatments for elderly patients, but the FDA has included a warning since 2007 that Abilify is associated with increased mortality rate in elderly patients with dementia-related psychosis.

         Relators' FCA complaint boils down to two separate theories. First, relators allege that defendant pharmaceutical companies engaged in a scheme to encourage providers to prescribe Abilify for unapproved ("off-label") uses and that some of those off-label prescriptions were paid for by government programs. Second, relators assert that defendants improperly induced providers to prescribe Abilify through remunerations and benefits in violation of the Anti-Kickback Statute. Relators assert that requests for government reimbursement for off-label prescriptions and prescriptions induced by kickbacks constitute false claims under the FCA.

         These allegations come on the heels of a set of nearly identical allegations leveled against BMS and Otsuka some nine years earlier. In 2007, BMS entered into a five-year Corporate Integrity Agreement as part of a settlement of a qui tam action which also involved improper promotion of Abilify. In 2008, Otsuka entered into its own five-year Corporate Integrity Agreement as a result of yet another qui tam action alleging the same misconduct. The two agreements used similar language to require Otsuka and BMS to adopt procedures and programs designed to ensure compliance with the FCA, the Anti-Kickback Statute, and cease off-label promotion of Abilify. The relators allege that, despite those agreements, the two companies continued to promote Abilify off-label and offer kickbacks to physicians who prescribed it.

         B. Procedural Background

         Relators brought this action under the False Claims Act, 31 U.S.C. § 3729 et seq., and twenty-eight state-law analogues after disclosure to the government, which declined to intervene. Specifically, the complaint alleges that defendants' illegal promotion of Abilify caused the government to pay off-label prescriptions in violation of 31 U.S.C. § 3729(a)(1)(A). The complaint further alleges that, as part of these fraudulent schemes, defendants violated the Anti-Kickback Statute, 42 U.S.C. § 1320-7b(b); caused the use or creation of false records material to false claims, 31 U.S.C. § 4729(a)(1)(B); failed to reimburse the United States for overpayments, id. § 3729(a)(1)(G); conspired to violate the FCA, id. § 3729(a)(1)(C); and that BMS retaliated against Ibanez and Edwards for internally reporting the company's alleged failure to comply with federal and state laws and the Corporate Integrity Agreements, id. § 3730(h).

         In response to relators' second amended complaint, defendants filed motions to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). The district court granted Otsuka's motion to dismiss, and granted in part and denied in part BMS's motion, dismissing all of the qui tam claims. As a result, the only claims that survived were the retaliation claims brought against BMS and Edwards' Arizona-employment claim analogue. The court declined to exercise supplemental jurisdiction over the remaining state law claims. Proceedings continued in the district court on the retaliation claims.

         However, relators moved to file a third amended complaint under Fed.R.Civ.P. 15(a)(2), and attached the proposed complaint. The district court directed the parties to address changes made in the complaint that it saw as potentially implicating the FCA's public-disclosure bar. Following responsive filings, the court found the public-disclosure bar precluded many of the amendments and that the amended complaint otherwise failed to plead presentment with adequate particularity to survive a Rule 12(b)(6) motion. Accordingly, the court denied relators' motion to file a third amended complaint on the basis of futility. The court subsequently granted a Rule 54(b) motion staying litigation on the retaliation claims and granting final judgment certification on both the order resolving the partial motion to dismiss and the order denying the motion to amend. Relators now timely appeal those certified orders.


         A. Jurisdiction

         The district court had jurisdiction over claims arising under the False Claims Act claims pursuant to 28 U.S.C. § 3732(a). The district court certified its order partially granting defendants' Rule 12(b)(6) motion and its order denying relators' Rule 15(a)(2) motion under Fed.R.Civ.P. 54(b). "Although Rule 54(b) relaxes the traditional finality requirement for appellate review, it does not tolerate immediate appeal of every action taken by a district court." Gen. Acquisition, Inc. v. GenCorp, Inc., 23 F.3d 1022, 1026 (6th Cir. 1994). Neither party challenges this court's jurisdiction to hear the certified orders on appeal. Nonetheless, we must still satisfy ourselves that the certification was proper. Otherwise, appellate jurisdiction is lacking. Lowery v. Fed. Express Corp., 426 F.3d 817, 820 (6th Cir. 2005).

         The district court's determination that certification was proper has two components. First, entry of final judgment as to one or more but fewer than all of the claims or parties; and second, that there is no just reason for delay. The first component is reviewed de novo and the second for abuse of discretion. Id. at 821.

         The district court's orders collectively ended the litigation of relators' qui tam claims against Otsuka and BMS, leaving only relators' personal, employment-based retaliation claims against BMS. See R. 73, Dist. Ct. Op. I, PID 1228; R. 97, Dist. Ct. Op. II, PID 2168. There was no error in deeming these orders final. That is, no matter how the record might develop in further proceedings on the unresolved retaliation claims against BMS, there are no grounds on which the dismissed claims would be subject to reopening. Second, the district court did not abuse its discretion in finding there was "no reason to delay" appeal of the orders. As noted by the district court in its certification order, "the qui tam and employment-based retaliation claims are sufficiently distinct, such that permitting immediate appeal will not cause piecemeal appeals" and so allowing this appeal to go forward would "create judicial and economic efficiencies." See R. 102, Order, PID 2195-96. Thus, the court weighed relevant considerations and did not abuse its discretion in determining that there was no reason for delay. See Lowery, 426 F.3d at 821-22. We now consider the orders certified for appeal.

         B. Standard of Review

         "This Court reviews de novo a district court's dismissal of a complaint for failure to state a claim, including dismissal for failure to plead with particularity under [Rule] 9(b)." United States ex rel. Eberhard v. Physicians Choice Lab. Servs., LLC, 642 Fed.Appx. 547, 550 (6th Cir. 2016) (quoting United States ex rel. Bledsoe v. Cmty. Health Sys., Inc. ("Bledsoe II"), 501 F.3d 493, 502 (6th Cir. 2007)). "Complaints alleging FCA violations must comply with Rule 9(b)'s requirement that fraud be pled with particularity because 'defendants accused of defrauding the federal government have the same protections as defendants sued for fraud in other contexts.'" Chesbrough v. VPA, P.C., 655 F.3d 461, 466 (6th Cir. 2011) (quoting Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 563 (6th Cir. 2003)). Thus, "[w]here a relator pleads a complex and far-reaching fraudulent scheme, " she also must provide "examples of specific false claims submitted to the government pursuant to that scheme" in order to proceed to discovery on the scheme. United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 838 F.3d 750, 768 (6th Cir. 2016) (quoting Bledsoe II, 501 F.3d at 510). "In the qui tam context, 'the Court must construe the complaint in the light most favorable to the plaintiff, ...

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