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Drug Company Cephalon Suffers Hefty Blows

Posted on by Mike Bothwell

Federal conspiracy claims and a Federal Trade Commission disgorgement action are a current problem for drugmaker Cephalon.

In April 2015, Cephalon failed to swat down a Federal Trade Commission disgorgement action and federal conspiracy claims. Although the story isn’t new news, the cases dating back to 2008 are still ongoing and new decisions were recently reached.

The FTC took issue with so-called “reverse-payment” settlements Cephalon struck with competing drug makers. Cephalon paid millions trying to stop the competing drug makers from introducing generic versions of their narcolepsy drug Povigil until the year 2012.

Even though U.S. District Judge Mitchell Goldberg found one Cephalon patent invalid in a related 2011 trial, the judge stayed the FTC action pending the U.S. Supreme Court’s guidance regarding reverse-payment settlement claims.

Cephalon is claiming the court should dismiss the FTC’s action since the generic of Provigil, modafinil, entered the market in 2012. Cephalon says injunctive relief is now moot and damages would be inappropriate. They also argue that consumers could obtain duplicative relief in private-plaintiff actions. To this, Goldberg responded “There is no way to predict the outcome of the private plaintiff’s antitrust lawsuits.”

U.S. District Judge Mitchell Goldberg kept the case going last year, saying Cephalon cannot stop the FTC from seeking disgorgement. He also stated “Moreover, the FTC explains that any award obtained pursuant to its proposed disgorgement remedy would be placed in a Consumer Relief Fund and would be used to satisfy any claims in the private plaintiff cases.”

Cephalon’s former employees accuse Cephalon of defrauding the U.S. government by submitting false claims for reimbursement for prescriptions of Provigil and its successor since 2007, Nuvigil, based on illegal off-label promotion. U.S. District Judge Thomas Goldstein is presiding over this False Claims Act complaint against Cephalon.

In 2008, Cephalon pleaded guilty to the misbranding through off-label promotion of Provigil, Actiq and Gabitril.

In April, 2015, Judge Goldstein tossed a few of the claims against Cephalon. However, he allowed many of the big-ticket allegations to advance. Goldstein also advanced the FCA conspiracy claims and claims under the New York False Claims Act based on conduct occurring before April 1, 2007.

Supreme Court Rules on Allisoin Engine Case

Posted on by Mike Bothwell

On June 9, 2008, the Supreme Court Ruled in the case of Allison Engine Co., Inc. v. U.S. ex rel. Sanders, 76 U.S.L.W. 4387, 2008 U.S. Lexis 4704 (June 9, 2008).  The Court was completely correct on the real issue at hand–“The inclusion of an express presentment requirement in subsection (a)(1), combined with the absence of anything similar in subsection (a)(2), suggests that Congress did not intend to include a presentment requirement in subsection (a)(2).”

Id. slip op. at 16.  However, the Court veered far of course on its focus in the unanimous opinion with the weaknesses highlighted in the footnotes.

Footnote 1 concerns the Court’s insistence in protecting private entities in light of its ruling that no presentment to the government is required under (a)(2), which goes so far afield that it is irreconcilable with the clear language in section 3729(c).  Congress was clear in subsection (c) that it intended a much broader reading, but the Supreme Court has effectively read (c) out of the statute.

Footnote 2 similarly runs roughshod over subsection (b) where Congress expressly stated that no specific intent to defraud is required.  The Supreme Court has pulled out of the statute the language “to get a claim paid” and read that as requiring specific intent.  Thus, both attempts to reconcile the ruling with the plain language of the FCA fall woefully short.

In addition, the Supreme Court has grafted onto the statute requirements that Congress specifically tried to clarify were not intended to be there when it amended the FCA in 1986.  The concepts of specific intent, materiality and limits on direct payments from the government were part of the target of the amendments attempt at cleaning up overly restrictive pre-1986 court decisions.  In the legislative history of the 1986 amendments, Congress told the Courts it expected the FCA to be interpreted very broadly as directed in the case of U.S. v. Neifert-White Co., 390 U.S. 228, 232 (1968), but in Allison Engine, Congress got the anti-Neifert-White.  Hopefully, Congress will correct the more damaging and narrowing comments of the Court in the upcoming “FCA Corrections Act of 2008″.