United States District Court, D. South Carolina, Columbia Division
JOSEPH F. ANDERSON, Jr., District Judge.
In this qui tam action, brought under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq., as well as under similar laws in twenty-eight states, the District of Columbia, and the city of Chicago under their respective state and local false claims acts, Frank Kurnik ("Kurnik") asserts claims of fraud on the Government by PharMerica Corp ("PharMerica") and Kindred Healthcare Inc. ("Kindred") (collectively "Defendants"). Kurnik filed his original complaint on June 14, 2011 and his operative amended complaint on April 24, 2014. Kurnik alleges that Defendants solicited and received illegal kickbacks from Amgen, Inc. ("Amgen")-in multiple forms of remuneration-to induce physicians to switch patients from the drug Procrit to the drug Aranesp. This alleged kickback scheme resulted in false claims to the Government when PharMerica failed to disclose the true nature of its Amgen arrangements to Medicare and Medicaid; and as a result, the arrangements were not protected by the discount safe harbor to the Medicare Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) (the "Anti-Kickback Statute"). Kurnik further alleges that Defendants assisted Amgen in its systematic and illegal misbranding of the drug Aranesp through off-label marketing and violations of continuing medical education rules and regulations, inter alia, by controlling speaker programs. According to Kurnik, the misbranding of Aranesp, in violation of the Food, Drug, and Cosmetics Act, 21 U.S.C. §§ 301, et seq., caused unlawful prescriptions of Aranesp to be submitted for payment by federal, state and municipal health care payors.
On January 13, 2015, Defendants filed the instant motion to dismiss alleging for the first time that the Court lacks subject-matter jurisdiction over Kurnik's claims under the first-to-file rule of the FCA, 31 U.S.C. § 3730(b)(5), which states "[w]hen a person brings an action under [the FCA], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." The Defendants argue that a qui tam action in Wisconsin, filed by relator Jennifer Denk, was pending when Kurnik filed his complaint and alleged the same material elements of fraud against PharMerica.
On March 18, 2015, the Court heard oral arguments on the motion to dismiss. For the reasons that follow, the Court denies the Defendants' Motion to Dismiss and finds that the Court possesses subject-matter jurisdiction over Kurnik's claims.
a. The Denk Complaint
On July 23, 2009, relator, Jennifer Denk ("Denk"), filed a qui tam action against PharMerica in the United States District Court for the Eastern District of Wisconsin styled United States ex rel. Denk v. PharMerica Corp., Civil Action No. 09-cv-00720-CNC (E.D. Wis.), alleging violations of the FCA (the "Denk Action"). Denk's original complaint alleged, inter alia, that PharMerica dispensed medications without a legally valid prescription from a physician, which Denk maintained resulted in PharMerica's submission of false claims to Medicare Part D and Medicaid.
Denk filed an amended complaint ("the Denk Complaint") on January 1, 2010. The Denk Complaint added new allegations that PharMerica "arranged for access/performance rebates from drug manufacturers" and accepted lavish meals in exchange for steering patients to pharmaceutical products, both inducing PharMerica to prefer the manufacturer's product. Denk explained that upon information and belief, PharMerica failed to disclose the details of its rebate arrangements and dinner events to "Part D Sponsors, Medicare, Medicaid, the patients receiving the drugs or the doctors prescribing the drugs." As a result, the arrangements were not protected by the discount safe harbor to the Anti-Kickback Statute and resulted in the submission of false claims to the Government.
The Defendants represent to the Court that in 2010, after Denk filed her complaint, and before Kurnik initiated this action, the Government began to conduct an investigation into PharMerica's rebate arrangements with pharmaceutical manufacturers and its recommendation of preferred products through therapeutic interchange programs. On May 28, 2013, after almost a three-year investigation, the Government notified the Wisconsin court of its decision not to intervene with respect to Denk's kickback claims, but to intervene with respect to Denk's claims related to dispensing medicine based on inadequate prescriptions. The Government filed its Complaint in Intervention against PharMerica with respect to these claims on August 9, 2013. Importantly, Denk voluntarily dismissed her kickback claims without prejudice on November 20, 2013. The Wisconsin court administratively closed the Denk Acton on September 26, 2014.
b. The Kurnik Complaint
Kurnik filed his original complaint in this action under seal on June 14, 2011. The Government declined to intervene as to PharMerica and the complaint was unsealed on November 26, 2013. Kurnik filed the operative amended complaint (the "Kurnik Complaint") on April 24, 2014.
In short, the Kurnik Complaint alleges fraudulent schemes carried out by the Defendants that (1) included accepting and soliciting kickbacks from Amgen for switching nursing home patients from Procrit to Aranesp in violation of the Anti-Kickback Statute; and (2) aiding and/or conspiring with Amgen to misbrand Aranesp, in violation of the Food, Drug, and Cosmetics Act, 21 U.S.C. §§ 301, et seq., causing unlawful prescriptions of Aranesp to be submitted for payment by federal, state and municipal health care payors.
Concerning the kickback claims, the Kurnik Complaint alleges more than just rebates and dinners, as alleged in the Denk Complaint, and informs the Government that Defendants "solicited and received remuneration from Amgen Inc. in the form of purported discounts, purported market-share rebates, grants, honoraria, speakers fees, consulting services, dinners, travel, or fees ...