ENDO - Ryan Complaint 2005

8/12/2019 ENDO - Ryan Complaint 2005

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UNITED STATES DISTRICT COURTEASTERN DISTRICT OF PENNSYLVANIAPHILADELPHIA DIVISIONUNITED STATES OF AMERICAex rel PEGGY RYAN,

Plaintiff,vENDO PHARMACEUTICALS INC.

Defendant.

CASE NO.:FILED IN C MER NDUNDER SEAL PURSU NT TO31 u s c 3730 b) 2)

COMPLAINT

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1 This is an action to recover damages and civil penalties on beh lf of the UnitedStates of America arising from false claims caused to be made by the Defendant to the UnitedStates and its agents and intermediaries in violation of the False Claims Act, 31 U.S.C. 3729et seq (the FCA ). The false claims were caused to be made by the Defendant by marketingand promoting the off-label use of the drug Lidoderm in violation of federal statutes andregulations.

2. Originally enacted in 1863, the FCA was substantially amended in 1986 by theFalse Claims Amendments Act. The 1986 amendments enhanced the government's ability torecover losses sustained as a result of fraud against the United States.

3 The FCA provides that any person who knowingly submits or causes to besubmitted to the government or recipients of federal funds a false or fraudulent claim forpayment or approval is liable for a civil penalty of between $5,000 and $11,000 for each suchclaim, and three times the amount of the damages sustained by the government. The Act penni ts

Case 2:05-cv-03450-RK Document 1 Filed 07/05/05 Page 1 of 10


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persons having information regarding a false or fraudulent claim against the government to bringan action on behalfo the government and to share in any recovery. The complaint must be filedunder seal, without service on the defendant. The complaint remains under seal while thegovernment conducts an investigationo the allegations in the complaint and determines whetherto join the action.

4 Pursuant to the Act, plaintiff/relator seeks to recover on behalfo the UnitedStates damages and civil penalties arising from Medicaid payments for Lidoderm prescriptionsfor unauthorized, off-label use. Defendant, by marketing and promoting Lidodenn forunapproved off-label use, caused thousandso claims to be submitted to Medicaid forreimbursement o Lidodenn prescriptions, when those prescriptions were not eligible forMedicaid reimbursement.

P RTIES5 Relator Peggy Ryan is a resident o the state o New York and an employee o

Defendant Endo Pharmaceuticals Inc. ( Endo ). Ryan is the original sourceo information and

facts set forth herein concerning the actionso Endo, and the facts set forth herein are based onRyan's personal knowledge.

6 Defendant Endo Pharmaceuticals Inc. is a Delaware corporation with its principalplace o business n Chadds Ford, Pennsylvania. Endo manufactures and sells pharmaceuticals.

JURISDICTION7 Jurisdiction is based on 37 U.S.C. 3730 and 28 U.S.C. 1331.8 At all relevant times Defendant Endo has regularly conducted substantial business

in this District, employed numerous individuals in this District, and made significant sales in this

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District. Consequently, Endo is subject to personal jurisdict ion in the Eastern District ofPennsylvania.

9. Venue is proper in the Eastern District ofPennsylvania pursuant to 28 U.S.C. 1391 b) l) and 2).

F CTS10. The Medicaid program is the single largest purchaser ofprescription drngs in the

United States. Most of the Medicaid funds used to purchase pharmaceuticals are provided by thefederal government. Medicaid tightly restricts the types and uses of drngs eligible for purchaseusing federal funds. Federal regulations further prohibit drug companies from marketingpractices that could lead to unnecessary or ineffective prescribing of drugs. These regulations areintended to ensure that Medicaid funds are only used to purchase drugs that have beendetermined to be safe and effective for treatment of specific conditions.

11. Relator Peggy Ryan alleges in this qui t m action that Defendant Endo hasundertaken a course of action that it knew would cause numerous violations of federal statutesand regulations relating to reimbursement for Lidodenn, an Endo product. Endo does not writethe prescriptions or provide idodenn to the Medicaid program. Rather, Endo intentionallyundertook a course of conduct that Endo knew would lead t the submission of thousands ofineligible Medicaid claims for Lidodenn prescriptions. Many of the phannaci sts and physicianssubmitting Medicaid claims for Lidoderm prescriptions were likely unaware that the claims wereineligible for Medicaid reimbursement, but Endo was fully aware that its actions would lead toproviders submitting false claims to the government.

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Regulatory ackground12. Pharmaceutical drugs cannot be sold in the United States until the Food and Drug

Administration ( FDA ) has concluded that a drug is safe and effective at specific dosages. TheFDA-approved indications and dosages are set forth on an approved drug's label. Physiciansmay prescribe FDA-approved drugs for indications, or at dosages, that vary from those set forthon the label, but drug companies are prohibited under the Food, Drug, and Cosmetic Act frommarketing or promoting approved drugs for uses other than the approved uses set forth on thelabel. 21 U.S.C. 355(a) (d). Distribution o prescription drugs for off-label uses is expresslyprohibited. 21 U.S.C. 331(d).

13. Federal law limits Medicaid reimbursement for prescription drugs to coveredoutpatient drugs. 42 U.S.C. 1396b(I)(10). Only drugs used for medically acceptedindications qualify as covered outpatient drugs. 42 U.S.C. 1396r-8(k)(3). Only an FDAapproved use, or one that is supported by express compendia set forth in the Medicaid statute, isa medically accepted indication. 42 U.S.C. 1396r-8(k)(6); 1396r-8(g)(l)(B)(i).

14. Federal anti-kickback laws, 42 U.S.C. 1320a-7b(b), also regulate the marketingo pharmaceuticals to prevent overutilization o prescription drugs. Drug companies areprohibited from offering or paying remuneration, cash or otherwise, to induce physicians orothers to recommend or prescribe drugs that may be paid for by federal programs such asMedicaid or Medicare. 42 U.S.C. 1320a-7b(b . Improper and illegal inducements includepayment o research grants, paying physicians for studies, or any payments that are based onthe volume o prescriptions written.

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Endo s Marketing o Lidoderm for Off-Label Use15 n September 1999 Endo introduced a new product, Lidoderm. Lidoderm is a

patch that contains 5% lidocaine, an analgesic. The FDA has approved Lidoderm only for use nthe reliefo postherpetic neuralgia ( PHN ). PHN is a complication that afflicts some victims oherpes zoster, commonly known as shingles. Approximately 20% o shingles victims suffer fromPHN, which results in severe pain lasting months or years after the initial shingles rash hascleared up. The older the shingles victim, the more likely it is that the victim will suffer fromPHN.

16 Lidodenn treats PHN by allowing for the lidocaine contained in the patch todirectly treat the affected nerves. The patch, consisting o an adhesive material containing 5%lidocaine and a polyester backing, is applied to intact skin. The lidocaine is then released into thedennal and epidennal layers o the skin, where it reaches the damaged nerves and provides painrelief. The patch delivery system greatly reduces the amount o lidocaine entering thebloodstream and also avoids numbness and the complete loss o sensation in the treated area.Lidodenn is the only topical treatment for PHN that has been approved by the FDA.

17 The market for Lidodenn is inherently limited by the relatively low numbers oAmericans who suffer from PHN in a given year, approximately 200,000. As a result, Endosought to increase the profitability o Lidoderm by encouraging its use to treat a variety oailments, such as carpal tunnel syndrome, lower back pain, osteoarthritis and numerous otherconditions.

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18 Endo is currently pursuing studies and clinical trials to detennine the effectivenesso Lidodenn in the treatment o conditions other than PHN. Currently, however, Lidoderm hasnot been approved by the FDA to treat any conditions other than PHN.

19 Endo has sought to exploit a loophole in the FDA rules concerning off-labelmarketing. FDA rules permit drug manufacturers to distribute publications created by neutralthird parties that describe the results o off-label uses when such publications are requested byphysicians. Endo sought to fraudulently misapply these rules through a strategy o creatingarticles, studies, publications, and programs that touted the effectiveness o Lidoderm in a varietyo off-label uses, but that would appear to be the product o neutral third parties.

20. Endo announced in 2004 that the results o two pilot studies suggested thatLidoderm was effective n treating low back pain and osteoarthritis. The studies and trialsinvolving the off-label use o Lidodenn were not neutral clinical trials, however. Instead, Endohas financed and directed the studies and trials o Lidoderm for the treatment o conditions otherthan PHN. Endo presents and publicizes the results o trials and studies it has controlled as ithose results were the product o independent, objective, third-party studies and trials. Endo' sintent in publicizing these results is to encourage physicians to prescribe Endo for unapproved,unauthorized, off-label use.

21. Endo also devised a marketing strategy whereby its sales force would promote theoff-label use o Lidodenn to physicians. At recent sales conference attended by Endo 's salesrepresentatives, the representatives were infonned that only 2 o Lidoderm prescriptions are forPHN. Endo instructed its sales representatives to inform physicians that Lidoderm is effective intreating carpal tunnel syndrome, osteoarthritis, low back pain, and several other conditions.

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Endo further provided its representatives with literature and publications touting Lidoderm's offlabel usage to treat conditions other than PHN.

22. Endo intended for the materials provided to its sales representatives to e used toencourage sales representatives to market Lidodenn to physicians for off-label usage and for thematerials to be provided to physicians in order to encourage physicians to prescribe Lidoderm forthe treatment o conditions other than PHN.

23. Although the number o patients suffering from PHN has remained relativelyconstant, net sales o Lidoderm were 309.2 million in 2004, a 73% increase from 2003. Thisdramatic growth in sales is directly attributable to Endo's aggressive, illegal marketing practices.False laims

24. Endo knows that a substantial amount o the prescriptions for Lidoderm were andare paid for by Medicaid. In the state o New York, Lidoderm prescriptions amounting to morethan 20 million were paid for by Medicaid in the calendar year 2003.

25. Physicians and pharmacists participating in the Medicaid program are required tosign a provider agreement with their resident state. These agreements require providers tocomply with all Medicaid requirements. Most states further require providers to certify that theprovider is in compliance with all Medicaid requirements. Even in states without a certificationrequirement, all providers' participation n the Medicaid program is conditioned on compliancewith all state and federal stah1tes and regulations.

26. Medicaid claims for the payment o off-label Lidodenn prescriptions are filedwith the states by the pharmacists who fill the Medicaid patients' prescriptions. Typically thephannacist filling the prescription does not have knowledge whether the prescription is on-label

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or off-label. As a result, a pharmacist generally would not have knowledge as to whether theprescription is for a medically acceptable use and, accordingly, whether the prescription is underthe circumstances a covered outpatient drug.

27. Even so, because off-label prescriptions are not eligible for Medicaidreimbursement, submissiono a Medicaid claim for an off-label prescription is a false claimunder the False Claims Act, 3 U.S.C. 3729. Because liability under the False Claims Actarises for any person who knowingly causes a false claim to be submitted, however, Endo isliable for the false claims submitted by unwitting pharmacists.

28. Endo knows that off-label prescriptions forLidoden are not eligible forMedicaid reimbursement. Nevertheless, Endo knowingly and intentionally soughtto increase thenumber o off-label prescriptions for Lidoderm. Without Endo s efforts to encourage and solicitproviders to prescribe Lidoden for off-label uses, most o the ineligible claims for payment ooff-label Lidoderm prescriptions would not have been filed.

COUNT I31 U.S.C. 3729 a) l)

29. Relator realleges and incorporates by reference the allegationso paragraphs 1-28o this complaint.

30. This count sets forth claims for treble damages and forfeitures under the federalFalse Claims Act, 3 U.S.C. 3729-3732, as amended.

31. Through the acts described above, Defendants and its agents and employeesknowingly caused to be presented to the United States Government fraudulent claims, records,

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and statements in order to obtain reimbursement for off-label prescriptions paid for by theMedicaid program.

32. The United States, unaware of the falsity of the claims, approved, paid, andparticipated in payments made by the United States' for claims that otherwise would not havebeen allowed.

33. By reason of these payments and approvals, the United States has been damaged,and possibly continues to be damaged, in an amount yet to be determined.

PR YER OR RELIEF

WHEREFORE, Plaintiff/Relator requests that judgment be entered against Defendant,ordering that:

a Defendant cease and desist from violating the False Claims Act, 31 U.S.C. 3729et seq ;

b Defendant pay an amount equal to three times the amount of damages the UnitedStates have sustained because of Defendant's actions, plus a civil penalty against Defendant ofnot less than 5,500, and not more than 11,000 for each violation of l U.S.C. 3729;

c PlaintiffiRelator be awarded the maximum amount allowed pursuant to 31 U.S.C. 3730(d);

d Plaintiff/Relator be awarded all costs of this action, including attorneys' fees,expenses, and costs pursuant to 31 U.S.C. 3730(d) and (h); and

e the United States and Plaintiff/Relator be granted all such other relief as the Courtdeems just and proper.



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ENDO - Ryan Complaint 2005

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