Plumbers' Local Union No. 690 Health Plan v. Sanofi, S.A., Sanofi U.S. Servs. Inc.

PLUMBERS' LOCAL UNION NO. 690 HEALTH PLAN, Plaintiff, v. SANOFI, S.A., SANOFI US SERVICES INC., SANOFI-AVENTIS U.S., LLC,GENZYME CORPORATION, FIDIA FARMACEUTICI S.P.A., FIDIA PHARMA USA INC.,ACCENTURE PLC (ACN), DELOITTE LLP, CHRISTOPHER A. VIEHBACHER, DENNIS URBANIAK,RAYMOND GODLESKI, THOMAS C. VALENTINE, DOE DEFENDANTS A-Z,ABC CORPORATIONS AA-ZZ, AND XYZ PARTNERSHIPSAND ASSOCIATIONS AAA-ZZZ, Defendants.

No. 15-cv-956 (KM)(MAH)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

May 11, 2016

OPINION

KEVIN MCNULTY, U.S.D.J.:

Plumbers' Local Union No. 690 Health Plan ("Local 690") brings a class action suit against Sanofi US Services Inc., Sanofi-Aventis U.S., LLC (together "Sanofi US"), Sanofi, S.A. (together with Sanofi US, "Sanofi"), Genzyme Corporation,¹ Fidia Farmaceutici S.p.A. ("Fidia Italy"), Fidia Pharma USA Inc. ("Fidia USA"; together with Fidia Italy, "Fidia"), Accenture PLC (ACN), Deloitte LLP, Christopher A. Viehbacher, Dennis Urbaniak, Raymond Godleski, andThomas C. Valentine. The suit complains of two separate schemes, both allegedly harming Local 690 in New Jersey and Pennsylvania: (a) all Sanofi defendants, both Fidia defendants, Genzyme, and the individual defendants allegedly provided free samples of the drugs Hyalgan and Synvisc to doctors and providers to convince them to buy and administer these drugs, resulting in higher reimbursement costs for Local 690 and the rest of the class; and 2) all Sanofi defendants, Viehbacher, Urbaniak, and Godleski, allegedly entered into contracts with Deloitte and Accenture that appeared proper, but were in fact kickbacks to induce them to cause retail pharmacies to switch to Sanofi diabetes drugs.

This matter comes before the Court on seven motions to dismiss:

1. A motion to dismiss the original complaint (ECF No. 1) by Sanofi US, Viehbacher, Urbaniak, and Godleski (ECF No. 7).

2. A motion to dismiss the first amended complaint ("1AC (ECF No. 9)) by Sanofi US, Genzyme, Viehbacher, Urbaniak, and Godleski

3. A motion to dismiss the 1AC by Deloitte (ECF No. 36).

4. A motion to dismiss the 1AC by Accenture (ECF No. 37).

5. A motion to dismiss, joining the previous motions to dismiss the 1AC, by Valentine (ECF No. 49).

6. A motion to dismiss the 1AC by Fidia USA (ECF No. 50).

7. A motion to dismiss the 1AC by Sanofi, S.A., for lack of personal jurisdiction under Fed R. Civ. P. 12(b)(2) (ECF No. 63).²

I DENY the motion to dismiss the original complaint because it was mooted by the filing of the 1AC. I also DENY the motion of Sanofi, S.A., to dismiss on grounds of lack of personal jurisdiction, because it cannot be determined from the pleadings and I currently lack the necessary additional information. I GRANT the remaining motions to dismiss because Local 690fails to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). Reviewing the complaint, I find that it does not set forth facts sufficient to make out a plausible claim for relief against the defendants. I do not reach the other proffered bases for dismissing the 1AC.

The defects I have identified are not necessarily fatal. These dismissals are therefore without prejudice to the filing of a Second Amended Complaint within 60 days. If this misconduct occurred, and if it affected Local 690 and its beneficiaries in New Jersey and Pennsylvania, it should be possible through reasonable investigation to uncover specific facts and examples of it.

I. BACKGROUND³

A. Parties

1. Plaintiff

Local 690, which is located in Pennsylvania, is a third party payor ("TPP") that reimburses its members for the cost of drugs. (1AC ¶¶ 3, 5). The relevant Local 690 members who purchase the drugs are confined to New Jersey and Pennsylvania. (1AC ¶ 5)

2. Defendants

1. Sanofi S.A. is a French corporation headquartered in Paris. (1AC ¶ 7) It is a pharmaceutical company that manufactures, markets, and sells prescription pharmaceuticals. (1AC ¶ 8)

2. Sanofi US Services Inc., is a wholly owned subsidiary of Sanofi, S.A., incorporated in Delaware and headquartered in New Jersey. (1AC ¶ 10) It conducts business throughout the United States for Sanofi, S.A. (1AC ¶¶ 9, 15)3. Sanofi-Aventis U.S., LLC, is a wholly owned subsidiary of Sanofi, S.A., headquartered in New Jersey (1AC ¶ 11) It conducts business in the United States for Sanofi, S.A. (1AC ¶¶ 9, 15)

4. Fidia Farmaceutici S.p.A., is an Italian corporation headquartered in Italy. (1AC ¶ 20) It owned the rights to the drug Hyalgan, and until 2011 it licensed to Sanofi, S.A. the right to market Hyalgan in the U.S. (1AC ¶¶ 21-22)

5. Fidia Pharma USA Inc. is a wholly owned subsidiary of Fidia Italy, incorporated in Delaware and headquartered in New Jersey. (1AC ¶ 23)

6. Genzyme Corporation is a biotech company, headquartered in Massachusetts, that was acquired by Sanofi, S.A. in 2011. (1AC ¶ 16) Genzyme manufactures, markets, and sells Synvisc, a competitor drug of Hyalgan. (1AC ¶¶ 18, 57)

7. Accenture PLC (ACN) is an Irish corporation headquartered in Ireland that provides consulting services globally. (1AC ¶¶ 25-26) Accenture maintains two New Jersey offices. (1AC ¶ 29)

8. Deloitte LLP is headquartered in New York and provides various services through its wholly own subsidiaries. (1AC ¶ 31)

9. Christopher Viehbacher was CEO of Sanofi, S.A., from 2008 until 2014. (1AC ¶ 32) He resided during the relevant period in France and Massachusetts. (1AC ¶ 34)

10. Dennis Urbaniak "was employed by Defendants as the Vice President of the U.S. diabetes business unit" and resided in New Jersey during the relevant period. (1AC ¶¶ 35, 37)

11. Raymond Godleski "was employed by Defendants as the Assistant Vice President of Special Projects and worked as a supervisor in the U.S. diabetes marketing unit" and resided in New Jersey during the relevant period. (1AC ¶¶ 38, 40)

12. Thomas C. Valentine is a former Sanofi sales representative and manager who resides in California. (1AC ¶ 41)

B. Facts

Local 690 alleges two separate fraudulent practices: (1) an illegal scheme regarding samples of Hyalgan and Synvisc; and (2) illegal contracts with Accenture and Deloitte to persuade pharmacies to switch to Sanofi diabetes drugs.

1. Samples of Hyalgan and Synvisc

Hyalgan and Synvisc are injectable drugs used to relieve osteoarthritis pain. (1AC ¶¶ 61, 63, 67) Osteoarthritis particularly affects persons such as members of Local 690, who perform physical work. (1AC ¶ 64) The Sanofi defendants marketed and sold Hyalgan, under a license from Fidia Italy, beginning in 1997. (1AC ¶¶ 68-70) Fidia had an advisory role in marketing Hyalgan, including sampling strategy and procedure, but it assumed the role of direct marketer and distributor in 2011. (1AC ¶¶ 70-71) Synvisc was owned, marketed and sold by Genzyme from 2005 until Sanofi acquired Genzyme in 2011. (1AC ¶¶ 16-18, 72) Hyalgan and Synvisc are sold directly to doctors who administer them and then bill for the drug and their service. (1AC ¶¶ 77-78)

From 2005 to 2009 Medicare and Medicaid calculated reimbursement rates based in part on average sales prices ("ASP") reported by the drug companies. (1AC ¶¶ 74, 79) For TPPs like Local 690, Sanofi tied the price of Hyalgan to the Medicare reimbursement rates. (1AC ¶ 123) Local 690 was also responsible for a 20% co-insurance payment when Medicare reimbursed the doctor for Hyalgan and Synvisc. (1AC ¶ 124) Companies were required to factor discounts and free goods into their ASP calculations. (1AC ¶¶ 75-76)⁴ If reported ASPs were not taking into account the provision of free goods, theresult would be that Medicare and its co-payers paid an inflated price for the drug. (1AC ¶ 83)

From 2005 to 2009 Sanofi sales representatives distributed 168,000 samples of Hyalgan, but the company did not track the distribution of samples. (1AC ¶¶ 91-92) For much of that time, Medicare assigned Hyalgan the same reimbursement code as a lower-cost competitor, Supartz; as a result, Supartz offered doctors higher profits. (1AC ¶¶ 84-85) To redress that competitive disadvantage, a Sanofi sales manager directed sales representatives to "use [Hyalgan] samples as a negotiating tool," and Sanofi sales representatives promoted the "value add" of Hyalgan samples to their physician customers. (1AC ¶¶ 90, 93-94)

The 1AC alleges that "[i]t is believed and therefore averred that Genzyme acted similarly with respect to Synvisc." (1AC ¶ 96)

The 1AC alleges upon information and belief that, between 2005 and 2009, Sanofi's sales force used free samples to promote purchases in California, New York, Texas, Rhode Island, North Carolina, Indiana, Florida, and Georgia. (1AC ¶ 97) In one example from California, the amount of free samples was explicitly reduced in connection with Sanofi's reduction of the price of Hyalgan. (1AC ¶ 97(a)) Each sample, if not properly reflected in the ASP, was worth between $70 and $100 under federal health care programs, and possibly more under private reimbursement. (1AC ¶ 99)

In August 2005, Sanofi sales representatives received training that included a description of the prosecution of TAP Pharmaceuticals for its misuse of samples. (1AC ¶ 103) The sales persons were instructed to be careful regarding samples. They were told that they would be protected if they told physicians not to bill for the samples, and that samples were to be used for trials and indigent patients. (Id.) Sanofi sales representatives allegedly ignored the lessons of TAP and provided free samples to physicians as a means of gaining and maintaining business for Hyalgan. (1AC ¶ 110) Sanofi required its sales representatives to inform physicians about securing reimbursement forHyalgan. (1AC ¶ 126) Sanofi also provided a hotline and a website for doctors needing further resources. (1AC ¶ 129)

The 1AC alleges throughout that Sanofi representatives knew about or even prompted doctors to bill Medicare, private insurers, and consumers for free samples. The 1AC alleges that Fidia, Sanofi, and Genzyme knowingly through their free samples practice caused doctors to falsely certify to...