United States ex rel. Wilkerson v. Allergan Ltd.

1

United States of America, ex rel. Jeffrey Wilkerson and Larry Jackson, et al., Plaintiffs-Relators, v. Allergan Limited f/k/a Allergan PLC, et al., Defendants.

No. 22 CV 3013

United States District Court, N.D. Illinois, Eastern Division

March 22, 2024

MEMORANDUM OPINION AND ORDER

Lindsay C. Jenkins, United States District Judge

Relators Jeffrey Wilkerson and Larry Jackson were pharmaceutical sales representatives for Allergan USA, Inc. (“Allergan”),^[1]which manufactures Linzess and Viberzi. Relators allege that while working for Allergan, they discovered that Allergan was engaged in a nationwide scheme to provide illegal kickbacks to doctors in exchange prescribing more Linzess and Viberzi. Relators filed this qui tam action^[2]on behalf of the United States under the False Claims Act (“FCA”), 31 U.S.C. §§ 37293733; on behalf of several states under analogous statutes; and on behalf of two states under insurance fraud statutes. [Dkt. 65.] Relators' theory is that Allergan violated these statutes by asking government entities to pay for prescriptions written by doctors to whom Allergan paid illegal kickbacks. Jackson also alleges that Allergan terminated his employment in retaliation for reporting distinct FCA violations.

Allergan moves to dismiss the operative Third Amended Complaint (the “Operative Complaint”) [Dkt. 65] for failure to state a claim upon which relief may be granted. [Dkt. 132.] Fed.R.Civ.P. 12(b)(6). The motion is granted; while Relators come close to stating viable claims, a few key facts are missing. Despite being the fourth pleading in this case, the Operative Complaint is the first that has been subject to adversarial testing. Thus, the Court will give Relators one final chance to amend.

I. Background

A. Statutory Framework

The Court begins with the federal statutory backdrop of this case, the False Claims Act and the Anti-Kickback Statute (“AKS”). The FCA, 31 U.S.C. §§ 37293733, prohibits the submission of false claims for payment to federal health care programs. As relevant here, a person violates the FCA when he:

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim; [or]

(C) conspires to commit a violation of [the FCA] ....

§ 3729(a)(1). The state statutes under which Relators seek to recover prohibit similar conduct. [See Dkt. 65 ¶¶ 35-38; 225-399; Dkt. 133 at 21-22.] Cf. Thulin v. Shopko Stores Operating Co., LLC, 771 F.3d 994, 995 (7th Cir. 2014).

The AKS prohibits soliciting, receiving, offering, or paying any “remuneration” in exchange for referring a patient for services that are reimbursed by a federal health care program, such as Medicare. 42 U.S.C. § 1320a-7b(b). A claim that includes items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for FCA purposes. § 1320a-7b(g). The Court refers to violations of the FCA that involve the submission of claims resulting from kickbacks prohibited by the AKS as “FCA kickback schemes” or simply “kickback schemes.”

B. Factual Overview

Allergan, headquartered in New Jersey, markets and sells pharmaceutical products including the two drugs at issue in this case, Linzess and Viberzi. [Dkt. 65 ¶ 13.] Relators worked for Allergan and its predecessor Actavis Pharma, Inc. as sales representatives, Jackson from 2013 to 2017 and Wilkerson from 2013 to 2016. [Id. ¶¶ 20-21.]^[3]Jackson and Wilkerson worked in Allergan's gastroenterology group, which promoted Linzess and Viberzi. [Id.] Each Relator was responsible a portion of Allergan's geographic territory: Jackson covered Tulsa, Oklahoma; Northwest Arkansas; and Southwest Missouri, while Wilkerson oversaw West Tennessee and North Mississippi. [Id.]

Linzess, a brand name for linaclotide, is a prescription medication that treats two chronic constipation disorders, irritable bowel syndrome with constipation and chronic idiopathic constipation. [Id. ¶ 66.] Linzess launched in the United States in December 2012. [Id. ¶ 67.] Actavis acquired the company that produced Linzess in July 2014; Allergan in turn acquired Actavis in March 2015 and continued marketing Linzess. [Id. ¶ 68.] Viberzi is an opioid-based drug with the active ingredient eluxadoline used to treat irritable bowel syndrome with diarrhea (“IBS-D”). [Id. ¶ 71.] Allergan acquired eluxadoline in July 2014; the FDA approved Viberzi in May 2015, and it became available in December of that year. [Id. ¶¶ 72-74.] Relators allege that Linzess and Viberzi are more expensive than over-the-counter alternatives. [Id. ¶¶ 69-70, 75-76.] Viberzi allegedly “is not a drug to be taken lightly”; it may cause serious side effects and it has the potential for addiction and abuse. [Id. ¶¶ 79-85.]

The federal government administers two subsidized health care programs that are relevant here, Medicare and Medicaid. Medicare is available to persons at least 65 years old and disabled persons; Medicare Part D covers prescription drugs. [Id. ¶¶ 44-45.] Medicare contracts with private entities to provide Part D insurance; as a condition of participation, those entities must certify that they agree to comply with applicable federal laws, including the AKS, as must doctors who prescribe drugs to Medicare patients and subcontracting pharmacies. [Id. ¶¶ 46-49.] Claims submitted to Medicare are paid by the federal government. [See id. ¶ 44.] Medicaid, which provides health care benefits primarily to poor and disabled persons, requires similar certifications for private parties that states contract with to implement the Medicaid program. [Id. ¶¶ 50-54.] Payment for claims submitted to Medicaid are shared by the federal and state governments. [See id. ¶ 50.]^[4]

C. The Alleged Kickback Scheme

Relators allege that when Allergan launched Viberzi in late 2015, it “devised a scheme” to provide illegal kickbacks to physicians through a speaker program that Relators call the “Speaker Bureau.” [Id. ¶¶ 87-88.] The official purpose of the Speaker Bureau was to educate health care providers about Linzess and Viberzi.

[See id. ¶¶ 116, 120; Dkt. 133 at 6-7.] Relators allege, however, that the true “purpose and intent” of the Speaker Bureau “was to give physicians cash, food, alcohol, travel expenses, and other illegal remuneration to induce them to prescribe Allergan drugs, and to cause other physicians to prescribe those drugs.” [Dkt. 65 ¶ 88.] Relators allege that the scheme operated nationwide: Allergan paid kickbacks to doctors throughout the United States, causing millions of dollars in losses by the federal government and several states. [id. ¶¶ 89-90.]^[5]

Allergan allegedly held over 8,000 speaker events between 2015 and 2017. [Id. ¶¶ 101-03.]^[6] These events fell into two categories. For “in-office” events, a speaker physician and an Allergan sales representative would visit a health care provider's office, provide refreshments, and (ostensibly) present educational materials about Linzess and Viberzi. [id. ¶¶ 116-17.] “Out-of-office” events were “dinner parties,” often at “up-scale restaurants.” [id. ¶ 119.] Medical providers would join speaker physicians and sales representatives for meals paid for by Allergan, again where the speakers purported to educate guests. [id. ¶¶ 119-20.] Allergan required a minimum number of positive RSVPs to hold speaker events: two “prescribers” or “dispensers” for in-office events; four attendees, three of whom were prescribers or dispensers, for out-of-office events. [id. ¶¶ 162-63.] It also imposed a $150-per-person cap for food and drink for out-of-office events. [id. ¶ 121.] Allergan paid speakers $1,000-$3,500 per speaker event, plus reimbursement for travel and lodging. [id. ¶¶ 117, 120.] If an event was cancelled shortly before being held, or if there were fewer attendees than the number of RSVPs required to schedule the event, Allergan still paid the speakers. [id. ¶¶ 175-82.]

Relators allege that the purpose of the Speaker Bureau was not to educate medical providers about Linzess and Viberzi, but to induce speaker physicians to prescribe more of these drugs. They identify several facets of how the Speaker Bureau allegedly operated in practice that they believe demonstrate its fraudulent purpose^[7]:

• District and regional managers instructed sales representatives to focus on bringing high-volume prescribers into the Speaker Bureau; speakers were retained or removed based on prescription volume. [id. ¶¶ 105-10.]

• Sales representatives' compensation was based on physicians' prescription volume; they were rewarded when they met or exceeded quotas and fired if they failed to meet quotas. [id. ¶¶ 91-94.]

• Often, events had little or no educational content. [id. ¶¶ 116-20.]

• Managers emphasized that the Speaker Bureau had an RSVP requirement, not an attendance requirement, encouraged sales representatives to consider noncommittal statements positive RSVPs, and did not care if events were under-attended or cancelled outright. [id. ¶¶ 164-66.]

• Allergan knew about the under-attendance problem because the number of attendees was reported through a platform called “IntraMed.” [id. ¶ 169.]

• Managers instructed salespeople to falsify attendance records. [id. ¶ 121.]

• Allergan paid speaker physicians full fees for under-attended or cancelled events and did not criticize or discipline salespeople who organized such events. [id. ¶¶ 164, 166, 181-83.]

In total, Relators allege that there were over 2,000 “sham” events, which they define as events that were cancelled in advance or were unattended or under-attended except by the speaker and the sales representative. [id. ¶¶ 175-80.]^[8]

Relators offer more specific allegations...