United States ex rel. Everest Principals, LLC v. Abbott Labs.

622 F.Supp.3d 920

UNITED STATES of America, et al.;EX REL. EVEREST PRINCIPALS, LLC, Plaintiffs and Relator, v. ABBOTT LABORATORIES, INC. a/k/a Abbott Laboratories,Abbott Cardiovascular Systems Inc., and Abbott Vascular Inc., Defendants.

Case No.: 3:20-cv-286-W (AGS)

United States District Court, S.D. California

Signed August 18, 2022

U S. Attorney CV, U.S. Attorneys Office, Civil Division, San Diego, CA, for Plaintiff and Relator United States of America.

Attorney General, State of California Office of the Attorney General, San Diego, CA, for Plaintiff and Relator State of California.

Chiharu Sekino, Casey Therese Yamasaki, Miller Shah LLP, San Diego, CA, Christian Schreiber, Monique Olivier, Olivier & Schreiber LLP, Oakland, CA, Jonathan K. Tycko, Pro Hac Vice, Washington, DC, Mallory Morales, Tycko & Zavareei LLP, Washington, DC, Laurie Rubinow, Pro Hac Vice, James Edward Miller, Miller Shah LLP, Chester, CT, for Plaintiff and Relator Everest Principals, LLC.

Karen P. Hewitt, Kelly V. O'Donnell, Jones Day, San Diego, CA, Rajeev Muttreja, Pro Hac Vice, Jones Day, New York, NY, Eric C. Tung, Jones Day, Los Angeles, CA, for Defendants Abbott Laboratories, Abbott Cardiovascular Systems, Inc.

Karen P. Hewitt, Kelly V. O'Donnell, Jones Day, San Diego, CA, for Defendant Abbott Vascular, Inc.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS RELATOR'S FIRST AMENDED COMPLAINT WITH LEAVE TO AMEND

Thomas J. Whelan, United States District Judge

Pending before the Court is Defendants Abbott Laboratories, Inc. a/k/a Abbott Laboratories, Abbott Cardiovascular Systems Inc., and Abbott Vascular Inc.'s (collectively, "Abbott" or "Defendants") Motion to Dismiss Plaintiff and Relator Everest Principals, LLC's¹ ("Plaintiff" or "Relator") First Amended Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (Mot. [Doc. 45].) Relator opposes the Motion. (Opp'n [Doc. 48].) The Court decides the matter on the papers submitted and without oral argument. See Civ. L.R. 7.1(d)(1).

For the reasons stated below, the Court GRANTS IN PART AND DENIES IN PART Defendants' Motion to Dismiss WITH LEAVE TO AMEND. [Doc. 45]. Specifically, the Court DENIES Defendants' Motion to Dismiss as to Relator's Federal False Claims Act Claims (Counts 1-3) and GRANTS Defendants' Motion to Dismiss as to Relator's State False Claims Act claims (Counts 4-31) WITH LEAVE TO AMEND.

I. BACKGROUND

Plaintiff and Relator Everest Principals, LLC is a "single member Delaware limited liability corporation whose sole member was employed by Abbott from August 2015 to April 2017 as a Therapy Development Specialist in its Structural Heart Division." (First Amended Compl. ("FAC") [Doc. 35] ¶ 5.) Defendant Abbott Laboratories is a publicly traded, global healthcare company that owns the patent for MitraClip (or "MC Device")—a medical device used on certain cardiac patients. (Id. ¶¶ 2, 6.) Defendant Abbott Laboratories, Inc. is allegedly the parent company of Defendants Abbott Cardiovascular Systems Inc., and Abbott Vascular Inc. (Id. ¶¶ 6-9.)

Relator brings this action against Abbott pursuant to the qui tam provisions of the federal False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq., the Anti-Kickback Statute ("AKS"), 42 U.S.C. § 1320a-7b, and applicable analogue state laws. (FAC ¶ 1.) Relator alleges that "Abbott devised and conducted illicit schemes whereby it paid kickbacks in the form of cash, and cash equivalents, including patient referrals, lavish meals, free marketing and patient practice-building support to healthcare providers, including physicians and hospitals, with the specific intent of inducing these healthcare providers to perform the [Transcatheter Mitral Valve Repair, or "TMVR"] procedure using Abbott's [MitraClip] on their cardiac patients covered by Government Healthcare Programs." (Id. ¶ 57.) According to Relator, through these alleged illicit schemes, "Abbott has caused the submission of thousands of false claims to Medicare, Medicaid, TRICARE, the Veterans Administration healthcare program, and other state and federally funded healthcare programs in violation of the AKS, the FCA, and analogous state laws." (Id.)

Relator alleges that the "central aspect" of Abbott's kickback scheme "involves remuneration to implanting physicians and hospitals in the form of patient referrals and patient practice building." (FAC ¶ 66.) Abbott allegedly targets physicians who are not certified to implant MitraClip ("non-implanting physicians") and "induces them through free luncheons, cocktail parties, and dinner conferences to refer their cardiac patients to Abbott's targeted implanting physicians and hospitals for the TMVR procedure using Abbott's [MitraClip] device." (Id.) Abbott also allegedly "targets implanting physicians and hospitals and provides them with illegal remuneration through, inter alia, patient referrals, sham speaker program honoraria, free patient marketing and practice building and promises to participate in future clinical trials, to induce them to use Abbott's [MitraClip] Device for their cardiac patients." (Id.)

Relator contends that these kickback schemes encompass Abbott's "entire marketing strategy and were developed by management and ratified by the highest levels of the company." (Id. ¶ 67.) Indeed, according to Relator, "Abbott employees are evaluated and rewarded based on the number of referrals they successfully secure for their targeted physicians and the number of [MitraClip] procedures performed by those physicians." (Id.) Relator also alleges that its old manager, Michael Meadors, "constantly pressured" Abbott's sales team to host events with physicians to drive up MitraClip implants, and "met with physicians to make Abbott's expectations in exchange for remuneration clear." (Id. ¶ 68.) These events included educational speaker programs and "meals that were primarily social in nature to referring physicians with no legitimate business purpose" and were allegedly organized by Abbott to help build the participating physicians' practices. (Id. ¶¶ 84, 88, 94.) Abbott allegedly instructed Relator to emphasize to its targeted implanting physicians that "they have an ideal opportunity to build their patient base from Abbott's referral physicians." (Id. ¶ 88.)

A. Allegations Concerning Dr. M.P.

One of the key physicians Relator was responsible for building a partnership with was Dr. M.P., a "San Diego interventional cardiologist who specializes in structural heart procedures." (Id. ¶ 88.) Relator was allegedly expected to build a partnership with Dr. M.P. through meal events and speaker programs. (Id.) In fact, Relator hosted more than ten "primarily social" meal events for Dr. M.P. and his/her referring physicians from October 2015 to June 2016. (Id. ¶¶ 84, 88.) The alleged goal of these meal events was to help grow Dr. M.P.'s practice area and solicit patient referrals. (Id. ¶ 88.)

For example, in February 2016, Relator hosted a dinner event for Dr. M.P. at Fleming's Prime Steakhouse and Wine Bar in Palm Desert, California, with local referring physicians because Dr. M.P. was allegedly interested in growing his practice in that area. (Id.) Likewise, on March 10, 2016, Relator hosted a marketing dinner for Dr. M.P. and Dr. M.M., a patient referring physician. (Id. ¶ 84.) The alleged goal of this meal event was to "funnel" Dr. M.M.'s patients with Mitral Regurgitation ("MR") to Dr. M.P. for the MC Device. (Id.) According to Relator, "this practice building social event exceeded Abbott's per person meal spend limit." (Id.) Similarly, on May 24, 2016, Relator arranged a dinner for Dr. M.P. in Temecula, California because Dr. M.P. allegedly wanted to solicit patient referrals in that area. (Id. ¶ 88.) And on June 6, 2016, Relator arranged a lunch for Dr. M.P. with the Cardiology Specialists Medical Group (CSM), "whom Dr. M.P. specifically requested that Abbott target to refer patients to him." (Id.)

Relator also arranged speaking programs for Dr. M.P. where Abbott allegedly paid Dr. M.P. "generous speaker honorarium" fees and offered him free marketing and advertising to potential referring physicians to help build his patient practice. (Id.) Relator's manager, Mr. Meadors, told Dr. M.P. on August 3, 2016, that the doctor's MitraClip "continues to steadily improve," that "getting to advocacy requires an urgency to treat on your part and an urgency to refer from the non-MitraClip implanting physicians," and that he looked forward to partnering more closely with him. (Id. ¶ 89.) According to Relator, Dr. M.P. received approximately $179,000 in Medicare payments for the TMVR procedure from 2016 to 2018.² (Id. Ex. A.)

B. Allegations Concerning Dr. D.S.

Relator was also responsible for developing a relationship with Dr. D.S., an implanting cardiologist in La Mesa, California. (Id. ¶ 109.) Relator alleges that its goal was to help Dr. D.S. build his patient practice by providing free marketing and advertising services. (Id.) For instance, on September 30, 2016, Relator (on Abbott's behalf) prepared a sushi cocktail party for Dr. D.S. (Id. ¶ 109-110.) According to Relator, "24 of the 70 invitees appear to have been personal guests," of Dr. D.S. in violation of Abbott's Office of Ethics and Compliance ("OEC") guidelines, which prohibit a physician's personal guests from attending these types of events. (Id. ¶ 110.) Dr. D.S. also told Relator which physicians to invite. (Id.) When Relator informed Meadors that it was having difficulty arranging the event, particularly due to the excessive sushi costs, Meadors allegedly instructed Relator to "manipulate the final receipts by attributing the excessive meal costs to items that were unrelated to food such as equipment rental and set up charges." (Id.)

C. Allegations Concerning Dr. H.N.

Relator also alleges it was responsible for assisting Dr. H.N. (an implanting cardiologist in Arizona) in building his/her patient practice. (Id. ¶ 92.) For example, on January...