Commonwealth of Massachusetts ex rel. Kelly, et al. v. Novartis Pharmaceuticals Corporation, et al. (Lawyers Weekly No. 12-098-17)






  1. 2016-03107-BLS1





1 Novartis Corporation and Genentech, Inc.

2 The District Court’s order actually dismissed the state claims with prejudice, notwithstanding its declination of jurisdiction over them. The First Circuit reversed that part of the District Court’s decision.  It observed that while the District Court could have dismissed the state claims based on the same reasoning applied to the federal claims had it retainedjurisdiction, once it declined jurisdiction, it was required to dismiss the state claims




Allison Kelly and Frank Garcia (Relators) brought qui tam actions against Genentech, Inc. (Genentech) and Novartis Pharmaceuticals Corporation (Novartis) in federal district court in Massachuesetts under the Federal False Claims Act (FCA), 31 U.S.C. § 3729 et seq., the Massachusetts False Claims Act (MFCA), G. L. c. 12, § 5B(a)(1)-(10), and several other analogous state statutes.  The federal claims asserted in their complaints were dismissed by the District Court for failure to plead the alleged fraud with the specificity required by Fed. R. Civ. P. 9(b).  See U.S. ex rel. Garcia v. Novartis  Pharm. Corp.,91 F. Supp. 3d 87 (D. Mass. 2015).  The dismissal was affirmed by the First Circuit Court of Appeals.  See U.S. ex. rel. Kelly v. Novartis Pharm. Corp.,827 F. 3d 5 (1stCir. 2016) (Kelly).  While the Relators’ FCA claims were dismissed with prejudice, their state claims were dismissed without prejudice because the District Court declined to exercise supplemental jurisdiction over them.2 The Relators then filed




without prejudice.  Kelly, 827 F. 3d at 16.

3 Novartis Corporation is also a named defendant, but the Relators did not serve that company with a summons and complaint or the Amended Complaint, so the case is dismissed as to it.

4 Because the court concludes that the Relators have not complied with Rule 9(b), it will not consider the defendants’ arguments that the Amended Complaint should also be dismissed because the“public disclosure” bar applies or because the Relators failed to file the Amended Complaint under seal.

thequi tam action against Genentech and Novartis now before the Superior Court alleging claims underthe MFCA.3 As with their previous federal complaints, the Relators allege that the defendants, who jointly marketed the asthma medication Xolair, providedillegal kickbacks to certain Massachusetts doctors, which caused the doctors to prescribe Xolair to Massachusetts Medicaid patients and submit false reimbursement claims for the drug to Medicaid.  The defendants now move to dismiss the Relator’s First Amended Complaint (Amended Complaint) contending, among other grounds, that the Relators have again failed to plead fraud with sufficient particularity required by Mass. R. Civ. P. 9(b).  Because this court finds the First Circuit’s reasoning in Kellypersuasive and no material additional allegations have been added to the Amended Complaint, the motion is ALLOWED.4


The following facts are drawn from the allegations in the Relators’ Amended Complaint  (assumed to be true for the purposes of this motion), their federal complaints, and Kelly.

Beginning in2001, the defendants engaged in a joint venture to market an injected drug called Xolair.  Xolair is approved by the FDA for treating moderate-to-severe persistent allergic asthma in patients twelve and older whose symptoms are not adequately controlled with inhaled corticosteriods.  Garcia was a Xolair sales representative for Genentech from2003 through 2004 and Kelly was a Xolair sales representative for Novartis from 2003 through 2007; each of their sales territories were in the New York City area, not Massachusetts.

In March 2006, Garcia and Kelly filed a qui tam action in the U.S. District Court for the




District of Massachusetts on behalf of the United States and several individual states under the FCA and analogous state statutes including Massachusetts’ MFCA(the 2006 Complaint).5 The complaint alleged, among other things, that in an effort to increase sales of Xolair, the defendants paid kickbacks in violation of 42 U.S.C. § 1320a-7b(b), the Anti-Kickback Statute, to medical providers who served patients participating in government health insurance programs (e.g., Medicaid).6 According to the Relators, these efforts induced the providers to prescribe Xolair for their patients and then submit false claims for reimbursement of Xolair purchases togovernment health insurance programs.7

5 In October 2010, Stephen Fauci, another Genentech employee, filed a similar qui tam complaint against the defendants in the same court.  He was represented by the same counsel as Garcia and Kelly.  He voluntarily dismissed his claims just before the defendants filed their motion to dismiss in the federal district court. See Kelly,837 F. 3d at 10 n. 7.

6 The Anti-Kickback Statute prohibits the payment of kickbacks, bribes, or other inducements to doctors for the purpose of influencing their decisions about prescriptions that are reimbursed by a federal health care program.  The kickbacks allegedly provided to the doctors included honoraria, expensive dinners, gifts, preceptorships, medical equipment, and free administrative and billing services.

7 The doctors’ claimswere “false” because they implicitly certified that they had complied with all statutory and regulatory requirements, including those under the Anti-Kickback Statute.

In January 2011, following a four year investigation, the United States declined to intervene.  The individual states named in the 2006 Complaint, including Massachusetts, also elected not to intervene.  Kelly subsequently requested and was granted permission to dismiss herself from the action, and all references to her were removed from the Complaint.

Nonetheless, a year later, Kelly filed another qui tam action against the defendants in the Massachusetts Federal District Court under the FCA and several state FCAs, including the MFCA (2012 Complaint).  The allegations in her lengthy complaint were similar to those in the 2006 Complaint, however, this version of the complaint added moredetail.  Once again, the United States and the named states, including Massachusetts, declined to intervene.

In October 2012, Garcia filed a motion to amend his 2006 Complaint and consolidate it




with Kelly’s 2012 Complaint but the District Court declined to rule on the motion.  Two years later, the Relators renewed the motion and filed a 408-page Proposed Amended and Consolidated Complaint (the 2014 PAC).  The defendants opposed the motion on grounds of futility, prejudice, and delay; the motion was denied.

In June 2014, the defendants filed a motion to dismiss the 2006 and 2012 Complaints, which was allowed in March2015.  The Court dismissed the FCA claims with prejudice, holding that the complaints failed to plead fraud withthe particularityrequired by FRCP 9(b) and that amendment would be futile.  As noted above, the District Court declined to exercise supplemental jurisdiction over the state law claims, but nonetheless dismissed them with prejudicefor failure to plead fraud with particularity.

The Relators appealed, and the First Circuit issued the Kellydecision in June 2016, upholding the District Court’s dismissal of the federal claims with prejudice,but reversing its dismissal of the state claims with prejudice.  Inconnection with the federal claims,the Court explained that the Relators’ 2006 and 2012 Complaints failed to comply withFRCP 9(b) because: “Relators’ evidence and arguments proceed[ed] more by insinuation than any factual or statistical evidence that would strengthen the inference of fraud beyond possibility.”  Kelly, 827 F.3d at 15.  The Court observed that although the Relators’ complaints alleged “that certain doctors, at various points, (1) were enrolled in federal reimbursement programs, (2) received services and incentives from defendants, and (3) prescribed Xolair,” they  “failed . . . to tie these independently unexceptional allegations together into particularized charges about specific fraudulent claims for payment.”  Id.

Of importance to the motion to dismiss now before this court, the First Circuit also reviewed the 2014 PAC and expressly found that it did not curethe deficiencies in the Relators’




complaints:“[a]though the [2014 PAC] added extra grist for speculation, it offered nothing new of substance to cure the inferential gaps found in Relators’ prior complaints.”  Id.

The Relators subsequently filed the instant action under the MFCA.


Because the MFCA was closely modeled after the FCA and because there are few Massachusetts cases interpreting the MFCA, courts often “look for guidance to cases and treatises interpreting the [FCA].”  Scannell v. Attorney Gen., 70 Mass. App. Ct. 46, 49 n. 4 (2007). Accordingly, the court may rely upon Kelly’s analysis of the shortcomings of the 2006 and 2012 Complaints and the 2014 PAC, which this court finds persuasive,to determine whether the Amended Complaint8 now before it has been pled with the specificity required by Mass. R. Civ. P. 9(b).  The Relators maintain that they have alleged new facts not found in the 2014 PAC, and these new allegations, coupled with the allegations contained in their federal complaints,are adequate to satisfy the specificity requirements of Rule 9(b).  The court disagrees.

8 The defendants initially moved to dismiss the original complaint on the same grounds and filed a brief in support of the motion.  In response, the Relators amended their complaint to add several new paragraphs.  Following the amendment, the defendants renewed the motion to dismiss and both parties engaged in additional briefing.

In support of their contention, the Relators point to Paragraphs 100-126 of their Amended Complaint.  In Paragraphs 100-125, Relators describe the defendants’ alleged plan, known as the “Medicaid Push,” to target doctors and medical providers serving Medicaid patients and encourage them to prescribe Xolair for their Medicaid patientsby offering “kickbacks.”In Paragraphs 126(A)-(H), Relators identify eight Massachusetts doctors who allegedly received various kickbacks and filed false reimbursement claims with Medicaid as a result of this plan.Each of these paragraphs are very similar to one another, although the names of the doctors are different.  For simplicity, the court will reviewparagraph 126(C)whichalleges that:




Dr. Javid Sheik, Boston, MA.  Beginning in 2003, Dr. Sheik received kickbacks from the Defendants in the form of refrigerators, swirlers, PEP kits, ICG Kits, American Express Gift Checks, [and] 2003 ticketsfor the 800 Club at Fenway Park for he and his family. Dr. Sheik thereafter wrote prescriptions for Xolair, bought and billed it through a specialty pharmacy from 2003 through at least March 2007. He was reimbursed by Medicaid because his office advised the Genentech representative of this, who was providing free administrative services to them including sending in prescriptions and Statements of Medical Necessity for Medicaid Patients.

Paragraphs 126(A)-(B) and 126(D)-(H), each one of which discusses a different doctor, are written in the same fashion and contain similar allegations.

Relators contend these paragraphs demonstrate that they have now pled their MFCA claims with sufficient particularity.  However, they are in reality nothing more than a repackaging of allegations previously allegedin their 2006 and 2012 Complaints and the 2014 PAC that Kellyfound to be inadequate.  They provide no additional detail regarding the false claims allegedly filed as a consequence of the defendants’ supposed scheme.  Compare, e.g., 2014 PAC at ¶¶ 397, 437, 594, 780-786, 802 (referencing the eight doctors) with Amended Complaint ¶ 126(A)-(H), 2006 Compl. at ¶¶ 40-42 and 2014 PAC ¶¶ 676-690 (referencing Medical Push) with Amended Complaint ¶¶ 100-125.

Significantly, when pressed at the hearing on the motion, the Relators’ counsel conceded that the only allegations in the Amended Complaint not found in either the 2006 and 2012 Complaints or the 2014 PAC were the last sentences of each of Paragraphs 126(A)-(H).  Inthese sentences, each of which is similar to the last sentence ofParagraph 126(C) quoted above, Relators assert that sales representatives provided administrative services to each of the named doctors and, as a result, either became aware of or were directly informed that the doctors had been reimbursed by Medicaid.  These conclusory allegations, however, are at best, merely inferences that can be readily drawn from the allegations previously pledin federal court.  The




2014 PAC alleged that unnamed salesrepresentatives of the defendants provided administrative services to the doctors prescribing Xolair. Notably, Paragraphs 126(A)-(H) do notidentify the sales representatives who learned of the reimbursements, when any claims for Xolair were allegedly submitted to Medicaid by the nameddoctors, or any details about those claims.

Accordingly, after a careful and thorough review of theAmendedComplaint, the court adopts the reasoning articulated by the First Circuit in Kellyandsimilarlyfinds that the Relators havefailed to satisfy Mass. R. Civ. P. 9(b) in connection with their MFCA claims.


For the foregoing reasons, the defendants’ motion to dismiss is ALLOWED.  Final judgment shall issue dismissing the First Amended Complaint with prejudice.


Mitchell H. Kaplan

Justice of the Superior Court

Dated: July 20,2017

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