Presented by Brennan Torregrossa Asst. General Counsel Dispute Resolution & Prevention GlaxoSmithKline John N. Ellison and Barbara R. Binis
Reed Smith LLP
http://delvacca.acc.com
Can You Get Insurance Coverage for False
Claims Act and Similar Claims?
Qui Tam Actions
Procedure
•
Actions brought under the FCA by private individuals,
called “relators,” on behalf of the federal government
•
A relator files suit under seal, serves the federal
government with the complaint, and discloses all material
evidence related to the claim to the federal government.
31 U.S.C. § 3730(b)(2)
•
The federal government has 60 days to investigate the
allegations and decide if it wants to intervene in the action
•
If the federal government chooses to intervene, it takes
over primary control of the action. 31 U.S.C.
§ 3730(c)(1)
•
If the federal government chooses not to intervene, the
relator may still continue to pursue the action on his/her
own. 31 U.S.C. § 3730(c)(3)
Potential Relators / Employee
Complainants
Types of FCA Actions Brought by
Government
Interplay Between FCA and Other
Federal Statutes
Off-Label Promotion:
Potential Liabilities
*
Off-label Promotion
•
Although off-label use is legal, it carries potential risks
and legal implications
•
Drug companies are prohibited by law from advertising
or marketing medications for any purpose other than
their FDA-approved use, and from distributing
information about clinical findings of off-label use,
except in specific circumstances
Know Your Company’s
Materials
e.g., see:
06/06/13 FDA Untitled Letter sent to Johnson &
Johnson International, Inc. concerning a Print Ad for
Xarelto featured in WebMD magazine for minimizing
the drug’s risks by “fail[ing] to convey this important
risk information with a prominence and readability
reasonably comparable to the efficacy claims” (i.e.,
presenting risk information “without any of the
emphasis (i.e. color scheme, borders, layout, and
graphics) used with the efficacy claims”)
Know Your Company’s
Materials
(cont.)
e
.g., see:
09/25/08 FDA Warning Letter sent to Shire
Development, Inc. stating that a webpage and a
video testimonial posted on youtube.com featuring
celebrity Ty Pennington overstated the efficacy of
Adderall XR and broadened the indicated uses. For
example, in the video, Pennington implied that the
product would “transform patients’ lives,” improve
their “confidence,” and help them to “fit in” and not
feel “different” or “alienated.”
Be Mindful of Oral Statements
Made To Investors/Potential
Investors
e
.g., see:
11/8/13 FDA Warning Letter sent to Aegerion
Pharmaceuticals regarding statements its CEO made
on CNBC’s TV show “Fast Money” promoting
Juxtapid as safe and effective for use in decreasing
cardiovascular events, and increasing the lifespan of
patients with the rare genetic disease homozygous
familial hypercholesterolemia (HoFH), which would be
a new “intended use.”
FCA CLAIMS
Insurance Coverage Issues
*
FCA: Potentially Available Insurance
Coverage
•
Claims under the FCA against life sciences companies,
including off-label use and/or off-label promotion, arise in
a variety of contexts
•
Depending on the nature of the allegations and the
context in which the claims arise, there could be
opportunities for insurance coverage under various types
of policies
•
Types of insurance policies to review:
• Commercial general liability and excess policies
• Directors’ and officers’ coverage
• Specialty products like employment practices coverage and crime/blanket bond insurance
*
FCA: Potentially Available Insurance
Coverage
(cont.)
•
Commercial General Liability Insurance
• CGL policies typically provide broad coverage against third-party claims alleging damages that resulted from a company’s products or behavior, including bodily injury and property damage
• Most CGL policies do not exclude coverage for claims arising out of injury as a result of off-label use of a pharmaceutical
• Many CGL policies do exclude coverage for claims arising out of illegal off-label promotion
• Insurers often argue that intentional misconduct provision
precludes coverage, but this usually requires finding by court that intentional misconduct occurred
*
FCA: Potentially Available Insurance
Coverage
(cont.)
•
Directors’ & Officers’ Liability Insurance
• D&O policies typically provide coverage to the company and its directors and officers against claims resulting from “wrongful acts” allegedly committed by the directors and officers
• D&O policies may be implicated by direct suits for alleged off-label promotion
• D&O policies may also be implicated by securities claims and shareholder derivative suits
• D&O policies could provide coverage where CGL policies exclude it
Off-Label Claims: Potentially Available
Insurance Coverage
•
Employment Practices Liability Insurance
• EPLI policies typically provide coverage for liabilities arising out of “wrongful employment acts”
• Many off-label promotion cases, particularly those involving
employee complainants, include allegations relating to conduct by the company that could fit within the definition of “wrongful
employment acts”
• Beware of Retaliation claims
• U.S. ex rel. Ibanez, et al. v. Bristol-Myers Squibb Co., et al., 1:11-cv-00029 (S.D. Ohio) – judge dismissed FCA claims that BMS offered
kickbacks to promote off-label sales of Abilify, but left relators’ retaliation claims intact
Off-Label Claims: Potentially Available
Insurance Coverage
(cont.)
•
Crime/Blanket Bond Policy
• FCA lawsuits can often arise out of scenarios where an employee or former employee has possession of proprietary materials owned by the company that should not be in his or her possession
• Depending on the nature of the proprietary material, the company may have been the victim of a theft or wrongful taking that might fall within the scope of crime coverage
• It is worth analyzing the specific facts and policy terms to see if a viable opportunity for coverage exists
Review Your Coverage Now
Recommendations
•
Many off-label uses are reimbursable under
Medicare and similar government programs
•
With respect to prescription drugs, the
government reimburses off-label uses that
appear in certain designated compendia (now
online)
•
Split in courts on whether compendia are
exclusive or whether other medical literature not
in a designated compendium qualifies
•
Reimbursement standards for medical devices
Off-Label Use and Government
Reimbursement
•
Many insurers cover off-label uses to the extent
that the government does
•
Unless coverage is explicitly linked to a
government program, private insurers are free to
impose more restrictive definitions of medical
necessity
•
Insurance policies that refuse to cover any
off-label use are now uncommon
•
Some states have required coverage of off-label
uses under various circumstances
Off-Label Use and Third-Party Payor
Reimbursement
Running Afoul of the Anti-Kickback
Statute
• Illegal for pharmaceutical companies to provide payments or financial incentives to physicians/hospitals as inducement to prescribe their drugs
• Examples of such payments include:
• Extravagant meals and gifts
• Vacations and golf outings
• Tickets to sporting events and concerts
• Payments for attending conferences and lectures
• Excessive payments to serve on “advisory boards”
• Also illegal for pharmaceutical companies to provide financial incentives to insurance companies and group purchasing
Recent Example of FCA Case
Alleging Illegal Kickbacks
United States ex rel Nevyas, et al. v. Allergan Inc.,
2:09-cv-00432 (E.D. Pa.)
Plaintiffs, owners of a surgical ophthalmology
practice, allege that since 2002, Allergan engaged
in illegal kickback scheme to induce doctors to
prescribe Restasis. Inducements included free
business consulting services, billing advice, and
membership in its high-paying speaker’s bureau.
What Is the Trade Agreements Act
(TAA)?
•
TAA requires that certain products sold to the U.S.
government originate in either the United States or in one of
the designated countries in which the United States has
special trade agreements
•
Recent FCA settlement for $8.3 million based on TAA
violations
• United States ex rel. Cox v. Smith & Nephew, Inc., 2:08-cv-02832 (W.D. Tenn.) – suit filed in 2008; settled in 2014
• Medical device company allegedly failed to segregate TAA-compliant devices from devices that were repackaged in the United States, but were originally imported from Malaysia (a non-designated country)
• Company could therefore not attest that all goods sold were TAA certified
• Even though company voluntarily disclosed the potential violations, a former employee filed suit under the FCA
• First-ever FCA settlement for a medical device manufacturer based on TAA compliance
Insurance Issues Related to Off-Label
And Other Claims
• Potentially broader coverage is available because some of the more generic insurance products may be implicated by off-label claims like CGL insurance and product liability insurance
• “Advertising injury” coverage • Product defect coverage
• At a minimum, provide notice to all potentially implicated insurers
• Duty to defend vs. duty to indemnify
• Impact of deductibles/self-insured retentions on selection of defense counsel
• Strategies for still controlling the defense effort while maximizing potential for insurance coverage
