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Genentech and Novartis Escape FCA Suit Over Xolair Marketing


A Massachusetts federal judge on Tuesday nixed a lawsuit accusing Novartis Pharmaceuticals Corp. and Genentech Inc. of off-label marketing and providing kickbacks to sell an asthma drug, saying fraud was “probable,” but the whistleblower plaintiffs hadn't shown specific violations of the False Claims Act. Relators Frank Garcia, who worked as a Xolair sales representative for Genentech, and Allison Kelly, who sold Xolair for Novartis, first accused the companies in 2006 of engaging in an off-label marketing and kickback scheme that caused health care providers to overbill federal and state health insurance programs for the drug. But U.S. District Judge William G. Young said Tuesday that neither relator provided a “single example of fraudulent conduct” resulting in a false claim for reimbursement.

“Kelly’s allegations suggest that fraud was probable,” the judge said. “But the factual and statistical evidence resulting from the information she gives in support of these allegations ... is not sufficient to strengthen the inference of fraud beyond possibility.”

The U.S. Food and Drug Administration approved Xolair for treating moderate to severe persistent allergic asthma in patients aged 12 and older whose symptoms are inadequately controlled with inhaled corticosteroids.

The two claimed the companies’ pharmaceutical reps told doctors the drug was effective for mild asthma and allergic conditions not associated with asthma, like a nut allergy, and provided doctors with expensive gifts and free medical equipment.

The companies asked the judge to dismiss the case, saying the plaintiff’s complaints are “replete with sweeping and conclusory allegations regarding off-label, kickback, and other purported ‘schemes,’” but short on specifics.

Kelly provided information about Novartis inviting health care providers to upscale meals and drinks to promote sales of Xolair, and also referenced emails illustrating how the companies pushed for Xolair sales.

Xolair did about $2 billion in sales between 2003 and 2008, according to the relators.

Judge Young said Tuesday that Kelly provided sufficiently detailed information about Novartis’ sales and marketing practices, but that was not enough to make the False Claims case.

“The detailed information she provides regarding the instructions she and her colleagues received from their manager to promote Xolair to [health care providers], even for unapproved uses, are nothing more than improper marketing practices and illegal kickback activities used by Novartis to increase sales,” the judge said. “Such allegations are not sufficient by themselves to make out a violation under the FCA.”

The defendants had asked the judge to dismiss the case on a first-to-file violation, which prevents a person from filing a suit based on the same allegations of fraud from an earlier case. Kelly voluntarily withdrew from Garcia’s 2006 complaint when the case was coming out from under seal in 2011. Her complaint was dismissed without prejudice, and she filed her own complaint in 2012.

Judge Young ruled that the first-to-file rule did not apply because Kelly dismissed herself from the case five years after alerting the government to a potential fraud, and because she received permission from a judge that previously heard the case to file a new complaint.

“Kelly’s situation reflects a combination of circumstances that, concurring together, lead to the conclusion that she ought not be barred by the first-to-file rule,” the judge said.

A Novartis spokeswoman said the company is "pleased with the decision."

Representatives from Genentech did not immediately return messages seeking comment.

The plaintiffs are represented by Timothy M. Cornell of Gardner Cornell PC.

Novartis is represented by Debra E. Schreck and Michael A. Rogoff of Kaye Scholer LLP, Michael J. Ticcioni of Mintz Levin Cohn Ferris Glovsky & Popeo PC, and Tracy A. Miner of Demeo LLP.

Genentech is represented by David J. Silbert and Elliot R. Peters of Keker & Van Nest LLP and Matthew J. O'Connor and Ronald G. Dove Jr of Covington & Burling LLP.

The case is United States of America et al v. Novartis Pharmaceuticals Corp. et al., 1:12-cv-10962, in the U.S. District Court for the District of Massachusetts.