Guttman & Buschner Represent Whistleblowers in Justice Dept. $257 Million Civil Settlement with Wyeth over Unlawful Marketing of Rapamune

Reuben Guttman Articles, Traci Buschner Articles, Whistleblower News

Pfizer subsidiary pleads guilty to off-label marketing of powerful immunosuppressent Rapamune; settlement latest in series of major off-label whistleblower cases against Abbott, GlaxoSmithKline and Amgen

WASHINGTON, DC (July 30, 2013) – Leading whistleblower attorneys Reuben Guttman and Traci Buschner of Guttman, Buschner & Brooks PLLC represented two key whistleblowers behind a $257.4 million settlement announced today between drugmaker Wyeth Pharmaceuticals, a subsidiary of Pfizer, and the U.S. Department of Justice stemming from alleged marketing abuses of Wyeth’s powerful immunosuppressant drug Rapamune. The case was originally brought by  Marlene Sandler and Scott Paris, both of whom were sales representatives for the company.

Today’s blockbuster settlement of the whistleblower case was originally panned by the Justice Department, but raised the ire of a Congressional oversight committee in 2010.

The case, filed under seal in 2005 in U.S. District Court for the Eastern District of Pennsylvania, led to an investigation by the Justice Department and multiple states into abusive marketing practices related to Rapamune, which is primarily approved by the FDA for individuals following kidney transplants to help the body prevent organ rejection. On Dec.3, 2006, the DOJ filed a formal notice with the Eastern District declining to intervene in the case.

Guttman and Buschner continued to move forward with the case, and filed an amended complaint on behalf of the whistleblowers on May 24, 2010 ─ which spurred a formal inquiry by the U.S. House of Representatives Committee on Oversight and Government Reform, then chaired by U.S. Representative Edolphus Towns.

On Sept. 21, 2010, the Justice Department intervened in the case and transferred it to the U.S. the District Court for the Western District of Oklahoma in Oklahoma City, where an investigation was initiated with regard to claims brought by a third whistleblower.

The settlement agreement notes the broad scope of Wyeth’s alleged unlawful marketing of Rapamune for well over a decade, spanning from September 1999 to December 2011:

Wyeth (a) knowingly promoted the sale and use of Rapamune for uses for which it had not been approved by the United States Food and Drug Administration (FDA), including for use in connection with solid organ transplant patients other than kidney transplant patients, which were not medically-accepted indications (as defined in 42 U.S.C. § 1396r-8(k)(6)), and were not covered by Medicare, Medicaid and other Federal health care programs; and (b) knowingly promoted the sale and use of Rapamune in treatment regimens that had not been approved by the FDA including the use of Rapamune with transplant patients who used another immunosuppressant drug before using Rapamune and the use of Rapamune in combination with certain types of products other than cyclosporine and corticosteroids.

Ms. Sandler and Mr. Paris were represented by Reuben Guttman and Traci Buschner. Mr. Guttman is one of the country’s preeminent whistleblower lawyers, having representing individuals in some of the largest pharmaceutical and financial services cases on record.

“Pfizer subsidiary Wyeth joins a parade of other pharma giants to plead guilty and pay significant penalties for unlawfully marketing their drugs,” said Mr. Guttman. “The abuses related to illicit marketing of Rapamune paint a disturbing portrait. Wyeth leadership placed a highly vulnerable patient population at serious health risk. Exposing those whom drug makers have pledged to heal to increased risk merits immediate congressional oversight. Hopefully, the settlement will prompt Congress to take action.”

Mr. Guttman continued: “Over the past five years, at least half a dozen pharma giants have paid fines for conduct that places patients in harm’s way, yet not a single individual has been held accountable. Our nation can no longer afford the expenditure for drugs that don’t work, cause additional harm and saddle the country with the long-term of obligation of paying for the medical care of victims. These cases are reported in terms of dollars but they are more about conduct that impacts patients and taxpayer.”

In the last three years, Guttman and Buschner have had unprecedented success representing lead whistleblowers in the government’s $1.6 billion settlement with Abbott (2012); its $1.04 billion settlement with GlaxoSmithKline (2012); and its $24.9 million dollar settlement with Amgen (2013). The firm also represented whistleblower Lynn Szymoniak, who first reported claims of robo-signing to 60 Minutes and whose allegations led to a $95 million settlement as part of the government’s historic $25 billion settlement with the country’s four largest banks (2012).

Mr. Guttman and Ms. Buschner currently represent several relators in an ongoing case, in which the government has intervened, against defense contractor LockheedMartin regarding alleged environmental noncompliance and mishandling of hazardous waste at the Paducah Kentucky Gaseous Diffusion Plant.

Reflections on a Defense Giant’s Derelictions

Reuben Guttman Articles, Whistleblowers Blog

Defense contractors have been shielded from whistleblower actions in the US. Until recently, that is, says Reuben Guttman.

Rarely does the United States hold its defense contractors accountable in noticeable ways. Though there has been a lot of action under the Federal False Claims Act (FCA), the statute that allows whistleblowers to bring suit against wrongdoers in the name of the government, many of the big dollar recoveries in recent years have been against pharmaceutical companies. Yet, after years of litigation, on June 17, the United States District Court for the Southern District of Ohio awarded the United States over $473 million in damages against United Technologies Corporation (UTC).

False statements

The Court previously found that UTC’s predecessor in interest, Pratt and Whitney (Pratt), violated the False Claims Act (FCA) when it made three false statements in its multiyear contract offer to produce F-15 and F-16 fighter jet engines. Yet, the Court held that the government suffered no damages as a result of this violation and that the government’s common law claims were precluded by previous litigation in front of the Board of Contract Appeals. The United States Court of Appeals for the Sixth Circuit upheld the finding of liability, but ordered the District Court to re-evaluate its damages calculation and held that the common law claims were not precluded.

Evaluating damages

When re-evaluating its damages calculation, the District Court undertook a three step process. First, it determined what the government eventually paid each year of the Fighter Engine Contract.

Secondly, to determine what the government should have paid each year, the District Court determined the market to be a government-regulated market and adopted the government’s accounting expert’s testimony that the Court should remove the amounts the government proved it paid as a result of UTC’s fraud in each of the contract years and add back any amounts UTC proved in each year as an offset.

Finally, the District Court determined whether the total amount of damages should be reduced by the reductions in the price of the warranty on the engines that were made in Pratt’s best and final offer.

The District Court held that United Technologies could not prove any offsets and so it accepted the government expert’s analysis of the amounts the government paid as a result of the fraud. It also held that the total amount of damages should not be reduced by the warranty price reductions because the warranty price was arrived at through an arms-length negotiation.

Statute of limitations

As a consequence of the FCA’s statute of limitations, six years from the date of government knowledge of the elements of the claim but in no event more than 10 years, the District Court calculated the damages for the first three and a half years as common law damages and applied the interest rates published by the Treasury in the Current Value of Funds Rate. As for the years that were not barred by the FCA’s statute of limitations, the District Court accepted the government’s election of the FCA’s remedy of treble damages plus penalties.

The tolling rule

And what about the tolling rule? In 2013, in a case US ex rel. Carter v. Halliburton Co, the United States Court of Appeals for the Fourth Circuit held that the Wartime Suspension of Limitations Act (WSLA) applied to cases brought under the False Claims Act. The WSLA tolls the statute of limitations during times at which the United States is at war. If the WSLA were applied to this case, it is possible that the FCA’s treble damages could apply to all of the years in the Fighter Engine Contract, but this is unlikely.

The Supreme Court has held that the WLSA applies only to offenses committed after the triggering clause and before the termination of hostilities in another case United States v. Smith. The Fighter Engine Contract covered the years 1985 to 1990 and FCA treble damages were applied to all violations after March 3, 1989. The violations that occurred between 1985 and March 1989 occurred prior to a WSLA “triggering event” – such as the Gulf War that started in 1991; as a result the WSLA tolling provisions likely do not apply.

Notwithstanding that the WSLA was not applied, the District Court’s damage awards follow the Sixth Circuit’s instruction that “damages under the [FCA] typically are liberally calculated to ensure that they ‘afford the government complete indemnity for the injuries done it.’’

Q&A: Whistle-blower lawyer on Amgen settlement, False Claims Act

Reuben Guttman Articles, Whistleblower News

This interview with Reuben Guttman was conducted by journalist Terry Baynes with Thomson Reuters.

California-based drugmaker Amgen Inc agreed on Tuesday to pay $24.9 million to settle allegations that it provided kickbacks to long-term care pharmacy providers to entice them to switch patients to its anemia drug Aranesp. Whistle-blower Frank Kurnik, a longtime Amgen employee, and the Justice Department accused the company of giving pharmacy providers rebates based on their volume of Aranesp prescriptions.

Reuben Guttman, a lawyer at Guttman, Buschner & Brooks PLLC, who brought the lawsuit on behalf of Kurnik, said the case reflects how prosecutions under the False Claims Act are focusing on conduct higher up the corporate ladder.

Amgen declined to provide a lawyer to discuss the settlement. The company in a statement about the settlement denied all of the allegations.

Reuters asked Guttman about the case and developments in False Claims Act litigation. The questions and answers have been edited for brevity and clarity.

Reuters: What does the case reveal about the type of conduct coming under scrutiny in False Claims Act cases?

Guttman: Typically, you’re talking about kickbacks paid to doctors in a lot of these cases. Instead of going from doctor to doctor and hospital to hospital, Amgen allegedly orchestrated a scheme that paid kickbacks to long-term care pharmacy providers who influenced prescriptions at nursing homes. The case showed how decisions about patient care are being made hundreds of miles away, at a corporate level. Healthcare fraud schemes orchestrated at a corporatewide level are schemes that are going to draw more prosecutorial focus.

Reuters: What were some of the biggest challenges in bringing the case?

Guttman: Typically, in cases like this, you’re talking about numbers of witnesses who can testify to specific kickbacks paid to doctors. This was more complicated, which is why it’s significant. We had to show that the contractual relationships with these long-term care pharmacy providers were actually orchestrated to engage in unlawful conduct. It involved the aggregation of documents and testimony. The challenge is to dig down and show how the schemes are implemented.

Reuters: Was there anything unusual about the case?

Guttman: In comparison to other pharmaceutical cases, this one had a short lifespan. False Claims Act cases can last for more than five years. This one was filed in 2010 and resolved in 2013. That’s light speed for the investigation and resolution of a pharmaceutical case of any magnitude.

Reuters: What explains the faster timeline in this case?

Guttman: The Justice Department is getting more aggressive about investigating these cases. In addition, recent amendments to the False Claims Act give the government more expansive use of “civil investigative demands” before intervening in a case to obtain documents, which they can share with the whistle-blower’s lawyers. That has created new paradigms of government and whistle-blower lawyers working together in reviewing documents. Efficiencies from changes in the law allow cases to move quicker.

Reuters: Is the Justice Department intervening in these cases more often?

Guttman: It really depends on the evidence that’s brought to the Justice Department and the way in which the case is presented. Last year, the Justice Department got about 700 false claims cases. It gets harder and harder for the Justice Department to investigate cases when there are so many cases being filed. If the case is well documented, if the whistle-blower has sufficient facts and is credible, and the whistle-blower’s counsel is present and can present a case, there’s a greater chance of intervention.

Reuters: How is the role of the whistle-blower lawyer changing?

Guttman: Lawyers for whistle-blowers have to anticipate that when they file a case, they’ll have to see that case through to trial. The frauds are more complex. Even where the case is a great one, you can’t count on the government intervening due to the number of fraud cases being filed. There’s a role for the whistle-blower lawyer who’s willing to be active, work with experts and cooperate with the government in pursuing cases. The government is going to be looking for mechanisms to leverage their resources.

Reuters: Does the case change if or when the government intervenes?

Guttman: Defendants act differently if the government is involved or not. There’s a fear factor that the government is bearing down on you.

$24.9 Million Settlement with Biotechnology Company Amgen, Inc. Resolves South Carolina False Claims Act Lawsuit

Reuben Guttman Articles, Traci Buschner Articles, Whistleblower News

PRESS NOTICE
BILL NETTLES
UNITED STATES ATTORNEY
DISTRICT OF SOUTH CAROLINA
1441 Main Street, Suite 500 * Columbia, SC 29201 * (803) 929-3000

April 16, 2013
FOR IMMEDIATE RELEASE
CONTACT PERSON: Fran Trapp
(803) 929-3000
Fran.Trapp@usdoj.gov

COLUMBIA, South Carolina —-United States Attorney Bill Nettles announced a $24.9 million settlement with Amgen, Inc., a California based biotechnology company. Amgen, Inc. agreed to the settlement to address allegations it paid kickbacks to long-term care pharmacy providers Omnicare Inc., PharMerica Corporation, and Kindred Healthcare Inc. in return for implementing “therapeutic interchange” programs that were designed to switch Medicare and Medicaid beneficiaries from a competitor drug to Aranesp. The Government alleged that the kickbacks took the form of performance-based rebates on Aranesp. As part of that program, the Government alleged that Amgen distributed materials designed to recommend Aranesp’s use in patients who did not have “anemia associated with chronic renal failure,” as specified in the approved labeling for Aranesp.

The Government alleged that the kickbacks took the form of performance-based rebates on Aranesp.

The District of South Carolina began investigating these False Claims Act allegations in the summer of 2010. In particular, the investigation focused on whether Aranesp was marketed to patients, many of whom were in skilled nursing facilities, who did not have “anemia associated with chronic renal failure.”

The False Claims Act allows the government to bring civil actions against entities that knowingly use or cause the use of false documents to obtain money from the government or to conceal an obligation to pay money to the government. The lawsuit in this case was initially filed by an Amgen employee under the qui tam or whistleblower provision of the False Claims Act. This provision entitles a private person to bring a lawsuit on behalf of the United States, where the private person has information that the named defendant has knowingly violated the False Claims Act. Under the False Claims Act, the private person, also known as a “whistleblower,” is entitled to a share of the government’s recovery. In this matter, the whistleblower shall receive over $3 million from the proceeds of the settlement.

“By this agreement we are making important strides in holding drug manufacturers accountable for fraudulent and abusive practices not only in South Carolina, but nationwide. I am proud of the tireless work of this office to investigate this case across the country,” said U.S. Attorney Nettles.

This settlement was the result of a coordinated effort by Assistant United States Attorneys Fran Trapp and James Leventis of the U.S. Attorney’s Office for the District of South Carolina, along with the Commercial Litigation Branch of the Justice Department’s Civil Division, FDA’s Office of Inspector General, HHS’s Office of Inspector General, and Defense Criminal Investigating Service, who diligently worked to investigate the allegations and litigate the case.

The whistleblower was represented by South Carolina attorney Richard Harpootlian along with Reuben Guttman and Traci Buschner, of Guttman, Buschner & Brooks PLLC.

FCA Whistleblowers Forced To Go It Alone As DOJ Drags Feet

Reuben Guttman Articles, Whistleblower News

By Dietrich Knauth

This article was published in Law360 on April 12, 2013.

With the rise in whistleblower cases under the False Claims Act, the U.S. Department of Justice is under pressure to unseal cases in which it hasn’t made a definitive decision whether or not to intervene, forcing whistleblowers to litigate more fraud cases on their own.

Congress and the courts have relaxed the standards for whistleblower eligibility under the FCA, and the lowered standards, along with the increased publicity of high-dollar settlements, has caused the ranks of potential relators to swell. The DOJ reported in December that a record 647 qui tam suits had been filed in 2012, after hovering in the 300s and low 400s for much of the previous decade.

But more whistleblower suits means more work for the DOJ. While whistleblower complaints remain under seal for at least 60 days before the government decides whether or not to intervene, the DOJ has told Congress that cases typically remain under seal for far longer — about 18 months on average, and sometimes cases remain secret for years. That has created pushback from Congress and the courts, who have pressured DOJ to decide more quickly and let the cases be litigated even if it hasn’t quite made up its mind, attorneys say.

“There’s going to be a sea change in terms of how these cases are litigated,” said Reuben Guttman, of Guttman, Buschner & Brooks PLLC. “The message is that more cases are going to be unsealed without a decision on intervention. We have to all assume that we’re going to litigate the case.”

Congress has noticed the backlog, and Sens. Patrick Leahy, D-Vt., and Chuck Grassley, R-Iowa, have introduced legislation, the Fighting Fraud to Protect Taxpayers Act, that would speed up the DOJ’s investigation of sealed FCA complaints by reinvesting some fraud recovery funds into increased investigations.

But the more immediate impact will come from federal courts, which are growing less receptive to the DOJ’s requests for more time to decide whether it will intervene. In response, the DOJ has begun allowing cases to be unsealed with a notice that it will not intervene “at this time,” attorneys say.

“Judges are becoming more demanding as to having the government explain why it needs more time to investigate and make a decision for intervention,” said Ginny Gibson, a Hogan Lovells partner and former federal prosecutor.

In the past, whistleblowers pinned more of their hopes on attracting the DOJ’s intervention, and if the DOJ stayed out, they often dropped cases rather than going ahead at their own expense. But that calculus may have changed, and more experienced whistleblower attorneys are likely to pursue a good case even if the DOJ doesn’t intervene, Gibson said.

“The whistleblowers are stepping up and taking more cases further down the litigation path,” she said. “This is in part because the whistleblower bar has become more sophisticated and better funded.”

In addition to more tenacious whistleblowers, companies will have to fend off suits from unexpected areas, according to Andy Liu, co-chair of the False Claims Act practice at Crowell & Moring LLP. He pointed out that external sources had filed whistleblower complaints against companies that held General Services Administration schedule contracts, premising the suits on alleged violations of the most-favored-pricing clauses in the GSA contracts and the Trade Agreements Act.

“Increasingly, you’re seeing whistleblowers who are not your traditional corporate insiders,” Liu said. “You’re seeing more competitors filing whistleblower suits.”

Adding to the pressure on companies, some courts have also allowed federal government employees to serve as whistleblowers, according to David Nadler, a partner in Dickstein Shapiro LLP’s government contracts group. In Little v. Shell Exploration & Production Co., the Fifth Circuit held that auditors for the U.S. Department of the Interior could sue Shell for undercalculating its royalty payments by $19 million through unauthorized deductions, a ruling that could encourage more government investigators to bring private suits.

For defense attorneys, it’s all part of a trend of widening liability and more aggressive litigation by the DOJ and private relators who are more willing than ever to pick up the slack when DOJ can’t take the lead.

“You don’t want to detract from the DOJ’s own prosecutorial agenda, and they want to save resources for those home-grown cases,” Guttman said.

Whistleblower attorneys are well aware that the DOJ has limited resources and is more than happy to let private relators do the heavy lifting in litigation while it focuses its attention on its own civil and criminal cases, Guttman said. After all, the U.S. government gets paid either way if a FCA suit settles or ends in a monetary judgment.

–Editing by Elizabeth Bowen and Chris Yates.

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