Saturday, December 11, 2010

EXCLUSIVE: Massachusetts Files For $191 Million In Proventil® (Albuterol) Pricing Fraud Punitives

UDATED commentary -- 12.11.10 @ 11 AM EST (originally posted 12.10.10 @ 5:14 PM EST).

The Attorney General for the Commonwealth of Massachusetts just filed his memorandum of law, and request for miscellaneous relief this afternoon, in the Proventil® (Albuterol) price fraud litigation. Recall that last month, the federal trial court jury awarded $4.6 million in actuals, and the very-able federal District Court Judge Patti Saris reserved the right to calculate -- and then impose -- civil punitive damages, at a later time. [Legacy Schering-Plough acquired Warrick; then in late 2009, Merck acquired Schering-Plough.]

Tonight, Massachusetts has sworn to what it thinks (and I concur) ought to be the penalty: $191 million. Do see it all, as a 32 page PDF file, but here is a bit of it:

. . . .The Commonwealth moves, pursuant to Fed. R. Civ. P. 58(b) (2) (A) and (d), for entry of judgment in its favor, based on the jury’s verdict of $4.6 million in damages in this case (plus prejudgment interest and costs), which must be trebled, and asks for an award of over $191 million in civil penalties. While substantial, penalties in this amount are needed to punish the Defendants for their misconduct in this case, which the jury found to be willful, and to deter them and others from engaging in similar acts to defraud the Massachusetts Medicaid program (MassHealth), a vital government program serving the Commonwealth’s poorest and most vulnerable citizens. As set forth below, penalties in this amount, which are less than 4 percent of the minimum penalties mandated by the Massachusetts False Claims Act (MFCA), do not violate the Excessive Fines or Due Process clauses of the federal and state Constitutions. The Commonwealth also requests that the Court enter judgment in its favor for Defendants’ breach of the implied covenant of good faith and fair dealing in the Medicaid Rebate Agreement. . . .

Although Defendants may have accurately reported AMPs for purposes of the rebate agreement, they “sabotaged” the intended benefit of the agreement by simultaneously reporting, and failing to correct, falsely inflated published prices, thereby inflating reimbursement and diminishing the value of the rebates. Defendants’ extra-contractual conduct (violating the MFCA, the MMFCA and committing common law fraud) interfered with the reasonable expectations of the parties and destroyed the value of the agreement to the Commonwealth. Accordingly, the Court should rule as a matter of law that Defendants breached the implied covenant of good faith and fair dealing implicit in the Medicaid Rebate Agreement. . . .

The jury found Defendants liable under both Section 1 and Section 2 of the MFCA.
Under Section 1, the jury found Defendants caused 989,103 false claims to be presented. Section 1 of the MFCA provides:
Any person who (1) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval. . . shall be liable to the commonwealth or political subdivision for a civil penalty of not less than $5,000 and not more than $10,000 per violation, plus three times the amount of damages, including consequential damages, that the commonwealth or political subdivision sustains because of the act of that person.

M.G.L. c. 12 § 5B.

The plain language of the statute indicates that (1) each false claim that a person "causes to be presented" to the Commonwealth is a violation and (2) a civil penalty is to be assessed "per violation." By the plain terms of the statute, a person commits a violation (and is subject to a civil penalty) each time he causes a false claim to be presented. "The Supreme Court has repeatedly emphasized the importance of the plain meaning rule, stating that if the language of a statute or regulation has a plain and ordinary meaning, courts need look no further and should apply the regulation as it is written." In re Pharmaceutical Indus. Average Wholesale Price Litig., 582 F.3d 156 (1st Cir. 2009)(quoting Textron, Inc. v. Comm’r, 336 F.3d 26, 31 (1st Cir. 2003)). . . .

And so, $191 million is at the very low end of what Massachusetts could assert, under a plain reading of the relevant statutes -- as the jury found 989,103 separate violations, times $5,000 each is nearly $5 billion; that number times $10,000 is nearly $10 billion. Ouch. $191 million looks waifish -- by comparison. We'll keep you informed when Merck answers this motion.

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