Commonwealth Court affirms Phila. judge's dismissal of state's off-label marketing suit against Janssen Pharmaceuticals

A Pennsylvania appellate court has affirmed a decision by Philadelphia’s Common Pleas

Court dismissing a suit that was brought by the state against Janssen Pharmaceuticals over allegations that the drug maker fraudulently withheld information about the safety and efficacy of its anti-psychotic drug Risperdal.

The entire Commonwealth Court bench ruled July 26 to uphold the earlier trial court’s decision dismissing the commonwealth’s complaint and denying post-trial relief in the case of Commonwealth of Pennsylvania v. Ortho-McNeil-Janssen Pharmaceuticals.

The case began in 2007 when the commonwealth filed suit against Janssen, Eli Lilly & Co. Inc. and AstraZeneca Pharmaceuticals, seeking to recover, among other things, expenses incurred for reimbursing pharmacies for the purchase of Risperdal and other antipsychotic drugs manufactured by the defendants.

Pennsylvania authorities alleged that the companies promoted their respective antipsychotic drugs for non-medically accepted and non-medically necessary uses, also known as “off-label” marketing.

The commonwealth also asserted that the defendants misrepresented the risks associated with the drugs.

The record shows that in late December, the defendants filed a preliminary objection seeking to sever the actions, a motion that was granted by the Philadelphia Common Pleas Court.

The trial court subsequently ordered the commonwealth to file separate complaints against each of the drug companies.

As for the case against Janssen, the commonwealth filed its six-count complaint against the drug maker in early 2008, alleging submission of false and fraudulent claims under the state’s Medicaid program; submission of false and fraudulent claims under the Pharmaceutical Assistance Contract for the Elderly (PACE) Program; negligence; fraud and misrepresentation; misrepresentation under restatement of torts; and unjust enrichment.

In January 2010, Philadelphia Common Pleas Court Judge Howland W. Abramson granted a Janssen motion for judgment on the pleadings, thereby dismissing the commonwealth’s claims seeking double damages under the Medicaid fraud statute.

In April of that year, Janssen sought dismissal of the common law fraud and misrepresentation and unjust enrichment claims.

The commonwealth then filed an amended complaint, leaving in tact many of the same allegations.

In May 2010, the claims of fraud and misrepresentation and unjust enrichment went to a jury trial, which lasted one week.

In mid June 2010, Philadelphia Common Pleas Court Judge Frederica A. Massiah-Jackson granted Janssen’s motion for compulsory nonsuit.

Months later, the judge issued a decision denying the commonwealth’s request to remove the compulsory nonsuit and a motion for post-trial relief.

The commonwealth appealed the rulings to Commonwealth Court, arguing, among other things, that the trial court erred in granting judgment on the pleadings and dismissing the statutory Medicaid fraud claims.

In its ruling last week, the Commonwealth Court, which is Pennsylvania’s lower-tier appellate court, wrote that the trial court did not err since Janssen is not a “provider” subject to civil remedies.

“We are bound by the statutory definition of ‘provider,’” the ruling states. “Contrary to the Commonwealth’s assertions, a drug manufacturer does not qualify.

“In contrast to drug manufacturers, who do not sell drugs directly to Medicaid recipients or receive reimbursements directly from Commonwealth agencies, pharmacies and practitioners supply drugs to recipients and receive reimbursements from the Commonwealth; therefore they qualify as ‘providers,’” the ruling continues.

The appellate court wrote that the state’s General Assembly specifically chose to use the word “provider” in the Fraud Act’s civil remedies provision, and since Janssen is not a provider by definition, it is not subject to civil remedies under the Fraud Act.

“For these reasons, we discern no error in the trial court’s dismissal of the Commonwealth’s Fraud Act claim against Janssen,” the ruling states.

The appellate judges went on to state that the trial court did not err in granting nonsuit to the defendants on the commonwealth’s claims of fraudulent misrepresentation and nondisclosure since the commonwealth “did not present clear and convincing proof on the essential element of causation.”

The commonwealth had lastly contended that the trial court erred in denying its motion for post-trial relief on the unjust enrichment claim.

The appellate judges again agreed with the trial court, ruling the Philadelphia judge overseeing the case didn’t err when granting nonsuit in this respect.

However, while the appellate judges said the trial court’s rationale on this issue was not supportable, they did nonetheless affirm the decision on the claim.

Janssen had argued that the unjust enrichment claim was nothing more than a “recasting” of its fraud claim.

“The Commonwealth’s claim must fail because it did not prove any benefit conferred on Janssen was unjust,” the ruling states. “It also specifies the trial record references to the rebate agreement, the existence of which bars recovery under an unjust enrichment theory.”

The judges further wrote that as to its unjust enrichment claim, the commonwealth did not quantify the benefit allegedly conferred on Janssen, and it did not prove any enrichment was unjust.

“Thus, no error is apparent in the trial court’s grant of Janssen’s motion for compulsory nonsuit on these claims,” the appellate ruling states.