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In re Baycol Products Litigation

United States Court of Appeals, Eighth Circuit

October 15, 2013

In re BAYCOL PRODUCTS LITIGATION
v.
Bayer Healthcare, doing business as Bayer Healthcare Pharmaceuticals; Bayer Pharmaceuticals Corporation; Bayer Corporation; Bayer A.G., Defendants-Appellees. United States of America, ex rel Laurie Simpson, Plaintiff Laurie Simpson, Plaintiff Relator-Appellant

Submitted: June 12, 2013.

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[Copyrighted Material Omitted]

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Edward Normand, argued, Armonk, NY, for Appellant.

Adam Hoeflich, argued, Chicago, IL, (Peter W. Sipkins, Minneapolis, MN, Philip S. Beck and Susan A. Weber, Chicago, IL, James Hemmings, Middleton, WI, Ryan C. Morris, Kristin Graham Koehler, Lowell J. Schiller, and John A. Meiser, Washington, DC, on the brief), for Appellee.

Before LOKEN, BRIGHT, and BYE, Circuit Judges.

BRIGHT, Circuit Judge.

Laurie Simpson appeals the dismissal of the qui tam action she brought against Bayer Healthcare under the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733. Simpson alleged Bayer defrauded the United States government through its marketing and sale of the cholesterol-lowering drug Baycol. She claimed Bayer fraudulently caused the government to make reimbursements for Baycol prescriptions through federal health insurance programs such as Medicare and Medicaid; she also claimed Bayer fraudulently induced the Department of Defense (DoD) to enter into two contracts for the purchase of Baycol. The district court dismissed Simpson's claims, concluding she failed to plead fraud with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure. We affirm the dismissal relating to federal health insurance programs but reverse as to the DoD contract claims and remand for further proceedings.

I.

In early 1998, Bayer began marketing Baycol to compete with other cholesterol-lowering " cerivastatin" or " statin" [1] drugs. Certain studies concluded Baycol was less effective at lowering cholesterol than competing drugs when Baycol was prescribed at the dosage initially approved by the Food and Drug Administration (FDA). Bayer then sought and obtained approval from the FDA to sell Baycol at higher dosage levels. Doctors began to report, however, that patients who were prescribed Baycol developed rhabdomyolysis, a rare but serious muscle disorder in which destroyed muscle cells release into the bloodstream. The likelihood of this warned-about side effect appeared to increase when Baycol was prescribed at higher doses, or in conjunction with gemfibrozil, another cholesterol-lowering drug. In July 2001, the FDA asked Bayer to address these concerns about Baycol. Bayer voluntarily withdrew Baycol from the market in August 2001.

Laurie Simpson worked at Bayer from 1998 through 2004 as a manager of market research. While at Bayer, Simpson's work involved marketing Baycol. In October 2006, relying in large part upon information to which she was privy during her

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time at Bayer, Simpson filed a qui tam action against Bayer as a relator on behalf of the government. She alleged Bayer knew about, but downplayed, the risks of developing rhabdomyolysis through the use of Baycol. She also alleged Bayer misrepresented Baycol's efficacy when compared to competing cholesterol-lowering drugs sold by other manufacturers (such as Lipitor), and paid illegal kickbacks to physicians to increase Bayer's share of the market for statin drugs.

Part of Simpson's initial lawsuit was dismissed for lack of jurisdiction on the grounds Simpson was not the original source of her allegations. See 31 U.S.C. § 3730(e)(4)(A) (indicating courts lack jurisdiction over an FCA claim unless the relator is " an original source of the information" ). Some of her allegations— those involving payments the government made before October 2000— were also dismissed because they were barred by the FCA's six-year statute of limitations. The district court initially dismissed the remainder of Simpson's suit without prejudice for failing to plead fraud with particularity, but gave Simpson a chance to cure the deficiencies by filing an amended complaint, which Simpson filed. This appeal concerns what was left of Simpson's suit.

In this second amended complaint (SAC), Simpson alleged Bayer defrauded the government in two distinct respects. First, Simpson alleged Bayer fraudulently caused the government to make reimbursements for Baycol prescriptions through federal health insurance programs such as Medicare and Medicaid, asserting that " had the Government known the full truth [about Baycol] it would not have paid the [reimbursement] claims." SAC at ¶ 266; Appellant's App. at A-128. Simpson also alleged Bayer fraudulently induced the DoD to enter into two contracts for the purchase of Baycol to be prescribed to members of the armed services by physicians working at Military Treatment Facilities. We will first summarize Simpson's allegations regarding the DoD contracts.

A. The DoD Contracts

The DoD reached an initial agreement with Bayer for the purchase of Baycol on October 1, 1999. The initial DoD contract called for Bayer to sell Baycol to the military for an 18-month term in three different dosages (0.2 mg, 0.3 mg, and 0.4 mg) at a price of $.30 per tablet. This initial contract had an estimated base value per year of $11,505,000, and provided the military with an option to renew for two separate one-year extensions. If the DoD exercised its option to renew, the per tablet price would increase to $.31 per tablet the first year (for an estimated base value of $11,888,500), and to $.32 per tablet the second year (for an estimated base value of $12,272,000). Id. at ¶ 72; Appellant's App. at A-70.

After entering into the initial contract with Bayer, the DoD became concerned about the connection between rhabdomyolysis and Baycol, and contacted Bayer regarding those concerns. Simpson alleged that on November 10, 1999, Casimir Zygmunt, a Baycol representative at Bayer, responded to inquiries made by Lieutenant Commander Richerson, the DoD's point of contact for the DoD Statin Award Implementation Plan, about Baycol's safety with respect to the risk of rhabdomyolysis. Simpson alleged Zygmunt told the DoD there is " [n]o evidence to suggest Baycol causes more rhabdo then (sic) others— it is a class effect." Id. at ¶ 107; Appellant's App. at A-77. Simpson alleged this was " a false statement because Bayer did possess evidence at the time suggesting that Baycol did cause more rhabdomyolysis than other statins." Id. (Emphasis in original).

Paragraphs 108 through 120 of the SAC further describe the contacts between Bayer and the DoD over the latter's concern

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about the frequency or severity of rhabdomyolysis associated with Baycol. For example, in a letter Bayer sent to the DoD on December 3, 1999, Simpson alleges Bayer falsely stated " there are insufficient data upon which to base a dose-response relationship" between the frequency or severity of rhabdomyolysis and the use of Baycol. Id. at ¶ 112; Appellant's App. at A-78. Simpson alleged this was a false statement because " Bayer was aware at the time that there was in fact a dose-response relationship with Baycol's adverse side-effects." Id.

On January 20, 2001, the DoD renewed the original contract with Bayer and extended the period of performance from February 20, 2001, through February 19, 2002, for an estimated dollar value of $11,888,500.[2] Id. at ¶ 80; Appellant's App. at A-71. In addition, on February 20, 2001, the DoD agreed to purchase a higher dosage of Baycol from Bayer (0.8 mg tablet) under a Blanket Purchase Agreement (BPA). Under the BPA, Bayer sold 0.8 mg tablets of Baycol to the military at a discounted price of $15.00 for 30 tablets, and $45.00 for 90 tablets. Id. at ¶ 96; Appellant's App. at A-74.

Simpson alleged the January 2001 contract extension and the February 2001 BPA were fraudulently induced by the false statements Bayer made about Baycol's effectiveness and connection to rhabdomyolysis. Simpson alleged that " [i]f the DoD and other prescribers had known the truth (which DoD attempted to discover on multiple occasions), then it is unlikely the DoD would have entered into the contract with Bayer or would have extended the contract." Id. at ¶ 123; Appellant's App. at A-82.

Finally, as relevant to the January 2001 contract extension and February 2001 BPA, Simpson alleged that " [a]ccording to the DoD PEC [Pharmacoeconomic Center], there were approximately 400,000 Baycol prescriptions filled in MTFs [Military Treatment Facilities] during the period commencing October 2000 to the withdrawal of Baycol from the market [in August 2001]." Id. at ¶ 244; Appellant's App. at A-123. Simpson also alleged that " [f]rom October 2000 through the time of the withdrawal of Baycol from the market in August 2001, government agencies, under various contracts with Bayer for the supply of Baycol, including the DoD ... paid Bayer at least $11,983,305.08 for their supplies of Baycol." Id. at ¶ 243. In other words, Simpson alleged Baycol was used by members of the armed services after Bayer allegedly ...


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