Ed clearly beat us out of the gate, here — and on our own turf, no less(!) — but here is his excellent run-down of the latest in the Organon Qui Tam/False Claims Act suit.
As we earlier reported, Organon’s lawyers tried to suggest that its own team’s due diligence review was so-completely defective, at the time Schering was negotiating to acquire Organon, last summer, that Schering should not be seen as a “sucessor” to the Organon businesses. WHAT?! Within twelve days of that Schering filing, Schering chose to switch its law firms, mid-stream in the Organon matter. . . .
Let’s turn to some of the juicier tidbits from Dr. Feldstein’s latest filing:
. . . .It is simply inconceivable that the defendant pharmaceutical companies are even suggesting that the sale of Raplon, which was approved by the FDA and disseminated for widespread use by physicians and hospitals both nationally and internationally, did not result in claims for reimbursement being submitted to Medicare and Medicaid in connection with its use. . . . [Page 25]
. . . .Furthermore, when deciding a 12(b)(6) motion, the court must accept all of the allegations in the complaint as true and must give the plaintiff “the benefit of every favorable inference that can be drawn from those allegations.” Caldwell Trucking, 890 F. Supp. at 1252; see also Erickson, 127 S.Ct. 2197 at 2200. Rule 12(b)(6) does not permit a court to dismiss a complaint simply because it doubts the accuracy or validity of the factual allegations. Caldwell Trucking, 890 F. Supp. at 1252. “The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.” Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). . . . [Page 26]
. . . .Defendants [Schering and Organon] also challenge the sufficiency of Dr. Feldstein’s allegation that Organon’s conduct caused the submission of false claims to the United States Government. Dr. Feldstein has specifically alleged that Organon obtained an invalid approval for Raplon by misrepresenting or concealing information about Raplon from the FDA. This, in turn, caused physicians to administer Raplon to patients and to submit (along with patients and hospitals) reimbursement claims to Medicare and Medicaid for a drug that should have never been approved. The allegations adequately plead the causation element; Dr. Feldstein need not actually prove that element at this stage of the litigation. In fact, United States ex rel. Franklin v. Parke-Davis, 147 F.Supp.2d 39, 46 (D.Mass.2001), rejected the same “lack of causation” argument in a similar context.
In Franklin, the relator alleged that a pharmaceutical company caused doctors to prescribe medication for unapproved uses and then submitted false claims for payment to Medicaid. The defendant pharmaceutical company claimed that the Relator had failed to adequately plead that its actions caused the physicians to submit false claims. The Court addressed that argument as follows:
Defendant argues that Relator has not stated a claim because he has not accounted for the independent actions of the physicians who wrote the off-label prescriptions and the pharmacists who accepted and filled the off-label prescriptions. In other words, Defendant argues that — as a matter of law — Relator’s allegations cannot establish the causation requirement of the FCA because the actions of these professionals were an intervening force that breaks the chain of legal causation. See [United States ex rel. Cantekin v. University of Pittsburgh], 192 F.3d 402, 416 (3d Cir. 1999)] (applying intervening cause analysis to claim under the FCA). Under black letter law, however, such an intervening force only breaks the causal connection when it is unforeseeable. See id. Accord D. Dobbs, et al., Prosser and Keeton on Torts § 44, at 303-04 (5th ed. 1984) (“The courts are quite generally agreed that [foreseeable intervening forces] will not supersede the defendant’s responsibility.”); Restatement (Second) of Torts § 443 (1965) (“The intervention of a force which is a normal consequence of a situation created by the actor’s . . . conduct is not a superseding cause of harm which such conduct has been a substantial factor in bringing about.”). In this case, when all reasonable inferences are drawn in favor of the Relator [Dr. Feldstein], the participation of doctors and pharmacists in the submission of false Medicaid claims was not only foreseeable, it was an intended consequence of the alleged scheme of fraud.
. . . .Finally, Defendants assert that Dr. Feldstein has not adequately plead that Schering is liable as Organon’s successor-in-interest. Dr. Feldstein has alleged that “Schering acquired Organon and succeeded to its rights and liabilities.” (Amended Complaint ¶ 25). Schering does not deny that it acquired Organon and has even identified Organon in its Rule 7.1 Disclosure Statement as “an indirect wholly-owned subsidiary of Schering-Plough Corporation, a publicly held corporation established under the laws of the State of New Jersey.” The Amended Complaint alleges that Schering acquired Organon and that fact appears undisputed. The acquisition of one company by another is the key predicate for a determination of successor liability and that has been established here. See, e.g, Pennsylvania Dep’t of Envtl. Prot. v. Concept Scis., Inc., 232 F. Supp. 2d 454, 461 (E.D. Pa. 2002)(interpreting Pennsylvania law and finding that “alleging that a defendant is a corporate successor is sufficient to survive a motion to dismiss.”). Defendants [Schering and Organon] cannot seriously assert that the statement does not provide them with adequate notice of the successor liability claim and the ground upon which it is based. The facts that will ultimately determine the validity of that claim are within Schering’s possession.
For these reasons, this Court should deny Defendants’ motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). . . .
In other words, as to this last little bit — Dr. Feldstein’s law firm is saying — “this does not pass the ’straight face’ test” — those Schering lawyers cannot even utter it aloud, in open court, in front of Judge Cavanaugh, without (unsucessfully, I might add) suppressing smirks — smirks, of their own incredulity. . . .
I’ll explain the significance of the rest of the above snippets, and add to my commentary later today — but, for now, other duties beckon.
However, also during the day, do check the comments over at Ed’s, as well — as there will be new matter there, to boot, no doubt!