District Court Holds Corporate Integrity Agreement Obligations May Create "Reverse" FCA Liability in Cephalon Case

Last week, U.S. District Court Judge Thomas O’Neill of the Eastern District of Pennsylvania denied Cephalon’s motion to dismiss False Claims Act allegations brought by three former employees. Bruce Boise, Keith Dufour, and Andrew Augustine, joined by the United States, alleged that Cephalon promoted two drugs, Provigil and Nuvigil off-label (view the third amended complaint here). The complaint had additional weight due to the fact that Cephalon was under a Corporate Integrity Agreement during the alleged illegal conduct, which outlined “Stipulated Penalties for Failure to Comply” with a variety of compliance obligations. The CIA includes, for example, a “$5,000 penalty for each false certification” made pursuant to required reports. The whistleblowers alleged that by not reporting off-label promotion Cephalon violated its CIA obligations and, thus, the “reverse” False Claims Act.  “Reverse" false claims are situations where the alleged loss to the government did not result from an improper payment to a manufacturer (i.e. where prescriptions are wrongly reimbursed under Medicare), but where the government is entitled to payments from the manufacturer. In this case, the relators alleged that Cephalon made reverse false claims by falsely certifying compliance with the CIA’s reporting requirements. The company did this to avoid its obligation to pay penalties under the agreement, the complaint alleged.   In 2008, Cephalon (since ...
Source: Policy and Medicine - Category: American Health Authors: Source Type: blogs