TEVA Agrees to Pay $54 Million to Settle McEldrew Young False Claims Act Qui Tam Whistleblower Lawsuit

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Attorney Eric. L. Young announced today that Teva Pharmaceuticals USA, Inc., Teva Neuroscience, Inc., and Teva Sales and Marketing, Inc. (hereinafter collectively referred to as “TEVA”) have settled allegations in a qui tam complaint filed by McEldrew Young, Attorneys-at-Law, and co-counsel, Shepherd, Finkelman, Miller & Shah, LLP (“SFMS”), on behalf of two relators, Charles Arnstein and Hossam Senousy, both of whom previously worked as sales representatives for TEVA.

The allegations in the qui tam complaint focused on a scheme to induce physicians to write prescriptions for the drugs Copaxone and Azilect by paying them as “speakers” or “consultants,” when, in reality, many of the programs at issue were sham events. As a result of TEVA’s allegedly illegal payments, the physicians prescribed Copaxone, which treats relapsing-remitting multiple sclerosis, and Azilect, which treats symptoms of Parkinson’s disease, and influenced other prescribers to do the same.

According to the complaint, physicians who participated in the alleged sham speaker programs wrote prescriptions for the two drugs that were filled at pharmacies across the country.  After filling and dispensing the prescriptions, the pharmacies then submitted claims for reimbursement to various government-funded health care programs.  The pharmacies’ claims resulted in payments by the government for prescriptions that were allegedly induced through fraud, i.e., TEVA’s alleged illegal payments to physicians who wrote the prescriptions.  Since TEVA’s actions allegedly caused the submission of false claims to the government via the dispensing pharmacies, those actions constituted violations of the False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733.

The complaint also alleged violations of the Anti-Kickback Statute (“AKS”), 42 U.S.C. § 1320a -7b, which, among other things, criminalizes “knowingly or willingly” offering or paying a person “remuneration,” in the form of  kickbacks, bribes, or rebates, to “induce” that person to “recommend” the purchase of a drug covered by a “Federal health care program.” 42 U.S.C. § 1320a-7b(b)(2).  Simply stated, the AKS prohibits a pharmaceutical manufacturer from offering, directly or indirectly, any remuneration to induce a physician to prescribe, or a Medicare patient to purchase, that manufacturer’s drugs.

The AKS was amended in 2010 to explicitly state that “a claim that includes items and services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].”  42 U.S.C. § 1320a-7b(g). Thus, a claim submitted to a government-funded health care program for a prescription drug in violation of the AKS also constitutes a violation of the FCA.  The 2010 amendments also reduced the standard for “intent” under the AKS, such that “a person need not have actual knowledge of [the AKS] or specific intent to commit a violation of [the AKS].”  42 U.S.C. § 1320a-7b(h).

Background

McEldrew Young and SFMS filed the original qui tam complaint on behalf of the relators in May 2013.  The complaint alleged that, beginning in 2003, TEVA provided bogus honoraria or speaking fees to physicians for participation in numerous sham speaker programs in connection with the drugs Azilect and Copaxone.

On November 18, 2014, the United States, along with the various state and municipal governments that were also named as plaintiffs in the complaint, notified the Court of their decision to decline intervention in the case.  On March 12, 2015, the Court issued an Order unsealing the complaint while confirming that the various governments had declined to intervene in the action.

Despite the governments’ decision against intervention, McEldrew Young and SFMS were not deterred in prosecuting the case on behalf of their clients, as well as the federal, state and municipal governments that suffered damages as a result of TEVA’s allegedly illegal practices. “Although we were faced with an adversary of disproportionate size and considerably greater resources, we remained steadfast and aggressively prosecuted the case based on our belief in our clients and the correctness of our position,” said Eric Young, managing partner of McEldrew Young’s whistleblower practice. McEldrew Young and SFMS were assisted during litigation by co-counsel David J. Caputo and Joseph Trautwein of Youman & Caputo, LLC, and Heidi A. Wendel of Heidi Wendel Law.

Summary Judgment Motion

On February 27, 2019, Chief U.S. District Judge Colleen McMahon issued a Memorandum Decision and Order denying TEVA’s motion for summary judgment in its entirety.  In a detailed, seventy-page opinion, Judge McMahon rejected numerous arguments asserted by TEVA and ruled that all allegations of TEVA’s FCA violations would proceed to trial on the merits, which was scheduled to start on August 19, 2019.

In dismissing TEVA’s assertion that the AKS required evidence of a quid pro quo arrangement, the Court found that the relators’ complaint raised a genuine issue of material fact as to whether TEVA had violated the AKS.  The Court also ruled that there was a genuine issue of material fact regarding the efficacy of TEVA’s compliance program.  Although TEVA’s written compliance polices had “all of the right language,” the Court noted that the existence of those policies had no bearing on whether TEVA actually adhered to them.

Settlement of Complaint Allegations

“This settlement helps ensure that when a physician chooses a prescription drug for his or her patient, that choice will be motivated solely by the best interests of the patient and not tainted by any improper financial considerations,” said Eric Young.  Mr. Young added, “We were inspired by the level of our clients’ commitment to hold TEVA accountable for its alleged misconduct.  Today’s result is also a victory for American taxpayers who are the ultimate victims when unscrupulous individuals and companies defraud the government, oftentimes with impunity.”

As the managing partner of McEldrew Young’s whistleblower practice, Eric Young has a distinguished track record of success.  Mr. Young has recovered more than $2 billion dollars for the government on behalf of his whistleblower clients. McEldrew Young represents whistleblowers from across the country and abroad.  Many whistleblower cases are brought under the False Claims Act, which allows a private individual, known as a relator, to file a lawsuit on behalf of the United States government against an individual or company that has perpetrated a fraud against the government.  If a relator successfully recovers funds on behalf of the government, he or she may receive a reward of up to twenty-five percent (25%) of the civil monetary recovery if the government intervenes, and up to thirty percent (30%) if the government declines to intervene, such as in this case.

Case citation: United States ex rel. Arnstein and Senousy v. Teva Pharmaceuticals USA, Inc., No. 1:13-cv-03702-CM-OTW (S.D.N.Y.)