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Allergan Kickback Claims Survive Provisional Stage

John Wood ("Wood") served as a senior territory manager for Allergan Inc. ("Allergan" or the "Company") from October 2008 through July 2010, during which time he became privy to the allegedly illegal practice of bribing physicians to prescribe Allergan drugs in exchange for $100 million worth of drug samples and other goods. Once Wood internally reported the purported misconduct to Allergan, his was terminated. Consequently, Wood brought a False Claims Act ("FCA") lawsuit on behalf of the federal government and 25 states.

Allergan argued that, because there had been two other FCA suits with the same allegations, Wood's suit should be blocked by the public disclosure bar and the first-to-file bar. In order to be a whistleblower, a relator must be able to provide information to the government that would not have already been known. Thus, the public disclosure bar prevents a person from pursuing claims that were publicly disclosed. The first-to-file bar requires that no other person, except the government, can intervene or bring a related action based on the facts underlying the pending action.

However, Judge Jesse M. Furman of the U.S. District Court of the Southern District of New York was unconvinced by Allergan's arguments. First, the previous cases were under seal and only the government had knowledge of the allegations. Therefore, the claims would not have been exposed to the public disclosure bar. Wood had amended and supplemented his claim after the previous suits were dismissed, which allowed his claims to survive the first-to-file bar. Despite Allergen arguing for a three-year statute of limitations, Judge Furman also extended the statute of limitations for Wood by up to 10 years, on the grounds that it was the government's fault for not unsealing the case for an extended period of time.

Allergan denied violating the Anti-Kickback Statute because free samples are allowed under the Prescription Drug Marketing Act. Again, Judge Furman rejected the Company's argument. Medicare does not cover eye drop drugs that are provided for the day of cataract surgery, which meant that physicians might not have been able to be reimbursed for the drugs. Allergan's samples and other "gifts" could have subsidized certain costs for physicians, which would increase their profits per surgery and constitute a violation of the Anti-Kickback Statute.

Ultimately, Judge Furman dismissed some of Wood's state claims, but allowed the majority of his claims to proceed.

The legal team at SFMS has significant experience litigating FCA matters. If you have any questions regarding this subject or this posting, please contact Nick Lussier (nlussier@sfmslaw.com) or Chiharu Sekino (csekino@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

Shepherd, Finkelman, Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, And Pennsylvania. SFMS is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.

SOURCES

"Determining the Scope of FCA's Public Disclosure Bar," Law360. Last Modified on February 18, 2016.

Kass, Dani. "Allergan Must Face FCA Suit Over Drug Samples, Rx Pads," Law360. Last modified on April 3, 2017.

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