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Priority Pharmacy, Inc. v. Serono

January 5, 2010

PRIORITY PHARMACY, INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
SERONO, INC., A DELAWARE CORPORATION; SERONO LABORATORIES, INC., A DELAWARE CORPORATION, AND DOES 1 THROUGH 20, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge

TRANSFER VENUE AND ORDER DENYING MOTION TO GRANTING MOTION TO DISMISS

Defendants Serono, Inc. and Serono Laboratories, Inc. (collectively "Serono" or Defendants") have filed a motion to transfer venue, or, in the alternative, to dismiss Plaintiff's Complaint for failure to state a claim. For the reasons discussed below, Defendants' motion to transfer venue is DENIED and Defendants' motion to dismiss is GRANTED.

I. BACKGROUND

In this action, Plaintiff Priority Pharmacy, Inc., sues Serono for attorney's fees and costs in excess of $300,000 that it incurred in defending itself in United States ex. Rel. Driscoll, et al. v. Serono, Inc., et al., Case No. 00-11680, a qui tam action filed in the United States District Court of Massachusetts. The qui tam action concerned the alleged violation of federal and state law by Serono and certain pharmacies, including Plaintiff, in connection with the sale/purchase of Serono's AIDS treatment drug, Serostim.

Since the mid-1990s, Serono has manufactured and sold the drug Serostim, which is approved for the treatment of "wasting" associated with AIDS. Priority is a California San Diego-based pharmacy.

Following FDA approval of Serostim, Serono created a Specialty Provider Program/Preferred Provider Program ("SPP/PPP"). Pharmacies that participated in the program collected and provided Serono with data about their Serostim sales. Serono provided the participating pharmacies with a reduction in the price of Serostim to reimburse them for the extra work and costs incurred in providing the data to Serono.

Plaintiff participated in the SPP/PPP program from 1997 until January, 2001, when Serono terminated the program.

On August 17, 2000, the qui tam action was filed again Serono, alleging that Serono knowingly accepted payment or reimbursement from public and private health insurers that exceeded the reimbursement price for Serostim established by agreement between Serono and the FDA. Subsequently, the complaint was amended several times, adding claims against Serono for violations of federal law and the false claim acts of various states, adding as defendants pharmacies which participated in the SPP/PPP program, and adding claims that the pharmacy defendants violated the federal False Claim Act and state false claims acts.

The federal government conducted an investigation into Serono's promotion, marketing, and sales of Serostim. The United States eventually elected to intervene as to the federal claims against Serono, and Serono engaged in settlement negotiations with the federal government and the relators. In October, 2005, Serono, the government, and the relators entered into a settlement agreement under which Serono agreed to plead guilty to criminal charges and pay an amount exceeding $700 million to resolve all of the pending matters.

The United States elected not to intervene as to the federal claims against the pharmacy defendants. On August 19, 2007, Plaintiff brought a motion to dismiss the Fourth Amended Complaint upon various grounds. In an order dated March 18, 2008, the Massachusetts district court dismissed the Fourth Amended Complaint as against the pharmacy defendants on the ground that the relators had failed to plead fraud with particularity. (Plaintiff's RJN, Ex. 5.) The court explained: "These paragraphs outline a fraudulent scheme, but they fail to identify a single particular false claim submitted for payment by any of the pharmacy defendants to any governmental agency at any time. There are no details concerning such matters as the specific dates, content, identification numbers, or dollar amounts of false claims actually submitted." (Id.)

On May 29, 2009, Plaintiff commenced this action. Plaintiff seeks recovery of the attorney's fees and costs it incurred in its defense of the qui tam action. Plaintiff asserts claims for (1) equitable indemnification; (2) negligence; and (3) declaratory relief.

II. DISCUSSION

A. Motion to Transfer

Defendants contend that this case should be transferred to the Massachusetts district court pursuant to 28 U.S.C. ยง 1404(a). Upon review of the relevant factors, the Court concludes that Defendants have not satisfied ...


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