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State, v. Abbvie Inc.

United States District Court, N.D. California

July 25, 2019

STATE OF CALIFORNIA et al., Plaintiffs,
ABBVIE INC., Defendant.



         This case was originally filed in Alameda Superior Court, and alleges a campaign of kickbacks and other inducements by defendant AbbVie Inc. to inflate sales of its Humira drug, which is used to treat autoimmune disorders such as arthritis and colitis. See Dkt. No. 1-1.[1] The complaint is based on AbbVie's conduct in California with California patients and California healthcare providers. Plaintiffs are the State of California, by and through the California Insurance Commissioner (“Commissioner”), and relator-plaintiff Lazaro Suarez. The complaint states a single claim under the California Insurance Frauds Prevention Act, which prohibits the use of “runners, cappers, steerers, or other persons to procure clients or patients to perform or obtain services or benefits” covered by insurance. Cal. Ins. Code § 1871.7(a) (“IFPA”).

         AbbVie removed the case to this Court on the argument that it has complete diversity with Suarez and that the State of California should be disregarded as a nominal party for jurisdictional purposes. Dkt. No. 1 at 2-3. Plaintiffs now ask for the matter to be remanded to state court. Dkt. No. 47. The Court finds that the State of California is a real party in interest and that the case was removed improvidently and without jurisdiction. It is remanded to the Superior Court. 28 U.S.C. § 1447(c).


         AbbVie is a biopharmaceutical company incorporated in Delaware and headquartered in Chicago, Illinois. Dkt. No. 1-1 ¶ 31. Suarez is a registered nurse and former AbbVie employee, and has sued as a whistleblower based on his experiences as a “nurse educator” and “patient ambassador” with the company. Id. ¶ 23. Suarez lives in Florida and alleges that he helped train AbbVie personnel in California. Id.

         The State of California and Suarez have sued AbbVie only for its conduct in California. As alleged in the complaint, AbbVie pursued two illicit schemes to pump up the sales of Humira in California. One scheme involved “classic kickbacks” in the form of substantial cash payments, gifts, trips and vacations, meals at “fancy restaurants” and wineries, and other bribes given to California healthcare providers, including providers employed by the University of California. Dkt. No. 1-1 ¶¶ 82-156. While the sufficiency of the complaint is not in question for the remand motion, the detailed kickback allegations are all the more striking in that they feature evidence gleaned from AbbVie's own emails and records, and the testimony of confidential witnesses. See, e.g., id. ¶¶ 129-36. The complaint alleges that the kickback scheme succeeded in getting healthcare providers in California to order Humira “far in excess of the amount that they would have prescribed” without the bribes. Id. ¶ 1.

         The other scheme took the form of AbbVie's “Ambassador Program, ” which was a network of nurses AbbVie made available at no cost to healthcare providers who prescribed Humira for their patients. Id. ¶¶ 48-49. A central theme of the complaint is that AbbVie used the Ambassador Program to start and keep patients on Humira under the guise of providing skilled nursing services to them. The “ambassadors” would develop relationships with doctors and patients to increase sales of Humira by handling insurance authorizations and claims, appealing denials of coverage by insurers, guiding patients to enroll in insurance plans that paid for Humira, and other tactics to ensure coverage of Humira prescriptions for commercially insured patients. Id. ¶¶ 52-81. Plaintiffs contend that the Ambassador Program was “wildly successful” and “dramatically increased the number of prescriptions for Humira that are filled and refilled” in California. Id. ¶¶ 54, 61.

         Plaintiffs say that these illicit sales practices were particularly pernicious because Humira is an expensive drug with serious potential health hazards. The complaint alleges that Humira is subject to a “boxed warning” condition, which requires AbbVie to state in a bold-print box that Humira is associated with “serious infections and malignancies” such as tuberculosis and T-cell lymphoma. Id. ¶¶ 4, 46. The complaint also alleges that AbbVie made over $12 billion in Humira sales in 2017 alone. Id. ¶ 44. With respect to California, it alleges that insurers paid approximately $1, 290, 000, 000 to cover 274, 000 claims for Humira prescriptions by California patients between 2013 and 2018. Id. ¶ 45.

         On the basis of these and other factual allegations, the State of California and Suarez have brought a single claim against AbbVie for insurance fraud under the IFPA. Section 1871.7 of the IFPA makes it unlawful to use “runners, cappers, steerers, or other persons to procure clients or patients to perform or obtain services or benefits . . . under a contract of insurance or that will be the basis for a claim against an insured individual or his or her insurer.” Cal. Ins. Code § 1871.7(a). Violations are subject to a “civil penalty of not less than five thousand dollars ($5, 000) nor more than ten thousand dollars ($10, 000), plus an assessment of not more than three times the amount of each claim” paid by an insurer. Id. § 1871.7(b). Equitable and injunctive relief may also be ordered. Id.

         The IFPA authorizes the Commissioner to bring an action. Id. § 1871.7(d). It also allows for an “interested person” to bring a qui tam action “for the person and for the State of California” and “in the name of the State.” Id. § 1871.7(e)(1). If a qui tam case is initiated, the Commissioner may intervene to assume the prosecution of the action. Id. § 1871.7(e)(4)(A).

         That is what happened here. The State of California exercised its right to intervene by and through the Commissioner. Dkt. No. 1-1 ¶¶ 8-10. Suarez is staying on as a relator-plaintiff, but the Commissioner has “primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action.” Cal. Ins. Code § 1871.7(f)(1).

         The IFPA provides for an allocation of the civil penalties and assessments plaintiffs recover if they prevail in court or settle favorably with AbbVie. Id. § 1871.7(g)(1)(A)(iii). Relator Suarez is entitled to reasonable attorney's fees and costs, and up to 40% of the monetary recovery. Id. § 1871.7(g)(1)(A)(iii)(I), (IV). The Commissioner also gets attorney's fees and costs, and at least 60% of the monetary recovery, and possibly more depending on the allocation to the relator. Id. § 1871.7(g)(1)(A)(iii)(II), (IV). The money allocated to the Commissioner must be paid to the General Fund of the State of California and used to fund fraud investigations and prevention efforts by the California Department of Justice and Department of Insurance. Id. § 1871.7(g)(1)(A)(iv).


         I.LEGAL ...

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