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U.S.A. ex rel. Barrett v. Allergan, Inc.

United States District Court, C.D. California

September 24, 2019

U.S.A. ex rel. Terrance Barrett
Allergan, Inc.

          Present:The Honorable James V. Selna, U.S. District Court Judge.


         Proceedings: [IN CHAMBERS] Order Regarding Motion to Dismiss

         Defendant Allergan, Inc. (“Allergan”) filed a motion to dismiss Relator’s Second Amended Complaint (“SAC”). Mot., Dkt. 40. Relator Terrance Barrett (“Barrett”) opposed the motion. Opp’n., Dkt. 43. Barrett replied. Reply, Dkt. 44.

         For the following reasons, the Court DENIES the motion.

         I. Background

         Barrett filed his Complaint on February 6, 2018. Dkt. 1. The United States Government declined to intervene on October 24, 2018, and on November 1, 2018, the Court ordered that the complaint be unsealed. Dkt. 18. The initial complaint asserted two claims for relief under the federal False Claims Act (“FCA”) and 30 analogous state and local false claim statutes. Dkt. 1. Barrett amended his complaint on August 22, 2018 and again on June 4, 2019. Dkt. 15, 29. The SAC alleges one claim under the FCA and 29 analogous state and local false claim statutes. SAC, Dkt. 29.

         Allergan develops, manufactures, and sells pharmaceuticals. SAC, Dkt. 29, ¶ 14. During the time period at issue, Allergan manufactured and sold the prescription drug Botox. Id. at ¶ 15. Barrett was employed as a Regional Sales Manager for Allergan from 2008-2018. Id. at ¶ 11. In order to be reimbursed for Botox, providers must first purchase Botox from Allergan and once they use the product, bill the patient, the Government, or insurers. Id. at ¶ 17. The rate the Government pays is determined by the Average Sales Price (“ASP”), a statutorily defined calculation. Id. at ¶¶ 16-18. Barrett alleges that Allergan is required to include both therapeutic and cosmetic sales in their ASP. Id. at ¶¶ 18-20; 22-23. Manufacturers are also required to report the drug’s average manufacturers price (“AMP”) and “Best Price” to the Government on a quarterly basis. Id. at ¶ 28.

         Barrett alleges that Allergan failed to report to the Government the accurate prices for Botox, thereby causing the Government to overpay for the drug. Id. at ¶ 1. Barrett contends that Allergen provided physicians with free products and cash rebate programs which effectively reduced the drug price for private providers, while Allergan failed to report the value of the programs in its price reporting obligations, thereby elevating the price of Botox reported and paid by the Government. Id. at ¶ 3. Allergan is alleged to have provided free Botox through (1) “new patient and provided training programs” in connection with it’s breast implant product, Natrelle Gel; (2) bundled deals with Natrelle Gel implants and Juvederm; and (3) condoning abuse of Botox-related programs in response to physician demand including the “Brilliant Distinctions” customer rewards program. Id. at 4. Barrett also alleges that providing reduced-price Botox and Natrelle Gel implants constituted unlawful kickbacks to induce prescriptions. Id. at ¶ 5.

         On June 4, 2019, Allergan filed the subject Motion to Dismiss. Mot., Dkt. 40.

         II. Legal Standard

         A. Motion to Dismiss: Fed.R.Civ.P. 12(b)(6)

         Under Rule 12(b)(6), a defendant may move to dismiss for failure to state a claim upon which relief can be granted. A plaintiff must state “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has “facial plausibility” if the plaintiff pleads facts that “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         In resolving a 12(b)(6) motion under Twombly, the Court must follow a two-pronged approach. First, the Court must accept all well-pleaded factual allegations as true, but “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. 678. Nor must the Court “‘accept as true a legal conclusion couched as a factual allegation.’” Id. at 678-80 (quoting Twombly, 550 U.S. at 555). Second, assuming the veracity of well-pleaded factual allegations, the Court must “determine whether they plausibly give rise to an entitlement to relief.” Id. at 679. This determination is context-specific, requiring the Court to draw on its experience and common sense, but there is no plausibility “where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct.” Id.

         B. False Claims Act (“FCA”)

         Under the FCA, 31 U.S.C. § 3729, et seq., any person or entity who “knowingly presents . . . a false or fraudulent claim for payment” to the United States government is liable for civil penalties. 31 U.S.C. § 3729(a)(1)(A); United States ex rel. Biddle v. Bd. of Trs. of Leland Stanford, Jr. Univ., 161 F.3d 533, 535 (9th Cir. 1998). “Knowing” and “knowingly” “(A) mean that a person, with respect to information–(i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information; and (B) require no proof of specific intent to defraud.” 31 U.S.C. § 3729(b)(1). “Congress enacted the [FCA] to ‘enhance the Government’s ability to recover losses sustained as a result of fraud against the Government.’” United States ex rel. Barajas v. Northrop Corp., 5 F.3d 407, 409 (9th Cir. 1993) (quoting S.Rep. No. 345, 99th Cong., 2d Sess. 1 (1986)). “The FCA allows private individuals, referred to as ‘relators, ’ to bring suit on the Government’s behalf against entities that have ...

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