Pharmaceutical & Life Sciences News

Drug Patents Face New Scrutiny in Novel False Claims Lawsuits

Jan. 7, 2020, 10:45 AM

Drug companies that allegedly defrauded the government to extend monopolies on brand name drugs face novel legal challenges under the False Claims Act from a patent lawyer who says the cases are a new front in the battle over pricey medications.

Zachary Silbersher, of Kroub Silbersher & Kolmykov PLLC in New York, alleges that Allergan Plc, Janssen Pharmaceutica, and Valeant Pharmaceuticals International Inc. defrauded the Medicaid and Medicare systems and maintained monopolies on products by misrepresenting claims to the U.S. Patent and Trademark Office.

All three cases will be in court this year, and a win for Silbersher could change the way drugmakers approach follow-on patents, which extend exclusivity for the same product by giving it a slightly altered formula or method of administration. At stake is the question of whether that common practice in the pharmaceutical industry constitutes a false claim if the patents were obtained fraudulently.

Silbersher decided to bring the cases in his role as a patent attorney after discovering multiple instances in patent and court filings where he believed the companies were pursuing fraudulent patent extensions.

“One of the things we’re trying to achieve in these cases is attacking the problem [of high drug prices] at the core, which is how companies are using patents in a fraudulent way to perpetuate monopoly pricing,” Silbersher said. “Even if we were to succeed in one or two cases, I think the industry would take notice and would be a bit more rigorous in what they disclose to the Patent Office and how they go about getting patents.”

False Claims Act cases are common in the health-care industry where whistleblowers allege fraudulent Medicare claims by doctors or hospitals. Entities violate the False Claims Act when they obtain payment from the federal government based on misrepresentation or fraudulent schemes.

“I find this to be a very both novel but also compelling and creative potential use of the False Claims Act,” said Colette Matzzie, a whistleblower attorney and partner at Phillips & Cohen LLP, who is not involved in the case. “It’s absolutely correct, if the allegations are true, that there is an upstream fraud in a sense.”

The Cases

Silbersher is bringing cases against Allergan over its Namenda Alzheimer’s treatment; Janssen over its prostate cancer drug Zytiga; and Valeant over its ulcerative colitis drug, Apriso.

In each case, Silbersher alleges the companies obtained follow-on patents that weren’t warranted because the changes to the drugs were too minor or not eligible to be patented.

In the Allergan case, which is being heard in the U.S. District Court for the Northern District of California, Silbersher alleges the company fraudulently obtained a “follow-on” patent for the dementia drug Namenda XR and a patent for a variation called Namzaric. The whistleblower alleges the drugmakers switched from a version of Namenda that immediately released the drug to an extended release version, pulling the original version off the market once the new patent was in hand. That blocked generic drugmakers from creating a cheaper alternative.

“Allergan’s position, as fully set out in its motion to dismiss the complaint, is that the claims asserted by this plaintiff against it fail as a matter of law for several reasons and should be dismissed promptly and in their entirety,” Allergan spokeswoman Lisa Brown said in a statement.

A lawsuit in the U.S. District Court for the District of New Jersey argues that Johnson & Johnson and its Janssen unit had a fraudulent monopoly on Zytiga for four years thanks to a tweak to the drug’s formulation that the Patent Trial and Appeal Board later found was too obvious to patent.

“Janssen stands by its decision to defend the validity and infringement of the relevant patent,” company spokeswoman Michelle Larkin said in a statement.

In the case against Valeant, now owned by Bausch Health Companies Inc., Silbersher alleges that the company fraudulently obtained the patent for Apriso and as a result has held a monopoly on the drug, setting artificially high prices and defrauding Medicare and Medicaid.

Silbersher alleges that Valeant obtained a follow-on patent that extended exclusivity for 20 years after claiming it discovered a novel way to administer the drug without food. However, the company had previously participated in two scientific studies that showed the formulation of the drug would be effective without food.

That matters because information that is already publicly available or obvious to someone skilled in the given field is not patentable.

A spokeswoman for the company declined to comment. The case is being heard in the U.S. District Court for the Northern District of California.

Public Disclosure Hurdle

A major hurdle in the cases for Silbersher and his attorneys will be the public disclosure provision of the False Claims Act. The law prohibits whistleblowers from bringing a qui tam case—brought by a private individual on behalf of the government, which the Justice Department can choose to join—if the fraud has already been disclosed in certain ways, unless the person bringing the case has direct and independent knowledge of the information.

In such cases, courts must determine whether patent filings are public disclosure documents that would preclude Silbersher from bringing a qui tam action.

“The argument they’re facing here, and the pretty substantial hurdle, is the argument that all of this has already been disclosed in what could be considered public reports,” Matzzie said.

“The courts are going to focus on that technical jurisdictional question of whether these claims are publicly disclosed,” she added.

Several of the companies have argued in motions to dismiss that Silbersher failed to meet the public disclosure provision.

However, Nicomedes Sy Herrera, the lead attorney in the cases and a partner with Herrera Purdy LLP in San Francisco, notes that the Affordable Care Act changed the law to allow for more types of public disclosure to be used in such cases.

Under the ACA, plaintiffs can pursue a case if they flag documents like government accountability reports and other federal filings. Information obtained from a criminal, civil, or administrative proceeding in which the government isn’t a party is also fair game.

“The purpose was to encourage qui tam lawsuits, such as the one brought by Mr. Silbersher, to stop massive fraud on our healthcare system,” Herrera said. “So it would be incorrect, as the pharma companies have argued, to consider the record of those proceedings available on an electronic docket to be ‘federal reports’ that would disqualify an otherwise meritorious suit.”

To contact the reporter on this story: Valerie Bauman in Washington at vbauman@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Andrew Childers at achilders@bloomberglaw.com

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