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United States ex rel Kennedy v. Aventis Pharmaceuticals

April 20, 2009


The opinion of the court was delivered by: Matthew F. Kennelly, District Judge


Relators Katy Kennedy and Frank Matos have filed this qui tam action against Aventis Pharmaceuticals, Inc. on behalf of the United States and the State of Illinois under the False Claims Act, 31 U.S.C. § 3730(b) (FCA), and the Illinois Whistleblower Reward and Protection Act, 740 ILCS 175/4(b) (IWRPA). Kennedy has also made a claim on her own behalf against Aventis, claiming retaliation in violation of the Illinois Whistleblower Act, 740 ILCS 174/20. Aventis asks the Court to dismiss the qui tam claims in relators' fourth amended complaint pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) and to decline supplemental jurisdiction over Kennedy's state law claim.

On December 10, 2008, the Court granted Aventis's motion to dismiss the FCA claims in relators' third amended complaint for failure to state a claim. The Court stated that it would convert the order into a final judgment unless relators filed a proposed fourth amended complaint that satisfied Rules 9(b) and 12(b)(6). Relators filed a fourth amended complaint on December 31, 2008. Aventis has again moved to dismiss. For the following reasons, the Court grants Aventis's motion in part and denies it in part.


When considering a motion to dismiss for failure to state a claim, the Court accepts as true the facts alleged in the complaint and draws all reasonable inferences in favor of the plaintiff. Newell Operating Co. v. Int'l Union of United Auto., Aerospace, and Agr. Implement Workers of Am., 538 F.3d 583, 587 (7th Cir. 2008).

Relators allege that Aventis aggressively marketed its prescription drug Lovenox to medical providers to induce them to prescribe it for "off-label" uses -- in other words, uses for which it had not been approved by the Food and Drug Administration. Charges for off-label prescriptions, relators allege, are not properly reimbursable under the Medicare program. They allege that by promoting off-label use of Lovenox, Aventis knowingly caused hospitals to submit false claims for Medicare reimbursement. Relators also allege that Aventis made payments to hospitals and to Ben Muoghalu, a pharmacist at Provena St. Joseph Medical Center and a member of that hospital's pharmacy formulary committee, to encourage them to prescribe Lovenox. Relators characterize these payments as illegal kickbacks. The Court will discuss the pertinent details of relators' allegations in the body of this decision.


The FCA imposes civil liability on "[a]ny person" who "knowingly presents, or causes to be presented, to . . . the United States . . . a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a)(1). To establish a claim under this section, a relator must prove that there was a false or fraudulent claim; the defendant knew the claim was false; and the defendant presented the claim or caused it to be presented to the United States for payment or approval. United States ex rel. Fowler v. Caremark Rx, LLC, 496 F.3d 730, 740-41 (7th Cir. 2007).

A person also violates the FCA if he "knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved." 31 U.S.C. § 3729(a)(2). To establish a claim under this provision, a relator must prove that the defendant made, or caused someone to make, a statement to receive money from the government; the statement was false; and the defendant knew it was false. See Fowler, 496 F.3d at 741. If the claim under section 3729(a)(2) is premised upon a false certification of regulatory compliance, the relator must also prove that the certification was a condition of or prerequisite to payment by the government. United States ex rel. Crews v. NHS Healthcare of Ill., Inc., 460 F.3d 853, 858 (7th Cir. 2006); United States ex rel. Gross v. AIDS Research Alliance-Chicago, 415 F.3d 601, 604 (7th Cir. 2005).

The FCA "is an anti-fraud statute and claims under it are subject to the heightened pleading requirements of Rule 9(b)." Fowler, 496 F.3d at 740. Rule 9(b) requires a party to "state with particularity the circumstances constituting fraud . . . ." Fed. R. Civ. P. 9(b). This means that the complaint must allege "the who, what, when, where and how" of the alleged fraud. Gross, 415 F.3d at 605 (quoting United States ex rel. Garst v. Lockheed-Martin Corp., 328 F.3d 374, 376 (7th Cir. 2003)).

A. Outlier Payments

The Medicare claims process, at least as relators describe it in their fourth amended complaint, appears rather complicated. The Court will attempt to simplify things to the extent possible.

The process for submitting claims for Medicare patients, relators allege, is entirely electronic. 4th Am. Compl. ¶ 22. Hospitals submit claims data to a "fiscal intermediary" on an electronic document called a Universal Billing (UB) form. Id. ¶¶ 22, 24. The claims data, relators allege, includes all pharmaceutical products dispensed to the patient. Id. ¶ 24.

Relators allege that when a Medicare patient is discharged, "procedure codes" are assigned and entered on the UB form to reflect the patient's treatment. The patient is also assigned a "diagnosis related group" (DRG) code that corresponds to her diagnosis. The DRG code is likewise recorded on the UB form. Id. ΒΆ 25. When the fiscal intermediary receives the UB form from the hospital, it extracts the relevant data, processes it, and determines the amount to be paid to the hospital. Id. ...

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