$1.2 Billion Medicaid Fraud Penalty Award Reversed And Claim Dismissed In Arkansas Appeal

Author:Mr Kenneth J. Wilbur
Profession:Drinker Biddle & Reath LLP

In another decision narrowing the scope of state Medicaid fraud statutes, on March 20, 2014, the Supreme Court of Arkansas, in Ortho-McNeil-Janssen Pharmaceuticals, Inc. v. State of Arkansas, No. CV-12-1058, unanimously reversed and dismissed a $1.19 billion award under the Arkansas Medicaid Fraud False Claims Act (MFFCA), and reversed and remanded for a new trial a related $11.4 million award under the Arkansas Deceptive Trade Practices Act (DTPA). In reversing a Medicaid fraud claim predicated on statements not made in the context of an actual claim for payment from Medicaid, the Arkansas decision parallels the Supreme Court of Louisiana's decision in Caldwell ex rel State of Louisiana v. Janssen Pharmaceutical, Inc., (No. 2012-C-2447, No. 2012-C-2466), see related article.

The Arkansas decision turned on the interpretation of Ark. Code Ann. § 20-77-902, which provides:

A person shall be liable to the State of Arkansas, through the Attorney General, for a civil penalty and restitution if he or she: ... (8) Knowingly makes or causes to be made or induces or seeks to induce the making of any false statement or representation of a material fact: (A) With respect to the conditions or operation of any institution, facility, or entity in order that the institution, facility, or entity may qualify either upon initial certification or upon recertification as a hospital, rural primary care hospital, skilled nursing facility, nursing facility, intermediate care facility for the mentally retarded, home health agency, or other entity for which certification is required; or (B) With respect to information required pursuant to applicable federal and state law, rules, regulations, and provider agreements[.]

The State alleged that Janssen had violated a general FDA labeling regulation, 21 C.F.R. § 201.57(e), by including in a "Dear Health Care Provider" letter information that was inconsistent with Risperdal's approved package insert. Despite having stipulated that it had no evidence that a single prescription had been written or dollar of Medicaid funds spent as a result of the alleged falsity, the State argued that Janssen had made a false statement "with respect information required pursuant to applicable federal ... regulations," under § 20-77-902(8)(B). The $1.19 billion trial award was predicated on imposing a $5000 penalty for each of the 238,874 prescriptions written or refilled during the relevant time period.

The unanimous 7-0 decision on the MFFCA claim...

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