Posted June 8th, 2018.
By Dani Kass
Law360 (June 8, 2018, 3:35 PM EDT) — Roche Diagnostics Corp. and Humana Inc. must face a whistleblower’s False Claims Act suit accusing the drugmaker of getting its diabetes products back on the insurer’s Medicare Advantage formulary by forgiving a massive debt the insurer had racked up, an Illinois federal judge ruled Thursday.
U.S. District Judge Elaine E. Bucklo said former Roche account manager Crystal Derrick sufficiently alleged that the two companies knew the debt forgiveness deal was likely an illegal kickback, in part because they refused to consult a lawyer, and warned the whistleblower to keep the deal secret. Derrick is alleging that claims sent to the Centers for Medicare & Medicaid Services after the deal are fraudulent by nature, since they stem from a kickback, which the judge found persuasive.
“These allegations necessarily lead to the conclusion that Humana presented claims to CMS that were tainted by the alleged fraud,” the order states.
While Judge Bucklo denied the vast majority of the motion to dismiss, she did free Humana from retaliation claims, as Derrick was only an employee of Roche.
The allegations date back to March 2013, when Humana told Roche that it would be ending their contract and taking Humana’s products off the formulary for its mail-order pharmacy, RightSource. The termination was “a significant blow” to Roche, the suit states.
Derrick worked for Roche at the time, helping to oversee its account with the insurer.
Two months later, Derrick discovered that Humana had been out of compliance with their formulary agreement, leading to Roche paying rebates that it hadn’t been required to pay, the suit says. Humana agreed that Roche had overpaid and asked the drugmaker to qualify that amount.
In June, Roche’s finance department placed that number at $45 million, but the company decided to use the owed money as leverage to instead get back into business with Humana, according to the whistleblower.
After a series of negotiations, during which Humana didn’t bring in promised lawyers or auditors, Roche was back on the formulary and Humana was set to pay up to $11 million to settle the debt, the suit says.
Derrick raised concerns about the legality of the deal to her bosses and was then fired shortly after the deal went into effect that December, she alleges. While the company said her firing was based on a mistake two months before, she alleges the company was responding to the concerns she raised.
She sued in June 2014, and the complaint was unsealed in May 2017 after the federal government declined to intervene.
Humana and Roche moved to dismiss the entire suit, in part arguing that Derrick never pointed to any specific claims submitted to CMS. But Judge Bucklo said the whistleblower alleged enough to show there was likely a fraud and that claims were made, and that more detailed information can be found in discovery.
The judge noted that Derrick wouldn’t have access to Humana’s CMS claims, given that she worked for Roche.
“Discovery may ultimately reveal a benign motive behind these individuals’ alleged conduct, but the complaint need not ‘exclude all possibility of honesty in order to give the particulars of fraud,’” the order states.
Derrick’s attorney, Inayat Ali Hemani of Sanford Heisler Sharp, said in a statement Friday that “we are very pleased with the court’s decision to allow this case to go forward. We expect that the discovery process will further document the back-room dealing between Roche and Humana.”
Representatives for Roche and Humana declined to comment.
The relator is represented by Jamie S. Franklin of The Franklin Law Firm LLC and Ross B. Brooks, Inayat Hemani and Kevin H. Sharp of Sanford Heisler Sharp LLP.
Roche is represented by Thomas S. Crane, Kevin M. McGinty, Mackenzie A. Queenin and Brendan J. Lowd of Mintz Levin Cohn Ferris Glovsky and Popeo PC and David J. Stetler of the Law Offices of David J. Stetler LLC.
Humana is represented by Scott C. Solberg of Eimer Stahl LLP and John E. Kelly and Brian R. Iverson of Bass Berry & Sims PLC.
The case is Crystal Derrick v. Hoffman-La Roche LTD,et al, case number 1:14-cv-04601, in the U.S. District Court for the Northern District of Illinois.
–Editing by Dipti Coorg.