Supreme Court eyeing Takeda whistleblower drug suit

Takeda Pharmaceutical headquarters in Tokyo.
Kiyoshi Ota | Bloomberg | Getty Images

A drug company worker accusing his employer of encouraging excessive dosage in heartburn medication prescriptions faces a last-ditch fight at the U.S. Supreme Court—whose decision could dramatically affect the chances of future whistleblower claims.

At the heart of the long-shot petition by Takeda Pharamceuticals sales rep Noah Nathan is the question of how much evidence whistleblowers must have on hand when they file lawsuits claiming the federal government has been defrauded. That question has been the subject of disagreements between federal appeals courts in rulings on other cases.

If Nathan convinces the Supreme Court to hear his appeal—and if it ultimately rules in his favor—he and other whistleblowers could have an easier time pursuing their claims than they currently do. That could in turn boost their potential to recover monetary damages for the government and themselves, lawyers said.

This week, Nathan's attorneys are set to answer a recent recommendation by the solicitor general—who argues on the federal government's behalf before the high court—that the Supreme Court not hear Nathan's appeal of a lower-court dismissal of the suit related to Takeda's medication Dexilant.

The solicitor general argued Nathan's case is not the right case to use to settle the lower courts' difference of opinion.

Nathan's action is "a very significant issue for defendants," said Douglas Hallward-Driemeier, a lawyer who heads the Supreme Court practice for Ropes & Gray, and who previously served as an assistant to the solicitor general.

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Hallward-Driemeier, who is not involved in Nathan's case, said he expects that if the suit prevails "you would see a lot more claims that aren't valid" being allowed to be pursued in federal court. That in turn would give plaintiffs the opportunity to conduct discovery to uncover additional evidence before trial, he said.

Hallward-Driemeier said that because discovery proceedings are "an extremely costly proposition for defendants," it could lead to more claims being settled before going to trial regardless of the merits of a case. He said there should be "a relatively high bar" that whistleblowers meet before being allowed to pursue a complaint.

But Nathan's appeals lawyers Jeffrey Lamken and Michael Patillo argue they have assembled enough evidence to meet the standard for whistleblower cases.

"Takeda's marketing practices caused physicians to unwittingly prescribe Dexilant at double the dose indicated for heartburn, potentially endangering the health of many American patients," said Bonnie Nathan. She is Noah's wife and a lawyer who has been involved in the litigation since it began in 2009.

According to Bonnie Nathan, the Supreme Court must make it clear that there was enough evidence, or it could seriously hamper the legitimate claims of others.

"This case is about ensuring that the courts do not make it more difficult for drug companies to be held accountable when they engage in such deceptive marketing schemes," she said.

Source: Takeda

Noah Nathan claims there is strong statistical evidence that doctors have been incorrectly prescribing the heartburn medication Dexilant—previously known as Kapidex—overwhelmingly in 60-milligram doses, instead of in the 30-mg dosage that the Food and Drug Administration has approved for heartburn treatment.

In fact, he claims about 93 percent of all Dexilant prescriptions were for the 60-mg dose, when the 30-mg dosage should be being prescribed at a rate 10 times that of the higher dose.

Nathan argues that disparity is directly a result of an allegedly "deceptive marketing campaign" by Takeda, which "exclusively" gave doctors samples in the 60-mg format in a bid to capture a share of the multibillion-dollar heartburn drug market, court papers said.

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Nathan claims heartburn patients thus were unnecessarily exposed to risk of bone fractures and other side effects that can occur from the 60-mg dosage. The higher dosage is approved by the FDA for healing a rarer condition, known as erosive esophagitis, which is caused by heartburn.

But Nathan's lawyers say Takeda was motivated to aggressively market the 60-mg dosage because the company believes it is more effective for alleviating heartburn, and thus more likely to be used and purchased by patients.

Noah Nathan's court filings include affidavits from doctors, among them former American Medical Association President Dr. Richard Corlin, saying they prescribed Dexilant in 60-mg doses primarily because that was the dosage in the samples given them by Takeda.

"Because of Takeda's marketing of 60 mg Kapidex, including the exclusive sampling of 60 mg Kapidex, I was not aware Kapidex had a 30 mg dose," Corlin said in his affidavit.

As a result, Nathan alleges there were widespread false claims made to the U.S. government in the form of Medicare prescription reimbursement requests for Dexilant.

While there is no difference in price between the two dosages of Dexilant—which last week cost about $205 for a month-long supply at a New York pharmacy—Nathan's argument is based on the idea that because 60-mg dosages aren't approved for treating conventional heartburn, then Medicare should not be sent claims for such "off-label" prescriptions in that dosage.

A Takeda spokewoman, in an email response to CNBC's request for comment, said, "Because this matter is pending in court, it would not be appropriate for Takeda to comment on the specific allegations in the lawsuit."

Noah Nathan
Source: Noah Nathan | LinkedIn

"Takeda's marketing and sales materials go through a rigorous medical, regulatory and legal review process. Takeda markets all of its products, including Dexilant ... based on their U.S. Food and Drug Administration (FDA) approved indications," the spokeswoman wrote.

There is no record of the FDA taking action against Takeda in connection with Nathan's claims, according to an agency spokeswoman.

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Despite being filed nearly five years ago, the merits of Nathan's allegations against Takeda have never been ruled on by a judge or a jury. Instead, a federal judge in Virginia has twice dismissed his lawsuit on the grounds that the complaint, as written, did not cite enough grounds required for a whistleblower action.

Most recently, in the 2011 dismissal, the judge said that Nathan's complaint had failed to cite specific cases in which it is known that a false claim was presented to the government, or that Takeda's marketing of the drug caused such false claims to be made to the government.

The U.S. Fourth Circuit Court of Appeals last year upheld the lower court's dismissal of the case.

That left Nathan one last option: asking the Supreme Court to hear an appeal of the dismissal, a request that on average has just a 1-in-100 chance of succeeding.

In a brief asking for such a review, his lawyers argued that the complaint cited sufficient evidence of false claims, because of the combination of statistical data showing Dexilant being prescribed at 60-mg rates far in excess of what should be the case, along with their citation of 98 specific cases in which prescriptions in that dosage by doctors were submitted for Medicare reimbursement.

In other words, because there are such a high rate of likely "off-label" prescriptions of Dexilant overall, it is reasonable to believe that some or most of the specific prescriptions cited are also for off-label uses.

Last fall, after Takeda filed a brief opposing such a review, the Supreme Court asked the solicitor general to weigh in on the case.

On Feb. 25, the solicitor general argued against the case being heard, saying it "is not a suitable vehicle for resolving the question being presented" because it was properly dismissed by the lower court. The solicitor general suggested that other, pending cases in lower courts could offer the Supreme Court better opportunities to settle the issue.

Nathan's lawyers are expected to file their reply to the solicitor general later this week. At some point thereafter, the high court will either decide to take the appeal, and set a date for oral arguments, or refuse to hear the case, which would effectively end it.

By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan.