Action Alleging Drug Company Kickback Scheme Is Revived

Friday, August 21, 2026

Page 3

Ninth Circuit:

Action Alleging Drug Company Kickback Scheme Is Revived

Opinion Says Judge Wrongly Found Public Disclosure Bar Prevented Whistleblower Claims Asserting That Doctors Were Paid to Push Pills Where Available Compensation Data Only Provided ‘Piece of Puzzle’

By a MetNews Staff Writer

A divided Ninth U.S. Circuit Court of Appeals has held that a judge wrongly dismissed claims filed by a Los Angeles area realtor and other parties accusing Regeneron Pharmaceuticals Inc. of implementing an illegal kickback scheme, by which doctors and their staff were allegedly renumerated to encourage prescriptions for certain medications controlled by the drugmaker, in violation of California and federal law.

Senior Circuit Judge Jay S. Bybee and Circuit Judge Ana de Alba signed Wednesday’s memorandum opinion, which concludes that District Court Judge John W. Holcomb of the Central District of California erred in finding that the plaintiffs’ False Claims Act (“FCA”) claims are barred by so-called “public disclosure bar,” found at 31 U.S.C. §3730(e)(4), because compensation data was published by the companies.

That section provides that a court “shall dismiss” an FCA action “if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed” through certain channels.

Saying that the realtors—former employees of the drugmaker who were statutorily authorized by the FCA to bring suit on behalf of the government and keep a percentage of any recovery—filled in key details necessary to the viability of the claims, Bybee and Alba declared:

“[T]he existence of the payments may have been public prior to Relators’ lawsuit, but all the most pertinent details…—those that constitute the alleged fraud and indicate Regeneron’s intent to unlawfully induce referrals—were not.”

Alternative Basis

Bybee and Alba rejected Regeneron’s assertion that Holcomb erred in denying an earlier motion to dismiss the Realtor’s FCA allegations on the alternative basis that they failed to state a claim on which relief could be granted, saying:

“Relators’ complaint is rife with factual allegations pleaded with sufficient particularity to survive Regeneron’s motion to dismiss….For example, Regeneron allegedly paid some doctors to stay at luxury hotels, while another doctor was reimbursed for a first-class plane ticket, both in violation of Regeneron’s own written policies. Relators even allege that some doctors were paid $10,595.10 for educational events that never occurred.”

Circuit Judge Kenneth K. Lee dissented, arguing that the plaintiffs’ allegations “fall short of stating a plausible claim” because they “consist of vague language without concrete examples” and rely on “correlation” information to assert that the defendants wrongly induced the doctors to write prescriptions for the drugs.

The dispute arose after two whistleblowers, Teá Damavandi, who worked for Regeneron in 2015 as a sales representative covering the greater Los Angeles area, and Naresha Moore, who worked at the company’s Tarrytown, New York headquarters between 2015 and 2018, filed a complaint against the drugmaker in November 2018, asserting claims on behalf of the U.S., California, and 29 other states based on the FCA and similar state statutes.

In the operative complaint, the plaintiff’s asserted that Regeneron, and related entities, aggressively marketed four of medications—Eylea (an eye disease remedy), Praluent (a cholesterol drug), Dupixent (an injection targeting eczema), and Kevzara (a shot that treats rheumatoid arthritis)—by making cash payments and other perks, like first-class tickets and luxury hotel stays relating to “sham” educational seminars, to doctors and their staff.

Plaintiffs’ Allegations

They alleged:

“For Eylea alone, 83 percent of doctors who prescribed $7 billion worth of the drug to Medicare patients received some form of remuneration from Defendants between 2013 and 2019….”

Noting that “Medicare and Medicaid require doctors to obtain prior authorization to…the costly and often unnecessary Covered Drugs in this case” to “guard against drug companies aggressively pushing drugs (on doctors),” they claimed that this is “not the typical” kickback case and added:

“[Sales representatives]…supplied the doctor offices with a free online proprietary tool-account (MyPraluent) that…allowed them to track and target doctors’ prescribing volume, and appeal government denials of prior authorizations. They also created canned medical justifications…; induced doctor office staff to accelerate prior authorizations; and gave patients free samples…when prior authorizations were denied.”

Motion to Dismiss

The defendants moved to dismiss the operative complaint in 2022 for failure to state a claim but the plaintiffs’ FCA claims against Regeneron survived the request.

On Sept. 1 2023, the defendant filed an answer and requested judgment on the pleadings, asserting for the first time that the surviving causes of action are precluded by the public disclosure bar.

Holcomb granted the request in July 2024, saying:

“Relators argue that the [publicly available] records ‘are far too generalized to shed any light on the true nature of the payments,’ but the Court disagrees. Those records are itemized by payments made to different doctors. Some records contain descriptions of the payments, such as ‘Food and Beverage,’ ‘Travel and Lodging,’ or ‘Compensation for services other than consulting….’ ”

Judgment was entered in favor of the defendants one month later, after the plaintiffs declined to amend and the court decided against exercising supplemental jurisdiction over the state-law claims.

Bybee and Alba wrote:

“The publicly disclosed information in this case consists of high-level transactional data showing that Regeneron made payments to physicians….But those data reveal only ‘a piece of the puzzle’; they do not clearly show the ‘full picture’ of the allegedly fraudulent scheme….”

Tracking Returns

They added:

“Relators further add to the public disclosure that Regeneron used scorecards to track its return on investment in doctors, that it dropped one doctor when his prescription volume went down, and that it capitulated to one doctor’s threat to cancel a speaker event if Regeneron did not pay to stay him in a luxury resort. Nor could one determine from the fact that Regeneron paid doctors certain sums that the programs for which those payments were made were sham programs or that some of them never actually occurred.”

As to whether the plaintiffs had stated a claim, they noted that the FCA causes of action are premised on alleged violations of the Anti-Kickback Statute (AKS), found at 42 U.S.C. § 1320a-7b(g), which requires the realtors to plausibly allege that Regeneron offered renumeration with the intent to exert “undue influence” over the independent judgment of doctors. They reasoned:

“Relators’ allegations are sufficient to have put Regeneron on ‘notice of the particular misconduct which is alleged to constitute the fraud charged so that [it] can defend against the charge. And not just deny that [it] ha[s] done anything wrong.’ ”

The jurists added:

“[T]he district court should reevaluate on remand whether it would be appropriate to exercise supplemental jurisdiction over the remaining state-law claims.”

Lee’s View

Saying that “[t]his case demonstrates that what appears unseemly is not always unlawful,” Lee remarked:

“To violate the AKS, the allegations must…show that the exchange amounted to undue influence. Relators have failed to do so. At most, they show that pharmaceutical companies and physicians have a cozy relationship. But that is not illegal, even if it may seem distasteful. Nor is this type of business practice uncommon ….E-discovery companies and other legal vendors offer similar ‘educational’ seminars with free lunches to law firms. They often even give free tickets to coveted concerts or prime seats at, say, a Yankees or Mets game. And law firms do the same with their clients or prospective ones—partners lavish them with fancy dinners, box suites, and other enticements.”

He argued:

“The ultimate goal of pharmaceutical companies, law firms, or legal vendors is the same—they want more business. But that does not automatically amount to a quid-pro-quo arrangement or an ‘undue influence.’ They use these methods so that their product or service will be in their clients’ front of mind when they make decisions and to educate their clients on latest developments. Perhaps offering some of the more extravagant benefits may seem a bit much, especially in the medical context, but I do not believe it is unlawful under the AKS.”

The case is Moore v. Regeneron Pharmaceuticals Inc., 24-5569.